This is around the time of year hoteliers are normally preparing their budgets for next year, but nothing about the current situation is normal.
As the coronavirus pandemic has thrown off expectations for most of 2020 and limited the usefulness of historical data to guide the process, hoteliers are saying setting a budget for 2021 is a completely new experience.
It’s going to be a much different process than it has been in the past for all the obvious reasons, said Richard Jones, SVP and COO at Hospitality Ventures Management Group.
“There’s no operator and no owner that’s going to go into 2021 with an annual business plan and a budget that they can have any reasonable degree of confidence that it’s going to realize itself the way it’s planned out,” he said.
Changed timeline
The pandemic moved HP Hotels to ramp up its budgeting process about three months earlier than in normal years, SVP Jason LaBarge said. The company normally begins budgeting for the next year around September and then finishes up before the holidays in November and sends it to investment and ownership groups by 1 December.
This year, it makes more sense to start it earlier, he said. The hotels have limited staffing, particularly at limited-service hotels, so this will give the teams extra time to focus on the plan and dive into the market trends. It’s a local market business, even more so now as there’s less corporate travel, so the hotels are relying on local groups.
“We wanted to give the teams extra time to focus in on their current clientele at the hotels and to understand where that business is coming from and why and what they can keep going forward,” he said.
The plan also puts the budget in front of owners and investors sooner so they can figure out their long-term plans faster as well, LaBarge said. The industry is still running about 40% to 50% behind pre-COVID-19 occupancy levels, and there likely won’t be much change over the next 10 to 12 months. The goal is to give these groups an outlook that might be a bit pessimistic, but they can go back and readjust as needed because it’s better to get it in front of them sooner than later.
Taking a different approach, Peachtree Hotel Management President Patrick Short said his company will try to push its budgeting process as far as it can into the fall to give its 2021 budget the most up-to-date information possible.
