HBM 491 Spring
Summary Operating Statement Problem (40 points)
Due 03/26/2020
Your assignment is to prepare a hotel summary operating statement for analysis and then evaluate the hotel’s performance by comparing actual results to budget for a 4-month period. Students are to evaluate revenue, departmental expenses, and undistributed operating expenses for the purpose of determining their impact on gross operating profit (income before fixed charges).
1. Part I worth 15 points. Students must submit a summary operating statement using a spreadsheet that consists of 10 columns:
Budget dollar figures for the 4-month period (given)
Actual dollar figures for the 4-month period (given)
Absolute differences between the budget and actual figures
Relative differences between the budget and actual figures
*Percentage of revenues for actual figures
*Percentage of revenues for budget figures
Per occupied room for actual figures
Per occupied room for budget figures
Per available room for actual figures
Per available room for budget figures
*When calculating ‘percentage of revenues’, all revenue categories are calculated as a percentage of total revenue. Departmental costs & expenses are normally based on a percentage of their respective revenue source (i.e. room expense as a % of room revenue, food expense as a % of food revenue, telephone expense as a % of telephone revenue, etc.). Undistributed operating expenses and fixed charges are computed as a percentage of total revenue.
2. Part II worth 25 points. The second part of the assignment will include the submission of a 3-page, double-spaced paper explaining the hotel’s performance versus budget for the 4-month period. The written assignment focuses on the student’s ability to explain how the hotel achieved the increase (or decrease) in its actual GOP from the budget. The written analysis should contain reference to revenues, and control of both departmental and undistributed expenses. Please refer to the ‘guideline’ on the next page when writing the paper.
Guideline for Reading and Analyzing Summary Operating Statement
General Recommendation
· Always compare actual results to budget and look for variances between actual and budget figures
· Break down analysis into the major sections of revenue, departmental expenses and undistributed operating expenses
Revenue
· Examine rooms revenue variance from budget and identify the reason for increase or decrease by looking at occupancy, average room rate and RevPar
· Assess other revenue sources and assess if there are increases or decreases from budget
· Examine the contribution percentage of each revenue source to total revenue
· Assess total revenues and identify reasons for increase or decrease from budget
Departmental Costs & Expenses
· Assess expense ratio to respective revenue source for each expense category and compare to budget
· Look at absolute dollar differences and per occupied room dollar amounts to assess if expense increased or decreased from budget
· Assess total costs & expenses ratio to total revenue and compare to budget
· Evaluate total operated department income both on percentage of total revenue and dollar figure to assess reasons for increase or decrease from budget
Undistributed Operating Expenses
· Assess the ratio of total undistributed operating expense to total revenue and compare to budget
· Evaluate each expense category using both absolute dollar amount and per available room figures to assess if expense increased or decreased from budget
· Determine if the change in undistributed operating expenses is appropriate in view of revenue increases/decreases and changes in total departmental expenses.
Gross Operating Profit (Income before Fixed Charges)
· Assess GOP absolute and relative difference from budget and identify why
· Assess GOP ratio to total revenue and compare to budget
· Identify problem areas for improvement
problem-sp
| ACTUAL | BUDGET | ABSOLUTE DIFFERENCE | RELATIVE DIFFERENCE | % OF REVENUE ACTUAL | % OF REVENUE BUDGET | PER AVAILABLE ROOM ACTUAL | PER AVAILABLE ROOM BUDGET | PER OCCUPIED ROOM ACTUAL | PER OCCUPIED ROOM BUDGET | |||||||
