Understanding hotel price forecasting

Forecasting is an important strategy to get your head around in order to set your prices based on anticipated demand.  Not only that but with an accurate forecast of expected room revenue, you’re in a better position to prepare and stick to a manageable budget throughout the year.

What is hotel price forecasting?

Essentially it means evaluating demand for accommodation, and pricing your room rates accordingly. The concept is that when you have a clear idea of when your business will be experiencing higher demand for occupancy, you’ll be able to charge higher rates for each room. This allows you to maximise revenue during peak seasons and therefore better manage the downturns.

Hotel price forecasting requires the use of both historical data and projected or anticipated factors. Your historical information will provide you insights on occupancy, revenue, room rates and average spend per room. It should also consider turnaways or denials – those reservations that you’d had to turn away due to lack of availability or rejection for another reason. 

Looking forward, you also need to consider factors for the coming seasons – things like market or industry trends, public or school holidays, seasonal demand, changes to travel behaviour or big events in your area that may impact on demand. There might also be changes to accommodation options in your local area – new operators, or those that have closed or are under renovation – which should also be considered in your forecasted rate.

Where do you start?

A good approach is to pick a point in the year that you already know is a good time for your business. Map out the forecast for that period, using the factors above. For example, if you’re a coastal hotel in Australasia, you might start with your December – February forecast and consider previous demand for rooms and additional sales revenue, as well as anticipated events that may either boost or reduce your expected occupancy.

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The earlier you start your forecasting, the more time and flexibility you have to amend and adjust your forecasted rates.

Create this forecasted demand calendar before working on your annual budgeting plan. It will provide you with a framework to work your budget around. Many hoteliers will do this process in a spreadsheet, however, good hotel management software makes it much easier for you to collect, review and input data in one place.

Budgeting with hotel price forecasting

Budgeting isn’t just about money in. It also looks about the money that must go out before you can make a profit. This includes things like sales resources, your marketing and distribution costs, or any maintenance, upgrades or refurbishments you may need to make.

Now when you consider your budget, and your anticipated occupancy, it should give you a good idea on how to price your room rates and what additional sales or services you could leverage during both quiet and peak times.

We have more ideas on pricing strategies for hotel rooms as well as tips for increasing your hotel revenue on our blog!

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About the author

Amri is Preno's head of marketing and enjoys being part of the hospitality ecosystem. She is passionate about helping accommodation businesses to transform their marketing, by exploring their core strengths and sharing their successes.

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