The Practical Guide to Understanding and Raising Hotel Profitability

Adrian Martin

• Publisher: Routledge
• Year: 2019
• eBook ISBN: 9781000690569
• Edition: 1
• Topic: Business
• Subtopic: Hospitality, Travel & Tourism Industry
• Index: Business

The Practical Guide to Understanding and Raising Hotel Profitability offers a comprehensive, easy-to-follow breakdown of how to understand profit and loss accounts for hotels. It offers practical advice on how to maximise the profits of this customer-facing business and improve performance results.

Chapters cover every aspect of the profit and loss account including marketing, accommodation, food and beverage sales, quality, budgeting, event sales, and all the corresponding costs involved. It explains all the relevant KPIs and industry quirks within the profit and loss document as well as industry benchmarks to equip the reader with the skills to attend high level meetings, complete finance-based assignments and ultimately run their own business. Valuable tips from leading professionals within the industry are included throughout, giving advice on how to improve hotels' financial results and positively influence net profit through everyday actions.

Packed full of practical case studies and written in an easy-to-read-style, this book is essential reading for hospitality students and current hospitality and hotel managers.

Chapter 1

Understanding and raising profits in hotels

1.0 Introduction

When most people think about what a General Manager (GM) of a hotel does, they focus on the role of maintaining standards and the customer facing aspects. Yet a GMs job is to do all the above whilst simultaneously improving the hotel’s financial performance, often without any guidance or previous experience.

They will manage and create the overall hotel budget, oversee marketing, as well as dealing with staff issues, and report to the owners, whilst keeping abreast of changes to the market and legislation. Universal feedback from hoteliers, staff, and students of hotel management highlights that the area of the role most struggled with is profitability – both understanding associated reports and knowing how to improve the results within them.

The focus of this book is on helping those who either study or work in the hotel trade to succeed with the financial aspect of the industry.

Being given a budget for the first time and being measured on targets as well as attending high level meetings on profit and loss can be daunting for many staff who have not been trained in this area. The chapters of this book are set out to follow each line of a hotel’s profit and loss (P&L) account (revenue, cost of sales and expenditure), as well as discussing quality standards, marketing and budgets, with tips from respected industry professionals on how to make improvements in every area.

Chapter 1 describes what a profit and loss account is and the meaning of the terms within it. It also explains the difference between fixed and variable costs, the difference between gross and net profit, and some of the key performance indicators (KPIs) used throughout the hotel industry.

1.1 What is a profit and loss account?

A profit and loss account is a summary of financial data that measures the financial success of any business.

The P&L account calculates the total sum of money that came in to the business from customers (otherwise termed as revenue or sales) and subtracts all the bills (costs of goods sold and expenses) which were created to achieve that revenue over a year-long period.

The money left over at the end equals the net profit, sometimes referred to as the ‘bottom line’ as it is the last figure on the profit and loss account:

Hotel profit and loss statement

Revenue/sales
Accommodation	1,150,000
Food	500,000
Beverage	150,000
Event sales	400,000
Total revenue	2,200,000

Cost of goods sold
Accommodation	50,000
Food	160,000
Beverage	50,000
Total cost	260,000
Gross profit	1,940,000

Expenses
Payroll	750,000
Advertising	75,000
Accounting/finance	15,000
Depreciation	100,000
Refurbishment/equipment	200,000
Utilities/telephone	100,000
Insurance	50,000
OTA commission	200,000
Property taxes	100,000
Interes...

Table of contents

• Cover
• Endorsement
• Half Title
• Series Page
• Title Page
• Copyright Page
• Dedication
• Contents
• Contributors
• Note from the series editor
• Preface
• Acknowledgements
• Chapter 1 Understanding and raising profits in hotels
• Chapter 2 Maintaining and improving quality
• Chapter 3 Marketing and sales
• Chapter 4 Budgeting
• Chapter 5 Accommodation sales
• Chapter 6 Food sales: Contributed by Dimitri Lera
• Chapter 7 Beverage sales: Contributed by Jennifer Kaye
• Chapter 8 Event sales: Contributed by Philip Berners
• Chapter 9 Accommodation costs
• Chapter 10 Food costs
• Chapter 11 Liquor costs
• Chapter 12 Payroll costs
• Chapter 13 Marketing costs
• Chapter 14 Fixed costs
• Chapter 15 Net profit and EBITDA
• Glossary of terms
• Index