Why should the hotel general manager care about forecasting?
13 April 2023
Forecasting is the fastest way to financial success for a hotel. All stakeholders in a hotel are dependent on an accurate forecast to be able to perform their jobs satisfactorily. The revenue manager is the most qualified person to make volume (rooms and guests) and revenue forecasts and should, therefore, regularly provide all roles and departments with accurate forecasts. One forecast for all instead of departments spending time making forecasts.
Many hoteliers think forecasts are unnecessary because the dynamics constantly change, so there will never be an accurate forecast. The main reason for forecasting is not competition in accuracy; it is to use the forecasts for planning to achieve a healthy profit. There are so many benefits from forecasting in hotels, so there should be no doubts about why hotels should forecast. Here is a comprehensive list of benefits for many different roles in a hotel, including a few action points for each role.
What's in it for the owner?
As the hotel owner focused on maximizing the return on investment (ROI), forecasting is critical in helping you achieve your goals in several ways.
- Informed decision-making: Accurate forecasting provides insights into market trends, demand patterns, and financial performance, enabling you to make data-driven decisions about pricing, inventory management, and resource allocation that directly impact your ROI.
- Cost optimization: Forecasting helps you identify areas for cost optimization across various departments, allowing you to implement cost-saving measures and improve the hotel's overall profitability.
- Revenue enhancement: Accurate demand forecasting enables you to capitalize on opportunities for revenue growth, such as dynamic pricing, targeted marketing campaigns, and strategic partnerships that can positively impact your ROI.
- Investment decisions: Forecasting informs your decisions about capital investments, such as property renovations, expansions, or acquisitions, ensuring that you allocate your resources to projects with the highest potential for ROI.
- Risk management: Forecasting helps you identify potential risks and develop contingency plans to mitigate their impact on your investment, protecting your financial interests and ensuring the hotel's long-term success.
- Performance measurement: Regularly analyzing financial data using forecasting allows you to monitor the hotel's performance against financial targets and benchmarks, evaluate the effectiveness of your strategies, and adjust your approach to maximize ROI.
- Strategic planning: Forecasting enables you to develop long-term strategic plans for your hotel, such as market positioning, growth strategies, and sustainability initiatives contributing to increased profitability and ROI.
- Stakeholder communication: Providing accurate financial forecasts to investors, lenders, and other stakeholders can improve their confidence in your ability to deliver strong financial performance and maximize the return on their investment.
- Collaboration with management: Accurate forecasting allows you to work closely with your hotel's management team to develop cohesive strategies and promotions that drive revenue, optimize costs, and improve guest satisfaction, ultimately contributing to a higher ROI.
As a hotel owner, effective forecasting is crucial for making informed decisions that contribute to the hotel's financial success and maximize your return on investment. By leveraging forecasting data and insights, you can implement strategies that optimize resources, manage risks, and enhance revenue, ensuring your hotel's long-term success and profitability.
The owner's action list
- Ask for an updated 12-month rolling forecast every month from the hotel management.
What's in it for the general manager?
General managers are responsible for the hotel's P&L in some hotel companies. In others, their primary responsibility is ensuring guest satisfaction. However, effective forecasting is crucial in enhancing the guest experience and ensuring the hotel's financial success. Here's how forecasting benefits the general manager from a guest satisfaction perspective.
- Optimal staffing: Accurate forecasting helps you determine the appropriate staffing levels to provide excellent service without over- or under-staffing, ensuring a positive guest experience.
- Inventory management: By forecasting demand, you can ensure that essential items like linens, toiletries, and food supplies are always available, contributing to guest satisfaction.
- Facility maintenance: Forecasting can help you schedule maintenance and renovations during periods of lower demand, minimizing disruptions to guests' stays.
- Personalized experiences: Understanding patterns in guest preferences and demand enables you to tailor your offerings, such as room packages, special events, or promotions, to better meet guests' expectations.
- Financial stability: Accurate revenue forecasting ensures the hotel has the necessary resources to invest in guest services, amenities, and staff training, ultimately contributing to a better guest experience.
- Proactive problem-solving: Forecasting allows you to identify potential challenges and develop contingency plans to address them, minimizing the impact on guests.
- Strategic decision-making: Forecasting can inform long-term decisions about hotel expansion, renovation, or rebranding, which can improve the guest experience and attract new clientele.
While spending time with guests and focusing on their satisfaction is essential, forecasting is a critical tool that enables you to make informed decisions that directly impact the guest experience. Combining effective forecasting with a strong focus on guest satisfaction can create an exceptional environment that keeps guests returning to your hotel.
The general manager's action list
- Provide the owner with an updated 12-month rolling forecast every month.
- Ask the revenue manager for an updated 12-month rolling forecast every month.
