Difference between revisions of "Investments"

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== Costs and investments ==
== Costs and investments ==
The website [https://www.fixr.com/costs/build-hotel what does it cost to build a hotel] gives some outlines on the total of investments building a new hotel. Looking into renovation costs,[https://assetsamerica.com/hotel-renovation-costs-companies/ this website gives some insights]. Also, check the [[rooms]] page, with some links to websites that give an indication of costs. Looking at KPI's and ratios in general, check [https://businessblog.trivago.com/revenue-management-tips-small-hotels/ this site].<br>
The website [https://www.fixr.com/costs/build-hotel what does it cost to build a hotel] gives some outlines on the total of investments building a new hotel. Looking into renovation costs, [https://assetsamerica.com/hotel-renovation-costs-companies/ this website gives some insights]. Also, check the [[rooms]] page, with some links to websites that give an indication of costs. Looking at KPI's and ratios in general, check [https://businessblog.trivago.com/revenue-management-tips-small-hotels/ this site].<br>
Of course, any situation is different, any time frame (think of the [[Covid]] period), the ownership, the state (quality) of the premises etc.
Of course, any situation is different, any time frame (think of the [[Covid]] period), the ownership, the state (quality) of the premises etc.
A good starting point for as an example of the cost of hotel 'equipment', you can might find in this  [https://www.nehmer.com/costguide costguide] giving an overview of costs related to renovating rooms.<br><br>
A good starting point for as an example of the cost of hotel 'equipment', you can might find in this  [https://www.nehmer.com/costguide costguide] giving an overview of costs related to renovating rooms.<br><br>

Revision as of 11:41, 29 August 2023

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Cost groups

There are three major cost groups indicated in the operating review after each year:

  • The fixed costs stay the same during all of the years, and the fixed depreciation costs are one of them.
  • The variable costs, depend on the occupancy rate.
  • The costs Management Team Decisions, will depend on the decisions the new Management Team takes, after taking over. All these costs are incremental.

Fixed depreciation costs of existing assets

There is a number of depreciation costs of existing assets, set at € 525,187 fixed costs which you can find in the operating review and which you cannot influence. This part of the fixed costs is called depreciation costs of existing assets. You do not have to bother about this amount, though it is around 34.64% of your total costs. As these costs are fixed, they are not influenced by the occupancy rate, by decisions in the near future and will stay the same all over the years.

Example of all costs data in four consecutive years.

In the example Team file, you will get additional information if you a mouse over the cells in column A. The same goes for your own hotel's Team File.

New investments

However, if you do new investments, you new additional costs occur in the group Depreciation costs of new investments in your operating review. The depreciation costs of these investments, is done automatically according to the rules on the investments page.
Looking at the market and the cost structure, a maximum investment of € 900,000 per year is advised by the hotel's accountant. Of course, there needs to be an exact plan on what to use this money for. There is no worry about financing these kinds of investments; the liquidity to finance an investment of € 900,000 per year is no problem.

Let's have a look at an investment of € 900,000 per year. Presume the new investments would be linearly depreciated in 4 years without any residual value, we would see costs as in the table underneath.

Investments and depreciation
Year Investment Additional yearly depreciationTotal depreciation costs in this year
Year 0 Not done € 0 € 0
Year 1 Max € 900,000 € 225,000 € 225,000
Year 2Max € 900,000 € 225,000 € 450,000
Year 3 Max € 900,000 € 225,000 € 675,000
Year 4 Max € 900,000 € 225,000 € 900,000
TotalMax € 3,600,000 € 2,250,000


In the Game we always assume, all investments to be equally/linearly depreciated over a period of four years, without any residual value. Another presumption; all investments immediately take effect from January first in the applicable year.

Investments and depreciation
Year Investment Additional yearly depreciationTotal depreciation costs in this year
Year 0 Not done € 0 € 0
Year 1 € 100,000 € 25,000 € 25,000
Year 2 none 0 € 25,000
Year 3 € 200,000 € 50,000 € 75.000
Year 4 € 900,000 € 225,000 € 300,000
Total€ 1.200,000 € 425,000

How big should the investment be?

As stated, the hotel is getting outdated and does have the liquidity to invest. First of all, you have to have a clear plan; what do you exactly want to do? Does this fit in with your strategy? Secondly, realise that investments bring costs (the depreciation as explained above). So, will the incremental revenues compensate the additional costs and will, in the end, the profit go up?
Do you want to renovate the sauna, what does this cost? Well, check the internet, or look at similar cases. An educated guess is required, so estimate the costs yourself, based on any comparable prices you have found. Try to be realistic, but as in reality 'how much does it cost' depend on so many things and is not easy to answer.
The excellent Hotel cost estimating guide 2023 of JN + A and HVS design gives you information on the cost of upgrading elements in the hotel. Check this guide to get a grip on costs of new investments. Feel free to use another guide, if that is more appropriate for your hotel. Do not get lost in too many details; rather thinks in hundreds and in thousands of euro's.
Or, use horwathhtl to get an estimate.

Costs and investments

The website what does it cost to build a hotel gives some outlines on the total of investments building a new hotel. Looking into renovation costs, this website gives some insights. Also, check the rooms page, with some links to websites that give an indication of costs. Looking at KPI's and ratios in general, check this site.
Of course, any situation is different, any time frame (think of the Covid period), the ownership, the state (quality) of the premises etc. A good starting point for as an example of the cost of hotel 'equipment', you can might find in this costguide giving an overview of costs related to renovating rooms.


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