To be successful in business, every company needs to create a business plan that forms the basis of management decisions.

Based on the business plan, company defines the objectives of the business, looks at the risks and uncertainties and develops business activities that lead to the realization of the set goals. All these activities are converted into numbers and recorded in a financial plan also known as an operating budget. Whether you’re a general manager, or a department head – everyone has felt the pains of budgeting season.  This stressful time of year has become even more stressful in the wake of the pandemic which has rattled the hotel business and made planning for the future an impossible task. Though owners’ expectations have not changed because of COVID-19, they want to see higher profitability year over year.

I experiencedsituation in hotels, where a budget was a pure Excel calculation, actual from previous year plus 10%. On my question, based on what that increase, the answer I got was “owner expectations”. I guess that the chance to achieve such a budget are low, as there was not a planned strategy on how to achieve the result.

I understand that owners have expectations, many times dictated also by credit repayments, but a budget should be realistic and prepared based on fact and figures. It doesn’t make sense to show on paper great monthly results ifthose can’t be achieved.

When advising hotel teams on how to prepare the operational budget, I ask first to do a forecast until the end of the current year. It is crucial to have date until the end of the current year to reduce the risk of over/under estimating for the following year. I had situation in a hotel where the forecast was very approximately done, with the result that during budget presentation to the owners at the end of the year, the team had to justifya very challenging double-digit profit increase!

Beside financial reports, Iask to pay a lot of attention onthe analysisof the market situation,the competitive set reports, the new hotels on the market, the economicsituation, and onone off event that are planned. All those information enable a management team to elaborate an accurate sales strategy plan and the marketing plan. When reviewing budgets, I analyze in detail the payroll cost. It is crucial, to achieve a good GOP to have a tight control over this cost. 

Budget planning may be time-consuming, but it is a critical part of a hotel’s success. Who invested the time to prepare a well-planned budget streamlines operations and creates strategic opportunities for the hotel, ensuring that every złotych spent goes towards boosting bookings, improving thereputation, and generating the highest possible returns. Conversely, a poorly planned budget undermines thrproperty’s potential and wastes resources.

Author: Emanuele Dalnodar