What is the meaning / definition of Constrained demand in the hospitality industry?

The term constrained demand refers to demand being severely restricted in activity. It is used in the hospitality industry – in revenue management – when referring to demand forecasts.

To understand constrained demand you must first understand unconstrained demand. Unconstrained demand is your hotels total demand for a particular date irrespective of your capacity. Hotels should identify when unconstrained demand is above the capacity of the hotel. This is an important part of your hotel reverevenue management strategy.

Constrained demand, is the demand you get when adapting factors such as price. By increases in price, you are changing the demand, in a way constraining it, thereby allowing less customers to book your hotel.

The concept of “Unconstrained Demand” is sometimes applied when a limit of a resource (hotel size) reduces the potential revenue from e.g. earning potential of the hotel restaurant.

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