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Michigan State University Extension

Tourism Educational Materials - 33411028


06/06/02

Hotel/Motel Industry Comparison

Industry averages can help you compare the operating performance of your hotel or
motel with other similar operations. By periodically comparing your occupancy, room
rate, sales and expense figures with industry averages and your past performance, you
can identify areas that need attention and opportunities to increase your profitability.
If you are planning a hotel or motel, industry averages can provide a basis for
developing your financial projections. This data, along with local market area
statistics, can provide you with information to develop realistic assumptions to
support your projections.
This publication summarizes national industry averages for two types of hotels and
motels: full-service properties that offer food and beverage and limited-service
properties that provide lodging only. While the industry averages are based on larger
properties (generally over 50 rooms), they can still be used to analyze the
performance of smaller motels as sales and expense categories are typically similar.
The industry averages presented are from "The Host Report: Annual Report for the
Year 1992," a publication of Arthur Andersen and Smith Travel Research. To order a
copy of the complete report, contact The Host Report, 2115 Fourth Street, Berkeley,
CA 94710.
Occupancy and Room Rate Trends
Two key variables that determine hotel and motel sales are the Occupancy Percent and
the Average Room Rate. Occupancy Percent is equal to the number of rooms sold
divided by the number of rooms available during a period. Average daily room rate is
equal to total room revenue divided by the number of rooms sold during the period.
Presented below are 1992 occupancy and average room rate levels for both fullservice and limited-service properties. (Vis. 1)
Revenue and Expense Industry Averages
The American Hotel & Motel Association has adapted a series of revenue and expense
categories for hotels and motels called the Uniform System of Accounts. These
accounts provide a standardized format for analyzing your operation. Definitions of
these accounts are presented at the end of this publication.
Each revenue or expense account can be analyzed as a percent of sales (% of Sales) or
as a dollar amount per available room ($/Available Room). Accounts that vary in
relation to sales, such as franchise fees, are better analyzed as a % of Sales. Accounts
that are relatively fixed, such as interest, are better analyzed as a $/Available Room.

The (Vis. 2) presents industry averages for both Full-Service and Limited-Service
hotels.
Comparison with Your Hotel or Motel (Vis. 3)
1. Enter your hotel or motel's annual occupancy, average room rate and income
statement data in the first column titled "$ Amount." If you are using different account
classifications, translate them into this uniform industry format.
2. For each account, calculate and record your "% of Sales." Departmental expenses
should be based on the corresponding departmental revenue. All other accounts
should be based on total sales.
3. For each account, calculate and record your "$/Available Room" ratio. This is
simply the amount of revenue or expense on each line divided by the number of
rooms in your property.
4. Using the industry averages on the previous page, analyze your "% of Sales" and
"$/Avail Room." Look for significant differences and record your comments in the
space provided.
Once you complete this analysis, focus on those variances that are significant and
controllable. Investigate how other properties have managed to increase sales or
decrease expenses in the categories you have identified. Work with your staff to
correct problems and set your sights on doing better than the industry averages.
Chart of Accounts
Room Sales are generated from the rental of overnight guest rooms. It is a function of
the number of rooms in the property, the days open, the occupancy percentage and
the average daily room rate.
Food Sales are generated in hotel restaurants and banquet facilities. They are a
function of the number of people served per day and the average food check per
person.
Beverage Sales includes wine, liquor and beer sales generated in the lounge,
restaurant or banquet facilities.
Other Food & Beverage Sales includes meeting room revenue and miscellaneous
income.
Telephone Sales include local and long distance calls made by guests and pay phone
commissions.
Minor Department Sales includes gift shop revenue, guest laundry income and
recreation fees.

Rentals and Other Income include space rental, concessions, commissions, vending
machines and other revenues that are not included in the other departments.
Rooms Department Expense includes payroll for front office manager, desk clerk,
head housekeeper, room inspector, room cleaner, house person, laundry worker,
reservationist and bellperson. Other expenses include travel agent commissions,
cleaning supplies, laundry supplies, guest supplies, reservation fees, uniforms and
other expenses related to guest room usage.
Food and Beverage Department Expense include food and beverage purchases,
payroll for the food and beverage director, restaurant manager, host, servers, bus
person, cook, dishwasher, bartender, and banquet server, and other expenses such as
china, linen, laundry, entertainment, and supplies.
Telephone Department Expense includes the cost of calls made by guests and charged
to the hotels telephone.
Other Departments Expense includes cost of sales (typically gift shop and vending
goods) and other expenses related to the minor departments, rentals and other income.
Administrative & General Expense includes payroll for the general manager,
secretary, controller, night auditor, and security person. Other expenses include credit
card commissions, liability insurance, postage, office supplies, dues and subscriptions
and other administrative expenses.
Marketing Expense includes payroll for the marketing director and sales person. Other
expenses include advertising, merchandising costs, and sales office expenses.
Franchise Fees includes marketing and royalty fees paid to a regional or national
chain.
Energy Expense includes electricity, gas, water and sewer services.
Property Operations and Maintenance Expense includes payroll for the chief engineer,
general maintenance and grounds person. Other expenses include supplies, materials
and contracted work.
Management Fees includes the fees paid to a management company for operating the
property.
Property Taxes include both the real property and personal property taxes.
Insurance Expense includes the cost of insuring against damage or destruction to the
building and its contents.
Rent Expense is the amount paid for leasing or renting land, buildings, furnishings,
fixtures or equipment.
Interest Expense is the periodic charge for the use of funds loaned by a bank or other

lender.
Depreciation/Amortization Expense is a measure of the loss of value of business
assets during a period. It is an accounting measure and may not correspond to the
market value of the assets.
This publication was produced by the Tourism Research and Resource Center,
University of Wisconsin-Cooperative Extension.
Written by Bill Ryan with layout and technical assistance provided by Karen Marvin.
UW-Extension provides equal opportunities in employment and programming,
including Title IX requirements. University of Wisconsin-Extension, United States
Department of Agriculture and Wisconsin Counties Cooperating. A partner in
education with the University of Wisconsin-Extension and the U.S. Small Business
Administration. If you need this material in an alternative format please contact the
program coordinator or the UWEX Affirmative Action Office.
Vis 1
Occupancy and Average Room Rate (1992)

Vis 2
Industry Average for Full Service and Limited Service Hotel

Vis 3
Comparison For Your Hotel/Motel

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