The top 10 forecasting secrets - Part 1
Forecasting is incredibly important because we need a fresh and current plan to help us execute our financial strategy and as the saying goes, “Without a map any road will take you where you want to go.” I know for many hotels the idea of having a monthly forecast seems far-reaching and complicated, but I know it’s not. Once you start you will see what I mean and if you already complete this important planning piece you fully know what I mean.
Secret #1
Budget first. That is the critical building block, to ensure you have a 12-month detailed budget completed on an annual basis. Once the annual budget is built and approved it gets locked down and never, ever gets changed. The budget is the year’s target and the forecasts are the tools we use to guide us to the prize. The budget is like a 12-inning baseball game. We have that many games to play this year and our goal is to win the aggregate of those contests. We must expect that we will miss some and, on the flip side, win some.
Secret #2
Create a circle. Each month the financial window opens and closes in your hotel. Each month is an opportunity to begin again, to learn what worked and repeat. To examine what didn’t work so well and find a new way forward. Make sure the schedule is a circle that repeats itself in a routine like fashion. Pick your dates and lock them in each month, only playing with the calendar and weekdays vs. weekends. Maybe you finalize your actual on the fourth business day and the first draft of the new forecast is due on the fifth and the final forecast is locked by the end of the seventh day. Be boringly consistent with your schedule so everyone gets into a rhythm.
Secret #3
Get the entire management team to participate. This is the magic. If someone on your team has the responsibility to schedule their staff and order their supplies, then they are forecast ready material. Don’t make the mistake of having someone else prepare their forecast instead of them. If you do this, they will not take ownership of those numbers, ever, period, full stop. It’s so important to have your team members producing their own numbers. Train them to plan their staffing and expenses based on the latest day-by-day occupancy and segmentation if they are in operations. For your non-operating department managers, it’s a focus on the schedule for variable positions and vacations for managers that fit into the latest forecasted business volumes. The same goes for expenses. What are we executing on this month and does it fit the planned top-line revenue picture? Use your forecasting process to build a coordinated plan aimed at achieving your over-arching goals.
Secret #4
Leave time to push back. Always leave enough time to review, push back, resubmit, and approve each part of the forecast. Once the day-by-day occupancy is completed get it published. The next step is your F&B sales forecast and it’s driven by the room’s segmentation activity, groups, corporate and transient. Now that you have your revenues it’s time to get the payroll and expenses laid out by each department. Here is where you also want to ensure there is enough time to consolidate, review and, where necessary, push back. Make sure each part of your forecast costs makes sense to the projected revenues. You may be thinking that there is no time to do this little dance. Nothing is more important than starting each month with a fresh and complete plan for making your financial goals and it needs to be in the hands of each department head.
Secret #5
Don’t disconnect. Picking up on Secret #4, this is the most common mistake I see with hotels that say they do a monthly forecast. Here is the brass tack. They do a forecast at the executive level and submit it to corporate and to the owners, but they don’t connect it to the operating managers. That’s right, the left hand doesn’t know what the right hand is up to. Take the time to ensure that your departments all have the same numbers in the detail you sent to your master. More on the disconnection here.
To be continued
David Lund – The Hotel Financial Coach
Contact David at (415) 696-9593 |
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