Hotel Formulas You Need to Know for Your Hotel
Most people we talk to don’t have a set process for gleaning insights into how the hotel is performing each month based on analytics on their Income Statement.
They give the Income Statement a once over, and lament that the bottom line isn’t what it should be, but they’re not quite sure it's accurate anyways, and besides it's already late to the bank so there’s no time to look into it or make changes. It is what it is.
They give the Income Statement a once over, and hey, the bottom line is looking up!
Let’s not look too closely.
If that is you though, you’re leaving money on the table!
Once your team gets on a good schedule for recording all the activity and making necessary reclasses and accruals to the Income Statement, you are ready to dig deeper into your performance and learn to tweak and improve every single month!
If you aren’t quite to that place yet, watch the videos on reclasses and accruals to move you closer to that point!
The purpose of analytics is to arrange your financial data to make it more useful for decision making. The problem is, there are so many ways to arrange the data, that people are scared to dive into the analytics at all.
Average Daily Rate, Occupancy, Revenue Per Occupied Room, Revenue Per Available Room, Percent of Revenue, Labor metrics, Liquidity Ratios, Solvency Ratios, Profitability Ratios, yada, yada, yada.
Come back to me here!
I know it all seems like a little much.
What is the point?
And where do you even start?
Well let’s go over a little example to answer the first question and then we’ll tackle the second.
At the end of the month, you review your income statement and notice a steep increase in the complimentary breakfast expense per occupied room (POR). Uh oh, costs are going up? That’s no good!
But what is really going on?
Is there waste in food cost from preparing too much?
Is someone walking out the back door with the groceries?
Then wait, you notice that the occupancy in your SMERF market segment has tripled!
After digging in, you realize that the answer to rising costs is that all those softball teams that are in town for tournaments eat a LOT!!!
Once you know what is going on, you can adjust the price for that market segment or accept the expense and be happy for the extra revenue.
You are empowered with information and not mistakenly blaming your kitchen staff for rising costs.
This will save the team so much frustration!
This is the value of analytics.
They make the numbers meaningful.
The numbers will tell the story!
Ok, so we’re all clear on how the analytics can help but it is still really overwhelming to absorb the different formulas.
I know it is, but don’t worry!
We have compiled a list of what we believe are the 5 most useful hotel analytics for your toolbelt and put them in a convenient little cheat sheet for you!
So click the link to download that Free cheat sheet: Hotel Analytics Cheat Sheet
Keep it handy.
Show your team.
Talk about it regularly.
We guarantee that you will get comfortable with the numbers over time.
Before you know it, you'll be noticing trends and drawing more and more information from what you see!
So your tip for the week is to get familiar with what a few basic financial analytics are trying to tell you.
This will help you use your Income Statement to evaluate the exact operations of the hotel each month!