Capacity management in the tourism industry is measured by the available seat-miles per month. Capacity management is an important factor within hospitality operations as it tests activity for the manager and therefore gives them an indication of the maximum level of value-added over a period of time, so they can see what the operation could achieve in normal conditions.
According to Armistead and Clark (1994, p6) “Capacity management is the ability to balance demand from customers and the capability of the service delivery system to satisfy the demand. This places an emphasis on understanding first, the nature of demand by forecasting and second, the options for managing capacity to meet the expected demand”.
The process consists of forecasting and managing capacity, these are made up from smaller components which will be discussed in further details in this report.
2. Forecasting
Forecasting is used to identify capacity gaps between product demand and the current capacity. It is an important process in all management decisions not just tourism management; although each situation is different you can apply the same procedures to make realistic capacity decisions within any business. Forecasting methods can be divided into qualitative and quantitative categories which are based on the availability of historical time series data.
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Establishing the level of demand when forecasting is of the upmost importance as failure to do so can cause over booking and overcrowding. Other eventualities from inaccuracy of forecasting can include incorrect numbers for staff and lack aircrafts which was one of the factors which effected American airlines development in 1990 (Krajewski and Ritzman, p275) . It helps to understand product life cycle as it will impact the capacity.
It is also important for a manager to look at external factors such as trends as they will have an effect on the supply and demand of a product or service, these can include;
Ageing population- this will affect the quantitative forecasting as our current population is living longer, so you can’t use historical data to establish relationships as it’s continuously changing.
Seasonal trends- They can depend social, economic and environmental impacts. This would be best measure by qualitative forecasting.
Disposable income- Due to the recession people will have less disposable income.
2.1 Forecasting Techniques
There are various different forecasting techniques that cover various timescales, the two most common techniques are:
Long-term capacity management
For large projects
Usually planned over several years
In tourism this will involve several departments
Short-term capacity management
Plan and order resources
Usually a monthly, weekly or daily basis
Tourism short term capacity management would involve the cleaning of an aircraft
Long term planning requires demand forecasts for an extended period of time, the decisions made are often concerned with strategic decisions to ensure achievement of their desired objectives.
Short-term capacity management focuses on relatively small time durations and specific processes; they are specifically for smaller levels of operation. Unfortunately, forecast accuracy declines as the forecasting time lengthens. Forecasts also don’t allow for competitors actions however waiting line models and decision trees do.
3. Types of forecasting
Forecasting methods can be divided into two broad approaches, these are;
Qualitative
Quantitative
The majority of forecasting techniques use past or historical data in the form of time series. One single method is never used on its own as they are both usually interlinked.
3.1Qualitative Forecasting
The Qualitative method generally uses the judgment of experts in the appropriate field to generate forecasts. An advantage of this is that experts can generate a forecast if there isn’t any historical data available. The main challenge to qualitative data analysis is that there is “no clear and accepted set of conventions for analysis corresponding to those observed with quantitative data (Robson, 1993, p.370).
The most popular methods of qualitative forecasting are:
Delphi technique
Scenario writing
Subject approach
Expert opinion
Life cycle analysis
3.2 Quantitative forecasting
The Quantitative methods use historical data; the methods consist of analyzing historical data concerning the time series of the particular variable of interest and other time series if they interlink with the area concerned. There are two main methods used within quantitative forecasting, the first method bases the future forecast on a past trends, these are known as time series methods.
The second method also uses historical data. But the forecaster examines the cause and effect relationships of the variable with other relevant variables such as;
Disposable income
Interest rate
Unemployment rate
The state of the economy e.g. the recession
This type of forecasting uses past time series, forecasting techniques that are under this category are called casual methods.
4. Capacity management
After deciding what products and services should be on offered, management should then plan the system’s capacity. The first step in the Capacity Management process, forecasting, is the best way to judge attendance and understand product life cycle. Therefore Capacity Management itself is used to make sure the capacity, from a tourism manager’s point of view, meets the targets set.
The capacity of an airline usually depends on the location and the available seats per miles, as well as staff, time and other resources which are used.
4.1 Measuring Capacity
According to (Krajewski and Ritzman, p276) “No single capacity measure is applicable to all types of situations” Every manager will have to take other factors into consideration before they measure their capacity. If there is an insufficient capacity it won’t be possible to meet all of the demand, therefore to much capacity is provided and this will result in resources not being used to their maximum capability.
4.2 Coping with Demand
The need for accurate forecasts of tourism demand to assist managerial decision making is highly important as the tourism product is perishable and if it doesn’t meet the demand they lose revenue as an aircraft still has to fly without the demand being met. There are several ways of coping with demand and these are;
Keep the activities level of resources constant and ignore any fluctuations.
Adjust capacity to match demand.
Change the demand to fit the capacity.
4.3 Queuing Theory
Queuing theory is important to an as its one of the important factors in meeting their attendees’ needs. Queues arise when a demand for a service has exceeded the capacity, the customer doesn’t get the service straight away upon arrival so they must wait for the service to be ready. This is an important for an airport as they have a random system which customers can arrive at any time; it isn’t difficult for an airport to experience queues, but it is important that they deal with them sufficiently. These queues will often build up, disappear in quieter periods and then reappear all the time as there are always flights departing and arriving. Airports offer departing guests waiting rooms and shops to deal with queues and when they arrive they must go through customs which is a slow but easy method for managing the mass amount of people.
4.4 Queue Discipline
Most managers will employ a simple queuing method to ensure a positive experience for the customer. These can be;
Priority system for certain customers
FIFO – First In First Out
LIFO – Last In First Out
5. Conclusion
This report has looked at the three main stages involved in capacity management and the different methods available to any manager. Although forecasting isn’t always accurate, there is a wide variety of techniques in the first stage which can be used for any method. It is highly important to consider past experience as well as modern trends for more of a refined forecast, failure to do so could lead into an inaccurate forecast. The capacity management stage can then deal with the demand if it is insufficient or too high, then the queuing theory may be taken into consideration.
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In an airport due to the nature of the business it is unpredictable to measure the amount of customers as people can come and go as they please. This means the queuing theory may or may not make the service time, however if the demand has been manipulated to help predict the expected demand then it will reduce the waiting time and overall give the customer a positive experience. All of the stages combined prepare a tourism manager for any unforeseen outcomes in a tourism service and will allow them to successfully manage any outcome.
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