Banquet & Catering Forecasting

Forecast accuracy enables your team to intelligently prepare for future events, ensuring proper ordering and staff will be available to make your events successful! This training module covers the importance of forecasting; how to incorporate historical information as you forecast future sales; other important factors to create accurate forecasts, and information on evaluating your forecasts. 

Introduction

Welcome to Banquet & Catering Forecasting!

Thank you for participating in the Banquet & Catering Forecasting training module. 

This course is designed to present Two Roads Event Designers with information they should know the importance of forecast accuracy; the factors that should be taken into account when forecasting revenue for banquet sales and how to go about building a forecast for your department. 

TRAINING FORMAT

This training module has 3 sections. Each section covers information about the forecasting process, and it will walk you through this process in a chronological order. At the end of each section, there will be a couple of short quizzes. Completing these quizzes completes the training module. 

Looking Back to Look Forward

The Importance of Forecast Accuracy

Before you begin the forecasting process, you should understand why it is important to forecast accurately. 

Forecast accuracy enables your team, both Operations and Revenue Management, to change their strategy at the right time in order to reap the greatest benefit.

It also helps the team to prevent losses by making the proper decisions based on relevant information.

In short, organizations that can create high quality, accurate forecasts are able to see what interventions are required to meet their business performance targets.

Comparing Pace

As you begin the forecasting process, you should determine whether you are ahead or behind last year's pace. Is your banquet pace in line with Group Rooms Pace? If not, why? What can the past tell us about the future?

You can start to determine the answer to these questions by looking at a Sales & Marketing Pace Report. For many Two Roads properties, this report is called the MK14 Report. Your hotel or resort may not use this specific spreadsheet, but they will use a similar pace report that shows the current, on the books revenue compared to the revenue from the same time last year. Essentially, you are using the pace report to see what percentage of revenue you are currently expecting compared to the revenue from last year over the same time period. This comparison will help you to determine why your forecast looks like it does right now, and whether you should expect it to significantly change. It will help shape the narrative of your current business so you can ensure that all relevant stakeholders understand how the business is going to look, and allow them to prepare accordingly. 

The next page will walk you through an MK14 Report. 

MK14 Report

The MK14 Report is a Pace Report used for forecasting throughout your property. You will first need to make sure that you are on the correct tab for Banquet or Catering Sales. The banquet sales tab is listed as "B" at the bottom of the spreadsheet:

The catering sales tab is listed as "C" at the bottom of the spreadsheet:

On the left side of the report, you will notice that information is being supplied for the current year in monthly, quarterly and total increments, and that this information is supplied for the past year as well:

Under the column labeled "Definites," you will find information about revenue that is already on the books. This shows your current pace, and lets you compare it to the pace from last year. An example is below (Note: Several columns were collapsed in order to show the "Definites" column next to the corresponding time periods):


As you can see above, at this property, the annual current pace for total banquet rooms is 25,817 compared to 25,658 from the previous year. The current pace for second quarter banquets revenue is $1,196,709 compared to $1,285,679 from the previous year. 

The next set of columns relevant to your forecasting is "Reach to Forecast." This shows how many rooms and/or total revenue must be picked up in order to reach your forecast, in comparison to what was needed a year before. An example is below:


In the above example, 344 banquet rooms must be booked to hit the second quarter forecast this year. At this point in time last year, 200 rooms were needed to be booked to hit the that year's forecast. 

As you look at your pace report, locate any major year to year differences and determine if their are factors that are not being accounted for in your forecast. You can also use the data from the "Reach to Forecast" to help determine the accuracy of your forecast. Does it seem unrealistic that you will pick up your reach to forecast? If so, you may need to adjust your forecast.

Using The Numbers To Understand The Story

Once you understand where you are standing in comparison to last year, you can start to make sense of why you are ahead, behind or even with past business numbers. Every property may have different banquet business trends, and different factors that impact their forecasting accuracy. As you work to improve your forecasting accuracy, you need to understand the story of your property's forecasting. Ask yourself the following questions:

  • What do your lead times look like? For instance, do you historically book a lot of short term or repeat business?
  • How do you measure your accuracy? Are you more often over or under? 
  • Who do you involve in forecasting? What role do your managers play?
  • What documentation do you submit for forecasting on a regular basis?

As you start to understand the story, continue to dig into the numbers to understand the differences between past forecast and actuals, and between past and present. Where do you see anomalies, and what could help to explain them? For instance, construction and renovation could have a short-medium term impact on your business. Sizable pop-up events, holidays and one-time conferences could also explain major yearly discrepancies. 

Develop a structured approach to complete your forecast. Do the same thing each time, so that you can easily identify variances and red flags. 

What is a pace report?

  • A report that helps you compare your revenue and projected revenue to a previous year
  • An MK14 report
  • A tool that helps you understand the narrative of your current business, and will lead you to more accurate forecasts
  • All of the above

Fill in the blanks

Fill in the blanks in the question area below based on the following information:

When asked to enter a number, use numerics. For instance, you would input "10" instead of "ten." It does not matter if you use a comma in your answer or not. 

