For example, they look at sales expense, marketing expense, and accounting costs all calculated as a percentage of revenue. STR's International Profitability Program This could be by department or by total hotel revenue. Computing this metric for information technology is a logical extension. The operating expense ratio (OER) is defined as a measurement of the cost to operate a piece of property compared to the income brought in by the property. In considering IT spending as a percentage of revenue, the first important principle is that this metric varies greatly by industry. High expenses and wasteful practices deplete profit margins and threaten a property’s financial health and long-term viability. For the hotels that reported paying a management fee in 2015, the combined payments for the base and incentive fees averaged 3.5 percent of total revenue. How to calculate percentages of total revenues Scaling each company's operating profits to its revenue allows us to make a better like-for-like comparison with regard to company profitability. HOTEL EXPENSE ACCOUNTING. According to a CBRE survey of over 7,000 hotels, during 2018, property taxes averaged 3.6 percent of total operating revenue, and insurance costs averaged 0.8 percent… Cost of Goods Sold) or that expires due to the passage of time (ex. If, on the other hand, your hotel has matured to a more advanced stage and it’s been in business for 3+ years, then 8-15% of your annual revenue on marketing should be more than enough to guarantee you a good balance between profit and visibility. Analyzing the 2005 data by the various types of hotels, PKF-HR finds that maintenance expenses range from a low of 4.7 percent of total revenue at convention hotels to a high of 5.5 percent … For example, if a hotel has 300 rooms, but only 290 are in service, then for that period, 290 is the base to use for metrics like RevPar. Keeping hotel operating expenses under control is key to running a successful property. STR's profitability database gives you the industry's most comprehensive, accurate and actionable data insights on hotel revenue and expenses. detailed breakdowns of departmental revenue and expenses, in-depth performance analyses, year-over-year comparisons and enhanced benchmarking offerings. This expense ratio was the greatest at extended-stay hotels (4.2%), and lowest at suite hotels with food and beverage (2.9%). On the other hand, proper cost management primes your property for … More of a snapshot of that individual department. 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