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What is Forecasting?

Aug 19, 2013  By 

What is forecasting for a revenue manager?! Actually it is just one part of all his/her duties, BUT it is one of the most important one. I have seen lately many posts on linkedin groups, where forecasting as such, caught many peoples attention and where many asked ‘what is forecasting’, ‘how you do it’ or ‘what benefits you have by forecasting’ and other questions.

First of all, forecasting as said is one part of the job and also an important one, because forecasting keeps you doing a good job. This applies to all other industries and all other companies as well. Every company needs to forecast their revenues, productions or performances. They do it to keep track, for stakeholder reports, saving costs and/or increasing revenues by using the forecast the right and proper way.

A forecast is a guideline and a status quo calculation at a certain point of time. In hotels we usually do it once a week, for a time window of at least 90 days. So coming back to the entry question of ‘what is a forecast’; Forecasting more less is a measurement. A measurement?!

Let me explain you (even though most of the readers know what we do while forecasting) how we forecast:

We look at the current figures what we have already sold or on the books for a certain time period; most of the time hotels look at each month. After having those figures prepared, you have to work on the expected additional room nights and revenues – what will you still pick up for that particular month? Once you add up those figures, you will have a forecast, a momentum of revenues and of room nights for a certain period of time.

Many revenue people see forecasting as a duty, which they have to do and which they send to GM, executive team members or head offices and stop looking at those excel files, reports or tools after clicking the ‘SEND’ button in their email program.

BUT the art of forecasting is what differences a good from a weak revenue person… a forecast itself is so much more than just an excel sheet! It might sound stupid but it tells you the future AND the past…

A forecast report is a possibility to change a strategy AND a chance to improve existing strategies OR to completely implement a new strategy. A forecast is a control mechanism, which leads you to actions. If you see the budget (never the less revenue people don’t focus on budgets) as a goal and you have your latest forecast on hand, and then you compare both with each other – you see a result, which might vary from behind expectations, online with expectations and/or ahead of expectations. Depending on the result you can see if the team made so far a good job or not. If you are behind expectations in all segments – something goes completely wrong, or is the whole market suffering as well? Or was the budget a complete fail? Many questions are immediately popping up and leads you, as said previously to actions. If you wouldn’t do forecasting you wouldn’t even know where you stand. You can use the forecast to see your strengths and your weakness.

Let’s start with the weaknesses. If a forecast tells you, that you are behind expectations, you start evaluating what causes the weakness and you start optimising your previous set strategies, if there weren’t any, that might have caused your weakness.

If your forecast keeps you on par with the expectation, you might be happy and keep it that way or if you are the passionate one, you also see that as an opportunity and you look into improvements and slight changes.

If your forecast is telling you that your tools and strategies are in place and you sit with a big smile in front of your excel sheet, seeing all numbers in green, you might keep smiling and thinking – i am the best revenue person ;) – and lean back in your chair and dream the rest of the day. BUT I am telling you, still then, there is space to improve… If your segment(s) is (are) ahead, there is a big chance that you lose money, because you might not have your pricing optimised!!

I, personally, see in each scenario so many opportunities that my forecasts are my measurements for any strategies in place, leading me to (all) actions and make me, as a smart revenue person the ‘leader’ of the teams. By knowing exactly which segments is well or not well performing, I challenge the related teams to improve and to do the necessary changes. Some examples: If my FIT leisure segments are too weak – I challenge my Leisure Sales team – Are promotions in place? Are we feeding the right markets with promotions? Is our wholesale contract rate correctly priced? Group or MICE Sales team I will visit and ask my questions if our group segments are behind expectations. And this I will do with all other colleagues involved in our performance, E-Commerce, Reservations, Corporate Sales, MarCom, Events,…. Everybody can imagine for him/herself how much work and many time it takes to work on the outcome of a forecast.

Having now this full understanding and seeing the impact of a proper made forecast, I think you would agree that quite a time should be spent on forecasting and that most probably more people in your hotel or team should be involved in the process of forecasting, or AT LEAST in the analysis of the outcome, to improve the hotel performance.

If you would ask me now again this question ‘what is forecasting?’ – I would answer you as a summary: ‘if a revenue manager puts all his knowledge into the forecasting process, then forecasting is the HEART of your performance!!’

Article source lifeofrevenuemanager.com to continue reading Click here

About Uwe Gundlach

Uwe Gundlach

Uwe has been a hospitality professional for 15 years with 10 years of experience in Revenue Management. He has worked in Europe, Asia and in the Caribbean for both, hotel chains and standalone hotel properties, in different revenue

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