Hotel Budgeting

A guide for planning and controlling processes in hotels

Prepared by Waleed Bashawri

Influences of Decision Making

Information
Strategic & Operat. Planning
Financial Plans & Budget
Industry forecasts

Plan

News

Activity based costing

Product based profitability
If, Then?
Targets, objectives

Report
Market share
Local trends
Channel mix
Deviation Analysis
Promotion Effectiveness

Consolidation
Management reports
Performance measurement
Product performance
Customer Analysis

Targets of Hotel Managers

Increase hotel occupancy rate
Increase profitability of sales
Cost control
Owners of revenues and expenses
Relating expenses and revenues

Benefits of Budget System

Focus on future and preparation for
possible outcomes
Enhanced communication
Information for different parties
Benchmark for performance control
Achievement oriented organizational
behavior (combined with
compensation system)

Industrial Comparisons
Uniform System of Accounts for Lodging
Industry
New York City Hotel Association
First published in 1926
9th revision

Based on
Service standards
Region and type of property

Management Functions and

Budget
Planning

Organizing

Leading

Feedback

Controlling

Reasons of Failure

Top management support

Organizational conformity
Responsibility accounting
Wrong internal or external information
Time schedules
Flexibility
Evaluation of actual results
Reflecting evaluation results back to
business

Before starting...

Current years activity figures

General economic and industry
conditions
Competitive environment
Prices (rates) being applied
Industry forecasts and trends

Structure of the Multi-Property

Operation
Summary profit & loss schedule
Revenues

Rooms
F&B
Outlet rents
Laundry

Expenses

Cost of Sales
Departmental Expenses
Payroll and related expenses
Undistributed expenses

Cumulative profit & loss figures

Structure of the Multi-Property

Operation
Ratios
Operational ratios

Occupancy rate
Double occupancy rate
Average stay
Average room rate
RevPar
F&B spending
Cost of sales ratio for F&B outlets
Payroll and related expenses ratio
Total cost per occupied room

Profitability ratios

Structure of the Multi-Property

Operation
Single Property profit & loss schedule
Departmental Budgets

Property 3

Laundry
F&B

Laundry

F&B
Rooms

Property 2

Rooms

Property 1
Laundry
F&B
Rooms

Summary Profit & Loss Schedules

Cost Drivers and Department

Budgets
Housekeeping department

Cost Driver

Budgeted Unit Cost

Departmental Expenses
Computers & computer supplies

# of rooms sold

$1.00

China/glass

# of rooms sold

$0.50

Cleaning Material

# of guests

$0.50

Amenities

# of guests

$1.00

Flowers & decoration

# of rooms sold

$2.00

Customer supplies

# of guests

$0.50

Room supplies

# of rooms sold

$2.00

Laundry

# of guests

$1.00

Linen

# of guests

$0.20

Printed materials and office supplies

# of rooms sold

$0.30

Total Departmental Expenses

Budgeting Mechanics
Identify Market Segments
Corporate base information

Parameter 1
Reservation Source
Option 1,1 - Local Travel Agency
Option 1,2 - International Travel
Agency
Option 1,3 Internet,

Parameter 2
Price Category
Option 2,1 Rack Rate
Option 2,2 Corporate
Rate
Option 2,3 - CIR 1
Option 2,4 - CIR 2

Enter Sales Estimation

Complete Departmental Budgets
Collect & Merge
Final Approval
Collect & Merge Property Budgets
Final Corporate Approval

Parameter 3
Room Type
Option 3,1 Single Room
Option 3,2 Double Room
Option 3,3 Suite

Framework for Successful

Budgeting

Budgeting Tools
Spreadsheets
For small sized hotels with minimum outlets

Specialized budgeting software

Large scale hotels with more than 200
rooms
Hotel Chains

Thank you.