Question

The Bayside Fountain Hotel is adjacent to County Coliseum, a 24,000‐seat arena that is home to the city’s professional basketball and ice hockey teams and that hosts a variety of concerts, trade shows, and conventions throughout the year. The hotel has experienced the following occupancy rates for the past 9 years, since the coliseum opened:

YEAR	Occupancy Rate(%)
1	83
2	78
3	75
4	81
5	86
6	85
7	89
8	90
9	86

a.Use Excel and POM‐QM to compute an exponential smoothing forecast with α = .20, an adjusted exponential smoothing forecast with α = .20 and β = .20. Print your results.                                                 

b.Use POM‐QM to compute a linear trend line forecast. Print your results. Use the linear function obtained from POM‐QM to manually compute forecast for year 11 through 13.                                          c.Use MAD to compare three forecasts and indicate which seems to be most accurate.

Read problem 3 description. Use Excel and POM‐QM to compute an exponential smoothing forecast with α = .20. Question 3a, the forecast for year 9 (two decimals) is___________?

Use Excel and POM-QM to compute an adjusted exponential smoothing forecast with α = .20 and β = .20. Question 3b, the forecast for year 9 (in Excel, two decimals) is__________?

Question 3c, the forecast for year 9 (in POM-QM, two decimals) is___________?

Question 3d, use Excel and POM-QM to compute a linear trend line forecast. The forecast for year 10 (two decimals) is_______?

Question 3e, based on the linear function obtained from Excel and POM-QM, manually compute the forecast for year 13. It is

A.91.67

B.93.00

C.94.33

D.95.67

Question 3f, based on three MADs (exponential smoothing, adjusted exponential smoothing and linear trend line) in Excel and POM-QM. Which forecasting method is the most accurate?

A. exponential smoothing

B. adjusted exponential smoothing

C. linear trend line

D. three methods are the same accurate

Answer 1

Question: The Bayside Fountain Hotel is adjacent to County Coliseum, a 24,000‐seat arena that is home to the city’s professional basketball and ice hockey teams and that hosts a variety of concerts, trade shows, and conventions throughout the year. The hotel has experienced the following occupancy rates for the past 9 years, since the coliseum opened:

Answer: Note: I do not have POM-QM software, but I have calculated using Excel. I have included all forecast wrt to year.

Calculations:

Excel:

Formulas used:

* I have color-coded each forecast for your convenience.

Conclusion:

The Linear Trend line gives a better forecast as compared to Exponential Smoothing forecast and Adjusted Exponential Smoothing. Since, MAD, when compared, is the lowest and closest to the actual values, hence Linear trend line is the best forecast method.

Which forecasting method is the most accurate?

C. Linear Trend Line

Manual Formulas:

Exponential Smoothing Forecast:

Ft+1 = x At + (1 - ) x Ft

Adjusted Exponential Smoothing Forecast:

Exponential Smoothing: Ft+1 = x At + (1 - ) x Ft

Trend: Tt+1 = x (Ft+1 - ft) + (1 - ) x Tt

Adj. Exp. Sm: FITt = Ft + Tt

Linear Equation:

The easiest method to find the linear equation is by using a line chart in excel. Select "Year" and "Occupancy Rate" column and insert a line chart, right-click on the line chart and click "Add trendline", in the corresponding popup check "Display Equation on chart".

Y = 77 + 1.3333(x)

Here: x = year

Mean Absolute Deviation (MAD):

MAD = |Error| / n

Here: |Error| = |Actual Value - Forecast|