Claudio Esposito’s Post

RevPAR vs. GOPPAR: Which Metric Matters Most for Your Hotel? For hoteliers striving to maximize profitability, understanding key performance metrics is essential. Two of the most discussed metrics in revenue management are Revenue Per Available Room (RevPAR) and Gross Operating Profit Per Available Room (GOPPAR). But which one should you focus on to truly measure your hotel’s success? What is RevPAR? RevPAR calculates revenue generated per available room, giving a snapshot of your property's financial health based on occupancy and room rates. The formula is: RevPAR = Total Room Revenue ÷ Total Available Rooms Or RevPAR = Average Daily Rate (ADR) × Occupancy Rate RevPAR is ideal for gauging top-line performance and helps you understand how effectively you're filling rooms at profitable rates. However, RevPAR alone doesn’t account for operational costs, meaning it only tells part of the story. What is GOPPAR? GOPPAR, on the other hand, considers your hotel’s gross operating profit relative to available rooms. The formula is: GOPPAR = Gross Operating Profit ÷ Total Available Rooms This metric dives deeper, reflecting how well you manage costs across various revenue streams (F&B, spa, events, etc.). It measures bottom-line profitability, making it a comprehensive indicator of overall financial health. Which Metric Matters More? The answer depends on your goals: If your primary focus is increasing occupancy and revenue, RevPAR is invaluable. For a holistic view that includes cost control and profitability, GOPPAR is essential. Modern hoteliers often use both metrics in tandem. RevPAR helps drive revenue strategies, while GOPPAR ensures those efforts translate to real profit. How to Balance RevPAR and GOPPAR? Optimize Pricing: Use dynamic pricing to balance high occupancy with competitive rates. Control Costs: Monitor expenses in F&B, labor, and utilities to enhance GOPPAR. Diversify Revenue: Explore ancillary revenue opportunities to bolster both metrics. Understanding the interplay between RevPAR and GOPPAR ensures a well-rounded approach to hotel revenue management. Prioritize smart strategies that drive sustainable growth—not just short-term wins.

Why hotels don't offer a 24-hour checkout time based on the check-in period ? Hotels typically have a standard checkout time, which is usually around 11:00 AM or 12:00 PM, regardless of the check-in time. There are several reasons why hotels don't offer a 24-hour checkout time based on the check-in period: 1. Operational Efficiency: Hotels need time to clean and prepare rooms for incoming guests. By having a standard checkout time, housekeeping staff can efficiently clean and maintain rooms, ensuring that they are ready for new guests in a timely manner. 2. Room Availability: If hotels allowed guests to check out at any time based on their check-in period, it could lead to a shortage of available rooms for new guests. Having a standard checkout time helps hotels manage room availability and ensure a smooth check-in process for incoming guests. 3. Staffing and Scheduling: Hotel operations, including housekeeping and front desk staff, are typically scheduled based on the standard checkout time. Having a consistent checkout time allows hotels to plan and allocate resources effectively, ensuring that staff members are available to assist guests during peak hours. 4. Revenue Management: The standard checkout time allows hotels to optimize their revenue management strategies. It enables them to plan for expected check-ins and check-outs, allocate rooms efficiently, and maximize occupancy rates. However, it's worth noting that some hotels do offer flexible checkout options, such as late checkout or early check-in, for an additional fee or based on availability. These options allow guests to extend their stay or check-in earlier, providing more flexibility while still maintaining operational efficiency. Ultimately, the checkout time is a balance between guest convenience, operational efficiency, and revenue management for hotels. Source: Forbes

Variable costs vs Fixed costs For many hoteliers, the definition of this is simple but when relating it to examples some might have a challenge explaining that. I have seen this question in an interview call for a mid-level manager position. Therefore, it is worth understanding as we manage variable expenses in day-by-day operations, and we don’t have control over fixed costs. Let’s Look at the definitions: 𝐅𝐢𝐱𝐞𝐝 𝐂𝐨𝐬𝐭𝐬: Are the expenses normally not affected by changes in occupancy or volume. Some examples: Government fees. Licenses. Hotel Operating software. Employee wages/insurance. TV Channels, Movies subscriptions. Various Mandatory Audits. Annual Maintenance Contracts. (AMC) 𝐕𝐚𝐫𝐢𝐚𝐛𝐥𝐞 𝐂𝐨𝐬𝐭𝐬: Are expenses related to hotel occupancy and volume. As business volume or occupancy increases, variable costs will increase; as hotel occupancy decreases, variable costs should decrease. Some examples: Guest Supplies. Cleaning Supplies. Operating Supplies. Laundry Operation. Food & Beverage. Travel Agency Commission. Decoration and Flower. Why did we say occupancy & volume? The hotel can be full with a group of single occupancy so the variable will increase, cost will increase more if the volume (family guests) is staying in the hotel as the consumption of guest supplies will be more. Same for F&B, their variable cost is linked to the number of covers they do, their guests are a mix of in-house and visitors so their costs increase or decrease based on volume (hotel can be low occupancy but restaurant is still full) Any fixed cost can turn to a variable? Yes, some fixed costs but not all can be reviewed and adjusted if the long-term business forecast shows a continuous drop, examples of some fixed costs that can be reviewed and adjusted : AMC contracts: Various contracts with third-party suppliers can be reviewed and adjusted in terms of the quantity and area coverage to reduce the impact of the cost for a certain period. This doesn't necessarily means monthly changes but more it can be over certain season or periods.

