3 Approaches For Annual Budgeting & Strategizing
by Prabhjot Bedi
Only business excellence folks actually enjoy the traditional, annual exercise of budgeting, and maybe some young management trainees. Everyone else knows what is coming, sort of.
Make sure there is an increase of X% on last years revenues.
Make sure there is a decrease of Y% on last years costs.
A war cry, "Lets do more this year people!"
Ofcourse, there will be a lot of breakdown of numbers. ARR, REVPAR, Occ%, Market Segments, Competitive Analysis (of which the most common one is 'more hotels are coming in our area, so competition will increase'), New companies expected based on projects in the area (especially for business hotels) and new trends (weddings, MICE, long weekends, bleisure, day trips) for leisure hotels.
Some will spend a lot of time looking at 'good days' for weddings(No tara doobna), main holidays of the year etc to set up monthly budgets. It is criminal to just look at last year's monthly financials to set next years'. Diwali could have moved to a different month and that can cause havoc with revenue projections for that month.
I am not being dismissive. Apologies if I gave off that vibe. I just feel, you should do all this and more. For example one of the best budget meetings I attended went into each line item on cost. 'How can we reduce the number of garbage bags we used last year?' was a thrilling discussion. Remember, every rupee saved from cost is equal to 4 or 5 rupees you have to add to your revenue. It is all profit baby!
So while you do all that, use this time to bond with your team, maybe make this an off-site event (just don't go to another hotel in the same city and use the meeting room there. That is not "off-site"), and here are 3 ways I would want you to look at this annual exercise to make it even more rewarding.
Oh, before that a quick shout out to the Balance Score Card method. I personally love it and would ask you to look at it as a good framework to use.
Approach 1. "Feel"
How would you want your guests to feel this financial year? Start there. Forget all the pie-charts and those wavy lines on top of those sky scrappers in your financial projections. Those will be forgotten long before someone forgets how you made them feel. Ask yourself, your loved ones about a holiday, a stay, a meal they still remember and I guarantee you, no one will tell you how much they paid. They will tell you how they felt.
So, this year, in your annual session, carve out sometime (a lot of time, if you can) to answer the question 'How do we want our guests to feel?'
You can do this in a very broad sense, but if the idea is already resonating with you, you are the type of leader who should delve a little deeper into this.
'How do we want our guests to feel when they_________' - fill in the blank with all your services - e.g. call the hotel, check in, dine with us, give their car to a valet, visit our website, book a room on an OTA etc.
Wanna make this even better?
a. Do this for each market segment or guest type. 'How do we want our single lady travellers to feel?', 'How do we want the tour leader to feel?'. 'How do we want a newly wed couple to feel?' so on and so forth.
b. If you can do this little bit, you will personally call me and thank me next year. 'How do we want our team, our associates to feel?', 'How do we want our suppliers to feel?', 'How do we want Pb to feel?' (you know I had to try! Scratch that last one if you don't want to really work too hard this year).
Approach 2. "Fill The Gap"
That's essentially what leadership boils down to. Filling the gaps.
So, you have decided that you want to grow your revenues by 20% next year. Very good. Wait, that is not enough? Awesome, so you want to grow it enough so you can double revenues in 3 years. Even more thunderous round of applause.
How?
Now, I am not suggesting that you map out each and every little detail. That is what your team is for. Let them suggest the how, help them see the why. If they suggest it, they will own the initiatives.
This is about something bigger.
Can you, with your current infrastructure increase revenues?
Can you, with your current team increase customer sat?
Can you, with your current processes, increase productivity, reduce costs?
This is the gap way of thinking.
Simply put, as the leader, identify the key gaps in the execution and fill those.
Approach 3. Pre-Morterm
for the OG insight, visit - www.eclathospitality.com/insights/premortem
Schedule sometime in all this, to lead your team through the following thought experiment.
"It is Mar / April 2025. We are sitting together to prepare the next year's budgets and plans. We first discuss last years actuals, that is FY 2024 - 25. We have not been able to achieve our projections. What went wrong?"
Let them vent. Let your team tell you all the things that went wrong.
"The new crockery was never ordered"
"I was not give the additional man-power"
"We did not spend money on the website"
"We did not....."
so on and so forth.
Collect all these. Each and every one of these.
As the leader, this becomes your job to make sure, none of these becomes the reason you did not meet your budgets for the year. Why? Coz you were given a fair warning, way ahead of time.
Whatever it is that derails your plans, promise yourself, it will not be one of these.
Happy budgeting!
Allow me to place a little selling bit here - I would love to be part of any budget meeting (off sites preferred, If I am being honest), but I will happily lead any of the above for you and your team. Count me in, include my expenses in the budget. :)
Prabhjot Bedi
+91 9872000604