News for the Hospitality Executive |
U.S. Hotel Managers Nailed Their Budgets In 2011
By
Robert Mandelbaum and Viet Vo
September 17, 2012 In
the fall of 2010 when U.S. hotel managers were preparing their budgets
for
2011, most industry participants were pleasantly surprised at the
strong pace
of the recovery in lodging
demand.
By year-end 2010, the occupancy
level for U.S. hotels increased by
5.4 percent. While hopeful that their
good fortune would continue into 2011, managers were somewhat skeptical
given
the continued sluggishness of the economy. As 2011 transpired, the budgeted projections actually transformed into reality. In fact, the 2011 U.S. hotel budgets were the most precise we have seen since PKF Hospitality Research, LLC (PKF-HR) began tracking budget accuracy in 2001. For 2011, hotel managers were expecting occupancy to continue to dominate rooms revenue (RevPAR) growth. The average 2011 budget called for a 5.1 percent increase in occupied rooms, combined with a 3.4 percent gain in ADR. The net result was a forecast of 8.6 percent growth in rooms revenue. At the end of 2011, rooms revenue at the properties in our study sample increased by 8.2 percent, just short of the budgeted 8.6 percent growth rate. Contrary to expectations, occupancy levels at the subject hotels did not increase as much as projected. In 2011, rooms occupied grew by 4.1 percent, a full percentage point short of the budgeted 5.1 percent growth rate. Conversely, the ADR increased 3.9 percent, greater than the budgeted projection of 3.4 percent. Throughout the year, it appears that the managers in our study sample were able to be more aggressive with their pricing policies than initially anticipated. Total revenue growth for the sample fell just 0.1 percent short of expectations. This implies that the combined growth in revenue from food and beverage, other operated departments, and rentals and other income exceeded the budget. Expense Controls Preserve The Bottom-Line With occupancy levels falling below expectations, it is not surprising that total hotel expenses also came up short of the budgeted amount. Hotel managers had expected a 5.8 percent increase in expenses in 2011, but only spent 5.4 percent more to operate their properties. Cautious Optimism The attitude of U.S. hoteliers has not changed much since the fall of 2010. Entering 2013, uneven economic news tempers the enthusiasm of hotel owners and operators despite the fact that revenues and profits continue to grow at a healthy rate. History has shown that hotel budgets are most accurate during prosperous periods. Based on our September 2012 edition of Hotel Horizons®, PKF-HR is forecasting a 6.2 percent increase in total revenue during 2013 that will result in a 10.9 percent rise in NOI. It will be interesting to see how aggressive hotel managers are when budgeting their revenue, expense, and profit growth rates for 2013. Robert Mandelbaum and Viet Vo work in the Atlanta office of PKF Hospitality Research, LLC (PKF-HR). PKF-HR offers hotel managers several tools and reports to assist them in the preparation of their 2013 budgets. For more information, please visit the PKF-HR website at www.pkfc.com/store, or call (855) 223-1200. |
Contact:
Robert Mandelbaum |