1. travel
2. tourist facilities
3. hotel

Hotel Profit and Loss Statement 101
Tweet: The Basics of a Hotel P&L. #HotelProfit. #HotelManagement. #HotelBuzzwords
It is a trademark of hotels that most new employees will be thrown into the mix and expected to
perform with little or no training. Hotels never close, the wheel never stops turning and no one can
afford to slow down to help you catch up. As a new manager, you are expected to hit the ground
running. There are so many different aspects of hotel management, but the bottom line is the bottom
line. When it’s all said and done, if your hotel is not profitable and you are not able to speak to the ups
and downs of your P&L statement, you will be looking for another job very quickly.
Whether you are provided a 3-page or a 30-page statement, the following tips will help you successfully
Read, Decipher, Report and React.
READ IT:
As a hotel manager, the primary page you are looking for is the current month’s overview. The columns
will be divided up as: (This format stays the same throughout the entire Profit and Loss Statement and each
number is represented by a Dollar Amount and a Percentage.)





This Month Actual
This Month Budget
The Actual/Budget Difference
This Month Last Year
Last Year/This Year Difference





Year to Date Actual
Year to Date Budget
Actual/Budget Difference
Year to Date Last Year Actual
Last Year/This Year Difference
YOU SHOULD HIGHLIGHT ANY DIFFERENCE OF +/- 10%.
(Your company may require a different guideline, but this is a good starting place if you are given no guidelines.)
DECIPHER IT: Money In/Money Out
Money IN:
ROOM Revenue is your primary source of income. This revenue is made up of a combination
of Occupancy and Average Daily Rate. If either of these numbers have fallen short of the budget
or short of last year’s numbers, you will need to justify this, especially if your overall Room
Revenue fell short of budget. If one of these numbers is short and the other is up and you
achieved your top line Room Revenue goal, you can easily defend this with the help of the STR
Report.
OTHER Revenue could include Food and Beverage, Meetings, and Miscellaneous Income
(Telephone, Fax, Suite Shop of Pantry, etc.) You should know exactly where your company is
coding all revenue that is coming into your hotel so that you can better budget and defend
every dollar.
Money OUT:
The rest of the P&L will be concentrated on your expenses-all of the money you spent to run your
property. The bulk of this will always be in payroll and this being said, if you are aware that your hotel is
not going to make the top-line budget, you can save the most money by cutting hours and still achieve
your bottom line goal.
Fixed Expenses: These are expenses that you may or may not have control over before the
budget is set, but once the amount is agreed upon, these expenses will be a constant every
month, regardless of your hotel’s occupancy or top-line numbers. These may include mortgage
payments, property insurance, subscriptions, loan payments, management salaries, etc. Your
owners and managers will be looking at these, but there is little for you to say if the budget is off
on these items. When planning your budget for the year or for each month, you should always
know the cost of your fixed expenses and start with that money already gone from your top line.
Variable Expenses: These are expenses that will fluctuate with your hotel’s occupancy or topline revenue. If your hotel exceeded occupancy expectations by a significant amount, then, of
course, these expenses will be higher, but the percentage of the income/expense should be
constant, so for these numbers, you will concentrate more on the percentage than on the dollar
amount. For any of these that show a +/- 10% difference to budget, you must be able to justify
to your management company and to your owners. Always keep in mind that your payroll is
your biggest expense and your hourly employees’ pay is considered a variable expense. You
should not assume that a hotel running at 30% occupancy should have the same hourly expense
as a hotel that is running 80%.
Controllable: These are expenses that you are directly responsible for, like linen costs, guest
supplies, food, tools, marketing material, office supplies, pest control, etc. These expenses may
or may not fluctuate due to the occupancy of the hotel. If they are considered variable costs,
then make sure they line up with the fluctuation of the occupancy. If they are not affected by
the occupancy, then you must be able to justify spending the money. A good example of a fixed
controllable expense variation would be Pest Control. You would have chosen your pest control
company and agreed on the monthly amount for your hotel before the budget was set, but if
you had an infestation of bed bugs, this line could show a huge increase that has nothing to do
with the occupancy of the hotel.
Non-Controllable: These are expenses that are not necessarily “Fixed,” as they may fluctuate
month to month, but you have little to no control over the cost of these. An example of a
Variable, non-Controllable expense is your Franchise Fees.
REPORT IT: Self-Confidence
The entire “Report-Out” to your boss, your management company or your ownership comes down to
the BOTTOM LINE. In all that you have taken note of up to this point, the focus is completely on how
these individual items translated to your Gross Operating Profit.
Income:
 You will begin by reporting on your INCOME, stating either how you achieved it or exceeded
it OR why you did not achieve it:
 Room Revenue
 Occupancy
 ADR
 Total Revenue
Expenses:
 Then you will look at EXPENSES and be able to speak to any line item that is +/- 10% to
Budget.
 Variable Expense differences should line up with Occupancy differences
 Controllable Expenses should reflect your management of your hotel
 Fixed Costs differences should always have a good reason.
 Non-Controllable Expense differences should be addressed but you should not have to
defend these.
Profit:
 Translation to the BOTTOM LINE:
 This Month Actual Dollar Amount:
Total Revenue – Total Expenses=Gross Operating Profit
o If you exceeded your budget on the top line and controlled your spending, you
will have a positive GOP.
o If you missed your budget on the top line and cut your expenses, you can still
have a positive GOP.
o If you exceeded your budget on the top line and went crazy spending money,
you could end up with a negative GOP.

This Month Actual Dollar Amount v Budget:
o This number may be negative or positive, but most importantly is that it lines up
correctly with your Actual Dollar amount. If you were positive $23,000, at the
very least, your Actual v Budget should be positive $23,000. If you were
negative $4,500, at the very least your Actual v Budget should be negative
$4500. Neither of these are ideal, but any negative variance will be tough to
explain.
This Month Actual/Budget Percentage: FLOW or FLEX?
This is where the game is won or lost.
Above all else, you, as a Hotel Manager are required to bring a certain percent of your
Revenue to the bottom line-no matter what the actual revenue is.


If you have exceeded your top line by $17,000 and you still only bring the budgeted
amount to the bottom line, you will have some hard questions to answer.
If you missed your top line to budget, but still brought the correct percentage of
your income to the bottom line, then you will at least show that you have managed
your hotel in a tough month.
 If your top line met or exceeded budget then this percentage number is called your
FLOW. If you missed your budget for the top line, then this number is called your
FLEX. Company requirements for Flex and Flow percentages vary so be sure to ask
your boss what your goals should be for either of these scenarios.
An excellent blog on how to control and calculate Flex and Flow is
Justin Shelton’s SPRINGUPBLOG, Series of five blogs on Flex/Flow.
REACT: For Future Success
A successful General Manager will always know how all of these numbers reflect on the operations of
the hotel and its staff. Reading and understanding the P&L every month will give you the tools you need
to perform better, save more, project outcomes and plan for the future. Your hotel is always expected
to outperform itself month after month and year after year and you are the key to making that happen.
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