1/ - When you’re looking at costs in a hotel P&L, there are MANY ways to project. How do I do it? I’ll talk through two ways, the early-on quick way and the more detailed slow way. There’s a third (zero based budgeting), but honestly, I don’t do that - the operators do.
2/ First, the early-on quick way... Ratio Analysis! The more detailed method will follow tomorrow. Each hotel department can be thought of as variable in one of three ways - Per Available Room (PAR), Per Occupied Room (POR), and Expense Ratio (%).
3/ Expenses that vary with Occ (e.g. the Rooms department) I focus on POR forecasting. Expenses that vary with the size and type of hotel (e.g. Admin & General) I focus on PAR forecasting. Expenses that vary with revenue (e.g. a management fee) I focus on % forecasting.
4/ Now - how do I get comps? The best way is to use your own operating comps, but you can’t do that for your first. @STR_Data can help in that case. They offer a similar service to trend reports, but for expenses - the HOST report.
5/ You can either purchase the amalgamated almanac or a custom report for a selected competitive set. This will give you what you need to do ratio-based projections.
6/ When looking at new development, this should get you what you need to make a fairly quick “keep going vs move on” decision.
7/ On an an acquisition, this should help to identify any departments that are out of whack, and narrow your focus to understanding what’s wrong / can be fixed.
8/ Tomorrow we’ll talk the next level of detail. I would never make an offer based on this level of underwriting - it just tells me “is this worth spending time on?”
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