Why hoteliers should use forward looking data to make smarter revenue decisions this budget season

Why hoteliers should use forward looking data to make smarter revenue decisions this budget season

The impact of Covid-19 on the hospitality industry means forecasting for strategic decision making has never been more critical to success, yet it is much more difficult to undertake. The traditional hotel demand pattern has been ripped apart – placing a significant obstacle in the way of making qualified revenue decisions, both through the budgeting process and in recovery. At such a crucial time, all commercial decision making should be grounded in accurate and reliable data. But when typical demand drivers have been upended and booking behaviour is unrecognisable, what type of data should you base your decisions on?

Traditional forecasting methods relied heavily on historical analysis. Such as identifying established demand drivers, year-over-year (YOY) trends and on-the-books (OTB) data. However, these tactics do not take into account the unique effect of the Covid-19 pandemic. With 2020 and the first half of 2021 being such outliers, trying to use them to accurately forecast the return of traveller demand is purely speculative. In recovery there is a need to disregard past forecasting approaches and make use of new, forward-looking data points to inform decision making.

Changing traveller behaviour

The global pandemic has brought about untold demand disruption for hoteliers. Traveller behaviour was, and still is, regulated by government policies and enforced lockdowns. These regulations have been in constant flux from country-to-country. Such unstable conditions make it incredibly challenging to forecast. To have any understanding of demand, hoteliers have to continually evaluate their own government’s travel restrictions and that of their source countries.

Consumers are uncertain when they will be able to travel, so the typical booking window has shortened. Sometimes travellers are booking within days of arrival, rendering OTB data far less relevant to decision making than it once was. Although, there are now signs that this is changing in a number of markets, such as the USA.  Hesitation around the ability to travel internationally has also generated a sharp rise in domestic travel and staycations. Meaning traveller search criteria has changed too.

Airporty-waiting-roomWith corporate and MICE travel currently paused in most regions’, hotel demand has moved almost entirely to leisure and hoteliers have to rely on what was previously a small segment of their business. With less demand and supply remaining stable, competition is amplified. Additionally, with safety and social distancing still top of mind for guests, hotels are competing with more private, alternative accommodation – which have had an upsurge in demand compared to hotels.

With a range of different factors and scenarios to consider, commercial teams have had to remain agile and pivot strategy to survive in many cases. As hoteliers begin to budget for 2022 there appears to be light at the end of the tunnel. Vaccination programmes around the globe are accelerating and economies are opening up. Restrictions are being relaxed; domestic leisure travel is resuming and there are positive signs for international travel as well. However, a quick glance at the news will tell you it’s not that straightforward. With variant strains of the virus regularly appearing, government restrictions on international travel change frequently. The latest example being Portugal – moving on to the UK’s green list for travel, stimulating demand to the region, only to be removed from the list within a month.

It is unknown how long the current circumstances will remain, but as long as they do, demand will remain unpredictable. In a period of such unstable demand the best approach to forecasting is using a predictive market intelligence solution. By harnessing forward-looking data points, commercial teams are offered a much needed glimpse of current and future demand, to make more confident revenue decisions.

Using forward-looking data to forecast effectively

Hoteliers haven’t encountered anything like the Covid-19 pandemic in their history. Travel has been dictated entirely by government policy, accompanied by severely depleted global demand. Inevitably, the old metrics revenue teams use to analyse their business and make strategic decisions are no longer as useful. A sizeable element of the budgeting process is dependent on forecasting. Now, at a pivotal stage, when budget is scarce and cannot afford to be misused, a significant challenge presents itself. How do you make accurate budget projections when traditional methods and historic data points are no longer effective?

Hoteliers have had to try and transition from forecasting demand patterns based on historical data points to new methods, such as rolling short-term forecasts and using forward looking data. With markets changing in the blink of an eye, a predictive market intelligence solution, like Market Insight, helps you create accurate forecasts based on real-time forward-looking demand insights. By harvesting and aggregating data from a variety of sources, it reveals the first signs of traveller intent for your market. Understanding forward-looking demand data and traveller intent, is crucial to facilitate more realistic forecasts this budget season.

