Today is the anniversary of our nations independence. Today isn't just July 4th that we celebrate with barbecues and fireworks; today is also Mark and Reneta's wedding anniversary. When we walked into class today, the PowerPoint slide looked like any normal beginning slide because it said "HAdm 1101 Welcome to day 8". However, when Mark changed they slide, the new title said "Love You!" and Mark and Reneta's wedding song began to play. After a chorus of "awwwws" Mark and Reneta got right back into the swing of things and began the lecture as if it were any normal day.
Today, we learned about financial statements which sparked more thoughts about how my CHESS hotel should be managed. We found that if we have two samples, one where there is a set occupancy and set ADR (Average Daily Rate), and one where the occupancy is the same but the ADR is higher, the second sample is obviously more profitable. If we extend this to where the first sample is same as before, but the second sample has and occupancy rate that is 3% lower and the ADR is 3% higher, the second sample was still more profitable.
This got me thinking be wise yesterday I was pretty much set on just keeping lower rates open longer so the occupancy rate will go up as part if a two part plan. If i do that, then my ADR would be lowered because I would be accepting more low rates than I originally was going to accept. Based on the two examples about occupancy vs. ADR, I think should ditch the part of my plan to just try increase occupancy by accepting lower rates and focus on keeping my ADR in the high 90s.
Today's lecture also covered the second part of my plan: cut expenses. We covered variable cost which is the commitments per occupied room, the variable amount which includes guest room supplies, divided by the ADR. This gives us a percentage and Reneta explained that most profitable percentage is slightly less than 20%. After Mark walked us through how to find the variable cost on Excel, I discover that my variable cost for business and group travelers was right at or below 20% while my variable cost for leisure travelers was well above 20% at 24%. This told me that I need to cut expenses on the leisure group and hopefully this tactic will help me reach the goal of a department revenue of $70,000 per week.
Happy Fourth of July everyone!
Happy anniversary Mark and Reneta!