Good demand forecasting can help make the most out of the ‘peaks’ and better avoid the ‘valleys’ through proper room rate decisions, staff allocation, property maintenance and hotel operations.
Forecasting is the lifeblood of revenue management. It’s a way to look into the future with the objective of
enhancing the future.
A number of factors come together to make an accurate forecast. The most important of these is understanding the behavior of your hotel. How your hotel behaves in certain demand levels. What is the impact of price changes? How the business mix will get impacted with certain Yield Management restriction, Length of Stay, Lead Time, Day of the Week production and many more behaviors.
Forecasting should always be done by day by market segment to get the right analysis and to make the right decision for your business. It should be adjusted on a daily basis for the current month and the next month. This will also
depend on, how dynamic is the pick-up for your hotel.
Steps to accurate forecasting
- Review your market segmentation and get make changes as per your objectives for future and past business mix.
- Understand the market segment mix by day of the week from the past data.
- Forecast room nights and revenue by day as per the current trends of the property.
- Adjust the forecast to achieve desired results and take action accordingly.
- Take actions on a daily basis to optimize the Revenues.
Take action on the forecasted results
Depending on the forecast by day, now we need to take action by the day. Every day is different, so actions taken for
each day will be different. Some of the common actions taken in revenue management are:
1) Price point adjustments as per market demand levels
2) Channel management put restrictions by channel
3) Yield management restrictions MINLOS, MAXLOS, CTA etc.
Let’s understand better with an example
If your objective is to grow the ADR, look at the forecasting by market segment and see which segments are coming in over
high demand days at a lower price point. Once you have reached the desired room nights for that day, put restrictions
on that market segment to avoid any revenue leakages.
Market segmentation in play
Forecasting by the market segment is very critical for any property. With forecasting, a property can maximise on
RevPAR for both low and high demand. If a day is not reaching its maximum potential when compared to the
forecast, revenue managers need to adjust volume through required channels. In all this, understanding the behavior of each market segment is important at different price points and market conditions. This makes pricing and yield management decisions easier.
Look beyond bookings
Forecasting needs to filter down to all departments of the property to ensure all team members are on the same wavelength. It plays an important role in manpower planning by day to ensure smooth operations and cost-saving. As a smart revenue manager, you’d be prudent to push this process business-wide for best revenue results.
This article is written by Guest writer Kammelh Kishore, originally published in STAAH’s New E-Book.
About the Writer
Kammelh Kishore is the founder of RevMutu Consultancy Services and has more than 15 years of experience in this field. A pioneer in revenue management in India, he works with more than 50 properties in India and around the world.