Any employer knows that maintaining a healthy profit margin is essential to the company's survival. Profits allow the company to grow, hire new workers and make improvements to its existing structure. A hotel is no different in this regard. The major difference is that a hotel doesn't maintain much inventory and generally faces intense competition in the local area that dictates prices and amenities.
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1.
Look at expenditures. Understand how much is being spent on laundry, labor, electricity and every expense associated with the business. Determine your costs for a typical month.
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2.
Calculate the average number of rooms booked per month. The number of visitors usually increases during the weekend as people travel. The total number of rooms rented per week shows highs and lows throughout the month.
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3.
Calculate the monthly price per room. Take the average number of rooms booked each month and determine the total gross profit from the rooms. Rooms feature different prices, and some may be included in discount programs, so the average is the important number to work from. Determine the average price for the entire month.
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4.
Subtract the total expenditures per month from the average income from the bookings. This shows your profit margin for a month. If the number is negative, the company is losing money. If the number is positive, then the higher the number, the more money the hotel is making.
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5.
To increase the profit margin, look at ways to increase bookings and adjust rates to match the local competition. Rooms that are not booked are wasted space. Invest profits into marketing and consider a rate adjustment of a few dollars for non-discounted customers.
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6.
Estimate increases in profit. Using the same steps that you employed to determine the profit margin, calculate your future profits based on the assumption that your bookings and room rates are increased. This will show you where to make money without hurting your business.
