Given the large-scale disruptions forced upon the hotel sector by COVID-19 and the uncertain recovery period ahead, it has never been more important that a hotel understands its demand through accurate and holistic revenue forecasting.
But how can hotels achieve total revenue forecasting today when market demand is uneven and hard to predict?
Here are six tactics and tips to help boost your hotel’s forecasting capabilities across all revenue streams, even when demand patterns are disrupted.
1. Apply analytics to your forecasting models
Revenue management systems have traditionally used a limited number of forecasting models at a level defined manually by users. High-performance forecasting, on the other hand, relies on hundreds of advanced forecasting models where the most appropriate model is selected by the system automatically. Then the forecast model parameters are calibrated to understand the impact of the specific price sensitivities, no-shows, cancellations, booking curves, etc. within the forecasting group.
Analytics can be employed to solve a variety of challenges, including adapting the forecasts to demand shifts and understanding demand as a function of price (the impact of price changes on the demand that exists for the room product).
Why does this matter? Let’s say we’re trying to price our rooms for certain length-of-stay patterns that show similar behavior. It may be better to estimate them together because we can combine their data and build a more robust basis for forecasting.
Conversely, if we’re trying to estimate price elasticity, it may not be a good idea to pool room types from distinct classes because a deluxe and a standard may show different behavioral patterns in terms of willingness to pay.
2. Learn what drives room demand
To gain more granular insights, hoteliers need to consider the interdependency of what drives room demand and demand to other aspects of your hotels, such as selling meeting and event spaces based upon a minimum group block.
Hoteliers should start with analysing the net revenues and profit values from individual revenue management segments. These insights provide the opportunity to optimise a hotel’s business mix by room class, while considering total profit by available demand. It also allows you to create overall guest spend hurdles outside of just the room night alone and helps with any decision-making around who to give the last room to—a known guest who spends $400 more across the hotel, or an infrequent leisure traveller who will be spending no time on the property.
3. Consolidate data to get an accurate spend profile of guests
Predicting ancillary spend across the hotel can be a major challenge, but the extra revenue can support a hotel’s financial recovery following the impact of COVID-19 travel restrictions. Understanding your ancillary spend can also support your total hotel operations in general decision-making, amenities determination, floor design and licensing agreements.
To build detailed insights around the true worth of a guest, hotels need to gather data across all revenue streams that a guest could interact with. This can be done through encouraging guests to assign any and all spends to their room or guest folio, which not only helps you gather the spend patterns but can also help you reduce the credit card processing costs associated with retail, food service, spa services, guest rooms, gift shop and more. Through gathering this data, hotels can ensure they take the most profitable business and have an accurate picture of their guests’ true worth.
4. Understand, manage and optimise your channels
To help understand, manage, and optimise your channels, hotels need clean data. Hotels need to be able to separate each booking endpoint as well as isolate the differences in demand and cost structures. This is not possible, for instance, if your teams are using channel and source codes interchangeably with some codes repeating in both areas—which could lead to confusion within reservations teams.
With clean, accurate data, hotels should be able to isolate their channel costs. This enables you to make decisions on whether to take more or less of the available demand across the various channels based on the cost of taking one additional reservation through that channel. Isolating channel costs also helps control costs on a channel-by-channel basis and can help you better negotiate with online travel agencies.
5. Consider hotel servicing costs
In a push towards property-wide profit optimisation, hotel servicing costs need to be a focus. When considering servicing costs, you should take a broad look at the data you assemble on your targeted guest segments, including their spend profile and total propensity for usage of an amenity.
The key area to start your investigation is in the non-room revenue hurdles. Applying that to crucial elements of the guest usage patterns, and creating metrics that will provide visibility across the guest’s length of stay, will open up key areas such as house staffing allocation and costs across rooms, restaurant, golf, spa, and other spend areas.
6. Miscellaneous inventory should be miscellaneous no more
Miscellaneous inventory (e.g., cabanas, chair rentals, and excursions) is typically harder to track across a hotel property. While this type of inventory is found more often in larger properties or resorts, it is important that hoteliers identify all potential revenue sources and how they impact the total guest experience.
In addition to transactional data aggregation across the property, hotels need to determine guest segmentation, such as wedding party guest versus non-wedding party guest. By isolating these segments, you can start to identify the corollary values and metrics to monitor, thus allowing you to measure and manage your non-room-based, guest-spending hurdles.
No Time Like the Present
In an uncertain market, it is critical that hotels have detailed and accurate whole-of-property forecasts to base their pricing strategies on. By applying revenue science to your hotel’s forecasting, you can move away from relying on intuition and guesstimates to building data-driven strategies and decisions in planning, cost control and promotions with the goal of driving higher profitability.
This is strictly an exclusive feature, reprints of this article in any shape or form without prior written approval from 4Hoteliers.com is not permitted.
Tracy Dong, Senior Advisor, Asia Pacific region at IDeaS Revenue Solutions. For more information on how your hotel can plan achieve total revenue forecasting in an uncertain market, please visit: www.ideas.com