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Factors for designing the perfect forecast



Factors for designing the perfect forecast

By Neville Isaac, Chief Customer Officer

Tips to improve competitiveness by designing a forecast adapted to your product

Neville Isaac

Neville Isaac

In a competitive market it is essential to find reliable formulas that allow us to establish a pattern that will simplify the task of achieving our revenue goals. Market competition and the emerging Big Data phenomenon provide the ideal scenario in which to understand what influences the consumer’s decision-making processes and how a business can use this to its advantage. This does not mean exerting some kind of control over the customer, but understanding the market better in order to optimize processes and adapt products to the potential needs of an increasingly demanding customer.

Developing a forecast is conceived as a way of “providing information” to the revenue management department to forecast the income and variables that influence an establishment’s growth. The procedure for making an estimate of expected income for future periods involves studying growth in previous years, analyzing current booking processes, as well as parameters and future availability so as to transfer to the accommodation what should be the most competitive market.

Price variables such as competitor set, demand, brand focus, target, sociopolitical changes, past events that have affected positively or negatively and future events related to the sector, directly influence the reservation processes of consumers and, therefore, affect competitiveness.

Importance of forecasting

By forecast, we mean the prediction of demand during a certain time period. As specialists in hospitality, we look at elaborating a correct forecast to anticipate future performance and reduce uncertainty about what will happen in the coming months. By analyzing historical and current results, as well as market trends and consumer and competitor behavior, the hotelier can make projections using the main result indicators: occupation, average price, revenue per room, income, etc.

The goal of forecasting is to better understand where the business is going and make the necessary strategic adjustments to obtain greater profitability. In Revenue Management, we can predict demand through forecasting, which will simplify the task of making strategic decisions to optimize inventory and pricing in the aim of maximizing income and operating profit.

A forecast, broken down by consumer market segments, will make it easier to identify the most profitable customers, so that we can take specific action aimed at providing the best possible customer experience, and thus win the loyalty of the most interesting target audience. By focusing on demand prediction, we can establish pricing customization strategies, working from the point of view of Customer-Centric Revenue Management.

Developing a forecast is a job for the Revenue Manager: many use basic spreadsheets to tackle this task. Bear in mind that an inadequate forecast can lead to poor decision-making, and thus impact negatively on revenue and profit margins, therefore investing in technology is highly profitable in optimizing the process of collecting data, synthesizing information and making decisions.

Since the forecast provides medium and long term insights, the work of the Revenue Manager can be challenging especially since it needs to be done on a daily or weekly basis, especially if broken down by segments or by booking channels, in which case gathering information can be an arduous task.

The importance of forecasting has a direct impact on the market intelligence that we can apply to the day-to-day running of an establishment.

Preparing an adequate forecast

Given the high expectations regarding the importance of forecasting, it is important for us to lay down the elements that affect this model. Both data collection, and the human and technological ability to interpret them will be decisive when developing the forecast. True business forecasts consider the following data:

Historical Data

Collecting and analyzing operational data is essential for a correct estimation of demand, our understanding of demand being the number of potential customers who are willing and able to acquire our product at a certain price.

When talking about data, we are not only referring to the historical results, for example in a hotel, we may consider occupation, average price and income, but also to many other indicators provide information about the behavior of our customers in the past, and any situation or event that has impacted demand.

Breaking down data by segments, markets and marketing channels, will allow us to access a much more accurate analysis, so that we can identify which are the most profitable customers that can provide a sustainable improvement in hotel profit.

Current Data

It is essential to relate results from past periods to what is happening now. In this respect, it is necessary at this point to collect data regarding previous indicators for reservations that we already have confirmed and compare it with the same time for the previous year. This allows us to check whether demand behavior is similar to that in the previous year, and to detect whether there have been variations in trends.

If we know the existing offer for a destination, this will inform us about alternative products, their level of quality and their price-performance ratio. By using this information, we can identify our competitive positioning and the reasons why clients choose our hotel against those of our competitors.

