Financial Ratios from Income Statements: Accounting in hospitality management is carried out to identify and document financial issues and produce information regarding an organization’s assets, liabilities, and investments. Through this process, the management of a hospitality establishment understands and interprets financial ratios, which are crucial for basic control of operations in the establishments. Some of the most important financial ratios in hospitality accounting include average daily rate, occupancy percentage, room sales to total sales, cost of food sold percentage, profit margins for rooms and F&B, housekeeping cost per occupied room, and cost of beverage sold percentage. These financial ratios can be determined or worked …show more content…
The hotel’s first indicator of productivity is its average percentage of labor costs for rooms and F&B departments, whose ratios are within the normal ranges of 18 and 22 percent and 35 and 44 percent respectively. Secondly, since it is a full-service hotel, the establishment’s percentage of cost of food sold is an indicator of profitability that fall within the range of 35 to 45 percent. The third indicator of its profitability is cost of beverage sold percentage, which fall within the normal range of 20 to 25
Next I will need to find out the yearly net income from the investment. This will be gross ticket sales minus the total expenses. Deer Valley expects 300 skiers per day for 40 days at $55.00 per ticket, giving us $660,000 in ticket sales. In order to figure the total expenses I need to separate the fixed and variable expenses. Fixed expenses are those that will be there everyday the lodge is open regardless of the number of skiers. The Lodge is open 200 days per year and the cost of running the new lift is $500 per day for the entire 200 days giving us $100,000 in fixed costs. Variable costs are the expenses based on the number of customers. There is an additional $5 expense per skier per day associated with the new lift. If there are 300 skiers multiplied by $5 each multiplied by the 40 days that they are expected to be on the lift, we will have $60,000 in variable expenses. Fixed costs of $100,000 plus the variable costs of $60,000 will give us $160,000 in total expenses. The gross ticket sales of $660,000 minus the total expenses of $160,000 give us a yearly net income of $500,000.
In analyzing the common-size balance sheet for Applebee’s, it is noted that the total current assets has jumped from 11% to 14% of the total assets. The total assets for Applebee’s has jumped 6% from 2000 to 2001 driven by increased in the total current assets of 28%. Of those 28% increase, they consisted of 88% increase in the Cash & Equivalents (increased of $10.6 millions) caused by the decreased in the Capital Stock repurchasing in 2001 by Applebee’s. The repurchase of capital stock has decreased by 31% as noted from the year-to-year percentage changes of the Statement of Cash Flow which equivalent to about $11 million dollars. The other current assets increased was from the other Current Assets category; there was an increase of 92% from 2000 to 2001. Due to the higher earnings for Applebee’s, there was an increase in income tax due. A significant component of the increase of other Current Assets was from increased in prepaid income taxes with net deferred income tax asset of $6.7 millions dollars.
The sample represents all U.S. regions and several different hotel location types, including city (47.7%), suburb (15.2%), airport (15.2%), and resort (21.9%). The total data presented here are from hotel managers (N = 98) and hourly employees (N=66) who completed a baseline survey followed by daily diary telephone interviews for eight consecutive days.
Marshall, M.H., McManus, W.W., Viele, V.F. (2003). Accounting: What the Numbers Mean. 6th ed. New York: McGraw-Hill Companies.
Hilton Worldwide carries out business through three segments: (1) management and franchise; (2) ownership; and (3) time-share. These business segments enable management to capitalize on strengths like brand recognition and economies of scale. The company focuses primarily on the management and franchise segment which consist of 3,918 hotels with 610,413 rooms. Managing the properties, rather than owning them, allows the company t...
Upon examining P&G’s financial ability to meet short-term obligations, it is apparent that not only have their current liabilities exceeded current assets over the last three years, but close to half of their current assets have been tied up in inventories and other illiquid assets. For example, assessing both the quick and current ratio respectively shows that less than 70% of the firm’s current assets could be converted immediately to pay current commitments, but a little more than 90% of the firm’s liabilities would ultimately be covered. Though, based on industry average similar findings occur; therefore, it must not be uncommon for industries similar to P&G to
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
...hould not be. Alan Campbell who has been working in the hotel industry for over thirty years believes that there should be more that goes into Revenue Management than just what the computer tells us. Campbell states, “Revenue managers need to have a feel for the system, not how it works, but what it does, and how it does it.” In other words a Revenue Manager must know all of the events happening in the area as well as all of the other venues in the area. They must have an instinct for knowing if the numbers are right and will bring the hotel the best property rates.
Amenities, location, packages, rates, special offers - just a few of the many factors that are considered when choosing the functions of a hotel. I was very curious to see how different types of hotels differ in what they offer, how they offer it, and where they offer it. These services are extremely significant because they are what define a hotel. They define what type of guests they are targeting, what type of hotel they want to be perceived as, and what level of service they want to deliver to their guests. The impression of the hotel left on the guest is essential for the success of the hotel. The idea of adding amenities to keep up with competition or getting creative with services offered is not new. The Journal of Retail & Leisure Property mentioned that starting in the 1970’s, “hotels and resorts tried to gain market share from their competitors by increasing amenities in the guest rooms.” The services and amenities have always been a factor when deciding what approach to take when trying to find the most success. By comparing an average 2-3 star hotel with a 5-star hotel, I was able to gain a better understanding of the different services offered in hotels and the different expectations that certain guests have in their stay.
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
b) Managers – that they have very little to no control over their property or employees. It seems like many important decisions have been taken away from managers, and they can not react in the best interest for the hotel chain because what’s in the customer’s best interest is usually not the same as the company’s best interest.
The Marriott Corporation (MC), had seen a long, successful reign in the hospitality industry until the late 1980s. An economic downturn and the 1990 real estate crash resulted in MC owning newly developed hotel properties with no potential buyers in sight and a mound of debt. During the late 1980s, MC had promised in their annual reports to sell off some of their hotel properties and reduce their burden of debt. However, the company made little progress toward fulfilling that promise. During 1992, MC realized that financial results were only slightly up from the previous year and their ability to raise funds in the capital market was severely limited. MC was left with little choice, as they had to consider some major changes within the company if they wished to remain a successful business. Thus, J.W. Marriott, Jr., Chairman of the board and president of MC, turned to Stephen Bollenbach, the new chief financial officer, for ideas and guidance.
As the marketing consultant for a hospitality management company, it is often my responsibility to define target markets for various restaurants and hotels. In fact, I have been tasked with creating a fictional hospitality operation, to utilize as an illustration to define a marketing strategy and target market. In addition, I must identify and analyze the product life cycle of an organization that has been in business for a minimum of twenty-five years.
Whitla, P., Walters, P., Davies, H. 2007, Global strategies in the international hotel industry, Hospitality Management, vol. 26, pp. 777–792.
However the cash surplus generated during peak period that is July to November is typically enough to meet the short fall. But this year the hotel requires major renovations in order to be continually be able to attract guests. They estimated that the renovations will cost $250000 but now it appears that $300000 of work is necessary. Also their long term group also manager has also left unexpectedly and her replacement is not as effective in obtaining business from the regional business and organization. Furthermore their revenues have also declined by 15% for January and February and advance booking are also down. Thus a cash flow forecast is made to estimate the