Budget Season: Understanding Revenue

Dimitris Mittas, COO, Global Asset Solutions and David Ordoñez, hotel asset manager, Global

Asset Solutions, address the importance of productivity in budget preparation

Budget season is fast approaching, bringing with it the annual tension between hope, optimism, and hard reality. Rising costs and sustained margin pressure continue to challenge the hotel sector, pushing asset managers to dig deeper for strategies that truly impact profitability. In our previous articles on budgeting — available at Global Asset Solutions News — we explored several dimensions of building stronger budgets. This year, our objective goes beyond costs— we are placing a renewed emphasis on top-line performance as well as cost control and productivity improvements. A vital part of this shift involves integrating the Revenue Generation Index (RGI) into the budgeting and planning process more strategically and deliberately.

Strengthening Revenue Strategy:

Setting and Using RGI Targets in Budget Planning.

From Segmentation to Competitiveness: Rethinking the Budget Process

Traditionally, hotels build their annual forecasts by reviewing past performance, factoring in one- off events from the current or upcoming year, and accounting for business already on the books (BOTB). While this process provides a foundation, it often neglects a crucial element: competitive performance.

Despite regular conversations about market share and RGI throughout the year, competition is rarely integrated into the budgeting phase in a meaningful way. As a result, the budget becomes an inward-looking exercise, missing the opportunity to set aspirational yet realistic benchmarks against the competitive set.

Making RGI a Core Budget Metric

To shift from reactive to strategic revenue management, we now require that all hotels include budgeted monthly RGI targets as part of their annual budget submission. This initiative is part of a broader push for accountability, transparency, and commercial focus.

Establishing a clear RGI target offers multiple benefits:

• It provides a benchmark for performance evaluation throughout the year.

• It ensures alignment with the hotel’s overall revenue and market positioning strategy.

• It requires the submission of supporting action plans, turning the budget into a plan of action rather than a static forecast.

By budgeting the RGI monthly — and not just top-line revenues — we ensure that properties

measure themselves not only against their own history, but also against the performance of the competitive set.

The Role of the Revenue Manager

An experienced Revenue Manager, who monitors market trends, maintains regular contact with peers in other hotels, and understands the dynamics of the comp set, is well-positioned to forecast a realistic and competitive RGI. Through their market insight and data analysis, they can:

• Anticipate shifts in demand and pricing strategies.

• Identify growth opportunities or potential threats.

• Set ambitious, yet achievable targets that reflect both internal capabilities and external

realities.

Their ability to interpret market evolution throughout the year is essential to producing an RGI that is not only informed but actionable — turning market knowledge into strategic advantage.

Linking RGI to Strategic Priorities: ADR, ARI, and Market Leadership

RGI is more than just a metric — it reflects how well a hotel is performing relative to its

competition. A key component of RGI is the Average Rate Index (ARI), which shows whether a hotel is outperforming the comp set in terms of rate (ADR).

By setting a strong RGI target, the hotel signals an intention not only to grow occupancy or revenue in isolation, but to optimize rate performance, aiming for a better ARI and stronger positioning within the market.

This becomes even more strategic when we consider the potential to grow RGI above 100 —

surpassing the comp set and becoming a market leader. Setting this as a budgeted target:

• Encourages the team to push beyond historical performance.

• Helps unify commercial efforts around shared revenue goals.

• Elevates the hotel & ambition to outperform, not just participate in, the market.

Aligning the Team Around RGI Targets

Integrating achievable RGI into the budget process is not just a financial decision — it is a

leadership and team alignment tool. By clearly communicating RGI goals, management sets

performance expectations across departments, including Sales, Marketing, Distribution, and

Operations.

Everyone becomes aligned around a shared realistic goal: gaining market share and outperforming the competition. The RGI serves as a common language, helping teams understand how their actions contribute to broader business success.

Beyond revenue, one of the most powerful levers in building a realistic and actionable budget is productivity. Managed effectively, it turns budgeting from a numbers exercise into a strategy for measurable performance improvement. In our next article, we take a closer look at how disciplined productivity analysis can protect margins and strengthen results.

In our next article, we take.... https://www.globalassetsolutions.com/budget-season-understanding-costs-and-productivity