Mastering the Bottom Line: Financial Management for Hotel Department Managers

Whether your financial year starts in January or not, the focus at this time of the year is setting the business financial goals for 2024. Currently I’m busy working with hotel management teams to agree departmental budgets and KPIs for next year – a mix of reviewing previous performance, current financial metrics, ambition and a little bit of magic!

But do you know how to achieve your financial targets? Do you know your GP from your ADR? Or what your wage budget as a monetary value actually is versus your % budget? How about your cost of sales? Do you have a plan in place to manage your costs?

Hotel managers are expected to manage and train their teams, deliver exceptional customer experiences while increasing sales and managing costs to ensure the business is profitable. Easy, right!? Not always. In my experience most hotel managers don’t understand the difference between Gross and Net Sales and that VAT is actually 16.6% of gross sales and not 20%!

To often, hotel managers are expected to learn all about hospitality finance by osmosis or by self-learning, leaving teams confused about key financial acronyms, how they manage budgets or even how they are meant to complete daily financial tasks to ensure good accounting practises.

Here are some of my top tips to support hotel managers manage their financial responsibilities really well:

📊 Share key financial information – sales targets by department, cost of sales and wage KPIs and other key areas of focus. Transparency about financial information within a hospitality business, with the key people is vital – if we don’t know what we’re expected to achieve how can we measure success?

🔑 Accountants and General Managers should explain WHY we do what we do – cash balancing, voucher reconciliation, ledger management – that helps hotel managers understand the importance of accuracy

💷 Start with the basics; COS, GP, wage %, ADR, occupancy – explain each metric in simple terms.

📈 Demonstrate in really clear examples that if sales go down, so should the key costs – wages, cost of food and drinks and commission i.e. 28% of £80,000 is very different from 28% of £100,000

🏛️ Break down the big numbers into monthly and weekly targets so it is easier to work out what monetary cost is. For example, if I know my wage budget might be exceeded in January due to lower sales than expected, I know that I will make some savings in the busier periods throughout the year, ensuring I achieve the annual KPI

Finally my last word is that profitability is not a bad word. In my experience motivated and inspired hotel manager are committed to the overall successful performance of their properties and the owners. After all, while we’re a customer first industry we all love to achieve our common goal of financial success.

If you would like to give your hotel departmental managers the financial management skills to ensure improved financial performance in 2024, find out more about our training services here.