Operating review
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In this file we will explain more in depth the results you can see on the tab results in your Team file.
Costs and results
Ar you take over your hotel will probably make expenses [[decisions 6 till 10) then have been made in the past.
Compensating for the extra expenses or benefiting from them can only be done in a few ways:
- More revenues by choosing higher prices, so a higher profit per sold product;
- More revenues by achieving a higher occupancy-rate, so more sales.
- Make less costs ;
- Make costs hoping that -by making them- other costs are brought down (for instance, in using ICT, less staff is needed);
In the file decisions you can see what the costs are, your hotel can make. The effect of all expenses will only last one year. Spending the maximum on all possible costs looks like a bad idea! You have to earn back all these expenses, so you will have to make clear choices and keep the profit in mind! So the numbers mentioned are not a gift, nor a budget: it just gives you an indication of the (maximum) possibilities without getting in serious financial trouble. So, if you would decide to spend to the maximum on all options you could have in extra costs (per year):
- Decisions 6 maximum € 200,000
- Decisions 7 maximum € 100,000
- Decisions 8 maximum € 225,000 year 1 up to € 900,000 in year 4 as depreciations. Depending on your new investments.
- Decisions 9 maximum € 50,000
- Decisions 10 maximum € 100,000
The maximum grand total on expenses in the first year is a maximum of € 675,000. Keep in mind that the profit as you take over was € 486,307! The total costs was € 2,430,595. Creating all these expenses will raise the costs by more than 29%! You probably will make a loss, as the additional costs exceed the profit you made in the past. So think of how these additional costs will generate new revenues. Or compensate the costs by higher prices or a higher occupancy rate.
All results
There are also pages on the revenues per room: RevPOR and RevPAR.
The results of your hotel will be calculated automatically by the accountant of your hotel. You just have to analyse the results, you do not have to calculate them yourselves. The history gives you information on how the hotel performs as you take over, you cannot influence this, of course.
After each year they will be ready for you in your Team finances via the link in your Team file.
Your results presented there will be divided into the next parts:
- The results, the operating review with
- The Revenues
- The Costs: divided in costs fixed, costs variable and costs of your team's decisions
- Net profit
- The elements Key metrics, Market information from Top Research and Short comment of your coach are explained in separate pages.
Operating review
Please take into account that your hotel has 364 days (not 365) and some figures are rounded; we never use decimals, neither should you.
At the end of each year, you will find in your Team File on the tab Results your operating review. Your team (and your coach) are the only ones who can see these results. If a year has passed, you will see your results, as soon as they have been released by your coach.
You do not have to calculate anything in this operating review yourselves. You only take the decisions and the rest is automatically calculated for you. An extended algorithm calculates your occupancy rate depending on your decisions, your coach's mark (related to the quality of your explanations) and some other elements. Depending on your occupancy rate, you'll get more revenues from food & beverage and banqueting & other revenues as well.
All the fixed costs can not be influenced at all. The variable costs will automatically be calculated related to your occupancy rate. The costs of your team choices will also be automatically brought to your operating review and will be visible here as well.
Revenues
Revenues comprises the average (sales) prices times the number of booked rooms (occupancy rate). You can influence the prices, because you set them, while the occupancy rate is defined by all of your decisions and your explanations through an algorithm. The mark your coach gives to you for your performing as a team is influencing your occupancy rate heavily. The maximum occupancy rate would mean all 100 rooms occupied during all days, so 52 weeks x 100 rooms x 7 days = 36,400 room nights which is an illusion.
Check the situation for real via benchmarks and you will see that the margin in somewhere between 50% to 70% occupancy rate.
All food and beverages are considered to be caused by these guests: so the higher the occupancy rate, the more revenues you get from food and beverages.
Banqueting an other revenues are separated revenue unit in the hotel. The sales prices in the past varied from a minimum of € 25 to a maximum of € 30 per person. You decide on the price of banqueting, so you do have some control. This gives you an indication: on the Banqueting page, you can find some more info, pictures and videos on banqueting. Other elements in this group are things like additional sales, renting out bikes, upgrades, storno-fees etc. All together a bit more than 8% of the total revenues.
The above situation is just an example of the revenues as they will be shown in the complete operating review. So this example shows the history (column B, history) which is the same for all teams as they start. After each year the next column (so the next year) will be available and filled out automatically. In this example this is just year 1 in column C. In the example all years have been filled out.
