In Brief: David Lund outlines practical strategies for hotel managers and department heads who lack accounting backgrounds to better understand and utilize financial reports in daily operations and decision-making.
Almost forty years ago I was a food and beverage control clerk. The hotel got its first computer — an IBM XT — and I got two hours a week on it. I taught myself Lotus 1-2-3 and moved the big green columnar pads into the machine. Work that used to take days took minutes. But the real gift wasn’t the time I saved. For the first time, I could see how the whole thing fit together. The numbers stopped being a wall of figures and started being a story. And a story is something anyone can learn to read.
That’s the promise of this post. If you’re a department head, an aspiring manager or a future GM who breaks into a light sweat when the monthly statements land, what follows is the way I’ve taught hotel leaders to look at their financials for more than a decade. No accounting degree required.
First, get one thing straight: intimidating is not complicated
People confuse these two words all the time. Complicated means it would take years to master. A hotel P&L is not complicated — the math is the addition and subtraction you already do every day. What a P&L is, for most people, is intimidating. Intimidating just means unfamiliar — for now. And unfamiliar is something you can fix in a single afternoon. You already read an income statement every payday: your paycheck starts with a big number at the top, takes deductions off in the middle and leaves you with a smaller number at the bottom. The hotel’s version is the same shape, just with more lines.
Read it in layers, not lines
Here’s why most people drown in the P&L: they read it like a book — top to bottom, every line — and they give up by line fifteen. That’s the wrong way. You read a P&L in layers, and there are only three.
Layer one — revenue. Where did the money come from? Rooms, food, beverage, other. Know the shape of your top line — in a typical full-service hotel, rooms is about two-thirds of it. Then make exactly two comparisons: versus last year (are we growing?) and versus budget (did we keep the promise we made?). Up or down, and roughly why. That’s the whole first layer. Five minutes — no more.
Layer two — the big costs. Start with payroll, because in a hotel it’s almost always your biggest controllable cost. You’re not auditing pennies here. You’re asking one question: did the big stuff move, and why? And here’s the practice that separates hotels that manage payroll from hotels that just pay it: measure labor as hours per unit, not dollars or percentages. Hours per room occupied in rooms. Hours per cover in food and beverage. Why hours? Because your managers don’t control wage rates — but they absolutely control hours and the schedule. A percentage can flatter you when rates move; hours per room occupied tells the truth. And small movements are big money. In one hotel, housekeeping and front office productivity improved from 1.806 hours per room occupied to 1.755 — just five-hundredths of an hour. Multiply that little sliver by 41,975 rooms occupied and a $30 loaded wage rate and it’s $64,000 of savings in five months. That’s the power of knowing your hours.
Layer three — flow-through. This is the one number that tells you more about how the hotel is really being run than any other line on the page. When revenue moved, how much of it reached the bottom line? If revenue grew $145,000 and profit grew $85,000, your flow-through is 59 percent — you kept 59 cents of every new dollar. One division. It tells you more than fifteen lines of variances ever will. When revenue falls, the same math shows how much profit you protected on the way down.
Demand a statement that helps you
Reading in layers is your half of the deal. The other half is having financials worth reading — and this is where most hotels leave easy insight on the table. A great statement shows up on time, within five business days of month-end, while you can still act on it. It’s on an accrual basis, so costs land in the month they belong to, not the month the invoice wandered in. It follows the uniform system (USALI), so it’s the same shape every month and comparable to every other hotel. And every number sits beside its budget and last-year comparison, with a percentage to give it context.
Then there are the enhancements — the things I wish every operator added, because they’re simple and they change the conversation. Get the statistics into the statements with a monthly stats journal entry: occupancy, ADR, RevPAR, covers — and hours worked, split between management and hourly, so the productivity math above is sitting right there on the page. Add a separate schedule for supplemental payroll and benefits — vacations, stat holidays, sick pay, health care, pensions. These are big dollars, they’re usually scattered as allocations across the departments, and until you total them on one page you have no idea what the real picture is. And track arrivals, departures, length of stay and guests per room. They sound like trivia; they’re not. A higher length of stay should mean better rooms productivity — stayovers clean easier than departures — and guests per room drives F&B capture, linen and amenity costs. Commentary on the big variances, and a name beside every line — someone who owns it. That’s a statement that talks.
Now, what you do NOT need to do
You do not need to memorize hundreds of account codes — you need the shape, not the index. You do not need to become an accountant — that’s a different job, and yours is to lead with what the numbers say. And you do not need to explain every variance — chase the big movements and let the pennies go. You’re a leader reading a statement, not a bookkeeper closing the month. Your job is to see the story and ask the good questions. The paper can’t talk. A leader makes it talk.
The thirty-minute deal
Here’s the deal I make with every leader I coach. Give the financials thirty minutes a month — a timer, a closed door, the three layers. Revenue: up or down, versus last year and budget. Big costs: did the big stuff move, and what happened with the hours? Flow-through: of every new dollar, what did we keep? The first month it will feel slow. By the third month you’ll be done with time to spare, and somewhere around then you’ll have the same realization I watch happen with clients: you could have done this the whole time. The fear was never about the math. It was about nobody ever showing you the shape of the thing.
A year from now you’re one of two people: the leader who reads the P&L in thirty minutes and sits calm in any meeting, or the one still drowning at line fifteen and hoping nobody asks. The difference is thirty minutes a month — and starting this month.
David Lund
The Hotel Financial Coach
At Hotel Financial Coach I help hotel leaders and teams with financial leadership coaching, webinars and workshops. Learning and applying the necessary financial leadership skills is the fast track to greater career success and increased personal prosperity. I significantly improve individual and team results with a proven return on investment.
Call or write today and arrange for a complimentary discussion on how you can create a financially engaged leadership team in your hotel.
Contact David at (415) 696-9593.
Email: [email protected]
www.hotelfinancialcoach.com
