Forecast is an important part of any Revenue Management strategy, allowing vital pricing, promotion or distribution decisions to be made based on demand and expected performance. In this article, we've looked at some useful Forecast tips that can help improve a Revenue Management strategy.

What is Forecast?
Forecast is a tool that can help us anticipate future business performance, better preparing us to deal with future uncertainty in the management process. Using past performance data, industry trends and other information available to us, we are able to make informed projections about key metrics (KPIs) such as occupancy rate, average price and total revenue. Ultimately, the purpose of Forecast is to give hotels a better understanding of how they will perform in the future so that necessary adjustments can be made.

The importance of Forecast
The ability to create Forecasts can be incredibly useful for managing a hotel, as it allows you to forecast future performance. That, in turn, means we can make more accurate financial decisions, be better prepared for any financial issues, and make adjustments to maximize revenue and minimize damage. For example, Forecast can allow hotels to adjust prices based on demand, focus sales on different segments or make changes to their marketing strategy in order to attract more customers of a certain type.

The 6 Tips for a Proper Forecast

1. Questions / Hypotheses
What is the expected pickup? Based on historical trends, how and when will certain events affect us? Are there events in the city? What is our competition's demand and supply? These are all questions that we are looking for answers to and that will help us to prepare an improved Forecast.

2. Data Collection
With the help of reports (PMS, Channel Manager, RMS), it is important to obtain information about our historical performance (cancellations, no-shows, room nights, ADR, RevPAR, average stay, etc).

3. Data Organization
The objective here is to organize the data collected in order to create or identify consumption patterns and market trends.

4. Data Analysis
For this analysis, before we break down the data by market segment, it is essential to understand the performance of our individual and group business. From here, we start to extract information such as search, group wash, expected pickup, special events, among others.

5. Recommendations and Decisions
Identify opportunities, peaks, gaps and decide which path to take. Which market segment is most productive? What interests us to work more? Is our strategy to develop the occupation more and more or work to achieve a certain average price? The answer to these questions determines what kind of Revenue Manager we are and how we will work.

6. Act
With all the previous work done, we can implement our strategy. We must constantly monitor the Forecast (and revise it when necessary), identify demand spikes, opportunities, special events and develop strategies. By measuring its impact, we can begin to act according to the demand for our hotel, our competition and our surrounding market.

We believe that by following these steps, not only can you improve the quality of your Forecast, but also, consequently, improve the overall performance of your hotel.

Our Introduction to Revenue Management trainings deepen this topic in order to equip trainees with the tools to implement processes effectively.