The hospitality industry is fast-paced and over the last few years, it has faced many unprecedented financial challenges. In a world where the economic downturn has become the new normal, hospitality business owners, now more than ever, need to adopt the best practices and processes to effectively manage finances and make informed business decisions backed by financial data.

This guide will provide a comprehensive overview of key financial management aspects in the hospitality industry, including budgeting, auditing, financial tracking, and profit and loss reporting.

It will discuss the importance of each area and provide practical tips and strategies for effective financial management in the hospitality sector for hospitality professionals, managers, and owners who are involved in financial decision-making and want to improve their financial management practices.

4 best practices for hospitality financial management

Budgeting

Knowing how much money is coming in and out of your hospitality business is essential for success. For this reason, budgeting is a key skill and responsibility that all hospitality business owners should understand.

Budgeting is the process of calculating how much money your business has available to spend over a set period. This is often based on financial documents detailing the estimation of income and expenses over the period. Without an effective budgeting strategy, you may run out of money.

To create a business budget, you should utilise any existing data and identify patterns and trends. It is likely that seasons and calendar events have an impact on the performance of your hotel, pub, or restaurant and by analysing this information you can calculate budgets during high and low seasons.

Additionally, you can look for ways to cut costs and implement money-saving solutions to increase revenue and free up cash to be spent elsewhere in the business. This can be achieved by adapting, enhancing, and adjusting your products or services.

When budgeting, you should forecast for months or even years in advance. A budget oversees and plans for much more than just day-to-day operations and should protect you and your business during unforeseen circumstances and expected emergencies.

Auditing

The term auditing refers to a financial statement audit. A financial statement audit is the process of analysing an important financial document from a company such as a cash flow statement, income statement, or balance sheet. This is usually completed by a financial statement auditor whose objectives are to ensure reasonable assurance that a company is free from material misstatements due to fraud or error.

Auditing is important to provide credibility to a firm and shareholders with confidence that accounts and business performance are true and reliable. Furthermore, auditing improves the credit rating of a business, boosts productivity in operations, and can attract additional stakeholders.

Through this process, auditors can help businesses in the hospitality industry monitor and utilise data including expenses, occupancy rates, and revenue, ensure the company is compliant with regulatory requirements, and identify areas of improvement to allow the business to grow.

Financial tracking

Financial tracking is the practice of analysing spending on a daily basis. This can be achieved by recording receipts, invoices, and business expenses. This process enables you to understand your spending, identify where you can cut costs, and monitor how much of your budget is being spent over time.

This information is typically recorded using accounting software to help hotels and hospitality businesses manage their budget effectively, track income and expenses, create financial reports, and analyse the overall financial performance.

A detailed financial tracking model will consider and include everything from payroll and property maintenance to energy and revenue. This is an effective way of capturing and tracking expenses to improve financial management in a business.

Profit and loss reporting

A hotel income statement, also known as a profit and loss statement, tracks a business’s revenue and expenses to calculate how much profit was earned over a particular period. A profit and loss report for a hotel, restaurant, or other hospitality business should include net sales, cost of goods sold, gross margin, operating expense, and net profit.

Each entry on a profit and loss statement will provide insight into how much money a company has made and spent over that period. This report is then used to assess the operational efficiency of a business and provide shareholders, creditors, and investors with an understanding of how a company manages its resources.

A profit and loss statement is an indicator of a company’s health and is one of the primary documents that will need to be provided when applying for loans or funding.

Financial Management in Hospitality FAQs

What is financial management in the hospitality industry?

Financial planning in the hospitality industry is the process of planning and organizing financial activities and operations of a business. This can be achieved by budgeting, auditing, financial tracking, and profit and loss reporting.

Why is financial management important to hospitality organizations?

Financial management is essential to hospitality organizations for success, growth, and expansion. By carefully monitoring their finances and expenditures, hospitality organisations can achieve their business goals and make informed decisions for the future.

What do you do in hospitality management?

Hospitality management involves overseeing all tasks of managing a hospitality business. This can include but is not limited to overseeing the day-to-day administrative, operational, and commercial activities of the business.

