This month we look at budgeting in the hospitality industry with our industry guru, Monica Or FIH, explaining why budgeting is a key skill that all hospitality professionals should understand. Read Monica’s top tips and industry advice.

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Budgeting in the Hospitality
Industry
When businesses start up you often hear stories of their
founders having a chat in the local pub and writing down
their business idea on a napkin. This formulates the
starting point for turning that idea in to a flourishing
hospitality business. Although in order for that business to
take off one key success factor will come down to how the
finances of that business are run. At the end of the day it
all comes down to the numbers.
Knowing how much money is coming in and out of your
business is crucial and that is why budgeting is a key skill
that all hospitality professionals should understand. Sadly
this is a responsibility that is usually only given to
Supervisors or Managers, although in reality every one of
your team members should understand the importance of
their role in generating sales and how their behaviour and
service delivery will impact this.
Top Tips on how to budget for your hotel:
• Utilise the data you have on your hotel and look at patterns and trends. There
will be certain calendar events which will have an impact on your hotel’s
performance and also adhoc events that will do likewise
• Itemise the costs you incur and include costs that you may not have incurred
yet but could do in the future. According to Iguchi (2019) 76% of hospitality
employers have no budget for training. Often seen as an expense that can be
cut, but should be seen as an investment that will reap returns.
• Compare your strengths and weaknesses with your competitors – are your
strengths in service delivery, the way your hotel looks or the amenities you
have – take advantage of this
• Compare your anticipated income and revenue with your actuals. Always
ensure you have enough cash reserves for an unexpected eventuality.
• Look at ways to cut costs if needed or to increase revenue by adapting, or
enhancing your products and services
• Remember to forecast and forward plan, it is not just the day to day
operations you should be concerned with

2. Getting your costings right will have a huge impact on your budget. Labour is always
a big expense for any business although an expense that can reap great rewards for
you if invested in properly. According to Goldstein (2018) in the latest UK Hotels
Trading Performance Review she states: ‘Payroll costs form the largest proportion of
costs for a hotel, with our analysis showing that the average payroll costs, as at
October YTD 2018, equate to 26% of total revenue for London hotels, increasing to
over 30% in Regional UK hotels. Total payroll cost for the Top 20 regional UK towns
/ cities equates to 27% of total revenue, with payroll costs rising to 30% for other
major UK city / town centre locations.’ She goes on to say that ‘payroll costs at full-
service, independent luxury hotels equate to 37% of total revenue.’
It is also important to keep an eye on your costs as they creep up due to
circumstances out of your control. Recent cost increases include:
• Payroll costs due to Brexit uncertainty, increase in the National Living Wage
and hospitality organisations increasing pay in an effort to retain staff
• Credit card fees due to contactless payment transactions and fees associated
with this
• Energy costs increasing with hotels balancing between being sustainable and
meeting the demands of their customers who expect free WiFi, power
showers, air conditioning, contactless charging points, universal USB sockets,
adequate lighting, HD TVs and electronic vehicle charging points.
At the end of the day budgeting does not just come down to monetary terms but it is
also about the value and return on investment you are getting on what you are
spending your money on. So you need to ensure you have quantifiable measurable
outcomes that you can justify your expenditure.
References:
Goldstein, P (2018) UK Hotels Trading Performance Review 2019, Knight Frank.
Available at: https://www.knightfrank.co.uk/research/uk-hotels-trading-performance-
review-2018-6021.aspx
Iguchi, I (2019) Training does not have to be draining, how to train your staff on a
tight budget, IOH Webinar 2 July 2019. Available
at: https://www.instituteofhospitality.org/event/training-doesnt-have-to-be-draining-
how-to-train-your-staff-on-a-tight-budget/
About Monica Or FIH
Working with the owner/managers of independent hotels and restaurants, Monica
assists her clients to create memorable guest experience through their operations
and service delivery. She is the Amazon Best Selling author of her three books: ‘Star
Quality Hospitality – The Key to a Successful Hospitality Business’, ‘Star Quality
Experience – The Hotelier’s Guide to Creating Memorable Guest Journeys’ and ‘Star
Quality Talent – Inspiring Hospitality Careers’

3. Monica has also developed the Academy of Wine and Food online courses available
from the Institute of Hospitality as well as her own Star Quality Experience series
of online courses for Hoteliers and Restaurateurs.
Website: https://starqualityhospitality.co.uk/
Useful Resources
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understand more about the industry
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relevance to hospitality professionals, academics and students in partnership with
industry experts. If you are not a member, find out how to join and gain full access to
these exclusive resources.
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