Do Your Hotel Financial Statements Pass the Test?
By David Lund Hospitality & Leadership Expert, The Hotel Financial Coach | March 12, 2017
Do your hotel financial statements give you the information you need to effectively run your business? 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. 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 have the ability to produce an enhanced statement with just a little more detail added that will greatly assist you in effectively managing your business. How would these elements add insight and value to your business? Let’s explore this.
Top line property operating statement showing divisional results in a summary format. This simple and incredibly effective presentation is almost always absent. Hotels will have what they think is a top line summary but it is usually not properly set up. A proper and useful top line statement will have total hotel revenue first. The statement has the current month on the left and its compared to budget/forecast and last year, descriptions down the center and actual year to date on the right followed by budget YTD and YTD last year. Then secondly the rooms section; total room revenues, total payroll, total other expense and next its total rooms expenses and finally rooms profit, 5 lines total. Beside every number is the percentage, so 100% for the revenue, 15% for the payroll and 10% for the expenses, 25% for the total expense and 75% for rooms profit.
Right off the bat you see what matters and we see the same percentages in the budget and last year columns. Next the total F&B section with; total food revenue, total beverage revenue, total other F&B revenue, and then total F&B revenue. Next its food cost, then beverage cost and if applicable other cost of sales, then total cost of sales. Next, its total F&B payroll followed by F&B expenses, total F&B departmental expenses and then total F&B profit, 11 lines. Again, and always we see percentages within the department. What percent of total F&B sales are beverage? What’s my food cost % this month compared to the budget and last year? It’s all here. Next it the same totals for all minor operating departments, with cost of sales, payroll and expense totals, then MOD profit. The next line is other income not including store rents. This brings us to the line, GOI, gross operating income line which equals all profits from all operating departments a critical navel gaze in your hotel.
The next part is for non-operating departments. We start with A&G; total payroll, total expenses and then total A&G, 3 lines. Then its sales and marketing and then POMEC or as some like to call it, maintenance and it has an extra line for total utilities. The next line is total non-operating department costs, the sum of the three departments above. In most hotels, this is the protruding waste line and it's critical to see it clearly. The last line before GOP is store rents and its only for pure retail rent, if you run your own shop it’s a MOD.
The GOP line is critical in that it’s the manager's number, everything above this line is within his or her control, everything below the line is an owners number. Below GOP we want to see management fees. Then its insurance, property taxes, leasing costs, debt or other financing costs and lastly depreciation & reserve for FF&E. Below this, you will want to lay out the occupancy, rate and revpar totals. Next, it’s a F&B customer (covers) summary and average spend and last it’s a payroll and efte summary. If set up properly all of this can be captured in two pages. For most executives, you should be able to get 95% of what you need to see to manage your business from this report. From this greatly enhanced report, you will know where you need to spend your time working on your operation.
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