An analysis of financial ratios for 601 hotels finds that room revenue, rather than occupancy, is the strongest driver of both departmental expenses and revenues for food, beverage, and other income. The study, which provides updated benchmarks for projecting fixed and variable components of hotel financial performance, finds that hotels generally became more efficient during the study period, 2001 to 2012, with the result that the fixed portion of many expenses declined. These lower fixed expenses appear to be reflected in lower capitalization rates for hotels because expenses are a factor in the risk level of an investment. While hoteliers may wish to use this regression methodology to develop their own analysis, the benchmarks presented are in many cases substantially different from past findings. As examples, the analysis found fixed departmental expense percentages as follows: rooms, 36 percent; food and beverage, 29 percent; and other income, 25 percent. Surprisingly, certain undistributed operating expenses that were considered to be largely fixed also have a substantial variable aspect. Thus, just 33 percent of administrative and general costs were fixed for this sample, as were 29 percent of marketing costs and 33 percent of utilities expenses.
All Science Journal Classification (ASJC) codes
- Tourism, Leisure and Hospitality Management