The ongoing recession has created its share of challenges for the hotel industry and far too many to list in this space. But there is one aspect of the business that has become downright impossible—forecasting. Well, forecasting accurately that is. I suppose, technically speaking, anyone is capable of forecasting. But from the experts like Smith Travel Research, PricewaterhouseCoopers and PKF Hospitality Research—which closely monitor the industry’s vital signs such as occupancy, ADR and RevPAR on a national level—to property owners and operators just interested in their individual hotels, no one can be sure what to expect from week to week, let alone month to month now. As an example, revised forecasts have become something of a regular occurrence for the aforementioend research firms. Owners and operators, meanwhile, don’t know whether their hotels will be 50% full this summer or sold out. (Of course, the latter may be a stretch right now.) But the impact of accurate forecasting, or the lack of it, has quite a ripple effect on the entire industry. For example, as if there weren’t enough things standing in the way of hotel transactions, it’s hard for buyers or sellers to put a value on something when you can’t predict future performance. And we all know lenders aren’t lining up to give away money now, especially if they have no concrete evidence that the borrower will be able to make a profit and honor their covenants. When hospitality stocks fell into favor on Wall Street a few years back, the reason most often cited was the transparency that the industry had now, which was reassuring to investors. That transparency is now a thing of the past, as is the industry’s favorable standing on Wall Street. But just how did we as an industry manage without all this data years ago? Properties were bought and sold based on location and their physical condition, demand ebbed and flowed without warning and revenue management was the job of the general manager not a software program. Of course, this is more than just a hospitality issue. Economists everywhere are divided about where things are headed and when. The latest nugget I heard was that the economy is headed in the right direction because gas prices were on their way up again. Apparently, that only happens when the economy is doing well. My forecast is that determining occupancy, ADR and RevPAR isn’t likely to get any easier in the coming months, so we’re all going to have to fly blind for a while. But that’s OK. Sometimes not being able to see can give you a better feel for things, valuable things like the hotel guest, who still is the most important indicator of where we are going as an industry. Besides, when the forecast is for stormy weather, sometimes it’s better not to know. The sun will come out again one of these days for the industry and when it does it will most likely be a surprise, and a real nice one at that.
Dennis Nessler