Stewart Hindley UK Hotel Finance and Hospitality Finance Specialists

At Stewart Hindley, we specialise in hotel finance to accelerate the success of your hospitality business. Financing a hotel is often a challenge but the good news is that we can help.

Whether you are new to trade or a first-time buyer with no track record, our specialists with over 20 years of industry experience have established relationships with lenders who will consider new-to-trade hotel operators.

With a proven track record in securing hotel finance for businesses in England, Scotland, Wales and Northern Ireland, we will find the right mortgage for you.

Our processes are clear, and we will help you every step of the way from advising what information you need to provide to liaising with lenders on your behalf.

For more information, get in touch with a member of the friendly team today.

Hotels, like any other business, have several reasons as to why it is important to save money and reduce overheads and outgoings.

Inflation, labour issues, and the rising cost of meeting the needs of modern, tech-savvy consumers are just some of the challenges hoteliers are facing. Saving money and cutting costs while maintaining an excellent customer experience is not easy and is one of the key issues in the hotel world.

If you own a hotel, bed and breakfast, or holiday rental, you may be searching for ways to reduce costs. This guide will mention eight cost-saving ideas that you need to consider to save money in your hotel business.

Why is it important to cut costs?

For hotels, it is important to cut costs to improve profitability, stability, and growth. By saving money, hotels can increase their profits and reinvest those funds elsewhere in the business. This allows hoteliers to improve their cash flow management and create accurate cash flow forecasts for the future.

Cutting costs is often faster and easier than growing revenue and can provide hotels with quicker results.

How can your hotel save costs?

There are a number of different ways hotels can save money and cut costs. Here are some ways your hotel can reduce expenses:

1. Build customer loyalty

Customer loyalty can save hotels money in many different ways. For example, loyal customers are likely to return and repeat business providing you with continual income streams. Additionally, loyal customers are likely to return to your hotel without the need for targeted marketing campaigns.

In this instance, it pays to provide customers with an excellent stay and experience to benefit from future customer acquisition costs, maintain steady occupancy rates, and of course, improve your competitive advantage.

2. Encourage word-of-mouth

Furthermore, loyal and satisfied customers are likely to recommend your hotel and services through positive word-of-mouth reviews. This means your hotel can attract new customers at no additional cost.

3. Optimise working rotas

Optimising working rotas and employee schedules can cut costs by avoiding overstaffing, minimising overtime pay, and ensuring compliance with employment laws. By accurately forecasting seasonal demand, hotels can make informed staffing decisions and save money by avoiding underestimated and overestimating staffing needs.

Additionally, consistent and fair work rotas have the power to engage and motivate employees and reduce employee burnout. Happy employees are much more likely to provide a great service to guests reducing the risk of complaints and negative reviews.

4. Staff retention

Ensuring that staff are not overworked and avoid excessive working hours can help to prevent burnout and reduce employee turnover. In turn, this reduces costs by saving on recruitment, hiring, and training. Onboarding new employees is a costly process. Making sure your current workforce is happy and satisfied helps to retain your team and cut costs.

5. Adopt a good marketing strategy

A good marketing strategy will focus on targeting your target audience. Marketing efficiency avoids overspending on marketing campaigns that are not aimed toward your audience. Using an efficient marketing strategy, your hotel can produce maximum return for minimal cost. This allows you to reduce costs while maintaining optimum results.

6. Limit marketing costs

While marketing is important to attract new customers and improve brand awareness, limiting your marketing costs can save you money. However, reducing your marketing costs does not mean that you stop creating engaging content that resonates with the audience.

In fact, organic and authentic content that you or your employees can produce using a mobile phone and free editing software is proving immensely popular on social media platforms such as TikTok. Thanks to the advancement of social media, marketing no longer requires high costs to get a great return.

7. Utilise your hotel floor space

By utilising your hotel floor space, you can maximise revenue, lower operational costs, and improve the overall guest experience. Efficiently using your floor space allows your hotel to accommodate more guests improving your revenue potential. Similarly, efficient floor space reduces energy, lighting, and electricity consumption further cutting costs to save money.

8. Adopt green practices

Green and eco-friendly practices, such as reducing energy and water consumption, using renewable energy, recycling waste, and sourcing locally, not only help to cut costs but also appeal to environmentally conscious guests.

