Updated 7 October 2026 · Reading time: 8 minutes
Why a budget by department, not a single total
Many hotel budgets are a single line: total revenue and total costs, perhaps split by nature as in the statutory accounts. A number like that tells you whether the year went well or badly, but not where or why.
With the USALI format the budget is built by department: rooms, food and beverage, other departments, then undistributed expenses and finally GOP. Each line has its own logic. Rooms revenue depends on occupancy and average rate. Food cost depends on covers. Energy depends on opening days and the season.
The practical benefit is one: the budget reads under the same rules as the actuals. Every month I compare the two columns line by line and see straight away which department is off. The format is explained in the USALI guide.
When to build it
The right moment depends on the property's calendar. The budget should be closed before the big decisions start: rates, agency contracts, seasonal hiring.
| Type of property | When to prepare the budget |
|---|---|
| Summer seasonal property (lake, seaside, campsite) | Between November and February, before opening. |
| Two-season mountain property | Twice: in autumn for the winter season, in spring for the summer season. |
| Year-round city hotel | In the fourth quarter, for the following year. |
In every case you need an owner: one person who gathers the assumptions, discusses them with the proprietors and signs off the final version.
The starting point and revenue
Start from last year's (or last season's) actuals restated in USALI and split by month. Without this base the budget is a guess with no reference point. All figures are entered net of VAT.
Rooms revenue follows a simple formula, month by month:
Rooms revenue = available rooms × open days × occupancy × ADR
If the property has very different customer groups (direct, OTA, tour operators, groups), it pays to estimate occupancy and ADR by segment: rates and commissions vary a lot from one channel to another.
An illustrative example for the month of July:
| Item (illustrative example) | Calculation | Result |
|---|---|---|
| Rooms available in the month | 40 rooms × 31 days | 1,240 |
| Rooms sold | 1,240 × 72% | 892.8 (about 893) |
| Rooms revenue, net of VAT | 892.8 × €145 | €129,456 |
| RevPAR | €129,456 ÷ 1,240 | €104.40 |
Other revenue is tied to volumes. Food and beverage is estimated per occupied room or per cover (breakfast, half board, a restaurant open to outside guests). Spa, parking, activities and miscellaneous income are estimated the same way, or as a monthly amount when they do not depend on guest numbers.
Departmental expenses, undistributed expenses and GOP
For each department I split costs into groups:
- Variable costs: they follow volumes. OTA commissions, laundry and guest amenities per occupied room; food and beverage cost of sales as a percentage of the department's revenue.
- Staff costs: estimated from planned hours and headcount, month by month. The 12th edition of USALI asks for full-time equivalent employees (FTEs) by department: planning FTEs in the budget means you can compare them with the actuals later.
- Other fixed departmental costs: rentals, subscriptions, service contracts.
Departmental revenue minus departmental expenses gives the departmental profit. Then come the undistributed expenses, estimated month by month: administrative and general, sales and marketing, maintenance, energy, water and waste, information and telecommunications systems. For energy I take last year's monthly consumption and apply the rates in the current contracts.
Total departmental profit minus undistributed expenses gives GOP. GOP divided by total revenue is the GOP margin. From the budget figures you can also calculate occupancy, ADR, RevPAR, TRevPAR, GOPPAR and CPOR: the formulas are in the KPI calculator.
From budget to forecast: reading variances
The budget is approved once. The forecast is updated: every month, or at least at mid-season, with actual figures for the closed months and the bookings already on hand for the months ahead. The budget stays as the reference; the forecast tells you where you are really heading.
Every variance breaks down into three effects: volume (more or fewer rooms sold), price (ADR different from plan) and cost (spending different from what that volume should have cost). An illustrative example for the rooms department:
| Item (illustrative example) | Calculation | Amount |
|---|---|---|
| Budgeted rooms revenue | 900 rooms sold × €145 | €130,500 |
| Actual rooms revenue | 850 rooms sold × €150 | €127,500 |
| Total revenue variance | €127,500 − €130,500 | −€3,000 |
| of which volume effect | (850 − 900) × €145 | −€7,250 |
| of which price effect | (€150 − €145) × 850 | +€4,250 |
| Budgeted rooms variable costs | 900 × €22 per room | €19,800 |
| Actual rooms variable costs | From the accounts | €20,400 |
| of which volume effect | (850 − 900) × €22 | −€1,100 (lower cost) |
| of which cost effect | €20,400 − (850 × €22) | +€1,700 (higher cost) |
Read this way, the month says three things: fewer rooms were sold, at a slightly higher rate, and the cost per occupied room rose from €22 to €24. These are three different problems, with three different people responsible.
Two-season properties and campsites
In mountain areas such as Valtellina and the Dolomites, many properties have a winter and a summer season, with different guests, rates and staff. It is best to treat them as two separate budgets within the same year:
- separate occupancy and ADR assumptions for winter and summer;
- seasonal staff planned for each season, with hiring dates;
- costs of the closed months (maintenance, insurance, permanent staff) shown separately, because both seasons have to carry them;
- a GOP for each season, as well as for the year.
Campsites follow the same principle, but pitches and rental units (bungalows, mobile homes, glamping) should be budgeted as separate departments: their rates, average length of stay and costs are very different. I cover this in the campsite guide.
The most common mistakes
- Budget = last year + x%: applying the same percentage to every line hides the real choices (rates, channels, staffing).
- No monthly split: an annual total cannot be compared with actuals until the year is over.
- No owner: if nobody signs off the assumptions, nobody answers for the variances.
- No monthly comparison: a budget left in a drawer does not help anyone decide.
- VAT-inclusive figures mixed with net figures: revenue and costs should always be entered net of VAT, as in the income statement.
The Excel template and where to start
The free template you can download from this page follows the steps above. The “Instructions” sheet explains how to fill it in. In the “Assumptions” sheet you enter rooms, opening days per month, occupancy, ADR per month, food and beverage revenue per occupied room, other revenue, departmental cost percentages, staff costs and undistributed expenses per month.
The “USALI Budget” sheet calculates, month by month, rooms, food and beverage and other revenue, departmental expenses and profit, undistributed expenses (administrative and general, sales and marketing, maintenance, energy, water and waste, IT), GOP and GOP margin. The KPI block shows occupancy, ADR, RevPAR, TRevPAR, GOPPAR and CPOR.
The template is a starting point. To link it to monthly actuals, to your property management system data and to an up-to-date forecast, the budget and forecast service is described on the Services page. The first meeting is free: on site if your property is in Lombardy, online via Microsoft Teams elsewhere. You can request it on the Contact page.
Source: HFTP, Uniform System of Accounts for the Lodging Industry, 12th Revised Edition (usali.hftp.org). The numerical examples are illustrative and do not refer to real properties.