Underneath you'll find an overview which gives some more insights into the revenue structure, as far as information is available in the Bergman's administration. This all reflects the year before you take over, this will be your starting position.
| Revenues History | ||||
|---|---|---|---|---|
| Rooms | Rooms revenues weekend | € 704,340 | 24.56% | |
| Rooms revenues weekdays | € 1,244,880 | 43.42% | 67.98% | |
| Food and beverage | F&B revenues weekend | € 266,080 | 9.28% | |
| F&B revenues weekdays | € 414,960 | 14.47% | 23.75% | |
| Banqueting and other revenues | Banqueting and other revenues | € 236,642 | 8.25% | 8.25% |
| Total revenues | € 2,866,902 | 100% | 100% |
Operating review costs
The situation below is just an example of the costs as they will be shown in the final operating review. So this example shows the situations as you take over (column B) which is the same for all teams and as you take over. After each year the next column (so the next year) will be available and filled out automatically. In this example, this is just year 1 in column C.
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.
| Costs | ||||
|---|---|---|---|---|
| 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: team decisions | Marketing expenses | € 0 | 00.00% | |
| Staff development expenses | € 0 | 00.00% | ||
| Extra depreciations costs | € 0 | 00.00% | ||
| Market research expenses | € 0 | 00.00% | ||
| Other expenses | € 0 | 00.00% | ||
| Total team decisions costs | € 0 | 100% | 00.00% | |
| Total all costs | € 2,430,595 | € 2,430,595 | 100% |
The different costs groups are all mentioned in the operating review table above.
- Costs: fixed
You cannot influence these costs at all. These are costs which will be created no matter what the occupancy rate is. Over the years there can be small fluctuations, but the amounts will stay almost the same.
- Depreciation costs of existing assets: depreciations of all the assets especially the building, fixtures and fittings.
- Fixed staff costs: staff needed to run the hotel and which have to be paid even if there are no guests at all.
- Costs of premises: costs of maintenance, repairs on small adaptions to the building and the parking lots.
- Insurance & interest costs: costs for insurance for staff, building a liability and costs for mortgage and other loans.
- Costs: variable
The variable costs will depend on the actual number of guests in the hotel so will only be filled out (automatically) after each year is finished. So there is a ratio between occupancy rate and all of these costs. You cannot influence this, but it will be influenced by the occupancy rate you have created with your way of managing.
- Variable staff costs: the more guest you have the more work here will be to be done and the more staff is needed. So additional costs.
- Laundry costs: the more guest the more towels, bed linen etc. needed.
- Cleaning costs: rooms need to be cleaned more often because of more guests and to be cleaned better.
- F&B purchase costs: more guest means more breakfasts etc. for guest and more f&b for additional staff so the purchase costs go up.
- Costs: team decisions
All of your decisions numbers 6 -10 lead directly to expenses which can be seen directly on the costs side as expenses. They are directly connected to the choices you make in your decisions each year. As you can see in the past there were no expenses on these decisions. Of course, this was good for the profit but it will come back like a boomerang! So Christina urges you to use this costs group team decisions in an efficient way, though she knows this will probably lower the profit!
Net profit
The total costs will be deducted from the revenues. If there is a bonus or a fine this is added or deducted from the profit leading to the net profit. There is no VAT or other taxes in the city. There is no reserve and as there is no liquidity in the game, there is no need for spending them. The balance sheets just show the individual profit of each year in the operating review and the total of the net profit over the years. No worries about liquidity: you can invest and pay, though you cannot see the proper balance sheets.
In this example on taking over:
- Total revenues were € 2,866,902
- Total costs € 2,430,595
- Net profit € 436,307
For instance, in year 4 there is a bonus in this case, € 106,491 so this is added to the profit.
So the net profit on taking over seems to be 15.21% of the revenues, a good and interesting result.
But, 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 are hardly any wages for them in the staff costs. Their income mainly originated from the net profit which they, partly, took out of the company, being the entrepreneurs.
Net profit index
Each year you will see the net profit index of your team. This reflects how your team is doing, compared to the total of the market. The index starts at 100. If your results are above 100 you are 'beating the market', or outperforming the market. If in a year the index goes down or below 100, you are not necessarily doing a bad job, it is just that compared to the total market your net profit is not matching their growth or your dip is deeper than theirs.
Ranking
The position you have each year is reflected here.
There is ranking on the total net profit, so you can have any position depending on the number of hotels in your city.
There is ranking on creativity, this is linked to what you have done in all of the years related to creativity and evaluated by your coach. You can have any position depending on the number of hotels in your city.
Calculate yourself?
If you want to make calculations yourself, you can, in the top menu download the Team Finances File as an Excel file. Store this one on your pc and you can do some calculations in this version (which now, of course, has no longer links to the real one and new changes in the online one).
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