BUDGET BEWARE

How To Survive Budgeting Season In An Uncertain World

Well, it is that time of the year again and although many of us are old enough to have gone through several recessions, times of conflict and serious economic challenges, I doubt any of us have seen these three challenges rolled into one perfect storm.

Let’s focus on the good news for a moment… Many of us were clever over lockdown and banked reserves when we could. We have had two strong Staycation years and whether the press want us to believe it or not, there is still a strong desire by our customers to travel, to have experiences and to spend their well-earned cash. Add that to the fact that many locations have multiple hotels full of humanitarian guests, we often see cities with over 40% of total bedroom stock removed from sale, pushing rates and demand higher than any of us expected. But the big question for all of us is ‘what will winter bring?’ My advice… budgets need to be considered… carefully:

• Your ADR will change. Business is better done face to face (we all know that) so as companies struggle to stand-out, you will see clever businesses re-focusing on face-toface meetings. Corporate business will come back but along with that, we need to consider a drop in ADR. Occupancy may remain steady but be prepared to rein-in your financial forecast.

• Be aware of your costs. Your cost base has changed significantly over the past few years and before you can start to sell rates, you need to understand how much your business is actually costing you to bring in. Work out your Cost of Occupied Room.

• Understand profitability. Are you a ‘busy fool’??? Your wonderful sales and marketing team and even your digital marketing team will be pushing for packages and rates to help fill need dates (which they absolutely should be doing) but are those rates actually profitable?

• Dropping rates does not stimulate demand. You just get the same demand at a lower price point! Make sure you understand the impact of rate changes and how much business you actually need to gain, to make the same profit.

• Invest in tech. Never, ever, ever has there been a better time to invest in technology. You have fewer team members, sharing more roles and the only way to not only support them but to enable them to do their job better is to invest in technology. I promise this will save you more than you know.

• Forecasted demand matters. Make great decisions based on forecasted demand and not Business on the Books. Your sales strategy needs to be clever and that means understanding your future pace and setting rates on where you know you will get to, and not where you are now.

But my strongest piece of advice is solving a problem that is right in front of you… reduce the commission you pay to OTA’s. While everyone is looking at costs increasing, only the most strategic hoteliers are actually looking at the costs draining right out of their business. I can take an educated guess that one of the biggest costs in Rooms Division are the commission cheques you write to the OTA’s.

There are hundreds of articles out there on how to improve your Book Direct campaign (some of which you will find on our website). Please read them… There are well documented and proven strategies that will actually work and if you want to make a huge impact to your bottom line, then this will be it.

And leaving the best to last… our gift to you…. During budgeting season we would like to offer access to Calculate Hub completely free of charge (hoteliers only please). Just register here and we will send you access: https:// rightrevenue.hubspotpagebuilder.com/ free-access-to-right-revenue-calculatehub