How to properly manage the hotel using Profit / Loss financial statements or P&L

It is important to check every detail of your business finances, both in terms of revenue and cost.

Hotel management is not just about strategy, contracts with tour operators and the classic savings per night cost menu that we all more or less know. The process is more complicated no matter what shape or size a unit has.

Hotel asset management, human resources, operations, budgeting and revenue and cost control are just a few areas that require attention, knowledge and skills. How can you evaluate the data if it is not structured in a specific form of financial statements to give specific information about the decisions?

To complete this step, you must prepare a structured profit / loss statement, or otherwise a Profit & Loss Account (hereinafter: P&L) based and internationally accepted providing information and indicators. A P&L provides revenue, cost and profit analysis. It helps to understand how much profit the investment generates and whether it ultimately pays off or you need to change direction.

It is important for the hotelier to fully understand each line at P&L by interpreting the data so that he can make business decisions. P&Ps are conducted at intervals (monthly, quarterly, semi-annually and annually). The frequency is up to the hotelier's personal decision but it is important to conduct P&L on a monthly basis to keep the business under control.

The reasons for conducting P&L are as follows:

1. They are essential for the success of the hotel, as they emphasize the sources of revenue, expenses and profits,

2. Provides a close monitoring of the performance of each department individually and as a whole, as a hotel.

3. Allows the analysis of the performance in comparison with the total and per section budgets of the departments,

4. Provides information to identify weaknesses and strengths of financial performance so that you can make targeted improvements rather than horizontal ones (cost reduction, improvement of low-yield operations, or investment in new revenue).

P&L, which is essentially the income statement for the year, is closely linked to the other two basic financial statements, the balance sheet and the cash flow statement.

P&L feeds the situations, and proper structure, execution, and understanding are vital to helping small, independent hotels maintain tighter cost and revenue control.

Implementing the following 5 steps will provide a strong foundation for developing an effective P&L:

1. Proper management and recording of all income, expenses and other data for the production of accurate and timely information

2. Analysis of the P&L in order to identify the points where the hotel meets or exceeds the set objectives and where improvements can be made

3. Management must determine the correct course of action to take in order to maximize results, based on the information provided by correct and accurate P&L

4. Carry out periodic reviews of the P&L process, drafting, interpreting, and implementing decisions

Commit to a review process to identify where further improvements can be made.

For a valid P&L, KPIs (key performance indexes) must be recorded next to the figures and data. The following are the key KPIs to consider:

- GOP (gross operating profit)

- EBITDA (earnings before taxes, interest, and depreciation)

- NOI (net operating income or profit)

- PROFIT PER DEPARTMENT performance cedar per section separately

- REVPAR (revenue per available room)

- ADR (average daily rate)

- YIELD Rate

- average prices of all expenses or groups of expenses and expenses per night, per room, per m2 of useful (main) spaces, etc.

Revenue, expenses, other expenses and staff must first be segregated and calculated separately, together with their indicators.

The hotel business that wants to achieve healthy financial results, should invest enough time to create in collaboration with the specialized financial advisor, a proper P&L and review it every month in detail. In previous articles I wrote that the accounting (accounting) approach to results is different from purely financial management (managerial accounting and financial management).

Decisions must then be communicated to the company's executives and the same or revised objectives set again according to the facts that have arisen.