The global hotel industry hit $1.5 trillion in 2023 — are you getting your share? Smart budgeting and forecasting are the keys to increasing profits and staying one step ahead.
Whether you manage a boutique hotel or a resort chain, this guide covers proven strategies to help you plan smarter and grow your bottom line. Let’s start by mastering the fundamentals of hotel budgeting and forecasting.
To take a comprehensive look at your hotel’s finances, budgeting and forecasting have to go hand in hand. While your budget allows you to understand your overall cashflow, forecasting helps you make smart adjustments along the way in response to shifting demand patterns.
Budgeting is an important tool for gaining an overview of your business’ current financial profile, while forecasting uses historical data, market trends and current bookings to help predict future performance. Think of your budget as the destination and forecasting as your GPS.
To illustrate: Accounting for the past month’s expenses is an example of budgeting, and planning to scale back staffing when anticipating a seasonal dip in bookings is an example of forecasting.
Together, they’re powerful tools. While your budget sets the big picture financial goals, forecasting helps you make smart adjustments along the way as you stay one step ahead of demand.
To begin, let’s look at the framework of building a budget. There are six key areas to focus on when gathering data:
Before gathering the data, you'll need the right team members in place — and this includes more than just your financial department! Key players include:
In addition to any other relevant parties that may be applicable to your property.
Now it’s time to gather last year's numbers, including revenue (preferably by guest segment), hotel expense tracking, market trends and competitor performance. As you do this, be sure to flag any unusual events or one-time expenses that may skew your data.
Next, create a reasonable timeline by identifying your submission deadline and working backward — making sure to give yourself enough leeway for departmental reviews and revisions.
Now it’s time to begin budgeting in earnest! The next section has all the details to create a comprehensive budgeting framework.
Pro tip: Schedule your budget meetings when monthly financials are fresh so you have real-time insights into current performance.
To kick things off, start with your revenue streams. Break them down into segments to account for revenue from rooms, food and beverage (further segmenting into room service and restaurant revenue, if appropriate), spa services, parking and any other categories applicable to your property.
Next, it’s time to map out your expenses. Some key costs to include are:
Now, be sure to factor in seasonality for both revenue and expenses. For instance, your summer peak season may require more housekeepers and servers, while winter may require higher heating costs.
Last but not least, build contingencies for each department. Maybe it’s a 3% buffer for utility rate increases or an extra insurance policy for unexpected maintenance. Better to plan now than scramble later!
To construct a hotel performance forecast, it’s important to analyze your key performance indicators (KPIs). As Pete Sams of Davidson Hospitality Group says, “Benchmarking is critical.” And STR data shows that properties using detailed KPI tracking consistently improve operational efficiency and maximize hotel profitability.
Your key metrics to track include:
It’s not simply knowing the numbers though; you need to know the story behind the numbers. For instance, if your RevPAR is trending up, what’s driving it? Is it rate strength or OCC gains? When you analyze and understand the patterns, this crucial context is what allows you to forecast accurately and make smarter pricing decisions.
To predict what’s next, take a look at your market conditions. What events are coming to town? Are new competitors coming to the area? Using your historical performance data, current booking pace and market intelligence are what allow you to create accurate forecasts. And for optimal results during high-demand periods, these can be updated weekly or even daily to stay agile with your pricing strategy and revenue forecasting.
Technology has completely changed the way hoteliers do financial planning, and its impact goes beyond number crunching, too! With 76% of hotels still facing staffing shortages, tech solutions have become essential for helping properties manage operations — something that’s critical in periods of high demand. Let’s look at the types of tools making a difference:
As you can see, budgeting and forecasting are vital parts of a hotelier’s role! To review, successful hotel forecasting comes down to a few key practices:
Need help getting started picking the right tech? The 2025 Hotel Tech Budgeting Playbook breaks down how to create a hotel tech budget and choose the right investments to keep your offerings up to date. Download your free copy today.
Scoring repeat reservations can be extremely valuable. In fact, a 5% increase in customer retention can boost profits by up to 75%. Get tips on how here.
Read More
Investing in new technology should not force you to deal with a slew of software. That’s why selecting guest experience solutions that integrate with your tech stack is so important.
Read More
Not sure how to decide which hotel reservation management system to invest in? Read this detailed Selection Guide to learn more.
Read More
Hotel market segmentation lets you impress guests at every touchpoint… and did we mention it also boosts revenue? Learn more here.
Read More
Guest experience management is one of the key elements that sets hotels apart. Learn how to drive satisfaction, loyalty and memorable stays with techniques, technology and more.
Read More
