Boost Hotel Occupancy: Focus on Forecasting Destination Demand
25 April 2023
Forecasting is necessary to make informed decisions about marketing, sales, pricing, resource allocation, labor scheduling, and overall business planning. To improve forecasting accuracy, hoteliers need to understand the demand for overnight accommodation at the destination level before starting to forecast the number of rooms sold and the average rate in their hotels. The question is how much of the destination demand for hotel accommodation you can capture. If you do not know the demand at the destination, your forecasts will be wild guesses and less reliable, especially when the demand shows significant variations.
Destination demand forecasting estimates the overall daily demand for hotel rooms in a particular destination. It considers various reasons for traveling to the destination, such as for business (conferences, exhibitions, business meetings) or leisure (culture, festivals, concerts, sports). This type of forecasting is essential for understanding the total demand for accommodation in a destination. It helps stakeholders make informed decisions about marketing-, sales-, revenue strategies, and overall business planning.
Forecasting demand for accommodation in a destination involves considering a mix of static and dynamic factors that influence travel demand. To structure the approach, you can categorize these factors into three main groups: reasons for travel, destination attractiveness, and external factors. Here's how you can approach forecasting accommodation demand for the destination.
Reasons for Travel
Reasons for travel can be structured based on the characteristics of the destination, which can be divided into natural, cultural, and infrastructural factors. Here's a breakdown of the reasons for travel based on these categories.
All destinations with natural factors tend to have strong seasonal patterns due to sensitivity to weather conditions, which must be considered when making forecasts. Here are a few examples of natural factors.
- Beaches: Coastal destinations that offer sun, sand, and water activities.
- Ski mountains: Destinations with ski resorts, snowboarding, and winter sports.
- National parks and nature reserves: Destinations with protected natural areas, wildlife, and outdoor recreation opportunities.
- Lakes, rivers, and waterfalls: Destinations with water-based attractions and activities.
- Scenic landscapes and viewpoints: Destinations known for their picturesque landscapes, such as mountains, canyons, or unique geological formations.
Cultural factors are not as sensitive to weather and, therefore, not as seasonal as natural factors. The cultural factors can attract visitors all year and function as a solid base for demand for accommodation.
- Historical sites: Destinations with significant historical landmarks, such as ancient ruins, castles, or UNESCO World Heritage sites.
- Museums and galleries: Destinations with a rich offering of museums, galleries, and cultural institutions.
- Local experiences: Destinations offering unique cultural experiences, such as culinary tours, traditional crafts, or festivals.
- Music, theater, and performing arts: Destinations with a vibrant arts scene featuring concerts, plays, or dance performances.
- Architecture and urban design: Destinations are known for their distinctive architecture or urban planning.
Good infrastructure is an opportunity to create demand for overnight accommodation, but it requires that the infrastructure is used for arranging events that will attract visitors. Here are a few examples of infrastructure that play a significant role when busy to drive demand for hotel rooms.
- Convention centers: Destinations with extensive conference and exhibition facilities, attracting business travelers and events.
- Sports arenas and stadiums: Destinations with notable venues, hosting major sports events and competitions.
- Corporate headquarters: Destinations with a high concentration of corporate offices, attracting business travelers for meetings and collaborations.
- Government: Destinations with central government institutions, attracting visitors for political, diplomatic, or administrative purposes.
- Transportation hubs: Destinations with major airports, train stations, or ports serving as gateways or stopovers for travelers.
By structuring the reasons for travel based on the characteristics of the destination, you can better understand the factors that drive demand for accommodation in a particular location. This information can be used to tailor marketing efforts, target specific traveler segments, and improve demand forecasting accuracy.
Destinations should highlight the reasons to visit the destination, emphasizing its unique selling points, attractions, and experiences, various accommodation options, convenience in accessibility, and easy-to-use tech solutions catering to different traveler segments. In addition, destination marketing aims to showcase the destination's appeal and create a compelling case for potential visitors. All these factors must be considered when forecasting the demand for hotel overnight accommodation at the destination.
Transportation accessibility is crucial in driving demand for overnight accommodation at a destination by influencing the ease of reaching and moving within the area. Here's how transportation accessibility can impact the demand for hotel rooms.
