Predicting hotel demand — whether for tonight, 30 days, 60 days or even 90 days out — has never been an exact science. In today’s unpredictable times it’s at best a guesstimate. Therefore, expecting revenue managers to compile accurate forecasts 12 months in advance, and then meet their milestones as the year rolls out, has long been something of a “Mission Impossible.”
The hotels market has been hard to predict for a number of years now. The market, constantly changing, has never been so dynamic.
The consumers have the control. They can search, research, book and cancel all at the click of a button. They can book on one channel, then cancel and book on another. Even the corporate market is hard to gauge. If your corporate rate is not favourable then the company’s travel agency or DMC will simply go online and book a promotional rate. Add to that the wholesalers who undercut hotels with their contract rates, and you have a real mess.
The 7 Layers of Data that will Improve Your Room Pricing
Hotel demand has become a very fickle thing, with market sentiment deeply affected by local and global events. With the markets in a constant state of flux, how do you accurately forecast? The answer is: You can’t.
Yet still, a hotel revenue manager’s success is measured against her ability to hit the initial forecast, whether that’s in 90, 60 or 30 days.
Hit Forecast or Price Right?
Revenue managers are constantly facing tough decisions. What do you do if you know you are not going to achieve forecast? Do you stick with it and price in the hope of achieving it, or do you price right? You might not make forecast, but you will make the most money possible on that day.
It’s a tough decision.
Data plays an important role. Being better informed helps you make better decisions, including:
- identifying which segments are currently performing
- benchmarking rates with your competitive set
- knowing your brand value and sticking to it.
Using information on which segments are booming and gauging where they are going are vital. Look at how you are pricing your product compared to that of your competitor set.
[bctt tweet="In uncertain times, #hotels should optimize price, not demand forecasts" username="OptimizeDemand"]
Pricing right isn’t about lowering your rates to fill rooms. Sometimes, it means pushing for a little bit more because you know those coming to your hotel or your destination will be willing to pay an optimal price.
Look for clues from your market.
For example, Sunday nights are typically low-occupancy and low-rate nights for many hotels, but if you are situated in the middle of a business district, or you know there’s a big meeting or conference coming to town, Sunday nights become a lucrative opportunity. Business people want to arrive a day early, be rested and prepare for the workweek before them.
Crunch the Numbers, Not the Price
Using a revenue management solution such as Duetto gives you access to a wealth of data that will help you achieve optimal pricing. It’s not just about looking at trends. It’s a reactive application that monitors demand, bookings and cancellations. This gives you the ability to flex your price by small increments — whether up or down — to achieve the optimal pick up.
Related video: Duetto Concepts: Optimizing Price vs. Forecast Accuracy
However, if the hotel revenue manager knows something about the market that’s not in the data, you can manually adjust your rates too. Maybe bad weather grounds planes at your local airport and you suddenly have an influx of walk-ins?
Remember, if you want to affect hotel demand, adjust your price. It’s the only thing you can control.
In the volatile market in which we all live at present, and with so much information at hand, revenue managers should be empowered to experiment with price, not tied to their forecasts.
No one can predict the future. As Duetto co-founder Marco Benvenuti says in his “Duetto Concepts” video about optimizing prices rather than hitting a forecast 100%, if he could develop a forecast that was even 97% accurate he would not be working in revenue management. He’d be playing roulette, forecasting what would be the next number to show up.
Forecast is a starting point, but you need to understand market demand and price correctly to attract every revenue opportunity.
Start experimenting with price. You will hit that optimal amount that will attract the maximum amount of people.