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How to Forecast Hotel Revenue with Optimized Precision?

by prashantpanwarrr
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Hotel demand forecasting

Forecasting future demand is getting harder to do accurately as reservation lead times change in the primary markets we operate in.

However, in order to conduct the hotel’s daily operations as efficiently as possible, it is crucial to provide our operational departments with a realistic financial picture. Additionally, owners and investors need to be aware of and have reasonable expectations for the financial performance of their hospitality business.

The accuracy of hotel demand forecasting is improved by using several results from various forecasting techniques to produce a more thorough, robust analysis. By considering the several outcomes a prediction can produce, the revenue manager’s job is to handle the implications and probable deviations from the defined strategy successfully.

This enables a critical assessment of the outcomes and the potential for future strategy modification for potential optimization.

As predicted future business performance, hotel demand forecasting is crucial for optimizing hotel income. Finding outliers or data points that deviate from the mean performance allows it to maximise results.

Hotel managers can use forecasting to gain useful insights that can serve as the basis for strategic decision-making to maximise hotel revenue performance. As a perishable asset for a hotel room, forecasting is a crucial tool for maximising occupancy rates.

3 Popular Hotel Revenue Forecasting Models

Operational Forecasting

This approach concentrates on the hotel’s operational areas. Principally, they are

  • Distribution of staff by department, accounting for seasonal peaks and troughs
  • Restaurants, including the average cost per cover and the number of breakfast, lunch, and dinner covers. 
  • It looks at the specifications for buying both perishable and non-perishable restaurant food, equipment, and supplies.
  • Risk management, which includes provisions for unexpected damage.

Financial forecasting

For owners and investors, this form of hotel demand forecasting provides a prediction of income and profitability. In other words, seasonality reserves it expects desired cash flow each month to make up for times of low demand. An illustration would be a beach resort that has to make enough money during the high season because it is closed during the winter.

Payments for any property mortgages, insurance, licence fees, amortisation of loans, and assets that are consistent regardless of whether the hotel’s doors are open are important measures for financial forecasting.

Revenue management forecasting

Hotel managers can predict and forecasting future demand with the use of revenue management. For possible group reservations, it primarily takes room pricing options and displacement analyses into account. It uses seasonal pricing models and considers market data, including competition pricing and overall market performance, in order to increase occupancy rates at the appropriate revenue maximisation price. Revenue management also gives hotels a marketing and sales advantage because it promotes rooms with lower demand and specifically targets the customer profile most likely to visit.

Advantages that revenue management forecasting offers

The output of the revenue manager serves as a foundation for informing hotel departments and establishing parameters for the best performance in accordance with anticipated demand. This offers chances and projects that different hotel departments can carry out. A revenue manager additionally intensifies marketing efforts and chooses which client groups to target during particular times of the year. For instance, promotions can be utilised to draw in a group with lesser disposable money during times of low demand.

In order to avoid shortages and unnecessary waste, revenue management forecasting also focuses on the necessary personnel modifications and product purchases, such as linen, food, and drink. With the deeper insights that revenue managers provide, hotel departments can modify their strategy and execution accordingly. After all, a revenue manager’s primary duty is to provide accurate, detailed information that leads to important business insights and, in turn, accelerates revenue growth throughout the hotel.

The method and outcomes of forecasting can differ amongst hotels. There are frequently considerable differences between properties in a company’s portfolio and even within the same hotel chain.

The forecasting procedure and outcomes can differ amongst hotels. There are frequently significant variances across different properties in a company’s portfolio, even within the same hotel group.

The accuracy of forecasting future demand improves with time and consistent, thorough execution. And once you’ve reached 5%, you may make your variance sharper by going as low as 3 or 4%. It should be a legitimate deviation that provides you with a tough objective that benefits your business and motivates your team. You can benefit from a strong instrument that is also an affordable approach to achieve reliable forecasting results by utilising a tried-and-true revenue management system with industry-leading technology at its foundation. Connect with RateGain for all the right forecasting future demand solutions today. 

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