Have You Missed Out on Your Hotel Balance Sheet?
Your Hotel Balance Sheet Learning Journey Begins Here!
Are You One of the Managers Who Missed Out on Your Hotel Balance Sheet?
Not to Worry!
I will get you up to speed in this Ultimate Guide on Hotel Balance Sheet Basics answering the following questions:
But first, you are probably wondering why I use the term “missed out on.”
And yes you are also asking yourself what’s the big deal with missing out?
What if I answered you with a metaphor?
Assume that your hotel business is one big tree with lots of branches.
You may be familiar with the branches of the tree.
However, you have little idea what the roots of that tree stand for.
You look even more baffled than before.
What am I talking about?
Hold it.
I am about to clear the air.
Metaphor of Branches Vs Roots of a Tree
As a hotel manager, you look at your Profit and Loss Statement at least once a month.
However, quite possibly you may have never laid eyes on your hotel balance sheet.
The hotel profit and loss statement can be likened to the branches of the tree I spoke about.
And the hotel balance sheet to the roots of the tree.
With the branches, you are conversant with the performance of the tree in bearing fruit.
In other words, you are familiar with the performance of the hotel.
The Hotel Profit and Loss Statement is often called The Performance Statement.
it also means that in performance you will know about hotel:
- revenue
- expenses and
- profit
On the other hand, you possibly have never seen the roots of the tree.
Most times you take it for granted and really don’t care about seeing it.
However, you do know that if the roots of the tree are not healthy, the branches may not last too long.
Similarly, the Hotel Balance Sheet can be called The Financial Position Statement.
It literally tells you about the long and short term health of your hotel business.
Using our metaphor, the balance sheet tells you how healthy or otherwise the roots of the tree are.
So, it is kind of tragic that:
- you know a lot about the branches of the tree
- but not whether the tree itself is healthy.
Only the strength or otherwise of the roots will tell you that.
Are You Not Interested in the Health of Your Hotel Business?
Similarly, only the Hotel Balance Sheet can tell you whether the business itself is healthy or otherwise.
Would you not want to know that?
Also, this health element is something your profit and loss statement can never show.
Isn’t that a good reason to know the hotel balance sheet better?
In this instance, you do not even have to dig out the roots.
You have to go to your Financial Controller and ask him or her to show you the hotel balance sheet.
I will lay out a strong case why every hotel manager must regularly pay attention to this often ignored financial statement.
So that you are aware of the health of your hotel business.
The Hotel Balance Sheet relates to the long and short term health of your hotel business.
I have explained all elements in a non-technical way so that any hotel manager can understand.
So, not to worry!
I promise that at the end of this ultimate guide, you will be a hotel balance sheet ninja!
This Ultimate Guide will cover:
How to Use This Ultimate Guide Effectively
You will get the most out of this guide if you follow some steps to learn this hotel financial statement.
Spend some time studying the Paradise Hotel Balance Sheet which begins with in Chapter 1 Below:
- Take Notes on what you do not understand [you can ask questions in the comments section below the post]
- Understand the concept of Assets, Liabilities and Owner Equity or Capital as the 3 Pillars of a Hotel Balance Sheet
- Assets are “2”, Liabilities are “3” and Owner Equity are “4” in the Paradise Hotel Balance Sheet Infographic.
- Look them up right now.
- Go on! I will wait.
Chapter 1 - Paradise Hotel Balance Sheet Example
Assets = Liabilities + Owner Equity
Chapter 2 - Current Assets
Click the Link below to go to the post that will explain everything there is to know about Current Assets.
Current Assets - Are You Optimizing Them in Your Hotel Balance Sheet?
For reference, Current Assets are “5” in the Paradise Hotel Balance Sheet Infographic.
Understand how Current Assets are different from Long Term Assets discussed in Chapter 4.
Chapter 3 - Current Liabilities
Click the Link below to go to the post that will explain everything to know about Current Liabilities.
Current Liabilities - Is Your Hotel Cash Flow Position Sound?
Understand first how Liabilities are different from Assets.
How are Current Liabilities different from Current Assets which were discussed in the previous chapter?
Chapter 4 - Long Term Assets
Click the Link below to go to the post that will explain everything to know about Long Term Assets.
Long Term Assets - Are They Delivering Optimum Hotel Revenue?
Refer to Long Term Assets shown in the Paradise Hotel Balance Sheet as Property and Equipment (”6”).
Understand how Long Term Assets are different from Current Assets which were discussed in Chapter 2.
Chapter 5 - Long Term Liabilities
Click the Link below to go to the post that will explain everything to know about Long Term Liabilities.
Long Term Liabilities - Is Your Hotel Defaulting on Loan Obligations in the Post Pandemic Era?
Refer Long Term Debt/Liabilities shown in the Paradise Hotel Balance Sheet Infographic in (”6”).
Understand how Long Term Liabilities are different from Current Liabilities which were discussed in Chapter 3.
Chapter 6 - Owner Equity
Click the Link below to go to the post that will explain everything to know about Owner Equity.
Capital - Are Your Monthly Business Results Improving Owner Equity?
Refer Capital / Owner Equity shown in the Paradise Hotel Balance Sheet Infographic in (”4”).
Understand how Owner Equity is different from assets and Liabilities discussed in Chapters 2-5.
Chapter 7 - Hotel Balance Sheet Relation to Hotel Profit and Loss Statement
Click the Link below to go to the post that will explain how a Hotel Balance Sheet is related to the Hotel Profit and Loss Statement.
Hotel Balance Sheet - How Is It Related to The Hotel Profit and Loss Statement?
Understand how:
- revenue,
- expenses and
- profit (net income)
form the pillars of a hotel profit and loss statement while
- assets
- liabilities and
- owner equity
are the pillars of a hotel balance sheet.
Understand how this relationship between the two financial statements works to keep a business sustained.
Chapter 8 - Hotel Balance Sheet Ratios
Click the Link below for the post that will explain 5 critical Financial Ratios in a Hotel Balance Sheet.
Balance Sheet - 5 Killer Ratios a Hotel Manager Cannot Ignore
You have now had a thorough understanding of assets, Liabilities and owner equity in a hotel balance sheet.
Now get to know powerful financial ratios in a hotel balance sheet.
Understand that the 5 ratios or KPIs in the post use assets, liabilities and owner equity elements which you saw in Chapters 2 to 7.
This wraps up the basics of a hotel balance sheet.
Coming Soon...
The Ultimate Online Course on Reading a Hotel Balance Sheet
So, you have taken the journey of understanding different parts of a Hotel Balance Sheet.
You are now ready to take it to the next level.
Utilizing your understanding of the Hotel Balance Sheet to take key financial decisions.
This online course will lay out:
- Why reading a hotel balance sheet correctly to take financial decisions is critical
- Decisions like purchasing long and short term assets to generate revenue, etc. and
- how to go about doing that
WATCH this teaser video for a glimpse of the forthcoming course.
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