Take Charge of Your Hotel Budget Process: Identify Your Trends

Author: Kristi White

Amid the flurry of November’s falling leaves, the avalanche of activity surrounding your 2019 budget preparation is most likely in full force. New technologies and digital innovations continue to disrupt the hotel industry, and savvy hoteliers are turning to advanced solutions to help them better navigate the budgeting process. The right technology streamlines and improves many budget-related activities, particularly when it comes to identifying trends. Understanding your performance over time helps you build a solid foundation for your budget plan.

Identify Your Seasonality Curve

Every hotel deals with seasonality, periods of high and low demand that occur throughout the year. To develop your most accurate budget plan, it’s essential you understand the seasonality curve of your region and your individual property. You can achieve this by tracking and studying your historical day-by-day performance – ideally for a minimum of three years.

Seasonality manifests itself differently depending on factors such as location, type of business, and targeted customer segments. Say for instance you operate an oceanside resort catering primarily to the leisure segment, your hotel probably has multiple high demand seasons relative to snowbird activity and holiday and school schedules. On the other hand, an urban hotel serving a large business traveler population may see rises in occupancy during the week and lower occupancy on weekends with a precipitous drop during holidays.


Trend or Outlier?

As you use your historical data to develop your seasonality curve, you will likely identify random data points in your history that diverge from other data points. These spikes or dips in occupancy over particular periods may not be actual trends, but rather outliers caused by a specific event or circumstance.

A great example of this is hurricane season, which can create sudden swings in demand. Following Hurricane Katrina in late August 2005, extended-stay hotels in surrounding regions saw a significant boost in business. One-time events such as a political rally or major sporting event may also create outliers within your data. It may even be a situation such as your top competitor undergoing a major renovation. It’s important to examine these anomalies to clearly understand the reasons behind them.

Fact Not Fiction

Your budget is your first forecast of the year. A thorough understanding of your property’s trends, anomalies, and key performance metrics – including average daily rate (ADR), occupancy, and net revenue per available room (Net RevPAR) – allows you to adapt your upcoming budget accordingly.

You’ll be dealing with data-driven facts rather than relying on guesswork or memory concerning when your property may experience periods of compression and maximized room rates, versus times of low demand that may require rebalancing your channel mix and marketing strategies. By analyzing your historic trends in conjunction with your current local market conditions, you’ll be better positioned for setting realistic targets for each day going forward.

Onward & Upward

Once you identify trends and establish your seasonality, don’t stop there. Sophisticated software enhanced with business intelligence helps put your data into action, allowing you to continuously track your trends at a granular level. In addition to determining the root causes behind anomalies, you’ll create a rolling forecast that grows in accuracy for each day, week, and month. This type of detailed trend analysis improves the precision of your future budget plans and drives better overall business performance.

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