Ratios
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Ratios helping you
Financial and marketing ratios are created with the use of numerical values taken from financial statements (operating reviews) as well as from marketing data, to gain meaningful information about a company. The most important one is the occupancy rate of your hotel.
Also the average room prices, especially if you compare it to the market averages and to your competitors choices, is interesting. You all start of, in year 0, with 90 | 120, which means average weekend price (lastminute price € 80 and rack rate € 100) is € 90. The average weekday prices (lastminute price € 100 and rack rate € 140) is € 120.
is a very important ratio, which gives you management information on the relationship between the number of occupied rooms and the total number of rooms. Benchmarks will put results into perspective. The occupancy rate is the % of the available rooms booked (occupied) during a certain period between 12.00 and 12.00 the next day.
The hotel market has a structural overcapacity: the supply of hotel rooms exceeds the demand for the hotel(nights). So whatever you do, it is, (as in reality), very difficult to achieve an occupancy rate exceeding 80%. This means that in a year, from your 100 hotel rooms you had 80 rooms occupied. On taking over your occupancy rate is 50% (check key metrics on operating review).
Different target groups, markets
There is also a difference between the two target groups: they each have their own occupancy rate which you can find in your results. Check the next pages for detailed information:
Total capacity of hotel
There is 100 rooms available during 364 days (in all calculations we take 52 weeks x 7 days, so 364). So the maximum capacity is to rent-out 364 days x 100 rooms = 36,400 'room nights'.
Weekends and the leisure target group
Please take into account that in this game a year is calculated as 52 weeks * 7 days = 364 nights per year!
The maximum number of hotel nights to be sold would be:
52 weeks x 100 rooms x 43% weekends x 7 days = 15,652 'room nights' (out of the total of 36,400).
At the average room price (€ 90), that would generate maximum revenue from selling rooms of € 1,408,680.
The revenue from renting the rooms now during weekends is € 704.340 as stated in the Operating review. So € 704,340 ./. € 1,408,680 = 50% of the possibilities at the prices you start off with. Mostly leisure guests.
So, upon taking over the management, the hotel realizes 50% of the maximum revenues on renting weekend rooms of € 1,408,680 per year. So 50% of 15,652 nights is 7,826 night. So an occupancy rate of 50%.
To be more specific on this look at the file Revenue per room.
Trying to analyse the revenues of the rooms as shown in the operating review, might bring some differences to what you expect. This due to -cancellations, overbooking, group-reductions, no shows, friends & relatives (no records available on this). So a few % difference in these revenues is normal.
Weekdays and the business target group
Please take into account that in this game a year is calculated as 52 weeks * 7 days = 364 nights per year!
So the maximum number of hotel nights to be sold would be:
52 weeks x 100 rooms x 57% weekdays x 7 days = 20,748 nights (out of the total of 36.400).
At the average room price (€ 120), that would generate a maximum revenue from selling rooms of € 2,489,760.
The revenue from renting the rooms now during weekdays is € 1,244,880 as stated in the Operating review. So € 1,244,880 ./. € 2,489,760 = 50% of the possible market at the prices you start off with. Mostly business guests.
So, upon taking over the management, the hotel realizes 50% of the maximum revenues on renting weekend rooms of € 2,489,760 per year. So 50% of 20,748 nights is 10,374 night. So an occupancy rate of 50%.
To be more specific on this look at the file Revenue per room.
Trying to analyze the revenues of the rooms as shown in the operating review, might bring some differences to what you expect. This due to -cancellations, overbookings, group-reductions, no shows, friends & relatives. So a few % difference in these revenues is normal.
Total
- Weekends and the leisure target group: 50% occupancy rate of 15.600 room night is approx. 7,800
- Weekdays and the business target group: 50% occupancy rate of 20,800 room night is approx. 10,400
- Average 50% occupancy rate of 36,400 room night (100 rooms x 7 nights times 52 weeks)
Indication
This gives an indication of the maximum growth. Of course, things change if you have a higher occupancy rate AND a higher sales price.
So making additional costs (apart from the fixed and variable costs you cannot "avoid"), this calculated maximum gives you an indication of what you could make on extra costs which still could be earned back. Or, even better, lead to more profit! Also, take into account that last year the net profit was € 486,307.
Benchmarks
All over the year, an average of 50% doesn't seem to be too bad a position to start from. Of course, there is a strong relationship with the profit. Between 50 and 60% as an average all over the years seems to be realistic: check real benchmarks. Above 60% generally means you are doing a good job unless your prices are very low and your costs high. Some periods you can get up to 95%, but as an average all over the year occupancy-rates above 80% are nearly impossible in the industry. Higher prices without explaining to the customers (marketing costs) or proper investments, will make the occupancy rate go down. Lower prices attract cheap-buyers which might boost your occupancy rate. But in the end, per room you will not make less profit so your profit will drop. So it is all about the balance and following your concept.
Type of customers
There is no specific information on the type of customers. The hotel has always been primarily aiming at the business guests and secondly at the leisure guests.
Covid situation
The situation in the hotel industry has been heavily influenced by Corona in 2020 and 2021. We assume, for the time being, that the extreme situation is temporary and that the market will rebound. Emerald Forest Hotel is an international hotel, but most of the guests are leisure guests. And of the business market, about 50% comes from abroad. We see signals in the market to think so.
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