Review budget before making cuts for 2009

It's time to challenge the 2009 budget assumptions. 2008 has been disappointing and 2009 will be softer. Want to be sure the fat is cut out of the budget in 2009? Here is our advice.

2009 budgets likely will reflect declining optimism by managers. Don't accept budgets until you go through every assumption. Challenge corporate guidance; it's instructive, not gospel. Participate in the entire budgeting process and insist on a brainstorming session on revenue enhancement and cost containment; there are solutions to revenue shortfalls and there is room to cut expenses.

Are budget preparers tactical or strategic? Strategic planning establishes the road map for long-term goals. Tactics are needed to deal with market fluctuations and allow you to live to fight another day. Some managers are strictly tactical and can't think beyond daily operations, some are purely strategic and don't understand profit motivation, but both need owners' input.

Review the assumptions on pricing, the detailed mix of demand and the sources of business. Review historical room night production from all sources and develop maximization strategies. Review external reports and measurements. Compare your performance and insist on a plan to gain market share or attract more profitable customers. Read online reviews and develop a strategy to improve your reputation if necessary.

Ask early and often "Why?" and "Is that really necessary?" Challenge labor and review fixed-variable positions, staffing guides and wage rates. Consolidate positions like administrative assistants and look at outsourcing opportunities.

Review marketing plans and test assumptions; is the plan backed with tactics, action steps, costs and a calendar? Review assumptions in the sales and marketing budget, but don't make cuts unless a position is definitely unnecessary. Review detail on advertising, promotion and public relations; does it drive your occupancy or is it corporate positioning? Review your website and be sure it's user friendly and optimized; consider a pay-per-click strategy. Review your Internet strategy; there may be an opportunity to add business. If the property is experiencing difficulty, ask the brand to develop a property-specific marketing plan and assist in funding it.

Challenge capital expense and labor dollars because of brand standards; minimally tell the brand you'll do it when all the brand-owned hotels do it. Require return on investment analysis on all capital requests and disapprove anything not absolutely necessary.

Review days and hours of operations for revenue departments and verify that management has a plan to adjust operating hours to demand. Challenge the status quo in all departments and assume it may be time for a change in operating philosophy.

A budget review is the first step. You need to have procedures in place to compare actual results to budget assumptions. The bottom line is in the challenged year ahead, aggressive budgeting and rigorous follow-up may mean survival and profitability.

hmm@questex.com

Thomas F. Morone is a member of the International Society of Hospitality Consultants ( ishc.com|~ ) and principal of Warnick + Co. LLC of Los Angeles. Contact him at tmorone@warnickco.com.