Hotel management company forecasting and budgeting practices: a survey‐based analysis

Abstract

PurposeThe purpose of this study is to investigate and document current US hotel management company practices in budgeting and forecasting, and to recommend a process to improve accuracy and efficiency.Design/methodology/approachKey corporate financial executives of hotel management companies operating in the USA were surveyed. Different from prior studies that surveyed the US property‐level managers, or European hotel operators, the study surveyed the authors of budget guidelines of US hotel management companies with at least ten units or 1,000 rooms, to discover and document the budgeting and forecasting practices of multi‐unit hotel management companies. Chi‐square and t‐tests for equality of means were used to identify the differences between large and small hotel management companies.FindingsMany concepts were identified that are not found in hospitality management textbooks. Current budgeting and forecasting methods used in the industry present opportunities for improving accuracy. There are also opportunities for time efficiencies, which may lead to improved participant satisfaction. Some significant differences were identified in budgeting and forecasting processes between large and small management companies.Research limitations/implicationsThe findings may not apply to independently owned and operated hotels, or small hotel management companies. Future research may focus on identifying economic factors that most influence hotel revenues at the local or regional level. Also, future research may focus on corporate computer software that facilitates intranet consolidation of property level budgets and forecasts and also allows spreadsheet flexibility for exploring various scenarios.Practical implicationsThe practical application of the study is the recommendation for a centralized budget process that enhances accuracy, improves efficiency, and reduces “gamesmanship”.Original/valueThere are four main contributions of the study: the obtaining of inputs from corporate officers of hotel management companies with operations in the USA; the documenting of forecasting and budgeting practices of hotel management companies operating in the USA; the recommending of a forecasting and budgeting process that may improve accuracy and participant satisfaction; and the identifying of differences between large and small companies in relation to forecasting and budgeting practices.

Budgeting practices: a study on Brazilian hotel companies

“…The study by Uyar & Bilgin (2011) on hotel companies in Turkey reveals that 63% prepare budget manuals, which corroborates the research by Steed & Gu (2009), who noted the establishment of the budget guidelines by senior management in an average 4.5 points on a scale of one to five.…”

“…The study by Steed & Gu (2009) showed that in 64.3% of hotel companies, the value indicated by the hotel owner was the most important influence in the guidelines for increasing revenue. Among the bases for such an increase, stand out REVPAR or increased percentage with 54.8%, percentage of increase over the previous year with 52.4%, based on ADR and occupancy percentage with 35.7%, respectively, improving the competitive set with 31%, another factor with 6.2% or the inflation forecast with 4.8%.…”

“…In research conducted by Uyar & Bilgin (2011), most companies, about 80%, take around one to two months to prepare their annual budget. The study by Steed & Gu (2009) revealed that 15% of hotels in the United States spend less than 40 hours, 27.5% between 40 and 80 hours, 27.5% between 81 to 120 hours and 30% take over 120 hours .…”

“…Recent studies highlighted the lack of research on budgeting practices in hotel companies (Steed & Gu, 2009;Uyar & Bilgin, 2011), especially in developing countries such as Brazil. Furthermore, the hotel industry is one of the most important in the service sector in many countries, including Brazil, which in 2012 received 5.67 million foreign tourists, surpassing the marks of 5.4 million in 2011 and 5 2 million in 2010, representing 5% of the national GDP.…”

“…In this sense, in order to achieve the goal of exploring the budgeting practices in the hotel industry of the main tourist centers of Brazil, the questionnaire was based on several previous studies in the United States (Schmidgall & DeFranco, 1998;Steed & Gu, 2009) , the United States and Scandinavia Borchgrevink & Zahl-Begnum, 1996), the United Kingdom and the United States (Jones, 1998;Jones, 2008a, b), Australia (Subramaniam;McManus & Mia, 2002;Winata & Mia, 2005) China (Yuen, 2006), Greece (Pavlatos & Paggios, 2009) and Turkey (Uyar & Bilgin, 2011).…”