Hotel Budget Plan – Are you ready for 2024?

What is your plan for the next year, including your budget and targets? What REVPAR or GOPPAR are you aiming for? You have reviewed the performance for next year, and are you describing all actions in full detail? Are all team members aware of the goals and the steps they need to take? Have you already set your budget for the new hotel, or are you still in the middle of it? What is your methodology? What is your process? Are you drilling down by segment, channel, account, and day, or are you really going for it?

It’s time to act and create your hotel budget plan. Our step-by-step guides will help you prepare for 2024 using our company’s most effective hotel budgeting techniques.

What is a Hotel Budget Plan, and When Should You Start?

A hotel budget is an explanation of how revenues will be generated and spent every month in the coming year to achieve the goals and objectives. This helps ensure that there is enough money each month to pay bills and to reserve for other expenses, such as investment.

The budget is a guideline for how the next year’s performance will be.

The hotel budget season usually begins towards the end of August, with management presentations starting the next month. Despite the fact that trends are constantly changing and COVID-19 is influencing booking behavior, you should still take into consideration factors like booking windows, cancellation trends, rising room rates, and inflation. These factors can have a significant impact on the accuracy of your budget plan. Practically, adjusting your hotel budget at a later date during this budget season is a good idea.

Do you have to adjust your hotel budget throughout the year?

This is where the Hotel Forecast comes in. You can compare your budget with your forecast.

Should every hotel create a budget plan?

Answer: Yes. Simply running a business on intuition is not enough anymore.

It is important to plan and report on your hotel’s performance, whether it is a small boutique hotel with 15 rooms or a large urban hotel with 400 keys.

Why is it important to have a budget for hotels?

The hotel industry is highly competitive. Hotels need to budget accurately to align their financial results with business objectives and ensure that their teams have the organization and preparation to achieve those goals.

It’s nearly impossible to achieve your goals if you don’t give your team clear goals.

What many hotels get wrong: the Budget Pitfall

Not everyone is as detailed when creating their budget. Let me share a funny budgeting story with you. We work with a variety of hoteliers, and this time, the issue is about resort management. Tour operators have influenced the way many hotels in vacation markets manage their properties. Budgets are set per person, not per room. This means that total revenue goals become flexible if there isn’t enough information to measure results.

The hotel management believed that the hotel was on track because the average rate per person had been achieved. The average occupancy rate per room was 20% below normal. This made it impossible to achieve the revenue target because the average room rates were totally off.

It gets funnier. We noticed when we worked through the monthly budget that some months had revenue targets below the previous year. When we asked why, it was explained that certain tour operators told them they expected 10% fewer bookings from one particular country. To offset the possible decline in demand, no one thought of forming partnerships with other channels of distribution. They were not thinking about capturing more market share or entering new markets.

Sorry, but I had to vent this out. Unfortunately, this is a very common occurrence in our industry. Tour operators, especially in resort markets, have too long been influencing hoteliers’ business practices. Hoteliers must gain a better understanding of the financial aspects of their business and develop a more strategic perspective. They must also be more creative with revenue strategies and methods to improve the performance of their properties.

Budget Hotel Budgeting is not sophisticated.

A colleague in the industry I highly respect called me last weekend to ask if I was aware of an online tool that helps hoteliers create a professional approach. It’s not just the standard punch-out, which most hotels use, with a list of trade shows and a percentage increase for each segment. He wanted a system that guides you through all the details and makes you consider every aspect. He is correct; plans are, in general, too superficial. It’s time to take them up a notch and make them more complete. Hotel businesses are multi-million euro or dollar enterprises that require a strategic and structurally sound approach.

How to Create a Budget Plan for a Hotel

Let’s first discuss some basic rules before diving into the details of budgeting. Consider the following factors to improve accuracy and maximize accuracy:

Give context to numbers and not just list them. By telling the story about how the revenue will be generated over the next year and what factors will contribute to it, you will encourage your team to contribute and understand the plan. This will improve the quality of the final result.

As we have all seen and heard, trends can change quickly. To better navigate the market, it is important to take a proactive approach.

Keep explanations out of reports. Simplifying will allow for better communication and make it easier to get everyone on board.

How to Start: Create a breakdown per hotel department

We have now established some ground rules. Let’s look at the elements that you should include in your plan for the next year.

We have compiled a list of questions for the coming year, taking into account the rapid adoption of mobile technologies by consumers and the continued growth of online sales.

Hotel Departments: Key Considerations

A detailed calendar is the basis for determining your target or budget. You can get a good overview of the revenue drivers for each day. Plan the upcoming year’s events, such as conferences, expositions, and trade fairs, concerts and holidays, vacations, or long weekends. You will see a shift in the first few months.

To uncover hidden revenue, perform displacement calculations for all segments, accounts, channels, and channels. Include channel distribution costs such as travel agent commissions, agency fees, and marketing investments. Payroll for sales, marketing, and reservations is also included.

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