- Ease of access: If a destination is well-connected through various transportation modes like flights, trains, buses, or cruise ships, it becomes easier for potential visitors to reach the destination. Better accessibility can attract more visitors, increasing the demand for hotel rooms.
- Travel time and convenience: Shorter travel times and convenient transportation options make a destination more appealing, as visitors can spend more time enjoying their stay rather than in transit. This can translate to a higher demand for overnight accommodation.
- Affordability: The cost of transportation can significantly influence a traveler's decision to visit a destination. If transportation is affordable, more visitors will likely choose the destination, resulting in higher demand for hotel rooms.
- Frequency and reliability: Frequent and reliable transportation services can make a destination more attractive, as visitors can plan their trips with confidence and flexibility. This can lead to more visitors choosing the destination and increased demand for hotel rooms.
- Connectivity to nearby attractions: Good transportation within a destination enables visitors to easily explore local attractions, making the destination more appealing. This can lead to a higher demand for overnight accommodation as visitors can conveniently explore the area.
- Impact on business travel: Well-connected transportation hubs can attract business travelers who prioritize time and convenience. Easy access to and within the destination can boost the demand for hotel rooms among business travelers attending meetings, conferences, or other events.
- Spillover effects: In cases where nearby destinations experience high demand or limited accommodation options, visitors may choose to stay in a well-connected neighboring area and commute to their primary destination. This spillover effect can increase demand for hotel rooms in the well-connected destination.
In summary, transportation accessibility is a critical factor in driving demand for overnight accommodation at a destination by making it easier and more appealing for visitors to reach and explore the area. Improved transportation options can attract both leisure and business travelers, resulting in increased demand for hotel rooms
The impact of market competition and supply on the reasons for traveling to a destination can be understood in terms of the availability and variety of accommodation options, which may influence travelers' decisions to visit or stay in a particular destination.
- Variety and quality of accommodation options: A healthy level of competition in the market can lead to a broader range of accommodation options catering to different preferences, budgets, and needs. This variety may make the destination more attractive to potential visitors, as they can find suitable lodging options that meet their requirements.
- Pricing and affordability: The supply of hotel rooms in the market can directly affect pricing. When hotel rooms are oversupplied, competition may lead to lower prices, making the destination more affordable and appealing to price-sensitive travelers. Conversely, limited supply and high competition can drive up prices, potentially deterring some visitors from choosing the destination.
- Innovations and improved guest experiences: Competition can drive hotels to invest in new facilities, amenities, or services to differentiate themselves from competitors. This may result in an enhanced guest experience, making the destination more attractive to potential visitors.
- Destination reputation and appeal: The presence of renowned hotel brands, boutique hotels, or unique lodging options in a destination can contribute to its overall reputation and appeal. These establishments can attract specific traveler segments or enhance the destination's allure to a broader audience.
- Revitalization and development: New hotel openings, renovations, or rebranding efforts can contribute to the revitalization of a destination. This may lead to improved infrastructure, new attractions, or enhanced public spaces, making the destination more appealing to potential visitors.
In summary, market competition and supply can indirectly influence the reasons for traveling to a destination by affecting the variety, quality, and pricing of accommodation options and shaping the destination's reputation and overall appeal. Understanding the dynamics of market competition and supply is crucial for accurately forecasting demand and making informed decisions about resource allocation, marketing strategies, and overall business planning.
Highlight the reasons to visit the destination
The importance of having an attractive reason to visit a destination cannot be overstated, as it is a fundamental driver of travel demand. Furthermore, the more important and compelling the reasons to visit a destination are, the more likely travelers will choose it for their vacations or business trips. Here's why attractive reasons to visit a destination are essential.
- Drives demand: Attractive reasons to visit a destination create interest among potential travelers, increasing the likelihood that they will choose the destination and contribute to the demand for accommodation, local businesses, and tourism services.
- Competitive advantage: Providing unique and attractive reasons to visit helps a destination differentiate itself from competitors and stand out in the crowded tourism market. This competitive advantage can help attract more visitors, leading to higher demand and increased revenue.
- Encourages repeat visits: When travelers have memorable and enjoyable experiences at a destination, they are more likely to return and recommend it to friends and family. This can lead to repeat visits and positive word-of-mouth marketing, driving further demand for the destination.
- Supports sustainable tourism: By offering compelling reasons to visit, destinations can attract travelers who are genuinely interested in the local culture, environment, and experiences. This can contribute to more sustainable tourism practices and support the local community's well-being.