This section of the MK14 shows information about rooms and revenue  

In the second quarter this year, there are  more rooms booked in comparison to the second quarter of last year. 

In the third quarter this year, there is $ more revenue in comparison to the third quarter of last year. 

The Nuts & Bolts of Forecasting

Understanding Reach

To complete the forecasting task, you must first have an understanding of several important facets of your business. The first is your booking history, as covered in Part 1 of this training. You must also understand your revenue expectations for future bookings, and current market trends

Your revenue expectations for future bookings is referred to as "Reach." This is the difference between what is actually, guaranteed on the books, and what the forecasted revenue is. "Definite business" revenue can be counted on the books when a client has signed a legal contract that stipulates guaranteed minimum revenue. However, in banquet sales, only counting guaranteed, fully contracted minimum revenue does not typically lead to accurate forecasting due to two extremely common scenarios, which will be explained in the next 2 pages. 

Forecasting Projected Bookings

The first scenario involves prospective clients who are in the process of booking, but have not yet booked. In this scenario, revenue is expected but not definite. How do we account for this in the forecasting process? The best way to do so is to talk to the sales manager, and determine the likelihood that the client will end up signing a contract. If the sales manager thinks there is only a 5-10% chance that the client will book, it is not worth considering as projected revenue. However, if they indicate that the client has an X% chance of booking, you can project X% of the expected revenue. For example, if your sales manager indicates that they are about 75% sure that a client will book a $10,000 guaranteed minimum contract, you can forecast 75% of that minimum, or $7,500. 

It is important here to have constant lines of communication open. If something changes to make a client more or less likely to book, you want to know immediately so that you can update your forecast immediately. Additionally, it is important to consider the practical reality of forecasting here. You do not want to be too conservative in your forecasting. The numbers we forecast determine everything from staffing to ordering. It is more detrimental to not have adequate staff or product for an event than it is to occasionally miss on a forecast.

For example, consider a major booking that has already received a contract and has told your sales manager they will return it in a few days. At this point, you are considering this event all but booked, and want to start preparing for its success. Even at such a late stage in the process, clients may still pull out before the deal is finalized, negatively impacting your forecast numbers in a big way. However, this is an explainable miss. As a counter-example, imagine the same client dragging their feet but eventually signing it. If you did not include this client in your forecasting at all, your property may suddenly realize that they are going to be severely understaffed in a couple of weeks, or perhaps it is too late to order extra linens. This forecasting miss will be harder to explain to your boss, as it demonstrated a lack of communication. 

Forecasting Beyond The Minimum

The second scenario in which forecasted revenue may be more accurate than definite revenue involves the guaranteed minimum amount of money to spend in the contract. Every time a group books, there is a guaranteed food and beverage minimum. Generally speaking, groups will usually surpass this minimum. If you anticipate this happening, you can build some hypothetical growth into your F&B forecast.

If you do build growth into your forecast, you should seek to always use the best and most current information available to you. Historically, how much do groups typically surpass their minimums at your property? If the group has visited your property before, look at their previous spending patterns. Use your relationship with the client to get a feel for their budget. You should be able to recognize an extremely budget-conscious client. You can also ask probing questions, and search for indications of their likelihood to exceed their minimum. In an obvious example, a corporate group that wants to make sure your bars are fully stocked with a variety of single malt scotches are a safe bet to exceed their beverage minimum. On the flip side, a group that wants to switch a steak entree for a chicken entree due to cost will likely not spend too much more than their minimum. 

Understand that forecasting beyond definite revenue always has some risk. As always, use the best information available to you to constantly update your forecasts. Remember that every group is different, so you should tailor your forecasts to the group rather than using a "one size fits all" number based on general trends. 

Understanding Your Environment

Another vital part of successful forecasting is understanding the environment you operate in, and any relevant market trends. 

It is important to understand the current and seasonal trends for your catering and group segmentation. What kind of groups are booking the upcoming season? Different market segments may have vastly different spending patterns. For instance, corporate groups tend to spend more than associations. If you have a social "gala" season, understand that these groups typically spend less money. As you dialogue with your clients, understand what they want out of an event. Oftentimes, groups use events to generate money for themselves, as they may use an event to fundraise and seek donations. For these groups, every dollar they don't spend at your property goes right back into their pocket, and they will be extremely cost-conscious. Look at trends for when these varying market segmented groups come in-oftentimes, properties will have high and low seasons based on the types of groups that book.

Looking at historical data, seek how this market segmentation and mix effects ROGR (Revenue per Occupied Group Room). Look to see the average check and covers per meal period per group room. You should also analyze the current year's pace as it compares to your property's history for 30, 60 and 90 day pickup for group and catering revenue. Always note anomalies and holiday shifts. Was there a major event in your property's city last year that is not taking place now? This would explain major yearly differences in revenue.

