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Revenue Management Glossary

Mean Absolute Deviation (MAD)


The Mean Absolute Deviation (MAD) allows you to calculate the inconsistencies between your forecasting – related to room rates, occupancy rates and/or revenue figures – from the actual value (bookings).

How to use it

Forecasting plays a crucial role in predicting occupancy rates, revenue and other key performance indicators, and is a basis for establishing more accurate revenue management strategies and planning and allocating resources efficiently in hotel management. By monitoring your MAD on an ongoing basis, you are able to better understand the margin of error between your forecasts and the actual bookings, and improve the accuracy of your future forecasts. More accurate forecasts enable you to make better, data-based revenue management and operational decisions which will help you to accomplish your business goals more effectively.


1 – Calculate the mean, by adding all of the data points and dividing that number by the total number of data points.
2 – Calculate the distance between each original data point and the mean by subtracting the mean from the value of each data point.
3 – Add the values of each distance together.
4 – Divide that number by the total number of data points, which gives you the MAD.

Related Terms

Mean Absolute Percentage Error (MAPE), Forecasting, Revenue Management, Occupancy
By regularly calculating the difference between my forecasts and my actual performance using MAD, I gain valuable insights into the consistency and reliability of my hotel’s operations and finances, can more easily identify opportunities to improve the consistency and stability in our operations, and as a result, improve our decision-making and long-term financial performance.

Hendrik Niehues

Hendrik Niehues