Whether you’re rebranding, renovating, or building from scratch, budgeting is one of the most important tasks during the early stages of hospitality project management. Funding is essential to set the resources in motion and can be one of the most daunting tasks when starting a hotel renovation.
Your property’s project budget is the estimated total expenses required to complete the project, considering both major and miscellaneous costs along the way. But how do you create a comprehensive budget? Let’s walk through the process.
- Identify project scope
The hotel renovation project scope is the key to making accurate estimates. Before establishing project costs, define and master your scope, timelines, and deliverables.
A well-defined project scope means better project planning. For example, a larger renovation with a shorter deadline means you will likely need more staffing and other resources at the ready. By understanding the size and other details of the project, you can define the equipment and resources required more easily. - Use historical data
Chances are that hotel renovations or builds like yours in scope have been done before. Take the time to look for these projects and their budgets to help you develop a proper estimate from the start. - Define resources
Now that you’ve figured out the project scope, it’s time to gather the different budget pieces. This means determining the resources required.
Most projects have four essential items: equipment, staffing, training, sales, and marketing. These items will vary depending on your specific project and it’s important to note that there will likely be other miscellaneous resources to be added as well.
Here is a quick overview of the four main factors:
- Equipment: For construction projects, equipment will largely refer to machineries, such as bulldozers or excavators. For software development projects, however, it could mean software tools. Be sure to note all necessary equipment to avoid underestimating costs.
- Staffing: Often the most expensive cost and one you should consider first when defining your resources, is staffing. Does your project need additional team members? If so, how many? Think in terms of payment when adding this to your budget. For example, hourly employees require the project length to be listed in hours.
- Training: It is common for an organizational change to occur when a new project is undertaken. This means training is required. The more extensive the change, the more time and cost should be put into this piece.
- Sales and Marketing: Although not always needed, determine ahead of time if you will be doing any marketing around this project. If you are rebranding your resort, will you be sharing the changes and new messaging with the public in advance? If you’re building a brand-new hotel, will you build excitement around a grand opening? If yes, don’t forget to budget for it.
- Evaluate resource costs and assign amounts
Once you know what resources are required for your project, you can begin evaluating the costs of each one and assigning the amounts needed. To determine dollar costs as accurately as possible, do plenty of research for each item.
Now is also a great time to look at previous similar projects again. Don’t be afraid to involve other people to get accurate estimates. - Build a budget
Now that you have reviewed your list of resources and assigned amounts, you have your estimates. Remember to include a contingency fund within your budget as well.
Now you can begin compiling everything in your spreadsheet or project management software. As you begin, group related items together. For example, all training items and materials should be under a training group or section. This will be helpful when reviewing later.
It’s also a good idea to include a timeline if your budget spans a longer period of time, allowing for recurring costs to be clearly identified.
Make note of any assumptions related to item costs. That way, if any of these costs don’t hold true once the project begins, you’ll know why and where the budget changes occurred. - Check your math
It is crucial that your budget accurately reflects the costs needed for completion. A simple typo or mathematical mistake somewhere can knock the entire budget off. Ensure accuracy by checking your math multiple times before handing it off for approval.
(Bonus tip: Have a partner or coworker review your math, too. You’ve been staring at it forever, it’s far easier for you to miss something than it is for a fresh pair of eyes.) - Obtain approvals
You’ve compiled your budget and triple-checked your math. Now, it’s time to present your budget to other business leaders or stakeholders who need to approve it.
Keep in mind your budget could be higher than others expected or wanted. Be prepared to explain the need for items and how you came up with the amounts. This is where highlighting cost assumptions can help your presentation be as persuasive as possible. - Implement and Track Spending
Once your budget has been approved, you should have a project manager oversee it. Spending should be tracked carefully using project management software.
Maintain a report of everything purchased and the project progress against your budget. Remember, if teammates fall behind on deliverables or you face unexpected delays, the cost will be affected.
Having detailed reports can help you request a budget increase, should it be needed.
Creating a comprehensive budget can be an intimidating task but breaking it down into the steps listed above will help you to have it done in no time at all. Preparing your budget before the project begins helps you stay on track and meet objectives.
As an award-winning hospitality renovation company, we specialize in preparing reliable, comprehensive budgets. We are known for the accuracy of our estimates and budgets, and deliver continuous cost guidance throughout the entirety of the project. If you need assistance getting your hospitality renovation off the ground, please contact us.
