How to build a hotel revenue budget
More than 30 years in hotel rooms division, from hostels to five-star chain hotels; focused on revenue management since 2009.
A hotel revenue budget sets, for every month, the room nights, ADR and room revenue you expect. Build it month by month from last year's actuals, adjusted for what you know will change: rooms, events, rates and channel mix. Budget commission as well, so you can check what you keep and not only what guests pay.
Start from last year, per month
Take last year's actual room nights, ADR and room revenue for each month. Months differ too much to budget a year as one number: a weak January and a strong May can average out to a figure that fits neither.
The formula per month
Example figures. 1,240 × 82% = 1,017 room nights; 1,017 × €145 = €147,465; €147,465 ÷ 1,240 = €118.92.
What to adjust compared with last year
- Rooms: a renovation, rooms out of order or extra rooms change the available room nights
- Dates: Easter, holidays and events move between months from one year to the next
- Rates: the price increase you plan, per month and not as one percentage for the year
- Channel mix: more or fewer OTA nights changes what you keep
- Groups and contracts that are already confirmed
Budget net of commission too
A budget for room revenue alone says nothing about OTA costs. A month can reach its revenue budget with more Booking.com nights and still leave you with less. Add the expected commission per channel and you get a net room revenue budget, which you can compare with net results every month.
Use the same basis as your actuals
Budget and actuals must be calculated the same way: both excl. VAT, the departure day not counted as a night, and the same number of rooms. A budget excl. VAT against actuals incl. VAT makes every month look better than it was.
Use it during the year
A budget is most useful before a month starts. Compare what is already on the books with the budget for the coming months, so there is still time to act when a month falls behind.
RevView shows every month against your budget and against last year, and the coming months on the books against the same time last year.
Questions
Should a hotel budget be incl. or excl. VAT?
Excl. VAT is most common. What matters is that the budget and the actuals use the same basis.
How detailed should a hotel budget be?
At least per month: room nights, ADR, room revenue and commission. Per segment or channel if you steer on those.
What if I have no history?
Start from the occupancy and rates of comparable hotels in your area, and budget the first months lower while the hotel builds up reviews and repeat guests.