Future data

Forecasting tries to predict the demand in a future period of time. We must therefore consider all the demand generators that we can predict and those we know will have an impact on our bottomline, either because they have already occurred in the past, which we expect to be repeated with a similar impact, or because they are new events which we know will generate demand peaks.

Access to information sources

The goal of forecasting is to estimate future demand as precisely as possible. Thus, we must make a comprehensive analysis of data and information from both inside and outside the hotel. The technological challenge is to access reliable and precise data sources that we will need at all times. Technology helps in this respect, allowing us to use different tools that will enable us to collect data and organize information.

Types of forecast

In order to reduce costs associated with excess expenditure and opportunity costs, it is crucial to establish a cross-sectional revenue system for different departments. To ensure that the forecast is suited to our predictions, it is important for to know the two types of forecasts available:

  • Demand forecast. This is the most important of the two, especially for perishable products like a hotel room.  We estimate demand by the type of room, market and segment, regardless of hotel capacity. It may so happen that we end up with an estimate of demand that exceeds the number of rooms in the hotel, because a demand generator at the destination triggers booking requests around that date or period (for example, a football match, a concert, or public holidays). In this case we talk about unconstrained demand or unlimited demand.

It is essential to know dates which we can predict an excess of demand, as this will affect the strategic decisions to optimize the hotel’s results. The opposite case is that of demand deficit: dates on which the forecasts tell us that there is not enough demand to fill the hotel. Identifying these dates is of equal importance when making decisions.

  • Capacity Forecast. The capacity forecast will allow us to estimate future income. According to the demand forecast, we can predict what part of that demand we will be able to accommodate and what income bookings will generate. If we have total expenditure statistics by segment, such as breakfast catch rate or average expenditure on food and beverages, we can also estimate income in other departments, while also predicting how resources and raw material needs will be allocated.

The capacity offered by these types of forecasts will determine the ability to react to different market situations. An information flow that feeds into decision-making in each of our departments will improve performance and satisfaction in a hotel that is connected to the needs of your market.

Forecasting phases

Developing an adequate forecast means implementing a well-structured and well-informed methodology by which to make decisions. Traditionally, this process has been developed manually. Currently, technology provides tools that aids in the capture, generation, calculation and implementation of conclusions regarding forecasts.

We propose a forecasting process that is designed in five well-defined phases:.

  1. Collect historical data:

Data about what happened in the past will help us to understand market movements. Traditionally, these data have been the cornerstone of any forecasting process, although this is currently getting more complicated, as decision-making processes can be enriched with new sources through which we can interpret the market.

  1. Identify causes:

Patterns for more complex market situations will allow us to estimate what associated problems may arise and estimate what approximate percentage the accommodation should assume. These kinds of eventualities are more pronounced when the distribution is more decentralized from our own booking channels, and that is where we will have to control these booking specifications.

  1. Demand behavior:

Identifying and developing strategies in the main market segments will make it easier to work on the needs of each of them with policies and totally differentiated products. This type of approach will help to be more precise and consistent with the peculiarities and perceptions of the different types of accommodation traveler:

  1. Compare:

Once historical and current data regarding demand behavior and our establishment’s performance indicators have been identified and analyzed, we must compare current trends with those of the previous year. Thus, we will be able to identify variations in trends and look for the causes, in order to make decisions about how to deal with the variations.

  1. Adjust forecasts

Compare your policies with the rest of the market. What had traditionally been done first becomes the final part of a process of study and analysis. Determining a competitive set for both products and destinations based on our hotel’s objectives will be crucial to see the position that we occupy in the market.

Objective quality vs online reputation

Nowadays, travelers can use multiple information tools to reserve a room in a market saturated with accommodation and information. With this is mind, and in the interests of competitiveness, all hoteliers and accommodation managers must understand the numerous factors that condition the booking/purchase processes, analyzing everything from the qualities of the hotel and the configuration of available services, to overall experience throughout the booking process: a full set of factors that influence the price the customer is willing to pay at all times.

