” Dumitru: The bank wants more details – they aren’t comfortable with our revenue forecast. They…

”
Dumitru: The bank wants more details – they aren’t
comfortable with our revenue forecast. They want to know why we
think revenue will grow in 2013 given the depressed state of the
economy.
Denis: Okay Dad. I think I can help you with that. I can
work up a forecast of the number of visitors to Las Vegas based on
historical records.
Dumitru: I knew that fancy education of yours would help the
business! Can you do something today?
Denis: Sure, Dad. I will email you something this evening
after classes.
Dumitru Mironescu had helped his parents flee Romania in
1983 to escape the tyranny of Nicolae Ceau_escu. The family settled
in Las Vegas and Dumitru had given up any ideas of furthering his
education so that he could take a job to help the family survive.
He started off modestly as a parking attendant at a major hotel
until he learned to speak English properly. His hard work paid off
and after a while he was parking the cars for guests using the
valet service. His incredible attention to detail and friendly
interaction with everyone was noticed and after a while he was
offered the position of driver for the hotel limousine service.
After several years of doing this, he and his friend, David,
scraped together all the money they had and bought their own used
vehicle and started their own limousine service. From those small
beginnings, Dumitru now ran one of the best services in Las Vegas
with a fleet of 17 vehicles.
During 2012, Dumitru decided that the time had come to
replace three of his oldest vehicles and expand the fleet with two
new vehicles. He approached his bank to finance the new purchases
and submitted a business plan which his son, Denis, had helped him
write.
Denis was very proud that he had been offered a position at
a university in Tennessee to study for his MBA. He was determined
to make the most of this opportunity and to help his Dad in every
possible way. While Dumitru’s business had done quite well over the
years, the recent recession had taken its toll. Denis knew that his
father had made many sacrifices to fund his studies and he would be
eternally grateful for that opportunity.
He knew that revenue for limousine services was driven by
the number of visitors to the area. After searching the internet,
Denis quickly found records of the number of visitors to Las Vegas
over many years:
http://www.lvcva.com/stats-and-facts/visitor-statistics/
From the annual data for 1970 to 2011, he noticed that the
total number of visitors seemed to be reaching a plateau. From the
monthly data, he noticed that there were some complex seasonal
patterns. He downloaded the data and set to work. He had to
forecast the number visitors for the period December 2012 through
December 2013 and prepare a convincing argument that revenue would
grow rather than remain static. He reached for the notes he took
from the class on forecasting realizing that this was not going to
be 10 minute exercise.”
Question 1b: What can Denis do to improve his forecast
in the future?