What Is Hotel Demand Forecasting And How To Do It
Before you start a business and after, you need to identify and forecast where your business will go. Demand Forecasting is the heart of business management. Forecasting comes naturally when you have certain goals set for your business, without which it will not succeed.
Hotel demand forecasting uses historical customer data to determine the guests' future demand for room nights. This helps in managing the room inventory in an organized and optimal manner.
It is one of the most important aspects for hotels since other predictions such as turnover, profit margins, cash flows and capital expenditure and risk assessments are derived from hotel demand forecasting.
Let us understand the different aspects of hotel demand forecasting and how you can perform them.
Types Of Hotel Demand Forecasting
Let us now understand the various types of hotel demand forecasting. They play an important role in the hotel business.
1. Operating Forecasting
Operating Forecasting predicts the various operations needs of the hotel, for the housekeeping, FNB, and Front Desk. It deals with:
Housekeeping staff for maintaining and cleaning the rooms
Number of guests walking in the reception area
Number of guests using the hotel restaurant
Purchase of both perishable and non - perishable cooks.
The operating forecast helps keep track of the requirements of hotels for operations and providing service.
2. Financial Forecasting
Financial Forecasting involves predicting the expenses and the revenue-generating from the hotel business. It involves forecasting the various costs related to rooms, perishables, marketing, amenities, and maintenance. The revenue generated from the hotel business involves that of hotel rooms and amenities such as spa, restaurant, bar etc.
3. Revenue Management Forecasting
Revenue Management involves keeping track of guest demand and adjusting the pricing and policy strategies accordingly. When customer demand rises and falls for the hotel, the hotels perform yield management to take care of short-term revenue.
When demand changes due to seasonality and long-term trends, revenue management becomes a broader exercise involving, overall strategy, pricing, amenities pricing, cancellation policies, etc. It is one of the most important types of hotel demand forecasting.
How To Do Hotel Demand Forecasting?
Let us now discuss the various ways by which you can perform hotel demand forecasting. By following these methods, hoteliers will be able to predict the performance of their hotels in terms of operations, finance and revenue management.
1. Lay Down Objectives
The first step toward hotel forecasting is to lay down the objectives. Where do you want your hotel to be in a year, or 5 years, or even 10 years? These are some of the questions you need to ask when before you perform hotel demand forecasting.
Keeping these goals in mind, you can perform hotel demand forecasting by taking into account the marketing and operational strategies you will inculcate. If you are planning to change any of them, you need to take them into account too.
2. Data Collection
The most important step of demand forecasting is collecting data and lots of it. You can only forecast only if you have data in hand. Based on data, you can make changes to the strategy and then predict the results after these changes. The various types of data are:
Historical Data: Historical Data includes past sales and revenue, expenses, number of guests, booking patterns, and lead time.
On The Books Data: One The Books Data measures how occupancy or revenue is booked at the hotel.
Forward-Looking Data: Forward-Looking Data is used to forecast future business performance. For example, how much revenue a hotel has got and how many rooms are left to sell.
3. Evaluate And Analyse Data
After you have collected all the data, it is important to measure, evaluate and analyze the data. For example, you have collected data on the room nights booked per week. You then evaluate the data and realise that you don't sell rooms on weekdays.
4. Trend Projections
Trend Projections are another important exercise for hotel demand forecasting. For example, this year, you had a lot of guests opting for camping accommodations. However, 1 or 2 years from now, you will not be getting the same number of guests. Why? Maybe guests will demand more glamping options. Prepare accordingly.
5. Conduct Marketing Research
Marketing research on a regular basis will help your business grow. Market research is all about understanding the market and its emerging trends. With the help of current data, you can predict future demand.
You can use customer surveys and put out surveys for the general public as well. With Market Research, you can also formulate hotel guest personas for effective targeting and marketing.
6. Take Holidays And Season Into Account
Holidays and seasonality determine hotel demand. During the off-season, you will have lower demand and during peak season, you have better chances of achieving full occupancy. Hotel Demand Forecasting involves planning for both the season and gaining as much revenue as possible.
7. Hotel Budget
Hotel Budgeting can make or break your hotel. Before you intake demand, you need to check your supply. For example, if you have 5 rooms and there is a demand for 10 rooms in your location, you need to check whether you have the budget you expand.
To Conclude, hotel demand forecasting involves consideration of several factors such as data, market research, holidays, seasonality, and various other factors. To make the most out of your room inventory, ones needs to be aware of the various trends and the fluctuations in demand and trends.
Bigfoot Hospitality is here to help you with all the aspects related to Hotel Management and Hotel Marketing. Read our blogs to know more about the hospitality industry.
Hotel Demand Forecasting - Frequently Asked Questions
What is hotel demand forecasting?
Hotel demand forecasting involves predicting the demand for room inventory based on existing data and emerging trends. Market demand plays a key role in forecasting demand for hotels.
What are the various costs incurred by hotels?
The various costs incurred by hotels are on food and beverages, cleaning equipment, maintenance, toiletries, staff, beddings, staff, administration, tableware and more. All these costs are recurring in nature, meaning, they have to be incurred every time.
What are the types of hotel demand forecasting?
The types of demand forecasting for hotels are revenue forecasting, financial forecasting and operations forecasting.