Forecasting

These forecasts are important to the rest of the hotel

because they help plan for:
Asset allocation
Staffing levels
Inventory availability

The primary message of the forecast is occupancy

percentage.
Forecasting Factors
Forecasting is a time-sensitive process.
The reservations forecast is quite accurate in the
short term, and less so long term.
History plays a big part in forecasting future
occupancies. Historical transient data is best
reflected in the transient booking cycle.
The transient booking cycle and group worksheet
provide the basis for the forecast.
Forecasting
Since short-term forecasts are the most accurate, the
time frames forecasted most often are:
3 Day
7 Day
10 Day
14 Day

Longer term forecasts are run:

30 day (or comparable cutoff date)
90 day
12 Month Rolling-Annual Budget/Marketing Plan
 Forecasting Room Availability
Front office managers do this as short-term planning to
know the number of rooms available for future
reservation
It helps to manage the room inventory effectively as the
number of rooms are fixed
The forecasted availability and occupancy numbers are
important to the daily operations
It is the foundation for making room pricing decisions,
set room aside for OOO for maintenance or deep
cleaning as well as for HR planning for the entire room
& food division
 Forecasting Room Availability
Skill of forecasting is complex and can be acquired
through experience, effective recordkeeping and
accurate counting methods
Following types of information can be helpful in
room availability forecasting:
A thorough knowledge of the hotel and its
surrounding area
Market profiles of the constituencies the hotel serves
Occupancy data for the past several months and for
the same period of the previous year
 Reservation trends and a history of reservation lead
times (how far in advance)
A listing of special events scheduled in the surrounding
geographic area
Business and historical profiles of specific groups
booked for the forecast dates
The number of non-guaranteed and guaranteed
reservation and an estimate of the number of expected
no shows
The percentage of rooms are already reserved and the
cut-off date for group room blocks held for the forecast
dates
 The room availability of the most important
competing hotels for the forecast dates (as
discovered by blind calls)
The impact of citywide or multi-hotel groups and
their potential influence on the forecast dates
Plans for remodeling or renovating the hotel that
would change the number of available rooms
Construction or renovating plans for competitive
hotels in the area
Forecasting Data

The process of forecasting room availability generally relies

on historical occupancy data.
To facilitate forecasting, the following daily occupancy data
should be collected:
No. of expected room arrivals
No. of expected room walk-ins
No. of expected room stayovers(rooms occupied on previous
nights thatll continue to be occupied for the night in
question)
No. of expected room no-shows
No. of expected room understays
No. of expected room check-outs
Forecast Formula

Number of Rooms Available for Sale

Total No. of Guestrooms
- No. of OOO Rooms
- No. of Room Stayovers
- No. of Room Reservations
+ No. of Room Reservations % of No-Shows
+ No of Room Understays
- Number of Room Overstays
_______________________________________
Number of Rooms Available for Sale
Establishing Overstays & Understays

Understay rooms represent permanently lost room

revenue
Overstays may boost room revenues. It is a boon when
the hotel is not operating at full capacity
In order to regulate both, front office staff should:
Confirm or reconfirm guests DOD at registration
Present an alternate guestroom reservation form to
registered guest to overstay guests
Review guest history
Contact potential overstay guests, especially those who
have not left by check-out time
 Summary Slide
Determining Occupancy
Determining Availability Factors
Overselling
Yield Management
Yield Management Tools
Reservations Management
Forecasting Factors
Forecasting
Reservation Sales Mgmt.
Reservation Call Mgmt.
Reservation Sales Strategy

Figure 12-1
Determining Occupancy
Availability is determined by considering a number
of factors:
Current Number of Reservations
Historical Factors
Early Arrivals
Early Departures
Cancellations
No-Shows
Stayovers
Out-of-Order Rooms
Walk-ins
Overselling

