Hospitality Industry Managerial Accounting HRT 374

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Hospitality Industry Managerial AccountingHRT 374

• Chapter 9
• Forecasting Methods

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Implicit vs. Explicit

• Implicit
• Unsystematic
• Imprecise
• Difficult to evaluate

• Explicit
• Systematic
• Reliable
• Accurate
• Easier to evaluate

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Personnel responsible

• Sales Director--
• Front Office Manager
• Food Beverage Manager
• Director of Catering
• Controller
• General Manager
• Management team

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Nature of forecasting

• Deals with future
• Uncertain
• Historical data
• Not accurate
• Deviations

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Underlying pattern of data

• Trends
• Seasonal
• Cyclical

Constant movement up or down
Summer, Fall, Winter, Spring
Weekdays, Weekends, Holidays
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Overview of forecasting methods

• Informal--
• Naive
• Moving averages
• Formal--
• Quantitative (causal and time series)
• Qualitative forecasting methods

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Naive

• Last period plus a percentage

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Moving averages page 407-408

• Average over a period of time

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Causal forecasting

• Regression Analysis
• Single regression

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Limitations

• Need data
• History may or may not repeat itself
• Cannot foresee the unforseeable-9/11

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Time series

• Always assumes a pattern over time
• Example, every December, sales drop 30

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Qualitative (limited numbers)

• Human judgment
• Market research
• Jury of executive opinion
• Sales force estimates
• Delphi technique

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Selecting a forecasting method

• Effectiveness
• Cost
• Frequency forecast will be updated
• Turnaround required
• Size and complexity
• Forecasting skills of personnel
• Purpose of forecasts

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Examples of short term lodging forecasting

• Rooms
• Reservations plus walk-ins
• Prior period adjusted by intuition
• Food
• Reservations plus walk-ins
• Prior period adjusted by intuition
• Catering
• Booked plus estimate of additional sales
• Prior period adjusted by intuition

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Cases

• ARAMARK
• Pizza Hut
• Hilton Hotels

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Project customer counts for 2004 if customers
increase by 5 prices increase by 50 cents

• 2003 Customers Avg dinner
  price
• Oct 2,000 6.95
• Nov 2,400 7.15
• October 2,000 x 1.05 2,100
• 6.95 0.50 7.45
• 2,100 x 7.45 15,645
• What is November?
• 2,400 x 1.05 2,520
• 7.15 0.50 7.65
• 7.65 x 2,520 19,278

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Chapter 9 Homework

• Problems 1, 3, 4

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Problem 1

• January 3,000 x 1.05 3,150
• 7.95 0.50 8.45
• 3,150 x 8.45 26,615.50
• February
• 2,750 x 1.05 x (8.05 0.50) 24,688
• March
• 3,050 x 1.05 x (8.00 0.50) 27,221.25

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Problem 3

• June 2004
• (4,200 x 1/6) (4,140 x 1/3) 4,250 x ½)
• (4,200 x .17) (4,140 x .33) (4,250 x .5)
• 714 1,366
  2,125 4,205
• July 2004 5,475
• August 2004 5,080

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Problem 4

• Mon 3,204 / 5 641
• Tue 3,090 / 5 618
• Wed 3,155 / 5 631
• Thur 3192 / 5 638
• Fri 3,722 / 5 744