Sustainable practices are becoming a top priority for hotels as they help to reduce environmental impact while maintaining a comfortable experience for guests.

Frequently asked questions

How can hotels reduce expenses?

Hotels can reduce expenses by building customer loyalty, optimising employee schedules, implementing staff retention schemes, adopting a good marketing strategy, utilising the hotel floor plan, and adopting green practices.

How can I make my hotel more profitable?

You can make your hotel more profitable by analysing and reducing operational costs. This can be achieved by implementing energy-saving appliances to reduce utility bills, negotiating better pricing with suppliers, optimising staff rotas to avoid overstaffing, and delivering great customer experiences to build customer loyalty to secure repeat business.

How do you cut costs in housekeeping?

You can cut costs in housekeeping by encouraging guests to reuse towels to save on water consumption and labour. Additional ways you can cut costs in housekeeping include purchasing cleaning supplies in bulk, effectively scheduling room cleaning, and offering a minimum night stay to reduce cleaning between guests.

What is cost control in hospitality?

Cost control in hospitality is defined as the method of reducing business expenses by managing and analysing financial data. This is the process of reducing business expenses to increase profits and revenue and improve the profitability of a hotel business.

Stewart Hindley UK Hotel Finance and Hospitality Finance Specialists

At Stewart Hindley, we specialise in hotel finance to accelerate the success of your hospitality business. Financing a hotel is often a challenge but the good news is that we can help.

Whether you are new to trade or a first-time buyer with no track record, our specialists with over 20 years of industry experience have established relationships with lenders who will consider new-to-trade hotel operators.

With a proven track record in securing hotel finance for businesses in England, Scotland, Wales and Northern Ireland, we will find the right mortgage for you.

Our processes are clear, and we will help you every step of the way from advising what information you need to provide to liaising with lenders on your behalf.

For more information, get in touch with a member of the friendly team today.

Hotel ownership comes in different forms, each with its unique advantages and disadvantages. Understanding the different types of hotel ownership can help prospective hoteliers make informed decisions about their investments.

In this article, we will delve into the four primary categories of hotel ownership: franchised, privately owned and operated, leased, and managed, exploring the characteristics of each ownership type, along with their respective advantages and disadvantages. Read on to discover which hotel ownership model aligns best with your plans and aspirations.

Franchised Hotels

Franchised hotels operate under an established brand, with the owner holding a franchise agreement. This agreement allows the hotelier to use the brand’s name, trademarks, and systems in exchange for royalty fees.

Advantages

Franchised hotels benefit from immediate brand recognition, leveraging the established reputation and marketing efforts of the parent company; this helps attract customers more easily than starting from scratch. Franchisees also receive ongoing support, including training programmes, operational guidance, and marketing assistance from the franchisor.

Being part of a franchise allows hoteliers to enjoy the advantages of collective purchasing power and economies of scale, and franchisees often benefit from a central reservations system, enabling access to a broader customer base.

Disadvantages

While there are many advantages to franchising, there are also some less favourable considerations, such as the high initial investment – franchise agreements typically involve significant upfront fees and ongoing royalty payments.

There is also less flexibility and autonomy as franchisees must adhere to brand standards and guidelines, meaning they may have less freedom to introduce unique concepts or adapt quickly to market changes.

Privately Owned and Operated Hotels

Privately owned and operated hotels are independent establishments owned by individuals or private entities. These hotels have complete control over their operations, branding, and marketing strategies.

Advantages

Owners have the freedom to create a unique identity and tailor the hotel experience according to their vision; this also means they can swiftly respond to market demands, implement changes, and differentiate themselves from competitors. This often results in privately owned hotels creating a more personal and intimate guest experience.

Because there are no franchisors or management companies to share revenues with, owners retain all the profits earned through their hotel.

Disadvantages

Independent hotels may lack the resources and support available to franchised or managed establishments, meaning owners are responsible for all aspects of hotel management, including marketing, reservations, and operational systems. As a result, building brand recognition can be challenging, requiring significant marketing efforts and investments.

Leased Hotels

Leased hotels involve an agreement where the owner leases the property to an individual or entity, who then operates the hotel and assumes responsibility for its day-to-day management.

