Definition of Budget – 

A Budget is an approved document prepared annually to forecast the expected revenue, expenses and profits from operations. It is normally prepared before the beginning of the year and operational heads are required to follow the same as a guide in conducting the business.

Types of Budget – 

Depending upon the operations and size of the business, Budgets are prepared department wise with each department treated as a Profit Centre and responsible for achieving the target. Following is an example of Budget prepared Department wise-

1. Revenue Budget- Prepared by Marketing Department which forecasts expected revenue from-

• Room 
• Banqueting
• Restaurant
• In-Room Dining
• Revenue from MOD including Laundry, Travel desk to name a few.

This is further broken down to revenue outlet wise, Revenue from food sales, Beverage etc.

2. Expenses Budget- This is prepared by all departments like Marketing, Front Office, House Keeping, Engineering, Hr & Admin, Procurement, Finance etc.
3. Capital Budget- This is prepared separately towards the proposed expenditure of Capital Nature like Kitchen Equipment, Lift, Generator, etc. detailed analysis is required to be done including calculation of ROI and justification for incurring the expenditure. Capital Budgets are approved based on the availability of surplus funds or through loans if required. Hence considerable thought needs to go in before preparing Capital Budget.

Budget Process – 

Before the process of budget preparation begins, Finance Department circulates template to each and every department where plotting is one of last two years actual figures with a column for the forecast of expected figures for the current year. 

Consultations are held with each department by Finance Team explaining the figures and guidance given.

The budget needs to be prepared month-wise and consolidated for the year as a whole. Adequate care needs to be exercised in projecting Revenue/ Expenses so that forecast is justifiable and is capable of being achieved. Once the rough Budget is ready, it is vetted by the Finance Department before a presentation is made to the Management. Departmental heads need to take the responsibility for their budgets and justify their forecast. Taking into consideration business trends, it is better to be factual and conservative. Based on the consultations, the Budget may be revised and finalized for approval and implementation.

Purpose of Budget is achieved only if variance analysis is done every month with actual and discussed. Reasons for deviation need to be analyzed including shortfall if any, with concrete plans for achieving the target.  .  Keeping this in mind, businesses prepare what is called “Rolling Forecast” which is a version of budget suited to operations and can be revised, unlike Budget which cannot be unless circumstances warrant it. 

Properly prepared and implemented, Budget is a mirror to the business operations.

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Hotels enter contracts for a variety of services and procurement. A well structured and defined Contract is therefore essential to ensure smooth operations. Vendor Management on the other hand is so critical that one cannot exist without the other.

Need for Contract and Vendor Management – A hotel cannot hope to carry out all the activities by itself.  It must essentially depend on outside parties to help it procure materials and services. Once a hotel enters a contract for supply of materials or services, I can concentrate on running the operations efficiently with customer focus being its core area.  Simultaneously, attention must be given on Vendor Management including vendor assessment on regular basis. Vendor rating and performance helps in taking quick action to replace a vendor if required or ensure that a vendor takes corrective steps to improve his services.

Areas where Contract is required-

Procurement –

Most important from operational and cost point of view. Encompasses procurement of –

• Perishables
• Groceries
• Meat
• Beverages
• Guest Amenities and linen. 
• Capital Goods
• Services – Equally important from operational view point. Includes-

• Pest Control Services.
• Laundry Services.
• Hiring of Audio visual equipments
• Hiring of Cutlery & Crockery
• Hiring of event managers
• Hiring of Security agencies
• Hiring of  Cab services
• Annual Maintenance contracts
• Running of loyalty programs
• Garbage Contracts. 

