Running a hotel is not an easy task. There are many expenses that come with the territory, and it can be difficult to keep track of them all. In this article, we will discuss common hotel business operating expenses, how to calculate them, and how to create a budget for your hotel business. We’ll also provide tips on how to lower your hotel’s operating costs. So read on for all the information you need to make informed decisions about your hotel’s finances.
Common Operating Expenses In The Hotel Business
There are two main types of expenses in the hotel business: fixed expenses and variable expenses.
Fixed Expenses
Fixed expenses are those that remain the same each month, regardless of how many guests you have. These costs can be difficult to reduce, but it is important to be aware of them when creating your hotel budget. Some of these expenses can include:
- Rent or mortgage payments
- Insurance
- Property taxes
- Utilities
Variable Expenses
Variable expenses, on the other hand, fluctuate based on how many guests you have. These costs can be easier to manage than fixed expenses, but it is still important to track them carefully. Some of these expenses can include:
- Wages for staff
- Cost of goods and services
- Marketing and advertising
How To Calculate Operating Costs
Now that you know the different types of expenses involved in running a hotel, you need to know how to calculate your hotel’s operating costs. This will help you create a budget and track your expenses over time.
Determine Your Monthly Fixed Costs
The first step is to determine your hotel’s monthly fixed costs. These are the expenses that remain the same each month, regardless of how many guests you have. To calculate your hotel’s fixed costs, add up all of your expenses that fall into this category. This can include rent or mortgage payments, insurance, property taxes, and utilities. Once you have your total, divide it by the number of months in a year to get your monthly fixed costs.
For example, if your hotel’s annual fixed costs are $120,000, your monthly fixed costs would be $10,000.
Estimate Your Variable Costs
The next step is to estimate your hotel’s variable costs. These are the expenses that fluctuate from month to month and are dependent on a variety of factors. To calculate these expenses, you need to view your history of each variable expense and calculate the average.
For example, if your hotel’s monthly wages for staff have ranged from $5,000 to $10,000 over the past year, you would take the average of these two numbers to get your monthly variable costs. This would give you a monthly average of $7,500 for wages.
Though this may not be an exact science, estimating your hotel’s variable costs in this way will give you a good starting point when creating your budget.
Add It All Up
Once you’ve determined your hotel’s monthly fixed and variable costs, you can calculate your hotel’s total monthly operating costs. To do this, simply add your hotel’s monthly fixed costs to its monthly variable costs.
For example, if your hotel’s monthly fixed costs are $10,000 and its monthly variable costs are $7,500, your hotel’s total monthly operating costs would be $17,500.
Create A Budget
Now that you know your hotel’s monthly operating costs, you can create a budget. This will help you track your expenses and ensure that you are not spending more than you are bringing in each month.
The first thing you need to do is determine your hotel’s monthly income. This can be done by looking at your hotel’s financial history and calculating the average monthly income. Once you have your hotel’s monthly income, subtract your hotel’s total monthly operating costs from this number.
For example, if your hotel’s average monthly income is $30,000 and its total monthly operating costs are $17,500, your hotel’s monthly profit would be $12,500.
You can then use this information to create a budget for your hotel. Be sure to include both your hotel’s income and operating costs in your budget so that you can track your progress over time.
Tips For Reducing Hotel Operating Costs
Once you create your budget, you may be stressed about how to reduce your hotel’s operating costs. However, there are a few things you can do to lower these costs without sacrificing quality or service.
Reduce Energy Usage
One of the easiest ways to reduce your hotel’s operating costs is to reduce its energy usage. There are a number of ways to do this, such as:
- Educating your staff and guests on energy conservation
- Investing in energy-efficient appliances and equipment
- Conducting regular maintenance checks on your hotel’s HVAC system
Outsource Housekeeping
Another way to reduce your hotel’s operating costs is to outsource housekeeping. This can be done by hiring a third-party cleaning company to clean your hotel rooms on a regular basis. This can be a cost-effective way to keep your hotel clean without having to hire full-time staff.
Only Hire Staff That Is Essential
When hiring staff, only hire those that are essential to the operation of your hotel. There is no need to hire staff that will not be used on a regular basis. This will help to reduce your hotel’s monthly wage expenses.
Discard Software That Isn’t Necessary
If your hotel is using software that isn’t necessary, get rid of it. This will help to reduce your hotel’s monthly expenses and free up storage space on your hotel’s computers.
Optimize Marketing
Marketing is essential but can be a large expense for hotel businesses. To save on marketing costs, try to optimize your hotel’s marketing efforts by:
- Targeting your marketing to those that are most likely to stay at your hotel
- Creating a marketing plan that is focused and effective
- Working with a hotel marketing company that can help you save on costs
Automate Your Processes
And finally, one of the best ways to reduce your hotel’s operating costs is to automate your processes. This can be done by investing in hotel management software that can automate a variety of tasks, such as:
- Booking hotel rooms
- Tracking guest information
- Managing staff schedules
- Generating reports
By automating these processes, you can free up time for your hotel staff to focus on more important tasks. This can help to improve the overall efficiency of your hotel and save you money in the long run.
Final Thoughts
Understanding your operating expenses and managing them is essential to running a successful hotel business. Be sure to create a budget and track your hotel’s income and expenses on a regular basis. Additionally, try to implement some of the tips above to help reduce your hotel’s operating costs. Doing so can help improve your hotel’s bottom line and allow you to reinvest in your business.