Hotel Revenue Glossary · Forecasting

Budget Variance

The difference between actual performance and budgeted performance, expressed as a dollar amount or percentage. Positive variance means actual exceeded budget; negative variance means actual fell short. Tracked for occupancy, ADR, RevPAR, and revenue.

Why it matters: Budget variance is the primary accountability metric in hotel management. Revenue managers are evaluated on their ability to meet or exceed budgeted RevPAR. Understanding variance drivers — whether occupancy or rate — guides corrective action.

Worked example: Budget for May: 3,720 room nights at A$188, RevPAR A$155.41 on 4,500 available. Actual: 3,940 nights at A$179, revenue A$705,260, RevPAR A$156.72. Revenue beat budget by A$5,900 and RevPAR by A$1.31, but the mix moved. The occupancy variance is +220 nights × A$188 = +A$41,360; the rate variance is 3,940 × -A$9 = -A$35,460. You made budget by selling more rooms cheaper, which is a different conversation from making it on rate.

Common mistake: Reporting a favourable revenue variance without splitting it into rate and occupancy. The two have opposite operational consequences: extra room nights bring extra housekeeping, laundry and breakfast cost, while extra rate does not. A A$5,900 beat driven by volume and one driven by rate land in completely different places on the P&L.

All glossary terms Forecast Forecast Accuracy RevPAR (Revenue Per Available Room)