The document discusses various types of budgets for hotel housekeeping departments including capital budgets, operating budgets, pre-opening budgets, master budgets, and flexible budgets. It describes the budget planning process which involves forecasting room sales and occupancy levels as well as calculating the cost per occupied room. Key expenses that must be considered include staff salaries and wages, laundry costs, linen supplies, guest supplies, cleaning supplies, and uniforms. The advantages of budgets are that they promote planning, coordination, and performance evaluation, while limitations include that they can increase pressure and conflict between departments.
2. Budget
Requirements-
• Data on labour costs and productivity
• Cost analysis for supplies and equipment
• An outline of any major repairs or capital equipment needed in the
coming year, etc.
3. Budget
A budget is a statement of intended for a given period.
• It sets out the parameters of how much of expenditure is permitted
for various items of costs.
• The efficiency of the departments is reflected in the extent to which it
stays within a budget.
• It helps in focusing on priorities of expenditure.
• It acts as an in-built control on activities within departments.
4. Budget
Types of budget-
• Capital budget
• Operating budget
• Pre opening budget
• Master budget
• Department budget
• Fixed budget
• Flexible budget
5. Budget
• Capital budget-
• This is an intended expenditure on assets that have a longer life & are
thus more expensive. E.g. vacuum cleaner, carpets, furniture,
curtains, linen, etc.
• It involves large sum of investments at a wider gap, giving a long time
impact.
• The decision to buy capital assets is taken by the GM, Financial
controller & the Executive HK.
• Capital budget are prepared annually. Items purchased as a part of
capital expenditure has a longer life span, more than a year.
• Examples of capital budgets are:
• Expenditure made on furniture, fixture, machinery and other heavy
equipments like chambermaid’s trolley, shampooing machines etc.
6. Budget
• Operating Budget-
• This is the intended expenditure on items of daily or short-term
consumption. E.g. guest / cleaning supplies, salaries & wages, etc.
• It involves less investment at frequent intervals, giving a short-term
impact.
• Operating budget accounts for help from Purchase dept, Finance
controller, Personnel dept, HK dept & Security dept.
• Operating budgets are prepared on a monthly basis enabling the
managers to outline seasonal variations and their corresponding
expenses.
• Items purchased as a part of operating budget are consumed within a
month or two.
• Examples of operating budgets are :Expenditure made on staff
salaries and wages, supplies etc.
7. Budget
Pre-opening budgets
• These force the planning necessary for the smooth opening of a new
hotel. These budgets allocate the resources for opening parties,
advertising, liaisons & PR.
• Pre-opening budgets also include the initial cost of employee salaries
and wages, as well as supplies, crockery, cutlery and other items.
8. Budget
Master Budget
• These represent the forecasted targets set for the whole organization
and incorporate all incomes and expenditures estimated for the
organization.
Department Budget
• Each department of a hotel forwards a budget for its estimated
expenses and revenues to the financial controller. In fact, the rooms’
division budget is in this case the combined budget of the front office
and the housekeeping department.
9. Budget
Fixed budgets
• These budgets remain unchanged over a period of time and are not
related to the level of revenues. Such budgets include budgets for
advertising and administration.
Flexible budgets
• These budgets pre-determine expenditure based on the revenue
expected and differ with different volumes of sale.
10. Budget
The budget-planning process
• The room division’s budget-planning process depends on two main
aspects:
• Forecasted room sales or occupancy levels
• Cost per occupied room
11. Budget
Forecasted room sales or occupancy levels depends on following factors-
Materials classified as fixed assets of the housekeeping department-
• Guest room furniture and equipment, software, hk equipment
Material classification of inventory assets-
• Cleaning supplies, guest supplies, linen and uniform
Main expenses to be considered are the forecast of room sales. Before planning
the budget, the Executive Housekeeper should have the yearly forecast of the
occupancy levels further broken down on monthly basis. This information can be
obtained by the marketing department of the hotel.
• As- Budget period---- occupancy percentage----Avg price per room---- Total
room sales
(The cost per occupied rooms forecasted for each category of expense.
The no. of occupied rooms forecasted for each budgeting period.)
12. Budget
Cost per occupied room
• Apart from the room sales forecast, other budgetary expenses are:
• Salaries and wages of staff and contract workers.
• Employees benefits like cost of holiday pay, health and medical expenses, staff meals,
insurance, pensions, farewell parties, payroll taxes, etc.
• Laundry expenses if in-house laundry is there.
• Linen supplies are recycled inventory but their life span is ultimately limited therefore
replacement cost for new linen is an expense that needs to be worked into the budget
planning process.
• The cost of all contract services is averaged throughout the budget period of one year
• All guest supplies & cleaning supplies also need to consider during the time of
calculating the cost per occupied room.
• Uniform, its number, material & stitching costs also need to consider for this purpose.
13. Budget
Aspects capital budget-
1.Supplier identification
• The purchase department should keep a track of reliable and cheap
suppliers. The following points should also be considered:
• Reliability of supplier operation
• Quality product as per the set standards of the establishment
• Cost factor, transportation and handling charges should be considered
• Whether suppliers meet the time parameters of the supply
• Whether suppliers meet your special specifications
14. Budget
• Receiving competitive quotation
The hotel should identify several suppliers because the hotel can have
advantage of getting competitive prices along with the best quality
products.
• Selection of a supplier
Normally the supplier with the lowest quote is chosen but care must be
taken that he follows all terms and conditions of the establishment as
discussed above.
• Making a budget
Armed with the quotation, the capital budget is broken down into:
Product
Freight, Transport
Handling charges
15. Budget- Advantages
• Compels management to think about the future, which is probably the most
important feature of a budgetary planning and control system.
• Forces management to look forward, to set out detailed plans for meeting the
targets for each department, operation and (ideally) each manager, to predict and
give the organization purpose and direction.
• Promotes coordination and communication
• Clearly defines areas of responsibility which requires managers of budget centres to
be made responsible for the achievement of budget targets for the operations under
their personal control.
• Provides a basis for performance appraisal (variance analysis).
16. Budget- limitation
• Budgets can be seen as pressure devices imposed by management, thus
resulting in:
• a) Bad labor relations
• b) Inaccurate record-keeping.
• Departmental conflict arises due to:
• a) Disputes over resource allocation
• b) Departments blaming each other if targets are not attained.
• It is hard to resolve personal/individual and corporate goals.
• Waste may arise as managers adopt the view, "we had better spend it or
we will lose it". This is often coupled with "empire building" in order to
enhance the prestige of a department.
• Responsibility versus controlling, i.e. some costs are under the influence of
more than one person, e.g. power costs.
• Managers may overestimate costs so that they will not be blamed in the
future should they overspend.
