The Asset Management Guide – Hotel planning and budgeting
Source: https://www.tfgassetmanagement.com/news/hospitality/the-asset-management-guide-%E2%80%93-hotel-planning-and-budgeting.aspx
Year end is the time when the hotel operators must submit their budget for the following year to the hotel asset manager and the hotel owner. As a hotel asset manager, what exactly do we look for in a budget?
• We don’t always look solely at RevPAR because it does not show how good the hotel is at managing their expense, and how much profits we earn. In fact, GOPPAR is a more accurate indicator of the hotel’s top-line and bottom-line performances. Also, sometimes hoteliers try to obtain RevPAR by lowering the rate, which then affects the positioning of the hotel.
• We don’t always compare to the previous year’s performance. Benchmarking against the competitive set is a more precise indicator of how the property is performing, rather than comparing to the previous year. Constant improvement compared to previous years is impossible due to extraneous causes.
• We do look at segmentations; presenting a good revenue forecast is not enough. The Hotel Asset Manager needs to understand the logic behind the forecast. This is done by analysing different market segments which determines the hotel’s yearlong strategy.
• We manage costs. Any major discrepancy in any of the expense items will raise questions. The hotel asset manager shall differentiate between managing costs and reducing costs.
Reducing costs is important, but a good hotel asset manager might also initiate programs which will require large investments if it creates long-term value for the hotel.