MPI – SEC Essentials of Hotel Revenue: Income, Expenses, P&L and the Bottom Line

1. 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

2. 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…”

3. 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.

4. 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!

5. 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

6. 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!

7. 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

8. 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.

9. 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.

10. 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.

11. 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

12. 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

13. 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.

14. Evaluate Your Business…Because WE do…!

15. 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!

16. 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.

17. 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: • 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%??

18. 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…

19. 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