A hotel’s financial area has always been one with its own intricacies. There are numerous financial aspects crucial to ensuring smooth hotel business operations, and one of them includes budgeting!
While just “budgeting” might already sound familiar, hotel budgeting is a more specific thing than that. Budgeting for hotels is an essential, accurate plan created by hotels to prepare and roadmap the potential revenue for the year ahead — and, of course, an important influencing factor to the success of the hotel business!
Our article here will introduce you to basic, yet crucial things one should know about hotel budgeting: starting from the definition, the importance, how budgeting works, and even provide you with tips on better budgeting for hotels!
What to Know About Hotel Budgeting
Hotel Budgeting Definition
Hotel budgeting definition.
There are many words to define what hotel budgeting is, but let’s keep it simple: hotel budgeting is the hotel’s plan for generating and allocating revenue for the upcoming year to achieve its objectives. Budgeting shows hotels the potential revenue they are going to earn and is regarded as a roadmap for the hotel’s financial performance in the year ahead, as well as one of the keys to a successful hotel business.
Who Should Participate in Hotel Budgeting and How It Works
Who should participate in hotel budgeting and how it works.
We already know that a hotel is comprised of various departments. When it comes to budgeting, the managers of those hotel departments participate by creating their own budgeting plans, as each of them has different expenses. This is where the role of the hotel finance department begins; they are responsible for consolidating the department budgets to create a proper overall hotel budgeting plan!
The Importance of Hotel Budgeting
The importance of hotel budgeting.
Do you think every hotel needs budgeting? The answer is yes! Whether it is a small or independent hotel, having a budgeting plan is essential for any hotel to ensure that the financial results are well-aligned with its business objectives. Moreover, budgeting can also help hotels compete in the highly competitive hospitality industry!
Timing for Hotel Budgeting
Timing for hotel budgeting.
Budgeting for hotels doesn’t happen anytime the hotel pleases. In fact, budgeting has its own timing. Typically, the hotel budgeting season starts around the end of August, followed by presentations to the management in the following month. During the budgeting period, it’s important for hotels to consider factors like booking trends, increasing room rates, or even inflation, as such factors might heavily influence the accuracy of the hotel’s budget plan.
For Hotel Budgeting, Research is Required
Research is required for hotel budgeting.
As stated previously, there are numerous factors that can affect the accuracy of the budget, which hotels should take into account. This is the reason why research is required; by gathering necessary market data and information, it gives the finance department a clear idea of what the future hotel revenue may look like when they make forecasts for the key variables in the budgeting plan.
There are so many details to know about budgeting for hotels! Given the importance of these details to the hotel budgeting process, it is crucial for hotels to ensure that the budgeting process runs seamlessly. As such, we have covered several valuable tips to achieve a better and more successful hotel budgeting, which we will share with you here!
7 Worthy Tips for Better Hotel Budgeting
One thing to always be kept in mind is to avoid rushing the budget planning process. Such carelessness might lead to inaccurate hotel budgeting, which will influence the hotel’s future revenue. Surely, there are also ways to dodge such mistakes — some of which you can find in the next section below!
1. Analyze Historical Data
Analyze historical data.
For an accurate calculation of a hotel budget, one of the best ways is to analyze historical data in the hotel’s finance area. Hotels usually will have predictable expenses and changes that occur at the same times every year, such as how food expenses increase significantly every Christmas period. This kind of data is helpful and provides vital information!
2. Create a Demand Calendar
Create a demand calendar.
A demand calendar is made up of the data of customers’ demands, such as demands for hotel rooms and other hotel services, which are compiled throughout the year. With a demand calendar, hotels can use the document to make plans for their hotel budget, an example is how to maximize revenue during the high-demand season.
3. Track Staff Performance
Track staff performance.
Creating and optimizing a budget for hotels comes with understanding the workforce first! By keeping track and having a good perception of the staff’s performance, it will be easier to comprehend the correlation between salary and productivity, thus helping to maximize employees’ value and plan a better budget.
4. Compare Year-to-Date Hotel Revenue
Compare year-to-date hotel revenue.
Another tip for accurate hotel budgeting is to identify the amount of revenue the hotel has earned year-to-date. Compare this year’s number to the hotel’s revenue at the same time last year, making it easier to forecast and plan the budget for the upcoming year!
5. Take Incentives into Account
Take incentives into account.
It’s crucial for hotels to track all costs spent on hotel operations, including the financial incentives for employees. Keeping accurate track of incentives helps to seamlessly allocate them to employees or departments, avoid miscalculations, and, eventually, convert unpaid incentives into additional budget for the hotel.
6. Utilize Hotel Digital Technology
Utilize hotel digital technology.
Although hotel technology won’t be able to fully replace the role of hospitality professionals, using the help of tech in hotel budgeting can reduce costs and optimize the budgeting process. There are lots of budgeting software for hotels to use, such as Actabl!
7. Review Profit and Loss Statement
Review profit and loss statement.
Lastly, reviewing the profit and loss (P&L) statement helps hotels determine their performance year-over-year based on average profits and losses. This also gives hotels a clearer picture of their financial success and, in addition, helps forecast the upcoming financial performance and budgeting.
Wrapping Up
Budgeting, either the planning or management part, is a complex area of the hotel’s finance. So, let us give applause first to every hotel’s finance department for handling this task! Aside from its intricacies, hotel budgeting is an equally essential aspect of the hotel’s business, as accurate and proper hotel budgeting will lead hotels to generate more revenue and excel in competition against competitors.
Understanding hotel budgeting does not only affect the success rate of the hotel’s business. In fact, individuals who master the art of hotel budgeting will undoubtedly be led to bright, successful finance careers in the hospitality industry, and be labeled as valuable talents!
So, does the idea of working in hospitality finance interest you? If yes, then you should not miss the chance to gain advanced access to a finance career in the hospitality industry, which you can easily get with us at RMC Asia!
Our internship and management training programs provide participants with practical work experience in various hotel departments, ranging from finance, food & beverages, front office, and more – all taking place in prestigious, international-scale hotels and resorts across Asia’s fascinating destinations.
Get a head start on your successful hospitality career by joining our programs and participants now!
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