Operating review
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All results
The results of your hotel will be made automatically by the accountant. You just have to analyse them, you do not have to calculate them yourselves apart from predictions linked to new costs and team decisions you make. After each year they will be ready for you via your secret Team File link.
Your results presented there will be divided into three parts:
- Section operating review: which you will find on the operating review page with all your revenues and costs resulting in your net profit (or loss). We'll dive into this now.
- The section with your personal key metrics.
- Section Market research, if paid for in advance.
Operating review
An operational review is an in-depth look at the big picture, summarizing the financial effects of your management choices: the costs, revenues and results.
This overview will be made automatically depending on your decisions e.g. and will be visible in your Team File after each year
In the administration of Emerald Forest Hotel, as we use it, no VAT Value Added Tax is visible. That is, not in the revenues, neither on the cost side. Furthermore, there is no record of the liquidity, balance sheets (opening nor end of the year) nor an investment overview.
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.
All Revenues
- Rooms revenues comprise the average (sales) prices the hotel management decided to choose, times the number of booked rooms (occupancy rate).
- F&B revenues: all food and beverages are considered to be incurred 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 information, pictures, and videos on banqueting. The 'other revenues' in this group are additional sales, such as rental bikes, upgrades, cancellation fees e.g. Altogether, a bit more than 8% of the total revenues.
Underneath you'll find an overview which gives some more insights into the revenue structure, as far as information is available in the hotel's administration. This all reflects the year before you take over, the year 0 will be your starting position, the other years just give you an indication of what might happen. The operating review will be created for you, by the accountant: it will be visible (in time due) on the tab results in your Team File.
| Revenues Year 0 | Source | Amount | Percentage | Sub 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 year 0: you cannot influence these costs and prices.
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 0. The four test year are just a basic testing in what this could bring. For now, in year 0, as you take over, these are all zero. These decisions are, what has been lacking, the last few years: you cannot do without anymore.
| Costs in year 0 | Source | Amount | Percentage | Sub 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:
- the fixed costs have stayed the same during all four years, the fixed depreciation costs are one of them.
- the variable costs depend on the occupancy rate like laundry: the more rooms occupied the more laundry.
- the Costs Management Team Decisions, will depend on the Year 1-2-3-4 decisions made by the new Management Team.
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.
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.
More on this on the page Key metrics, the page ratios and benchmarks.
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.
More numbers
Check basic set-up of costs groups in hotels to have some reference on the numbers.
Of course, any situation is different, any time frame (think of the Covid period), the ownership, the state (quality) of the premises etc. The file, though, this might give some ideas from a calculative perspective.
Models in operating a hotel
Read the interesting article on profit-models, ownership and distribution White paper in Hospitality Management, regretfully only in Dutch.
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