Operating review

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Operating review

An operational review is an in-depth look at the big picture, addressing in this case especially the financial elements so to make the choices, costs, revenues and results clearly visible.
In the administration of Emerald Forest Hotel, as we use it, no VAT Value added tax is visible. Not in the revenues, neither on the cost side. There is no record on the liquidity, balance sheets (opening nor end of the year) nor an investment plan. We consider the revenues and the costs to be without any VAT, and all revenues and costs to be paid at the date they occurred. There are no doubtful receivables.

All Revenues

  • Rooms revenues comprise the average (sales) prices the hotel had decided to choose, times the number of booked rooms (occupancy rate).
  • F&B revenues: all food and beverages are considered to be caused by these hotel guests: so the higher the occupancy rate, the more revenues the hotel gets from food and beverages.
  • Banqueting and other revenues are a separated revenue unit in the hotel. The sales prices of banqueting arrangements in the past, varied from a minimum of € 25 to a maximum of € 30 per person. On the Banqueting page, you can find some more info, pictures, and videos on banqueting. The 'other revenues' in this group are additional sales, renting out bikes, upgrades, cancellation fees e.g. Altogether a bit more than 8% of the total revenues.

Revenues overview history and projection on the coming four years.
We focus on the History now.


Underneath you'll find an overview which gives some more insights into the revenue structure, as far as information is available in the Bergman's administration. This all reflects the year before you take over, the history will be your starting position, the other years just give you an indication of what might happen. You are going to decide on that yourselves.

Revenues HistorySourceAmountPercentageSub total
 Rooms Rooms revenues weekend € 704,340 24.61%
 Rooms revenues weekdays € 1,244,880 43.49% 68.10%
 Food and beverage F&B revenues weekend € 266,080  9.29%
 F&B revenues weekdays € 414,960 14.49% 23.78%
 Banqueting and other revenues  Banqueting and other revenues  € 231,636  8.09%  8.09%
 Total revenues  € 2,861,896  100% 100%

All costs

The situation below is just an example of the projections of costs for the coming four years. Again, the situations as you take over is the history (coloured gray) the rest are predictions.

Costs overview during four years.
We focus on the History now.


Underneath you'll find an overview which gives further insights into the cost structure as far as information is available in the Bergman's administration. This all reflects the situation as you take over, this will be your starting position. Especially the Cost on Management Team Decisions are missing in the relevant year History. The four test year are just a basic testing in what this could bring. For now, in the history these are all zero. These management team decisions is what has been lacking, the last few years: you cannot do without anymore.

 Costs in historySourceAmountPercentageSub total
 Costs: fixed Depreciation costs of existing assets  € 525,187 34.64%
 Fixed staff costs  € 550,271 36.29%
 Costs of premises € 390,473 25.75%
 Insurance & interest costs €  50,012 03.29%
 Total fixed costs € 1,515,943  100% 62.36%
 Costs: variable Variable staff costs € 355,170 38.95%
 Laundry costs € 118,390 12.94%
 Cleaning costs € 236,780 25.88%
 F&B purchase costs € 204,312 22.33%
 Total variable costs € 914,652  100% 37.63%
 Costs: Management Team Decisions Marketing costs € 0 00.00%
 Staff development costs € 0 00.00%
 Extra depreciation costs € 0 00.00%
 Market research costs € 0 00.00%
 Other costs € 0 00.00%
 Total management team decisions costs € 0  100% 00.00%
 Total all costs € 2,430,595   100%

More info on costs:

Net profit

Of course, the net profit per year is very interesting. The total costs will be deducted from the total revenues. If there is a bonus (something which turned out much better than expected) or a fine (tax e.g.) this is added or deducted from the profit leading to the net profit.

Net profit as you take over in grey headed 'history'.
We focus on the history now.

In this example on taking over:
- Total revenues were € 2,861,896
- Total costs € 2,430,595
- Net profit € 436,301

The operating reviews show the profit of any individual year and the total of the net profit (all years added up). Again, in the example a number of predictions for additional costs in the future have been made. More on this on the page Net profit.

Key metrics

Some key metrics and ratios on the operations of the hotel in this section.

Key metrics of the History as the new management team takes over.
We focus on the history now.

More on this on the page Key metrics.

Running a hotel

In the file Running a hotel we've gathered some benchmarks, examples of cost overviews, operating reviews etc. from different organisations. Of course, any situation is different, any time frame (think of the Covid period), the owners ship, the state (quality) of the premises etc. The file, though, this might give some ideas from a calculative perspective.

Analysing

So the net profit on taking over, seems to be 15.21% of the revenues, a good and interesting result. Though, the management did not make enough investments over the recent years, so the depreciation costs have been kind of low. There is no problem with liquidity at all.
Furthermore, the Bergmans did not really consider themselves to be staff, so there hardly have been any wages for them in the staff costs, which distorts the numbers. Their income mainly originated from the net profit which they, partly, took out of the company, being the entrepreneurs.


→ Go! Following the Introduction to the Hotel? Step 10/10 is the page Staff


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Emerald Forest Hotel offering an emerald hotel experience! | Run your own hotel in this management simulation.