MPI – SEC
Essentials of Hotel Revenue:
Income, Expenses, P&L and
the Bottom Line
“ I’ve found a new place to dwell,
It’s down on the end of Lonely Street,
Heartbreak Hotel…”
--Elvis Presley’ s first hit single, January 1957
Tom Pasha, CONTACT Planning
tpasha@contactplan.com
Introductions…

Tom Pasha…






Hotels since age 15
14 Hyatts over 20 years
6-time DOS
National Sales Director
Founded CONTACT Planning,
a national meeting and golf
planning company
Trains planners from
“The Hotel Side…”
1
In this session…





TONS of Information!
Very Interactive
Ask lots of good questions
Take lots of notes…
See how Hotel Finances work,
and Negotiate better bookings.
2
Hotels Need Meeting Business!
Hotels Depend on Groups and
Meetings






Higher rate
Better catering, facility use – golf,
spa, gaming
Prime time groups increase revenue
Off-peak groups increase occupancy
Hotels are designed with Group
Meeting Space to fill rooms!
With that in mind, what can you
Negotiate? Everything!
Rooms Department





Profit Center of a Hotel
Largest Staff, with Front Desk, Bell
Desk and Housekeeping.
Peak staffing and expense during
high-demand times; lower staff and
expense for slower times.
Minimal operating costs / maximum
capital costs = higher profit center
Full rooms drive all other revenue
4
Rooms Make 80% Profit? YES!


All major expenses are covered as Capital expenses,
and are accrued over several years– TV’s, terry,
linen, equipment, etc.
When you calculate the expense of having a guest in
the room, it’s called: CPOR– Cost Per Occupied
Room– typically $20 or less per night.

All other expenses are static, whether the room is
occupied or not– mortgage, taxes, insurance, etc.

Hotels can keep 80 cents of every dollar they touch–
this is a non-gaming hotel’s primary profit center!
5
Food & Beverage





Restaurants, Bars, Rooms Service,
Banquets and Hospitality
Critical marketing / service for hotel
Good F&B fills rooms, banquets
High product cost, high staff costs
make F&B less profitable
Banquets and Beverage are the most
profitable sections of the F&B
department
6
F&B– The “L Side” of the P&L!
-- Outlets makes 15% Profit
-- Banquets make 40% Profit





F&B is much more labor and
materials intensive:
Chefs, not cooks….
Ingredients– baked goods,
butcher, food prep, etc.
Equipment, staffing expense
Total Profit of 20% is good,
but it is needed to fill the
rooms.
7
Hotels Accounting is based on
GAAPS– Generally Accepted
Accounting Principles
Rooms
80% Profit
 Catered F&B
40% Profit
 F&B
20% Profit
 Gaming
90% Profit
 Recreation
90% Profit
_______________________________



Actual “costs” are rarely used to determine rates.
Hotels work toward % of Occupancy and ADR, both
are rolling averages, compared to the Annual Budget.
8
Hotels are a Business…




Annual Budget determines renovations, raises,
promotions, corporate and ownership
expansion…everything!
Marketing Plan and sales budget start now, due in
October, November approval for following year.
Good hotels make 20% GOP; great ones make
over 50%!
Even when the hotel makes 40% GOP, after
insurance, taxes, mortgage, the owner may make
just 4% Net Operating Income.
9
In Financial Matters, Hotels
Measure Everything…





Annual Budget: Day-by-day forecast of all revenue
streams: Rooms, F&B, Recreation, Spa, Casino
Quarterly Forecast
Monthly Forecast
10-Day, 7-Day, 3-Day Forecast
Flash Report (The Daily) is compiled into monthly
P&L, which is compared to the Annual Budget.
10
Does Hotel Revenue Affect
Planners? Hotel Math…








100 SF of mtg space per group room
80% Rooms profit (Mtg space fills rooms)
40% Catered F&B profit
$100-$125 per room per day goal in Catering
300 rms x 365 = 109,500 (100% occupancy)
1095 roomnights = 1% on the annual;
90 roomnights = 1% on monthly;
Occ. rooms x ADR = Revenue @ 80% profit
11
Hotel Revenue Drives Sales






