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Economic analysis of hotel
The economics of the hotel industry
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Paragraph 1 – introduction. This should refer to the essay title and tell the reader what the essay is about in the order that the information will be presented.
REVPAR: Room Revenue per available Room
In today’s dynamic scenario and ever changing economies it is necessary to evaluate the revenues and expenses of your hotels and keep track of records in an updated tabulated way. For the same, analysis of certain industry ratios like the Revenue Per Available Room (RevPAR), the Average Daily Rate (ADR) and the Occupancy Rate, it becomes quite convenient to make a comparison between the previous year and the present year. Revenue Per Available Room (RevPAR), is certainly the most crucial ratio popularly used to assess the
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Both are different as REVPAR is about revenue and GOPPAR is about profit. Hence it is contradictory that REVPAR portraits the country level captivity of the hospitality industry and therefore helps in analyzing the top line whereas GOPPAR effects the bottom line. http://www.performancemagazine.org/measuring-hotel-performance-revpar-versus-goppar/ GOPPAR addresses the cost allocation and control of management of the hotel and is a compulsion for formulating any proper room pricing strategy. Logically REVPAR is a rather ineffective measurement but the fact stays that it should not be the only tool for measuring the hotels revenue. http://www.ukessays.com/essays/tourism/front-office-department-and-the-yield-management-tourism-essay.php#ixzz3FZe3JBij Revenue Mix: REVPAR measures only the total rooms’ income generator and it doesn’t take into account revenues from other areas of the hotel. This resulted in an inaccurate analysis when comparing hotel performances.
Consequently arose the need for GOPPAR /PROFPAR which stated the total operating profit of the hotel and helps delve into numbers to survive in this competitive environment. http://dreamstech.in/ryh/revpar-goppar-profpar-which-is-a-key-metric/ By Elie Younes, Associate, HVS
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On the other hand, GOPPAR provides a rooted hint of a hotel's profitability by taking into regard management control and efficiency. In addition, GOPPAR offers an overall more sturdy performance measure, especially when comparing the financial performances of hotels with different sizes or in different markets. The use of GOPPAR as a addition to RevPAR for hotel performance will thus enable a more accurate basis for hotel investment appraisal than relying merely on
In Be Our Guest, Inc.’s scenario, we can see that the total cash flow from operations increased from 1995, $168,000, to 1997, $229,000, by 37%. This increase to the CFO is a result of a few different accounts. Although net income decreased 22.8% from 1995 to 1997, because depreciation increased 25.8% from 1995 to 1997, the total net income adjusted for non-cash charges increased by 4% from $250,000 to $259,000, from 1995 to 1997. The changes to Accounts Receivable over the years reduce cash flow from operations by $75,000, $46, $42,633 in 1995, 1996, and 1997, respectively. These increases in accounts receivable cause the cash flow from operations to decrease because Be Our Guest, Inc. collected less money from their customers compared to the sales. Whereas, the changes in Accounts payable & accruals of, $5,768, $19,063, and $14,859, in 1995, 1996, and 1997, respectively, caused the cash flow from operations to increase because Be Our Guest, Inc. is paying their suppliers less, indicating they are retaining more cash for
The first method we will review is the accounting method. Through this accounting approach we will analyze specific ratios and their possible impact on the company's performance. The specific ratios we will review include the return on total assets, return on equity, gross profit margin, earnings per share, price earnings ratio, debt to assets, debt to equity, accounts receivable turnover, total asset turnover, fixed asset turnover, and average collection period. I will explain each ratio in greater detail, and why I have included it in this analysis, when I give the results of each specific ratio calculation.
After finding the appropriate risk-free rates and risk premiums, we began finding the Betas for each division of Marriott (Exhibit 1). We began by selecting an appropriate proxy firm for each of Marriott's three divisions. Lodging was the first division we analyzed. La Quinta Motor Inns seem to be the best pure-play. La Quinta's operations consisted of strictily lodging. It owns, operates, and licences motor inns which matches well with Marriott's operations in the lodging division. In order to calculate the betas of this division, we had to find the cost of debt. The cost of debt we used came from interest rates on long-term 30-yr government bonds plus it's debt rate premium because Marriot's lodging assets had long-term useful lives. After finding the cost of debt for the logding division, we calculated the division's beta of debt which came out to be 1.0233. Finally, we used the beta of debt to find the beta of the division's assets which came to .737.
