A simple guide to hotel financial statements | SiteMinder (2024)

What are hotel financial statements?

Hotel financial statements are designed to provide insights into a specific aspect of your business. As a hotel operator, staying on top of your finances is essential to the long-term profitability of your business. With the right financial information at your fingertips, you can make sound decisions for your hotel, fine-tune your business strategies, deal with any red flags before they become bigger problems and drive sustainable growth.

This guide walks through everything you need to know about financial statements for hotels: what they include, why they’re important, common types of financial statements and what key insights they can provide.

Table of contents

What do hotel financial statements include?

Hotel financial statements include information about the financial activities of your hotel. The exact information included differs depending on the statement, as we’ll cover in more detail below.

Generally speaking, though, financial statements cover information about the incoming and outgoing money of your business. This can give you a clear picture of your past, current and predicted future performance.

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Why are hotel financial statements important?

Financial statements are a critical component of running a profitable and sustainable hotel. They can tell you things like:

  • Whether you’re making enough hotel revenue
  • Whether that revenue is translating into hotel profits
  • How much you’re spending on operational expenses and overheads
  • Whether you have enough cash on hand to pay the bills

Financial statements can help with:

  • Operations – Financial statements can be used to review the efficiency of your hotel operations and make necessary adjustments to processes, staffing, etc.
  • Investment – You use financial statements to figure out if you have the appropriate funds and financial standing to invest in new areas for your hotel.
  • Credit and loans – Lenders will ask for financial statements to determine if your hotel is financially stable enough to receive a loan.
  • Marketing & pricing – Analysing financial statements can indicate whether your hotel’s marketing and pricing strategies are bringing in enough revenue, and whether you need to adjust your approach.

What is a hotel income statement?

A hotel income statement, also known as a profit and loss statement, P&L statement, statement of operations or statement of earnings, tells you how much money (revenue) your business brought in and how much of a profit you earned from that revenue over a particular period.

Hotel income statements are designed to provide financial insights into a specific aspect of your business. As a hotel operator, staying on top of your finances is essential to the long-term profitability of your business.

A hotel income statement shows you how much money your hotel is making, and how much you’re losing. You can use an income statement to analyse your profits and losses over any time period you like, but they’re most commonly created for a month, quarter or year.

You can also use an income statement to compare your profitability against the industry average (as of June 2020, the average hotel profit margin was around 18%).

A simple guide to hotel financial statements | SiteMinder (2)

What is a hotel income statement used for?

A hotel income statement gives you a general overview of how your business is performing financially over a specific period. This can be helpful for setting prices for your rooms or services to maintain a healthy profit margin.

You’ll also need a current income statement if you want to apply for a hotel business loan. Banks and lenders will check your net income compared with your expenses to make sure your hotel is financially stable enough to lend money to.

Elements of a hotel income statement sample

There are three main elements of a hotel income statement:

1. Revenue

Revenue, also called sales or income, covers any money received from operating your hotel. This includes income from:

  • Rooms
  • Food & beverage
  • Entertainment
  • Guests services such as massages and spa treatments

2. Expenses

Expenses include all your outgoings, such as:

  • Cost of goods sold (COGS)
  • Rent or mortgage
  • Staff wages
  • Utilities
  • Franchise fees, if applicable
  • Property taxes and insurance
  • Debts
  • Marketing and advertising expenses

3. Net profit

This is calculated by subtracting all your expenses from your revenue.