Advantages

Owners receive regular rental income without the operational and financial risks associated with hotel management, as the lessee bears the brunt of market fluctuations and economic uncertainties. Leaseholders handle the hotel’s operations, staffing, and maintenance, allowing owners to focus on other investments.

Disadvantages

Because of the lease setup, the owner has minimal control over the hotel’s operations, marketing strategies, or guest experience. This means that success hinges on the competency and commitment of the lessee, which may pose risks if they lack experience or encounter financial difficulties and, if the hotel performs particularly well, the owner may miss out on potential profits.

Managed Hotels

Managed hotels involve a contract where a professional hotel management company is hired to operate the property on behalf of the owner. The management company takes charge of day-to-day operations and implements its expertise to maximise profitability and guest satisfaction.

Advantages

Hotel management companies bring extensive industry knowledge, experience, and best practices to optimise operations and revenue generation. The management company shares the financial risk and responsibilities with the owner, aligning their interests to achieve profitability.

They also often have established networks and relationships with suppliers, travel agencies, and online booking platforms, expanding the hotel’s reach. Furthermore, managed hotels benefit from a pool of trained professionals recruited and supervised by the management company.

Disadvantages

Owners relinquish operational decision-making authority to the management company, which may result in a loss of control over certain aspects of the hotel’s operation, particularly if the owners are locked into a long-term management agreement.

Hiring a management company involves additional costs, including management fees, performance incentives, and potential profit-sharing arrangements.

How can Stewart Hindley help?

Choosing the right hotel ownership model requires careful consideration of individual goals, resources, and preferences. There are advantages and disadvantages to each of the approaches explored above and understanding them can help aspiring hoteliers make an informed decision to achieve success in the dynamic and exciting hospitality industry.

Remember, the choice of hotel ownership should align with your long-term vision and business objectives. Whether you opt for a franchise, private ownership, lease, or management, the key to success lies in strategic planning, effective execution, and a commitment to delivering exceptional guest experiences.

If you are looking to move into hotel operations, we can help. We are specialists in hotel finance and have been helping people get into hospitality for over 15 years. Get in touch with us today.

While weekends may naturally attract more leisure travellers, tapping into the midweek market can significantly increase your revenue and overall profitability. In this article, we’ll explore actionable tips that hoteliers can implement to boost midweek occupancy rates effectively.

What are occupancy rates?

Occupancy rates are a critical metric that every hotelier should keep a keen eye on. It measures the percentage of rooms in a hotel that are occupied during a specific period, typically calculated on a daily, weekly, or monthly basis. Understanding and optimising occupancy rates are essential for any hotel’s success, and one key area that often requires special attention is midweek occupancy rates.

Occupancy rates represent the heart of a hotel’s performance evaluation. They offer a clear picture of how well a hotel is utilising its available room inventory. The formula to calculate occupancy rate is straightforward:

Occupancy Rate = (Number of Rooms Occupied / Total Number of Rooms) * 100

For instance, if a hotel has 200 rooms and 160 are occupied on a particular night, the occupancy rate for that night would be 80%.

Why do high occupancy rates matter?

High occupancy rates mean that a hotel is selling more rooms, which directly impacts its revenue potential. Increasing occupancy rates, especially during traditionally slower periods like midweek, can significantly boost overall revenue and profitability. Occupied rooms also mean more guests using on-site amenities such as restaurants, bars, spa services, and room service. Increased ancillary revenue from these services further bolsters the hotel’s overall financial health.

Hotels with consistently high occupancy rates are often perceived as more successful and desirable by potential guests. Positive word-of-mouth and online reviews from satisfied guests can attract even more visitors, leading to a positive feedback loop for future bookings.

High occupancy rates allow hoteliers to gather more data about their guests, enabling them to better understand their preferences, behaviour, and booking patterns. This information can be used to tailor marketing strategies and offerings, thus attracting more guests during the midweek.

Why Midweek Occupancy Rates Deserve Special Focus

The focus on midweek occupancy rates is crucial due to the characteristic fluctuations in demand that occur during the week. Tapping into the midweek market presents a tremendous opportunity for hoteliers to optimise their occupancy and revenue streams.

