ROOMS DIVISION

BUDGETING
ROOMS REVENUE
WHAT IS A BUDGET?

A budget is a formalized projection

of business activity for a set period
in the future, quantified in terms of
trading currency and associated
figures.
WHY BUDGET?
7 GOOD REASONS
It forces a management to
evaluate what has happened in the
past
WHY BUDGET?
7 GOOD REASONS
 It leads a management to
investigate what is likely to happen
in the future.
WHY BUDGET?
7 GOOD REASONS
It establishes strong trends and
weak trends.
WHY BUDGET?
7 GOOD REASONS
 It allows for a planning of cash
flow, investment and operational
timing.
WHY BUDGET?
7 GOOD REASONS
 It allows management to measure
its performance in an accurately
quantitative way, day by day,
month, by month.
why budget?
7 good reasons
 It signals periods of dangerously
low or acutely high turnover, both
of which can have a de-stabilising
effect if not foreseen.
WHY BUDGET?
7 GOOD REASONS
It allows for other operational
actions to be reviewed or
implemented such as staffing,
stock and investment levels,
marketing initiatives and
promotional plans.
A TWO-WAY STRETCH

WHAT YOUR
SUPERIORS
EXPECT
WHAT YOU SEE
WILL PROBABLY
HAPPEN
THE ROOMS DIVISION
BUDGET
INCOMING REVENUES
 Money and average rate
 Occupancy
 Market and guest characteristics
OUTGOING COSTS/EXPENSES
 Operating costs (administration)
 Staffing
 Investments
the importance of the r.d.
budget
IT REPRESENTS
THE SINGLE
LARGEST SOURCE
OF INCOME FOR
THE HOTEL AND
CONSEQUENTLY
IS IMPORTANT TO
BE AS ACCURATE
AS POSSIBLE
THE IMPORTANCE OF THE
R.D. BUDGET
 IT IS THE START
POINT UPON
WHICH ALL
OTHER
OPERATIONAL
DEPARTMENTS
BASE THEIR
RESPECTIVE
BUDGETS
WHERE TO START?

GATHER INFORMATION
GATHER INFORMATION

HISTORICAL DATA
 What happened
last year? And the
years before?
GATHER INFORMATION

STRATEGIC INPUT
 Targets from
above
 constraints and
goals
GATHER INFORMATION

LOCAL ACTIVITY
 What’s happening
out there?
gather information

INTERNAL
ACTIVITY
 What’s happening
in here?
gather information

MARKET
INTELLIGENCE
 What does your
customer want?
GATHER INFORMATION

MARKET ANALYSIS
 What is our market?
 Whom can we expect?
 What will they spend?
 Who are our
competitors?
 What are the trends?
GATHER INFORMATION

CONCRETE DATA
 What do we know
will happen?
building a market model

DIFFERENT MARKET SEGMENTS WILL

YIELD DIFFERENT RESULTS
 Average rate
 Demand pattern
 Length of stay
 Demand elasticity
 Price sensitivity
 Ancillary revenue potential
 Product expectations……………& Fidelity
competition analysis
model
FAIR SHARE
ROOM NIGHTS
COMPETITIVE INDEX
MARKET SHARE
PENETRATION FACTOR
QUALIFY THE MODEL

ANALYSE THE TRENDS AND

FIGURES. KEEP ASKING:
 Why? When?, What? Who?, Where?
What if? Where from? How? How
much? etc…..
MORE….
DATA
QUESTIONS
You are about to By when is it to
compile your be submitted?
annual budget. How many hotels
Your hotel has are in this market
200 rooms and is category?
a 4 star property.
DATA QUESTIONS

