SOP For Full Year Forecasting In Hotels & Resorts

SOP Number: Finance and Accounting – 17

Department: Financial Control

Date Issued: 8-Aug-2021

Time to Train: 25 Minutes

Purpose of Full Year Forecasting:

Every month a full year forecast will be prepared for the current year by the Hotel Management Core Team. It is the responsibility of the General Manager to provide the environment for each department to participate in this forecast and ensure its accuracy based on the current market trends.

Full Year Forecasting SOP Procedures:

Forecasting is a team effort led by the General Manager. By the 20th of the month the Reservations and Sales staff should project the rooms forecast for the upcoming three (3) months, and the Catering staff should project the catering forecast for the upcoming three (3) months. This information should be given to the Rooms Department and Food & Beverage Department so they may forecast their business and expenses based on these projections.

The Controller/General Manager should have this information to enter into the forecasted area by the 23rd of the month. At this point, it should be reviewed with the General Manager. The forecast of the remaining months should reflect trends being experienced, targeted and improvement in performance statistics and group room bookings. The budget should not be entered unless we expect to achieve the budget.

The full year forecast process is not intended to create a new target for house profits. The target will always be the budget. This is intended to maintain our focus on the target as we identify potential deviations and implement corrective actions.

The Monthly Recap and Actual/Forecast Recap is generated from this information. A Forecast Accuracy Report is also generated for the previous month. This will compare the budget, last forecast and actual results. The company standard for forecasting accuracy is plus or minus 5%. This Report will enable the Hotel to isolate departments not meeting standards so that corrective actions can be taken. The forecast meeting each month should begin with the review of the prior month forecasting accuracy.

If projections fall below 10% of budget, the property should institute plans and actions for enhancing revenues and/or cutting costs.

1. Declines of 5% to 15% in Forecasted House Profit to Budget - Reductions which prudent management will dictate should be accomplished immediately and can be done with little or no economical risk.

2. Declines of 16% to 26% in Forecasted House Profit to Budget - Reductions which can be accomplished that will involve some risk to moderate revenue or quality risk. The gravity of the risk, particularly in revenue dollars, must be specifically identified. These actions must be discussed in advance with the corporate staff.

3. Declines of 27% or more in Forecasted House Profit to Budget - Reductions which can be accomplished, however, there will be great and/or long term risk involved. The gravity in volume of the risk must be specifically identified. These actions must be discussed in advance with the corporate staff.

Obviously, any ideas which could result in some revenue enhancement should also be identified and quantified with the impact on house profit reflected. Proposed plans and actions should be listed and sufficient detail by risk level or as revenue enhancements documented on the Plans & Actions form.

These forms are to be submitted on the 10th of the month with the Financial Package.

Training Summary Questions:

Q1.  Who is responsible for each department's participation in the forecast?

Q2. What is the purpose of the forecast process?

Q3. What are some methods for cutting costs?

Q4. What specific actions must be taken to reduce the forecasted decline in house profit to budget by 5 to 15 percent?