Online reputation, which is based on post-stay opinions, is a way of measuring the degree to which the customer’s expectations of quality during the purchase process has been met. Fulfillment of expectations will be measured according to the extent to which these conform to the reality of the hotel, that is to say, its objective quality and how it communicates this, and the way in which this provides the consumer with a realistic perception of this quality.

Objective quality and online reputation are two factors that should be constantly fed back into the organisation, and then to what extent that the hotel has understood the needs of the market, levels of satisfaction of the traveler will be improved.

Beonprice has created the Hotel Quality Index (HQI®): the only index of the hotel market that measures the integral quality of a hotel to know the competitive positioning and the price elasticity in the market, depending on each of the traveler segments.

The HQI® takes into account more than 350 objective parameters such as location, hotel services, catering, room size, etc., as well as online reputation. This index summarizes customer-booking behavior taking into account the quality expectation of the establishment before and after the reservation. The HQI®, as an innovator in the market, will continue its evolution on the calculation of the price elasticity that the market accepts for each accommodation. That is, the key information so that the recommendation is much more precise in order to increase the net RevPAR.

The HQI® takes into account the different perception of quality in each customer segment, which will enable a hotel to identify the most profitable segments, and work on a day-to-day basis from the standpoint of a customer-centric revenue management. Thus, what we seek is greater customization of price, so that we can achieve loyalty through optimizing prices and reducing acquisition costs in the future.

Probability of sale

Identifying competitive positioning allows the accommodation to obtain a new indicator that will directly impact the forecast: the probability of sale.

Given that we have information about the price the customer is willing to pay for a certain standard of quality, and we know our level of quality plus competitor quality and price details, we can determine the probability that a customer will decide to make a reservation. This increases precision when preparing our forecast.

Considering the probability of sale constitutes a new approach to forecasting that was, until now, impossible, since there was no access to technology that would allow this analysis. It is a new way of working that provides greater precision when calculating the demand forecast.

We believe that the key to success lies in using artificial intelligence to manage Big Data and know the behavior of demand. Having the perception of the integral quality of each establishment by each segment will allow the business to define its competitive positioning at all times.

This very precise analysis of demand will enable us to know what price the customer is willing to pay to meet their expectation in order to calculate a probability of sale. From here, businesses can establish strategies to optimize results, based on live data obtained.

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Leon Black step downs as Apollo CEO after review of Epstein ties



Leon Black step downs as Apollo CEO after review of Epstein ties 1

By Mike Spector and Chibuike Oguh

NEW YORK (Reuters) – Leon Black said on Monday he would step down as chief executive at Apollo Global Management Inc, following an independent review of his ties to the late financier and convicted sex offender Jeffrey Epstein.

While Black, whose net worth is pegged by Forbes at $8.2 billion, will remain Apollo’s chairman, his decision to step down illustrates how doing business with Epstein weighed on the reputation of one of Wall Street’s most prominent investment firms. Black co-founded Apollo 31 years ago.

Apollo said it plans to change its corporate governance structure, doing away with shares with special voting rights that currently give Black and other co-founders effective control of the firm.

The independent review, conducted by law firm Dechert LLP, found Black was not involved in any way with Epstein’s criminal activities. Black paid Epstein $158 million for advice on tax and estate planning and related services between 2012 and 2017, according to the review.

Black, 69, said that although the review confirmed he did not engage in any wrongdoing, he “deeply” regretted his involvement with Epstein.

“I hope that the results of the review, and related enhancements … will reaffirm to you that Apollo is dedicated to the highest levels of transparency and governance,” Black wrote in a note to Apollo fund investors. He will step down as CEO no later than July 31.

Apollo co-founder Marc Rowan, 58, will take over as CEO.

