Hotel life cycle
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HOTEL LIFE CYCLE. Hotel Lifecycle. ______________. Years Occupancy & Income 0 – 2Introduction to market 2 – 4Occupancy rises slowly 4 – 5Gradual increases in income 5 – 7Stabilized income levels 7 – 10Decline due to deterioration & obsolescence

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HOTEL LIFE CYCLE

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Hotel life cycle

HOTEL LIFE CYCLE


Hotel lifecycle

Hotel Lifecycle

______________

YearsOccupancy & Income

0 – 2Introduction to market

2 – 4Occupancy rises slowly

4 – 5Gradual increases in income

5 – 7Stabilized income levels

7 – 10Decline due to deterioration & obsolescence

Lifecycles can be lengthened based on maintenance & upgrades


Hotel lifecycle1

Hotel Lifecycle

______________


Value per hotel room

Value per Hotel Room

______________


Hotel expenses

Rooms Division

Food & Beverage

______________

Hotel Expenses


Income calculations

Income Calculations

______________

Departmental Expenses = 35%

Operating Expenses = 20%

Fixed Charges Expense = 5%


What makes a hotel profitable

What Makes a Hotel Profitable?

______________

  • Profits = Income before capital reserve, rent, debt service, income taxes, depreciation and amortization.

    Hotels that have higher profit margins:

  • Are smaller

  • Rely less on Food & Beverage

  • Able to control departmental expenses


Controlling labor costs

Controlling Labor Costs

______________

  • Payroll & Benefits:

    = 64% of rooms department expenses

    = 43% of total operating expenses

    = 33% of total revenue

  • Growth of hotel revenues is virtually identical to the growth of labor costs.

    • (Correlation coefficient of 0.9924)

      Ways to control labor

      1.Adjust staffing

      2.Adjust salaries & wages


Franchise fees

Franchise Fees

______________

Franchise fees are the 2nd largest

operating expense after payroll


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