Hotel Budgets – A key piece to the hotel success equation
Whether you are just beginning the process of budgeting for next year or if budget season is now behind you, below are some tips to keep in mind to build a successful budget for years to come. At Kriya RevGen, we like to consider revenue management and budgeting, both a science AND an art, and we feel the numbers, while incredibly useful and the backbone of all our decision making, will only get you so far. After that, you are left to your own devices to build a strong case for a budget or forecast—using a combination of common sense, past experience, and talent. Having just completed the first round of budgeting here, the following are some helpful tips we employed this year to hopefully ensure accurate targets for next year’s numbers.
Start with good historical data
While it may seem pretty obvious to most people, budgeting starts with gathering your previous years’ (plural) data to see where you finished. We say plural because we like to see how we’ve been trending over the past several years. This gives us a better sense of how a certain month tends to perform, and reduces the effect of outlier months. Additionally, start with realistic data. No one budgets on Dec 31 for Jan 1, so forecasts must be used for Sep-Dec. How is your forecast looking for Sep, Oct, Nov, and Dec? Budgeting on forecasts can be difficult, so start conservative. If you haven’t been hitting budget all year, maybe it’s not a good idea to give yourself a 5% increase over November’s budget.
Excerpt from a Kriya RevGEN report. Part of the hotel revenue management & analytics program.
Revisit your STR Reports (all of them)
Most of us have a tendency to open a STR report after the week is over to review how we did and to strategize for the week ahead. After that, we close up shop, and it gets hidden in our inbox for months to come. Make it a habit to organize your STR reports in a labeled folder on your hard drive. As you start budgeting, go month by month, and open up your weekly STRs for each week in that month as well as your monthly STR. If you subscribe to daily, make note of unordinary days and open up that daily report as well. With the quantitative data to back you up, make sure you arm yourself with qualitative data as well, as suggested in tip # 3.
Be a good journalist
Perhaps you’re the type of person who forgets what you had for lunch yesterday. If so, start a journal! After a week is over, make it a habit to take note of what happened throughout that week to back up your STR. Did you have an unexpected last minute group block, a huge thunderstorm, a bed bug outbreak on the 2nd floor, or an event like that at all this past year? If so, unless you write it down, chances are you will either forget the event entirely or forget how much or how little it negatively or positively affected you. At the end of each month, review your weekly journal entries and write a monthly review. The time it will take to do this will exponentially reduce the headaches while budgeting when you’re trying to remember why your RevPar index suddenly dropped 10 pts that week the wedding block you failed to wash unexpectedly cancelled.
Get in the holiday spirit
Create a calendar to keep track of all your holidays, where they land, and how that will affect you. In the NYC market, for instance, the Jewish holidays at the beginning of September, are of particular importance because of how the market slows to a halt. Keep in mind that all holidays, religious or secular, change dates and/or day of week. Both of these things can affect you. If Rosh Hashanah is a week after Labor Day next year as opposed to the same week as Labor Day this year, that probably means both weeks will suffer next year versus just the first week of September.
Seasonality Report from Kriya RevGEN.
Invest in a convention calendar
Certain markets provide great convention calendars from their CVBs. Once you buy the calendar, figure out where certain larger events will take place. If a convention is all the way across town, you may not see any compression from it. Additionally, understand how big the compression from the conventions has to be to affect you. There may be a big convention in town, but that alone may not have the same effect as seven smaller conventions. Additionally, understand if a convention tends to draw locally. If a convention is a travelling event, like the Car Show which visits several cities across the country, most guests come locally to attend and won’t need any accommodations.
Remember your PKF, but don’t live by it
It’s important to understand what PKF has to say about your market for the coming year, but only you know your property inside and out. IF PKF is expecting a 4% growth in the market, but you know that a certain large group is not staying at your property next year, budget based on your own research and assumptions. PKF is a great starting place directionally, but as long as you have the backup based on the above to prove it, you can soundly defend an increase or decrease in your own budget when it comes time to present to your ownership group. Stand behind your decisions knowing you’ve made the correct ones based on numbers and experience.
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