Right Contract & Right Vendor Management –

As can be seen from the list, it is clear that almost the entire operations of the hotel depends on efficient management of contracts and vendors. By efficient, we mean uninterrupted supply of goods and services at the contracted rates including emergency requirements.  Hence it is f critical importance that due care and caution is exercised while selecting a vendor and executing the contract. Following guide lines must help in achieving this-

• Constitution of Purchase Committee is a siaquanon. No compromise on this. Committee is vested with the responsibility of ensuing that only contractors/ suppliers with right credentials and with good standing in the market are given the responsibility. It is also the committee’s responsibility to ensure that well rounded quotation and assessment policy is in place for each area and the proposal by procurement manager is discussed and scrutinized threadbare before signing off on a proposal. It is essential that the Committee consists of Procurement Head, CFO. GM, senior operations Manager. Other stakeholders are part of the proceedings concerning their department alone. 
• Contract must be well drafted containing all clauses explicitly including legal clauses so that dispute resolution is easy. 
• Efficient performance monitoring system covering all parameters is necessary. Data analysis can become a vital tool here where the vendor is assessed on all parameters. 
• Compromise cannot be resorted to since even a small misstep can have serious consequences leading to disruption and loss of valuable time. 

About the author – A Fellow of the Institute of Chartered Accountants of India with over 15 years of experience in hospitality industry at senior level. Has over 40 years of experience in total.

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Anyone interested in acquiring a business enterprise needs to conduct a thorough investigation related to the business proposed to be acquired covering all aspects. The crux of due diligence remains same as shown in the above chart though aspects to be covered vary depending on the type of industry.  In this discussion the focus is on hospitality industry. The pandemic situation has turned the business scenario for hotels upside down. Thanks to many businesses either shutting down operations permanently/ temporarily there has emerged a whole set of companies wanting to exit business and find a buyer. This is more pronounced in Hotel Industry which depended heavily on corporate houses for its business. Many hotels are thus put up for sale. It is here that effective investigation and due diligence assumes significance.  

Steps for Due Diligence –

First and foremost party proposing to enter into any sort of agreement for due diligence need to execute a non disclosure agreement (information receiving party) with the organization where due diligence is conducted. Such agreement broadly covers-

1. All information received will be kept confidential. No documents will be copied, shared, or disclosed to any one without the prior permission of disclosing party.
2. Access to confidential information will be restricted to those of the employees or officers who are supposed to know the same.

Due Diligence Process & Types of Due diligence –

Due Diligence process related to hotel will cover a host of items and need discussion in two parts. In the first part, following areas are covered.  

Legal Due Diligence –

 Covers Compliance by the hotel of all legal aspects like-

1. License required to run the operations like Food License/ Liquor License/ 
2. Liquor license for special events 
3. License for running the hotel
4. Rating certificate issued by the Ministry of Tourism
5. Operating License
6. Approval from Fire Department
7. Public Liability Insurance
8. Compliance with all applicable laws including Labor Laws and filing of Returns

Tax Due Diligence –

Very important element in Due Diligence Process. Nonpayment/ Delayed payment of statutory dues can result in heavy penalties including imprisonment. It also damages the reputation of the Hotel. Any slackness in following the Due Diligence Process relating to Tax can have serious implications. Ensure that the Hotel has availed all tax benefits available. 

Operational Due Diligence –

This covers the following area-

1. Due diligence of operational aspects will help in establishing operational efficiency including wastage in operations like, Food Wastage, inefficient use of lighting, power, water, lack of proper control in procurement which may result in poor quality, delay in deliveries, poor quality etc. Due Diligence must cover audit of each area to throw deficiencies if any in operations. 

Conclusion –

Properly planned and executed due diligence is the key to successful conclusion for any business deal. 

Author – C A P. G. Subramanian is Principal Consultant with Kratos Hospitality and has over 15 years of experience in hospitality industry. 

The post Science Of Due Diligence – Consultant’s Perspective Part-1 appeared first on Kratos Hospitality.

Hotels, especially large ones, sometimes need special assistance to be able to pull of some of these more complicated hotel marketing strategies. They need help in implementing things like revenue management, guest marketing strategies, and even hospitality law. Kratos Hospitality Consultants in India help hoteliers to improve their businesses through years of experience in the hotel industry. Some of the benefits their services can include:

Revenue Management

Every owner of a hotel should know how to collect taxes from their guests. Yet, for many, it may be an intimidating task. There are several technical issues that can arise, which can complicate matters. On the other hand, an experienced hotel consultant has the experience to handle all technical issues, thus simplifying the revenue collection from guests. They can also make sure that there is a constant flow of guests into the hotel so as to avoid any sort of revenue leakage.

