05Oct

The Art of Forecasting for Group Business: An Overview

Author: Avanti Joglekar

Forecasting is a complicated and essential part of every property’s revenue management process.  That’s especially true for group business.  Group business can affect every segment of a property’s profits since it impacts both transient business and ancillary revenue generators.  

Until very recently, there’s not been much progress in developing a sophisticated revenue forecasting system for group business.  Yield management, which is the process by which a property optimizes the profitability of their rooms, has typically only focused on transient business with group business as an afterthought.  Since most yield management systems are designed exclusively for transient business, they lack the sophistication and agility needed to forecast for groups.  Yield management decisions for group business must consider allocation and price for both sleeping rooms and meeting rooms plus factor for transient business displacement, and few RMS currently offer those features.

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Another problem with using forecasting systems built for transient business to forecast for group business is that they base projections on different models.  While they both utilize historical data and booking profiles, that’s about where the similarities end.  Transient forecasting predicts future demand since those guests aren’t booking out blocks of rooms well in advance.  Group business bases its forecasting upon predicting whether the anticipated demand from an RPF actually occurs.  

Group business isn’t always required to use all of the rooms in their blocks, so if a hotel’s revenue management system isn’t able to dynamically update pricing across revenue segments as group demand fluctuates, the property is basically leaving potential profits on the table.  Factor in how to optimize the property’s meeting space and it’s impossible to get the most profit without the right tools.

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The impact of an inaccurate group forecast is significant, especially for larger properties which depend on group business and risk greater losses from unnecessary displacement.  When group forecasts are too high, the property loses profits because rooms that could have been sold to transient guests are left empty.  If group business forecasts are too low, the property risks accepting transient business at rates that are too low or booking to overcapacity.  In either case, the hotel loses ancillary profits due to incorrect staffing and supply purchasing.

Luckily, today there’s technology that’s dynamic and sophisticated enough to factor in room and meeting space into your group business yield management.  This top of class software can provide a comprehensive daily analysis of group business by segment and simultaneously adjust projections for transient business.  Click here for a link to our free eBook on how to maximize your group business potential.

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