| Revenues: | Revenue | Rooms Occupied | Average Rate | |||||||||||||
| Rooms | $6,872,809.84 | $7,101,609.19 | ($228,799.35) | -3.22% | 75.96% | 74.40% | $47.91 | $49.51 | $67.31 | $62.27 | Budget | $7,101,609.19 | 114,037 | 62.27 | ||
| Food | $1,792,197.77 | $2,026,807.23 | ($234,609.46) | -11.58% | 19.81% | 21.23% | $12.49 | $14.13 | $17.55 | $17.77 | Actual | $6,872,809.84 | 102,100 | 67.31 | ||
| Beverage | $90,893.66 | $96,693.04 | ($5,799.38) | -6.00% | 1.00% | 1.01% | $0.63 | $0.67 | $0.89 | $0.85 | ||||||
| Telephone | $126,166.80 | $135,312.81 | ($9,146.01) | -6.76% | 1.39% | 1.42% | $0.88 | $0.94 | $1.24 | $1.19 | Occupancy % | ADR | Rev ADR | |||
| Other Operated Departments | $46,205.33 | $45,641.21 | $564.12 | 1.24% | 0.51% | 0.48% | $0.32 | $0.32 | $0.45 | $0.40 | Budget | 79.50% | $62.27 | $49.51 | ||
| Rentals and Other Income | $119,208.08 | $138,621.36 | ($19,413.28) | -14.00% | 1.32% | 1.45% | $0.83 | $0.97 | $1.17 | $1.22 | Actual | 71.18% | $67.31 | $47.91 | ||
| Total Revenues: | $9,047,481.48 | $9,544,684.84 | ($497,203.36) | -5.21% | $63.07 | $66.54 | $88.61 | $83.70 | ||||||||
| Departmental Costs and Expenses: | ||||||||||||||||
| Rooms | $1,520,907.59 | $1,722,623.33 | ($201,715.74) | -11.71% | 22.13% | 24.26% | $10.60 | $12.01 | $14.90 | $15.11 | ||||||
| Food | $1,602,086.49 | $1,840,329.75 | ($238,243.26) | -12.95% | 89.39% | 90.80% | $11.17 | $12.83 | $15.69 | $16.14 | ||||||
| Beverage | $44,762.75 | $46,306.94 | ($1,544.19) | -3.33% | 49.25% | 47.89% | $0.31 | $0.32 | $0.44 | $0.41 | ||||||
| Telephone | $82,958.28 | $71,097.00 | $11,861.28 | 16.68% | 65.75% | 52.54% | $0.58 | $0.50 | $0.81 | $0.62 | ||||||
| Other Operated Departments | $31,881.68 | $29,666.79 | $2,214.89 | 7.47% | 69.00% | 65.00% | $0.22 | $0.21 | $0.31 | $0.26 | ||||||
| Rentals and Other Income | – | – | ||||||||||||||
| Total Costs and Expenses: | $3,282,596.79 | $3,710,023.81 | ($427,427.02) | -11.52% | 36.28% | 38.87% | $22.88 | $25.86 | $32.15 | $32.53 | ||||||
| Total Operated Departmental Income: | $5,764,884.69 | $5,834,661.03 | ($69,776.34) | -1.20% | 63.72% | 61.13% | $40.19 | $40.68 | $56.46 | $51.16 | ||||||
| Undistributed Operating Expenses: | ||||||||||||||||
| Administrative and General | $569,410.35 | $580,929.13 | ($11,518.78) | -1.98% | 6.29% | 6.09% | $3.97 | $4.05 | $5.58 | $5.09 | ||||||
| Marketing | $499,581.05 | $420,144.34 | $79,436.71 | 18.91% | 5.52% | 4.40% | $3.48 | $2.93 | $4.89 | $3.68 | ||||||
| Property Operation and Maintenance | $406,115.14 | $532,019.69 | ($125,904.55) | -23.67% | 4.49% | 5.57% | $2.83 | $3.71 | $3.98 | $4.67 | ||||||
| Utility Costs | $393,874.35 | $396,544.24 | ($2,669.89) | -0.67% | 4.35% | 4.15% | $2.75 | $2.76 | $3.86 | $3.48 | ||||||
| Total Undistributed Expenses | $1,868,980.89 | $1,929,637.40 | ($60,656.51) | -3.14% | 20.66% | 20.22% | $13.03 | $13.45 | $18.31 | $16.92 | ||||||
| Income before Fixed Charges | $3,895,903.80 | $3,905,023.63 | ($9,119.83) | -0.23% | 43.06% | 40.91% | $27.16 | $27.22 | $38.16 | $34.24 | ||||||
| Fixed Charges: | ||||||||||||||||
| Management Fees | $341,630.02 | $299,636.59 | $41,993.43 | 14.01% | 3.78% | 3.14% | $2.38 | $2.09 | $3.35 | $2.63 | ||||||
| Property Taxes and Other Municipal Charges | $316,850.06 | $338,933.28 | ($22,083.22) | -6.52% | 3.50% | 3.55% | $2.21 | $2.36 | $3.10 | $2.97 | ||||||
| Insurance | $51,808.30 | $62,140.25 | ($10,331.95) | -16.63% | 0.57% | 0.65% | $0.36 | $0.43 | $0.51 | $0.54 | ||||||
| Total Property Taxes and Insurance: | $710,288.38 | $700,710.12 | $9,578.26 | 1.37% | 7.85% | 7.34% | $4.95 | $4.88 | $6.96 | $6.14 | ||||||
| Net Operating Income | $3,185,615.42 | $3,204,313.51 | ($18,698.09) | -0.58% | 35.21% | 33.57% | $22.21 | $22.34 | $31.20 | $28.10 | ||||||
| Actual | Budget | |||||||||||||||
| Rooms Occupied | 102,100 | 114,037 | -11,937 | |||||||||||||
| Rooms Available | 143,445 |
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