| The Hotel Financial Control function generally analyses | | | | Hotel P&L. We worked as Advisor together with |
| the Hotel activity through a standard P&L | | | | an Hotel manager in a famous location in Italy. We |
| reclassification that identifies four main departments | | | | decided that the "chain" label driven booking was too |
| that represent the main business area of the Hotel: | | | | expensive and could be replaced by Internet media |
| Rooms Revenues, Food & Beverages | | | | bookings. The result was an increase in the overall |
| Revenues, Telephone Revenues and Other Income. | | | | Hotel occupancy rate with no decrease in the Avg |
| Rooms and F&B are the main drivers of value, | | | | Room Rate. The installation of the new system |
| while the other revenues may help the total | | | | required an overall three months investment, peanuts |
| contribution. For each of the four department the | | | | in comparison with what the Hotel was paying to |
| Hotel Financial Control calculates the department | | | | have a famous label on the door. But in order to |
| profit and then the cumulative Department Profit of | | | | really monitor each cent of cost we needed to |
| the Hotel. | | | | chance the Hotel Financial Control system. |
| Further in our accounting, we subtract the | | | | The issue is: Is it correct that the Hotel Financial |
| Undistributed Expenses (including Adm. & | | | | Control considers Sales costs as Undistributed |
| General, Marketing, Repairs and Maintenance, Energy | | | | Expenses, as these costs are not evenly insisting on |
| Costs, etc.) to obtain the Gross Operating Profit of | | | | the different revenue stream? In other words: what |
| the Hotel and we subtract Fixed Charges (including | | | | we noticed is that the Sales channel brings different |
| Equipment and other Rent/lease, Real Estate and | | | | Sales costs on Room Dept and on F&B Dept. If |
| other Taxes, Building and other Insurance, etc.) to | | | | these is the case, we might therefore decide to |
| obtain the Net Operating Income. | | | | include the different impact of Sales channel |
| The main size and performance measure in the Hotel | | | | expenses on the department. P&L with more |
| industry are identified as the Occupancy Rate, | | | | accuracy. |
| multiple occupancy factor, annual sleepers, GUR | | | | A different issue on the Hotel Financial Control |
| (number of sleepers per available bed) ARR (Average | | | | structure rely upon the new Real Estate ownership. |
| Room Rate), Revenues PAR (per available room), | | | | Hotel Real Estate are increasingly owned by financial |
| Revenues POR (Per Occupied Room). The main | | | | investors that very little care about the |
| profitability measures of an Hotel are based on Gross | | | | characteristics of the Hotel business and are very |
| Operating Income (GOI-Par and GOI-Por) and to Net | | | | demanding: they require a stable financial flow, |
| Operating Income (NOI-Par and NOI-Por). Hotel | | | | possibly a higher reward based on the performance |
| valuation multiples are often linked to RevPar, GopPar | | | | of the Hotel and they look at long-term capital |
| and NoiPar. | | | | appreciation. The structure of the lease / rent |
| Nice, but it is time to make few changes. Although | | | | contract and its cost is therefore not simply one of |
| the Hotel industry is almost stable compared to other | | | | the fixed costs of the Hotel but is "the" cost. The |
| businness, there are two drivers that would suggest | | | | Hotel Financial Control cannot simply include this in a |
| to the Hotel Financial Control to make some | | | | row down in the P&L, but a much in depth |
| development to the above Profit & Loss | | | | analysis is needed. We might want to include the |
| reclassification: these are the Internet based booking | | | | contingency share of the lease /rent in operating |
| and the new Real Estate financial structures. Let's | | | | expenses so that our Dept. profit really reflects the |
| see how these two drivers may lead to some | | | | profit to the firm. In addition we might want to |
| upgrades in our way to look at the accounts of an | | | | define into a proper P&L figure the relevant |
| Hotel. | | | | lease / rent expenses. |
| Hotel bookings include direct bookings at the Hotel | | | | Finally a few words on other issues: telephone |
| (via telephone or Internet based), "chain" label driven | | | | revenues and SPA revenues. |
| bookings and Internet media bookings (via major | | | | Everybody attending an hotel owns at least one |
| Internet bookings media). Each of these channel | | | | mobile telephone and pretends full Internet coverage: |
| requires a different organisation structure, different | | | | Hotel telephone revenues are therefore limited. The |
| contracts and different costs. It is not a simple sales | | | | wellness area, including SPA and fitness revenues |
| and marketing choice with associated Sales and | | | | instead are increasing: the Hotel Financial Control |
| Marketing costs: the decision to stress the Internet | | | | often replaces the telephone Dept line with the SPA |
| channel changes rather than the traditional channels | | | | Dept. line. |
| dramatically change the Hotel operations and the | | | | |