What the Hotel Profit and Loss Statement Does not Show You!

The Profit and Loss Statement below depicts the financial performance of Paradise Hotel, our Case Study Example.

It is for the year ended 31st December 2019 compared to Last Year and Budget respectively.

Comparisons with:

• previous period and
• with budget

are common methods of analyzing and measuring hotel financial performance.

However, the statement lacks some key traits for facilitating effective financial performance analysis.

• It does not show relationships between revenue and expenses beyond respective variances.
• Statement does not show behavior of expenses vis-a-vis revenue.

The pain from these huge shortcomings is almost paralyzing.

Relationships between:

• revenue,
• expenses and
• profitability

are the foundations of financial analysis.

Meaningful financial decisions cannot be taken based on what is existing in these statements.

Decision making requires a point of reference which is indicative of situations in the future.

Behavior of expenses are not reflected anywhere in a profit and loss statement.

All it shows is nature of expense.

The Hotel Profit and Loss Statement unfortunately cannot deliver here as it is historical.

So, use the profit and loss statement knowing clearly these shortcomings.

Want to know how these shortcomings can be overcome?

Click below for the full story.

Hotel Profit and Loss Statement Analysis

Tip Trailers - Learn Quickly!

Tip Trailers - Learn Quickly is a series that will bring basic concepts and tips to assist a beginner hotel manager.

You will get byte sized concepts explained to you in simple, non-technical language.

The philosophy behind Tip Trailers is to:

• quickly and
• briefly explain
• a fundamental concept
• often supported by visual elements like a :
  • video,
  • infographic,
  • screenshot,
  • slideshow and so on.

You will end up learning quickly!

The fundamental concept may be about hotel:

• financial statements
• financial performance
• revenue management
• leadership 
• productivity and so on

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