Measurement Flashcards
Measurement
There are both internal and external measures or standards against which managers can evaluate the result of operations.
“Internal Measures” compare what items: (3) examples?
Compare to past records of operation, compare to budget, and compare to industry averages.
Revenue
The amount of sales, measured in the appropriate currency, generated from the sale of goods and services. It is referred to as a top-line item to reflect its position in the income statement. It can be compared as current year over last year, actual vs budget, the fiscal year-to-date, or any other way that serves a purpose.
Room revenue =
Room revenue = Room nights sold x Room rate charged
Define “Occupancy Percentage”.
Expresses the proportion of rooms sold to total rooms.
Occupancy percentage =
Occupancy percentage = (Room nights sold in a period / Room nights available in that same period) x 100
Average Daily Rate (ADR)
Expresses the average room rate realized from the sale of rooms in a given period. It should be calculated on a daily, weekly, and monthly basis. According to the Uniform System of Accounts for the Lodging Industry, if a room night was not sold for revenue (comp rooms), it should not be counted for sales performance analysis.
ADR =
ADR = Room revenue / number of room nights sold
RevPAR
Combined occupancy percentage and ADR in a single statistic known as Revenue Per Available Room.
RevPAR =
RevPAR = ADR x Occupancy percentage
Contribution Margin (Net Revenue)
The amount of sales revenue left over to contribute to covering fixed costs and, once fixed costs are paid, profit. The overall rooms division contribution margin is determined by totaling the margins of the individual rooms (different room types may be priced differently and incur different variable costs)
Contribution margin =
Contribution margin = Room rate – Variable cost
Identical Net Revenue
Analyzing scenarios with changing price points and occupancy levels. The objective of this calculation is to identify the occupancy percentages that will generate identical net room revenue at changing average rates (ADR).
Required new occupancy =
Required new occupancy = (Current contribution margin / New contribution margin)
x (Current Occupancy %) x 100
Marginal Revenue
The additional revenue gained from selling one more product unit.