Ivy Joyce Villanueva

BSTM TTO- 3YB-1A

PROJECT A

Budgeting in the Hospitality and Tourism 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.

 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

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 nergy 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.