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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.

This skepticism appears to have influenced the 2011 budgets prepared by hotel managers in the fall of 2010.  Operators planned for a continuation of the growth in occupancy, but not at the same rapid pace enjoyed in 2010.  At the same time, they also realized that the soft economy would inhibit their ability to raise room rates.
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.

General managers, controllers, and directors of sales are currently beginning the process of preparing their budgets and marketing plans for 2013.  To assist them, we present our annual look at the budgeting accuracy of U.S. hotel operators.  From PKF-HR’s Trends® in the Hotel Industry database, we identified 623 operating statements that contained both actual and budgeted data for 2011.  Using these statements, we compared the revenues and expenses projected for 2011 with what was actually earned and spent during the year.

Just Short On Top
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.
By spending less than the budgeted amount for expenses, managers were able to overcome their revenue shortfall and exceed the budgeted levels of hotel net operating income (NOI).  The hotels in our study sample enjoyed a 16.1 percent increase in NOI in 2011, 0.9 percentage points greater than the 15.2 percent budgeted growth rate.

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, or call (855) 223-1200.


Robert Mandelbaum
Director of Research Information Services
Colliers PKF Hospitality Research
3475 Lenox Road
Suite 720
Atlanta, GA  30326
404-842-1150, ext 223 (Direct)
404-842-1165 (Fax)

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Also See: Staffing For Prosperity / Robert Mandelbaum / August 2012

Here Come the Profits! / Robert Mandelbaum / July 2012

The Cost Of Guest Loyalty / Robert Mandelbaum /June 2012

Giving And Taking of Credit at U.S. Hotels / Robert Mandelbaum and Alvin Minsk /April 2012

Will Meetings Market Recovery Continue In 2012? / Robert Mandelbaum / February 2012

Hotel Managers Labor To Control Labor / Robert Mandelbaum / January 2012

2010 Was A Budget Beater For U.S. Hotels; Looking Forward - 2012 Should Result in a 15.2% Rise in Profits for the Average U.S. Hotel / Robert Mandelbaum / October 2011

U.S. Hotel Utility Costs Under Control Adding to the Bottom Line / Robert Mandelbaum / September 2011

Price Begets Profits / Robert Mandelbaum / August 2011

One Night Stands Are Expensive / Robert Mandelbaum / July 2011

Hotel Food and Beverage: Locals Up, Lounges Down / Robert Mandelbaum / June 2011

FREEBIES: Hotels Give Some Things for Nothing / Robert Mandelbaum / April 2011

Hang Up The Phone And Hold The Starch, But Please Park The Car / Robert Mandelbaum /February 2011

Meeting Planners Optimism Rising / Robert Mandelbaum / January 2011

How Profitable Will Your RevPAR Be In 2011? / Robert Mandelbaum / December 2010

No Show – No Problem; Hotels Profit from Attrition and Cancellation Income / Robert Mandelbaum / November 2010

Right Direction - Wrong Amount: Hotel Managers Underestimated 2009 Declines in Performance / Robert Mandelbaum / October 2010

Surprised, or Stubborn? U.S. Hotel Managers Missed Their Budgets In 2008 / Robert Mandelbaum / October 2009

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