The Hotel Financial Control function typically analyzes Hotel activity through a standard P&L reclassification that identifies four main departments that represent the Hotel’s main business area: Rooms Revenue, Food and Beverage, Telephone, and Other Revenue. Rooms and F&B are the main value drivers, while other revenue can help the total contribution. For each of the four departments, the hotel financial control calculates the profit for the department and then the cumulative profit for the hotel department.
We then subtract Undistributed Expenses (including Administrative and General Expenses, Marketing, Repairs and Maintenance, Energy Costs, etc.) to obtain the Hotel’s Gross Operating Profit and subtract Fixed Charges (including Equipment and other Rentals/leases). , Real Estate and other Taxes, Building and other Insurance, etc.) to obtain the Net Operating Income.
The primary size and performance measure in the hospitality industry is identified as occupancy rate, multiple occupancy factor, annual sleepers, GUR (number of sleepers per available bed), ARR (Average Room Rate), Revenue PAR (per room available), Income PER (Per Occupied Room). The main measures of hotel profitability are based on Gross Operating Income (GOI-Par and GOI-Por) and Net Operating Income (NOI-Par and NOI-Por). Hotel valuation multiples are often tied to RevPar, GopPar and NoiPar.
Nice, but it’s time to make some changes. Although the hotel industry is less subject to sudden changes, there are two drivers that would suggest Hotel Financial Control to make some development in the previous reclassification: Internet-based reservation and new Real Estate financing structures. Let’s see how these drivers can lead to some improvements in the way we view Hotel bills.
Hotel reservations include direct hotel reservations (via telephone or Internet), “chain” tag-driven reservations, and Internet-mediated reservations (via major Internet reservation media). Each of these channels requires a different organizational structure, different contracts, and different costs. It’s not a simple sales and marketing choice with associated sales and marketing costs – the decision to emphasize changes to the Internet channel instead of traditional channels dramatically changes hotel operations and hotel P&L. We work as a Consultant together with a Hotel Manager in a famous place in Italy. We decided that “chain” tag-driven booking was too expensive and could be replaced by online media bookings. The result was an increase in the overall hotel occupancy rate without a decrease in the average room rate. The installation of the new system required a total investment of three months, a pinch compared to what the Hotel was paying to have a famous label on the door. But to really monitor every cent of the cost, we needed to test the hotel’s financial control system.
The problem is: is it correct that the financial control of the hotel considers the costs of sales as undistributed expenses, since these costs do not insist uniformly on the different income streams? In other words: what we notice is that the Sales channel generates different Sales costs in the Rooms Department and in the Food and Beverage Department. If this is the case, therefore, we might decide to include the different impact of Sales channel spending on the department. PvL more accurately.
A different problem in the financial control structure of the hotel is based on the new real estate. Hotel real estate is increasingly owned by financial investors who care very little about the characteristics of the hotel business and are very demanding: they require a stable financial flow, possibly a higher reward depending on the hotel’s performance, and they look to the long term. capital appreciation. The structure of the lease/rental contract and its cost is therefore not simply one of the fixed costs of the Hotel, but rather it is “the” cost. Hotel financial control cannot simply include this in a row down in the P&L, but a very deep analysis is needed. We may wish to include the contingency portion of the lease/rental in the operating expenses for our Department. the profit really reflects the profit of the company. In addition, we may want to define the relevant lease/rental expenses in an appropriate profit and loss figure.
Finally, a few words about other topics: telephone revenues and SPA revenues.
Everyone who attends a hotel owns at least one mobile phone and claims full internet coverage: therefore, the hotel’s phone revenue is limited. Instead, the income of the wellness area, including SPA and fitness, is increasing: the Hotel Financial Control often replaces the Department’s telephone line with the SPA Department. line.
As consultants in this industry, we are challenged by clients’ need for further improvements in hotel financial control to truly support management in their decisions.