Organizations use financial statements and ratio analysis assess financial performance viability. The ratio analysis are used to identify trends and to perform organizational comparison (financial) with other companies within same industry. Ratio analysis, using data reported on the financial statements, are divided into five major categories: common size, liquidity, solvency, efficiency, and profitability. This paper will assess the financial stability of John Hopkins Hospital (JHH) using the five ratio analysis.
...s combination of useful ways to compare, determine, and measure profits, own hospital, and other organizations. The equations and calculations are created for the purpose for organizations and management to use of company standing and profit growth. Accounts receivables is complex, but is created to have a revenue cycle and bring payments in. The revenue cycle is a methodical process used in most organizations for scheduling, revenue turning into cash, and problem solving. Banking relationships are always necessary if the organization permits, and banks are always available to help manage an organization. It’s clear numerous tools and resources are available to help management run their organization smoothly as hurdles can happen of issues. Ratios and accounting equations have a beneficial way of helping organizations in determining the overall standing of growth.
The lodging industry has seen improvement since the economic downturn of late 2007. There are factors beyond the industries control that could stifle growth in the industry, including but not limited to the still weak global economy and governmental breakdown. Since 2010, the industry has seen steady growth in average daily room rate (ADR), revenue per available room (RevPAR), revenue and net income. The have either reached or almost reached pre-downturn (2007) rates. Room construction in much of the United States has also started to rise again but at a slower rate than the financial indicators.
Thanks to these factors, pricing becomes one of the primary uses with which hotels attract customers. However, due to customers’ independent nature, there influence over industry players is limited. In the high-end segment of hotels, price influence becomes even less as hotels find it easier to differentiate themselves from the competition and customers become less price sensitive coming to expect higher prices as a symbolism of superior quality and services. Lastly, corporate business and tour operators can exert more influence due to their large purchases but this affect is of a limited nature and does not extend across the whole
The Hotel industry has become very important in the past years due to immense traveling and growth of international business. Hotel industry not only plays an important role in the life of people but as well as the economy of the country. Development and advancement in the Hotel industry have rapidly been taking place and especially since the rapid change in technology, it is very important for hotels to be promptly keeping up to date. When the hotel industry is spoken of, there are many famous hotels but one hotel company that has been outstanding in growth and other aspects of business, like in Leadership, Teamwork (Employee turnover), Motivation (Customer retention and satisfaction, Goals and objectives, (changing the way hotel business has worked), and Change within the company; structurally inside and physically outside, adding elements, like entertainment, gaming, and outdoor activities, is the Hilton Hotel Company.
Introduction Paragraph (You should have an idea of your hook, bridge and lastly your thesis statement as Letter C.)
The hotel industry performs within a saturated market, driven by customer loyalty and competitive pricing to stand-out. This competitive nature makes it extremely important to capitalise on strengths while improving on
Gross operating profit per available room (GOPPAR) is defined as total gross operating profit (GOP) per available room per day.It is also defined as a hotel’s total revenue minus its management’s controllable expenses per available room.
2. Demand-supply gap : Indian hotel industry is facing a mismatch between the demand and supply of rooms leading to higher room rates and occupancy levels. With the privilege of hosting Commonwealth Games 2010 there is more demand of rooms in five star hotels. This has led to the rapid expansion of the sector.
“The objective of this phase is to identify events and or future trends that will affect the hotel industry over the next five years. Also, the impact that those events and trends will have on your business in terms of cost and revenue changes and the timing of the impact.” (Fedele, 2010) For each of the external environment, it is also to identify what will affect the performance of the business.
Whitla, P., Walters, P., Davies, H. 2007, Global strategies in the international hotel industry, Hospitality Management, vol. 26, pp. 777–792.
The terms variable and fixed costs related to a hotel are used to distinguish between those costs that have or do not have a direct relationship to occupancy.