Using the historical record, a hotel may oversell in

order to offset the effect of the minus (or
negative) factors that determine availability.
When a hotel aggressively oversells, and does not
have enough rooms for confirmed reservations, it
must walk the guest. A walked reservation is a
guest who must stay somewhere other than where
they were initially booked to be.
Yield Management
Incorporating principles of opportunity cost, and
the simple laws of supply and demand,
reservations maximizes the revenue for remaining
rooms by using a pricing strategy called yield
management.
Using the hotels rate structure, the reservations
department can accelerate or slow down the pace
of transient room sales based on need.
The need is most often dictated by the group room
base.
Yield Management Tools
A rate trigger is a signal programmed into the
reservation computer system that instructs the system
to change the rate based on preset criteria. As
rooms are booked and others cancelled, different
rate triggers become active or inactive.
Length of stay restrictions include:
Closed to Arrival (CTA)
Minimum Length Stay (MLS)
Modified Length Stay (also called Min/Max)
Reservations Management

The reservations department in any hotel is

responsible for booking transient reservations and
providing occupancy data.
The process of booking transient rooms involves
sales management.
The process of gathering and determining the
occupancy data is called forecasting.

Figure 12-13
Reservation Sales Mgmt.
Proper staffing is crucial to maximizing revenue
and implementing yield management.
Reservations staff should be at peak levels during
prime selling time.
Incoming reservation calls are routed to available
agents via an Automated Call Distributor, which
also provides call volume reports on regular
intervals.
These reports aid in determining prime selling
time.
Reservation Call Mgmt.
The reservations department is often viewed as an
extension of the sales department. Knowledge of
the product (the hotel) is vital.
Since the agent is often the first hotel employee a
guest comes in contact with, he/she begin the guest
satisfaction process.

You can only make one first impression

Reservation Call Mgmt.
Hotel product knowledge should include:
Food and Beverage Outlet Information
General Hotel Information

General Vicinity of the Hotel (local area)

Since the agent is often the first hotel employee a

guest comes in contact with, he/she begin the guest
satisfaction process.
Crosstraining is a good way to allow the agents to
learn and grow professionally, while expanding their
hotel knowledge.
Reservation Call Mgmt.
The ACD aids in managing reservation calls by
measuring:
calllength
wait time

dropped calls

These measurements help compute the conversion

ratio of the number of transient bookings made vs.
the number of calls received.
Reservation Call Mgmt.
Proper phone voice, and verbiage used in transient
phone reservations include the following phrases:
How many people in your party?
Are you a member of our frequent stay program?
Have you stayed with us before?
Do you prefer smoking or nonsmoking?
What is your estimated time of arrival?
What credit card would you like to use?
Let me reverify this information for you.
Reservation Sales Strategy
The top down strategy is the most widely used.
This strategy has the agent quoting a rate for the
hotels best room type (i.e., most expensive), and
moving down to a lower rate, if not accepted. This
strategy is used in situations where the hotel wants
to drive the rate.
The bottom up strategy has the agent begin by
quoting a rate corresponding to the lowest room
type (least attractive or least expensive of the
available rooms).
Reservation Sales Strategy

The mid range strategy suggests that the agent

quote a rate from middle room type, going either
up or down a tier based on the guests acceptance
or opposition. Agents using this strategy have the
flexibility to tailor their approach to the guest and
the progress of the call. Experienced agents are
best suited for this strategy, as it requires
experience and the ability to implement either the
top down or bottom up strategies as needed.
 Front Office Budgeting
The most important long-term planning function

FOM is responsible for:

1. Forecasting Rooms Revenue

Use historical trend data

2. Estimating Expenses
Vary directly with rooms revenue
Payroll, laundry & supplies
 Forecasting Rooms Revenue
Forecasted Annual Rooms Revenue =

Rooms Occupancy Average

Available Percentage Daily Rate

Rooms Available = Total Rooms X 365 Days

 Forecasting Rooms Revenue Example

100 Room Hotel

100 x 365 days = 36,500 Rooms Available

75% Occupancy Percentage

.75
$50 Average Daily Rate

36,500 x .75 x $50 = $1,368,750

 Room Forecasting
Ten-Day Forecast
Done by FOM and Reservations Manager

House Count
Expected number of guests in the hotel
Divided into group and non-group

Three-Day Forecast
Updated with current information
Identifies changes in staffing needs
 Forecasting Room Availability
The most important short-term planning function
Hotel Occupancy History
The past few months and last year at this time
Reservation Trends
How far in advance are reservations being made?
Scheduled Events
City-wide conventions; sporting events, etc.
Group Profiles
Pickup history
 Forecasting Data
No-shows
Expected guests who did not arrive.

