The A-Z of how to forecast

The A-Z of how to forecast

I have been lucky enough to make a living and build a business on Revenue Management - a discipline I love and am passionate about but if I let you into a little secret... it isn't rocket science (there, my secret is out!)But while it isn't rocket science, there is a science to it and a methodology that should be applied every time you predict how your business will shape up, or make a decision on what rate you should actually sell. In fact if I am honest, the metrics that you do need to apply are often so over-whelming that Revenue Managers or those who claim to be Revenue Managers, often look at their business on the books and make a number stab at how they think they will end up and then apply a rate.  This is not good enough and whether you chose Right Revenue or any other revenue system, I would advise anyone who is serious about revenue to invest in technology.  The metrics that you need to apply to make a great business decision need to come from the maths, the trends and the facts.  But without investing in technology, here are my top 30 starting points and the metrics you need to be reviewing before making any decision on rate:

1. What day of the week are you measuring? As we know, each day will behave differently
2. In which month of the year does that day sit?  Saturdays in January will behave differently to Saturdays in March
3. How far in advance is the day in question?
4. How much business do you currently have on the books?
5. How is that business made up? Guaranteed / Unguaranteed etc
6. Which segments make up the business? Is that usual or out-of-trend?
7. Do you have packages online that might impact your decision either on the rooms you might sell or the rates you might achieve?
8. How were you sitting for the same day at the same point in time last year? Are you ahead or behind? What you did last year should only ever be used as a barometer and not a definition of how you will end up.  Trends need to be evaluated
9. You need to consider not only how you ended up last year but also how that day normally behaves? So for example, how do Tuesdays normally behave in March? How does my current business look compared to that?
10. What do I normally pick-up (lets use 6 weeks as an example) within the last 6 weeks for that day, within that month?
11. Now break that pick-up down by segment. What should I expect as a pick-up for each of my main market segments?
12. Is that pick-up achievable?
13. Which segments are contributing to not only my room forecast but my overall profitability?  Use Adjusted ADR as a measure for this.
14. How does the date in question normally trend? For example, is it usually a strong corporate day but this year is way behind or perhaps ahead on leisure business?
15. What are my competitors selling at and what was their rate evolution?
16. Are their any events happening in the area that might impact my selling rate?
17. Do I have any events in-house that effect my rate either positively or negatively (for example, you may have a tour group in which is holding a large block of rooms but at a really low rate.  How does that effect your decision?)
18. Do you have any Sales or Marketing promotions on?  Did you have last year? What effected your strategy?
19. What are my expected cancellations?
20. Where are my bookings coming from i.e. which source?  brand site? third parties? weddings? tours?
21. Which room types do I normally sell on this day? At the weekends you might sell more suites so room types need to be evaluated
22. What is my current breakdown of rooms and does this differ from the trend?
23. What is my cost of sale?  Am I filling my hotel with rooms that are going to have a low profitability margin (take OTA commission and PPC campaigns into account as an example of cost)
24. What are the general market trends?  Is business generally on the increase or decline?
25. Has the country of origin switched for my guests? Has the currency shift impacted where my guests are travelling from?
26. What are my length of stay trends?  Are longer or shorter length of stays effecting the nights before or after the date in question?
27. Do I have Out of Order or complimentary rooms to consider?
28. What does your overall booking curve by segment look like?  Are the trends changing?
29. Are you running any social media campaigns that might impact your decision?
30. And lastly what is your budget? And I leave this to last as budget should only ever be used as a target. Good Revenue Managers will always know what they will achieve, so forecasted figures for a revenue team will be the real target

I have kept it to 30 points but in real terms a revenue system will be evaluating hundreds if not thousands of data points and trends. My tip for anyone wanting to seriously impact their bottom line would be to invest in technology. Allow tech to help you make those vital decisions.  But until then, I hope this helps...Happy forecasting!(and for all things revenue, just ask@rightrevenue.wpengine.com)