Budgeting and Forecasting

Abstract

This study of 171 hotel financial executives shows that budgeting is an important part of hotels' financial planning. The majority of hoteliers set tentative financial goals prior to preparing their budgets. Most hoteliers use budgets as a way to compare actual performance to desired results (i.e., financial control), and as a planning tool. At the majority of hotels, a cooperative effort among departments produces the budget. Less than half of all respondents prepared long-term operations budgets, and even fewer revised their budgets during the year. Chain-affiliated hotels seem to be more exacting about producing and following budgets than are independent properties, but a hotel's level of income also plays a role in that regard. Revenue-forecasting techniques varied by department within individual hotels, with the most commonly used techniques being “expected units sold by expected average price per unit,”“number of guests by expected spending per guest,” and “last year's actual revenues adjusted subjectively.”