“When we initially entered the econometric forecasting business 14 years ago, we committed ourselves to a process of continuous self-evaluation,” said R. Mark Woodworth, president of PKF-HR. “The findings from these analyses inform the nuts and bolts of our ongoing forecasting efforts. Plus it enables our clients to overtly see that we strive to provide them with the most accurate forecasts upon which to make their important decisions.”
Actual Performance vs. Hotel Horizons® Outlook
|Quarterly National RevPAR Forecasts - 2008 to 2012|
|(Forecast for Next Quarter)|
|Sources:||Smith Travel Research (actual data)|
|PKF Hospitality Research, LLC (forecast data)|
PKF-HR’s Hotel Horizons® is a series of hotel forecast reports that analyze the historical and expected performance of U.S. lodging markets. Driven by a series of econometric forecasting models, the Hotel Horizons® reports cover five years of supply, demand, occupancy, ADR, and RevPAR for 50 major U.S. markets, as well as six national chain-scale segments and six national location categories. Within each market forecast, separate estimates are prepared for upper-price and lower-price hotels. The model relies on historical lodging data from Smith Travel Research, as well as historic and forecast economic data from Moody’s Analytics.
National Accuracy Highest
“Overall, we remain pleased with our demonstrated accuracy. We have learned that the accuracy of our forecasts varies with changes in the business cycle, as well as size of the market to be forecast,” said Woodworth.
“As we have seen in the past, the long-term accuracy of our national forecasts of the U.S. lodging market in its entirety, the chain-scales and the location categories, is very high,” said John B. (Jack) Corgel, PhD., the Robert C. Baker professor of real estate at the Cornell University School of Hotel Administration and senior advisor to PKF-HR. “One area where we have seen improvement since our last assessment is in the accuracy of our short-term forecasts. We attribute the improvement in short-term forecast accuracy to the lessons learned during our 2010 accuracy assessment.”
Local Forecast Accuracy Varies
While PKF-HR’s national forecasts proved to be consistently accurate, the precision of the firm’s local level forecasts varies from market to market. “In general, the size of the market appears to be a contributing factor, with the larger market forecasts achieving greater accuracy scores compared to the smaller markets,” said Woodworth.
“Fortunately we have seen an increase in the data available for us to include as variables in our local market forecasting models,” said Corgel. “In addition, we incorporate more input from locally based PKF Consultants regarding future rate data, advance booking information and convention calendars. As we begin to introduce these types of data into our econometric models, we expect to see greater consistency in the accuracy of our local market forecasts.”
Measuring the accuracy of forecasts involves an analysis of errors and often an examination of the sources of these errors. PKF-HR’s recent assessment, involved an investigation of both absolute errors (the difference between actual and forecast performance) and relative errors (the difference between results from the Hotel Horizons® model and forecasts from an intuitive approach).
“The inclusion of the relative errors analysis provides an external check on our forecasting methods,” notes Corgel. “Like everyone else, we can compare our absolute errors and make adjustments to our current models. The inclusion of the relative errors forces us to contemplate alternative methodologies.”
“The accuracy of our forecasts and complete visibility of the process have been paramount to the process since we started 14 years ago. Our clients, and the industry as a whole, benefit from the abundance of data that is out there for them to use. As we have been for the past 78 years, PKF-HR is very pleased that the lodging industry can rely on our firm as a reliable source for historical benchmarking data, as well as precise forecasts of future performance,” Woodworth concluded.
To download a copy of the PKF-HR forecast accuracy report, please visit:
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