Today, weather forecasting utilizes a bit more sophisticated science and advanced technology, and we depend on it daily. But imagine if meteorologists relied on gut feelings to complete their forecasts?
We'd often be caught unprepared by unexpected weather conditions—in the cold with no coat, in the rain with no umbrella, not to mention the risks to our property and safety.
The same is true of forecasting in the hospitality world. Marketing and revenue management rely on accurate demand forecasts to plan campaigns and optimize revenue. Operations uses forecasts to manage planning, buying and labor costs. And leadership and investors use forecasts to anticipate profits and optimize performance across the portfolio.
Yet today's forecasting methods are being applied to only part of the picture, and often the view is a bit foggy, leading to poor visibility and missed opportunities.
Revenue management has come a long way in recent years, so much so that we now call it a science. This means a lot of testing and observing, using proven methods and applications to make better decisions, and improving with each iteration.
A key aspect of revenue science is forecasting. Much like weather forecasting, revenue forecasting applies science, technology and data to predict future conditions.
And yet so much of this know-how is focused on rooms. Meanwhile, other important sources of revenue are being neglected, including food & beverage (F&B), meetings & events, retail, parking and ancillary revenue.
This is especially true of F&B. If F&B forecasting is done at all, it typically involves cutting and pasting last year's actuals or this year's budget and then adding (or subtracting) a few percentage points. It's hardly precise or reliable.
With so much data available to hotels today (in fact, F&B can generate up to ten times more data than rooms) there's no excuse for guesstimating, fudging or sandbagging (okay, there will always be some sandbagging), especially with so much opportunity to boost profits.
Imagine your hotel has a big group on the books that will occupy a large proportion of guest rooms, function space and restaurant capacity. Fantastic, right? Yes, but are you doing everything possible to leverage this demand?
Increasing rates for remaining guest rooms is a no-brainer, but what about other revenue? Perhaps you can increase fees for A/V and run a prix fixe menu in the restaurant.
If, on the other hand, the majority of meetings and meals will be held off property, you maximize profits by reducing operational costs, packaging unsold rooms with meals, spa treatments or recreation, and launching a promotion to attract local business.
Such tactics are common in rooms revenue management but rarely utilized to their full potential in other revenue streams. Yet even small tweaks to staffing can significantly boost profitability—particularly in F&B, where controlling labor costs can make the difference between a good and a great year.
It might even make the difference between earning your quarterly bonus or just missing it. Now that's a strategy you can take to the bank…literally.
Here are just a few ways to apply revenue science to total revenue forecasting:
By applying revenue science to total revenue forecasting, hotels move away from gut feelings and guesstimates to building data-driven strategies and decisions in planning, cost control and promotions, with the goal of driving higher profitability throughout the hotel and across the portfolio.
Whether it's time to make hay while the sun shines or to batten down the hatches when storm clouds are on the horizon, you'll always be better prepared with total revenue forecasting.
IDeaS Revenue Solutions
8500 Normandale Lake Boulevard, Suite 1200
Minneapolis, MN 55437
Phone: (952) 698-4200
Mike Chuma joined IDeaS in 2016, bringing more than 15 years of progressive experience in driving growth and strategy in enterprise SaaS technology, eCommerce platforms, brand management and marketing for companies ranging from start-ups to Fortune 500 organizations. In his most recent role with Digital River, Inc. as Senior Director, Global Product Management & Strategy, Mike held responsibility for global SaaS based ecommerce and subscriptions product platforms serving the software, subscriptions and online gaming markets. Prior to Digital River, Mike held strategic roles in eCommerce, multi-channel marketing and brand management for organizations such as Albertsons, Inc., SuperValu and Trinity Springs. Mike received his Bachelor of Business Administration degrees in Marketing & Finance from Boise State University.