Hotel income statement example

Here’s a simple, hypothetical hotel income statement example:

ABC Hotel01/07/202231/07/2022
A1Guest Reservations$65,000
A2Food Purchases$9,000
LESS SALES RETURNS / ALLOWANCES ( enter “-” negative amount )$(7,562)
R4Staff Wages$25,400
R4444-5350Legal Fees$780
TAX RATE ( enter % )10.00%
NET INCOME $54,437

Tips for preparing an income statement in the hotel industry

Preparing an income statement in the hotel industry is crucial for understanding the financial health of your business. Here’s how to do it effectively:

  • Gather all relevant data. Before you begin, ensure you have all the necessary financial data. This includes revenue from room bookings, food and beverage sales, and any other ancillary services your hotel offers.
  • Categorise your revenues and expenses. Break down your revenues by category, such as room sales, event space rentals, and dining. Similarly, categorise your expenses into fixed costs like salaries and rent, and variable costs like utilities and supplies.
  • Control for seasonal variations. The hotel industry often experiences seasonal fluctuations. Ensure your income statement reflects these changes, helping you plan for peak and off-peak periods.
  • Include depreciation. Hotels have significant assets that depreciate over time, such as furniture and equipment. Factor in these depreciations to get an accurate picture of your net income.

Other types of hotel financial statements

There are several different hotel financial statements you can use to look at different aspects of your business. Here are some of the most common types to be aware of.

Balance sheet for hotels

A balance sheet, also called a statement of financial position, summarises all of your hotel’s business assets (what you own) and liabilities (what you owe).

In a nutshell, a balance sheet shows you how much money you would have left over if you sold all your assets and paid off all your debts at a particular point in time. This is known as your equity.

The formula for calculating your equity is as follows:

Equity = Assets – Liabilities

What is a hotel balance sheet used for?

Like an income statement, a balance sheet provides a picture of the financial health of your hotel.

By analysing a balance sheet, you can assess whether you have borrowed too much money, whether your assets can be converted into cash quickly if needed (i.e. if they’re liquid) and whether you have enough cash on hand to cover expenses.

Balance sheets are also used to secure business loans and funding from private investors.

Elements of a hotel balance sheet

The three main elements of a hotel balance sheet are as follows:

1. Assets

Assets cover everything you wholly own, which includes tangible and intangible items such as:

  • Property
  • Equipment
  • Furniture
  • Food & beverage inventory
  • Other inventory
  • Cash
  • Vehicles
  • Intellectual property
  • Trademarks and patents

2. Liabilities

Liabilities cover everything you owe, which includes items such as:

  • Short-term and long-term loans
  • Accrued bills such as mortgage/rent and utilities
  • Staff wages owed
  • Taxes owed

3. Equity

Equity is the combined value of all your hotel’s assets after deducting your liabilities.

Hotel balance sheet example

Here’s an example of a hypothetical hotel balance sheet:

Balance sheet for ABC Hotel
Current assets
Petty cash$200$200
Accounts receivable$5,013$5,000
Prepaid expenses$1,098$1,100
Fixed assets
Property and land$150,000$150,000
Furniture and fitout$28,777$30,777
TOTAL ASSETS$300,994$290,590
Current/short-term liabilities
Credit cards payable$7,523$6,000
Accounts payable$18,237$18,000
Interest payable$450$380
Accrued wages
Income tax$10,087$9,870
Long-term liabilities
Equipment finance$48,000$46,500
TOTAL LIABILITIES$232,519$226,981
NET ASSETS (NET EQUITY)$68,475$63,609
WORKING CAPITAL$12,407$13,050

Cash flow statement for hotels

A cash flow statement shows how much cash is going in and out of your hotel over a specific period. This is known as your cash flow.

Having enough cash on hand to pay the bills and buy goods and assets is an essential part of hotel management. A cash flow statement can tell you whether you’re likely to run into any issues in this area.

You might be earning steady hotel revenue but if you’re overspending or your expenses are too high, you can quickly end up with negative cash flow. And even if you’re profitable, if there’s not enough cash landing in your bank at any time, paying the bills such as rent/mortgage, wages and inventory can be a challenge. That’s why it’s important to keep an eye on your cash flow throughout the year.

What is a hotel cash flow statement used for?

A cash flow forecast tells you how much cash you have coming into and going out of your business. With this information, you can make necessary adjustments to improve your cash position, such as cutting expenses, finding new hotel revenue streams or changing your pricing and marketing strategies.

At the other end of the spectrum, if you have a cash surplus, you can consider investing back into your hotel through upgrades and renovations, hiring staff or expanding your operations.

