The Importance of Demand Forecasting

It is critical that you collect and properly assess your hotel’s operating data. Effective data analysis leads to anaccurate assessment of demand; the number of buyers seeking to purchase what you have for sale at its currentprice. Estimating the number of potential buyers allows for accurate sales forecasts.

For hoteliers, an accurate estimate of future room demand is essential to the effective operation of their hotels because:

Accurate revenue forecasts allow hotel department leaders to more effi ciently schedule the departmental staff needed to serve guests. Proper staffi ng is required to ensure that guests are provided with the service levels intended. Customer-centric RMs are just asconcerned with ensuring guest satisfaction as they are with revenue optimization.

Accurate revenue forecasts give those responsible for purchasing supplies the information required to buy needed items in the correct quantities. The impact on guest satisfaction of ensuring the presence of necessary products and supplies upon guest arrival is signifi cant.

Accurate revenue forecasts allow managers and owners to estimate the future profi tability of their properties.

Doing so provides the information needed to make decisions about profi tability and cash fl ow that directly affect decisions related to capital improvements and capital expenditures.

Accurate demand forecasts allow RMs to make better decisions about how to modify and manage the prices of their products and services.

Historical Data

To begin the data collection and demand forecast process, it is important to understand that every operating hotel generates historical data even if the data are not recorded or analyzed.

Understanding historical data is essential because a key aspect of any RM’s job is to see into the future. Understanding a hotel’s past (historical) performance is one of the best ways to make good decisions about future performance.

The specifi c historical data that may be of interest to RMs and thus should be regularlycollected for future analysis will vary somewhat by property but would typically include thedata related to the following:

_ Number of reservations/ room nights booked per day

_ Number of reservations/ room nights denied per day

_ Number of daily reservation cancellations

_ Total number of room nights canceled

_ Number of check-ins (arrivals)

_ Number of check-outs (departures)

_ No-shows

_ Walk-ins

_ ADR achieved

_ Occupancy % achieved

_ By the property

_ By room type

_ Average number of guests per room

_ Average length of guest stay

Current Data

Current dataaid in understanding the present. Current data can be examined best when it is divided into its three main reporting areas:

_Occupancy and Availability Reports

_Group Rooms Pace Reporting

_Nonrooms Revenue Pace Reporting

 

_Occupancy and Availability Reports

What is happening now is best communicated by the monitoring of four key areas:

1. The number of rooms available to sell

2. The number of rooms reserved

3. The number of rooms held or blocked

4. The estimated ADR resulting from currently reserved or blocked rooms

Whether purchased as stand-alone programs or directly interfaced with the CRS or PMS, by utilizing information gleaned from the hotel’s historical and current sales data, these programs can:

_ Recommend room rates that will optimize the number of rooms sold

_ Recommend specifi c room rates that will optimize sales revenue

_ Recommend special room restrictions (e.g., minimum length of stay (MLOS) requirements) that serve to optimize the total revenue generated by the hotel during a specific time period

_ Identify special high consumer demand dates that deserve special management attention in pricing

 

Future Data

The careful and continual monitoring of historical and current data help RMs better understand previous and existing demand for their hotel’s guest rooms. This data also are essential because of their ability to help guide decision making and estimates related to future room demand. Of course, even the best of RMs will fi nd their crystal balls to be a bit fuzzy at times. These same RMs understand, however, that the essence of their job is to learn from the past, manage the present, and by doing so shape the future.

While the variation in individual properties makes it difficult to precisely identify the factors that will most affect thefuture demand for any single hotel’s guest rooms, for most properties these factors include:

_ Demand generators

_ Demand drains

_ The strength or weakness of the local as well asstate or national economy

_ The property’s addition or elimination of specifi cservices

_ The opening or closing of competitive hotels

_ Predictable factors such as planned road constructionor seasonality

_ Unpredictable factors such as unplanned events,road construction, or severe weather

_ The pricing decisions made by the property’s competitors

_ The pricing decisions made by the property

Important terms include the following:

_ Stayover: Guests not scheduled to check out of the hotel on the day his or her room status is assessed.

That is, the guest will be staying and using the room(s) for at least one more day.

_ No-show: A guest who makes a room reservation but fails to cancel the reservation (or arrive at the

hotel) on the date of the reservation.

_ Early Departure: A guest who checks out of the hotel before his or her originally scheduled check-out date.

_ Overstay: A guest who checks out of the hotel after his or her originally scheduled check-out date.