Hospitality financial management: current best practices 

by | Feb 20, 2025

The end of the financial year is almost here—a critical time for hotel financial management, analysis, and strategic planning. It is also a time that is most challenging, especially in an industry where seasonal demand fluctuates, regulations change constantly, and employees are overwhelmed with the rising number of demands. A lack of proper finance processes can result not only in cost overruns but also in poor customer experience.

Challenges faced by hotels during finance planning

Finance planning for hotels presents unique challenges, and not just during the year-end.

  • Seasonality: Hotel revenues fluctuate significantly throughout the year, with peak seasons and off-seasons impacting profitability.   
  • Inventory management: Accurately tracking inventory, particularly perishable goods like food and beverages, is essential for calculating the accurate cost of goods sold (COGS).   
  • High operating costs: Hotels incur substantial operating expenses, including utilities, labour, and maintenance, needing careful analysis and strategic planning to optimise costs for tax purposes. 
  • Ever-changing regulations: Laws and regulations are constantly evolving, making it crucial for hoteliers to stay informed and adapt their strategies accordingly.   
  • Economic factors: The hospitality industry is highly susceptible to changes in the economy, such as recessions or inflation, which can reduce disposable income and travel frequency.  
  • Demand fluctuations: Changes in travel behaviour/ global events, such as the rise of short-term rental platforms (e.g., Airbnb), can affect hotel occupancy rates and pricing strategies.  

“Good revenue per available room can vary by 30-40% between peak and off-peak seasons”

“Labour costs account for over half of the total operational expenses for hotels”

“28% of hoteliers cited managing inventory as a major challenge in hotel financial management”

Latest trends that address hotel finance management challenges

Every hotel needs a finance strategy that helps them maximise revenue, meet financial goals, and stay ahead of the competitors. A good financial strategy is a combination of multiple factors, including the latest trends and industry practices.  

1. Cloud accounting software  

Cloud software is at the forefront of driving digital transformation in hotels. Hotel finance management is a complex task, especially when a brand is used to manual or outdated methods. Cloud-based hotel accounting software offers an easy solution to this by providing seamless access to data anytime, anywhere and automating transaction processes. Real-time data updates enhance team collaboration and offer improved visibility into both financial and non-financial information. Cloud accounting is notably flexible, enabling businesses to scale resources up or down in response to changing needs.   

2. Data and reporting tools 

With the shift to digitalisation, the amount of data available for hoteliers is vast. Cloud PMS, reservation modules, channel managers, POS and even online presence expose a host of data on operations, current trends, consumer behaviour, competitors, reviews and more. The availability of such amounts of data requires careful analysis through reporting and visualisation. Data and reporting tools allow owners to understand their business and identify their best revenue sources. These tools are becoming crucial to managing a hotel’s finances, giving businesses the best chance to react swiftly to challenges and opportunities.   

3. Demand forecasting 

Traditionally, revenue management has depended on historical data to forecast future demand. However, a significant current trend in revenue management is the increasing reliance on forward-looking market demand data to predict future demand levels. Hotel managers can now access information about bookings at competitor hotels and other relevant data, which offers a clearer understanding of future demand trends. With this information, it becomes easier to develop well-informed, strategic financial plans to respond effectively to changing market conditions.  

4. Investing in staff and guests   

Investing in both staff and guests, instead of solely investing in physical resources, is another key trend. Hotels are realising the value of adequate staff training and rewards when it comes to empowering them to create exceptional guest experiences.  On the other hand, guests are the ones who generate revenue and reputation, making it essential that brands listen to them and satisfy them, retaining them for repeat and referral business. By investing in staff and guests, hotels can increase service quality and customer satisfaction, ultimately leading to higher profitability.  

5. ESG reporting 

Environmental, Social, and Governance considerations are key factors for most travellers and stakeholders when choosing brands today. It is high time for hospitality businesses to incorporate these metrics into their financial reporting, demonstrating a commitment to sustainable practices, including reducing the environmental impact, promoting social responsibility, and adhering to strong governance standards. By doing so, hotels foster transparency, attract responsible investors, and enhance their reputation while meeting the growing demand for eco-friendly, socially conscious services. Going forward, expect a stronger emphasis on reporting environmental and social impacts in the industry’s financial statements.

Struggling with financial management? Discover how our cutting-edge software can simplify your hotel’s finances. Book a Demo Today

A future of embracing innovation in hotel finance

In an industry that faces unique challenges in revenue management, hoteliers can rely on new technologies and best practices to streamline their financial operations. The future of hotel finance is bright for those who embrace innovation, prioritise a data-driven approach, and invest in their staff and guests.

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