Research: Hotel Business Impacted By Inaccurate Weather Forecasts

April 12, 2018    Category : Uncategorized   Posted By : admin

Research conducted by Neirbi Analytics and the Connecticut Lodging Association concluded that the 5-day weather forecast is often inaccurate, impacting hotel revenue.

Introduction

Snowfall beckons skiers; clear, hot days draw crowds to the beach. It’s a predictable formula that hoteliers rely on for marketing, budget projection, and other aspects of their business. But depending on the vagaries of the weather is no sure bet. Meteorology often seems more of an art than a science: a hurricane might turn off course, or a snowstorm could bypass a town that has already canceled school for the day. When a hotelier is counting on a weather system that doesn’t manifest, it can mean a huge financial drop from projected earnings.

Given that hotels depend on accurate weather prediction to run their business, Neirbi Analytics decided to do an analysis to determine exactly how accurate those predictions were. The result? On average, weather forecasts are inaccurate almost 25% of the time. That means hoteliers counting on weather prediction alone to project earnings are fighting a losing battle about a quarter of the time.

Our Findings

During 2017 and 2018, Neirbi Analytics analyzed over four months of weather data to understand the variance between the five-day precipitation forecast and actual precipitation.

  • New York City: Forecasted precipitation was false 40% of the time.
  • Boston, Massachusetts: Forecasted precipitation was false 13.2% of the time.
  • Orlando, Florida: Forecasted precipitation was false 24.5% of the time.
  • Mystic, Connecticut: Forecasted precipitation was false 22.6% of the time.

On average between the four cities, false forecasts occurred approximately 24.6% of the time. This number is consistent with previous weather forecasting accuracy studies.

The below charts show the accuracy of a precipitation forecast in New York (Figure 1), as well as the five-day precipitation variance in Orlando (Figure 2).

Figure 1

Figure 2

Neirbi_data_weather

Theory

So, what drives inaccurate weather forecasts? Are they all equally unreliable, or can hoteliers depend on certain predictions more than others?

First, a short-range forecast will be far more reliable than one that is 15 days out. Generally, predictions that are more than five days away are unreliable. Any small change, such as a fluctuation in the jet stream or even a change in land use, could throw off the accuracy of a computer model. In the real world, variables pile up quickly. Although a general weather pattern may be fairly easy to predict, the specifics of how and when it will manifest are not easy to pin down. If you have a lot riding on the accuracy of a weather report, it’s best not to depend on anything that’s more than three days out. And the next-day forecast is the only truly reliable forecast.

According to The Economist, weather forecasts are improving. Today, five-day forecasts are nearly as accurate as two-day projections were 30 years ago. This improved accuracy is a result of advances in technology, an increase in the number of observations, and greater collaboration between institutions that focus on weather prediction. One project, the NOAA National Operational Model Archive and Distribution System (NOMADS), is consolidating a wide range of global climate models and other data. Overall, its goal is to help people make personal or business decisions based on weather predictions over the course of days to decades. Another technology, AcuRite’s weather stations that you set up in your own backyard, promise a much more localized forecast than regional predictions. While projects such as these are only as powerful as the underlying technology, they’ll be something to keep an eye on in the very near future.

Survey

Weather forecasts drive consumer behavior. The five-day weather forecast, especially in terms of precipitation, is one of the leading determinants in decisions regarding travel, dining, and entertainment. The accuracy of that forecast is thus especially important to businesses that are affected by rain or snow.

Neirbi and the Connecticut Lodging Association (CLA) collaborated to conduct research on how weather forecasts impact occupancy and revenue at Connecticut hotels, bed and breakfasts, resorts, and attractions. The purpose of this survey was to answer the question, “As booking windows shrink and consumers have access to long-range forecasts, are long-range forecasts helping or hurting your business?” The following results are from our March 2018 survey:

Do you think weather has an impact on your hotel/venue’s occupancy and revenue?

  1. Yes: 100%
  2. No: 0%

Do you think incorrect weather forecasts have an impact on your hotel/venue’s occupancy and revenue? (Example: The forecast called for a rainy weekend, but it ended up being sunny.)

  1. Yes: 80%
  2. No: 20%

Do you think inclement weather (wind, rain, snow, etc.) has an impact on last-minute cancellations?

  1. Yes: 100%
  2. No: 0%

Does your hotel or venue have a cancellation policy that considers weather events?