In the following sections, we will delve into actionable tips that hoteliers can implement to boost midweek occupancy rates effectively, ensuring a thriving and successful hotel business throughout the week.

Ways to improve your midweek occupancy rates

There are many ways you can boost your midweek occupancy rates, from tailored marketing to enticing packages and working closely with local businesses.

Targeted marketing

Target midweek travellers in your marketing

Target the corporate traveller segment by offering amenities and services tailored to their needs. Fast and reliable Wi-Fi, business centres with printing facilities, meeting rooms, and shuttle services to nearby business districts can make your hotel an appealing choice for professionals travelling during the week.

This isn’t just limited to business travellers though, think about how you could attract retirees looking for good deals. This could include early bird specials in your restaurant, partnering with coach trip companies and highlighting the attractions near your hotel that would interest an older audience.

As well as business travellers and retirees, you might also consider attendees of nearby trade shows, conferences, theatre shows and festivals. Placing adverts with the exhibition centres and theatres, or running certain deals with these providers, can boost your midweek occupancy.

Engaging in social media campaigns

Create captivating social media campaigns specifically targeting midweek travellers. Use stunning visuals, and user-generated content, and share testimonials from satisfied midweek guests to build excitement and encourage bookings.

You could also run a competition with a midweek break as a prize – while the winners won’t pay for their stay, you’ll gain exposure and increase the likelihood of other people booking midweek breaks.

Personalised email marketing

Leverage your customer database to send personalised email campaigns to your guests. Segment your email list based on past stay history or preferences and offer enticing midweek deals tailored to each segment. Encouraging repeat visits from previous midweek guests can be a lot more successful and efficient than attracting new visitors.

Loyalty and referral programmes

Implement a loyalty programme that rewards guests for midweek stays. Offer exclusive perks, such as room upgrades, welcome amenities, or bonus loyalty points, to encourage repeat midweek bookings. Additionally, incentivise guests to refer friends and family for midweek stays through referral programmes.

Packages and policies

Tailored midweek packages

Create exclusive midweek packages that cater to the needs and preferences of potential guests. While you can run a discount on midweek rooms, you could also try introducing specials and packages that include something extra for the same price, such as complimentary breakfast, spa treatments or local activity vouchers.

Flexible check-in/check-out policies

Flexibility in check-in and check-out times can be a game-changer for midweek travellers. Offer the option for early check-ins and late check-outs whenever possible, as it allows guests to maximise their stay, especially those with tight schedules or early morning/late-night flights.

Maximise your weekend visitors

Encourage your weekend guests to stay an extra night on either side of their trip when they book, for example offering a 10-20% discount for arriving on Thursday night instead of Friday night, or staying until Monday instead of Sunday so they can fully relax and enjoy the area or your hotel’s amenities.

Working with industry

Participate in industry events

Attend relevant industry events and trade shows to network with potential clients and corporate travel managers. Establishing strong connections within the business travel community can lead to increased midweek bookings through corporate partnerships.

Collaborate with local businesses

Forge partnerships with nearby businesses, such as event venues, conference centres, or local offices. Offer special rates and exclusive deals to attendees or employees, making your hotel the preferred choice for midweek stays.

You can also make contact with estate agents; people looking to move into the area may not have anywhere to stay and would like to spend some time exploring their potential new town.

Rent out your space

Invite businesses to use your conference rooms for networking events, product launches or other corporate gatherings; these events are often held during midweek evenings and attendees may prefer to spend the night at your hotel instead of driving home.

Off-peak events

Unique midweek events

Organise midweek events or workshops that align with your hotel’s theme and target audience. These could include cooking classes, wine tastings, art exhibitions, or wellness workshops. Such events can attract attendees who may choose to stay at your hotel for added convenience.

Highlight off-peak perks

Promote the advantages of midweek stays to your target audience. Emphasise the tranquillity and reduced crowds at nearby attractions, making it an ideal time to explore the area without the typical weekend rush.

How can Stewart Hindley help?

As specialists in hotel finance, we have been helping people get into the hospitality industry for over 15 years and can start you on your way to opening your own hotel. Get in touch with us today.