Budget season is fast approaching and I am writing this article to highlight some areas to look at when you are reviewing a hotel financial budget. Maybe you want to make sure you have all your ducks in a row before you submit your 2018 numbers to the corporate office or perhaps you are the one doing the review. This article will give you some ideas of what you need for your review, what to look for and where to find it.
Budgeting is first and foremost a business plan with numbers. It is the culmination of all the wants, wishes, aspirations and ideas laid out in nauseating detail for the coming year. Budgeting is also a game played by managers, executives and owners at all levels. Under promise and over deliver is the hotel game because their incentives are linked to the budget.
Missing the GOP (Gross Operating Profit) target for the year in the hotel is a big deal. Miss it two years in a row and—depending on what is in your management agreement—your brand might be out in the street.
Having a good hotel budget, one that is a stretch but not too much of a stretch, is what you want to have and in order to get it you need to know what to look for.
The first thing you want to have for review when looking at the budget is a P&L style report that lays out the following from left to right: next year’s budget, the current year’s latest re-forecast, the current budget and last year’s actual.
In addition, you will want detailed level data on the prior three-five years. What have the trends been on occupancy, rate, revpar, average F&B customer spend, expenses per department, productivity, average wage rates and year-over-year flow-thru in rooms, F&B, non-operating department and GOP? Your system should be able to produce this as long as you have the actual history under your belt. Take the time to prepare this report in advance of your review schedule and it will make life much, much easier.