The perfect time to start your budget process for the year 2020 and ultimately, do your 5-year revenue projections is now. You have all the information you need to accurately, or with minimal deviation, map out your business performance for next year. In the next articles, we will be focusing on the revenue budgeting process. Here are 3 reasons why I advise hotels to start the budget process now.
Your 2019 performance is clear
You can now tell how you will perform this year. This is based on the set budget versus the year to date performance, and optimistic business projection (Forecast) until the end of the year. Your business projection will be dictated by:
- The current business on the books, group inquires, tentative and confirmed business. Your conversation ratio will tell you how much of this business will be actualized.
- Your trend on 3 months’ forecast and month on month pickup percentages. This means; how much business do you pick 3 months out, and how much business do you pick for the month within the month.
- The last thing that could dictate your performance is if the destination is expecting any citywide meeting, which will mean high occupancies and high yield for the hotel.
You have your hotel’s actual performance statistics for the last 2 years
Develop a document that shows each segment’s performance for the last 2 or 3yrs, including the current year, and the segment’s performance month on month. Most property management systems will generate this report for you. If you don’t have a system, draw an excel sheet. Why is this important?
- You will be able to identify your demand curve. When is your peak, high and need periods in the year.
- You will analyze the growth per segment over the years. You can identify which segment is gaining, losing and the one that is constant.
- You will identify each segment’s average room rate. It is important to know how your highest contributing segments in terms of revenue, are affecting the budgeted ADR
- You will identify exceptional periods. For example, Let’s say January is a need period. However, it did exceptionally well last year. You need to know why. Otherwise it will mislead you as you budget for the coming year. If could have been a one-off conference, or a state visit, or there was a crisis at the airport and you had layover business for 3 days…etc.
- You will identify periods when you have recurring groups or events and use this information to budget for the following year.
- You will also see the organic growth of business since you are using the actual performance of the hotel year on year. How much business is the hotel growing by year on year?
There is less pressure when you budget early
When you budget early, you are in a position to critically evaluate the numbers and put a solid plan in place. You will also be able to identify the gaps and the opportunities you might not have utilized in the current, or past years, that you can utilize in the coming year for a better performance. As you look at these numbers, you might also unearth an opportunity that could turn around the remainder of 2019!
With time in your hands, you are able to put together a strategy for each segment and for each month, critic it and even present to your team and management for their input before the year begins. That way, come January, you have a plan in place for the year.
In the next articles, we will be evaluating your performance by segment and how to build numbers for next year.
You need someone to walk with you through the budget process? TALK TO US +254 780 777310 or
Email: anne.murungi@thehospitalityconsult.com