  1. Yes (please specify): 90%
    1. “Only for extreme weather.”
    2. “Brand mandated.”
    3. “Our 48-hour cancellation policy is relaxed to accommodate guests who cannot travel here due to airline cancellations, etc.”
    4. “If driving would be dangerous, I will only charge $15 if they cancel less than two days. More than two days, no charge.”
    5. “On a per storm basis cxl [cancellation] fees are waived.”
    6. “Depends on the severity of the storm we do last-minute cancellations without penalty.”
    7. “If guests cannot make it due to weather we have to refund the stay.”
    8. “If a weather event leads to guests being unable to come to the property, then we credit their stay and invite them to rebook. If we take a proactive stance and closet the property, we also welcome the guests back at a later mutually agreeable time.”
    9. “Brand encouraged with consideration given to weather-affected guest’s origin and destination.”
  2. No: 10%

Do you and your team currently consider weather forecasts when planning strategies to price, market, and sell your hotel’s rooms/venues/services?

  1. Yes: 90%
  2. No: 10%


 

If yes, what forecasts do you most heavily consider?

  1. 10-day forecasts: 0%
  2. 5-day forecasts: 10%
  3. 3-day forecasts: 30%
  4. Seasonal: 10%
  5. All forecasts (continually update strategy as the forecast changes): 40%
  6. Not applicable (don’t consider weather forecasts at all): 10%

When inclement weather is in the forecast, does your hotel/venue expend resources to help prepare for the impact or to mitigate potential loss?

  1. Yes: 90%
  2. No: 10%

If yes, what types of resources are impacted? (You may select multiple if applicable.)

  1. Marketing: 10%
  2. Sales: 40%
  3. Labor: 90%
  4. Other (please specify): 10%
    1. Food supply
  5. Not applicable: 0%


 

Do you have a specific story of how a long-range weather forecast positively or negatively impacted your business?

  1. “Being an airport property, we usually gain more revenue. We have cancellations that are replaced with last-minute bookings at higher rates.”
  2. “Sold out during power outage for three days.”
  3. “Weather forecast from other markets will often impact our area before the local forecast.”
  4. “Typically, severe weather will cause cancelations and if there are outages in the area these folks will fill in the rooms. The biggest impact on this hotel is when a snow storm is forecast for a Monday or Tuesday. Our corporate travels all cancel for the week causing a massive revenue drop. Only some of these rooms may be used by locals without power. Other days of the week seem less affected. A Wednesday storm for instance will trap as many people here in the hotel that thought they were leaving as there are cancellations from those who could not get here. So, a Wednesday storm usually has no net effect.”
  5. “Around Christmas, I had 15 days cancelled for reasons of snow for people traveling from North Carolina and Ohio. The forecasts were correct.”
  6. We are seasonal and weather impacts us greatly, especially in the summer and rain.”
  7. N/A
  8. This past week’s weather has both positively and negatively affected hotel occupancy. Due to the bad wind and rain we actually picked up reservations over the weekend due to power loss. Today, with the projected blizzard not appearing and no snow accumulating we have lost business both for leisure, groups, and dining as a result of the forecast.”
  9. “No. Suffice it to say that when the meteorologists begin hyping a storm 10 days out, it effects lodging and restaurant reservations negatively. We have also used inclement weather to our advantage by inviting guests to arrive a day earlier at a special rate.”
  10. “No.”

 

 

Conclusion

It is apparent even from just one survey in one state that weather plays a dominant role in a hotel’s revenue and planning.  It is also apparent that there is much variety in exactly how much of an impact weather has and the strategy a hotelier can implement as a result. From mandated brand policies as it relates to weather cancellations to “taking it on a case per case basis”, the strategies vary widely. But with false forecasts occurring almost 25% of the time in the cities that Neirbi evaluated, it’s best to have a well thought out backup plan instead of relying on weather predictions to project your business’s earnings.

  • Devise a sales strategy that goes beyond weather-dependent guests.
  • Have a communication plan in place to reach key staff members instantly.
  • Create an email/social media marketing campaign that’s ready to launch when the weather situation is right.
  • Investigate insurance options for your large and special event customers that offer protection in case of a major weather event
  • Monitor the weather in feeder markets to target audiences at the optimal time

Remember, even if you operate a ski resort for example, not every guest is there because of the snow. Capitalize on what makes your hotel unique beyond weather-related factors to ensure a steady flow of guests come rain, shine, sleet, or snow…or none of the above depending on the accuracy of the forecast!

 

 

 

 

 

 

 

 

 

 

For additional information contact:

Ryan Duques duques@neirbi.com or (203) 836-8341

www.Neirbi.com