Has forecasting become a lost art?
— 10 experts shared their view
Robert Cross, the de facto Godfather of Revenue Management, stated "…everything starts with a day by day, segment by segment forecast", yet many hoteliers no longer produce one as part of their strategic process. Most of today's advanced revenue management systems do not generate one, instead of leaving the user to rely on a total hotel forecast and to trust the "black box" for the details.
Should hotels be producing a detailed long-term forecast, and if so, what are the benefits of doing so? How far out should they forecast and how often should they do it? The automated systems (only 15% of hotels have one!) can be very accurate at projecting the optimized results of an existing strategy, but are they effective when contemplating a change in strategy, as an increase in group rooms, eliminating an airline crew, or even a renovation? How do hotels that don't do it satisfy other stakeholders like senior leadership and owners, who may have an interest in understanding the detail behind the hotel's forecast, especially when recent performance has not met expectations?
CRME, CHIA, Chief Commercial Officer at Remington Hotels
In my opinion, day by day forecasting is even more important now than ever. At Crescent Hotels and Resorts, we believe this is an integral part of our strategy, as it conveys to our stakeholders our strategic intent by day by market segment. The forecast is produced at a minimum once a month for 90-120 days out and full-year for major group updates. Revenue management systems have become very accurate at projecting occupancies, but not at the segment level. This makes the system generated ADR less accurate, which is why our Directors of Revenue Strategy drive this process. Once we have compiled our internal projections, we compare our numbers to the system generated occupancies to ensure a correlation between them and help us validate our numbers.
The forecast process satisfies our stakeholders for operational and financial reasons. Operational departments are reliant on occupied rooms as a metric, as opposed to total revenues. We also have a financial responsibility to our owners, especially when it comes to profit. We must focus on implementing the right segmentation mix and channel strategies, as they have an impact on the cost of acquisition. As a discipline, our main goal is to drive revenues through our ability to evaluate data and implement strategies based on our findings. We believe that the forecast process allows us to do that in a more effective way.