How Hotels Count and Measure

Slides:

Advertisements

Similar presentations

1)Market Share 2)Market Growth 3)Total Revenue = Selling Price * Number Sold 4)Profit or Loss = Total Revenue – Total Costs 5)Total Costs = Variable Costs.

Advertisements

Evaluating Front Office Operations

Store UNDER DESK 6.

Break-even ‘SPLAT!!!’. is all the money that comes into a business. Many businesses keep their money in a bank account that pays them a regular income..

Chapter 1 The Hotel Industry. The hotel industry cycles with the economy. Generally building during booming times and putting old hotels out of business.

Cost Approaches to Pricing Chapter 8 Pricing Questions n n Which Costs Are Relevant in the Pricing Decision? n n What Is the Common Weakness of Informal.

Managing Capacity and Demand Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.

1 Planning and Evaluating Operations. 2 Occupancy Ratios Measures the success of the front office in selling rooms. –Common data includes: Number of Rooms.

GOALS BUSINESS MATH© Thomson/South-WesternLesson 11.2Slide Break-Even Point Calculate the break-even point for a product in units Calculate the break-even.

Yield Management  A technique used to Maximize Room Revenue  Used for reservations of a Perishable Commodity: –Hotel Rooms –Airplane Seats –Rental Cars.

Chapter Four Cost Volume Profit Analysis. Cost Behavior A cost is classified as either fixed or variable, according to whether the total amount of the.

Analyzing Cost, Volume, and Pricing to Increase Profitability Chapter 3.

Chapter 1 Cost and Sales Concepts

Finance June 2012.

Chapter 1 Cost and Sales Concepts

UNIT: 5.3 – Break-even Analysis pg. 642 Understand/practice break-even analysis & margin of safety IB Business Management.

The Traditional Hotel Industry

1. 2 Recap from Marketing Planning What one thing must your business have in order to be a business?

Reading Strategies ‘Unlocking the Text’. Revenue is all the money that comes into a business. Interest: Many businesses keep their money in a bank account.

1 §2.4 Optimization. The student will learn how to optimization of a function.

Types of Cost Costs Fixed Variable Costs.

5.3 Break-Even Analysis Chapter 32.

2.10 Entrepreneurship I.  A category of expenditure that a business incurs as a result of performing its normal business operations.  Examples include:

Revenue Management Week 5 Subject : V0206 – Administrasi & Operasional Kantor Depan Year : 2009.

Forecasting Rooms Revenue

Business Costs and Revenues Reference 6.1 and 6.2.

© The McGraw-Hill Companies, Inc., 2002 McGraw-Hill/Irwin Cost-Volume-Profit Analysis Chapter 19.

© The McGraw-Hill Companies, Inc., 2005 McGraw-Hill/Irwin 20-1 COST-VOLUME-PROFIT ANALYSIS Chapter 20.

Business Opportunity Lunchtime pitch for a sandwich stall

© The McGraw-Hill Companies, Inc., 2007 McGraw-Hill/Irwin Chapter 22 Cost-Volume-Profit Analysis.

2.10 Entrepreneurship I.  A category of expenditure that a business incurs as a result of performing its normal business operations.  Examples include:

U se of Sales Projections. Factors/Terms Associated with Making Sales Projections 1.Sales Ratio 2.Sales Forecast 3.Break-Even point 4.Economic Outlook.

Lecture 3 Cost-Volume-Profit Analysis. Contribution Margin The Basic Profit Equation Break-even Analysis Solving for targeted profits.

Differential Cost Analysis

PRICING OBJECTIVES, POLICIES, STRATEGIES. A. PRICE MUST COVER: 1. COST OF GOODS SOLD –TOTAL AMOUNT SPENT TO PRODUCE OR BUY THE GOODS THAT HAVE BEEN SOLD.

1-1 Cost Behavior and Cost Volume Profit Analysis Dr. Hisham Madi.

1.2 Linear functions & Applications. Linear Function f defined by (for real numbers m and b) x=independent variable y=dependent variable.

Break Even Analysis.

Differential Cost Analysis

Learning Objectives 1 To define and calculate revenue 2 To describe the different types of cost 3 To calculate revenue.

Break Even Analysis.

MKT-MP-8 Utilize pricing strategies to maximize return and meet customer’s perception of value.

@ 2012, Cengage Learning Cost Behavior and Cost-Volume-Profit Analysis LO 3a – Understanding Break-Even.

Break-even Analysis. Revenues, costs and profits Richard Repairs – your local garage repair service. Reminder for November and December trading. Looks.

The Theory of the Firm. Production Function States the relationship between inputs and outputs Inputs – the factors of production classified as: 

Cost-Volume-Profit Analysis Chapter 2. CVP analysis is used to answer questions such as:  How much must I sell to earn my desired income?  How will.

MODIFIED BREAKEVEN ANALYSIS TOTAL COST CURVES: COSTS AVERAGE COST CURVES: COSTS FIXED COSTS VARIABLE COSTS TOTAL COSTS QUANTITY AVERAGE TOTAL COSTS AVERAGE.

BREAK-EVEN (BE) Unit 2 Business Development Finance GCSE Business Studies.

CH 12 Managing Capacity and Demand

Financial planning: break-even. Syllabus Candidates should be able to: define contribution and contribution per unit (selling price – variable cost per.

Implement expense-control strategies

BUSS1 Formula Profit= Total revenue - Total cost Contribution= Selling price - Variable cost per unit Break-even = fixed cost/ contribution per unit Total.

