Accommodation Operation

ACCOMMODATION OPERATION
BHM15504
BUDGET AND BUDGETARY CONTROL
SUBMITTED BY- SUBMITTED TO-

PIYUSH AGARWAL MR. YATENDRA KUMAR
AKASH PATYANAK VICE PRINCIPAL
B.SC.(HM) 3RD YEAR
CONTENT
INTRODUCTION
DEFINITION
TYPE OF BUDGET
BUDGET PROCESS
PREPARATION OF BUDGET
PREPARATION OF OPERATING BUDGET
HOTEL INCOME STATEMENT
BUDGET REPORTS
BUDGET EXPENSES
INTRODUCTION:-
• Since housekeeping is not a revenue-generating
department, the executive housekeeper’s primary
responsibility in achieving the property’s financial goals is
to control the department’s expenses. In addition to
salaries and wages, inventoried items are a key area for
the executive housekeeper’s exercise of cost control
measure.
• Budget is one of the main planning activities for an
executive house-keeper. It is the process by which based
on actual performance of establishment in the past
estimates of expenditure, & receipts are made &
adjusted for forecasting future outcome.
DEFINITION:-
• A budget may be defined as plan which projects both the
revenue the hotel anticipates during the period covered
by the budget & the expenses require to generate the
anticipated revenue.
TYPES OF BUDGET:-
Two types of budgets are used in managing a hotel’s financial
resources: -
1. Capital budget
2. Operating budget
Capital budget:-
It plans for the expenditure of company assets for costly items.
Typically, these items are not used up in the normal course of
operations; instead they have a lifespan that exceeds a single
year. E.g., furniture, fixtures, equipment, etc. In addition major
initial purchases of recycled inventoried items (linen, towels,
uniforms, etc) may fall under capital budget as they have a
relatively long useful life.
Operating budget:-
It forecasts revenues and expenses associated with the routine
operations of the hotel during a certain period. Operating
expenditures are those costs a hotel incurs in order to generate
revenue in the normal course of doing business.
SOME POINTS KEEP IN MIND AT THE TIME OF
PREPARATION OF BUDGET BY THE EXECUTIVE
HOUSEKEEPER:-
• A budget should not be prepared at the last minute. Ideally the house-
keeper should have a list place in a convenient spot, in the office, & makes
notes through out the year, for improvement.
• Discussion should have previously taken, place, between the general
manager, & the other department heads in order that they are aware of
future company objectives which may be reflected.
• Past records & previous budget may be used as a basis for the new one,
taking into the account of inflation percentage..
• The housekeeper must also consider any change in the companies
purchasing policy.
• He should also be aware of new technology & better product which are
appeared in the market.
BUDGET PROCESS:-
• A budget is a plan. It projects both the revenues the hotel anticipates during the
period covered by the budget and the expenses required to generate the
anticipated revenues. The executive housekeeper’s responsibility in the budgetary
process is two-fold.
• First, he/she is involved in the planning process that leads to the formulation of
the budget (what expenses the housekeeping department will incur in light of
forecasted room sales).
• Second, since the budget represents an operational plan for the year, the
executive housekeeper ensures that the department’s actual expenses are in line
with budgeted costs and with actual occupancy level. Budget may need to be
adjusted in light of unforeseen or changing circumstances. As a plan, a budget is
also a guide. It provides the managers with standards by which they can measure
the success of the operations. By comparing actual expenses with allocated
amounts, the executive housekeeper can track the efficiency of housekeeping
operations and monitor the department’s ability to control it’s expenses within
the prescribed limits The operating budget outlines the financial goal of the hotel.
It relates operational costs to the year’s expected revenues. The yearly operating
budget is broken down into budgets for each month of the fiscal year.
PREPARATION OF BUDGET:-
• IN A SMALLER SCALE HOTEL
• IN A LARGER SCALE HOTEL

SMALL HOTELS:-
• In a smaller scale hotel or facility usually there is Front Office,
Housekeeping and Maintenance and the expenses are
controlled mainly by the Owner through the General Manager.
They were the key decision maker in preparing the yearly
budget with the assistance of an accountant or accounting
firm. The budgeted amount needed to operate for the whole
year is based on the expenses incurred on the previous years
and other related occasions that will affect the preparation of
budget for the coming year.
LARGE HOTELS:-
• In a larger scale hotel, expenses can be very complicated since
the operation varies from the departments created for the
smooth operation of the hotel. Some international hotels, the
budget is being prepared by each department head through
the assistance of the Financial Controller and General
Manager then submitted to the owner/ corporation for
approval. Once sanctioned, each department head is then
held accountable in ensuring that the budget allocated is
monitored and controlled based on the occupancy
percentage. The General Manager gets a copy of the results of
the budget every end of the month and discusses them with
the department head.
Example of departments in a larger scale hotel are: Administration, Front Office,
Housekeeping, Laundry, Engineering, Food & Beverage, Kitchen, Finance, Human
Resources, Recreation and any other departments created to suit the function and smooth
operation of the hotel. Each of these departments have sub-departments such as Front
Office with Reservation and Bell Service/ Concierge; Housekeeping with Laundry, Uniform,
Linen, Tailoring, Flower shop, Gardening and Landscaping, Upholstery shop (the latter can
be assigned to Engineering as well); Engineering with Carpentry, Masonry, Electrical,
Mechanical, Computer Technician etc.; Food & Beverage with Banqueting and Outside
Catering; Kitchen with Pastry shop; Finance with Purchasing, Receiving & Storage;
Recreation with Swimming Pool, Golf Course, Tennis Courts, Spa etc.; Human Resources
with Training and Clinic.
HOTEL INCOME STATEMENT:-
• The statement of income provides important financial information about
the results of hotel operations (actual expenses as well as the net income)
for a given period, which maybe monthly, quarterly or more but within a
business year.
• Separate departmental income statements prepared by each revenue
center presents more detailed information. Housekeeping is related to the
rooms’ division income statement. The executive housekeeper is directly
concerned with some items listed in the expense section. They are: -
• Salaries and wages

