Michigan State University Extension
Tourism Educational Materials - 33411028
06/06/02
Hotel/Motel Industry Comparison
List of files and visuals associated with this text.
Industry averages can help you compare the operating
performance of your hotel or motel with other similar
operations. By periodically comparing your occupancy, room
rate, sales and expense figures with industry averages and
your past performance, you can identify areas that need
attention and opportunities to increase your
profitability.
If you are planning a hotel or motel, industry averages
can provide a basis for developing your financial
projections. This data, along with local market area
statistics, can provide you with information to develop
realistic assumptions to support your projections.
This publication summarizes national industry averages for
two types of hotels and motels: full-service properties
that offer food and beverage and limited-service
properties that provide lodging only. While the industry
averages are based on larger properties (generally over 50
rooms), they can still be used to analyze the performance
of smaller motels as sales and expense categories are
typically similar.
The industry averages presented are from "The Host Report:
Annual Report for the Year 1992," a publication of Arthur
Andersen and Smith Travel Research. To order a copy of the
complete report, contact The Host Report, 2115 Fourth
Street, Berkeley, CA 94710.
Occupancy and Room Rate Trends
Two key variables that determine hotel and motel sales are
the Occupancy Percent and the Average Room Rate.
Occupancy Percent is equal to the number of rooms sold
divided by the number of rooms available during a period.
Average daily room rate is equal to total room revenue
divided by the number of rooms sold during the period.
Presented below are 1992 occupancy and average room rate
levels for both full-service and limited-service
properties. (Vis. 1)
Revenue and Expense Industry Averages
The American Hotel & Motel Association has adapted a
series of revenue and expense categories for hotels and
motels called the Uniform System of Accounts. These
accounts provide a standardized format for analyzing your
operation. Definitions of these accounts are presented at
the end of this publication.
Each revenue or expense account can be analyzed as a
percent of sales (% of Sales) or as a dollar amount per
available room ($/Available Room). Accounts that vary in
relation to sales, such as franchise fees, are better
analyzed as a % of Sales. Accounts that are relatively
fixed, such as interest, are better analyzed as a
$/Available Room.
The (Vis. 2) presents industry averages for both
Full-Service and Limited-Service hotels.
Comparison with Your Hotel or Motel
(Vis. 3)
1. Enter your hotel or motel's annual occupancy, average
room rate and income statement data in the first column
titled "$ Amount." If you are using different account
classifications, translate them into this uniform industry
format.
2. For each account, calculate and record your "% of
Sales." Departmental expenses should be based on the
corresponding departmental revenue. All other accounts
should be based on total sales.
3. For each account, calculate and record your
"$/Available Room" ratio. This is simply the amount of
revenue or expense on each line divided by the number of
rooms in your property.
4. Using the industry averages on the previous page,
analyze your "% of Sales" and "$/Avail Room." Look for
significant differences and record your comments in the
space provided.
Once you complete this analysis, focus on those variances
that are significant and controllable. Investigate how
other properties have managed to increase sales or
decrease expenses in the categories you have identified.
Work with your staff to correct problems and set your
sights on doing better than the industry averages.
Chart of Accounts
Room Sales are generated from the rental of overnight
guest rooms. It is a function of the number of rooms in
the property, the days open, the occupancy percentage and
the average daily room rate.
Food Sales are generated in hotel restaurants and banquet
facilities. They are a function of the number of people
served per day and the average food check per person.
Beverage Sales includes wine, liquor and beer sales
generated in the lounge, restaurant or banquet facilities.
Other Food & Beverage Sales includes meeting room revenue
and miscellaneous income.
Telephone Sales include local and long distance calls made
by guests and pay phone commissions.
Minor Department Sales includes gift shop revenue, guest
laundry income and recreation fees.
Rentals and Other Income include space rental,
concessions, commissions, vending machines and other
revenues that are not included in the other departments.
Rooms Department Expense includes payroll for front office
manager, desk clerk, head housekeeper, room inspector,
room cleaner, house person, laundry worker, reservationist
and bellperson. Other expenses include travel agent
commissions, cleaning supplies, laundry supplies, guest
supplies, reservation fees, uniforms and other expenses
related to guest room usage.
Food and Beverage Department Expense include food and
beverage purchases, payroll for the food and beverage
director, restaurant manager, host, servers, bus person,
cook, dishwasher, bartender, and banquet server, and other
expenses such as china, linen, laundry, entertainment, and
supplies.
Telephone Department Expense includes the cost of calls
made by guests and charged to the hotels telephone.
Other Departments Expense includes cost of sales
(typically gift shop and vending goods) and other expenses
related to the minor departments, rentals and other
income.
Administrative & General Expense includes payroll for the
general manager, secretary, controller, night auditor, and
security person. Other expenses include credit card
commissions, liability insurance, postage, office
supplies, dues and subscriptions and other administrative
expenses.
Marketing Expense includes payroll for the marketing
director and sales person. Other expenses include
advertising, merchandising costs, and sales office
expenses.
Franchise Fees includes marketing and royalty fees paid to
a regional or national chain.
Energy Expense includes electricity, gas, water and sewer
services.
Property Operations and Maintenance Expense includes
payroll for the chief engineer, general maintenance and
grounds person. Other expenses include supplies, materials
and contracted work.
Management Fees includes the fees paid to a management
company for operating the property.
Property Taxes include both the real property and personal
property taxes.
Insurance Expense includes the cost of insuring against
damage or destruction to the building and its contents.
Rent Expense is the amount paid for leasing or renting
land, buildings, furnishings, fixtures or equipment.
Interest Expense is the periodic charge for the use of
funds loaned by a bank or other lender.
Depreciation/Amortization Expense is a measure of the loss
of value of business assets during a period. It is an
accounting measure and may not correspond to the market
value of the assets.
This publication was produced by the Tourism Research and
Resource Center, University of Wisconsin-Cooperative
Extension.
Written by Bill Ryan with layout and technical assistance
provided by Karen Marvin.
UW-Extension provides equal opportunities in employment
and programming, including Title IX requirements.
University of Wisconsin-Extension, United States
Department of Agriculture and Wisconsin Counties
Cooperating. A partner in education with the University of
Wisconsin-Extension and the U.S. Small Business
Administration. If you need this material in an
alternative format please contact the program coordinator
or the UWEX Affirmative Action Office.
This information is for educational purposes only. References
to commercial products or trade names does not imply
endorsement by MSU Extension or bias against those not
mentioned. This information becomes public property upon
publication and may be printed verbatim with credit to MSU
Extension. Reprinting cannot be used to endorse or advertise
a commercial product or company.
This file was generated from data base TD on 09/30/03.
Data base TD was last revised on 06/06/02.
For more information about this data base or its contents please contact
alexande@msue.msu.edu . Please read our
disclaimer for important
information about using our site.
