How to make a yearly budget and a rolling forecast for a small hotel

• Most businesses in India keep their accounts from April to March. Budget the same year your accountant uses, so that the two can be compared.
• Budget each month on its own. A hotel's year is made of seasons, festivals and holidays, and a yearly total spread evenly over twelve months says nothing about May or January.
• Start two or three months before the year begins, so that the budget is ready when the first month opens.

Mark the year's holidays and festivals in your calendar first. The Government of India publishes each year's list of holidays for its offices, and each state publishes its own. Festival dates move from year to year, so check the month each one falls in: a Diwali in October and a Diwali in November make two different Octobers.

1. 1For each month of last year, write the rooms you had: your rooms multiplied by the nights in the month.
2. 2Write the rooms you sold, and divide them by the rooms you had to get the month's occupancy.
3. 3Write the room revenue without GST, and divide it by the rooms sold to get the average room rate.
4. 4Write the other revenue: food and drink, banquets and weddings, extras.
5. 5Write every cost, grouped as in our guide to hotel profit margin.
6. 6Mark anything that won't happen again: a large wedding, a month closed for repairs, a one-off contract.

On Booking.com, the extranet's Sales statistics compare the sales from guests who stayed with previous years. Use them to check your own figures for the share of bookings that came from it.

Rooms are most of a small hotel's revenue, so budget them with the most care:

1. 1For each month, count its weekday nights, its weekend nights and its festival or holiday nights.
2. 2For each kind, write the occupancy you expect, starting from last year's and changing it only for a reason you can name: a new hotel nearby, a new flight, a road closed, a festival moved.
3. 3For each kind, write the average price you expect, from last year's and from the prices you will set.
4. 4Multiply the rooms you had by the occupancy to get the rooms you expect to sell, and multiply those by the price to get the room revenue.
5. 5Add the kinds of night together for the month.
6. 6Split the rooms you expect to sell by where they will come from, booking site by booking site and direct, as last year did, so that you can budget each site's commission.

• Food and drink from guests: last year's food and drink revenue divided by the rooms sold gives what each occupied room brought. Multiply it by this year's budgeted rooms.
• Food and drink from the town: the restaurant's outside guests, by month.
• Banquets and weddings: those already booked, from their contracts, and the usual number for the season.
• Extras such as transfers, laundry and late check-outs, per occupied room as for food.

Split costs into those that stay the same whatever you sell and those that move with the rooms sold:

• Fixed each month: salaries, rent or loan instalments, maintenance contracts, software, insurance spread over the year, the minimum electricity bill.
• Moving with rooms sold: laundry, guest supplies, breakfast food, booking-site commission, payment charges, part of the electricity and water. Budget each as a cost per occupied room, from last year, multiplied by the rooms you expect to sell.
• Dated: salary rises in the month they start, the festival bonus, repairs and painting before the season, renewals of licences.
• Selling: advertising, photography, your website and booking engine.

Take the costs away from the revenue for each month to see the month's profit, and add the months up for the year. If the year's profit is too low, change the plan, not the figures: which months could sell more, which costs could fall.

A profitable year can still run out of cash in the quiet months. Make a second line for each month: the money in and out of the bank, on the day it moves.

• Money from booking sites arrives on their own timing. MakeMyTrip offers settlement one or two days after check-in for confirmed bookings, and Expedia's invoice for Hotel Collect bookings comes on the 5th of each month, to be paid within 14 days.
• Tax deducted and collected by the booking sites comes back only when you claim it, so it leaves the bank before it returns.
• Yearly bills, such as insurance and licences, leave in one month.
• Keep enough in reserve to pay salaries and loan instalments through the quietest months.

EHL Hospitality Business School calls forecasting the foundation of every revenue decision: past booking windows, seasons and occupancy give a baseline that repeats each year with some change, and events, competitors' prices and the economy move it. On the same day each month:

1. 1For each of the coming months, count the rooms already booked, from your own system and every site.
2. 2Compare each with the rooms that were booked for the same month at the same point last year. On Booking.com, the Pace Report shows your bookings for future dates against previous years.
3. 3Work out last year's pickup for each month: the rooms finally sold, less those already booked at this point last year. Add it to this year's rooms booked, raised or lowered by how far ahead of last year you are.
4. 4Take off the usual share of bookings that are cancelled, from your own count.
5. 5Add what you know that last year didn't have: a group, a wedding, an event, a closure, a new competitor.
6. 6Multiply the rooms you now expect by the average price of the rooms booked so far, and do the same for other income and costs.
7. 7Drop the month just ended and add one at the far end, so that the forecast always looks twelve months ahead.

Booking.com's Bookwindow information shows how far ahead your guests book, which tells you how far ahead the forecast can be trusted: the months closest to today are the most certain.

Keep one table: each month across the top, and under each the budget, the latest forecast and, once it is over, what happened. Then each month:

• Where what happened differs from the budget, find whether it was the rooms sold, the price or the costs.
• Where the forecast for a month two or three months ahead is below the budget, act now: offers for its quiet nights, companies and travel agents, events, your past guests (see our guide on increasing hotel occupancy).
• Where the forecast is above the budget, raise the price of the nights that are filling and stop discounting them.
• Keep the budget as it was set. Change the forecast, so that you can always see how far the year has moved from the plan.

• A spreadsheet, such as Google Sheets, which is free: one tab for the budget, one for the forecast, one for what happened, with the months as columns.
• The reports in your front desk system: rooms sold, revenue and bookings on the books by date.
• Booking.com's Analytics tab: the Pace Report, Sales statistics, Bookwindow information and Demand data for your city.
• Google Trends, for how searches for your town move through the year, and your Business Profile's Performance page, for searches, views and booking clicks month by month.

• Taking last year and adding the same rise to every month.
• Forgetting that festivals move from one month to another.
• Counting GST as revenue.
• Budgeting the profit and forgetting the cash.
• Changing the budget during the year to match what happened.
• Leaving the forecast to the end of the quarter, when it is too late to act on the months it shows.
• No one person who owns the budget and the forecast.