- Ask the revenue manager for detailed day-by-day forecasts for the number of rooms sold and the number of guests to use for optimal staffing.
What's in it for the revenue manager?
As a revenue manager, your primary responsibility is to maximize revenue by attracting more guests and increasing revenue per guest. Forecasting is vital in helping you achieve these goals in several ways.
- Demand forecasting: Accurate demand forecasting helps you identify trends in occupancy, seasonality, and market conditions, enabling you to make data-driven decisions about pricing, promotions, and inventory management.
- Dynamic pricing: Forecasting allows you to implement active pricing strategies, adjusting room rates based on demand, competition, and other factors to maximize revenue during periods of high and low demand.
- Targeted marketing campaigns: Forecasting helps you identify periods of low demand and customer segments with growth potential, allowing you to create targeted marketing campaigns to attract more guests and increase revenue.
- Cross-selling and upselling: Accurate forecasting of guest preferences and spending patterns enables you to identify opportunities for cross-selling and upselling additional services and amenities, such as dining, spa treatments, or special packages, to increase revenue per guest.
- Optimal distribution mix: Forecasting can inform your decisions about the most profitable distribution channels, such as online travel agencies (OTAs), direct bookings, or group bookings, helping you to allocate resources effectively and maximize revenue.
- Performance measurement: Regularly analyzing revenue data using forecasting helps you evaluate the effectiveness of your strategies, identify areas for improvement, and adjust your approach to maximize revenue growth.
- Collaboration with other departments: Accurate forecasting enables you to work closely with other departments, such as sales, marketing, and operations, to develop strategies and promotions that drive revenue across all areas of the hotel.
As a revenue manager, effective forecasting is crucial for making informed decisions contributing to revenue growth and guest satisfaction. By leveraging forecasting data and insights, you can implement strategies that maximize revenue potential while maintaining high guest satisfaction.
The revenue manager's action list
- Provide the general manager with an updated 12-month rolling forecast every month.
- Provide operations with a detailed day-by-day forecast for the number of rooms sold and guests weekly for the next 6-8 weeks for optimal staffing.
- Ask the team (marketing, sales, reservations) for forecast input to improve accuracy.
- Follow up on forecasting accuracy every month to learn how to improve accuracy.
What's in it for the sales manager?
As a sales manager responsible for contracting corporate room nights, signing agreements with the travel trade, and closing deals for Meetings, Incentives, Conferences, and Events (MICE), forecasting is critical in helping you achieve your goals in several ways.
- Targeted sales efforts: Accurate demand forecasting helps you identify periods of low demand and untapped market segments, allowing you to focus your sales efforts on the most promising opportunities for revenue growth.
- Strategic negotiations: Forecasting data provides insights into the hotel's performance, enabling you to make informed decisions when negotiating contracts with corporate clients, travel trade partners, and MICE planners, ensuring mutually beneficial agreements.
- Optimal pricing and inventory allocation: Forecasting allows you to determine the best pricing and inventory allocation for corporate and MICE bookings, maximizing revenue and ensuring the hotel's ability to accommodate other customer segments.
- Lead generation and prioritization: By understanding market trends and seasonality, you can better prioritize your sales efforts, focusing on the hotel's most profitable leads and opportunities.
- Sales performance measurement: Regularly analyzing sales data using forecasting helps you evaluate the effectiveness of your strategies, identify areas for improvement, and adjust your approach to maximize revenue growth.
- Collaboration with other departments: Accurate forecasting enables you to work closely with other departments, such as revenue management, marketing, and operations, to develop strategies and promotions that drive revenue across all areas of the hotel.
- Proactive planning for MICE events: Forecasting can help you identify periods with the most significant potential for MICE business, enabling you to proactively target event planners and secure bookings.
- Budgeting and resource allocation: Accurate forecasting informs your sales budget, helping you allocate resources effectively to achieve your revenue targets, such as hiring additional sales staff, attending trade shows, or investing in marketing materials.
As a sales manager, effective forecasting is crucial for making informed decisions contributing to revenue growth and the hotel's overall success. By leveraging forecasting data and insights, you can implement strategies that maximize your sales potential and secure profitable contracts with corporate clients, travel trade partners, and MICE planners.
The sales manager's action list
- Provide the revenue manager with information about demand from corporate clients, travel trade partners, and MICE planners.
- Collaborate with the revenue manager to identify periods when the hotel would benefit from more MICE business, agree on rate structures for negotiated agreements, and discuss resource allocation to maximize revenue growth.
What's in it for the marketing manager?
As a marketing manager responsible for promoting the hotel brand based on guest needs, setting up campaigns to attract guests, and developing brand partnerships, forecasting is critical in helping you achieve your goals in several ways.
