Budget 2023- How ready are you?

It’s July already and most of us would be working on Budget 2023 soon. Once again, the whole nine yards of analysis, commentaries and filling up excel workbooks would start soon and endless debates on what is that magic number that makes everyone happy will start. To change a highly mundane yearly activity into something interesting, read my points of view.

Avoid the frozen budget trap: unlike many industries (IT in particular), hotels and hotel management companies still practice the old-fashioned annual budget model. It provides some degree of certainty to the owners and makes loan re financing easier. Once a number is agreed upon and signed, it does not change irrespective of the market conditions.

This is akin to participating in a lottery : if the market conditions are stable, conditions to achieve the budget are favourable otherwise we are stuck in a frozen budget trap.

So instead of focusing on the absolute number (and spending endless hours debating it), focus on ratios and percentages to avoid this trap. If a shortfall in absolute GOP due to market conditions weighs more in your balance score card than a GOP margin as a percentage, then you have been trapped.

Maintain KPI Symmetry: if the goals and KPIs of above property leaders are significantly different from the hotels then what is important to the management company is not necessarily important to the hotel (or at least to the same degree). Ensure that the KPIs of the organisation at all levels are aligned (at least within the same discipline). If you have more than four to five KPIs then focus gets diluted and time is wasted in pursuing trivia.

Don’t confuse Strategy with Goal Setting: achieving a revenue growth of 8% is not a strategy, it’s a goal. Many hotels make this mistake of confusing goals as strategy.

Strategy answers “HOW” will the goals be achieved and how will the limited resources be allocated.

This need not be a very long list. But rather a highly distilled statement of how will you get from point A to B. This can be supported with more granular tactics which contain details of the strategy.

Avoid more than three rounds: I once worked for a hotel where we had to re submit the budget 21 times (yes, you read it right... 21 times!). So many man hours were wasted. Not to mention the frustration that came with it. The budget workbook ended up becoming a silly mathematical exercise to arrive at a best fit line to please all stakeholders. No one was interested in it when it was approved... finally.

Think about what can be set as a target which is aggressive yet realistic? How is the target set up to accommodate any unanticipated market changes? What is the broad guidance of your organisation and how can all stakeholders align with minimal tug of war ?

I wish you all the best for your budget 2023.

About the Author:

Anand Jindal has been working in the domain of Hotel Revenue Management since the last 16+ years. Over the course of his career he has worked for brands like Marriott, Hyatt and Wharf Hotels in property, cluster and corporate positions. Anand has had extensive experience across four markets: India, Middle East, Thailand and Greater China. The views and opinions presented in the article above are his own and do not represent any organization.