Operating review

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All results

The results (operating review) of your hotel at the end of each year, will be made automatically by the accountant. You just have to analyze the results, you do not have to calculate them yourselves. Of course, when taking decisions and making costs, you do some assumptions and calculations predicting occupancy and profit. After each year they will be ready for you via your secret Team File link.

Your results presented there will be divided into three parts:

• Section operating review: which you will find on the operating review page with all your revenues and costs resulting in your net profit (or loss). We'll dive into this now.
• The section with your personal key metrics.
• Section Market research, if your team decides to paid for this in advance.

Operating review

An operational review is an in-depth look at the big picture, summarizing the financial effects of your management choices: the costs, revenues and results.
The results in this overview will be made automatically depending on

• your evaluations by your coach (so the quality of your arguments)
• your competitors
• your decisions

The occupancy rate is the crucial element in all this. The total overview will be visible in your Team File after each year
In the administration of Emerald Forest Hotel, as we use it, no VAT Value Added Tax is applicable. That is, not in the revenues, neither on the cost side. Furthermore, there is no record of the liquidity, balance sheets (opening nor end of the year) nor an investment overview. We consider the revenues and the costs to be without any VAT, and all revenues and costs to be paid at the date they occurred; there is no debtors or creditors.

All Revenues

The hotel distinguishes three main groups of revenues.

• Rooms revenues comprise the average (sales) prices the hotel management decided to choose, times the number of booked rooms (occupancy rate).
  
• F&B revenues: all food and beverages are considered to be incurred by these hotel guests: so the higher the occupancy rate, the more revenues the hotel gets from food and beverages.
  
• Banqueting and other revenues are a separated revenue unit in the hotel. The sales prices of banqueting arrangements in the past, varied from a minimum of € 25 to a maximum of € 30 per person. On the Banqueting page, you can find some more information, pictures, and videos on banqueting. The 'other revenues' in this group are additional sales, such as rental bikes, upgrades, cancellation fees e.g. Altogether, a bit more than 8% of the total revenues.
  
  

Revenues overview year 0 and example of the coming four years.
We focus on the year 0: the moment you take over.

Underneath you'll find an overview which gives some more insights into the revenue structure, as far as information is available in the hotel's administration. This all reflects the year before you take over, the year 0 will be your starting position, the other years just give you an indication of what might happen. The operating review will be created for you, by the accountant: it will be visible (in time due) on the tab results in your Team File.

Revenues Year 0	Source	Amount	Percentage	Sub total
Rooms	Rooms revenues weekend	€ 704,340	24.61%
	Rooms revenues weekdays	€ 1,244,880	43.49%	68.10%
Food and beverage	F&B revenues weekend	€ 266,080	9.29%
	F&B revenues weekdays	€ 414,960	14.49%	23.78%
Banqueting & other revenues	Banqueting and other revenues	€ 231,636	8.09%	8.09%
Total revenues		€ 2,861,896	100%	100%

All costs

The situation below is just an example of the projections of costs for the coming four years. Again, the situation as you take over is the year 0: you cannot influence the costs and prices of year 0.

Costs overview during the starting year 0 and example of four consecutive years.
We focus on year 0 now.

Underneath you'll find an overview which gives further insights into the cost structure as far as information is available in the Bergman's administration. This all reflects the situation as you take over, this will be your starting position. Especially the Cost on Management Team Decisions are missing in the relevant year 0. The four test year are just a basic testing in what this could bring. For now, in year 0, as you take over, the Costs: Management Team decisions are all zero. These decisions are, what has been lacking the last few years: you cannot do without anymore.

Costs in year 0	Source	Amount	Percentage	Sub total
Costs: fixed	Depreciation costs of existing assets	€ 525,187	34.64%
	Fixed staff costs	€ 550,271	36.29%
	Costs of premises	€ 390,473	25.75%
	Insurance & interest costs	€  50,012	03.29%
Total fixed costs		€ 1,515,943	100%	62.36%
Costs: variable	Variable staff costs	€ 355,170	38.95%
	Laundry costs	€ 118,390	12.94%
	Cleaning costs	€ 236,780	25.88%
	F&B purchase costs	€ 204,312	22.33%
Total variable costs		€ 914,652	100%	37.63%
Costs: Management Team Decisions	Marketing costs	€ 0	00.00%
	Staff development costs	€ 0	00.00%
	Extra depreciation costs	€ 0	00.00%
	Market research costs	€ 0	00.00%
	Other costs	€ 0	00.00%
Total Management Team decisions costs		€ 0	100%	00.00%
Total all costs		€ 2,430,595		100%

More info on costs:

• the fixed costs have stayed the same during all four years, the fixed depreciation costs are one of them. You can not influence them and they are calculated automatically. The logics is also explained in your Team File when you do a mouse-over of the cost group.
• the variable costs depend on the occupancy rate like laundry: the more rooms occupied the more laundry. They are automatically influenced by this occupancy rate and calculated automatically. The logics is also explained in your Team File when you do a mouse-over of the cost group.
• the Costs Management Team Decisions, will depend on the Year 1-2-3-4 decisions made by the new Management Team. So, this is totally up to your Team, within the boundaries to prevent you from doing very illogical things

Net profit

Of course, the net profit per year is very interesting. The total costs will be deducted from the total revenues. If there is a bonus (something which turned out much better than expected) or a fine (tax e.g.) this is added or deducted from the profit leading to the net profit.

Net profit as you take over in grey headed 'year 0' and examples of the following years, year 4 not completed.
We focus on this year 0 now.

In this example on taking over:
- Total revenues were € 2,873,406
- Total costs € 2,434,417
- Fine € 50,000
- Net profit € 388,989

The operating reviews show the profit of any individual year and the total of the net profit (all years added up). Again, in the example a number of predictions for additional costs in the future have been made. More on this on the page Net profit.

Key metrics

Some key metrics and ratios on the operations of the hotel in this section.

Key metrics of year 0 as the new Management Team takes over.
Examples of the following year: we focus on year 0 now.

More on this on the page Key metrics, the page ratios and benchmarks.

Analyzing

So the net profit on taking over, in the example above, seems to be 15.07% of the revenues; 84.93% being costs. This seems to be a good and interesting result, but it is up to you to put this in (a real) perspective of the industry. Though, the management did not make enough investments over the recent years, so the depreciation costs have been kind of low. There is no problem with liquidity at all.
Furthermore, the Bergmans did not really consider themselves to be staff, so there hardly have been any wages for them in the staff costs, which distorts the numbers. Their income mainly originated from the net profit which they, partly, took out of the company, being the entrepreneurs.

More numbers

Check basic set-up of costs groups in hotels to have some reference on the numbers.
Of course, any situation is different, any time frame (think of the Covid period), the ownership, the state (quality) of the premises etc. The file, though, this might give some ideas from a calculative perspective.

Past

When your assignment is managing one of the new establishments, this still will be the benchmarks you start with, you refer to. S0, you will start, as a point of reference, with all the same set-up of costs and decisions in the past, in your new venue. The moment you take your own decisions, you can role out your new ideas, concept in full.

→ Go! Following the Introduction to the Hotel? Step 10/10 is the page Staff

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Emerald Forest Hotel offering an emerald hotel experience! | Run your own hotel in this management simulation.