Ultimate Guide on Hotel Financial Terms for Beginners

Are You on Top of Hotel Financial Terms as a Manager?

Or are you missing the forest for the trees?

What do I mean by that?

As a new (beginner) hotel manager, you are busy (hopefully) with the operation.

Because of that, often, you have not paid attention to an important factor.

You are not quite sure what some hotel financial terms actually mean.

Don’t make that mistake (that many end up making!).

Learning the ropes or basics is critical.

It is the foundation for being a successful hotel manager.

But I have got your back.

In this Ultimate Guide on Hotel Financial Terms, you will learn all that you need to know.

It will make you a business savvy hotel professional.

And a successful one too.

You would want that right.

Let’s jump right in.

This Blog Post will cover

Table of Contents

What are Hotel Financial Terms?

Hotel Financial Terms are definitions of important elements of a hotel operation and performance.

They can take the form of:

Key Performance Indicators [KPIs]
Financial Ratios
Calculations
Analysis

and more.

Let us briefly see what these definitions are with examples.

Hotel Financial Terms - Defined

Key Performance Indicators

The most common form of hotel financial terms are key performance indicators or KPIs.
KPIs show important measures on hotel performance.
For example, occupancy %, average daily rate, RevPAR and so on.

Financial Ratios

Financial Ratios compare one KPI with another.
For example a Debt Equity Ratio compares debt (borrowings) with equity (owner contribution).

Calculations

Calculations show how a particular KPI is arrived at.
For example, Occupied Rooms / Rooms Available x 100 calculates hotel occupancy %.

Analysis

Analysis can take form of a series of calculations to arrive at an important measure.
For example, Break Even Analysis uses revenue, expenses in a particular way to arrive at a break even point.

Why Should You Know Hotel Financial Terms?

Your first question will be: Why should I know hotel financial terms?

Fair enough.

Let me make a strong case for that.

I will use the example of occupancy of a hotel.

As a hotel manager, you manage the operation.

You deal with occupancies on a daily basis.

This is to increase occupancy every day as much as possible.

You may know that occupied rooms divided by rooms available multiplied by 100 gives Occupancy %.

However, do you know the difference between Paid Occupancy Rate and Total Occupancy Rate?

Why is it important to understand this difference?

Do You Know what are Lean, Standard and Peak Month Occupancies?

Knowing hotel financial terms will allow you to:

manage your operation and
in this case, optimize occupancies more efficiently.

25 Hotel Financial Terms for Beginners Series

Here is a list of 25 Hotel Financial Terms that Beginner Managers Must Know.

Occupancy Rate
Average Daily Rate
RevPAR
Market Segments
Hotel Room Revenue
Market Share
Average Length of Stay
Guest Repeat Ratio
Restaurant Seats Available
Food & Beverage Covers Served
Average Food & Beverage Check
Meal Period Analysis
Year on Year Growth
Fixed & Variable Expenses
Undistributed Operating Expenses
Management Fees
Gross Operating Profit
Depreciation
Net Income
Balance Sheet
Assets - Fixed & Current
Liabilities - Long Term & Current
Owner Equity
Cash Flow Vs Cash Balances
Financial Ratios

What You Will Learn in These Hotel Financial Terms

In each of the 25 chapters, you will learn how to use these hotel financial terms.

You will learn about:

What is the Hotel Financial Term?
Why Should You Know?
Where will You find it in the Hotel Financial Statement
Covid-19 Example and Lessons to learn
Formula / Calculation for the Hotel Financial Term
What are Related Hotel Financial Terms
FAQs on Hotel Financial Terms and Related Concepts

Your Guide to Professional Success

So, there you go.

25 Hotel Financial Terms which will make you a business savvy hotelier.

Click link below for each of the hotel financial terms as chapters of this Ultimate Guide.

Chapters for 25 Hotel Financial Terms

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Ultimate Guide on Hotel Financial Terms - Other Chapters

Hotel Room Revenue – 25 Financial Terms for Beginners

Market Segments – 25 Financial Terms for Beginners

Revenue per Available Room – 25 Financial Terms

Hotel Average Daily Rate – 25 Financial Terms

Hotel Occupancy Rate – 25 Financial Terms

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About the author, Lakshmi Narasimhan Soundararajan

Lakshmi Narasimhan Soundararajan is the Founder of Ignite Insight LLC a New York City based consultancy, which specializes in Hotel Finance Training, Coaching and Consulting.

Right from the time he was in school, Lakshmi had a head for numbers. In fact, he says, numbers talk to him and tell him stories. At the same time, as he fashioned his career in the hospitality industry, he worked closely with colleagues who did not have a financial background. He saw them struggle with numbers and fear them.

Lakshmi made up his mind there and then to commit his career to hotel finance training by simplifying numbers for the benefit of his non-financial background colleagues. He founded Profits Masterclass first and then Financial Skills Academy with the philosophy of assisting managers and small business owners to Build Financial Skills, Knowledge and Ability in themselves.

His vision is for Financial Skills Academy to be the Ultimate Learning Hub for Hotel Finance Training.

Lakshmi 's all time favorite historical figure is Leonard Da Vinci and in particular Da Vinci's love for simplicity. When founding Financial Skills Academy, Lakshmi based the value proposition for his hotel finance courses on three foundational principles: SIMPLE. NON-TECHNICAL. USABLE.

Lakshmi can be contacted at +1 201-253 5000, nara.profitsmasterclass@gmail.com or at LinkedIn www.linkedin.com/in/slakshminarasimhan/