7 questions to ask before signing off your 2027 hotel budget

Italian version

1. Are you budgeting the right source markets?

It’s easy to start with last year’s source mix and make small adjustments. But source-market demand doesn’t necessarily move in line with your overall market, and shifts can materially change the revenue behind your forecast.

Europe is a good example. Long-haul travel intent has softened in 2026. The European Travel Commission found overall long-haul travel intent for the May to August period fell five percentage points year over year, from 57% to 52%. Intent to visit Europe also fell three points, to 36%, with the US and South Korea recording a third consecutive summer of declining interest.

The ETC attributes the slowdown mainly to rising costs and geopolitical uncertainty rather than a deterioration in Europe’s attractiveness. The important point for budgeting is that even when overall destination demand remains relatively resilient, the markets supplying that demand can change.

All of that has a financial implication. Different source markets book at different times, stay for different lengths of time, travel at different points in the year, respond differently to price and use different channels. A shift in mix can therefore leave you with a similar overall level of demand but a very different outcome for occupancy, ADR and acquisition cost. It can also change where sales and marketing investment needs to go.

If you’re expecting a feeder market to return, grow or soften next year, say so in the budget and be clear on what that assumption is based on.

2. Are you budgeting total revenue, or just rooms revenue?

Rooms will still do most of the heavy lifting in the budget, but they do not tell you the full commercial story.

Modern revenue management increasingly looks beyond RevPAR to total revenue performance across the business. For hotels with meaningful F&B, spa, meetings, events or other ancillary income, that means the budget needs to consider not only how many guests you expect to attract and at what room rate, but also how much value those guests will generate once they are on property.

The ETC’s summer 2026 data gives a useful example of why. Planned spend on accommodation fell year over year, while food and drink remained the biggest spending priority and wellness increased. That does not translate directly into hotel ancillary revenue, but it does show that traveler spend can shift between categories rather than moving uniformly up or down.

If you are forecasting stronger rooms performance, what are you assuming happens to F&B spend, spa revenue, meetings or other ancillary income? Changes in length of stay, packages, guest segment or source-market mix can all affect how much guests spend beyond the room.

A rooms-led budget can therefore get the headline right and still miss the overall result. You might land close to your occupancy and ADR targets but fall short of total revenue because ancillary spend did not develop as expected.

The opportunity will also vary significantly by property. A resort with substantial F&B and spa operations has a very different revenue model from an urban select-service hotel. The budget should reflect where each hotel actually creates revenue and profit, rather than treating rooms performance as a proxy for the whole business.

3. Are you building next year’s rate assumptions on this year’s demand behavior?

Historical pace is still useful, but it can become a misleading reference point when booking behavior is changing.

In some markets like North America, booking windows have shortened considerably. Demand that used to appear months in advance may now arrive much closer to the stay date. At the same time, guests are more price sensitive and, in many cases, placing greater value on flexibility rather than simply choosing the lowest available rate.

That’s an important consideration to take into account when setting next year’s ADR assumptions. The rate you can realistically achieve depends partly on when demand is expected to materialize and how guests are likely to respond to price. A hotel can look light on the books without underlying demand necessarily being weaker. But assuming late pickup will arrive simply because it did this year creates a different risk.

The wider pricing environment is uneven too. Lighthouse pricing data shows that advertised price growth has varied significantly by hotel tier and region in 2026. So a broad assumption that rates will simply continue to rise at the same pace can hide very different conditions at market and property level.

Your ADR budget therefore needs to incorporate a view of how demand is expected to book. If you are forecasting rate growth, what is going to support it? Are you expecting to hold rate for longer because demand is arriving later? Are you assuming stronger compression closer to arrival? Has the booking window shifted enough that last year’s pace is no longer the right benchmark?

The budget does not need to predict exactly when every booking will arrive. But if the pace has changed, the rate assumptions should change with it.

4. What's your strategy for corporate negotiated rates?

RFP season and budget season overlap for a reason. The decisions being made now will determine how much corporate business you carry into next year, at what rate, and with what level of access.

GBTA and ALTOUR expect global hotel ADR to rise 1.8% in 2027, to $171, after stronger growth in 2026. That still points to rate growth, but a more modest market uplift puts more pressure on the quality of the deals you agree to.

A negotiated rate can be valuable if it gives you dependable base business on dates where you need it. The same account is far less attractive if it produces mainly on nights you could sell at a higher rate, comes through expensive channels, or never delivers the volume that was promised.

So the budget conversation should go beyond the percentage increase in the RFP. Look at what each account actually produced this year, when it stayed, how much it displaced, and what that business was worth after acquisition costs.

For some accounts, a fixed rate will still be the right answer. For others, stronger controls, different availability conditions or a more dynamic pricing approach may make more sense.

The important thing is that the 2027 corporate plan reflects the value of the business you expect to receive, not just the rate you managed to negotiate.

5. Is your compset still your competition?

Competitive sets often stay in place for years, even when the market around them changes.

New hotels open. Existing properties reposition, refurbish or change ownership. Serviced apartments and aparthotels become more relevant, while short-term rentals compete for some of the same trips and lengths of stay.

Over time, that can create a gap between the hotels you benchmark against and the options guests are actually considering.

You do not necessarily need to change the formal compset every time new supply appears. But you do need to be careful about what the numbers are telling you. A hotel can gain share against its traditional compset while still losing demand to newer or different competitors. And if one of the properties in the compset has changed its positioning, the comparison may be less useful than it once was.

