The devil
is in the detail
Forecasts
and budgets are a normal part of managing any business and the Hospitality
industry is no different.
The
challenges the Hospitality industry faces are much like any other industry,
identifying sources of business and the related dependencies. Once you have
done this it’s important to assess the impact from both a macro and micro level
such as unemployment levels, general health of the economy, inflation,
employment laws, interest rates and special events taking place In their market
(major sporting events, concerts, trade shows and exhibitions) and competitors
entering the market.
At the
forefront of the process is identifying any capital requirements of the
establishment. It could include expenses that address guest safety issues,
revenue optimisation opportunities such as a restaurant refurbishment, cost
avoidance or investment in energy management planning as an example. Then you
have to assess if any of these projects may disrupt the normal course of
business, such as a guest room renovation in particular or anything that might
constrict capacity. A critical component of this review is a calculation of a
return on any investment and the source and cost of capital funding for such projects.
Once the
capital plan and associated expenses have been established for a hotel, the
revenue component of the hotel operational forecast can be determined. There
are numerous factors and sources that come into consideration when determining
the data inputs for volume projections, occupancy rates as well as the room rates
and pricing of meals.
In the rooms
division of a hotel, projections need to factor sources of business from group
contracts, contracts with airline crews, online travel agency portal and offers
on brand websites, each source of revenue will have to be weighted against the
standard room rate after discounts and seller fees have been applied.
You then
have to step change by dates the increased demand and increase in room rates
that come with special event such as those listed above on the area in addition
to previous year’s actuals to try to determine the supply and demand on any
given day. Local market knowledge is important in this process, so the forecast
needs to be broken down by hotel and potentially distributed to the local
management for their input. Other factors that come into play regarding
determining average rates are the length of stays and arrival patterns.
In the food
and beverage area of the hotel, capture percentage rates come into play when
determining how much business will be generated by hotel guests, catering for
special events, versus business that comes in off the street to eat in the
restaurant. Determining the revenue per guest is a derivative of menu pricing
as well as meal period i.e. Breakfast, Lunch or Dinner.
Full-service
hotel operators, those with restaurants, spas, retail, banqueting, catering and
a large number of rooms need a more sophisticated tool to produce an effective
budget and forecast. The operators of these facilities need the ability to
modify labour expenses (the largest opex cost to any hotel operator) based on
business volume, seasonality and productivity standards. They need the ability
to adjust their variable operating expenses including labour based on volume of
occupied rooms, arrivals and departures, customers in the restaurant, spa or
golf facilities. They will need the software to drive a variety of expense
drivers such as cost per occupied room, cost per customer and cost per
available room as examples. Once the hotel determines the daily revenue and
transactional activity (rooms, guests, etc), the expense component would
fluctuate accordingly as business volumes change.
Labour
projections are also critical to the profitability of the hotel. It is a
delicate balance to try and contain labour costs without negatively impacting the
guest experience. Productivity per head should be as an example, how much time
it takes to clean a room in relation to the revenue and volume projections in
order to determine how many individuals are needed in a particular position on
any given day.
With
ProForecast and our capacity yield model, we offer you the flexibility to plan
your budgets and forecasts to the right level of granularity to ensure it is as
close to the actual outcome for your business.
Doing less
you might as well ask Siri or Alexa to come up with a plan.
Visit us at www.proforecast.com and book a demo to see the most powerful
forecasting application on the market.
Mark Harrison
Chief Commercial Officer
09/10/2019
