With the industry still recovering from the pandemic and inflation impacting both revenues and operational costs, what should budget 2023 consider?
NB: This is an article from Staah
The unprecedented volatility has made the task of budgeting for 2023 daunting. Demand is fluctuating, supply costs are rising, and historical trends are not as reliable. Yet, budgeting is an opportunity to engage different teams across your business, realign goals and work together towards shared financial goals.
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Let’s look at a few areas you should think about when preparing the annual budget for your hotel.
Start with data gathering
Your past data may not be totally reliable, but in the short term, it is still a good indicator of what your guests are seeking and when. Your PMS, channel manager, booking engine, website analytics, etc. are all a gold mine of insights – leverage these.
Post-pandemic, consider external sources such as airlines and OTAs to see where demand is coming from and what you can expect. Make note of local events and become more prudent in understanding your Comp Set data.
Get account-level projections
Since the sales department typically provides a big chunk of room night production, and their booking window skews longer than transient guests (for the most part), nailing down estimates for corporate business (business travelers) and groups is a good place to start your financial plan. The sales team can provide estimates for room night production per account, by month if possible.
Get a handle on daily demand
Once you’ve captured data from the sources above, create a demand calendar. A best practice is to build a calendar in Excel, with each week as a row, and each column as a day of the week. Enter the projected occupancy in each day’s cell.
By getting granular, you can understand rates and revenue potential better.
Opt for dynamic pricing
This approach to pricing rooms relies on algorithms to set room prices based on supply and demand on any given day. Prices are adjusted in real-time so the yield from every room is much higher. The good news is that with a smart platform such as STAAH, the heavy lifting of adjusting prices is done programmatically.
The devil is in the detail
Heard of zero-based budgeting? It starts from scratch and goes category by category to figure out which expenses are essential. Nothing is assumed. By going through this exercise, everyone involved has more visibility into how much each thing costs, which is valuable in case costs need to be cut at some point.
In this day and age of rising inflation, zero-based budgeting can reap great benefits.
Choose alternative offerings that cost less
The little things that add up to deliver a great guest experience also add up as costs on the balance sheet. Look for clever ways to manage these costs with smart alternatives that don’t affect the guest experience.
For instance, ditch the subscription for multiple magazines for digital subscriptions. Or opt for menus that are seasonal and local – you’ll also have a great story to tell when you do this.
Adopt technology to improve the guest experience
Budgeting is not just a cost-cutting exercise; it is also an exercise to find opportunities to grow revenue and improve guest experience efficiently. Investing in smart technology is one such smart option – you will be future-proofing your business. Mobile apps, online check-in, and check-outs, keyless entry, smart room technology … these are becoming minimum standards and your annual budget should start making room for these investments.
Upgrade your technology stack
Closely related to the point above is an audit of your current technology stack. Is your foundational software up to scratch to handle the volatility of modern hospitality? Your property management system, revenue management, distribution, online booking system, etc. should all be seamlessly integrated to maximize revenue and guest impact.
Invest in demand generation
Make room in your budget for marketing activity that generates demand. Understand different markets and audiences, see where the opportunity lies for your property, and invest in getting in front of this lucrative segment. Don’t rely on past sources for demand.
Finalise the budget
Preparing a hotel budget is not an easy feat. Once you’ve completed your research and finalised your budget, make sure to share it with various teams for feedback and refinement. Getting the buy-in from your whole team is essential to achieving your financial goals. Also, allow for refinement throughout the year. Revisiting your budget regularly will help you understand current performance and refine your budgeting strategy for future years.
The post Hotel Budgets: Things to Keep in Mind When Budgeting for 2023 appeared first on Revenue Hub.