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WEEK 15-17 Managerial Accounting For The Hospitality Industry, Financial Accounting For The Hospitality Industry and Revenue Management in Lodging Operations

This document provides an overview of topics covered in the final lectures of AOAM 311, including managerial accounting, financial accounting, and revenue management in the hospitality industry. Managerial accounting involves analyzing profit margins and capital expenditures. Financial accounting records occupancy rates, daily rates, and other revenue streams. Revenue management aims to sell rooms to the right clients at the right prices through analysis of occupancy rates, average daily rates, and revenue per available room. Strategies for maximizing hotel revenue include dynamic pricing, market segmentation, forecasting, budgeting, and benchmarking against competitors.

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193 views4 pages

WEEK 15-17 Managerial Accounting For The Hospitality Industry, Financial Accounting For The Hospitality Industry and Revenue Management in Lodging Operations

This document provides an overview of topics covered in the final lectures of AOAM 311, including managerial accounting, financial accounting, and revenue management in the hospitality industry. Managerial accounting involves analyzing profit margins and capital expenditures. Financial accounting records occupancy rates, daily rates, and other revenue streams. Revenue management aims to sell rooms to the right clients at the right prices through analysis of occupancy rates, average daily rates, and revenue per available room. Strategies for maximizing hotel revenue include dynamic pricing, market segmentation, forecasting, budgeting, and benchmarking against competitors.

Uploaded by

criz decena
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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AOAM 311

FINAL LECTURE

WEEK 15-17: Managerial Accounting for the Hospitality Industry, Financial


Accounting for the Hospitality Industry and Revenue Management in Lodging
Operations

Managerial Accounting for the Hospitality Industry

The process of developing comprehensive reports is called managerial


accounting, also known as management accounting.

Through margin analysis, manager is able to determine the amount of


profit that has been generated. He is able to determine how much has been
made from a particular customer, a particular market and even a particular
region.

Through capital budgeting, a manager is able to use information on


capital expenditure in order to decide whether to purchase certain assets.

FINANCIAL ACCOUNTING

Occupancy and Daily Rate

amount of money a hotel makes from its rooms depends on the average
daily rate and the occupancy.

Other Revenue Streams

Most hotels also generate revenue from their restaurant and bar sales,
conference room rentals and vending machine sales. These revenue streams
should be recorded separately in different ledgers when doing hotel accounting,
as doing so helps a hotel get a better picture of which areas are the most
profitable.

Hospitality Accounting Software


There is specialized hospitality accounting software that helps hotel
management and accounting personnel keep track of their daily finances, as well
as predict future revenues and expenses.

Profit and Loss

The Profit and Loss Statement, printed as the Statement of Income,


organizes revenue and expenses into a single document. This document
provides potential investors with important financial information about the
company. Revenue and expenses are organized in manner that allow investors
to understand the relationships between revenue, expenses and profit.

Balance Sheet

The Balance Sheet provides a snapshot of the business’s financial value


at the end of the business period. The Balance Sheet is divided into assets,
liabilities and owner’s equity.

REVENUE MANAGEMENT

the hotel industry, the widely accepted definition is: “Selling the right
room, to the right client, at the right moment, for the right price, through the
right distribution channel, with the best cost efficiency”.

How to increase hotel revenue:

• Be bookable online
• Build a revenue culture
• Sell other hotel products
• Leverage events and attractions

The metrics used in revenue management are:

• Occupancy rate
• ADR (Average daily rate)
• RevPAR (Revenue per available room)

OCCUPANCY RATE
rate refers to the number of occupied rental units at a given time,
compared to the total number of available rental units at that time.

The occupancy rate KPI can be calculated with the following formula:

Occupancy Rate = Number of Occupied Rooms / Total Number of Available


Rooms

Example: If your hotel has 220 rooms and 210 of the rooms are occupied:

210 / 220 = 0.95 = 95 percent occupancy rate

ADR (Average Daily Rate)

average daily rate of a hotel is the average rental income per paid
occupied room in a specific time period.

The simple formula for calculating the KPI average daily rate (ADR) is as follows:

ADR = Rooms Revenue Earned / Number of Rooms Sold

REVPAR (Revenue per Available Room)

RevPAR is a measurement of both a hotel’s average daily rate and its ability to
actually fill those rooms.

There are two possible was to calculate the KPI revenue per available room:

RevPAR = Rooms Revenue / Rooms Available

RevPAR = Average Daily Rate x Occupancy Rate

For example, if there are 200 rooms available, with an average daily rate of $100
and an occupancy rate of 80 percent, giving you a total revenue of $16,000, you
could work out RevPAR by:

Average Daily Rate ($100) x Occupancy Rate (0.80) = $80

Rooms Revenue ($16,000) / Rooms Available (200) = $80

Revenue Management Strategies


You need a revenue management strategy to remain sustainable – that’s
the short story. Ideally, you’ll even be able to turn a tidy profit each year. The
best hotel revenue management strategies recognize that hotel pricing is fluid,
and can change from one day to the next.

Dynamic Pricing

Dynamic pricing involves changing room rates daily or even within the
day based on real-time market data. Taking supply and demand into account,
prices should fluctuate regularly if you want to maximize revenue. This pricing
option is well suited in today’s market and is one many hoteliers opt to use.

Hotel Market Segmentation

Segmenting is a key aspect of revenue management. It allows you to


differentiate between the travelers who are coming to your hotel and devise
unique strategies for all of them.

Hotel Price Forecasting

Forecasting is not only important for rate setting, but also for budgeting
purposes. Accurate and effective forecasting requires a strong foundation in
historical data. By budgeting and forecasting in advance you’ll have plenty of
time and opportunity to make strategy adjustments.

Hotel Budgeting and Demand Forecasting

It’s a good idea to create demand calendar prior to setting your budgeting
plan so you know exactly what you’re dealing with. Most hotels forecast every
day for next 30 days and every week for next 90 days.

Hotel Benchmarking

Hotels will commonly benchmark against their competition to evaluate


performance. It’s not the definitive way to track performance, nor should it be
treated as an authority, but it does enable you to see where you stand and how
travelers might react

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