Do Your Hotel Financial Statements Pass the Test? Part 2

By David Lund Hospitality & Leadership Expert, The Hotel Financial Coach | April 30, 2017

Do your hotel financial statements give you the information you need to effectively manage your hotel? Are you able to see if your profits are where they should be in an enhanced top line statement? Do your statements measure flow thru? Do you record your rooms business by proper segments and track the rooms occupied, rate and revenue in each segment? Do you record customers served in F&B and do you separate meal periods? Do you record liquor, beer, wine and mineral sales on your financials separately? Do you measure labor productivity in your financials? Do you record hours of work in your financials? Do you have payroll segmented by management and hourly classifications? Do you have a separate supplemental payroll and benefits statement? Do you track arrivals and departures?

Most statements I see do not have most of these critical elements included. They’re lacking these incredibly effective items that can easily be added. Most people use the standard format as outlined in the 11th addition of the uniformed system of accounts for the lodging industry. This is great however you can produce an enhanced statement with just a little more detail added that will greatly assist you in effectively managing your hotel.

How Would These Elements add Insight and Value to your Business?

In part one we covered the Top Line Statement format, Flow Thru, Rooms Segmentation, F&B Customers and Average Checks by Meal Period. If you missed part one check out my website and blog post from February 27th, 2017, to get the article.
Measuring Productivity on Your Financial Statements.

The only truly effective way to measure labor productivity in the hotel business is by expressing the productivity in hours per room occupied in the rooms division, hours per cover served in the F&B division and EFTE’s per 100 rooms available in the non-operating departments. In this article, we will concentrate on Rooms and F&B productivity. The reason why hours per is the best way to measure productivity is we divide actual hours worked by the actual volume of business, units sold. Others may say that measuring labor percentage, or dollars of labor per unit sold are effective but the fact is our managers and leaders have no control over wage rates, but they do have control over hours worked, the schedule, and this is what we want them to focus on. Being able to see the hours worked and the number of rooms or covers served in our financial statements means we need to record and book these statistics monthly in a statistical journal entry. We accomplish this by adding a “stats” department to our chart of accounts and the statistical entry and department net to a big fat zero each month.

The beauty of knowing the hours per room occupied is powerful stuff. If we were making cars we would want to know how many hours of work it takes to make a car. We would then want to innovate and find ways to reduce this. In the hotel, it’s the same. We split off the rooms and F&B because they are very different. In the hotel business, we want to know how many hours it takes to service one room or one cover. We then want to innovate to see if our malmanagement practices are actually producing better or worse results and adjust accordingly. The only way to do this is with hours per calculations.

Coming up in January 2018...

Mobile Technology: Relentless Innovation

Technology has become a crucial component in attracting and retaining hotel guests, and the need to enhance a guest’s technology experience is driving a relentless pace of innovation. To meet and exceed guest expectations, 54% of hotels will spend more on technology in 2018, and mobile solutions in particular will top the list of capital investments. Many hotels are integrating mobile booking, mobile keys, mobile payments and mobile check-in into their operations. Other hotels are emphasizing the in-room experience, boosting bandwidth and upgrading flat screen TVs to more easily interface with guest mobile devices. And though not yet mainstream, there are many exciting technology developments on the near horizon. The Internet of Things (loT) is taking form in some places, and can be found in guest room control systems, voice activation systems, and in wearable sensors that can be used for access and payment options. Virtual reality headsets are available at some hotels so guests can enjoy virtual trips to exotic locations or if off-property, preview conference facilities and guest rooms. How long will it be before a hotel employs a fleet of robots for room service, or utilizes a hologram as a concierge, or installs gesture-controlled walls that feature interactive digital displays? Some hotels are already using augmented reality for translation services, or interactive wall maps, or even virtual décor. This pace of innovation is challenging property owners and brands to stay on top of the latest technology trends while still addressing current projects. The January Hotel Business Review will explore what some hotels are doing to maximize their opportunities in the mobile technology space.