Rowan has often kept a low-key profile compared with Apollo’s other co-founder, Joshua Harris, 56, and spearheaded many initiatives that turned Apollo into a credit investment giant, including the permanent capital base the firm enjoys through its ties to reinsurer Athene Holding Ltd.

The revelations of Black’s ties to Epstein took a toll on Apollo, which Black turned into one of the world’s largest private equity groups. Apollo executives had warned in October that some investors had paused their commitments to the buyout firm’s funds as they awaited the review’s findings.

Apollo shares are down 1% since the New York Times reported on Oct. 12 that Black paid at least $50 million to Epstein for advice and services, when most of his clients had deserted him.

Over the same period, shares of peers Blackstone Group Inc, KKR & Co Inc and Carlyle Group Inc are up 19%, 10% and 23%, respectively.

“We think a large number of (Apollo fund investors) took a ‘pause’, and we believe the outcome (of the review) and changes today will cause most of them to return to allocating to future Apollo funds,” Credit Suisse analysts wrote in a research note.

Apollo shares jumped 4% to $47.65 in after-hours trading on Monday.

“We continue to follow these events closely and will evaluate how Apollo addresses its issues,” the California State Teachers’ Retirement System, one of the largest U.S. public pension funds and an Apollo investor, said in a statement.

Epstein was found dead at age 66 in August 2019 in a Manhattan jail, while awaiting trial on sex trafficking charges for allegedly abusing dozens of underage girls in Manhattan and Florida from 2002 to 2005. New York City’s chief medical examiner ruled that the cause of death was suicide by hanging.


Black previously said he had paid millions of dollars to Epstein, but the exact size of his payments was revealed for the first time on Monday. Beyond the $158 million in payments, Black made two loans to Epstein totaling $30.5 million in early 2017.

Dechert said in its report that Black’s social ties with Epstein, who built his fortune by endearing himself to powerful figures in high society, went back to the mid-1990s.

Epstein won Black’s trust by resolving an estate tax issue for him in 2012 potentially worth at least $500 million, the report said. He ended up advising Black on various aspects of his personal financial affairs, from his family office and airplane to his yacht and artwork.

Black believed that Epstein provided advice over the years that conferred between $1 billion and $2 billion in value to him, according to the Dechert report. Black said in his note to investors that he had paid Epstein a fee equivalent to 5% of the value he generated on an after-tax basis, and not tied to hourly rates.

Black and Epstein’s relationship deteriorated after Epstein failed to repay $20 million of the loans and Black refused to pay tens of millions of dollars in fees that Epstein demanded, according to the Dechert report.

They severed ties in October 2018, according to the report. Black knew Epstein had been convicted in Florida a decade earlier for soliciting prostitution from a minor, the Dechert report said, but there was no evidence suggesting Black had knowledge of the other alleged crimes before they were publicly reported in late 2018, culminating in Epstein’s July 2019 arrest.

On Monday, Black pledged $200 million toward “initiatives that seek to achieve gender equality and protect and empower women,” as well as helping survivors of domestic violence, sexual assault and human trafficking.

Apollo said it would pursue a “one share, one vote” corporate governance structure that would do away with shares with special voting rights. It said the move could qualify it for listing on the S&P Global indices.

Apollo also said it would seek to give its board more authority to oversee its business, eroding the power of its executive committee led by Black.

The board will be expanded to include four new independent directors, including Avid Partners founder Pamela Joyner and physician and scientist Siddhartha Mukherjee, Apollo said. Apollo co-Presidents Scott Kleinman and James Zelter will join the board and take on increased responsibility running day-to-day operations.

Apollo had about $433 billion in assets under management as of the end of September.

(Reporting by Mike Spector and Chibuike Oguh; Additional reporting by Lawrence Delevigne and Jessica DiNapoli in New York; Editing by Sonya Hepinstall, Leslie Adler and Kim Coghill)

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EU sees no cliff-edge ending for COVID fiscal stimulus



EU sees no cliff-edge ending for COVID fiscal stimulus 2

BRUSSELS (Reuters) – European governments will not need to abruptly end fiscal support for their economies after the pandemic, top officials said on Monday, noting that any withdrawal of stimulus would be carried out gradually and only once the economy has recovered.

