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PurposeThis paper aims to present an integrated framework for hotel revenue room maximization. The revenue management (RM) model presented in this work treats the shortcomings in existing systems. In particular, it extends existing optimization techniques for hotel revenue management to address group reservations and uses “forecasted demand” arrivals generated from the real data.Design/methodology/approachThe proposed forecasting module attempts to model the hotel reservation process from first principles. In particular, it models hotel arrivals as an interrelated process of stochastic parameters like reservations, cancellations, duration of stay, no shows, seasonality, trend, etc. and simulates forward in time the actual process of reservations to obtain the forecast. On the other hand, the proposed optimization module extends existing optimization techniques for hotel revenue management to address group reservations, while including integrality constraints and using “forecasted demand” arrivals generated from the data. The optimization model is based on large‐scale integer programming model to optimize decision rules for accepting reservations.FindingsA case study based on three different sets of reservation records of simulated hotel data was conducted to test the operation of the system on real data. Results showed that the model is able to generate effective recommendations to maximize revenue.Originality/valueThe main value of this paper is that it presents an integrated framework for hotel room revenue maximization. The novelty introduced in this approach is that it is based on an advanced room demand forecast model that simulated the reservation process from its first principles and produces demand scenarios that are used by an optimization model to generate proper recommendations.

Hotel revenue management is perceived as a managerial tool for room revenue maximization. A typical revenue management system contains two main components: Forecasting and Optimization. A forecasting component that gives accurate forecasts is a cornerstone in any revenue management system. It simply draws a good picture for the future demand. The output of the forecast component is then used for optimization and allocation in such a way that maximizes revenue. This shows how it is important to have a reliable and precise forecasting system. Neural Networks have been successful in forecasting in many fields. In this paper, we propose the use of NN to enhance the accuracy of a Simulation based Forecasting system, that was developed in an earlier work. In particular a neural network is used for modeling the trend component in the simulation based forecasting model. In the original model, Holt's technique was used to forecast the trend. In our experiments using real hotel data we demonstrate that the proposed neural network approach outperforms the Holt's technique. The proposed enhancement also resulted in better arrivals and occupancy forecasting when incorporated in the simulation based forecasting system.

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