Now that we know more about demand in the hotel sector, and what or who can generate it, it’s time to see how Unconstrained Demand for your hotel works and how you should analyse it.
NB: This is an article from mirai, one of our Expert Partners
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To do so, we will explore the concept of “survivor bias”, illustrated by a classic example from World War II: the Allied Army bombers.
“Survivor bias”: looking beyond success
During World War II, the high number of aircraft downed in combat was a critical problem. The solution was to reinforce the most vulnerable areas of aircraft in order to increase chances of survival. To do this, analysts reviewed the impacts received by bombers returning to base.
At first glance, it might seem that the most logical thing to do would be to reinforce the areas receiving the most impacts. However, Abraham Wald, one of the analysts, realised a key error: these impacts represented the least critical areas, as aircraft with damage to these parts managed to return. To increase survivability, then, it was necessary to reinforce the areas that did not receive impacts, as these were the areas where damage had caused the aircraft to fall:
This reasoning is a classic example of “survivorship bias”, which occurs when the only stories considered are those that are successful, and failures are ignored.
Application to Unconstrained Demand analysis in hotels
What do Second World War Allied bombers have to do with demand for your hotel? Well, more than you might think.
In the hotel context, “survivorship bias” leads us to consider only sales achieved («successes»), without taking into account lost opportunities («critical impacts»). To get a complete picture of the unconstrained demand for your hotel, it is important to analyse both successes and missed opportunities.
Bearing this in mind, the following would be the main KPIs to take into account when calculating the real (unconstrained) demand of your hotel (time to brush up on your BI, you’re going to need it).
- Bookings generated: this KPI reflects all your hotel’s consolidated sales and provides a clear picture of what customers buy and when they buy it. It is equivalent to analysing data based on success stories, marked in red.
A good OTB (On The Books) report gives us a quick snapshot of all the sales that have been consolidated and the periods in which this successful demand is concentrated.
- Cancellations: while they do not count in the final production, cancellations are part of your unconstrained demand and should be analysed in detail. This includes the reasons for cancellation, as these help us understand the reasons bookings are lost, avoid duplicating data in rebookings, and detect patterns that can be anticipated.
