Current Scenario:

It is time to have the hotel budget approval; a strategic meeting will be happening where the departments of operations, sales & marketing, and Finance will have the primary objective to approve the Budget for the following year.

Some facts after the first Budget version built:

Operations There is a need to hire three more housekeeping, as the occupancy rate and average guest per room have increased significantly. The guests have complained about the amenities, such as soap, shampoo, and hair conditioner offered. Thus, it should be considered to purchase other brands with higher quality.

The bath towels are old. Also, 50% of the rooms or 200 rooms should have their carpet changed.

The Director of Accommodation is requesting approval to hire one more front desk manager, due to the fact the guests have complained about front desk services during the checkout, where it has been taking more time than the standard requires.

Sales & Marketing After research made, the team figured out there will be three new big hotels opening by June next year, both combined will have 700 modern rooms. The current annual ADR in the competitive set is CAD 270. In contrast, the new competitors have said they will enter the market, offering CAD 179 as a Soft Opening rate, as they want to capture new guests as soon as possible.

Considering the scenario mentioned above, the sales team presented a new budget with a decrease in the occupancy rate of 10pp, from 70% to 60%; additionally, the ADR also dropped from CAD 250 to CAD 230; therefore, the impact on room revenues projected will be significant. (Hotel has 400 rooms).

Moreover, the events and banquets revenues had a 30% decrease for the next year budget, or CAD 300,000.

The sales team is requesting two more senior professionals to be hired, as they are concerned about the three new competitors which are about to be operating in the market.

Finance Team

It was made a Budget data analysis, and the main concern is that the GOP has decreased by CAD 7,000,000 year over year (YOY). Mainly because of revenue-generating-YOY fell, payroll increased, and variable costs also increased due to OTAs commission and average per guest/ room that rose from 1.3 to 2.1.

The finance team doesnt approve the renovations and assumptions suggested by Operations and Sales & Marketing departments, as the Director of Finance has said Net Cash Flow would be detrimental for five months during the next year; if these budget figures are approved.

Directions provided to build your Summary Report:

If you were the General Manager, what solutions and actions would you suggest for each department mentioned above? Please write down a Budget Summary Report to be reported to the board of investors, including the current scenario and your suggestion to manage the situation. Please note you are allowed to change all scenarios above to develop your Budget Summary Report (below), making your solid assumptions in the document.

Please develop your Budget SUMMARY REPORT.