By David Lund
That’s a big statement because if you are involved in the budget in your hotel and you have played baseball then you are probably saying to yourself that I am off my rocker.
The budget is a mean and unruly nasty guest that comes every year and sometimes does not leave completed for weeks, even months. And, it is certainly not fun and engaging like a good game of baseball can be.
Alas, like all things, there is more than one way to look at the budget, and I did say “managing” in the title. So, let’s dig a little deeper and see what I am talking about. Much of life is how we choose to do battle and managing the budget in your hotel is no different.
To start with we need to unwrap the stiff that just arrived and realize the budget for what it is, a business plan with numbers. That is all and it is our job is to beat it at its own game.
Here is a strategy to follow to help you meet and exceed your annual budget
That being said you will never win all the games you play but with some creative strategies you are going to be better equipped to win more often.
The first thing to do is get comfortable with the basic rules of baseball and hotel budget making.
The number one basic rule is there are several innings in a baseball game, usually at least nine. The exact same can be said for the hotel financial/budget making world, except you have 12 innings to play.
That is 12 opportunities to win and, even if you lose some innings, you have the opportunity to catch up, especially if you fall behind in the earlier rounds. To bring this strategy to life, you need a system to follow.
It is important to highlight right here that in order to play this way we need to have a 1-2-3 financial strategy up and running in our hotel.
- One, do monthly financial statements using the accrual basis.
- Two, incorporate a current, detailed year-end monthly rolling forecast.
- Three and most important, include all department managers in the monthly forecast and reforecast process. Without their involvement and commitment, you are sunk.
No sense getting bent out of shape when you fail to deliver on any month, or even a string of defeats, because you have a couple of months where you can literally hit it out of the park and not only catch up but pull into the lead.
This is where the strategy of using the hotel budget comes into play with the incorporation of the rolling forecast. On the top-level statement, it looks something like this:
In this example we have the actual for the first three months of 2021. And things did not go according to the budget but, at this point, you can reel the year-end performance back in by working a re-forecast in any month up to the end of the year.
The process goes like this: first actualize the current month, then do a detailed forecast of (30, 60, 90 ++) and finally a year-end target. This is where you need to make sure you are doing everything possible to make sure the entire team is focused on the year-end result. That means you need to have a team that knows where all the bodies are buried and how you can find the savings in payroll and expenses to drive the profit back into positive territory compared to the budgeted target.
That is the game you play. And let’s be clear, it is not a game but you can really benefit from realizing the game is not over just because you are behind.
Another critical element is your revenue management strategy. As you can see in the schematic above, you are behind in REVPAR compare to the budget. In this situation, move heaven and earth to find your way back to the target. Just because you fell down in the first quarter does not mean you do not have a fighting chance to turn the ship around.
I cannot tell you how many years I had to battle back from early innings where we were literally getting our asses kicked financially. Falling behind on the revenues and spending more than planned. But the key is always don’t give up, do not throw in the towel.
Why? Because just like baseball, you can have a great inning or three or six and you are magically back in business. The bad luck and seemingly dead market and economy that delivered you such a thrashing in the early innings can turn on a dime.
That is why managing your hotel budget is just like paying baseball. You have several innings to play and win and, most importantly, you never give up!
Your next grand slam is just around the corner and putting it to work is entirely possible as long as you are keeping score…every month!