Budgeting Basics and Beyond

23.2. Hotels

The calculation of sales volume and unit price is much more difficult for hotels than for manufacturers. Hotels have a maximum capacity of rooms each night and annually, like a factory's production capacity. However, the demand for a hotel's rooms can vary greatly from day to day, month to month, and year to year.

For hotels, it is very difficult to predict sales and average unit selling price. Historical data can be of some help, but they do not take into account many environmental factors, such as the economy, new competitors, aging facililties, bad weather, unstable governments, fluctuating currencies, and current travel trends.

Reservations forecasting is much more art (and luck) than a science. Modern computer systems have done little to improve accuracy of hotel room sales. One problem is that a hotel room is a perishable commodity. If it is not sold one night, the potential value for that time is lost forever.

Hotels also try to maximize their revenues per room, but an airline system will not work. Airlines deal with one customer occupying one seat on a flight. Hotels, however, have customers staying different lengths of time, staying longer than they have reserved, and departing early; they also have no-shows. Hotels do not have fare products like airlines, they have market segments. The hotel's goal is to book as many of the next highest paying segments, and so on. The results of this can be a small number of rooms allocated to a low-paying market group. ...