Forecasting on sight

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Forecasting on sight

November 23, 2020, In Fairmas Blog

Why planning & analytical forecast processes are so important now.

Guest article by Haake Revenue4U on the importance of planning in turbulent times.

Birgit Haake, Haake Revenue4U

Autumn is traditionally the time when hotels plan and finalize their budgets for the next year. The hotel business is a cyclical business and strongly dependent on the socio- and macroeconomic environment. While MICE (Meetings, Incentives, Conventions & Events) and (international) business travel was more or less reliable drivers of demand for many hotels in the past, we are currently moving into unknown territory.

Currently, demand is driven by incidence figures, reproduction values and the associated restrictions and guidelines of governments worldwide, forcing hoteliers to constantly adjust their planning and “forecasting on sight”.

Forecasts establish strategies

A forecast is a prognosis of future developments. When it comes to predicting hotel demand, we can never really say that we know exactly what will happen, but rather what is highly likely to happen. The forecast quantifies the uncertainty of the future. Forecasts and planning help hotels turn intangible uncertainty into measurable risk. In hotel and revenue management, they are the basis for decision-making, and promising strategies require a large number of well-founded decisions.

The dilemma of historical data

Facts form the basis of forecasts. A forecast of the future is made on the basis of past and present data and booking speed. But what happens if the data and series of figures on demand and booking behavior of the individual market segment groups that have been collected with great effort in Excel over the years lose their relevance for current forecasts? More than ever, the individual input factors of the forecast require a different weighting (focus on recent trends) and other considerations that have so far often been neglected, such as the “uncertainty” factor, play an important role in the analytical forecast process.

Complicated vs. complex processes

Therefore, in times of machine learning, artificial intelligence (AI), predictive analytics and other buzzwords, it is surprising that numerous hotels gather their staff for manual statistics, trend analysis, planning and forecasting into Excel instead of strategic decision making and development. Equally surprising is that numerous hotels currently ignore their revenue management systems or even switch them off for cost reasons.

Digitalization requires enhanced skills and processes in hotel and revenue management. Large amounts of data from different sources must be converted into information in real time. IT systems and scientific revenue management systems are better suited for these complicated work processes than humans. The algorithms with their step-by-step, repetitive schema makes it possible to transform complicated facts into accurate information immediately. However, we often question this information and attach great importance to its explainability, i.e. the question why an algorithm decides this way and not another.

Instead, we should use our own human capabilities and take on more strategic roles. The insights and trend analyses provided help us to comprehensively manage the multitude of other influencing factors and the extent of their mutual interdependencies, i.e. the complex process.

The Flight Deck of the Hotels

Similar to the cockpit of a plane, the hotel should integrate instruments and tools with different core competencies and continuously monitor their outcome in order to intervene quickly and react to changes. While High Performance Revenue Management Systems and Market Intelligence Systems focus on forecasting demand in the lodging sector, providers of planning and financial software such as Fairmas consolidate the financial forecasting and planning process by integrating accounting data and other revenue streams. Moreover, they promote close and transparent collaboration between revenue management, sales, and finance.

In times of COVID-19, forecasting and planning are more difficult and important than ever. The option to create various what-if scenarios increases the transparency and flexibility of decisions.

Through a variety of tools and the use of AI, hotels can improve the speed and quality of forecasting and planning, develop current insights and trends for performance management and identify key business drivers. It helps to make the hotel more resilient and agile.

“REDUCE COMPLEXITY AND MAKE REVENUE MANAGEMENT A NATURAL DISCIPLINE IN YOUR ORGANISATION TO MAXIMIZE PROFIT.”

This is the mission of Birgit Haake. As an experienced consultant, she has been supporting hotel businesses for many years with targeted training offers as well as consulting and ongoing support in the development and expansion of an integrated revenue management concept.