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Financial Ratios Analysis - Essay Example

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Occupancy percentage: This is defined as a ratio of rooms sold to rooms available. Total number of rooms sold is 7555. Given this, the occupancy percentage works out as 24.4. Normally, 60 to 70 is the average occupancy rate and hence the hotel has not performed well. This…
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Financial Ratios Analysis
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Financial Ratios Analysis

Download file to see previous pages... d. Cost of beverage sold percentage: Cost of beverage sold as percentage of total beverage sales. This works out to be 22.9%, which is within the range of industry average of 20-25%. Interestingly, the actual is very close to budgeted average of 22.5%. This shows that while management has made efforts to achieve what was budgeted, the efforts are certainly within the industry average.
e. Average daily rate: This is taken as Room revenue to paid room nights. The paid room night is taken as 7555 and the average daily rate works out to be $62.7. As the value for previous year is not available, it is not possible to compare.
f. Profit margin: This is income to revenue. The margin works out to be 56.4% of revenue. Profit margin has been worked out separately for room services and F&B. Profit margin for room service stands at 78.2%, which is marginally higher than the industry average of 70-75%. At the same time, F&B division has profit margin of 22% as against the industry average of 15-25%.
g. Total revenue change from budget for rooms and F&B: This is actual revenue to budgeted revenue. This is almost one for F&B; but 0.88 for rooms. This is further corroborated by poorer occupancy rate. Marketing of room service is essential in this context.
h. Housekeeping cost per occupied room: This is ratio of total housekeeping costs to total room sold. The actual is 6.5 which are substantially lower than budgeted 7.6. Thus, it appears that housekeeping costs has been controlled considerably.
i. Room sales to total sales: This is a good indicator to gauge revenue generation by rooms. On the whole, room sales contributed 61.1% of total revenue. But this is found to be lower than budgeted 64.3%. This calls for some strategic intervention to boost up revenue collection from room service.
Based on the above analysis, it can be concluded that F&B division has performed well in comparison ...Download file to see next pagesRead More
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