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Hopefully by this time you’ve wrapped up another challenging budgeting process for the year ahead, and although there are likely a lot of unanswered questions and variables remaining, it’s time for the team to turn to the ongoing forecasting process.

Today’s uncertain economic outlook means forecasting must be a fluid process requiring weekly and, in some cases, daily attention. Oxford Economics anticipates a mild recession in the first half of 2023, as higher interest rates and inflation curtail real consumer spending and business investment, the company said in a recent news release.

The bottom line is that we’re in a dynamic environment, meaning long-term forecasts are liable to shift. It’s crucial to focus on month-to-month data trends rather than year-over-year, and analyze the data at least weekly to update your forecast with a true understanding of your specific market and your hotel’s unique business mix.

Below are five suggestions for building the most accurate demand and financial forecasts in 2023:

1. Use New Booking Patterns to Shape Your Forecast

The volatile travel landscape over the past couple years has led to a shift in the way travelers book their lodging today, and these new booking patterns will have an impact on your forecast.

Booking windows are lengthening in most markets. At Remington Hotels, Chief Commercial Officer Raul Moronta says that as the pandemic has waned and regulations have been lifted, fewer bookings are coming inside of three days.Throughout 2022, we have seen the zero-to-three-day booking window segment shrink significantly every single month, he says.

Some of that lengthening booking window can be attributed to the fact that group business has returned to near 2019 levels in many markets.

Coupled with the fact that cancellation rates continue to fall, a lengthening booking window should help hoteliers be even more confident in holding rate as day-of-arrival approaches, says Nicole Tomasso, Director of Revenue Strategy at Dragonfly Strategists. People are booking and staying – that pattern has changed dramatically and should impact your forecast, she says.

2. How Emerging Segments of Travelers Will Affect Your Forecast

The spike in “bleisure” business is real, and hoteliers can no longer look to business vs. leisure as the first step in their segmentation strategy. As an example, Tomasso cited a major bank planning their annual corporate outing and requesting additional rooms and nights for family members (at the corporate rate).

Mike Medsker, Product Lead for MDO’s myRevenue, says the fact that booking data is often incomplete provides segmentation challenges. Previously, he says, hotels were able to analyze the segments by booking source – business travelers would book using a corporate account and leisure guests would book direct or through an OTA. But now, many business travelers will use Expedia, for example, to find lower rates than the corporate account.

Despite the increasingly muddy data, it’s still critical to understand your potential guests’ purpose of travel. For a more clearer picture, move away from rate and booking source and instead look at day of week.

3. Shifting Your Forecasting Focus to the Bottom Line

Steadily rising demand should continue to drive pricing power in 2023. Remarkably, ADR will end 2022 up 30% or higher in most markets as compared to 2019. But unprecedented inflation and the overall rising cost of expenses – specifically labor, food, and amenities – continue to apply pressure to the bottom line and threaten to impact profitability in 2023.

One way revenue leaders are driving bottom-line performance is by driving more business direct, therefore skirting third-party commissions and some customer acquisition costs. Another is by managing and analyzing total revenue rather than just rooms revenue, including ancillary spend on F&B, parking, spa, etc.

But, for many hotels, accessing this important bottom-line data remains a challenge. For hoteliers with the right data, Medsker suggests a deep dive into assigning commissions to the various distribution channels, which will help you better analyze your current costs of acquisition.

4. Determining the Most Accurate Data for Your Forecast

Amidst the pandemic, forecasts based on historical data became largely irrelevant, and hoteliers were left scrambling for new, more accurate insights into future travel demand. Meanwhile, forward-looking data became more accessible, and hoteliers have begun placing more importance on their own internal on-the-books data, overlaid with new third-party datasets that provide forward-looking market data, competitor benchmarking data, and web-shopping analytics.

We can no longer rely on 2019 data as much, says Cormac Daly, Revenue Manager and Rooms Controller at the Lotte New York Palace in Midtown Manhattan. We've got to look at what's happening now. It's really important to immediately identify where we see trends, where we see pick up, and how the booking windows change.

Medsker suggests it’s important to blend both historical and forward-looking datasets. When you think of forward-looking data as only the competitor benchmarking tools, you're missing your own internal dynamics, he says. You need to pair that insight with a really deep dive into your own internal analytics. It’s great to see the market is up 5%, but you need to understand the trends behind the numbers and how they’re going to impact your business internally.

5. Align Operational Departments With Uniform Data

Now that you’ve identified the right demand, booking pattern, and consumer behavior data to shape your 2023 forecast, and applied the right cost analysis to provide a relatively accurate financial forecast for the year ahead, it’s time to share those baseline forecasts across the organization.

Centralizing data from each of your properties to help make smarter business decisions at the corporate level has become a priority. As your forecast changes on weekly and even daily basis, you’ll want to provide leadership with easily accessible and digestible reports in real time.

At a property level, the ability to look really granularly quickly is helpful. At an enterprise level, the ability to quickly look at macro level trends by aggregating all that data quickly is probably the most beneficial, says Cecil Hopper, director of revenue optimization for Miraval Resorts by Hyatt.

About MDO

myDigitalOffice (MDO) is the world's fastest growing hotel data platform, providing customers with centralized, digital access to all of their hotel's most critical documents and cross-functional performance metrics. The visibility, connectivity, and control delivered by our award-winning cloud-based dashboards, document management software, and integrated data feeds allow teams to reach greater levels of productivity, budget, and forecast, and reduce environmental impact while optimizing profitability. Learn more at mdo.io.

Jason Freed
Hospitality Data Evangelist
myDigitalOffice