WESTAR BEVERAGE SALESMULTIPLE REGRESSION

XIAOYU YANGHATIM OULADELHADJAHMEDMARIE HAYES

EXPLORATION:TOPIC

JANE BARTLEY-STAFF ANALYST FOR WESTAR'S CORPORATE PARENT• SHE PREDICTS & ANALYZES BEVERAGE SALES

(LIQUOR, BEER, AND WINE) FOR THE CHAIN'S BUSINESS HOTELS

• FORECAST NEEDED AT THE END OF THE WEEK • OTHER FORECASTING APPROACHES INEFFECTIVE

• PREVIOUS METHODS CONSIDERED ONLY ROOM OCCUPANCY• # OF PEOPLE STAYING IMPACTS BEVERAGE

SALES• HOTEL OCCUPANCY PREDICTABLE

EXPLORATION:HOTEL BACKGROUND INFORMATION

250-ROOM BUSINESS HOTEL LOCATED IN A RESORT AREA OF THE COLORADO ROCKIES

AVERAGE ROOMS RENTED/YR. 56,281

AVERAGE BEVERAGE SALES/MO. $24,031

HAS TWO LOUNGES ON PREMISES−POUR NOUS LOUNGE- 50 SEAT PUB-

STYLE LOUNGE−GAIETE - 200-SEAT NIGHTCLUB

EXPLORATION:WHY USE DUMMIES?

REGRESSION ANALYSIS IS USED WITH NUMERICAL VARIABLES.

RESULTS ONLY HAVE A VALID INTERPRETATION IF IT MAKES SENSE TO ASSUME THAT HAVING A VALUE OF 2 MEANS HAVING TWICE AS MUCH OF SOMETHING AS A 1 & HAVING A 50 MEANS 50 TIMES AS MUCH AS 1.

EXPLORATION:WHY USE DUMMIES?

SOCIAL SCIENTISTS OFTEN NEED TO WORK WITH CATEGORICAL VARIABLES IN WHICH THE DIFFERENT VALUES HAVE NO REAL NUMERICAL RELATIONSHIP WITH EACH OTHER. − EXAMPLES INCLUDE VARIABLES FOR RACE, POLITICAL

AFFILIATION, OR MARITAL STATUS.

IF YOU HAVE A VARIABLE FOR POLITICAL AFFILIATION WITH POSSIBLE RESPONSES INCLUDING DEMOCRAT, INDEPENDENT & REPUBLICAN, IT OBVIOUSLY DOESN'T MAKE SENSE TO ASSIGN VALUES OF 1 - 3 AND INTERPRET THAT AS MEANING THAT A REPUBLICAN IS SOMEHOW 3 TIMES AS POLITICALLY AFFILIATED AS A DEMOCRAT.

EXPLORATION:WHY USE DUMMIES?

THE SOLUTION IS TO USE DUMMY VARIABLES - VARIABLES WITH

ONLY TWO VALUES, ZERO AND ONE. IT DOES MAKE SENSE TO

CREATE A VARIABLE CALLED "REPUBLICAN" AND INTERPRET IT

AS MEANING THAT SOMEONE ASSIGNED A 1 ON THIS VARIABLE

IS REPUBLICAN AND SOMEONE WITH AN 0 IS NOT.

A DUMMY VARIABLE IS ONE THAT TAKES THE VALUES 0 OR 1 TO

INDICATE THE ABSENCE OR PRESENCE OF SOME CATEGORICAL

EFFECT THAT MAY BE EXPECTED TO SHIFT THE OUTCOME. THINK

OF IT AS A TRUTH VALUE REPRESENTED AS A NUMERICAL VALUE

0 OR 1 (AS IS SOMETIMES DONE IN COMPUTER

PROGRAMMING).

