Forecasting is a way for hotel managers to predict a number of key market indicators and customer behaviors, and is done using models that range from basic to very complex. It is also a strategic management tool for managers to gather more knowledge on visitor demographics and behaviors, as well as market trends. Forecasting models, moreover, can span any date range specified, including annual, monthly, and weekly forecasts.

What is Forecasting For?

The purpose of forecasting is to make future predictions that are as accurate as possible. These predictions can then be used to set room rates, schedule promotions, and manage group bookings.

Depending on the design of your forecasting model, hotels can predict arrivals, departures, number of nightly guests for a specified date range, and more. Forecasting in the hotel industry is used for everything from anticipating room bookings to predicted housekeeping costs.

Benefits of Forecasting

One major benefit of forecasting is identifying potential periods of low demand in advance. When a hotel knows that it might have challenges filling rooms during a particular period, it can adapt new strategies and identify proactive solutions to meet those challenges.

Limitations of Forecasting

In many respects, the accuracy of a forecast depends on the design of the forecasting model used.

How are Forecasting Models Created

Forecasting models can account for a number of factors. In a basic forecasting model, commonly used metrics include the number of rooms on the books, occupancy rate on the books, and expected pick up (number of anticipated bookings between current date and forecasted date). These metrics can be used to anticipate the number of room bookings and forecast occupancy rate for that date range.

A more advanced forecasting model will provide a more detailed breakdown of the metrics mentioned above. For example, rooms on the books will be broken down by guest demographic, and room pickups will include forecasting room nights and the average room rate.