The Importance of Demand

1
Forecasting

The only way to maximize long-term

revenue generation is to develop loyal
customers who prefer to buy from you,
even when lower-cost alternatives are
available to them.

~Hayes/ Miller
Chapter 6: Forecasting Demand
 The Importance of Demand
2
Forecasting

Accurate forecasts
are important for:

Schedul Purchasi Managi

ing ng ng cash
workers supplies flow

Chapter 6: Forecasting Demand

 The Importance of Demand
3
Forecasting
To forecast accurately, RMs use three types of
data:
Type of Information Describes
Events that have
Historical data
already occurred

Events occurring now or

Current data
in the very near term

Events that will occur in

Future data
the future
Chapter 6: Forecasting Demand
 The Importance of Demand
4
Forecasting
The Four Components of an Effective
Forecast
Insight

Effective
Future Historical
Demand
Data Data
Forecasts

Current
Data

Chapter 6: Forecasting Demand

 Historical Data
5

Trailing period

A data collection method characterized by

the act of discarding the oldest piece of
data in a data set when the newest data
are added, thus updating the set’s
information while keeping the set size
constant. Data contained in a trailing
Chapter 6: Forecasting Demand
period are often used in calculating a
 Historical Data
6

Rolling average

An average calculated by using historical

data generated during a changing time
period.

Chapter 6: Forecasting Demand

 Current Data
7

Occupancy and Availability

Reports
Minimum length of stay (MLOS)

A revenue management strategy that

instructs reservationists to decline any
room reservation request that does not
equal or exceed the predetermined
minimum number of nights allowed.
Chapter 6: Forecasting Demand
 Group Rooms Pace
8
Reporting
Group Rooms Pace Report
A summary report describing the amount of
future demand for a lodging property’s
group rooms and the rate(s) at which that
group business has been captured. Also
referred to as a group rooms booking pace
report.
Chapter 6: Forecasting Demand
 Group Rooms Pace
9
Reporting
Group Rooms Pace Report
Pick up

The proportion of previously reserved

rooms that are ultimately occupied.

Chapter 6: Forecasting Demand

 Group Rooms Pace
10
Reporting
Group Rooms Pace Report

For example: If 200 group rooms are

reserved and only 100 are ultimately
occupied, the pick-up rate is 50 percent

100 occupied ÷ 200 originally held = 50 %

pick up
Chapter 6: Forecasting Demand
 Group Rooms Pace
11
Reporting
Non-rooms Revenue Pace
A position or pace report should be
Reporting
prepared for any identifiable segment of
business that generates significant
revenues including income derived from
restaurants, bars, conferences, banquets,
spas and a variety of other operating
departments.
Chapter 6: Forecasting Demand
 Future Data
12

Factors Affecting Future

Demand
Demand generator

An entity or event that produces a

significant increase in business.

Chapter 6: Forecasting Demand

 Future Data
13

Factors Affecting Future

Demand
Demand drain

A circumstance that produces a significant

decrease in business.

Chapter 6: Forecasting Demand

 Future Data
14

Forecasting Future Demand

To best forecast future demand RM’s:

1. Know about special citywide or
area-wide events in the area that
affect demand

Chapter 6: Forecasting Demand

 Future Data
15

Factors Affecting Future

Demand
To best forecast future demand RM’s
(continued):
2. Understand demand for competitive
hotel properties in the area

Chapter 6: Forecasting Demand

 Future Data
16

Forecasting Future Demand

To best forecast future demand RM’s
(continued):

3. Consider the opening or closing of

competitive hotels

Chapter 6: Forecasting Demand

 Future Data
17

Forecasting Future Demand

To best forecast future demand RM’s
(continued):

4. Adjust demand forecasts quickly when

faced with significant demand-altering
events (i.e., unusual events, inclement
weather, power outages and airport or
highway closings)
Chapter 6: Forecasting Demand
 Future Data
18

The Misuse of Forecasts

Forecasts that are unrealistically low

Forecasts that are unrealistically high

Chapter 6: Forecasting Demand