Pearson New International Edition International pcl tp indd 1

Discussion Questions:
1. What are the pros and cons of using Web-based pricing tactics frequently, say
several times weekly, to change room rates?
2. Why might room occupancy (availability) forecasts be significantly incorrect on
an occasional basis? On a frequent basis?
3. What would you do, as a general manager, if you believed that the FOM used
lowballing tactics to underestimate room occupancy data?
What should FOMs do when they are asked, as they
commonly are, to predict the future? The answer is
“their best.” In many occupations an individual’s
ultimate success depends on his or her ability to
provide a best estimate of the future (e.g., weather
forecasting and selecting financial investments).
As you read in this chapter, accurate revenue
forecasts provide important information, and they
are critical in establishing room rates and managing
RevPar. If estimated demand is unknown, yield man-
agement principles will be impossible to implement
effectively. For these reasons the general manager
and, in this case, regional managers regularly
require FOMs to forecast room revenue and later to
compare actual revenue results with that forecast.
No revenue manager can predict the future
with 100 percent precision; however, basic fore-
cast strategies can help FOMs reach high levels
of accuracy. Renee, the FOM of the Santa Clara
Suites, should follow the three basics of fore-
casting: Renee should evaluate her historical
data (room revenue achieved in prior Octobers);
evaluate her current data (reservations on-the-
books for October); and gather data about the
events, if any, that will affect future revenue
estimates.
Many FOMs do a good job of retaining
records about past performance. For most, how-
ever, current data will be minimal for a time period
that is nine months away because many trav-
elers do not book their room reservations that far
in advance. Reports about transient booking pace,
however, can give meaningful insight into short-
term booking trends that may continue in the
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