Navigating uncertainty requires business leaders to have effective budgeting, forecasting and planning to better understand markets today, compare alternatives and make the best strategic decisions. With the hospitality sector recovering from the depths of the COVID-19 pandemic at varying rates, companies are making technology investments to position themselves for future growth while conditions continue to change.
Implementing financial planning and analysis (FP&A) software, also known as a corporate performance management (CPM) solution, streamlines organizational decision-making by integrating real-time data from a variety of sources and enabling detailed planning and analysis.
FP&A tools help business leaders base their operational and financial decisions on current information, instead of relying on data from past reporting periods that may not reflect current market or company conditions.
The software generates revenue forecasts and budgets based on real-time factors such as occupancy, pricing and staffing. Importing data from different systems and properties allows management to obtain a unified view of local, regional or company-wide performance without having to reformat or consolidate data from different spreadsheets or reports.
For instance, cash-flow modeling features allow hospitality companies and property managers to prepare monthly or 13-week rolling projections to help them understand how much cash they have on hand, whether they have sufficient funds for planned investments, or whether they may need to obtain additional debt or capital for operations or investments.
In addition, FP&A software includes scenario-planning functionality that enables more effective what-if analysis than is possible with spreadsheets.
For hospitality companies, one of the most important factors in financial planning is projecting future occupancy rates for specific properties and dates. Occupancy has a direct effect on revenue and staffing needs, two of the most important factors in generating cash flow, funds available for investment and ultimately, profitability.
The capacity planning functionality within FP&A solutions helps companies optimize staffing. For example, an upcoming event near a given property, or increases in seasonal demand, will create a need for additional staffing. Capacity planning tools help you analyze whether the most cost-effective way to meet this demand is through hiring, outsourcing some functions, using temporary workers or a combination of staffing models.
In addition to staffing, projecting occupancy rates can help companies optimize energy use in their properties. By only renting rooms on specific floors during low-occupancy periods, for instance, you can reduce heating or air-conditioning costs on floors without occupied rooms.
The software also helps companies with properties in different locations optimize operations and staffing for each facility’s needs. A hotel in a coastal beach area will likely have higher occupancy and staffing in warmer weather than an urban location in a downtown business district (particularly if pandemic recovery rates continue to influence the return of employees to urban offices), for example.
FP&A tools can also help you compare and optimize capital spending alternatives. Currently most properties are investing in hygiene-related upgrades, for example, such as installing advanced filtration systems, touch-free surfaces and app-controlled room functionality. The software helps you understand the effects of these investments on operating cash flow.
Longer term, FP&A software provides insights into the potential return of major investments. For instance, a property may be considering whether replacing a lobby restaurant is likely to generate a greater return than replacing that restaurant with a spa. By analyzing costs and potential revenue, and factoring in fluctuations in occupancy rates, the company can understand its options and make the most effective decision.
Similarly, property managers can analyze different marketing investments to reach potential audiences most effectively.
FP&A tools also allow management, business unit leaders and the finance team to access and share the same information. This, in turn, allows them to consolidate data from different sources, reconcile reports and compare alternatives easily.
Having access to the same data reduces complexity and potential confusion. This access is increasingly important with the growing use of distributed teams who are managing properties in different locations.
In addition, providing real-time access to this data allows business unit leaders to react to changing conditions and emerging opportunities more rapidly than is possible if they are relying on historic performance data to make decisions.