Variable costs vs Fixed costs For many hoteliers, the definition of this is simple but when relating it to examples some might have a challenge explaining that. I have seen this question in an interview call for a mid-level manager position. Therefore, it is worth understanding as we manage variable expenses in day-by-day operations, and we don’t have control over fixed costs. Let’s Look at the definitions: 𝐅𝐢𝐱𝐞𝐝 𝐂𝐨𝐬𝐭𝐬: Are the expenses normally not affected by changes in occupancy or volume. Some examples: Government fees. Licenses. Hotel Operating software. Employee wages/insurance. TV Channels, Movies subscriptions. Various Mandatory Audits. Annual Maintenance Contracts. (AMC) 𝐕𝐚𝐫𝐢𝐚𝐛𝐥𝐞 𝐂𝐨𝐬𝐭𝐬: Are expenses related to hotel occupancy and volume. As business volume or occupancy increases, variable costs will increase; as hotel occupancy decreases, variable costs should decrease. Some examples: Guest Supplies. Cleaning Supplies. Operating Supplies. Laundry Operation. Food & Beverage. Travel Agency Commission. Decoration and Flower. Why did we say occupancy & volume? The hotel can be full with a group of single occupancy so the variable will increase, cost will increase more if the volume (family guests) is staying in the hotel as the consumption of guest supplies will be more. Same for F&B, their variable cost is linked to the number of covers they do, their guests are a mix of in-house and visitors so their costs increase or decrease based on volume (hotel can be low occupancy but restaurant is still full) Any fixed cost can turn to a variable? Yes, some fixed costs but not all can be reviewed and adjusted if the long-term business forecast shows a continuous drop, examples of some fixed costs that can be reviewed and adjusted : AMC contracts: Various contracts with third-party suppliers can be reviewed and adjusted in terms of the quantity and area coverage to reduce the impact of the cost for a certain period. This doesn't necessarily means monthly changes but more it can be over certain season or periods.

The Hotel Complex financial model is a comprehensive tool designed to analyze the financial aspects of a multi-facility hotel operation. It encompasses key components such as revenue streams, operating expenses, occupancy rates, room rates, and financial projections. This model provides insights into the financial performance of the hotel complex, enabling informed decision-making, budgeting, pricing optimization, and growth planning. Key Components: - Revenue Streams: The model assesses revenue sources from room bookings, food and beverage services, and mobile app memberships. - Operating Expenses: It includes costs for staff, maintenance, utilities, marketing, administrative expenses, and other operational expenditures necessary to run the hotel complex. - Occupancy Rates and Room Rates: The model factors in projected occupancy rates and room rates, influencing revenue and profitability. - Financial Projections: It generates forecasts for revenue, expenses, profit margins, and cash flow, allowing stakeholders to assess the financial health and growth potential of the hotel complex, as well as the valuation of the business. Key Benefits: - Informed Decision Making: The Hotel Complex financial model empowers owners and operators to make data-driven decisions regarding pricing strategies, marketing campaigns, facility upgrades, and resource allocation. - Budgeting and Cost Control: By providing a comprehensive overview of expenses and potential revenues, the model assists in budgeting and cost control measures, ensuring financial stability. - Pricing Optimization: The financial model aids in optimizing pricing strategies by considering market conditions, occupancy rates, and competitive rates, ensuring profitability and occupancy. - Growth Planning: Financial projections support growth planning by allowing stakeholders to assess the potential outcomes of expanding facilities (3 locations are included) or improving services. Maximize returns in the hospitality industry with this comprehensive 5-year DCF financial model for hotel complexes. Forecast revenue, analyze investment opportunities, and optimize strategies for success in the hotel industry. 🏨💼📈 #HotelIndustry #Hospitality #FinancialModel

