Revenue Management for Holiday Inn

The report regarding aforesaid subject identified four key areas which can be

develop for improvement of RM of Holiday Inn. Although all the areas have

vital importance for RM but among them ‘Anticipate future demand through

forecasting techniques’ is of great importance. Past performance of an

organization whether good or bad cannot be changed, it can only be use for

better performance in future endeavors.

Aghazadeh1identified that to optimize revenue companies need a formal

forecasting process. Through various forecasting tools we can identify the

deficiency in the past and get a forecasted value of future. It helps the

organization to prepare a solid plan and implement it so as to obtain optimistic

output.

There are three forecasted methods we have used for the same data. The

first method is Moving Average method. In this method we used actual sales

record from Jan, 2016 to Mar, 2019. In Moving Average last 03 x months

actual sales were average out to calculate the forecasted sales of the forth

month then take percentage difference from actual to forecasted in

1
Aghazadeh (2007)
corresponding months. As we see in the table and graph that Holiday Inn has

tremendous difference in actual and forecasted values the difference in actual

and forecasted values in the month of Aug 2016, Dec 2016 and Jan 2017

depicts poor organizational planning although values of Dec 2016 and Jan

2017 showed positive increment but it also showed lack of competency of

planning department for wrongly shrink the forecasted sales value.

The second method used in forecasting Holiday Inn sales is Exponential

Smoothing method. In this method a forecasting formula is used F t+1 = αAt +

(1-α)Ft. In which Ft represent the forecasted value in the current month F t+1

represent forecasted value of the next month A t represent the actual sales

value in the previous month and α represents smoothing constant. The value

of α can be range between greates than 0 and less than 1. In our example we

take α = 0.2. As we see in the table and graph that in some months actual and

forecasted values of sales has very little difference it shows efficiency and

market knowledge of the planners while in some other months there are great

difference among actual and forecasted values of sales it shows inefficiency

and lack of market knowledge of the planners.

The third method we used for forecasting of Holiday Inn sales is Weighted

Rolling Average method. In this method we gave weights or importance to the

months which make impact in the forecasted month sales more than other

months. In our example we give 0.4 weight to the last month sales it means

that we consider that around 40% of the sales of the forecasted month is

dependent to the sales in the last month, 0.3 or 30% of the sales of the

forecasted month is dependent to the sales in the second last month, 0.2 or

20% sales of the forecasted month is dependent to the sales of third last

month and 0.1 or 10% sales of the forecasted month is dependent to the

sales of the forth last month. As we see in the table and graph that the actual

sales and the forecasted sales are of little difference in some of the months

and have great difference in other months.

Every forecasting methods has its limitations and every forecasting method

does not necessarily predicts the organizational sales correctly. It all depends

upon the nature of industry, market knowledge and availability of facts. By

comparing all the three forecasting methods we suggested that in Holiday Inn

case Weighted Rolling Average is the better forecasting tool as compared to

Exponential Smoothing and Moving Average tools of forecasting as it gives a

little more correct forecasted sales figures than the other two methods. Yang

& Pan2 identifies that hotels businesses needs accurate forecasting of future

performance in specific destination to benchmark their properties and better

optimize operations. Kachani & Chen 3 identified a framework for forecasting

and optimization of hotel industry, they work on various forecasting models by

using real-life hotel booking data. Jiang & Erdem 4 identifies that revenue

management has become more technology driven and it is becoming more

customer-centric. Gayar et al 5 identifies integrated framework for hotel

revenue room maximization by using forecasted demand.

Besides that there are some other factors that might be responsible for these

wrong predicted values. The factors include seasonal impact, vacations, govt.

tourism policy, law and order, economic and political situations of the region,

2
Yang & Pang (2016)
3
Kachani & Chen (2007)
4
Jiang & Erdem (2016)
5
Gayar et al (2011)
and presence of competitors in the region.

Therefore we are implementing anticipated future demand through

forecasting techniques and we use the Weighted Rolling Average method as

forecasting tool. The implementation plan is that at the end of a month we will

collect the actual sales figures from sales department then by using the

Rolling Weighted Average method of forecasting identify a forecasted sales

value. Now, in order to attain the forecasted sales we engage our operation

manager, booking manager and marketing manager to ensure that we can

obtain the target. The marketing manager by using various tools of traditional

as well as advance e-marketing can attract the customers. The operations

manager by taking into consideration the efficiency, effectiveness, customer

orientation, high value service can increase the sales margin of Holiday Inn.

The Booking Manager by offering attractive packages for group stay, free

bees and free vouchers techniques to attract various customers to the hotel.
 The forecasting technique will help the hotel to identify the future

environment in which it will be operated. It will help the hotel in strategy

making if there is any entrance or exit of competitors in the market. It will also

help th hotel to identify whether increase or decrease the current size of the

hotel, number of employees, shifting in alternate location, extension of hotel in

some other city of the country. It will help the hotel to anticipate future

business performance, better prepare them to deal with uncertainty during the

course of time. By using past performance growth data of the hotel, industry

trends, data of competitors of the similar season and various other information

like launch of smart phone app we will be able to work more effectively in

determining room occupancy ratio of customers, types of rooms customers

usually interested in, allied services customer joy for.

The ultimate aim of forecasting is to provide a better understanding of the

businesses processes and how they will perform in the future and necessary

adjustment may be made to align it with hotel target value. The forecasting

will allow the Holiday Inn managers to take measured decision at their
respective areas, better prepare themselves for any problem and make

adjustment so that they can maximize the hotel revenue and minimize loss.

We will also consider events and holidays and try our best to capture the

clients as much as possible during the events and holidays by providing them

a complete package, identify the facilities hotel provided them to pass their

leisure hours full of life and energy. We will also keep an eye on the changing

market trends and technological advancement so as to maximize revenue of

Holiday Inn.