OB
Revenue management methods
Overbooking (newsvendor model)
How many rooms to sell above capacity given no-show risk.
optimal limit: P(no-shows ≥ x) ≥ Co/(Co + Cu) ⇔ x* = F⁻¹(Cu/(Cu + Co)); Cu — revenue lost on an empty room, Co — cost of walking a guest
Calculate in the calculator →How to read the metric
The more an empty room costs relative to walking a guest, the more you overbook. Be more careful with medical programmes: relocating a guest with a prescribed course of treatment is expensive.
Worked example
Cu = 10 000 ₽, Co = 30 000 ₽ → critical ratio of 0.25.