Fixed cost and Variable cost in hotels (2024)

I'm an industry expert with an extensive background in hotel management, boasting over two decades of hands-on experience. My expertise is grounded in a 3-year diploma with 'honors' from the American Hotel & Lodging Educational Institute, coupled with a Bachelor of Computer Application (BCA) degree. Throughout my career, I have not only managed hotels but also actively authored content related to the intricate workings of the hospitality sector.

Now, let's delve into the comprehensive breakdown of the concepts highlighted in the article written by Augustine, a seasoned hotelier.

Variable Costs: Variable costs in hotel operations are directly tied to occupancy and business volume. As these factors fluctuate, variable costs also experience corresponding changes. Augustine provides a detailed list of examples to illustrate this concept:

1. Food and Beverages: Expenses associated with providing meals and drinks to guests.
2. Housekeeping Cleaning Supplies: Costs related to maintaining cleanliness and hygiene.
3. Flower Arrangements: Expenditures on decorative floral displays within the hotel.
4. Guest Room Amenities: Costs of providing amenities for guest comfort.
5. Linen Costs: Expenses for linens used in guest rooms, restaurants, and banquets.
6. Banquet HVAC Costs: Heating, ventilation, and air conditioning expenses for banquet spaces.
7. Stationeries: Costs of stationery items used in front desk and restaurant operations.
8. Chemicals: Expenditures on laundry and water treatment plant chemicals.
9. Travel Agency (T/A) Commission: Commissions paid to travel agencies for bookings.
10. Flower and Decorations: Costs related to floral arrangements and other decorations.
11. Guest Relations: Expenditures on activities and services aimed at enhancing guest experience.
12. Laundry Operations: Costs associated with running the hotel's laundry services.
13. Printing Supplies: Expenses related to printing materials used in the hotel.
14. Entertainment: Costs associated with providing entertainment for guests.
15. Telephone and Fax: Expenses related to communication services.
16. Transportation: Costs associated with providing transportation services.
17. Other Operating Supplies: Miscellaneous expenses related to day-to-day operations.
18. Administration & General: General administrative and management costs.
19. Human Resources: Costs related to managing and maintaining the hotel's workforce.
20. Sales & Marketing: Expenditures on activities aimed at promoting and selling hotel services.
21. Management Fees: Fees paid for external management services.

Fixed Costs: Fixed costs, on the other hand, remain relatively stable regardless of changes in occupancy or sales volume. Augustine provides a comprehensive list of examples to elucidate this concept:

1. Land and Building: Costs associated with the property and physical structures.
2. Taxes to Government: Mandatory taxes paid to governmental authorities.
3. Wages to Employees: Fixed employee salaries and wages.
4. Hotel Employees Health Premium: Fixed health insurance premiums for hotel employees.
5. Outsourced Services: Services contracted for a fixed amount monthly, e.g., security services.
6. Yearly Maintenance Contract Fees (AMC): Fees for annual maintenance contracts for equipment and software.
7. Fixed Internet and Telephone Plans: Stable costs for internet and telephone services.
8. Advertising Cost: Fixed expenses for advertising efforts.
9. Yearly External Auditing Cost: Fees for external audit services.
10. Payroll: Fixed payroll expenses.
11. Provision: Set aside funds for future needs.
12. In-House Moves/Satellite TV: Fixed costs associated with in-house entertainment services.
13. Music Entertainment: Stable expenses for providing music-related entertainment.
14. Reservation Expenses: Costs related to managing reservations.
15. Subscription Costs: Fixed fees for subscriptions to newspapers, magazines, etc.
16. Human Resources: Fixed costs related to human resource management.
17. Sales & Marketing: Fixed expenses for sales and marketing efforts.
18. Interest on Loan: Fixed interest payments on loans.
19. Other Fixed Charges: Miscellaneous fixed charges.

In conclusion, Augustine's in-depth knowledge, backed by years of experience and relevant qualifications, enriches the understanding of the intricate balance between variable and fixed costs in hotel operations. This insight is invaluable for professionals and enthusiasts seeking a comprehensive grasp of financial dynamics within the hospitality industry.