How to forecast hotel revenue for the future?
In an uncertain world, your ability to forecast hotel revenue for the future will help you plan and control your expenses.
The pandemic has thrown out budgets out of the window. With occupancies and revenue tumbling all across the globe, hotels have scrambled to improve revenue and save cost.
Some cost saving measures have been temporary, like a furlough or sabbatical for employees, some have be more drastic like shutting down operation.
The solution for planning is a simple process of forecasting.
To put it simply this definition by the Oxford dictionary, sums up the definition of the forecast, but the key words are ” based on the information you have now”
That is a very big variable and can change drastically.
So the big question. How do you forecast hotel revenue in future?
That is the one big job that the revenue manager in your hotel does. Using the tools and data to predict what will happen in future.
Forecasting is a combination of hard data and some future assumption based on trends.
Steps to Forecast your hotel revenue
Collect all data:
Start with the big picture data. What is happening in your city?
Is there any one time event or festival that can impact the data. Is there new business setting up shop or any going out of business.
I am not going to cover all the things you will want to check as it is not possible to cover macro trends in one article, however you should get this information from various sources like news, networking, etc.
Collect past data, future business on books, for your hotel and analyze it. Do you see a pattern.
Typical patterns include, week day – week end split, seasonality, spikes due to wedding dates etc.
Your data feed should give you trends on booking window, pace etc. If you do not have dedicated data with you, log in to the extranet of any OTA and look at the analytics section for your hotel.
What short term trends do you see. Has the booking pattern changed? Has the length of stay changed?
The more data points you have at your disposal, the better the chances of your forecast being correct
Present it to the managers
While we make the forecast, once the revenue forecast is made, work with the managers to make the expenses forecast to get to the profit number.
Variable expenses are based on occupied rooms or covers. Fixed expenses have to be made irrespective of level of occupancy.
After you calculate the numbers, discuss and take decision on the data.
Further reading and Training
Revenue management is an important vertical of the hotel that can help you to improve your revenue
Sign up for training online to learn more about Revenue management and Forecasting.
And if you are interested in training your team, do check out our training plans for hotels