There are also better ways to sense-check that picture now. Traveler search behavior can show which hotels guests are actually comparing you with, which can be very different from the fixed set you have been using for years.

If you are using market share, competitor pricing or historical index performance to support the 2027 plan, check that those benchmarks still reflect the market you are actually selling into and that they still make commercial sense.

6. What's your plan for AI-driven hotel discovery?

AI is starting to play a role in how travelers discover hotels, but most commercial teams still have very little visibility into what that means for them.

Lighthouse tested 4,545 prompts across nine markets to see which hotels appeared in ChatGPT recommendations. Coverage was low in some major destinations, and chain hotels appeared more often than independents in eight of the nine markets.

Around half of the cited sources came from OTA and metasearch listings, with editorial and media coverage accounting for a large share of the rest. In other words, work already happening across distribution, content and PR is starting to influence whether a hotel appears in AI recommendations.

Hotel websites represented a relatively small share of cited sources, but a much larger share of the links users could click through to.

If AI is becoming another way guests find hotels and reach the brand site,then as we head into budget season, there is a reasonable case for putting some resources behind it.

Some hotel groups are already starting to test how much value there is in improving their visibility in AI-led discovery, with Lighthouse’s ConnectAI as one example. Early data is encouraging; among hotels using the product, the market-adjusted median RevPAR uplift was 4.7%, although the sample is still relatively small and the product is less than a year old.

That makes AI discovery a more practical budget question. If it is becoming another meaningful booking channel, what investment do you need to make in 2027 to improve visibility, support direct traffic and measure the return?

7. Are you budgeting for another tool, or a different way of working?

AI will probably appear in a lot of 2027 budgets. But adding another tool is not necessarily going to change much on its own.

In a Lighthouse survey of 761 hospitality professionals, respondents rated AI's current impact on commercial strategy at 3.02 out of 5, almost unchanged from 3.06 when the same question was asked in 2024.

Expectations, however, are rising. The expected impact over the next five years reached 3.86, with 67% of respondents rating it four or five.

Among the respondents seeing the least impact today, integration with existing systems and the lack of a clear use case ranked ahead of budget constraints as barriers. That is worth thinking about when budgets are being built. The answer is surely not just more technology.

Look at where the commercial team’s time actually goes. Revenue managers still spend a lot of it pulling information together, checking different systems, preparing reports and working out what needs attention before they can act on it. The problem is not that they don’t have the data. Instead, it is the amount of manual work between the data and the decision that creates the bottleneck.

Fourteen percent of respondents said AI is already enabling employees to cover more properties with the same headcount. That is one outcome. There are others: getting to a pricing decision faster, spotting something across a portfolio that might otherwise be missed, or simply giving a revenue manager more time to work through an opportunity rather than assemble the information behind it.

That is also the thinking behind Ernest, Lighthouse’s AI teammate. It can answer questions using the context of a hotel or portfolio’s own performance, pace and targets, rather than leaving the team to pull that picture together first. It is part of a broader move towards using AI inside the existing commercial workflow, rather than treating it as a separate tool.

So when AI comes up in the 2027 budget, start with the work rather than the technology. Where is the team losing time today? What is taking too long? What are they not getting to at all?

Then decide where AI is actually worth paying for.

Before you sign off

A lot can change between the point you sign off the 2027 budget and the point you actually have to deliver it.

That makes the assumptions behind the plan important. But it also makes the tools you use to manage against it important.

If demand starts coming from a different market, booking windows move again, competitors change their pricing or one hotel in the portfolio starts missing plan, you need to be able to see that early enough to respond. Historical reports will tell you what happened. They are less useful when the question is what is changing now and what you should do about it.

That is worth considering as you decide where to invest for 2027. The right technology should make it easier to see what is happening across the business, understand what is behind it and get to the areas that need attention without spending hours pulling the picture together first.

You cannot budget away the uncertainty. You can make sure the team has what it needs to manage through it.

See how Ernest, your AI teammate, helps you connect the dots across your data, models and scenarios to surface new revenue opportunities this budget season.

Frequently asked questions

When should hotels start building the 2027 budget?

The timing varies by company, owner and management structure, but the process usually starts well before year-end. The important thing is to give commercial teams enough time to challenge the assumptions behind the numbers before the plan is finalized.

Who should own the commercial assumptions in the hotel budget?

Revenue management should not be working in isolation. Sales, marketing and distribution all influence the assumptions behind demand, rate and mix. There still needs to be clear accountability for bringing those inputs together into one commercial plan.

Should hotels build different budget scenarios?

In areas with more uncertainty, yes. You do not necessarily need a completely separate budget, but it is useful to understand how the plan changes if a major assumption moves, such as weaker demand from a key source market, lower rate growth or a shift toward higher-cost channels.

What is the difference between the budget and the forecast?

The budget sets out what you expect the hotel to achieve for the year. The forecast is the updated view of where performance is now likely to end up as actual bookings and market conditions develop.

You compare the two throughout the year. If the forecast starts to move away from budget, that tells you where the gap is opening up and gives the commercial team a chance to respond. The budget does not keep changing to match the forecast; it remains the reference point for measuring performance.

What should commercial leaders challenge most during budget review?

Focus on the assumptions that have the biggest effect on the result and the least evidence behind them. That does not mean they are wrong. It means they deserve more scrutiny before the budget is signed off.