A hotel budget in two currencies: euro revenue, lira costs and exchange-rate scenarios

A two-currency hotel budget keeps every line in the currency the hotel is actually obliged to pay or receive, converts both sides at one written budget rate, and tests the result at low, middle and high rates. The budget rate is a documented management decision, not a forecast.

The budget is approved in December with a margin the owner accepts. By June the lira cost lines have moved, the euro revenue has not, and nobody in the room can say whether the shortfall came from selling fewer rooms or from the exchange rate. This article shows how to build a hotel budget that survives that question: which lines are truly in euro and which are truly in lira, how to set and document the budget exchange rate, and how to run scenarios that name the first line to break.

What is really in euro and what is in lira?#

Sort every budget line by the currency of the obligation, not by the currency printed on the invoice. Most resorts then find a small number of hard-currency revenue lines and a long list of lira cost lines.

Revenue splits into two kinds. Contracted rates with tour operators and bed banks are usually fixed in euro for the season, so the euro amount is known a year ahead while its lira value is not. Direct and online travel agency bookings may be quoted in euro or lira, and the currency the guest sees can differ from the currency the hotel is settled in. The risk sits in the settlement currency, not in the price tag. This is the same distinction that matters when pricing rooms in euro while costs are in lira.

Costs are mostly lira obligations that reprice during the year: payroll and social security, locally bought food and beverage, utilities, municipal charges and most services. Between the two sit the mixed lines: rent tied to a published index, foreign-currency loan instalments, insurance, some software and international marketing.

For each line, record three things: the currency the hotel is legally obliged to pay or receive, the currency it is invoiced in, and the currency it is settled in. The common mistake is sorting by invoice currency. A euro invoice paid at the day's rate is a lira exposure, and it belongs in the lira column.

Why does a single-currency budget hide the risk?#

Because it converts one side at an assumed rate, a rate move and a trading move arrive on the same line and cannot be separated afterwards.

Budget in euro, and lira costs are converted at the budget rate. When the lira weakens, costs rise in euro terms, but the sheet reports a cost overrun rather than a rate effect. Budget in lira, and euro revenue is converted at the budget rate; a weaker lira inflates the lira revenue line and can make a poor trading year look acceptable.

The owner's question, whether the hotel is behind because it sold fewer rooms or because the rate moved, has no answer in a one-column sheet. The rate also changes behavior: a controller who sees lira revenue rising may delay a euro price increase that the cost base already justifies.

Two columns cost almost nothing. The same lines, one extra column, one stated rate, and a variance that splits into volume, price and rate.

How do you build a two-column budget sheet?#

Keep one row per line, with the obligation currency, the budget rate and both currency values, so every number can be read in the currency it is actually paid in.

The columns are: line, obligation currency, amount in that currency, budget rate, value in euro, value in lira, share of total cost, and a sensitivity column showing how much the euro value moves for a given rate move. The sheet must balance in both columns at the budget rate; the difference between the two totals is the rate assumption, not a rounding error.

Build the sensitivity column before the scenarios. Apply the same rate move to every foreign-currency line and see which one moves the margin most. Keep the rate in a single cell and reference it everywhere, so a scenario is one cell change rather than a re-key of the file. Keep the volume and price assumptions on a separate sheet, so that a rate scenario never quietly changes the trading plan.

For example only; illustrative figures, not a forecast.

The table is deliberately illustrative. What matters is the ranking, not the size of any cell.

How do you choose the budget exchange rate and write the rule down?#

Pick one published rate, on one stated date, from one named source, and write the choice and its consequences into the budget file. Treat it as a decision, not a prediction.

The central bank publishes indicative rates every business day. Using the same source every year is what makes one budget comparable with the next. For the date, take the rate on the day the budget is locked, or an average over a stated window; either is defensible if it is written down and applied to every line without exception.

The rule must state what happens when the actual rate moves away from the budget rate: who is told, at what trigger, and what the response is. Do not build the budget rate out of a forecast. Expectation surveys and market views belong to assumption-setting; mixing them into the locked rate makes the monthly variance unreadable. Record who approved the rate and when, because a rate with no named owner gets changed quietly in March. Keep the previous year's rate and rule in the same file, so the year-on-year comparison is honest about what changed. This rule sits inside the wider exercise of building next year's hotel budget month by month.

What do low, middle and high scenarios show, and which line breaks first?#

Three scenarios are not three forecasts. They are three tests that show the rate at which a specific line stops being affordable.

Build low, middle and high as rate cases around the budget rate, holding volumes and prices constant, so that only the rate moves. For each case compute the margin in euro and in lira, then find the break-even rate: the rate at which the euro margin reaches zero at the planned volume. Then vary one thing at a time, for example volume falling while the rate moves. That combination, not the rate alone, is the real risk case.

Name the first line to break. It is usually the lira line with the largest share of cost and the shortest repricing cycle. Attach a decision to each scenario: at which rate does the hotel pause a purchase, renegotiate a contract or reprice a segment. Keep the scenarios internal; they are tests of the plan, not a view on where the rate will go.

Where does the squeeze show first: payroll, food, energy?#

The squeeze appears first in the lira lines that reprice fastest and carry the largest share, which for most resorts means payroll, then food and beverage, then energy.

Payroll and social security reprice on wage decisions, usually once a year, and form the largest single lira line. A step change in January stays in the budget for twelve months. Food and beverage reprice continuously through supplier lists; the exposure depends on how long quoted prices are held and how much stock is carried, which is the same logic as purchasing when supplier prices rise every month.

Energy moves with contract cycles and consumption. A fixed-price contract changes the timing of the exposure, not whether it exists. Rent and index-linked contracts reprice on a published index, often annually and often with a lag, which delays the effect rather than removing it.

Foreign-currency debt is the reverse exposure. It is fixed in euro, so it does not move in euro terms, but it does move in lira terms, and it belongs in the same sheet. A practical ranking: multiply each lira line's share of total cost by how often it reprices. The top two lines are where the scenario work earns its keep.

What can the hotel do about it, and how do you review it monthly?#

The levers are contract terms, the timing of purchases and the currency of the price list. The review is a monthly variance split into volume, price and rate.

On contract terms, look at the currency of the contract, indexation clauses, price validity periods and who carries the rate. Confirm with counsel which currency rules apply to which channel and contract. On timing, buying forward, holding stock and agreeing price validity windows all move cost in time, and each carries a carrying cost or a risk of its own. Advance payments from operators improve the cash position and reduce the amount exposed to a later rate, but they are paid for in price or in flexibility.

For the monthly review, restate actuals at the budget rate and at the actual rate. The difference between the two is the rate effect; what remains is volume and price. This is the extension of reading the monthly budget variance in a hotel into two currencies. Report to the owner in both currencies, because a lira-only report in a weak-lira year can hide a weak trading result. Escalate on the written trigger from the budget file, not on memory or on how the month felt.

What to do next#

Take last year's approved budget, add the obligation-currency column and the sensitivity column, and write the budget-rate rule, with its source, date, owner and trigger, before the next budget cycle starts. The two columns are what turn a single margin number into a question the owner can actually answer: how much of the result came from trading, and how much came from the rate.