1. FORECASTING ROOM REVENUE

2.  For the purpose of making a revenue forecast(budget), the Front office Manager needs past periods (any specified) financial information. This means that the Reservation Manager shall supply to the F.O Manager figures of room revenue for say, three previous yeaRs. and the pattern in the increase of revenue and also the increase in terms of percentage.

3. Let us suppose that each year the increase in revenue is 15%(although this is hypothetical situation, because every year the increase can not be constant).

4. Year
Room Revenue
Increase of 15% every year
2001
2002
2003
2004
The figures in the table for the year 2001, 2002 and 2003 are for the past year, while figure for 2004 is the projected figure for 2004 as the forecasting is done in 2003 for Please note that the figure for the year 2004 in the room revenue column of Rs is revenue at the end of the year 2003 and the beginning of the year 2004, while the figure of Rs in the column “increase of 15% every year” projected increase over the figure of year The budgeted figure of Rs must have been calculated at the beginning of the year 2004 or at the end of the year 2003.

5. Another way of projecting room revenue is on the basis of past room sales and ARR.
Let us study by an example. Suppose a hotel has 100 rooms and average occupancy of the hotel for the year 2001 is say 80%. Therefore, the number of rooms sold over a period of the 2001 shall be 80/100*100*365=29200 rooms and suppose the total room revenue for the year is Rs Then the ARR shall be /29200= Rs. 4000

6. Further we see that the occ % increased by 3% in the year 2001 to 2002 and from 80% it became 83% in 2002.
Year
Total no. of rooms in the hotel
OCC%
No of rooms sold during the year
Total revenue for the year(say)
ARR
2001
100 80
29200
4000
2002 83
30295
5008
2003 86
31390
5676
2004 89
32585
6751

7. Also that every year it is increasing by 3% i
Also that every year it is increasing by 3% i.e the occ% for 2003 becomes 86% and for the year the occ percentage becomes 89%. Further from these figures we find that it means that a total number of rooms and the room revenue is Rs and hence the ARR id Rs for the year and for the year these figures are, total number of rooms being 31390, and the total room revenue being Rs which means and ARR of Rs and for the year these figures are total number of rooms 32585, total room revenue Rs and ARR of Rs

8. Now, based on above assumption of 3% increase in room occ% which means 92% for the year and the total room revenue say Rs the number of rooms sold will be and ARR shall be Rs From the above figures we note that while the occupancy% is increasing at a constant rate of 3 % every year, the ARR is increasing from 4000 to 5008 i.e % and further to Rs from 5008 which means 101.1% and further from 5676 to Rs. 6751, which means 119.6% increase and further from 5676 to 6751 which means 119.6% increase and further shall increase to Rs which means an increase of 108.5% in ARR.