Forecasting for Revenue Managers

Question 1

Summary vs By Channel/Segment

Answer 1

Total forecast vs a granular analysis

Question 2

Constrained vs. Unconstrained

Answer 2

A constrained forecast caps demand at the available room inventory of the hotel, but an unconstrained forecast provides a much better representation of demand by day.

Question 3

Room Nights Forecast vs Arrivals Forecast

Answer 3

Room nights remains the standard unless there is an automated system being used to calculate and arrivals forecast.

Question 4

What (2) steps are there to “Constructing a Forecast”

Answer 4

1. Begin with historical data from prior years and months to estimate future demand
2. As a date approaches measure booking pace in the form of booking curves

Question 5

What are the (2) different “Booking Curves” methods?

Answer 5

1. The pickup method: Records the cumulative room nights booked for that day throughout the booking window.
2. The velocity method: Standardizes the graph so that days with different final occupancies can be compared; therefore, the line reflects the percentage of final room nights as opposed to the actual number of room nights.

Question 6

Booking Matrices

Answer 6

Organize the data by day of week and average using a baseline timeframe to determine the average percentage committed by DBA (Days Before Arrival).

Question 7

Evaluating Forecast Accuracy

Answer 7

The most overlooked step in forecasting is the evaluation after the fact.

1. Mean Absolute Deviation (MAD): Measures the average error in terms of room nights
2. Mean Absolute Percentage Error (MAPE): Measures the average error as a percentage.

Question 8

Calculating MAD and MAPE

Answer 8

1. Subtract the forecast values from the actual values to find the variance for each period
2. Take the absolute value of the variance for each period so that the values are positive numbers
3. Average the absolute values to calculate the MAD
4. Divide the MAD by the average of the actuals to calculate the MAPE

Question 9

Optimal Channel Mix

Answer 9

Ideal mix of business from each channel that results in optimal profitability for a hotel, given its position in the marketplace relative to its competitors, taking into account its physical configuration, amenities and condition, management quality, brand strength, marketing prowess, and consumer perception.