Efficient multi-year planning of hotel profitability

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Efficient multi-year planning of hotel profitability

April 14, 2021, In All news, Fairmas Blog

Easy profitability forecasting for up to 15 years with the new Long Range Planner

Summary:

The Long Range Planner integrated in FairPlanner enables easy multi-year planning based on flexibly selectable scenarios such as budget, forecast or what-if. Planning takes place in the hotel’s own profit and loss statement and simplifies the strategic financial and profitability forecast for the next 15 years.

The multi – planning: a strategic financial planning concept has had its day

Corona’s crisis has triggered a revision of processes and procedures. In all corporate areas, including strategic sales and cost planning for the next 15 years.

In the last 10 years, growth in the hotel industry was almost considered as a sure thing. More and more hotels were built, and as room capacities increased, so did the number of investors and operating companies, since the industry was seen as crisis-proof. A lot of money has been flowing into the hotel industry since the returns generated in the hotel industry reached or in some cases surpassed the level of other sectors of the economy. The willingness of institutional investors such as banks and other investors to provide financing was high. An additional guarantor of growth was the prospect of the non-stop flow of tourists from China, one of the most populous countries in the world. Only the consequences of so-called “Overtourism,” meaning too many tourists, were seen as a potential brake on growth. 

Corona brought an abrupt end to the growth years for the hotel industry and is currently impacting strategic financial planning requirements in the hotel industry in two ways:

  • Strategic risk assessment is gaining importance
  • Strategic financial planning must be flexible 

Multi-year planning is about risk assessment, investment planning and profitability forecasting. Since Corona, there has been a closer look. The viability assessment of investors, owners and banks is increasingly focused on the multi-year time frame.

At the same time, the pandemic has shown that strategic financial planning, like annual budget and cost planning, should also meet the requirements of agile management.  Keyword rolling forecast and what-if calculation: Multi-year planning must also be efficient, flexible and transparent. This requires optimized processes, automation and digitization as well as the use of software solutions based on hotel-specific standards.

Multi-year planning with the Long Range Planner: Efficient, flexible, transparent.

What could be more ideal than to expand the Hotel BI financial planning with the additional functionality of long-term planning or multi-year planning?

FairPlanner as a BI platform with integrated financial planning optimizes the financial planning process through automated data integration via interfaces. The revenue and cost planning is based on the hotel’s own profit and loss statement and complies with internationally recognized hotel standards.

The Long Range Planner can now be accessed from the FairPlanner menu. Alternatively, an existing scenario can be copied-in as a basis for the long-term planning in the first year.

The Long Range Planner is found easily in the menu of FairPlanner.

A wide variety of scenarios can be flexibly used as the basis for long-term planning of sales and costs. Whether it is the last forecast, the past year, or a what-if calculation. Adjustments and changes can be made easily and quickly in a familiar way, so that working with the Long Range Planner can be done routinely without the need for further training.

As with the annual planning, the calculation is made on the hotel’s own profit and loss account, and the set drivers are adopted.

The structure of the Long Range Planner corresponds to the hotel’s own profit and loss chart of accounts.

The values are displayed in the familiar and clear manner, colors make it easier to recognize changes quickly, and the reports can be exported with one click.

With the Long Range Planner, the level of detail and the planning type can also be freely selected. Thus, calculations can be made with absolute values or with annual, percentage changes.

Since all the necessary information is included and the user has access to the various planning details, long-term planning with the new module in FairPlanner is very transparent.

At the same time, the Long Range Planner does not take over liquidity planning. The Long Range Planner is the profitability forecast for the next 15 years. It compares the expected turnover with the expected costs. In the end, there is necessary information about the expected contribution margins and pre-tax profits in the long-term planning based on the hotel’s own profit and loss statement.

The benefit: Controlling, business analysis, company evaluation

The Long Range Planner is highly informative for investors, owners and institutional lenders alike.

  • Banks receive information about the long-term security of their loans.
  • Owners get an overview of the long-term income generation from their financial investment and the value growth for the coming years.
  • Hotel managers receive the necessary information for long-term decisions and thus the possibilities to influence them in time to achieve goals.

The time expenditure compared to a long-term plan created in Excel is significantly less with the Long Range Planner. All basic principles and standards, from the structure to the calculation rules and drivers used, are adopted automatically.

In addition, unlike in conventional Excel spreadsheets, work can be carried out simultaneously on the Long Range Planner – a definite benefit in the area of collaboration. Through the integration of Long Range Planner in FairPlanner, senior management can contribute their respective departmental expertise (according to the rights management). The cloud-based SaaS technology allows simultaneous editing, the comment function allows writing comments.

What will follow…

Some additions and enhancements to FairPlanner are already being planned or programmed. Due to the long-term contact with our customers, we are close to the daily workflow of the hotel’s own financial planning – with the best basis for dynamic process optimization overall levels – from daily revenue monitoring to rolling forecast to long-term planning up to 15 years to calculate profit and return.

And since FairPlanner is a cloud-based SaaS solution, our customers can simply sit back – FairPlanner feature enhancements arrive directly with the release, without any hassle.

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If you would like to learn more about Hotel BI solutions, we recommend you schedule an individual demo appointment. We will give you a comprehensive insight into FairPlanner and will be happy to answer any questions.