Euro zone public debt rose sharply during 2020 and is likely to exceed 100% of GDP this year as governments borrow to help individuals and businesses survive lockdowns.

The higher debt raises concern about how to deal with it down the road and when to start cutting it again, since the EU last year suspended its rules limiting budget deficits and debt, known as the Stability and Growth Pact (SGP).

EU finance ministers are to discuss when to reintroduce any borrowing limits in the second quarter of this year.

“I believe it important that finance ministers debate and reach a common understanding on the appropriate fiscal stance by the summer. This can then serve as guidance for the preparation of their draft budgetary plans for 2022,” the chairman of the euro zone’s group of finance ministers, Paschal Donohoe, said on Monday.

“To avoid any misunderstanding, let me stress that this is not about an imminent withdrawal of fiscal stimulus,” he told the economic committee of the European Parliament.

“We all agree that our immediate priority is to shield our citizens, in particular younger cohorts and those most exposed to the crisis. There must be no cliff-edges,” he said.

Joao Leao, the finance minister of Portugal which holds the rotating presidency of the EU and therefore sets the agenda for EU finance ministers’ work until June, was equally cautious.

“We should not withdraw stimulus too early. We need to make sure the suspension clause for the SGP remains in force at least until we return to pre-crisis economic figures,” he told the committee. “We need to make sure jobs are maintained as well as the production capacity of companies.”

He said first cash from the EU’s 750 billion euro post-COVID economic recovery programme should reach the economy in the first half of the year.

“Real funding should be getting to the economy before the summer or in early part of the summer,” he said.

(Reporting by Jan Strupczewski; Editing by Giles Elgood)

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IMF to intensify focus on climate change’s economic impact, Georgieva



IMF to intensify focus on climate change's economic impact, Georgieva 3

By Andrea Shalal

WASHINGTON (Reuters) – The International Monetary Fund views climate change as a fundamental risk to economic and financial stability, its chief said on Monday, mapping out the IMF’s plans to help focus investments in green technologies that will boost global growth.

IMF Managing Director Kristalina Georgieva told the Climate Adaptation Summit that global economic output could expand by an average 0.7% annually over the next 15 years and millions of jobs could be created if carbon prices rose steadily and investments expanded in green infrastructure.

“We see climate as a fundamental risk for economic and financial stability, and we see climate action as an opportunity to reinvigorate growth, especially after the pandemic, and to generate new green jobs,” Georgieva said.

She said the IMF was taking action in four areas to accelerate the transition to a new low-carbon and climate-resilient economy.

Georgieva said the Fund would launch a new “Climate Change Dashboard” this year to track the economic impact of climate risks and the measures taken to mitigate them, a key step to ensuring the needed shift.

“Climate resilience is a critical priority,” she said. “This is why we place it at the heart of what do, this year and (in) the years to come.”

The Fund is also integrating climate factors into its annual economic country assessments, also known as Article IV consultations, focusing on adaptation in highly vulnerable countries, and carbon pricing in its assessment of large emitters, Georgieva said.

In addition, she said the IMF is adopting enhanced stress tests and standardizing disclosure of climate-related financial stability risks in its financial-sector surveys, and expanding its training and support to help central banks and finance ministries take climate considerations into account.

The World Bank, the largest multilateral funder of climate finance, boosted funding for adaptation projects to 50% of its total climate finance over the past four years, and plans to maintain that percentage for the next five years, World Bank President David Malpass told the same event on Monday.

In addition to funding projects addressing coastal erosion, increasing crop yields and building cyclone-resistant infrastructure, the Bank was also investing in early warning and evacuation systems, better social protection, and weather observation, he said.

(Reporting by Andrea Shalal; Editing by Paul Simao)

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