A budget is a quantified expectation for what a hotel wants to achieve. Its characteristics are:
- The budget is a detailed representation of the future results, financial position, and cash flows that management wants the business to achieve during a certain period of time.
- The budget may only be updated once a year, depending on how frequently senior management wants to revise information.
- The budget is compared to actual results to determine variances from expected performance.
- Management takes remedial steps to bring actual results back into line with the budget.
- The ‘budget to actual’ comparison can trigger changes in performance-based compensation paid to employees.