Walk-ins
Guests without reservations.
Overstays
Guests who stay beyond their departure date.
Understays
Guests who check out before departure date.
 Percentage Of No-shows
Number of Room No-Shows
Number of Room Reservations

Purpose:
Helps front office managers decide when
(and if) to sell rooms to walk-in.
 Percentage Of Walk-ins
Number of Room Walk-Ins
Total Number of Room Arrivals

Purpose:
Helps front office managers know how
many walk-ins to expect.
 Percentage Of Overstays

Number of Overstay Rooms

Number of Expected Check-Outs

Purpose:
Alerts front office managers to potential
problems when rooms have been reserved for
arriving guests.
 Percentage Of Understays

Number of Understay Rooms

Number of Expected Check-Outs

Purpose:
Alerts front office manager to additional
room availability.

20% of hotels charge understay guests

 Rooms Availability Formula
Total number of guestrooms
- Out of order rooms
- Stayovers
- Reservations
+ Reservations x no-show percentage
+ Understays
- Overstays

Number of Rooms Available for Sale

Rooms Availability Formula Example

150 Guestrooms
- 5 Out of Order
- 45 Stayovers
- 50 Reservations
+ 10% No-show
+ 5 Understays
- 20 Overstays

40 Rooms Available for Sale

 Establishing Room Rates
Marketing Positioning Statement
Room rates reflect service expectations to the hotels
target markets.

1. Market Condition Approach

2. Rule-of-thumb Approach

3. Hubbart Formula Approach

 1. Market Condition Approach
Common sense approach.

Often used, but has many problems.

Base room rates on your competitions rates.

Doesnt take into account new properties and construction

costs.

Allows the local market to determine the rate

 2. Rule-of-thumb Approach
Sets the minimum average room rate at $1 for each
$1,000 of construction & furnishing costs per room.
Assumes 70 % occupancy

$125,000 in construction and furnishings

- $125 room rate

Doesnt take inflation into account

Doesnt include other hotel services
 2. Rule-of-thumb Approach

Average per-room cost for hotel development:

Segment Per-room cost
Budget/Economy $52,800
Midscale w/o $85,600
Midscale with F&B $103,100
Full Service $165,900
Luxury/Resorts $516,300
 3. Hubbart Formula Approach
Bottom-upapproach
Begin with desired profit based upon expected Return on Investment
(ROI)
Calculate pretax profits, fixed charge, management fees, &
operating expenses
Estimate other departmental income
Determine the required rooms department income
Add expenses to get rooms department revenue
 3. Hubbart Formula Approach
Average Room Rate =
Rooms Department Revenue
Expected Number of Rooms Sold

Sets a Target Average Price

Lets you determine if your target is too high
You may have to finance the difference
 Evaluating
Front Office Operations

Occupancy Percentage
The most commonly used operating ratio

Average Daily Rate (ADR)

Average of all room types and rates

Revenue per Available Room (RevPAR)

Measures revenue capabilities of hotel
 Occupancy Percentage
Number of Rooms Occupied
Number of Rooms Available

What does rooms occupied include?

Rooms sold + comp rooms

What does rooms available include?

Use the rooms availability formula

2001= 59.20%
 Occupancy Percentage Example

Number of Rooms Occupied

Number of Rooms Available

Sold 95 rooms with 5 comps

150 room hotel with 25 out of order

95 + 5 = 100 =
80%
150 - 25 = 125
 Average Daily Rate (ADR)

Rooms Revenue
Number of Rooms Sold

Number of Rooms Sold includes comps

2001 = $83.48