How to analyze hotel P&L statement. | Hotel Marketing
September 7, 2020|Hotel Marketing
In terms of laying out your hotel's revenue, cost, and profit performance, it does not get much simpler than a Profit and Loss (P&L) statement, also known as an income statement. It does what it says on the tin.
If the impact of profit and loss on your hotel is entirely new to you, we recommend taking some time to wrap your head around how they work before delving into the analysis stage. Once you are confident with how to read a P&L statement, you can start to ask yourself what these figures mean for your hotel business.
The P&L statement tells you precisely how each department is performing numerically, of course. The sections of your P&L statement will likely be set up by the department as well. Your income section will have subsections for room, bar, and restaurant revenues. On the other hand, your expenses section will have subsections for labor, maintenance, and departmental costs.
Try and keep these subsections the same each year to allow accurate year-on-year comparison between your figures. If you change what is in each section, you will not be able to compare your numbers to previous years, which is arguably the principal purpose of your P&L statement.
A key pitfall for all P&L statements is the classic miscellaneous section, where it is tempting to throw in everything and anything. You can think of miscellaneous income as any revenue arising outside of your operating departments, such as rental, concession, and cancellation fees. On the other hand, you can think of miscellaneous costs as any daily expense that is necessary for your hotel business, such as telephone, electricity, supply items, and the like. Only use these subsections when you need to because you should not change the categories once they are put in place.
Once you are happy with your categories, you can get started with the analysis. The best way to do this is to always compare your figures to something, like looking at figures for the previous years or months.
If you are focusing on the current year, you can compare income figures to the relevant expenditure for each category. For example, you can express your sales as an income-to-expenditure ratio. It simply means the amount of cost per sales. How profitable your hotel is will depend on how effective you are at managing your costs. Again, this is where the miscellaneous section can be quite tricky. It is important not to put anything in these sections unless you need to.
Have a context when you analyze your figures. Are revenues lower than expected? Are your expenses out of hand? The P&L allows you to answer these questions by comparing your profitability across different departments and between like periods of different years. It provides a better insight than the raw data alone.
Once you have done some internal analysis, it is then a good idea to compare your hotel to competing hotels in your market. As the subsections in the P&L statement can vary between each hotel, a like-for like comparison would not be helpful. For example, two hotels will have completely different individual figures if one offers several bars and restaurants, while the other mainly focuses on selling rooms. It is much better to compare general figures like the gross operating profit to the competition by taking your gross revenue and subtracting your gross expenditure.
if we can help with your hotel's revenue management in any way at all, please do get in contact with us through firstname.lastname@example.org or you can give us a call on 888-999-8086.
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