Forecasting with Confidence 

A crucial part of revenue management is knowing when to set your pricing strategies. As the old saying goes “Revenue management is selling the right room, to the right guest, for the right price, at the right time.” However, it has become increasingly difficult to determine what the “right time” is. Every hotel and every market has a “booking window”, which is the time frame where you will see the majority of your pickup. In recent years, this booking window has been in constant flux due to a variety of factors. Primarily, guests are becoming more savvy and utilizing the knowledge that the longer they wait, the lower the rates will be. In short, they are booking closer and closer to their day of arrival. 

These shifts make it increasingly challenging for revenue managers to effectively forecast and set pricing strategies. When it comes to forecasting, accuracy is paramount. With these ever shifting booking windows, this becomes more and more difficult. While the ongoing effects of COVID-19 are unique, this trend actually dates back a few years. As early as 2016, large markets such as New York City had seen booking windows shrink to within 30 days of arrival. By 2019, this number shrunk to within 14 days of arrival. This was also true in the European market, in August of 2019, Accor hotels reported that 60% of all European bookings were made only 5 days in advance. Similarly, according to a study by Hyatt, by June 2020 65% of all their bookings were made within 4 days of arrival. Hyatt’s CEO referred to this trend as “the shortest booking window that the company has ever seen.”

Trying to Rewrite History

Typically, one of the major keys to producing an accurate forecast is to review historical data for the period you are forecasting. This is where the process of trying to determine the future results begins. However, the historical patterns that we relied on may no longer be valid. It goes without saying that our data from 2020 is mostly irrelevant due to the impact of COVID-19. The challenge now is to identify the trends that you can count on. In response to the shortening booking windows, it may be more beneficial to review patterns versus last month or even the previous week. 

Another approach is to use predictive, forward looking data to deliver a clearer picture of incoming demand. Using Avalon’s week over week or custom time frames can help you identify trends in demand and determine when and where it is coming from. Utilizing the data that is held within your own PMS can help you gain insight on pace, customer segments and help you identify rate opportunities. Whether you are utilizing one of the more popular systems such as Opera PMS or another system, Avalon can seamlessly integrate and allow you to maximize the knowledge you can gain from your data.

Where Do I Begin?

You may be asking yourself, with all the changes in the market and historical data, where do I even begin forecasting my hotel? While there may be many answers to this question, what we do know for sure is that you will be revising it many times! 

In the early days of the pandemic, hotels were forecasting and reforecasting on a daily and even a weekly basis. Fortunately, Avalon supports multiple budgets and forecasts, allowing for as many revisions as necessary. During these uncertain times, this is a crucial feature for any revenue management system. This flexibility allows for the implementation of multiple revenue management strategies. Hoteliers can quickly adapt to changes in market conditions and internal demand. Avalon’s system allows you to create “living” forecasts and budgets that can be adjusted along with the fluctuating changes and not bound by month end deadlines. 

Additionally, the ability to upload segmentation data directly from your PMS system will allow you to forecast via these specific channels. These alternative ways of forecasting allows the documents to be utilized as a strategic tool, instead of simply a reporting vehicle. This approach facilitates the adjustment of tactics mid-month versus waiting until the next reporting period. The ability to do this will allow for more effective yield management and make a substantial difference to the bottom line. 

A unique feature of Avalon is the inclusion of rate shopping of your competitors which allows hotels to optimize their revenue management strategies. Access to real-time competitive rate changes combined with direct access to internal hotel performance gives your revenue team unique knowledge of market positioning. This information will be crucial to outperforming your comp set on the STR report. Systems such as OTA Insight offer similar functionality, however the added benefit of having all this information in one place allows you to make faster decisions. 

The Benefits of Forecasting 

Forecasting is the first and most crucial step of the revenue management process. We need to set a course for where we are headed! As such, sustained accuracy will likely lead to more accurate and profitable decisions. Most importantly, this will generate superior performance over your competitors in the long run. Hotels should utilize the Avalon functionality to create aggressive, moderate, and conservative scenarios for recovery. These guidelines will help to develop a plan of action that can be shared with hotel leadership. As the systems are cloud based, this information can be disseminated seamlessly and avoid unnecessary meetings. 

With the entire hospitality industry struggling to maintain staffing levels, it is imperative that time is managed effectively. The flexibility of the documents also allows for “what if” scenarios to be played out quickly and gives the entire team clarity on how the actions taken will result in achieving the overall hotel goals. Forecasting can be a daunting task, especially in a tumultuous market. However, utilizing the right tools can take some of the guesswork out of the process leading to more efficient, effective and profitable results.