QUESTION

SHOULD OTHER FACTORS SUCH AS: −SEASON, −PROMOTIONAL FOOD OFFERED

DURING HAPPY HOUR−PRESENCE OR ABSENCE OF A PIANO

PLAYER IN THE POUR NOUS LOUNGE

BE CONSIDERED IN FORECASTING BEVERAGE SALES.

RELEVANT FACTORS PROMOTIONAL FOOD -DISCONTINUED AFTER

MONTH 12

PIANO PLAYER-DISCONTINUED AFTER MONTH 13

DATA MONTHS 14 AND 15 UNAVAILABLE CHANGE IN RECORD-KEEPING DUE TO CHANGE IN OWNERSHIP

CAN NOT USE BEVTOTAL AND BEVPUB OR BEVNITE, AND SIMILARLY FOODTOTAL AND FOODPUB OR FOODNITE TO PREDICT TOTAL SALES

HYPOTHESIS NULL: THE FACTORS OF ROOM, SEASON,

PROMOTIONAL FOOD AND PIANO ARE INSIGNIFICANT IN RELATION TO SALES.

ALT: THE FACTORS OF ROOM, SEASON, PROMOTIONAL FOOD AND PIANO ARE SIGNIFICANT IN RELATION TO SALES.

DATA MONTH Month number (month 1 was a January)

BEVTOTAL Total beverage sales (in $) pub and nightclub

BEVPUB Beverage sales (in $) for the Pour Nous Lounge

BEVNITE Beverage sales (in $) for the Gaiete night club

FOODTOT Total food expenditures (in $) pub and nightclub

FOODPUB Amount spent on food (in $) for the Pour Nous Lounge

FOODNITE Amount spent on food (in $) for the Gaiete night club

ROOMS Total room occupancy for the Westar

DATA ANALYSISGOAL IS TO FIND IF ANY RELATIONSHIPS EXIST

BETWEEN TOTAL SALES VS. ROOMS, SEASON, PROMOTIONAL FOOD, PIANO

MODEL TO PREDICT TOTAL SALES:

Final Equation: Y = -4895.8X + 31324 (X=0,1)

VALIDITY OF FINAL REGRESSION EQUATION:

Adjusted R Square: 22%

DATA ANALYSIS

THE VARIABLE THAT IS SIGNIFICANT: PROMOTIONAL FOOD

HOW DOES TOTAL SALES CHANGE WITH EACH OF THE RELEVANT VARIABLES?

− OFFER THE PROMOTIONAL FOOD, THE TOTAL SALES WILL DECREASE

− DO NOT OFFER THE PROMOTIONAL FOOD, THE TOTAL SALES WILL INCREASE.

DATA ANALYSIS FINAL

MULTIPLE REGRESSION ANALYSISIS THERE A RELATIONSHIP

BETWEEN PROMO FOOD & TOTAL SALES?

MULTIPLE R: 0.499

R SQUARED: 25%

ADJUSTED R SQUARED: 22%

STANDARD ERROR: 4396.37

SIGNIFICANCE: 68.25 E-5

P VALUE: 68.25 E-5

INTERCEPT: 31323.67

SLOPE: -4895.82

F VALUE: 8.64

RECOMMENDATIONSRECOMMEND TO USE THIS MODEL

TO FORECAST TOTAL SALES SINCE IT IS BETTER THAN THE OLD MODEL

FINAL R2 =22% VS. OLD R2 =9%

CONTINUE TO COLLECT MORE DATA

DO NOT OFFER PROMOTIONAL FOOD SINCE IT DECREASES SALES

RECOMMENDATIONS

WESTAR SHOULD REVITALIZE IT’S CURRENT MARKETING STRATEGIES TO INCREASE HOTEL OCCUPANCY WHICH WOULD THEN INCREASE TOTAL BEVERAGE SALES

THE MAXIMUM OCCUPANCY WAS 6,331 VS. CAPACITY 7,500*/MONTH FOR 1 OUT OF THE 28 MONTHS OF DATA

*250 ROOMS X 30 DAYS/MONTH=7,500