Hotel business plans: testing the commercial assumptions

A hotel business plan can add up in Excel and still be fragile in practice. The market looks promising, the refurbishment is budgeted and the projected average daily rate appears achievable. What remains to be established is how the hotel will generate the sales in the plan.

I connect revenue assumptions with decisions about the product, marketing and sales. An ambition needs identifiable sources of demand, reasons for guests to choose the hotel and an organisation capable of delivering them.

Break down the expected demand

An annual occupancy rate can conceal very different trading patterns. I look at the periods to protect, those to develop and the guest segments that could support them. Growth from corporate accounts, groups or individual travellers involves different sales activities and lead times.

For each significant source of demand, the plan needs to identify the offer, the target markets and the commercial work required. A segment in a spreadsheet is not yet a portfolio of customers.

Connect the rate with what the guest will actually buy

The projected rate depends on market comparisons, but also on the preference the hotel expects to create. Location, breakfast, atmosphere, reputation and value for money can all influence the choice. Their value depends on the guest and the purpose of the stay.

If the plan assumes a move upmarket, I look for what will make that change visible before booking and tangible during the stay. A refurbishment budget does not describe the whole transformation. Services, skills, images and information also determine whether guests can understand the offer.

Align the sales plan with the ability to deliver

An offer must be available when the plan expects to sell it. Building work, recruitment, training, distribution and prospecting do not always progress at the same pace. The commercial timetable needs to reflect these dependencies and booking lead times.

I also distinguish between having tools and using them. Who follows up priority accounts? Who adjusts the offers? Who makes a decision when several departments pass it between them? These responsibilities can determine whether demand turns into sales.

Test the deviations that would change a decision

Finally, I test the plan against a few concrete deviations: a delayed opening, a segment that takes longer to develop or an achieved rate below the assumption. The purpose is to establish what action would then be needed, with which resources and by when.

OTA commissions and direct sales costs complete this assessment. They help explain the economics of the sales, while keeping revenue and acquisition costs distinct.

The business plan becomes a framework for decisions: commercial assumptions are explicit, actions have an owner and the timetable can be monitored. This is how I approach the development of the hotel's top line.

Preparing an acquisition, an opening or a repositioning? Explore my hotel consulting assignments.