Case Study 1: Forecasting in the Hotel Monroe

Monroe is a small town not too far from Detroit, Michigan, which has long been nicknamed the Motor City. The region's main source of employment used to be the automobile industry. The Detroit Red Wings hockey team sold out all of its home games in the Joe Louis Arena in the years the Wings contended for the Stanley Cup. Hotels and restaurants also did well in the Detroit metropolitan area when people had jobs and money to spend. But those days were over.

The Hotel Monroe saw better times as well before the economic collapse and the Great Recession of 2007-2009. When the car manufacturers all suffered huge losses, the night shifts and the weekend shifts were the first to be cancelled in the car assembly plants. New car sales declined and import models competed hard with domestic ones. As a result, layoffs and plant closures decimated the work force. People lost their jobs by the thousands at first, by the tens of thousands later. Businesses that made their money selling their wares to the auto workers and their families closed down in big numbers, people left Detroit and the surrounding towns in droves, and the bad economy brought Detroit to its knees. The recovery was painstakingly slow, and the city had to declare bankruptcy in the summer of 2013.

During this tough economic period, the Hotel Monroe struggled to keep the lights on. Renovation plans were shelved and staffing levels were reduced in the 120-room suburban hotel. The hotel was downgraded from four stars to three. The monthly occupancy rarely reached 50 percent, and cash flow was a contentious issue. The hotel tried to make up for its weathered appearance by offering personal attention and hospitable, intuitive service.

Trevor, the general manager of the hotel, is a college-educated man in his mid-thirties. His family owns the Monroe. He worked most jobs in the hotel during his summer vacations as a boy growing up, starting out as a bellhop and a busboy. He runs the business now. He has the habit of pitching in where he can on the occasional busy afternoon: he parks cars, carries luggage for arriving guests, and answers the phone at the front desk to help out. After he had to let go of the assistant hotel manager, he took on more administrative duties as well. Since he can't afford to buy a season ticket anymore to see his beloved Red Wings play, he watches the games on TV in his office, after a dinner of pizza and beer.

Trevor was struggling with the forecast for next week. While looking at the Running 10-Day Occupancy Report during the intermission between the first and second periods of the hockey game, he was astonished to see that the forecast was way off. The previous week had been forecasted to have an occupancy of between 45 and 55 percent, but the report showed remarkable occupancy numbers. In fact, the Monroe's occupancy had been over 75 percent most days of the past week.

Trevor knew they had been busy and he remembered asking some of the housekeeping staff to take extra shifts, asking a maintenance employee to put in some overtime, and even calling in part-time help to clean rooms. He was looking for clues to explain this dramatic increase in business before finalizing the forecast for the following week; he wasn't sure if the sudden spike in occupancy would hold. To find out what was happening, he needed more information.

Trevor decided to do some research instead of watching the second period of the hockey game. He left his office, got into his car, and glanced down at his watch: it was 8:45 p.m. He decided to drive around town and check the parking lots of the hotels in his comp set. All of them were full, indicating that it was a busy time for all of the hotels in town. A number of the licence plates he saw were from out of state. Why were so many people visiting Monroe in October?

Trevor returned from his tour and parked his car in the back of the Hotel Monroe's parking lot. As he walked through the hotel lobby on the way to his office, he saw Gary behind the front desk and stopped to chat for a minute. He learned from Gary that the Monroe had only 18 vacant rooms for the night. He asked if Gary knew what was going on. Why the unexpected surge in demand for rooms?

"I guess this is all about that latest YouTube sensation, boss. Everybody wants to try the well water at Old Mike's Farm. That video went viral. Have you seen it?"

The telephone at the front desk rang, and Trevor quickly thanked Gary for the input before moving on as Gary reached to answer the phone. The truth was that Trevor had no idea what Gary was talking about. He wasn't a YouTube watcher at all. He went back to his office and fired up his laptop. He got on YouTube and searched for "Mike's Farm in Monroe." There were hundreds of matches for his search, and on top of the list he found a video that was less than two minutes long. Mike, the elderly person in the video, talked about a miracle cure that not only healed his skin condition but also rejuvenated him in general. He was widowed but now he was interested in getting married again to someone much younger. It all began with drinking his well water. He had never used that water before for more than watering his garden. However, this past summer he noticed that every plant and flower in the garden grew much taller and bigger than before. He tried the water himself, drinking a cup or two a day at first. It tasted good and made him feel good. Now he was drinking four or five cups a day and he never felt better in his life. He was delighted to offer his well water to anyone without charge, although donations to the local fire department were welcome. A donation box was put out by the well. "Bring your own bottles, and limit two bottles per person, please," Mike suggested as he closed his message.

Trevor understood now why suddenly a lot of folks wanted to come to Monroe. Trevor wished all the believers in the miracle cure the best, and he also hoped that the wish of the local fire fighters to be able to afford to buy a new fire engine would come true as well. But what should trevor do for his forecast for next week?

Discussion Questions

Question 1

1. Should Trevor revise his short-term forecast for the following week?

Question 2

2. Is there reason to revise the long-term forecast?