It’s that season again. No, not the season where “pumpkin spice” seems to be infused in everything from pancakes to chewing gum, but…budgeting season. So, we thought we would provide you with our list of top 10 room revenue budgeting tips to contemplate as you sip your pumpkin spice latte. Enjoy!
Tip #1: Understand market projections
Budgeting in a vacuum doesn’t work. You need to gain an understanding of general market trends for your area as a starting point. Take this information with a “grain of salt”.
For example, new supply (traditional or not) may or may not have a direct impact on your particular operation. STR, PwC, HVS and others publish guidance based on their research. If you don’t know what we are talking about, give us a call.
Tip #2: Build from the bottom up
“Backing in” to a budget figure to meet a pro forma or to satisfy owners’ expectations isn’t the best approach to developing a realistic budget.
You can get as granular as you like (day-by-day by sub market segment, for example, is ideal – and highly recommended), but at the very least, you should document historical performance of your major market segments (group, transient, etc.) by month.
That will give you some additional insights into seasonal patterns.
Tip#3: Watch out for the market segmentation trap
Clearly defining how you will categorize, track and record guest stays is vital and perhaps not as easy as it may appear. Mixing channel production with market segmentation can be disastrous. From a marketing and revenue management perspective, it is critical to understand how many people are calling in by phone to make reservations or booking through the property website (direct bookings).
This should be tracked, but if you try to mix channel with traditional P&L market segmentation such as retail, discount and package, you will soon be in trouble.
Why? How would you ensure consistency in tracking a bed-and-breakfast reservation made by someone who made a reservation via the booking engine? Would it be categorized as an “IBE” reservation or a “package” booking?
Tip#4: Use “unconstrained” transient demand first
Yeah, your property has a finite number of rooms available to sell at any given time and you may already have some group blocks on the books to consider, but for now, ignore those facts. Layer in what your theoretical potential transient demand is (by sub segment and by day, if possible).
You can then easily identify high occupancy dates (Hint: those are the dates where you have to remove room nights from your projections in order to get back down to 100% occupancy).
Read rest of the tips at RevenueMatters