Title: The Three Pillars of Success in the Hospitality Industry: Money, Property, and People. In the dynamic world of the hospitality industry, where every day presents a unique challenge, true leadership demands a balance of several key elements. To become a successful leader or General Manager, one must master the art of managing **money**, **property**, and most importantly, **people**. These three pillars are interconnected, and their harmony ensures the growth and sustainability of any hotel. 1. Money: The Lifeblood of Operations The first aspect, **money**, is the backbone of any business. In the hospitality industry, financial prudence determines not only profitability but also the long-term survival of the hotel. A successful leader understands that proper budgeting, cost control, and revenue management are essential. From efficiently managing operational expenses to maximizing revenue through innovative services, staying on top of financial goals is crucial. Whether it's minimizing waste or capitalizing on market trends, every penny saved or earned contributes directly to the hotel's overall success. A true leader ensures that financial transparency exists at all levels, fostering trust within the team and encouraging sound financial practices. 2. Property: The Heart of Hospitality A well-maintained **property** is essential for creating a lasting impression on guests. The hotel's physical condition reflects its brand and sets the tone for the overall guest experience. From the lobby to the guest rooms, cleanliness, functionality, and ambiance speak volumes about the hotel’s commitment to quality. A great leader pays attention to even the smallest details, understanding that a pristine and aesthetically pleasing environment elevates the guest experience. Maintaining the property goes beyond aesthetic value—it extends to ensuring that the infrastructure is up to standard and that routine maintenance is carried out effectively. A well-kept property, after all, is a hotel’s most valuable asset. 3. People: The Soul of Hospitality While money and property are vital, **people** are at the heart of the hospitality industry. Employees, from room attendants to front desk staff, are the face of the hotel, and the way they interact with guests leaves a lasting impression. Valuing and investing in people creates an environment where staff feel appreciated, motivated, and ready to deliver exceptional service. Great leaders recognize that employees are their greatest asset. They create a positive work culture, encourage growth through training and development, and empower their teams to take ownership of their roles. A motivated team can turn even the most challenging situations into opportunities for excellence, and in turn, guests receive outstanding service, leading to repeat business and positive reviews. Balancing these three pillars—money, property, and people—is the key to becoming an exceptional leader in the hospitality .

The Hotel Complex financial model is a comprehensive tool designed to analyze the financial aspects of a multi-facility hotel operation. It encompasses key components such as revenue streams, operating expenses, occupancy rates, room rates, and financial projections. This model provides insights into the financial performance of the hotel complex, enabling informed decision-making, budgeting, pricing optimization, and growth planning. Key Components: Revenue Streams: The model assesses revenue sources from room bookings, food and beverage services, and mobile app memberships. Operating Expenses: It includes costs for staff, maintenance, utilities, marketing, administrative expenses, and other operational expenditures necessary to run the hotel complex. Occupancy Rates and Room Rates: The model factors in projected occupancy rates and room rates, influencing revenue and profitability. Financial Projections: It generates forecasts for revenue, expenses, profit margins, and cash flow, allowing stakeholders to assess the financial health and growth potential of the hotel complex, as well as the valuation of the business. Key Benefits: Informed Decision Making: The Hotel Complex financial model empowers owners and operators to make data-driven decisions regarding pricing strategies, marketing campaigns, facility upgrades, and resource allocation. Budgeting and Cost Control: By providing a comprehensive overview of expenses and potential revenues, the model assists in budgeting and cost control measures, ensuring financial stability. Pricing Optimization: The financial model aids in optimizing pricing strategies by considering market conditions, occupancy rates, and competitive rates, ensuring profitability and occupancy. Growth Planning: Financial projections support growth planning by allowing stakeholders to assess the potential outcomes of expanding facilities (3 locations are included) or improving services. Unlock opportunities in the hotel complex industry with this detailed financial model. Forecast revenue streams, analyze investment opportunities, and optimize strategies for success in the hospitality business. 🏨💼💰 #HotelComplex #FinancialModel #Hospitality