UNIT 6 COSTS AND PRODUCTION: LONG AND SHORT-RUN, TOTAL, FIXED AND VARIABLE COSTS, LAW OF DIMINISHING RETURNS, INCREASING, CONSTANT AND DIMINISHING RETURNS.

Short-term Decision Making

5-2: What Are the Costs of Production?

IB Business Management

Cost Behavior and Cost-Volume-Profit Analysis

Chapter 1 The Traditional Hotel Industry

SHOW ME THE…….

Implement expense-control strategies

The Traditional Hotel Industry

Implement expense-control strategies

Short-term Decision Making

Pricing Methods Cost-based pricing

Revenue - Expenses = Profit

A.Number 1 B.Number 2 C.Number 3 D.Number 4

COSTS, OUTPUT AND OPTIMAL QUANTITY OF PRODUCTION

Break-Even & Crossover Analysis

A.Number 1 B.Number 2 C.Number 3 D.Number 4

Show Me the Money! Budgeting and Forecasting Revenues

Presentation transcript:

How Hotels Count and Measure Occupancy The relationship between demand (the number of rooms actually sold) and supply (the number of rooms available for sale) Measures the hotel’s “share of the market,” so it measures quantity Occupancy = number of rooms sold ÷ number of rooms available for sale Sales per Occupied Room (Average Daily Rate, ADR) The amount received for each room sold Measures the quality of the business. Normally, price (ADR) increases as occupancy percentage increases Average daily rate = room sales (measured in dollars) ÷ number of rooms sold 1

How Hotels Count and Measure RevPar (Revenue per Available Room) The relationship between revenue per room and the total room inventory available Measure how well front-office managers fill rooms without cutting prices RevPar = room revenue ÷ number of rooms available for sale Double Occupancy Refers to any room in which there is more than one person Double occupancy increases per-room revenue because of the additional charge High double occupancy skews room revenue, and hence ADR, upward Percentage of double occupancy = (number of guests – number of rooms occupied) ÷ number of rooms occupied

How Hotels Count and Measure Break-even Point The point at which there are neither profits nor losses Below this point fixed costs to be paid exceed revenues leading to losses Some fixed costs: interest, lease/mortgage payments, salaries Any revenue above this point makes a huge contribution to profits, once semi-fixed and variable costs are paid Semi-fixed costs: utilities Variable costs: wages, laundry, soap used by guests Over the years, the break-even point has dropped from 70% occupancy to 55% to 60% occupancy 3

Calculating Daily Statistics – Example Notation Item Hotel (A) Number of rooms available for sale 800 (B) Number of rooms in the hotel 820 (C) Number of rooms sold to guest 600 (D) Number of dollars received from guests for rooms $48,000 (E) Number of employees on staff 500 (F) Number of guests 700 Item Hint Hotel Percentage of Occupancy (C)÷(A) 75% Sales per occupied room (ADR) (D)÷(C) $80 Sales per available room (REVPAR) (D)/(A) $60 Mathematical check ADR x Occupancy=REVPAR $80 x 75%=$60 Employees per guest room (E)÷(A) 0.625 Percentage of double occupancy [(F)-(C)]÷(C) 16.6% 4

Calculating Daily Statistics – In-class Assignment Given Notation Item Hotel A Hotel B (A) Number of rooms available for sale 1000 2000 (B) Number of rooms in the hotel 1050 2100 (C) Number of rooms sold to guest 750 1400 (D) Number of dollars received from guests for rooms $75,000 $280,000 (E) Number of employees on staff 650 3000 (F) Number of guests 850 1800 Calculate for both hotels the following: Item Hint Hotel A Hotel B Percentage of Occupancy (C)÷(A) Sales per occupied room (ADR) (D)÷(C) Sales per available room (REVPAR) (D)÷(A) Mathematical check ADR x Occupancy=REVPAR Employees per guest room (E)÷(A) Percentage of double occupancy [(F) -(C)]÷(C) 5

Special Characteristics of the Hotel Business Perishability At midnight, value of unsold inventory is $0 Tomorrow we are selling tomorrow’s inventory Puts pressure to sell “now” Location Fixed Cannot move or “deliver” to high demand areas Changing value of fixed location Re-routing of highway could devastate business Marketing and sales promotion very important Need to bring customers to hotel 6

Special Characteristics of the Hotel Business Fixed Supply, but Varying Demand Example: Our hotel only has 100 rooms Today only 50 are sold, revenue is lost Tomorrow, Super Bowl in town, but I can only sell 100 rooms! No way to make up lost revenue No way to increase production to meet increased demand 7

Special Characteristics of the Hotel Business High Operating Costs Capital Intensive Cost per room is $50,000 to $1 million Labor Intensive Hassles of dealing with labor Costs of dealing with labor High Fixed Costs – Low Variable Costs Even at low/no occupancy we incur fixed costs Mortgage, utilities, salaries, marketing, etc. Variable costs per occupied room are low Cost of cleaning, replacing linen, utilities used, etc. Need to make or exceed Break Even Point High profits, once break-even point exceeded 8

Special Characteristics of the Hotel Business Seasonality Within Year Business fluctuates from winter to spring to summer to fall in most hotels Within Month Business fluctuates from early to mid to late part of the month Within Week Corporate/Downtown hotels busy on weekdays, empty on weekends Leisure hotels busy on weekends, empty on weekdays 9