- Increases overall tourism revenue: The more attractive the reasons to visit a destination, the more likely travelers will spend time and money there, contributing to the overall tourism revenue and supporting local businesses and communities.
In summary, having attractive reasons to visit a destination is crucial for driving demand, creating a competitive advantage, and fostering sustainable tourism. Therefore, destination marketing efforts should emphasize these reasons to effectively showcase the destination's unique appeal and attract potential visitors.
Find the right target group
Demographics and target markets can influence the reasons for traveling to a destination by shaping the experiences and offerings that cater to specific traveler preferences, needs, and behaviors. Here's how demographics and target markets can impact the reasons for visiting a destination.
- Tailored experiences: By understanding the demographics and target markets, destinations can develop and promote tailored experiences and offerings that cater to specific traveler segments. This may include family-friendly attractions, adventure tourism, cultural experiences, or luxury travel.
- Marketing and communication: Knowing the target markets allows destinations to create more effective marketing campaigns that resonate with the intended audience. Well-targeted communication can inspire potential visitors to consider the destination and its offerings.
- Niche markets: Some destinations may focus on niche markets, such as eco-tourism, medical tourism, or gastronomy. By catering to these specific interests, destinations can attract a dedicated audience more likely to visit the unique offerings.
- Accessibility and inclusivity: Understanding the needs of different traveler segments can help destinations ensure accessibility and inclusivity in their offerings. For example, providing facilities for travelers with disabilities or developing attractions that cater to various age groups can make a destination more appealing to a broader audience.
- Cultural sensitivity and understanding: Destinations that understand their target markets' cultural preferences and expectations can create more culturally sensitive experiences. This can make a more enjoyable and memorable visit, encouraging potential visitors to choose the destination.
- Seasonality and travel patterns: Different demographics and target markets may have different travel patterns and seasonality preferences. Understanding these patterns can help destinations develop strategies to attract visitors during specific times of the year, ensuring a more balanced demand for accommodation.
By understanding the demographics and target markets, destinations can create tailored experiences, marketing campaigns, and inclusive offerings that cater to the needs and preferences of specific traveler segments. This, in turn, can impact the reasons for traveling to the destination and drive demand for accommodation by making the destination more appealing to its target audience.
Technological advancements and booking channels can indirectly impact the reasons for traveling to a destination by shaping travelers' decision-making processes, accessibility, and overall travel experience. Here's how these factors can affect the reasons for visiting a destination.
- Ease of booking and information access: The rise of online travel agencies (OTAs), mobile booking apps, and other digital platforms has made it easier for travelers to find, compare, and book accommodations. This convenience can encourage potential visitors to choose a destination with readily available information and seamless booking processes.
- Personalization and tailored offerings: Advanced technology allows for better personalization of travel options and recommendations, making it more likely for travelers to find suitable accommodation and activities in a destination, thus increasing its appeal.
- Real-time pricing and promotions: Technological advancements enable dynamic pricing and real-time promotions, influencing travelers' decisions based on affordability and perceived value. As a result, a destination with attractive offers and deals may see increased demand.
- Enhanced customer reviews and reputation: Online reviews and social media significantly impact travelers' decision-making processes. A destination with positive reviews and a strong online presence is more likely to attract potential visitors.
- Virtual experiences and destination marketing: Advanced technology enables destinations to showcase their offerings through virtual tours, immersive experiences, and interactive content. These marketing efforts can inspire travelers to visit the destination by providing a glimpse of what to expect.
- Improved travel planning and support: Technology-driven tools and services, such as AI-powered chatbots and personalized travel itineraries, can streamline the planning process and provide support throughout a trip. This convenience and support can make a destination more appealing to potential visitors.
In summary, technological advancements and booking channels can indirectly influence the reasons for traveling to a destination by making it easier to find, compare, and book accommodations, tailoring travel offerings to individual preferences, and enhancing the overall travel experience. By understanding these dynamics, industry stakeholders can better anticipate demand fluctuations and make informed decisions about resource allocation, marketing strategies, and overall business planning.
Political and regulatory environment
The political and regulatory environment can considerably impact the reasons for traveling to a destination by affecting the perception of safety, ease of travel, and overall attractiveness. Here's how these factors can influence the demand for accommodation.
