When hospitality revenue management analytics defies our biased intuition: The case of capacity constraints and correlated channel-demand

Abstract

Sellout projections are critical to revenue management decisions, particularly in the context of multi-channel distribution. This research investigates the unexpectedly complex relationship between the likelihood of a sellout and the correlation in demand across distribution channels. Using a detailed numerical simulation implemented in VBA, the Study reveals that these dynamics are both intricate and counterintuitive. A follow-up empirical investigation, conducted through a scenario-based survey, assessed participants’ intuitive judgments when faced with this cognitively demanding computational task. The results show that intuition often fails, overconfidence bias is present - especially among experts - and there is no evidence of framing bias. The primary contribution of this Study is theoretical: it uncovers the complex and unintuitive mathematical relationship between channel demand correlation and the probability of reaching or exceeding capacity. These insights have practical implications for improving revenue management forecasting and for designing interventions such as targeted training or bias-aware decision support systems.