In order to have the best possible forecast for revenue data, use a combination of historical actuals and expected growth to setup default average checks. Then, update the checks in each individual booking to reflect any additional known information. 

Throughout this entire process, share all of your data and reasoning with your team. Use any specialized knowledge or information they possess to constantly seek a more accurate forecast.

True or False

  • "Reach" can be defined as the difference between revenue on the books and revenue that is forecasted
  • Once a contract has been signed, you should never forecast for more revenue than is guaranteed
  • You do not want to be TOO conservative in your forecasting, as it may lead to staff or other shortages
  • It is inappropriate to use your relationship with a client to get a feel for their budget
  • Generally speaking, corporate groups are more likely to go over their budget than an association would be

Fill in the Blanks

Consider the scenario below:

As you work on updating your forecasts, you talk to your staff about upcoming groups. Fred, a sales manager, is in the final stages of booking an event for Lion Enterprises International (LEI) that includes a food and beverage minimum of $10,000. Although he has not yet received the final contract back from LEI, he is 80% sure that they will return it for that sales minimum.

Another group, Big Shot Suits (BSS) LLC, has already signed a contract that guarantees a food and beverage minimum at $10,000. This group has held functions at your property before, and they really like to drink! Last time, they ended up doubling their food and beverage minimum. Your staff member Sally has been in frequent conversation with their event planner, and she has reported to you that they have specifically said they plan on spending at least twice as much of their F&B revenue once again.

 

Based on the above scenario, fill in the blanks below. When asked to enter a number, use numerics. For instance, you would input "10" instead of "ten." It does not matter if you use a comma in your answer or not.

As you prepare your MK14 report, you should forecast $ in F&B revenue for LEI.

As you prepare your MK14 report, the best forecast for BSS' F&B revenue is .

Fine-Tuning and Completing Your Forecast

Involve Your Team

Forecasting is a shared responsibility. Each member of the team has a role in building the forecast, and each member possesses knowledge and information that can contribute to a more accurate forecast. Consider how different members of the team can provide the following as you seek the best forecast possible:

  • Program meal periods and counts should be verified at the time groups are turned over and assigned. 
    • Do they correspond to the single/double room block contracted?
  • Average checks should be adjusted to meet seasonal expectation, reflect contracted discounts and history for repeat bookings in both Banquets and Catering.
  • Updates to programs should be made as information becomes available. Large revenue swings should be reported, especially for groups inside of 90 days.

Implement a structured approach and develop a routine for team members to revalidate program information for business during the upcoming forecast dates.

Pulling the Numbers

Know your reports! There are a variety of different reports that can help you determine the best numbers for your property. Check out Revenue Consumption, Cover Count, and Status Change Reports to start, in addition to your weekly MK14 (or any other pace report that your property may use). As you pull the numbers from the reports, make sure they are as up to date and accurate as possible. Look at the following areas to ensure the best possible forecast:

  • Look to see if the current business on the books reflects the Expected Revenues for Banquets & Catering. Have your average checks been updated to reflect expected spend, or do they remain in default? Update if necessary.
  • Validate overall Average Checks and Covers per Group Room Night. Know your historical averages.
  • Make sure that catering events are updated with expected attendance. 
  • Bring your team together to explain any anomalies and to answer questions regarding any of the above.
  • Some properties may have additional steps. As you continuously evaluate forecast accuracy, think about any unique factors at your property that you must pay attention to here.

Determine the Demand & Reach Potential to Complete the Forecast

You are almost ready to submit your forecast! Before you do, complete the following final steps:

  • Compare "Same Time Last Year" revenues and room counts to this year using the MK14 report or DASH (or another pace report that your property uses)
  • Validate information in current tentative bookings and the potential for them to go definite
  • Determine 30, 60, 90 day reach based on pickup expectations 
  • Evaluate the space left for Catering and factor in current demand
  • Assign the reach covers and average checks. Then, spread them across the appropriate meal periods and dates for Banquets and Catering
  • Submit your forecast

Tracking and Follow Up

Even after your forecast is submitted, it is important to continuously update it with any new information, and to analyze your process and the forecast's accuracy. Track your daily revenues to be aware of any variances as they occur. Address these variances with your team to point out any areas of improvement in future forecasts. Finally, take what you have learned this month to improve your accuracy for next month. 

Remember, it takes a team to build a forecast. Celebrate your success with your team, and reflect on any failures or major misses in forecasting for maximum learning. 

True or False

  • Only managers should be consulted when preparing a forecast
  • Average checks should be adjusted to meet seasonal expectations & reflect contracted discounts
  • Forecasts should be updated anytime there is a change in expected attendance
  • Only 30 day pickup expectations should be considered when submitting a forecast. You can worry about 60 and 90 day pickup expectations later
  • Any major variances in your forecasts are opportunities to learn and create better forecasts in the future