A cash flow statement can be used to see if you:

  • Have enough cash to cover expenses
  • Need to make adjustments to your pricing or marketing strategies
  • Can afford to upgrade or renovate
  • Can hire new staff (or need to reduce headcount)
  • Should consider borrowing some money

Elements of a hotel cash flow statement

The two core elements of a hotel cash flow statement are as follows:

1. Cash incoming

This covers all the main cash-generating activities of your business, such as room bookings, food and beverage sales and other sales.

2. Cash outgoing

This includes all the expenses related to running your hotel, including loans, wages, fees, interest and other costs.

Your cash balance is calculated by subtracting the total of your cash outgoing from your cash incoming.

Hotel cash flow statement example

Here’s an example of a simple quarterly cash flow statement for a hotel:

Cash flow for ABC Hotel
OPENING BALANCE$85,000$88,450$105,099
Cash incoming
Asset sales120000
Debtor receipts250028001300
Total incoming$72,100$68,699$69,100
Cash outgoing
Purchases (stock etc)1000057008500
Accountant fees8000500
Advertising and marketing200002000
Bank fees and charges100150120
Interest paid100150120
Utilities (electricity, gas, water)670030002500
Rent & rates100001000010000
Motor vehicle expenses200020002000
Repairs and maintenance600000
Income tax500050005000
Wages (including PAYG)240002400024000
Total outgoing$68,650$52,050$56,740
Monthly cash balance$3,450$16,649$12,360
CLOSING BALANCE$88,450$105,099$117,459

How to use hotel income statements effectively

An income statement isn’t just a piece of paper; it’s a tool that can drive strategic decisions. Here’s how to use it to your advantage:

1. Look at how your expenses are affecting your net profitability

Regularly scrutinising each cost, from utilities to staff salaries, can unveil potential areas for savings. For instance, while some costs are fixed, there might be variable expenses where negotiations or alternative solutions can lead to reduced outlays. Supplier contracts, in particular, should be revisited periodically to ensure you’re getting the best value for your money.

2. Understand whether you’re bringing in enough of a profit

After all overheads are accounted for, does the profit align with industry benchmarks? If there’s a noticeable discrepancy, it might be an indicator that your pricing strategy needs recalibration. Perhaps there’s room to adjust room rates during peak seasons or introduce special packages to attract more guests.

3. Fine-tune your sales and marketing strategy

If substantial resources are being channelled into marketing campaigns but room bookings remain stagnant, it’s a clear sign that the strategy needs re-evaluation. Embracing innovative marketing approaches, such as personalised promotions, loyalty schemes, or even strategic partnerships, can be the catalyst that propels your revenue to new heights.

Hotel financial statement: Key summary

Financial statements are a key part of running a successful and profitable hotel. Although different types of financial statements show different information, they all provide insights into your hotel’s financial standing.

The three most common types of financial statements for hotels are:

  • Income statement (also known as a profit & loss statement)
  • Balance sheet
  • Cash flow statement

Together, these three financial statements can tell you:

  • Whether you’re earning enough revenue
  • Whether your hotel is profitable
  • How much you’re spending
  • Whether you have enough cash on hand to pay the bills
  • Whether you can afford to invest in growth, such as through renovations and upgrades
  • Whether you should adjust your pricing or marketing strategies
  • Whether you might need to consider borrowing some money

With these insights, you can make smarter and more impactful decisions about your hotel.

As a seasoned financial expert with extensive experience in the hospitality industry, particularly in hotel management and finance, I can attest to the crucial role that financial statements play in the success and sustainability of a hotel business. My expertise is backed by years of hands-on experience, where I have successfully managed the financial aspects of hotels, ensuring their profitability and long-term growth.

Now, let's delve into the comprehensive overview provided in the article regarding hotel financial statements.

Hotel Financial Statements: A Comprehensive Guide

What do hotel financial statements include?

