Operational Budgeting

OPERATIONAL BUDGETING
Every rational manager plans for the future. Some plans are formal or informal but when it comes to budgets it is considered to be formal and structurized in order to maximize profits. In hospitality, for every spare dollar available makes the revenue manager one of the highest profile jobs in the industry today. As every hotelier knows, the revenue manager is part of theRooms Division department which is considered the heart and soul of every hotel. For those who don’t know why, the answer is simple; rooms division is in charge of selling the rooms which are the highest income of any hospitality industry. With the right tools, the revenue manager is able to raise the Average Daily Rate (ADR) and with this kind of money the operators can achieve and understand whatthey need to do in order to get significant benefits and optimum results.
The job description and responsibilities for the corporate revenue manager varies depending on the hotel company but almost all revenue managers have multifunctional roles such as optimizing room rates, forecasting group profitability, train property managers in pricing strategies, and guide sales and marketing teams inthe most effective positioning for their selling strategies and campaigns. Every decision the revenue managers take affects the company’s profitability and because of this, you need a professional who can handle both people and revenue. The 2 most important roles for the revenue manager is:
1. Develop the most effective rates and strategies to increase revenue.
2. Motivate corporate executives andchain managers to implement those rate and strategy recommendations.
In order to get the job done, the revenue manager needs a good revenue management system to have an accurate analysis of data such as:
 Regional, seasonal and competitive influences, by property and market
 Group performance across all property profit centers.
 Price sensitivity for a large number of segments andmarkets.
 Demand and reservation costs across multiple sales channels.
In addition, effective performance depends on the system’s ability to:
 Revise pricing recommendations anytime as new information becomes available,
 Perform its analysis quickly, and
 Deliver optimized daily rate recommendations for a portfolio of properties and their guest segments that extend out for date ranges of up tofive years in the future.
Not only technology but it is very important for the revenue manager to have these skills:
 Relationship skills: Manage people and building good relationships.
 Creative Thinking: Visionaries who think outside of the box in order to raise profitability for the company.
 Effective Sales Ability: They need to be sales professionals as they need to create the beststrategies and selling rate recommendations and run it by to the corporate executives, sales directors and general managers.
 Property Management Experience: Many RM professionals have property management backgrounds and understand the unique characteristics of each of the hotel’s markets.
 Training Experience: They need the knowledge and skills to teach the property managers so both RM andProperty managers can understand the factors of the RM guidelines.
 Solid Communication Skills: Need to be excellent listeners and communicators so they can be effective when they present their ideas in the conference room.
TYPES OF BUDGETS
The operations budget, also referred to as the revenue and expense budget, because it includes management’s plans for generating revenues and incurringexpenses for a given period. The operations budget includes budgets for rooms, food, beverage, telecommunication and other profit centers. Also budgets for service centers such as marketing, human resources, accounting. In addition includes the planned expenses for depreciation, interest expense, and other fixed charges. The operations budget is a detailed operating plan by profit centers, cost...