Magic Lavender hotel has a firm position on the market. According to the statictics, its market room share is 8,87% now and is predicted to increase during next 3 years. Let us analyze its balance sheet in order to determine its costs and revenue.
The most important indicator for the hotel industry is a Revenue per Available Room or RevPAR. Now this indicator is 104$. It means, that every day each room gains 104$.
The next very important indicator is a Total Revenue per Available Room or TrevPar.
This indicator “determine the overall financial performance of the property”(1). Now this indicator is 162$. But together with RevPar is predicted to grow continuously. Slight declines in all indicators expected in the year 6. Such a decline can be caused by different reasons:
General crisis tendency in the world economy;
Recession in the hotel industry;
Reduction in the number of tourists;
Increased competition on the market.
Net profit is another important financial indicator of the activity of any company. When we speak about Magic Lavender, it is necessary to mention, that Net profit also shows continuous growth what mean, that the hotel activity is developing and improving.
Return on Equity or ROE is vital for the shareholders. The indicatory of 1,41% means, that every dollar, that was invested, gains 1,41 dollar or the return on the investment is 141%. This indicator as well is predicted to growth.
According to Chris Bradford, “an operating budget is a combination of known expenses, expected future costs, and forecasted income over the course of a year”. Operating budget is a necessary step for the hotel managers on the way of the efficient doing business. The hotel industry has its own peculiarities. In particular, for the operating plan it is very important to determine two variables: “occupancy rate and ADR, or average daily rate, which means the average cost of staying in a hotel room for one night” (Hill). These two indicators play significant role in the forecasting of the financial results of the hotel. It is obvious, that there are a direct proportional relationship between the number of visitors hotel has, its costs of staying and its revenue rate.
The operating budget for Magic Lavender Hotel will look like that
References
RC Solutions. TRevPar: the most effective metric for revenue managers? [online] Available at: http://www.revparguru.com/trevpar-the-most-effective-metric-for-revenue-managers/ [Accessed 20 January 2016].
Bradford,C. What Is an Operating Budget? [online] Available at: http://smallbusiness.chron.com/operating-budget-61475.html [Accessed 20 January 2016].
Hill, B. About Budgets in Business Operations of Hotels. Demand Media.
