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,

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.

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.

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

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…!

Space-Space and room block match?-100 sf per room?

Dates-Prime Time?

-Day/ Date Pattern?- Holidays?

Rates-Rate history for Attendees?- Group Pick-up history?

Banquets-Daily spend $125++/day?-Hosted bars?-Sponsored events?

Gaming-Time allowed for activity?-Chips promoted?

Recreation-Time allowed?-Organized?-Spouses program?

Amenities-Time allowed?-Organized?

Outlets-Time allowed?-Vouchers okay?-Specials?

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.

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 Confirmed prices, menus TBD by mutual agreemento Negotiate % discounts: 10% - 20% is commono Current pricing for bookings over a year out.o Menu-matching: See what is already being served

that day and order that too – discuss an additional discount

o Ask for a “Non-Profit,” Fund-Raiser, Veteran’s, Senior or Junior menu to be customized.

o Ask for a seasonal special – a summer light lunch?o Confirm exact menus and price on your contract.o 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…

19

Call me if I can help!

…Thank You!

Tom PashaCONTACT PlanningTel: 407-891-2252tpasha@contactplan.comwww.contactplan.comwww.full-contact-training.comwww.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