Investments
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Cost groups
There are three major cost groups visible in the operating review after each year:
- the fixed costs have stayed the same during all four years, and the fixed depreciation costs are one of them.
- the variable costs depend on the occupancy rate
- the costs team decisions, will depend of course on the decisions the team took over the years.
Fixed depreciation costs of existing assets
There is a number of depreciation costs of existing assets, set at € 525,187 fixed costs which you can find in the operating review and which you cannot influence. This part of the fixed costs is called depreciation costs of existing assets. You do not have to bother about this amount, though it is around 34.64% of your total of costs as you have a rather big asset. As these costs are fixed they are not influenced by the occupancy rate nor by your decisions and so will stay the same all over the years.
With a mouseover in column A you will get additional information.
New investments
However, if you do new investments, you will get a cost group Extra depreciation on your operating review.
In your explanations, you should calculate how you want to do this.
You can do investments of max. € 900,000 per year. You will have to explain of course what you planning to use this money for. As you will only get an overview of costs and revenues per year in the operating review you will not see the investment anywhere on for instance your balance.
You do not have to worry about financing your investment neither: the € 600,000 per year is no problem.
So you have to consider if you want the extra costs coming from your investment.
All your investments will be linearly depreciated in 4 years; there is no choice in this. So you fill out € 225,000 extra depreciation costs during all four operational years if you opt for the full € 600,000 only in year 1. For the rest see the max numbers in the table underneath.
| Max. investments and depreciations | |||
|---|---|---|---|
| Year | Investment | Additional yearly depreciations | Total depreciations this year |
| History | Not done | € 0 | € 0 |
| Year 1 | Max € 900,000 | € 225,000 | € 225,000 |
| Year 2 | Max € 900,000 | € 225,000 | € 450,000 |
| Year 3 | Max € 900,000 | € 225,000 | € 675,000 |
| Year 4 | Max € 900,000 | € 225,000 | € 900,000 |
| Total | Max € 3,600,000 | € 900,000 | € 2,250,000 |
But you can also chose for total different investments like:
| Max. investments and depreciations | |||
|---|---|---|---|
| Year | Investment | Additional yearly depreciations | Total depreciations this year |
| History | Not done | € 0 | € 0 |
| Year 01 | € 100,000 | € 25,000 | € 25,000 |
| Year 02 | none | 0 | € 25,000 |
| Year 03 | € 200,000 | € 50,000 | € 75.000 |
| Year 04 | € 900,000 | € 225,000 | € 300,000 |
| Total | € 1.200,000 | € 275,000 | € 425,000 |
Remember there is a history of the hotel. You carefully have to explain the amount in your Team file.
But you fill out the depreciation each year, NOT the investment, as you are working in an operational review which is on costs, not investments!
How big should the investment be?
First of all, you have to have a clear plan: what do you exactly want to do? Does this fit in with your strategy?
Secondly, realise that investments bring costs (the depreciation as explained above), so will you earn this back?
But you do want to renovate the sauna, what does this cost? Well, check the internet, look around in study material or look at cases. An educated guess is required, so estimate the costs yourself, based on any comparable prices you have found. Try to be realistic, but as in reality 'how much does it cost' depend on so many things and is not easy to answer. A good starting point is estimating hotel costs. Do not focus too much on details!
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