Putting it simply, there is something to be said for picking out key cost lines and creating averages at this granular level, that mean something to you and your operation. A key line here may be for travel agents’ commission or ‘OTA’ (Online Travel Agent) costs – preferably at ‘POR’ level as you will normally only pay commission for bookings actually taken. Even creating a measurement that takes-in your ‘Room REV POR’ and deducting ‘OTA’ costs, ‘POR’ will give you a good idea of room profitability. Utility costs ‘PAR’ and ‘POR’ are also very interesting.
Metrics today are just statistics; and you can choose the wrong ones!
I would recommend reviewing the type of business you are (or think you are) operating and the key elements of it. If you are a lodge selling purely accommodation, then ‘TREV PAR’ will not mean much to you. If you are a resort with F&B and leisure facilities (golf and/or spa), then ‘TREV PAR’ and ‘POR’ will be very important to you.
‘GOP PAR’ and ‘POR’ should be important to you whatever the business, as it is a hotel business efficiency measure and is a good benchmark against other operations – whether within your own business or against a competitor set from any of the benchmarking services such as those of HotStats, STR Global or BDO. Again, make sure you compare like with like when dealing with relative hotels – no point in comparing 3* with 5* performance.
The great thing about the hotel industry is that we have a globally recognised accounting standard – the ‘Uniform System of Accounts for the Lodging Industry’ (also known as ‘USALI’ or ‘Uniform System’) which enables us, as an industry, to do really valid comparisons. This standard has just been updated and the 11th Edition is now officially out there, with HOSPA this autumn covering the major update in many ways. This standard is written into many management contracts across the world, affecting operators and owners alike.
I would always recommend that you don’t overlook other ‘Key Statistics’ that you find important, combining them into a ‘Dashboard’ for your business – something that ‘sits above’ your normal ‘Profit and Loss’ report, and employs all the normal absolute ‘£s’ and percentages that can be easily and readily held in your mind.
Of course Finance should be taking the responsibility of keeping a track of these numbers in the appropriate formats – whether in Excel, a database or indeed an OLAP (Online Analytical Processor that uses Cube technology).
There is also a case to be said for having different Dashboards for different departments (over and above their individual P&L’s from the Uniform System P&L.
So a Housekeeper may have POR’s on Linen, guest Supplies and/or Cleaning materials.
Revenue Management on OTA and Distribution Costs
Maintenance Stats on Utility Costs by Gas, Electric and Water both on POR and a PAR basis.
F&B Management on F&B Sales by outlet on a POR basis, Consumables and Stationery Costs POR.
The trick with these and the overall Dashboard is to keep it simple and let the numbers jump off the page that would otherwise be buried in the overall P&L.
Once a quarter at least review the trends on the graphs – stand back and review the ‘big picture’ and it can be surprising what will appear in front of you!
The trends that can also be tracked over time – preferably in graphs – can be the pure percentage change in a Statistic – this can be quite revealing as below when trying to assess change over a period of time such as above – where this Hotel’s business can be seen to be affected primarily by its volume but is changing latterly to rate.
This can be very enlightening, enabling you to see the change in the numbers over a period of time in a picture (for example, using ‘Revenues Weekly’ and ‘Costs Monthly’). Any spike or serious change can be seen straight away and acted upon, which of course is the point of any useful piece of information.