Budget Season: Living on a Prayer
Let's be honest: is your 2025 budget forecast currently based on:
A) Complex data models?
B) A hopeful prayer?
C) A fortune cookie?
If you picked B or C, we feel you. It’s tough out there.
But what if you could optimize your budget forecast without sacrificing your sanity?
Here’s our tips for building a budget forecast:
Review Your Previous Performance – Analyze performance by segment (Transient, Group, Contract) and channel. Which segments were most profitable, not just which brought in the most revenue?
Audit External Factors – Are your competitors consistently underpricing or overpricing you? Is a new hotel opening? What outside forces are affecting your sales?
Forecast by Segment – Start with your group conversion rates, then forecast occupancy and ADR by day, and from your projected occupancy you can determine how much people will spend on amenities.
Re-forecast Quarterly – Formally update your budget based on YTD performance and updated market trends. This keeps everyone aligned on what's actually achievable.
Your Budget Should Include:
Occupancy Goal: The overall load factor you aim to achieve.
ADR Goal: The average rate you need to hit for each segment.
RevPAR Goal: The key output metric (Occupancy x ADR).
No need to live on a prayer. By analyzing the right data, you can build a budget that guides the hotel's strategy for the year ahead.
Like our hospitality industry insights? Then you’ll love Socially Awkward–a podcast where you’ll learn from the hospitality industry professionals. Stay tuned for the S.T.A.R. Report, cause next week we’ll be breaking down some budgeting power moves.
Until next time, keep crunching those numbers!
