Seven ways to plan your hotel budget in times of inflation

Seven ways to plan your hotel budget in times of inflation

With the industry still recovering, here are a few things to consider this budget season


Go back to March 2020, and you’ll find a major point of inflection for the hotel industry — one that they’re still reflecting from. Back then, the COVID-19 pandemic kept people at home and unable to travel, massively reducing demand for hotels and other businesses of the hospitality industry. Now, as the volume of global travelers gets closer to pre-pandemic times, the space is facing other significant challenges. 

For starters, there’s a global hospitality labor shortage making it harder than ever to meet evolving customer demands. Plus, around the world, businesses and individuals are facing the pressures and impacts of growing inflation — and hotels are not immune. 

As hospitality leaders attempt to plan for the next 12 months and set an annual budget for their hotel operations, these trends and influences make it hard to strategize around their finances. To help with that, we’ve diving into some of the key areas managers should think about as they plan their hotel budget. 

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How to budget for inflation in 2023

Inflation has been a topic on everyone’s lips of late, and it’s not surprising. The pandemic, supply chain issues and the Russo-Ukrainian crisis have all impacted costs, and hotels are being impacted in a variety of ways. Primarily, the rising costs of labor, food and supplies is putting pressure on hotels to raise their room prices, making them less accessible to travelers and negatively impacting demand. The solution? Hotels must get creative and reduce their spending where they can — and that’s easier said than done. 

That said, despite inflation eating away at people’s purchasing power, demand for hotels is still high. Now, there are some nuances here. People are more likely to take local trips versus long overseas adventures, to match their budgets. As such, hotels need to balance thriftiness with excellent customer experiences that keep people coming back. What does that all mean for your budget planning? Here are seven things to consider as you set your budget for 2023. 

budgeting during inflation

1. Rethink your room pricing 

One way that hotel managers are improving their revenue and enhancing their occupancy is with dynamic pricing. Also known as time-based pricing, this approach relies on algorithms to set room prices based on supply and demand on any given day, and these prices are adjusted in real time. 

In short, this is a way to automate revenue management, so that hotel managers don’t have to continually review market activities to determine the best possible price for any given date. The factors taken into account by the algorithm include seasonality (a hotel in a beach town would be more expensive in the summer than in the winter), competitor pricing, current occupancy for those dates, and consumer demand. The system then sets the best possible rate to increase sales and profit.

hotel room prices are increasing

2. Choose alternative offerings that cost less 

As a hotel, you’ve built a reputation for delivering great customer service and amenities that exceed your customer needs. But often, these are the costs that really add up on your budget plan. So, how do you cut costs without compromising on your guest experience?

One way is to choose digital services that replace and consolidate traditional — and costly — alternatives. For instance, rather than subscribing to multiple newspapers and magazines, which have to be shipped to your hotel and delivered to your guests, you can opt for a digital subscription service that’s readily available to anyone on your network. This will reduce multiple budget line items to just one affordable one. The added bonus? You can reduce the environmental footprint of the hotel by cutting down on the volume of your paper recycling. 

Another area to consider is food costs. Even in the best of times, commodity prices change on a daily basis. Hotel operators already know that fluctuation is the norm, but the hospitality business seems to be hit with shortages more regularly than ever before in recent years. Throw high inflation into the mix, and this can present significant challenges.

Back-office inventory-tracking software can help hotel businesses avoid many issues associated with ingredient availability and market fluctuations by allowing them to keep better tabs on the ingredients they keep in stock. Choosing local, seasonal ingredients can keep costs down, and updating restaurant and room-service menus can be a snap for a hotel that use customer-facing digital technology rather than printed materials to keep guests informed.

pressreader app at hotels

3. Budget for sustainable products and activities

Today, more than ever, travelers are choosing to spend their dollars on the brands that best align with their values. They do their research, and they want to invest in businesses that do more for the planet, whether that’s by actively sponsoring environmental projects, making changes to the way they do things, or opting for sustainable products and services.

For hotel managers, this demand will mean replacing some line items on the budget, and adding some others. For example: 

  • Adopting sustainable practices, like a composting system, can vastly reduce the carbon footprint of your hotel. Plus, you can use that composted material to feed your on-site garden for free. 

  • You can replace mainstream cosmetics and toiletries with local brands that use sustainable practices to develop their products.

  • As we mentioned above, you can also replace your print offerings with a digital newsstand that gives guests access to thousands of publications from their own devices.


Going sustainable is also good for your budget. When you make room cleaning services optional, for example, you can reduce the amount of cleaning products being used while also cutting down your laundry bill. It’s these cuts that will allow you to invest in the other resources and technologies that enhance the guest experience. 

use sustainable products

4. Adopt tech that enhances the guest experience

We’re all interacting with technology every day — whether it’s on our mobile devices, at our work computer or even as part of managing our home. As such, your guests expect a technology offering that’s equal parts easy to use and safe. 

In terms of setting your budget for next year, this may require putting some funds aside to build or refine a mobile app that lets guests book their stay. Guests should also be able to request amenities, check out of their rooms and, perhaps, use the app as a mobile key so they can bypass the check-in desk when they arrive at the hotel. 

The good thing about investing in these and other new technologies is that guests will be more comfortable spending at your hotel, mitigating the impact of inflation.

mature businessman with tablet in a hotel room

5. Invest in a modern tech stack 

Your tech investments shouldn’t stop at the guest app. It’s also important to develop the foundational tools and software behind your operation. 

This can include software such as: 

  • A property management system that facilitates booking management and other hotel admin tasks

  • Staff collaboration technology that keeps your employees organized

  • Concierge software that enhances the in-person experience with your concierge staff

  • Guest feedback tools that let your guests provide timely perspectives based on their experiences

  • Marketing automation platforms that automate communications with current, past and future guests

A modern hotel tech stack should also facilitate internal communication, data collection and analysis, and in-depth reporting on that data. After over two years of continual change, how hotels plan for the future is vastly different. You can’t rely on recent historical data — so you need to opt for data-rich solutions that can accurately forecast changes in the market and encourage informed budgeting and decision making. 

As you choose these technologies, you should consider the expense, scalability and integration capabilities of each tool — as that will influence budgeting. Don’t forget to consider the time and money that will be spent on deploying and teaching the platform to your employees. 

6. Market all of your hotel facilities — every single one

For most hotels, there’s usually more than one revenue stream. There may be a spa, a restaurant or a laundry service that might also be contributing to the hotel’s bottom line. Putting money towards efficiently and effectively advertising these services is important. 

Leveraging your hotel’s digital presence will be important here. You can promote these services on your website or booking page, post marketing messages on your hotel social media accounts, partner with digital travel magazines and market them on your newsletters, as appropriate. Your mobile app can also be a good platform for these ads. 

Consider employing a testing strategy here. Determine which of these services benefits the most from your marketing efforts, and consider investing more in the area where you see a higher return on investment. As you explore and uncover the best approach, it’s worth building this flexibility into your budgeting. 

7. Be pragmatic about your labor costs 

According to a recent poll of 13,000 job seekers, more than half of the U.S. hospitality sector wouldn’t return to their jobs — and that means hotels need to step up and find ways to keep their employees engaged. Part of that will require investing in your hotel staff through professional development opportunities and training. Other potential expenses will include added perks and benefits, and creative methods for improving work-life balance. 

With so much uncertainty in the future of hotels, and inflation rates quickly rising, budgeting for 2023 can feel like a monumental process — but it doesn’t have to. By incorporating the considerations laid out above, and downloading our free budget template, you’ll be one step closer to setting you and your team up for success. 

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