- Targeted marketing campaigns: Accurate demand forecasting helps you identify periods of low demand and untapped market segments, allowing you to create targeted marketing campaigns that appeal to the right audience and generate bookings.
- Optimal marketing budget allocation: Forecasting enables you to allocate your marketing budget more effectively, investing in the most promising channels and tactics that deliver the best return on investment (ROI).
- Data-driven decision-making: Forecasting provides insights into market trends, customer preferences, and booking patterns, enabling you to make data-driven decisions about your marketing strategies and tactics.
- Personalized marketing: By understanding guest needs and preferences, you can develop customized marketing campaigns that resonate with your target audience and drive bookings.
- Performance measurement: Regularly analyzing marketing data using forecasting helps you evaluate your campaigns' effectiveness, identify improvement areas, and adjust your approach to maximize results.
- Collaboration with other departments: Accurate forecasting enables you to work closely with other departments, such as sales, revenue management, and operations, to develop cohesive strategies and promotions that drive revenue across all areas of the hotel.
- Brand positioning: Forecasting can help you identify opportunities to differentiate your hotel brand in the market, focusing on the unique selling points and guest needs that set you apart from competitors.
- Brand partnerships: Understanding market trends and guest preferences through forecasting can guide you in identifying potential brand partners whose values, products, or services align with your hotel brand and can contribute to a stronger brand image and guest experience.
As a marketing manager, effective forecasting is crucial for making informed decisions contributing to the hotel's brand visibility, guest satisfaction, and revenue growth. By leveraging forecasting data and insights, you can implement targeted and data-driven marketing strategies that resonate with your audience and drive bookings.
The marketing manager's action list
- Provide other departments in the hotel with information about guest needs and preferences.
- Collaborate with the revenue manager to identify periods when the hotel would benefit from attracting more guests to create and plan campaigns with a high return on marketing spend.
What's in it for the CFO/Business Controller?
As a CFO or Business Controller responsible for budgeting, financial planning, business control, and profit maximization, forecasting is critical in helping you achieve your goals in several ways.
- Budgeting: Accurate forecasting provides the foundation for creating realistic budgets, allowing you to allocate resources effectively and set achievable financial targets for the hotel.
- Financial planning: Forecasting helps you anticipate future revenue streams, costs, and cash flow, enabling you to develop long-term financial plans and strategies for growth and profitability.
- Business control: Regularly analyzing financial data using forecasting allows you to monitor the hotel's performance against budgets and financial targets, identify deviations, and implement corrective actions to stay on track.
- Profit maximization: Forecasting enables you to identify opportunities for cost optimization and revenue enhancement across various departments, helping you make informed decisions that contribute to the hotel's overall profitability.
- Risk management: Accurate forecasting helps you identify potential financial risks, such as market downturns or unexpected expenses, and develop contingency plans to mitigate their impact on the hotel's financial performance.
- Investment decisions: Forecasting provides insights into the hotel's financial health and potential growth opportunities, guiding you in making informed decisions about capital investments, such as renovations, expansions, or acquisitions.
- Stakeholder communication: Providing accurate financial forecasts to investors, board members, and other stakeholders can improve their confidence in the hotel's management and its ability to deliver strong financial performance.
- Collaboration with other departments: Accurate forecasting enables you to work closely with other departments, such as sales, marketing, and operations, to develop cohesive strategies and promotions that drive revenue and optimize costs across all areas of the hotel.
- Compliance and reporting: Forecasting helps ensure timely and accurate financial reporting, maintaining compliance with regulatory requirements and providing essential information for decision-making.
As a CFO or Business Controller, effective forecasting is crucial for making informed decisions contributing to the hotel's financial stability, growth, and profitability. By leveraging forecasting data and insights, you can implement strategies that optimize resources, manage risks, and maximize profits, ensuring the hotel's long-term success.
The CFO/Business controller's action list
- Collaborate with the revenue manager for budgeting, forecasting, and financial planning to increase accuracy in financial reporting and future outlook for the hotel.
- Provide management with accurate financial reporting, analysis, and future outlook to make better resource allocation and investment decisions.
What's in it for the housekeeping manager?
As a housekeeping manager, your primary responsibility is to ensure a clean and comfortable environment for guests in their rooms. Forecasting can help you optimize your department's operations, enhancing the guest experience in several ways.
- Staff scheduling: Accurate forecasting allows you to schedule the correct number of housekeeping staff based on anticipated occupancy levels, ensuring timely room cleaning and turndown service without over- or under-staffing.
- Inventory management: By forecasting demand, you can ensure sufficient linens, towels, guest amenities, and minibar items, reducing the risk of shortages that could negatively impact guest satisfaction.
