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?
The forecast is a fundamental piece of the hotel puzzle because it helps hoteliers, owners and stakeholders better understand the future, challenge themselves, support operations from a staffing and cost perspective and build credibility for the business. On its own, however, a forecast is just a number, and a constantly shifting one at that. Like a puzzle, a forecast requires many other elements in order to be complete. Specifically, two: clean, relevant data and a clear strategy. The first is delivered by technology—something impossible to do manually because of the vast, ever-increasing amount of available data. The second can only be done by humans, revenue managers in this case. This is where the synergy—not dichotomy—between human and machine wins.
Advanced revenue management system (RMS) solutions have the power to adapt to any change in the market and compare similar exceptional behaviours in the past at a rate unachievable by humans. The machine algorithms continuously learn at a faster pace day after day, and accuracy will only improve going forward.
In disruptive times like these, a hotel's perseverance depends on precise forecasting through predictive analytics, enabling revenue managers to rethink and adapt current and future strategies, which can be then fed back into their respective RMS, completing the forecasting puzzle.