Agreement Between Real Estate Developer and Hotel Operators The agreement between a real estate developer and hotel operators is a crucial document that outlines the terms and conditions under which the hotel will be developed, managed, and operated. This agreement typically involves a detailed understanding of responsibilities, financial arrangements, performance expectations, and legal obligations. By clearly defining these aspects, both parties can ensure a successful partnership and a profitable venture. 1. Ownership and Management Structure A. Ownership: Clearly define who owns the real estate and the hotel business. This can involve separate entities for the real estate and the hotel operations. B. Management: Specify the management company responsible for the day-to-day operations of the hotel. This can be an independent management company or the hotel brand itself. 2. Financial Arrangements A. Management Fees: Outline the fees paid to the management company for their services. These fees can be fixed, percentage-based, or a combination of both. B. Revenue Sharing: Define how the revenue generated by the hotel will be shared between the developer and the management company. C. Capital Expenditures: Specify who is responsible for funding capital improvements and renovations. 3. Performance Expectations A. Operational Standards: Set clear standards for hotel operations, including service quality, guest satisfaction, and compliance with brand standards. B. Performance Metrics: Establish key performance indicators (KPIs) to measure the hotel's performance, such as occupancy rates, average daily rate (ADR), and revenue per available room (RevPAR). C. Termination Clauses: Include clauses that allow for the termination of the agreement based on poor performance or breach of contract. 4. Legal Obligations A. Compliance: Ensure that both parties comply with local laws and regulations, including zoning laws, building codes, and environmental regulations. B. Liability: Define the liability of each party in case of accidents, damages, or legal disputes. C. Insurance: Specify the insurance requirements for both the real estate and the hotel operations. 5. Exit Strategy A. Sale of Property: Outline the process and conditions under which the property can be sold, including the rights of first refusal for the management company. B. Transfer of Management: Define the process for transferring management to a new company or operator. Ensuring a Successful Partnership A well-structured agreement between a real estate developer and hotel operators is essential for ensuring a successful partnership and a profitable venture. By clearly defining ownership, financial arrangements, performance expectations, legal obligations, and exit strategies, both parties can work together effectively and achieve their respective goals. #RealEstateDevelopment #HotelManagement #AgreementTerms #FinancialArrangements #PerformanceMetrics #LegalObligations

HOSPITALITY NEWS #775 Hotel Financials: Key Changes in USALI 12th Edition The 12th revised edition of the Uniform System of Accounts for the Lodging Industry (USALI) fundamentally enhances the transparency of financial and operational aspects in the hospitality industry. To quote Sir Arthur Conan Doyle's iconic character Sherlock Holmes, “It is a capital mistake to theorize before one has data.” Embodying this wisdom, the updates in USALI provide a robust framework for data-driven decision-making and increased transparency, aligning closely with evolving business needs. These are thoughtful changes, designed to align with the shifting demands of the hospitality industry - these changes support the enhancement of customer experiences, the advancement of corporate sustainability programs, and the integration of digital marketing strategies, ensuring that each decision is backed by clear, actionable data. Clear improvement in the revised USALI elaborates under the sections dealing with the management of the guest loyalty program. The edition categorizes the costs associated with these programs under various schedules, clearly delineating expenses such as member benefits and service recovery efforts. This, therefore, gives hotels a perfect way of accounting for costs that are incurred in running loyalty programs – which play a key role in ensuring customer retention and content. Sources: HN

The Hotel Complex financial model is a comprehensive tool designed to analyze the financial aspects of a multi-facility hotel operation. It encompasses key components such as revenue streams, operating expenses, occupancy rates, room rates, and financial projections. This model provides insights into the financial performance of the hotel complex, enabling informed decision-making, budgeting, pricing optimization, and growth planning. Key Components: - Revenue Streams: The model assesses revenue sources from room bookings, food and beverage services, and mobile app memberships. - Operating Expenses: It includes costs for staff, maintenance, utilities, marketing, administrative expenses, and other operational expenditures necessary to run the hotel complex. - Occupancy Rates and Room Rates: The model factors in projected occupancy rates and room rates, influencing revenue and profitability. - Financial Projections: It generates forecasts for revenue, expenses, profit margins, and cash flow, allowing stakeholders to assess the financial health and growth potential of the hotel complex, as well as the valuation of the business. Key Benefits: - Informed Decision Making: The Hotel Complex financial model empowers owners and operators to make data-driven decisions regarding pricing strategies, marketing campaigns, facility upgrades, and resource allocation. - Budgeting and Cost Control: By providing a comprehensive overview of expenses and potential revenues, the model assists in budgeting and cost control measures, ensuring financial stability. - Pricing Optimization: The financial model aids in optimizing pricing strategies by considering market conditions, occupancy rates, and competitive rates, ensuring profitability and occupancy. - Growth Planning: Financial projections support growth planning by allowing stakeholders to assess the potential outcomes of expanding facilities (3 locations are included) or improving services. 🏨💼 Elevate Your Hospitality Business with Our Hotel Complex Financial Model! 🌟✨Dive into the world of hotel management, forecast revenues, analyze costs, and optimize financial performance with our specialized model. Tailor-made for hoteliers, it's your key to unlocking success in the competitive hospitality industry. Download now and start your journey towards profitability! #HotelManagement #Hospitality #FinancialModel #Success