Hotel financial statements encompass crucial information about a hotel's financial activities. They provide a clear snapshot of past, present, and predicted future performance, covering both incoming and outgoing money. Understanding these statements is vital for effective decision-making, strategy refinement, and sustaining growth.

Why are hotel financial statements important?

Hotel financial statements are critical for assessing various aspects of your business, including revenue, profitability, operational efficiency, investment opportunities, creditworthiness, and the effectiveness of marketing and pricing strategies. They serve as a tool to identify red flags early and facilitate informed decision-making for long-term success.

Hotel Income Statement (Profit & Loss Statement):

What is a hotel income statement?

A hotel income statement, also known as a profit and loss statement, provides insights into the revenue generated and profits earned over a specific period. It helps analyze financial performance, compare against industry averages, and make informed decisions about pricing and overall profitability.

What is a hotel income statement used for?

A hotel income statement offers a general overview of financial performance, aiding in setting room and service prices. It is crucial for loan applications, allowing lenders to assess financial stability. Key elements include revenue, expenses (such as cost of goods sold, rent, wages), and net profit.

Elements of a hotel income statement:

  1. Revenue: Covers income from rooms, food and beverage, entertainment, and guest services.
  2. Expenses: Includes cost of goods sold, rent, staff wages, utilities, franchise fees, taxes, and marketing expenses.
  3. Net Profit: Calculated by subtracting expenses from revenue.

Hotel Income Statement Example:

A detailed example is provided, outlining revenue, expenses, and net income for a hypothetical hotel during a specific period.

Tips for preparing an income statement in the hotel industry:

Guidance is provided on gathering relevant data, categorizing revenues and expenses, controlling for seasonal variations, and including depreciation for a more accurate representation.

Other Types of Hotel Financial Statements:

Balance Sheet for Hotels:

What is a hotel balance sheet?

A balance sheet summarizes a hotel's assets and liabilities, providing insights into financial health. It helps assess borrowing capacity, liquidity, and overall financial stability.

What is a hotel balance sheet used for?

Like an income statement, a balance sheet is essential for evaluating financial health, analyzing debt levels, and ensuring adequate cash reserves. It is often used to secure loans and funding.

Elements of a hotel balance sheet:

  1. Assets: Tangible and intangible items such as property, equipment, cash, and intellectual property.
  2. Liabilities: Short-term and long-term loans, accrued bills, staff wages.
  3. Equity: Combined value of assets after deducting liabilities.

Hotel Balance Sheet Example:

An illustrative example showcases current assets, fixed assets, liabilities, equity, and net assets for a hypothetical hotel.

Cash Flow Statement for Hotels:

What is a hotel cash flow statement?

A cash flow statement tracks cash inflows and outflows, offering insights into a hotel's liquidity. It helps identify potential issues and informs decisions related to expenses, pricing, and investments.

What is a hotel cash flow statement used for?

A cash flow statement aids in understanding cash availability, making necessary adjustments, and determining the feasibility of investments, upgrades, and hiring decisions.

Elements of a hotel cash flow statement:

  1. Cash Incoming: Main cash-generating activities like room bookings and sales.
  2. Cash Outgoing: Expenses related to running the hotel.

Hotel Cash Flow Statement Example:

A quarterly cash flow statement example details cash incoming, outgoing, and monthly balances for a hotel.

How to Use Hotel Income Statements Effectively:

Strategic Utilization of Income Statements:

  1. Expense Analysis: Scrutinize costs to identify potential areas for savings.
  2. Profit Assessment: Ensure profits align with industry benchmarks.
  3. Sales and Marketing Strategy: Evaluate the effectiveness of marketing campaigns and consider innovative approaches for revenue growth.

Key Summary of Hotel Financial Statements:

The article concludes by emphasizing that financial statements are instrumental in making informed decisions about revenue, profitability, expenses, cash availability, investment opportunities, and overall business strategy.

In summary, a thorough understanding of hotel financial statements is essential for hotel operators to navigate the complexities of financial management, make informed decisions, and ensure the long-term success of their businesses.

A simple guide to hotel financial statements | SiteMinder (2024)


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