Guest Marketing

Many hotel consultants deal with marketing strategies and guest attraction. They are well-versed in the latest strategies used by hoteliers to attract more customers. This can help increase the number of guests in the hotel and turn them into regular customers. These consultants can help in creating events for patrons and inviting them to social networking sites such as Facebook and Twitter.

Higher ROI

Another advantage of having a hotel consultant on-board is the higher ROI that can be gained. This is because they know how to convert visitors into customers. Through their marketing strategy, they can attract customers from other establishments in the area. Through this way, they can gain a higher ROI than the competition. They can improve their customer service, increase their revenues and help the hospitality industry grow. There are several advantages that come with hiring the services of hotel consultants, which you should consider when looking for a capable firm to handle your business.

Hotel consultants offer better revenue management

Just like any other professional, hoteliers need to monitor their costs and accounts on a regular basis. The number of rooms that are being rented daily, the average occupancy rate and the average sale price are just some of the data that a hotelier needs to track. Without a competent consultant, tracking these accounts can become tedious and complicated, which makes it difficult for the hotelier to achieve a good profit margin. When employing a hotel consultant, the service provider uses advanced software and the best practices for ensuring that the numbers are all accurate and can bring about positive results.

Expertise from the technical support

As mentioned earlier, technical support from a consultant can be very helpful in improving the operations of every hotelier. Through the help of consultants, the technical issues that arise during the day can easily be addressed. They can also address issues that occur regularly and can give advice and recommendations to address the issues that may occur more frequently. Because technical issues can be very complex, it is best to have someone from the hotel operations consulting firm to look at the operations of the hotel to ensure that everything is running smoothly.

A changing market

Every market has a different trend in its guest habits, preferences and demands. A change in the market can affect every aspect of the business – from the quality and quantity of services provided to the price and payment structure. This can have a great impact on the operational strategy and the operational plans. It is important that you hire an experienced hotel consultant firm so that you can adjust your operational strategy depending on the changing market trends. To have an effective and efficient guest experience, you should always have an operational strategy that is adjusted according to the changing market needs of your guests.

If you are a hotel owner or manager, it’s critical to hire an expert consultant for your hotel operations. An experienced hospitality consultant in India will have the advice and strategies to help you increase your hotel revenue. Contact Kratos Hospitality and let’s dive into this opportunity for growth.

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The challenges in the hospitality industry consist of a shortage of skilled labour, inability to adapt, insufficient marketing, difficulty to innovate, and insufficient funds. These challenges are increasing competition in the sector; increasing the need for skilled labour; and decreasing profitability. As of now, there is still insufficient capital in this industry. There are many challenges in hospitality to overcome in the hospitality industry.

Managing employees in the hospitality industry are difficult. Many hotels and restaurants have staff but there are not enough people to manage them. A strategic partnership with well-reputed hotel consultants like Kratos Hospitality can help you make your business easier to manage while the owner can focus on the profits.

Managing employees in the hospitality industry is very hard. Hotels and restaurants have many different responsibilities to handle. Each of these responsibilities requires time and effort. Managing hotels and restaurants are similar to managing any other business. The only difference is the scale and the complexity.

Managing technology in the hospitality industry is very difficult. Many hotels and restaurants are now using technology systems to aid them in managing. Technology systems are used mainly to provide information to the management about the daily operations. There are also software applications that aid in the management of stock. Technology systems used by hotels and restaurants to manage include barcode scanning, voice recognition, and web based accounting.

The biggest challenge faced by the hospitality industry is improving customer service. Customer service is considered as one of the main factors in attracting new customers in the hotel industry. Therefore, it was necessary for hotel consultants and other staff to conduct training sessions for the employees to improve their skills in customer service.

