Hotel Budgeting Advice | Hotel Marketing

Hotel Budgeting Advice | Hotel Marketing
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The importance of a budget is massive in the relationship between the owner and the hotel manager. It maps out the operation the property intends to follow. Budget renders operating standards into action and exhibits how managers generate profit. It also provides opportunities for owners whether the operator is making allowance for their objectives and projections. For many of the larger management companies, budget often involves minimal discussion.
People who have never visited the property make critical decisions solely on data, which shouldn't be the case. With their firsthand knowledge, one might assume that the perfect people to guide their budget process are the property-level asset management team.
Budget Challenges
With the absence of profound operating experience or the services of an experienced asset manager, owners are at an enormous disadvantage when evaluating budgets. Timing and process are crucial factors towards the prevailing budget challenges.
• Budget presentations usually happen early to mid-November, allowing only 45 to 60 days before the new fiscal year. The complexity of commenting on and proposing changes to the budget is a difficult feat to accomplish, considering the time scale. The more prominent companies assign specific personnel dedicated solely to the budget. Unfortunately, most owners lack the resources to parallel this expertise.
• Regardless of the level of approval owners require, may it be lenient or uncompromising, managers still control the budget process making it more difficult to suggest or allow changes.
• An annual budget will significantly impact budgets in subsequent years. Although generally written in isolation, a budget should derive from the previous year's budget.
• Labor expenses, one of the most crucial costs variables, is seldom presented in intricate detail to owners, ultimately missing opportunities to locate and point out potential savings. Correspondingly, operators give more importance to occupancy rather than rate, which may be detrimental to hotel profitability.
Submitting budgets with limited review time is an indication that the owner must prepare not only for an extensive review and suggestions regarding the budget but also demands them to assume greater involvement in the budget process than they initially thought of. They must first view budgeting as a process that requires consistency and proactivity. Then, illustrate the budget long before the delivery of the budget proposal. And finally, consider providing the operator a standard that will determine its acceptance later.
Based on the current year's results, owners must consistently evaluate the hotel and its critical concerns. During the evaluation, owners must consider the underlying questions; What is working? In which field is the hotel competitive? Even more important question: What didn't work? Where is the hotel failing? Is the hotel catering to the right clients? Are the hotel owner's budget and financial expectations met or exceeded? With these questions, owners must also emphasize utilizing the Revenue Per Available Room (RevPAR) formula, the most common profitability measure. Does the budget mirror current operations? Did the predicted expenditures and revenue match the results?
Payroll, gains, and costs must consistently undergo reviews every month. This information provides an opportunity to assess operator performance ahead of budget time. We must also be aware that managers and brands constantly revise services, which requires even more monitoring to ensure that the hotel is not falling behind predictions. Owners must ensure that managers see these changes and their impact incorporated into the budget.
It should be a given that owners must require the managers to discuss budget submissions ahead of time. These considerations allow the owners to emphasize concerns that need addressing and create an opportunity to respond to proposals immediately. This kind of conversation is vital, and no remote comments will achieve fundamental changes...