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Navigating Budget Season In A Pandemic

It’s October, and as is customary, many hotels have begun the process of (or at least attempting) budgeting for our next fiscal year. It is certainly no task that anyone wants to undertake right now, and many hotel companies are putting off the effort until more stable economic indicators prevail. Many hoteliers may not have that luxury though, and if that describes you then let’s consider what you need to be aware of as you build out your budget for 2021.

Top & Bottom Line Hotel Budgets

How does a hotelier typically go about building a top line budget? Typically, we begin by pulling in all of our historical data, and then looking at what we have on the books. From there we can begin to look at year-on-year (YoY) growth rates, incremental supply into the market, new and recurring events (such as conferences), and pull your group rooms control (GRC) to figure out what your group pipeline looks like. 

But what happens when this historical data includes a year like this one? Suddenly, all that data is skewed, and it’s hard to determine what is valid and what is not.

Instead of looking at YoY figures, we need to get much more granular. You need to look at short term booking patterns - what has your booking window been for the past month (instead of the past two years)? And what are you expecting for the short-term window ahead? Now you need to have a degree in psychology to understand if events will have a positive or negative impact on your market since desire to travel is almost entirely based on perception (Is Christmas safe?  Probably not as safe as Summer break?).

And let’s not forget why we forecast in the first place - so we can foresee demand, and capture revenue! If we cannot foresee the demand, and we don’t have the tools in place to assist us in detecting that in these uncertain times, we will inevitably leave money on the table. 

The bottom line budget is where the money is at – as we know, it’s your net earnings or net profits. But again, we cannot use 2020 as a benchmark to help us forecast ahead for 2021. So what can hoteliers do?

How Technology Can Help With Budgeting

The answer now is we have to have our finger on the pulse like never before; we have to budget/forecast more than once or twice; and we must always have our eye on the numbers. No more set it and forget it. And this is where technology shines - cleaning up those repetitive tasks, providing you the insights you need, and making you more efficient. But how do we make the cost fit into our bottom line?

Don’t get me wrong, Duetto does not have a silver bullet to fix all of the problems of our volatile market, but Duetto’s platform (especially our ScoreBoard reporting and forecasting application) does a tremendous amount of heavy lifting for you, so that when you do need to build your budget, and when you do need to make the many adjustments that you will inevitably need to make as you move forward, you can do it all in one place with speed and efficiency. 

4 Ways ScoreBoard Makes Budgeting Easier

  • ScoreBoard is always up-to-date with real time historical occupancy and future bookings (no more needing to chase down reports in the PMS)
  • The application can quickly and easily provide a fresh forecast based on short-term trends (ruling out long-term volatility and pre-COVID data)
  • It does the forecasting for you, but still allows you to apply your own overrides and adjustments before your final presentation to leadership/ownership
  • Scoreboard allows you to run custom reports of your forecasts and budgets, and distribute them via email from the app

Scoreboard has saved Duetto hotels tens of thousands of hours in laborious, repetitive tasks that were better spent thinking about how to grow profits and not on how to run an On-the-Books pace report out of the PMS. 

And what about capturing demand? We talked a bit about this in the top line budget. As restrictions are lifted and consumer confidence grows again, we’re going to see exceptionally short booking windows and if we don’t have our eye on the ball, we may miss out on a lot of revenue.

Duetto’s GameChanger application is our pricing and optimization tool, and it is perfectly optimized to detect anomalies (both positive and negative) in your demand trends. This is exactly what hoteliers need at a time like this. Unfortunately right now in times of low demand the only indicator we have for our rate sets as hoteliers are our competitors, and if demand hits hard and fast, we may find ourselves leaving money all over the table if we are following our competitors instead of demand. 

My deepest concern is that hoteliers will begin reverse yielding again to protect their sensitive booking windows, which will lead to a lot of attrition. As an industry, we need to be putting our lowest rates first to build a base in lieu of group and corporate, and we need tools to help us fill the cup! Having a system like GameChanger that is watching your pick up and cancellations 24/7/365 and adjusting accordingly is priceless.

Good luck with your budgeting season. If you could use some guidance, then don’t forget to Ask Duetto – our revenue management experts are on hand to answer your questions through recovery to profitability.

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