Your hotel is situated How many visitors

on the outskirts of a arrive at the
large industrial town
airport and how
approximately
equidistant from the many of those
local national airport, stay with you?
city congress centre What is the
and the city’s Congress Centre’s
business centre
activity schedule?
DATA
QUESTIONS
Last year you Will this increase
enjoyed an or decrease next
occupancy of 52% year?
and an average rate
of $195 for Is this a good Av.
corporates and $295 rate?
for transient. The What are the Av
guest mix is
corporate – 40% rates of your
and transient – 60%
competitors?
Will the market
take a price hike?
DATA
QUESTIONS
You have 3 Are there packages
which encourage spin-
restaurants and 2 off trade in these
bars, additionally a facilities?
discotheque open 5 How much revenue is
evenings a week. earned from the health
centre?
There is a small What is the in-house
Health Centre, and out-house ratio of
gymnasium and use?
small pool.
DATA
QUESTIONS
Conference & Does the price
Banqueting structure of C&B
comprises 2 encourage the use of
ballrooms and 5 rooms?
meeting rooms. Is the business floor
used fully?
There is a business
centre for guests on Does it have the
the newly created correct facilities?
business floor Does it make or cost
money?
DATA
QUESTIONS
Your reservation At what time is
office is staffed by the peak
2 people who also reservation time?
work on the front Are all enquiries
desk. fielded correctly?
Outside office hrs
reservations are
handled by
reception through
switchboard.
DATA
QUESTIONS
The hotel is part of How many
a referral system reservations
and benefits from a come through the
Central Reservation CRS?
System.
It is ‘real-time’
Web Reservations enabled (auto
of just been
introduced through conversion)?
the CRS Is Revenue
Management
used?
data
questions
CRS, Internet,….? How has YM
affected Av. Rate?
Is it communicated
effectively to
reservations
centres?
How many
reservations are
‘rejected/denied’?
DATA
QUESTIONS
REPORTS: How long do guests
Night Clerks stay?
Arrivals/Departures
Long staying guests
Does it vary with
Reservations taken season?
Group activity What are these
Source of business groups’
Occupancy forecasts characteristics?
What is the S.O.B.?
What is the pick-up
and wash-down?
DATA
QUESTIONS
Over the last 3 Will demand increase
continue?
years the demand
Same rate or greater?
has increased
Which is the increasing
incremetally. segment?
This was due to What are the airline slip
burgeoning patterns?
Are there air delays?
industries,
Who handles Congress
increased air Centre bookings?
transport and the Any new airlines coming
congress centre to the airport?
DATA
QUESTIONS
However periods Where did the
of demand are increase come from?
patchy and What were the
demand patterns?
uneven.
What ‘yield’
approach was used?
Successfully?
What will the pattern
be next year?
BUDGETING FOR COSTS

FIXED COSTS
 Ground Rent
 Rates
 Rental of services
(telecommunications)
 Administration
 Indirect Costs (Undistributed)
BUDGETING FOR COSTS

VARIABLE COSTS
 Casual staffing
 Room amenities
 Laundering
 Cleaning materials
 Operational supplies
BUDGETING FOR COSTS

PARTIALLY VARIABLE
 Full time staffing
 Energy
r.d. iNPUT

Projected staffing levels

Expected salaries, bonuses
Changes to membership subscriptions
(satellite, GDS’s, commissions etc.)
Changes in supplier
Changes in procedures (outsourcing)
Minor capital purchases
CALCULATING COSTS

Usually done on a % basis for variable costs

Be aware of the costs this holds:
 significant changes in volume needing:
 MORE/LESS STAFF
 EXTRA/REDUCED SERVICES
 NEW EQUIPMENT/NEW POSITIONS
 NEW PROCEDURES/TRAINING
 PURCHASE VOLUMES CHANGING
RDM Operating Budget: Basics….

January: February:
56% Occupancy 40% Occupany
Corporate – 40% Corporate – 25%
Transient – 60% Transient – 75%
Staff: HSK - 20 mins per room to clean, 4
staff (inc supervisor)
RD – 3 x 8hr shifts per day, 5 staff (inc
supervisor)