REVPAR:
Revenue per Available Room: Total
Revenue, divided by Total Rooms In-House
ADR:
Average Daily Rate: Total Revenue, Divided
by Occupied Rooms;
Space
100sf per room? What space is left to sell?
Drivers:
Anticipated Catering, Outlets, Golf, Spa,
Casino play, etc. per occupied room;
REVMAX: How a hotel evaluates your business
Hotels work to Maximize Occupancy during slow
times and Maximize Revenue during Prime
Times.
Evaluate Your
Business…Because WE do…!
Space
-Space and
room block
match?
-100 sf per
room?
Gaming
Dates
-Prime Time?
Rates
Banquets
-Daily spend
-Day/ Date
Pattern?
- Holidays?
-Rate history
for Attendees?
$125++/day?
- Group Pick-up
-Hosted bars?
history?
-Sponsored
events?
Recreation
Amenities
Outlets
-Time allowed?
-Organized?
-Time allowed?
-Vouchers okay?
-Specials?
-Time allowed for -Time allowed?
activity?
-Organized?
-Chips promoted? -Spouses
program?
13
Improve Your Booking and
You Can Improve Your Deal…

Since hotels make their revenue
by filling rooms, you can make
your business better!







Sunday Arrivals
Space and Rooms match
Rooms match history
Attendance matches room block
Book shoulder times instead of peak
No (HAS) Hold All Space Bookings
Book Banquet events– call sponsors
and suppliers!
14
From a Financial Standpoint, You Can
Negotiate Your Best Rooms Deal…








Don’t hesitate to ask for what you need the hotel needs your business
Shop several hotels and tell the hotels they
are being shopped.
Tell the hotels your decision date
Meet the GM and DOS and let them know
how important this negotiation will be
Negotiate at month-end and quarter-end
Have a contract draft e-mailed to you; take
some time to look it over.
Negotiate in person, whenever possible
Confirm each point in order; if you get to a
sticking point, pass it and return later.
15
Negotiate “Catering…?”




Catering: The Highest F&B Revenue % in a Hotel!
Catered Food: 40% profit / Beverage @ 25% profit
With that margin, you can negotiate pricing to stretch
your budget.
Know your attendance, history and F&B “spend,” and
you can Negotiate:
o
o
o
o
o
o
o
o
Confirmed prices, menus TBD by mutual agreement
Negotiate % discounts: 10% - 20% is common
Current pricing for bookings over a year out.
Menu-matching: See what is already being served that
day and order that too – discuss an additional discount
Ask for a “Non-Profit,” Fund-Raiser, Veteran’s, Senior or
Junior menu to be customized.
Ask for a seasonal special – a summer light lunch?
Confirm exact menus and price on your contract.
Ask to discount the Service Charge: Do you tip 24%??
Negotiate Value-Added Items:








Value Added Items are Comps and Upgrades–
charged back to the hotel at cost, not retail, so
they don’t hurt the hotel bottom line.
Centerpieces: Mirror Tiles, Votive Candles
Props, themes, linen and napkin upgrade, buffet
lights, up-lights, logo’d décor,
Easels, Stanchions, Risers, Podiums, Flags,
Backdrops
Meet with the Chef and Catering Manager – Ask
what they do best- Seasonal, Farm to Table, Action
Stations, Choice of Entrée, Dual Entrees
House wine included with dinner
Upgraded desserts – chefs love to work with
dessert
Negotiating Rooms and Catering is best
when you know how hotel finances work, so
give it a try, and…
Call me if I can help!
…Thank You!
Tom Pasha
CONTACT Planning
Tel: 407-891-2252
tpasha@contactplan.com
www.contactplan.com
www.full-contact-training.com
www.tompasha.com
www.meetingplannertrainingcamp.com
“ And still those voices are calling from far away,
Wake you up in the middle of the night, just to hear them say,
Welcome to the Hotel California.”
-- The Eagles, Hotel California, 1979
18