- Political stability: A stable political environment is essential for creating a perception of safety and security among travelers. Destinations with political stability are more likely to attract visitors, leading to increased demand for accommodation. Conversely, political instability or conflicts can deter potential visitors, decreasing the need for hotel rooms.
- Visa policies: Visa requirements and the ease of obtaining a visa can significantly influence the attractiveness of a destination. Destinations with lenient visa policies, visa-on-arrival options, or visa-free travel for certain nationalities can encourage more visitors, increasing the demand for accommodation. On the other hand, strict visa requirements or cumbersome processes can discourage potential visitors from choosing the destination.
- Travel restrictions: Travel restrictions, such as those imposed due to security concerns or public health crises, can significantly impact the demand for accommodation in a destination. When restrictions are in place, travelers may be unable or unwilling to visit the destination, leading to decreased demand for hotel rooms.
- Regulations and policies affecting tourism: Government policies and regulations can impact the tourism industry in various ways, such as incentivizing or discouraging certain types of travel and accommodation, supporting infrastructure development, or implementing environmental and sustainability measures. These policies can shape the destination's attractiveness and, in turn, influence the demand for accommodation.
- International relations: The relationships between countries can affect travel patterns and preferences. Positive diplomatic relations may encourage travel between countries, boosting the demand for accommodation, while strained relations may result in decreased travel and lower demand for hotel rooms.
- Perception of safety and security: The political and regulatory environment can shape travelers' perceptions of safety and security in a destination. A positive perception can attract more visitors, while negative perceptions or concerns about safety can deter potential travelers, impacting the demand for accommodation.
In summary, the political and regulatory environment can significantly impact the reasons for traveling to a destination by affecting perceptions of safety, ease of travel, and overall attractiveness. By understanding the political and regulatory environment dynamics, industry stakeholders can better anticipate changes in demand and develop strategies to adapt and respond to these changes.
Economic factors play a significant role in shaping the reasons for traveling to a destination, as they affect both the affordability and desirability of travel. Here's how economic factors impact the reasons for traveling to a destination.
- Economic growth: A robust local economy can create more business opportunities and attract investment, increasing business travel to the destination. Similarly, strong economic growth in source markets can boost disposable income levels, making travel more affordable and growing leisure travel demand.
- Exchange rates: Fluctuations in exchange rates can influence the affordability of travel for international visitors. A favorable exchange rate can make a destination more attractive to foreign tourists as their money goes further, increasing demand for accommodation. Conversely, unfavorable exchange rates can deter visitors and reduce demand.
- Disposable income levels: Higher disposable income levels in source markets can lead to more spending on travel and tourism, driving demand for accommodation in various destinations. Conversely, if disposable income levels decrease due to economic downturns or other factors, travel demand may decline as people cut back on discretionary spending.
- Travel costs: Economic factors can also influence the cost of travel, such as airfare, transportation, and other travel-related expenses. Lower travel costs can encourage more people to travel and increase demand for accommodation, while higher travel costs can deter potential visitors.
- Business confidence: Economic stability and growth can increase business confidence, driving investment and corporate expansion. This can result in more business travel to the destination for meetings, conferences, and other corporate events, thereby increasing the demand for accommodation.
In summary, economic factors directly impact the reasons for traveling to a destination, affecting both the affordability and desirability of travel. Understanding these factors can help stakeholders in the travel and tourism industry make informed decisions about marketing, pricing, and inventory management to better cater to the needs of travelers and optimize demand for accommodation.
The forecasting process
To forecast accommodation demand at the destination, you can start by analyzing historical data, considering the above factors, and identifying trends and patterns. Then, use this information to create a baseline forecast.
Next, consider the dynamic factors that may affect future demand. For instance, evaluate upcoming events, transportation developments, changes in political or regulatory environments, and destination marketing campaigns. Then, adjust your baseline forecast accordingly to account for these factors.
Lastly, use forecasting models and techniques, such as time series analysis, regression analysis, or machine learning algorithms, to predict future demand based on the identified trends and dynamic factors.
By structuring your approach around reasons for travel, destination attractiveness, and external factors, you can create a comprehensive and accurate forecast of accommodation demand for a destination. Then, regularly monitor and update your forecast as new information becomes available to ensure accuracy and relevance.