rooms division budgeting

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 EXPECTWHAT 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 SHAREROOM NIGHTSCOMPETITIVE INDEXMARKET SHAREPENETRATION 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 compile your annual budget.Your hotel has 200 rooms and is a 4 star property.

By when is it to be submitted?How many hotels are in this market category?

DATA QUESTIONS

Your hotel is situated on the outskirts of a large industrial town approximately equidistant from the local national airport, city congress centre and the city’s business centre

How many visitors arrive at the airport and how many of those stay with you?What is the Congress Centre’s activity schedule?

DATAQUESTIONS

Last year you enjoyed an occupancy of 52% and an average rate of $195 for corporates and $295 for transient. The guest mix is corporate – 40%

and transient – 60%

Will this increase or decrease next year?Is this a good Av. rate?What are the Av rates of your competitors?Will the market take a price hike?

DATA QUESTIONS

You have 3 restaurants and 2 bars, additionally a discotheque open 5 evenings a week.There is a small Health Centre, gymnasium and small pool.

Are there packages which encourage spin-off trade in these facilities?How much revenue is earned from the health centre?What is the in-house and out-house ratio of use?

DATAQUESTIONS

Conference & Banqueting comprises 2 ballrooms and 5 meeting rooms.There is a business centre for guests on the newly created business floor

Does the price structure of C&B encourage the use of rooms?Is the business floor used fully?Does it have the correct facilities?Does it make or cost money?

DATAQUESTIONS

Your reservation office is staffed by 2 people who also work on the front desk.Outside office hrs reservations are handled by reception through switchboard.

At what time is the peak reservation time?Are all enquiries fielded correctly?

DATAQUESTIONS

The hotel is part of a referral system and benefits from a Central Reservation System.Web Reservations of just been introduced through the CRS

How many reservations come through the CRS?It is ‘real-time’ enabled (auto conversion)?Is Revenue Management used?

dataquestions

CRS, Internet,….? How has YM affected Av. Rate?Is it communicated effectively to reservations centres?How many reservations are ‘rejected/denied’?

DATAQUESTIONS

REPORTS:Night ClerksArrivals/DeparturesLong staying guestsReservations takenGroup activitySource of businessOccupancy forecasts

How long do guests stay?Does it vary with season?What are these groups’ characteristics?What is the S.O.B.?What is the pick-up and wash-down?

DATAQUESTIONS

Over the last 3 years the demand has increased incremetally. This was due to burgeoning industries, increased air transport and the congress centre

Will demand increase continue?Same rate or greater?Which is the increasing segment?What are the airline slip patterns?Are there air delays?Who handles Congress Centre bookings?Any new airlines coming to the airport?

DATAQUESTIONS

However periods of demand are patchy and uneven.

Where did the increase come from?What were the demand patterns?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 levelsExpected salaries, bonusesChanges to membership subscriptions (satellite, GDS’s, commissions etc.)Changes in supplierChanges in procedures (outsourcing)Minor capital purchases

CALCULATING COSTS

Usually done on a % basis for variable costsBe 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)