Recovery-neon-lettering

With live demand projections 365 days in advance, hoteliers can examine source market data to understand who is looking to travel to their destination. Armed with insights on the booking window and length-of-stay (LOS), hoteliers can apportion budget to sales and marketing campaigns that target precise dates, LOS and source country. Similarly, judging the strength of international demand enables hoteliers to understand how best to allocate budget to their domestic market. A segment that is expected to be a vital source of revenue for the foreseeable future.

Looking into the future and making comprehensive plans has never been more important. With forward looking data insights at your disposal, it is much easier to develop different scenarios and contingency plans. Commercial teams can be ready for several situations by creating best, worst and average case outlooks. This will give an overview of revenue and costs at different levels of occupancy and with different market mixes. You’ll be better prepared for what transpires in the market, which will allow quick and assertive decision making. 

Medium and long-term forecasts are an essential means to keep revenue on track. But with the market being so unpredictable, you also need to react to demand changes immediately as they happen and seize opportunities to drive revenue. That’s why it is critical to maintain the use of a market intelligence solution throughout recovery, to capture minute changes in demand.

 

Capturing demand in a dynamic business environment

The vaccine roll-out has started to deliver positive results for economies as a whole, particularly the travel and hospitality sectors. With restrictions easing there is increased traveller demand - especially in Europe and North America, as well as domestic tourism rebounding strongly around the globe. But the timeline to a full recovery is still unclear. Travel is recovering at different rates depending on the country, and market demand is still volatile, changing on a frequent basis. Hoteliers need to be more flexible than ever as they navigate recovery. Without the right business intelligence data, they won’t be able to identify shifts in traveller demand and take much needed revenue opportunities.

Forward-looking data points deliver location-specific and segmented demand insights. These help to anticipate future market behaviour and understand how traveller intent is fluctuating in your source markets, empowering more informed, data-driven decision making. Using this information revenue teams can refine their pricing strategy and collaborate with marketing teams to develop personalised promotions and offers. This activity can be targeted at consumers from sources where you know demand already exists. This will not only help to increase revenue and drive business growth, but it is a much more efficient use of a constrained budget. Commercial teams can allocate budget to markets which show the highest demand signals while restricting budget for markets and segments that won’t bring the desired ROI.

 

Redefine your competition and get ahead of them

Changing travel restrictions have led hotels to repeatedly open and close; properties which were once competition, may no longer be part of your compset. Combine this with the dramatic reduction in business and MICE travel and there's no longer a distinction between hotels focusing on corporate travel, versus hotels focusing on leisure. Add in the continuing popularity of alternative accommodation and your compset has changed once more. In recovery you are competing with almost the whole market. You should factor in these influences and fine-tune your compset for a more comprehensive approach to recovery. But to do this manually is both difficult and labour intensive, when resources are scarce.

Sprint-race-ahead-of-the-competition

You should consider a tool that can automatically adjust your competitive set. Market Insight’s dynamic comp set data no longer limits you to a static group of pre-covid competitors. You can analyse how your hotel's rates and availability measure up against a wider selection of competitors based on factors such as, consumer searches, your amenities, star rating and price. This also includes alternative accommodation on home-sharing sites, so you can see how your occupancy and rates matchup against rental homes.

Dynamic comp set data is then brought together with the forward-looking data points mentioned above to give a complete picture of demand and competition in your market. By utilising Market Insight’s actionable, real-time information to frequently optimise rates and create promotions and deals, you can gain a competitive advantage over hotels solely using historic and OTB data. Staying a step ahead of the competition in recovery, with an innovative intelligence solution may be the difference between driving growth and merely surviving.

 

Conclusion 

Recovery is on the horizon but a return to pre-pandemic demand levels will only materialise gradually. International markets will re-open at differing speeds and hotels will be operating with varying source market mixes. Dependent on factors such as: government travel policies, successful vaccination programmes, resumption of business travel, coronavirus variants and travel corridors. In the upcoming months it’s likely the domestic leisure sector will continue to be your main source of revenue. But when foreign travel segments do return you want to be the first to identify these demand trends and take action - making well informed pricing, distribution and marketing decisions before your competitors.

Hoteliers who aim to perform above the market in recovery should look to a predictive market intelligence solution that gives an accurate sense of future demand. Actionable, forward-looking demand insights will help you forecast more effectively and deploy strategies to capture shifts in demand ahead of your new compset; driving revenue and business growth.

 

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