Forecasting When Your Hotel Budget Fails!
Most hoteliers budget for the following year, using the best information they have at the time.
It is hard work, and the team puts their heads together to do their very best.
Still though... it is a shot in the dark!
So what do you do when the budget isn’t helping?
You use a forecast!
A forecast is simply making a copy of your yearly hotel budget and adjusting it for the new information you get when you are closer to the actual dates.
If you are creating next year’s budget in October, for example, it will be challenging to estimate what your sales will be next June.
However, next April, you will have a much better idea of what June will look like!
And that is where your forecast comes in.
The budget, once finalized, should not be altered.
You can, however, use it as a baseline to create a more realistic hotel forecast.
Many hotel pros who say they forecast mean that they get their updated 30-60-90 revenue forecast, but they don’t go the step further to adjust their expenses.
That revenue forecast is gold!
It just doesn’t quite paint the whole picture.
For instance, your Income Statement may show that comp breakfast cost is 10% under budget. Woohoo! BUT, if revenue is down 30%, that cost should actually be much lower.
And vice versa. The Income Statement may show comp breakfast as being over budget (wah wah), but if revenue is up 30%, then there is a very good reason!
The forecast adjusts those expenses so that you can see the full picture.
When the hotel budget becomes unreliable, it can get written off, leaving the team feeling aimless.
Your forecast, on the other hand, is much more real-time, and if the team sees that revenue is going to be less than expected, they can act quickly to:
Cut any fixed expenses that aren’t necessary.
Make staffing adjustments.
Make more informed purchasing decisions.
Prepare hotel owners if a cash call might be necessary (set GOP, gross operating profit, levels as a guide for this).
It's exceptionally normal for hotel pros to make their operational budget for the following year, but never quite get around to doing monthly forecasts.
So if that is you, don't worry, you are in good company!
If you want to give forecasting a real chance though - you need to implement a simple forecasting process.
I’ve put together a guide that has everything you need to get started with forecasting, including:
A clear outline of what a forecast actually is.
How to know if you’re ready to forecast.
Guidance on setting up monthly forecast meetings.
The simplest inputs you need to make a forecast.
And key decisions that can be made based on your forecast.
You can download our Beginner’s Guide to Hotel Forecasting by clicking here!
So your tip for the week is to setup a monthly forecasting process for your team so that you are making decisions based on up to date information.