The ability to forecast demand accurately is the base of all successful and effective revenue management strategies. Forecasting allows your hotel to assess potential risks and opportunities, anticipate future demand, price accordingly and align resources to maximize revenue. But in order to have a truly accurate and effective forecasting strategy, it is not enough to simply keep a record of past performance data and industry trends. Keep reading to discover how to optimise your forecasting strategy.
Break Down Pace Reports
Before the Revenue Manager can effectively forecast, they must first delve deep into their data. You can click here for our recent post on how to optimise your data use. Avoid a pricing catastrophe and focus on room mix pace rather than occupancy pace. Compared to last year, your hotel may be performing the same occupancy wise, but the rooms being occupied may be your least profitable ones. This could be due to economic conditions including FX rates or your superior rooms may be overpriced. Breaking down this Pace Report will highlight the revenue metric that really matters to your pricing strategy and help you find the right combination of guests in your hotel.
Split Pace Reports Among Week Parts
By splitting pace reports among week parts, you will be able to see whether one week part is dragging down the other. It is normal for your weekends to be a busier time than week-days. However, this split pace report will allow you to see if it is to an excessive amount. Once you have access to this data you can make rate adjustments accordingly. Consider flexing the rate or creating a package to promote shoulder night stays.
Exceptional Events & Human Judgement
It is important to take note of events that effected occupancy rates in a way that was uncharacteristic for the season. This is where human judgement comes into place. Rather than comparing exact dates, compare similar special periods, for example school holidays or bank holidays, as they can differ from year to year. This will reveal more accurate shifts in patterns and allow you to better manage your rate tactics.
Similarly, always be on the look-out for upcoming ‘exceptional events’, especially those which will take place around your hotel’s location. Even something as slight as a Wedding at a local hotel is worthwhile taking into consideration. It may be best to put a minimum two-night stay to ensure you do not displace your regular business. Alternatively, you can take the opportunity to slightly increase your base rate.
Thorough Competitor Review
It only takes a click of a button to compare your competitors rates to your own. However, you should take this opportunity to do more of a thorough review. Can you gauge from their rate how many rooms they have left to sell? If you increase or decrease your rate by €10 will they follow suit? Pick a date 60 days ahead and monitor your competitor rate on that date for the next 30 days. Take note of how many times they adjust it, or if they adjust it at all. The knowledge of competitor’s pricing is crucial for effective forecasting so that you can come up with an optimised pricing strategy.
Dealing with Cancellations
With many distribution channels promoting ‘free cancellation’, cancellation rates have been increasing dramatically over recent years. Revenue Managers therefore need to forecast for cancellations, which can be as high as 50% from some OTAs. Create an overbooking strategy to combat last minute cancellations. Promote a Prepaid or Advance Purchase rate for your early-bird bookers. Furthermore, send a pre-stay email a week before arrival. This will allow you to upsell hotel facilities and remind guests of cancellation policies. If they need to cancel, this email will serve as a subtle reminder to advise your hotel immediately, providing you with more time to re-sell the room.
Lastly, ensure that the most current forecast is shared with all departments of your hotel. If the Front Desk and Reservations team know the reasons behind rate increases, decreases and incentives, it makes it easier for them to put this forecast into place and encourage guests to book direct. Furthermore, it will help all teams drive sales, but also help other departments with forecasting their sales and staffing.
If a Revenue Manager is thoroughly aware of both the internal and external supply and demand factors, they can then start to accurately forecast. With continuous effective and accurate forecasting, your hotel will be better equipped to deal with future uncertainty and come up with a winning strategy that yields results.