Chapter 6 | Forecasting

Question 1

6 major reasons that hospitality firms need forecasting

Answer 1

1. Prediction of future sales volume is necessary for planning, which is a major function of management
2. It is the foundation of revenue management - room rates, booking limits, overbooking, stay controls are all based on the “future” demand.
3. It helps staff scheduling
4. It provides information for operations budgeting
5. It provides references for financing & capital planning
6. Reduction of forecast error can translate into an increase in revenue

Question 2

3 Typical types of Forecast

Answer 2

Occupancy
Revenue
Demand

Question 3

Other types of forecasts

Answer 3

1. The demand of high-value customers
2. Demand over time - booking curve
3. Group booking
4. Price Sensitivity
5. Cross-selling and up-selling probabilities
6. Cancellation probability
7. No-show probability

Question 4

Five basic steps to conduct forecasting

Answer 4

1. Collection of data
2. Cleaning of Data/Unconstraining of Censored Observations
3. Estimation of Forecasting Model from Data
4. Generation of Forecast for Each Product Category
5. Evaluation of the Accuracy of Forecast/Providing Feedback to Users

Question 5

Three aspects of constrained demand

Answer 5

1. Booking limit
2. Room rate
3. Purchase restrictions

Question 6

How is unconstrained demand different?

Answer 6

Unconstrained demand gives a more accurate forecast

Question 7

What is historical data and when do you use it?

Answer 7

Utilizes full information of past demand and is used if you don’t have advanced booking (restaurants)

Question 8

What is advanced data and when do you use it?

Answer 8

Utilizes partial information for future demand and is used if reservations are a large part of your operation (hotels)

Question 9

Seven major factors to consider after quantitative forecasting

Answer 9

1. Past sales levels and trends
2. General economic trends
3. Industry specific factors
4. Political and legal events
5. The company’s planned policies
6. Competitor actions
7. Market research studies

Question 10

What are the two major qualitative forecasting methods?

Answer 10

Market research: gather info from potential customers/similar operations
Delphi method: formal process conducted with group of experts to achieve consensus on future events as they affect the company’s markets

Question 11

When should you use qualitative methods?

Answer 11

1. When the business is brand new and has no quantitative data
2. Helps to understand the background of quantitative data
3. Works best when based on quantitative method
4. Produce your forecast based on quantitative methods and adjust based on qualitative