Question

minimum of 300 words

Describe the purpose of, and methods

used to create, short-term forecasts in

the lodging industry.

Answer 1

forecasting is a tool to help owners anticipate future business performance based on a range of factors. It's commonly used in the hospitality trade to optimize potential future profits and cash flow.

Forecasting methods and how they work

There are two commonly used prediction methods when it comes to forecasting.

1. The Qualitative Method

Short term predictions that use market research and expert knowledge in order to compile results into a forecast, this is called the Qualitative Method.

2. The Quantitative Method

For more long term forecasting the Quantitative Method is more widely used. This method includes making predictions based on historical data such as sales.

THE PROCESS

• Like any business, keeping organized and accurate records is at the top of the list of ways to improve forecasting.
• Utilize past performance data, the numbers are there so put them to work!
• Be in the know when it comes to industry trends and observe them closely. Also, keep an eye on what your competitors are doing, they might have come across something you've missed.
• Don't set it and forget it when it comes to your forecasts, refer to them regularly. Review your predictions and compare them to your actuals, were your assumptions correct? If not, make edits to the forecasts where necessary.
• Work with your marketing department, they'll know the trends and issues surrounding the market.

Here’s a list of general tactics you can use to improve your hotel’s revenue stream:

• Be bookable online
  These days travelers enjoy the flexibility, convenience, and value of booking online. By connecting to online travel agents/more online travel agents you’ll easily see an uplift.
• Build a revenue culture
  Who’s on your revenue team? Everyone! Anticipatory service + proactive revenue-minded employee = emotionally connected customers with engaged loyalty and higher revenue returns.
• Sell other hotel products
  Revenue opportunities extend far beyond simply selling your rooms. Think about the amenities you have on-site and what you are charging for them, and go even further by offering hotel guests the chance to purchase items like soap, utensils, towels, etc – especially if your hotel has a unique sense of style.
• Leverage events and attractions
  Local events and attractions are a great opportunity to put together packages for guests or offer additional services such as transport. The benefits are two-fold – guests will enjoy their stay more and your hotel will generate more income.

Here’s a list of the most common pricing strategies your hotel might find useful:

• Value-added pricing
  You can set your room rates higher than the local competition while also offering more extras in the basic package. This gives the illusion that the hotel offers a premium experience that focuses on value rather than just low rates.
• Discount pricing
  Used in slow seasons to boost occupancy by dropping base rates. Revenue can be made up of other services in the hotel.
• Price per segment
  Offering the same product at different prices to different types of customers. E.g ‘family rate’
• Length of stay
  When demand outweighs supply, it can help to implement a rule where guests are ‘obligated’ to stay a minimum number of days. In such cases, lower rates may not be necessary.
• Positional pricing
  Basing your rates off-brand strength and reputation.
• Penetration pricing
  Positioning yourself as the cheapest in the market. Be mindful of how travelers will perceive your hotel – you need to retain the opportunity to sell at higher rates.
• Skimming
  Positioning your hotel among the most expensive. Price leaders often achieve among the highest profitability, however, the consumers need to clearly understand the reasons that they would pay more for staying at your hotel.

Key components of an effective forecast include:

• Occupancy
• Revenue
• Room rates
• Turnaways/Regrets/Denials – tracking of reservations that are turned away or not booked, and is a critical measurement of demand. Ideally, your turnaways are captured and measured on your online as well as direct/telephone requests.
• Spend-per room
• Reservations
• Market trends

UNDERSTANDING THE CUSTOMER NNEDS AND SATISFYING THEM AT OPTIMUM PRICING STRATEGY IS THE KEY TO SUCCESS IN ANY INDUSTRY.