• Contract cleaning
• Laundry and dry-cleaning
• Linen
• Operating supplies
• Uniforms
In the budget planning process the room manager will solicit information from the
executive housekeeper concerning the expense category falling under
housekeeping department’s area of responsibility. Expected expenses are assessed
as a percentage of the revenue forecasted for room sales. This percentage is
standardized in relation to generated revenues.
Budget reports
Based on monthly income statements, a room’s division budget report is prepared,

which shows the variances between budgeted expenses and actual expenses.
When the actual revenue exceeds the budget, or budgeted expenses exceeds
actual, it is a favorable variance. When the budgeted revenue exceeds the actual or
the actual expenses exceed the budgeted ones, it is an unfavorable variance.
Percentage variances are determined by dividing the variance by the budgeted
amount.
BUDGET REPORTS:-
• Based on monthly income statements, a room’s division

budget report is prepared, which shows the variances
between budgeted expenses and actual expenses. When the
actual revenue exceeds the budget, or budgeted expenses
exceeds actual, it is a favorable variance. When the budgeted
revenue exceeds the actual or the actual expenses exceed the
budgeted ones, it is an unfavorable variance. Percentage
variances are determined by dividing the variance by the
budgeted amount.
PREPARING THE OPERATING
BUDGET
• The process of planning an annual operating budget involves
gathering information, formulating initial plans, reconsidering
goals and objectives and making final adjustments. Operating
budgets are typically prepared for each fiscal year. Monthly
operating budgets are also prepared to enable managers to
clearly outline seasonal variations in expected revenues and
corresponding expenses.
BUDGET EXPENSES:-
• Since the expense levels in the entire expense category on the

departmental income statement vary with occupancy, everything in
the operating budget depends upon how accurately occupancy
levels are forecasted. The rooms’ manager gives the executive
housekeeper the yearly forecast of occupancy levels broken down
into monthly budget periods. Using historical data along with input
from hotel’s marketing department, the rooms’ manager will
provide an occupancy percentage for each budgeted period. The
executive housekeeper can predict a certain level of expense when
he/she knows
• • Cost per occupied room for each category of expense

• • Number of occupied rooms forecasted for each budget period
WHY DO WE NEED TO PREPARE
A BUDGET?
• To determine and clearly list our objectives
• To provide us with a guide to achieving our objectives
• To serve as a basis for evaluating performance

Preparing a Budget for Housekeeping • Different Types of Budgets • Zero-based
budgeting • Incremental budgeting 4
Preparing a Budget for Housekeeping • Capital Budget • Operating Budget • Fixed Cost •
Variable Cost • Operating Equipment 5
Fixed Costs and Variable Costs • Fixed cost A cost or expense that will not change as a
result of changes in revenue or level of business • Variable cost A cost that changes in
direct proportion to the revenue or volume of business
Fixed Costs and Variable CostsPayroll • Payroll is an example of fixed and variable costs
(the largest cost we control) • Depending on Hotel Occ % this needs to be budgeted to
flex. • However this is one of the costs that needs to be monitored on a day by day basis.
Guest & Operating Supplies • Cost of consumable supplies • Daily • Weekly • Monthly 8
Operating Equipment • How much you will use during a period? • How much is the cost
to order? • How much is the cost to carry the items in inventory?
The Impact of Inventory on Cash The cost of: • The item • Storing the item • Money
TEAMWORK! • Financial Success is about teamwork. • It is EVERYONE’S responsibility to
ensure that the hotel is as profitable as possible and, therefore, meets its financial targets!
THANK YOU

Accommodation Operation

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ACCOMMODATION OPERATION

BUDGET AND BUDGETARY CONTROL

SUBMITTED BY- SUBMITTED TO-

• IN A LARGER SCALE HOTEL

• Salaries and wages

Based on monthly income statements, a room’s division budget report is prepared,

• Based on monthly income statements, a room’s division

• Since the expense levels in the entire expense category on the

• • Cost per occupied room for each category of expense

• To provide us with a guide to achieving our objectives

• To serve as a basis for evaluating performance

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