Online booking systems are the latest advancement in managing technology in the hospitality industry. The software used in such systems enables the hotel industry to use online applications to perform a variety of tasks. For instance, a client who plans to stay in a specific hotel can check the availability of a room number through the website. Another feature of such an application is that a client can book his or her reservation by simply logging onto the website and making the payment. These applications make it easier for hotels and other hospitality businesses to serve the customers better.

Another major challenge the hospitality industry must address is improving its ability to manage and distribute products. A large part of the hospitality industry’s profits come from tourism, which means improving its distribution channels to ensure that there is a constant flow of tourists. Tourism is one of the fastest-growing industries in the world and therefore improving its distribution channels will help improve its profit margin. Some of the distribution channels in which the hospitality industry must focus include tourism management, tour and travel, and leisure and entertainment. The improvement of these distribution channels will help increase profitability.

One of the challenges in the hospitality industry is increasing its online presence. To do this, hotels should look at improving their website by improving their site architecture, including the use of open source applications and integrating e-commerce functionality with their core business. The integration of pos systems used in hotels will also help increase online sales and facilitate the interaction of customers with the hotel. Hotel websites should also include travel information, such as hotel reviews and tips for travellers, map information and reservation status. Many hotels have successfully integrated technology systems used in hospitality to allow guests to make their reservations through an automated website. Many hotels are now offering online access through their websites, allowing guests to make their bookings without visiting the hotel.

The post Challenges And Managing Technology Systems Used in the Hospitality Industry appeared first on Kratos Hospitality.

1. These people have a lot of experience in their respective fields.
2. They are also working in different hotels, and they know exactly how everything works in those hotels.
3. Most of them are also capable of providing their reports and recommendations to their clients in the best possible way.

On the other hand, it would be impossible to find a better source of information than their existing customers.

As far as the hospitality industry is concerned, India is the largest and the developed country. It is home to people from all over the world. So it naturally follows that there will be a considerable amount of hotels. The people from this country have a comprehensive knowledge of all the hotels in India, and the best part is that many of them are working with the best hotels in India. Hence, the demand for hospitality consultants has risen, and the competition between the various companies is quite challenging.

The number of hotels is increasing daily. At present, there are about 250 different types of hotels. All these hotels employ hospitality consultants from various companies. Hence, if you want to start a hotel, then it is better if you hire the services of hospitality consultants in India from an experienced and reliable company. This will help you manage your hospitality business properly without having to worry about anything.

When you talk about the various kinds of services being provided by a consultant, then the first thing that strikes your mind is the cost factor. But the cost is not the only thing that you need to consider. You should also make sure that a consultant’s services will be useful for your hotel. The consultant should help you provide the best quality of service. This is the reason why you need to make sure that the cost factor is not a barrier.

Hospitality consultants will provide you with the services like budget management, guest services, reservations, housekeeping and even the management of the amenities inside the hospitality. Thus, if you think that you do not have the knowledge or experience, it is better to leave it to the professionals. The hospitality should not have any problem in providing the services required by the guest. There are many hotels that have received complaints from the guests. If you take help from a good consultant, then this problem can be avoided completely.

Hospitality consultants in India provide many benefits for the hospitality industry. They know the inner workings of the hotel industry and know what all needs to be done to make the guests satisfied. They will definitely increase the number of guests at your hospitality establishment.

Hotel consultants offer you a good chance to expand your hospitality business in the country. Many factors are required for starting a hospitality venture. You should be able to provide the best quality service. The industry is growing tremendously, and the demand for hospitality rooms is always high. The service provided by the consultants in India is world-class and you do not need to worry about the quality.

However, the biggest problem faced by most of the small and medium-sized hotels in India is the lack of adequate knowledge about the industry. They do not have the necessary budgets to hire the necessary personnel and the infrastructure to provide the needed services. The best option to resolve this problem is to hire the services of a hospitality consultant who has sufficient knowledge about the market, the competition and the various aspects of the hospitality industry. With the help of hospitality consultants in India, you can expand your hospitality services to meet your guest’s expectations.

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