Today, there are two critical elements that must be planned and executed by every hotelier; the business plan and the budget. A short summary up front will save the Type A reader from heartache, and six short chapters with a concluding chapter on what steps are needed is very helpful.
The first chapter is a current status or forecast of trends as well as a competitive analysis that shows how we stack up against the hotels in our STR competitive set. I attended the Lodging Conference to listen to Bernie Baumohl of the Economic Outlook Group, a great presenter and forecaster of macroeconomics. I also like to have a graphic that lists how we compete in various areas like location, brand, reputation, amenity package and so forth. I call it our beauty contest.
The second chapter includes fiscal risks as well as operational risks. If we are unable to pay for a needed renovation or if we are having difficulty finding employees, that information is critical for the owner. Anything that puts the hotel at a competitive disadvantage should be discussed here, not just competitive advantages.
Chapter three is a review of the geographic location including transportation and neighborhood demographics that include our intended target market. Using data from the local tourism authority or chamber of commerce assists us as will an analysis of our market segmentation. Today, we have seen shifts in business and group travel as well as domestic leisure and international travel.
Chapter four identifies the key management personnel. An overall organizational chart that includes all salaried executives and key leadership is appropriate. Adding the key responsibility parameters for each of them is very helpful for the reader and ensures that all are on the same page. Further, we are all finding lots of need for training new management team members who were line employees last year.
As we increasingly provide guests with an authentic connection to our area, a well-configured hotel revenue/sales system can help us optimize these strategies and boost revenue. A lead form at the front desk, and reviewing competitor websites/social sites — including Instagram, Facebook and Twitter — is critical. Looking at all previous users of our property, strengthening community relationships and exploring creative partnership opportunities work wonders.
Chapter five is a market analysis that identifies all direct and indirect competitors along with a summary of each and a brief summary of how we will compete and position our hotel with each. Develop a demand projection based on an estimate provided by a local guru from a tourism authority or consulting firm, or if you prefer, go with your gut after completing the work below.
Review market intelligence reports carefully. Ensure email lists are updated for newsletters and e-blasts and meet with general managers and marketing team members of competitor hotels. Site tour each business and establish a referral program. Coordinate a market review with the revenue management team and discuss opportunities for digital marketing and pay-per-click.
Additionally, meeting with key contacts at the brand, visitor bureau and chambers of commerce is worth the time. Qualify key companies and individuals to create or update email lists. Business Journals also have great lists of top businesses and employers. Continuously create and deliver “can’t-resist” content for websites and e-blasts. Post to social media at least two times per week, and use public relations effectively by having a PR plan and a clear sales action plan with whom, what, when and how much does it cost?
Chapter six morphs into the budget, which should be commenced only after we know what the draft business plan looks like. This financial analysis must include all needed capital expenses as well as operating expenses for each department. Remember that inflation has moved energy, insurance, food and labor costs up significantly over the past 18 months. Supply costs are up, and if revenues will not be sufficient to pay these expenses, here is where big decisions must be made. Budget accuracy depends on the determination made to gather correct and current market data, so research is paramount!
Chapter seven is our summary of how we will perform and why. It behooves all of us to do this work prior to the budget, though many hotel executives will continue to use a plugged budget number from last year’s profit and loss statements. Be honest about the hotel’s strengths and weaknesses and we will nail our budgets!
2024 will see increased use of big data, robotics and artificial intelligence. Stay up on the latest and we will all love 2024, an election year!
Robert A. Rauch is founder of R.A. Rauch & Associates, a hospitality management and consulting firm based in San Diego.
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