Rooms Division Budgeting
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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 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?
DATA QUESTIONS 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 spinoff trade in these facilities? How much revenue is earned from the health centre? What is the in-house and out-house ratio of use?
DATA QUESTIONS 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?
DATA QUESTIONS 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?
DATA QUESTIONS 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?
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: Night Clerks Arrivals/Departures Long staying guests Reservations taken Group activity Source of business Occupancy 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?
DATA QUESTIONS 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?
DATA QUESTIONS 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 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)
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 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?
DATA QUESTIONS 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 spinoff trade in these facilities? How much revenue is earned from the health centre? What is the in-house and out-house ratio of use?
DATA QUESTIONS 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?
DATA QUESTIONS 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?
DATA QUESTIONS 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?
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: Night Clerks Arrivals/Departures Long staying guests Reservations taken Group activity Source of business Occupancy 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?
DATA QUESTIONS 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?
DATA QUESTIONS 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 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)
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