- Training and development: Understanding occupancy trends allows you to schedule staff training during periods of lower demand, ensuring that your team is well-equipped to meet guest expectations and deliver exceptional service.
- Budget control: Accurate forecasting helps you manage your department's budget more effectively, allowing for better allocation of resources to critical areas such as cleaning supplies, equipment, and staff wages.
- Maintenance coordination: By anticipating periods of high and low occupancy, you can coordinate with other departments to schedule routine maintenance or deep cleaning, minimizing disruptions to guests.
- Sustainability initiatives: Forecasting can help you identify opportunities to implement environmentally friendly practices, such as reducing water and energy consumption through efficient laundry and cleaning, which can contribute to a positive guest experience.
- Proactive problem-solving: With accurate forecasting, you can identify potential challenges, such as increased demand during special events or seasonal fluctuations, and develop contingency plans to address them, ensuring a seamless guest experience.
Forecasting is crucial in helping you manage your housekeeping department efficiently and effectively, directly impacting the quality of service and overall guest experience. In addition, by leveraging forecasting data, you can make informed decisions supporting guest satisfaction and the hotel's financial success.
The housekeeping manager's action list
- Ask the revenue manager for current forecasts for rooms and guests to optimize staff scheduling, inventory management, and maintenance coordination.
- Collaborate with the revenue manager for long-term major maintenance and staff planning.
What's in it for other roles in the hotel?
Forecasting can benefit various hotel departments and roles, contributing to efficient operations, guest satisfaction, and revenue growth. Some of the roles that can benefit from forecasting include.
- Food and Beverage Manager: Forecasting helps anticipate demand for dining outlets, catering, and events, allowing for optimal staffing, inventory management, and menu planning to minimize waste and maximize profitability.
- Front Office Manager: Forecasting allows efficient staff scheduling and capacity planning, ensuring smooth check-in/check-out processes and high-quality guest service.
- Reservation Manager: Accurate forecasting helps the reservation team manage room inventory effectively, allocate rooms to different market segments, and optimize distribution channels.
- Human Resources Manager: Forecasting can inform staffing requirements and scheduling, training and development plans, and employee retention initiatives, contributing to a well-trained and motivated workforce.
- Maintenance and Engineering Manager: Forecasting enables the scheduling of preventive maintenance, repairs, and renovations during periods of lower demand, minimizing disruptions to guests and ensuring well-maintained facilities.
- IT Manager: Accurate forecasting helps identify the need for technology investments, such as software upgrades or new systems, to enhance guest experience and streamline operations.
- Security Manager: Forecasting can help anticipate periods of high demand or potential security risks, enabling the implementation of appropriate security measures to protect guests, staff, and property.
- Spa and Wellness Manager: Forecasting can inform staff scheduling, inventory management, and promotional planning, ensuring optimal guest experiences and revenue generation for spa and wellness facilities.
- Event Manager: Forecasting helps schedule and plan events, such as weddings, conferences, or exhibitions, ensuring the availability of resources, staff, and facilities to deliver successful events.
By incorporating forecasting into their daily operations and decision-making processes, hotel staff across various departments can optimize their resources, enhance guest satisfaction, and contribute to the hotel's overall success.
Significant benefits for independent hoteliers
Forecasting is a natural part of running the business for professionally managed hotels. It brings all the benefits above for all positions and departments in a hotel to grow revenue and maximize profits. However, many independent hoteliers run their hotels based on experience and gut feeling, so why spend time forecasting in a world that constantly changes and is difficult to predict? Are there any convincing benefits for the independent hotelier to start forecasting? Here are five massive benefits that would make the most stubborn independent hotelier consider getting started with forecasting.
- Cash management: Forecasting enables the independent hotelier to balance the revenue and costs to maintain a healthy cash level in the company. Running out of cash is the worst nightmare for any business person.
- The bank and investors: Providing accurate financial forecasts to the bank and investors can improve their confidence in the hotel's management and its ability to pay back loans and deliver a healthy return to investors.
- Cost control: Forecasting allows the independent hotelier to keep a tight grip on costs by optimizing staffing and scheduling, identifying areas for cost savings, and implementing cost-saving measures, improving the hotel's overall profitability and resource utilization.
- Competition: Forecasting helps identify opportunities for revenue growth instead of letting the competition steal your guests and revenue.
- Reputation: Forecasting helps allocate staff and other resources to deliver a superior guest experience and a higher review score. A bad reputation hurts the feelings of the independent hotelier, so this alone is an excellent reason to start forecasting.
Help getting started
Demand Calendar has excellent, user-friendly forecasting functions that will save time and increase forecasting accuracy. However, it is about more than just implementing a system for forecasting. It is equally important to create a solid easy-to-follow forecasting process. Here is the ideal forecasting process