Hotel forecasting: What is it and why do you need it?
by Beonprice - 14 October, 2022
A big part of effective hotel revenue management involves understanding the market and predicting future trends. By anticipating demand, you can adjust your pricing strategies and attract guests to your business during both on and off-peak seasons. You can also plan resources and inventory in line with the number of guests you expect to receive during any given period, helping you improve operating costs and better manage your internal processes. And the key to all this is using the right data to create regular hotel forecasting reports.
Hotel forecasting has come on in leaps and bounds these days. The explosion of AI and Big Data is providing the hotel industry with a wealth of tools to help hotels become more competitive and, ultimately, more profitable.
Let’s take a look at what hotel forecasting is exactly, and why it is imperative for your business.
What is hotel forecasting?
Hotel forecasting is a strategic tool for analysing past trends in order to make predictions about future demand based on a variety of factors. The aim is to optimise occupancy and create the most appealing prices so that you can boost your revenue streams and design a profitable business model for your hotel.
Essentially, hotel forecasting involves collecting and analysing the right data so that you can make predictions about how many bookings you are likely to have at any given time. This data takes into account sales conditions, segmentation strategies, trend deviations (past vs current demand), lead time, and market fluctuations.
In the context of hotel management, there are a number of forecasting strategies that you should be implementing in your business plan.
- Operational forecasting: so that you can anticipate staffing levels in all areas of your business (reception, housekeeping, restaurant, etc.)
- Financial forecasting: to determine financial results and establish financial goals accordingly
- Revenue management forecasting: so that you can predict future demand and implement strategies in line with anticipated occupancy in order to maximise revenue.
In this article, we will be focusing on revenue management forecasting.
Why do we need it?
Hotel forecasting helps you analyse past trends, anticipate demand, and prepare for the future. And, given the levels of uncertainty in the hospitality industry, especially since the start of the pandemic and the resulting travel restrictions, this has never been more important.
Generally speaking, the biggest benefit of regularly creating hotel forecasting reports is that it helps you to:
- Estimate the future profitability of your hotel.
- Plan strategies that help you boost your revenue.
- Control periods of high and low demand so that you can stimulate sales accordingly.
- Predict resource levels that ensure smooth operations.
- Optimise inventory and pricing strategies. (including price customisation strategies)
- Identify profitable market segments and implement measures to improve the guest experience at your hotel, in line with market demand. This, in turn, will help you boost loyalty.
- Define clear KPIs to improve your business.
- Establish whether you are on track to achieve the objectives you establish in your annual budgets
- Determine where you have made mistakes in the past so that you can make adjustments and identify potential new revenue streams.
All the above, combined with your general Revenue Management strategy, will help you maximise your revenue and GOPPAR (gross operating profit per available room).
The hotel forecasting process
There are the steps involved in the hotel forecasting process:
- Collect historical data and market trends: room nights, ADR, RevPAR, OCC, unconstrained demand, competition, events and trends, etc. Helps you understand past behaviours so that you can anticipate future demand.
- Identify patterns and causes: regrets and denials, cancellations, no-shows, etc. Helps you understand why problems occur.
- Analyse demand behaviour: booking pace by segment, length of stay and average stay, lead time by segment, etc. Helps you develop strategies for each market segment in line with needs and demand.
- Compare results: OTB vs STLY KPIs by segment, group behaviour, etc. Helps you identify variations in market trends and identify causes.
- Analyse your forecast so that you can make adjustments to your prices in line with the competition and your environment, company objectives, etc.
- Review your forecast: make sure you review your forecast on a regular basis and make adjustments in line with evolving market trends, ideally on a weekly basis.
How hotel forecasting technology can help
In order to create effective hotel forecasting reports on a regular basis, you need to use the right tools and technology. This will help you collect all the data you need in order to analyse past trends and make data-driven adjustments to your pricing and occupancy strategies. And the best solution for this is a hotel Revenue Management System (RMS).
Beonprice’s RMS combines a range of Artificial Intelligence technologies that can help you detect changes in consumer behaviour and automatically implement adjustments in line with demand trends. Our solution also combines an HQI (Hotel Quality Index), which helps you analyse the strategies used by your competitors and provides you with recommendations for price elasticity, forecasting and sales strategies. And all this enables you to predict how much each guest segment is willing to pay at any given time. You can then use this data to make adjustments to your rates, inventory, and operations and, ultimately, create consistent revenue streams for your hotel.