Hospitality Financial Leadership – Why Managing Your Hotel Budget Is Like Playing Baseball
That’s a big statement because if you’re involved in your hotel budget and you’ve played baseball, you’re probably telling yourself I’m out of my rocker.
Alas, like all things, there is more than one way to look at the budget, and I said “manager” in the title. So, let’s dig a little deeper and see what I’m talking about. A big part of life is how we choose to fight and managing your hotel budget is no different.
To start, we have to unpack the stiff that just arrived and realize the budget for what it is, a business plan with numbers. That’s it and it’s up to us to beat him at his own game.
That being said, you’ll never win every game you play, but with some creative strategies, you’ll be better equipped to win more often.
The first thing to do is to familiarize yourself with the basic rules of baseball and establishing a hotel budget.
Basic rule number one is that there are multiple innings in a baseball game, usually at least nine. The same can be said for the financial/budget world of the hotel, except you have 12 innings to play.
That’s 12 winning opportunities, and even if you lose a few rounds, you have a chance to make up for it, especially if you’ve fallen behind in previous rounds. To bring this strategy to life, you need a system to follow.
It is important to emphasize here that to play this way, we must have a 1-2-3 financial strategy operational in our hotel.
- One, prepare monthly financial statements on an accrual basis.
- Of them, incorporate a current and detailed end-of-year rolling monthly forecast.
- Three and most importantly, include all department heads in the monthly forecasting and re-forecasting process. Without their involvement and commitment, you are sunk.
There’s no point in getting out of shape when you fail to deliver a month, or even a losing streak, because you have a few months where you can literally step out of the park and not just catch up but take the lead.
This is where the strategy for using the hotel budget comes in with the integration of the rolling forecast. On the top level declaration, it looks like this:
In this example, we have the actual for the first three months of 2021. And things didn’t go to budget, but, at this point, you can bump up year-end performance by working on a new forecast in any month. until the end of the year.
The process goes like this: first refresh the current month, then make a detailed forecast of (30, 60, 90++) and finally a year-end goal. This is where you need to make sure you’re doing all you can to make sure the whole team is focused on the year-end result. This means you need to have a team that knows where all the bodies are buried and how you can find the payroll and expense savings to bring profits back into positive territory against the budgeted target.
This is the game you are playing. And let’s be clear, it’s not a game, but you can really benefit from the fact that the game isn’t over just because you’re late.
Another critical element is your revenue management strategy. As you can see in the diagram above, you are behind budget in REVPAR. In this situation, move heaven and earth to find your way back to the target. Just because you fell in the first trimester doesn’t mean you have no chance of turning around.
I can’t tell you how many years I had to fight from the first rounds where we were literally getting our ass kicked financially. Falling behind income and spending more than planned. But the key is still don’t give up, don’t throw in the towel.
Why? Because just like baseball, you can have one good inning or three or six and you’re magically back in business. Bad luck and the seemingly dead market and economy that gave you such a beating in the early innings can turn a penny.
That’s why managing your hotel budget is like paying for a baseball. You have several rounds to play and win and, above all, you never give up!
Your next grand slam is just around the corner and it’s totally possible to pull off as long as you keep track of the points…every month!