NEMICE contract/negotiations session, part 2
More from Tim Brown’s negotiation session at NEMICE yesterday:
Some helpful facts to tuck away about hotel profit margins–they get a 74 percent margin on rooms, a 36 percent margin on group food and beverage, a 19 percent margin on F&B outlets, a 15 percent margin on recreational outlets, and a 15 percent margin on retail and miscellaneous departments.
More helpful facts: When it comes to expenses as percentage of revenues, hotels spend 33 percent on debt service/renovation, 30 percent on employee costs, 23 percent on operating costs, 8 percent on energy, and just 6 percent on sales and marketing.
A quick summary of where we’re at today:
The economy and the hotel industry is getting stronger, and average daily rates and occupancy are improving. "Every hotel has formulated how much of its inventory to save for transient travelers–which provide a much higher value than group business," said Brown. "If a hotel has a hole for a short-term meeting, that’s good for you." But, he added, as hotels get busier, groups with the best history are going to be the winners.
Related Topics: Business stuff
April 28th, 2005 at 10:06 am
The above profit margins, although fairly accurate, are very general. One should not assume that all hotels with different levels of quality of product and service have these same figures on their P&L. Nor should one assume that all hotels have a strong transient base, that provides a higher value than their group business, that very much depends on the type of hotel and it’s location. Employee costs are currently running more into 40-45% with the rising costs of healthcare.
April 28th, 2005 at 10:23 am
Thank you for the caveat, Michele! When applying any generality to a specific situation, the details can make a difference and should of course be taken into consideration.
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