By Jill Wilder, President of Aptech
It’s that time of year – budget season. “Budget” – even the word sounds daunting to most people. The good news is the budgeting process for your hotel doesn’t have to be overly difficult. The key assets when building a budget for your hotel company are:
✓ Organization
✓ Teamwork – with all departments supplying their input and information without delay.
✓ Hotel-specific software – to help your finance team gather accurate data across your portfolio and easily provide their recommended budget on time.
Let’s Start with the Basics
A hotel budget is essentially a financial plan and strategy for the upcoming fiscal year. It provides an inside look at the organization’s financial health, and offers projections for revenue, expenses and general performance. One note though: Monitoring budgets doesn’t stop with approval at the end of budget season; finance teams must consistently monitor the hotel’s performance throughout the year against the budget as the hotel industry is easily affected by economic factors and the results of guest demand at different times of the year.
The most important step is to ensure you have accurate data – your budget can only be as useful and accurate as the data you have. Accurate historical data including revenue and expenses is the key to identifying targets for the coming year as well as occupancy trends and evaluating property performance. Today’s software solutions help automate many processes and access applicable data on one dashboard. Finance teams do not have to manually create reports like they did in the past, and because of that, these solutions help reduce errors and provide valuable insights.
While your finance team is most likely in the middle of budgeting season, now is the time to ask a few questions: As you work through budgeting season, have you involved all of your hotel’s department managers? Have they all submitted their assigned tasks by the deadlines you requested? Is there anyone who might need some extra guidance from your team? A solid budget requires input from multiple departments, and some may need help from the finance team for next year’s projections.
Is Your Property or Hotel Group Still Using Analytics from COVID?
Statista estimates that hotel and resort industry market size worldwide reached $1.5 trillion USD in 2023, with occupancy rates rebounding to pre-pandemic levels. It’s imperative that hotels walk away from the analytics focused around COVID and work with new patterns and new data. It’s time!
As of the first quarter of this year, there were 6,195 hotels under construction, with 3,840 properties planned to start construction over the next 12 months. With occupancy rates up to prepandemic levels and construction at full force, your finance team should be looking at recent data and not relying on prepandemic and pandemic numbers. It’s time to move forward and use accurate, recent data to start propelling your property’s performance forward and stop looking back.
What Your Finance Team is Gathering for Your Hotel’s 2025 Budget
A hotel budget depends on accurate estimates of expenses, revenue and financial goals. This includes estimated revenue such as:
◾ room sales (based on occupancy rates and ADR/average daily rate)
◾ food and beverage sales including events
◾ ancillary revenue such as spa, golf, conference sales
Projected expenses include:
◾ fixed costs
◾ variable costs
◾ operating expenses
◾ sales and marketing
◾ cost of goods sold (including food and beverage expenses)
◾ capital expenditures, as well as any fees for equipment replacement (including property improvements)
For example, rooms tend to generate the most revenue for a hotel, and labor tends to be the biggest expense. By gathering this information and properly completing a budget, your hotel finance team can focus on profitability, operational efficiency and ensuring the overall financial health of the business.
By analyzing performance data, financial data from different departments, and market conditions, your team can review trends that are valuable in creating your property’s budget and financial forecasts. In a nutshell, the most important goal of a budget, or the plan your finance team puts in place, is to ensure financial performance aligns with the organization’s business objectives.
Looking Ahead
Before you know it, it will be budget season again in 2025. Be sure to follow our blog for highlights on the updates included in the new USALI 12. The deadline for hotels to adopt these changes is January 1, 2026, so many hotel organizations will most likely incorporate these updates by August of next year to include them in their 2026 budgets.
