Operating review

From Emerald Forest Hotel

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In this file we will explain more in depth the results you can see on the tab results in your Team file.

The total of the Results

At the end of each year, you will find in your Team File on the tab Results your operating review and more after 'release'. Your team (and your coach) are the only ones who can see these results. If a year has passed, you will see your results, as soon as they have been released by your coach.
You do not have to calculate anything to create these results yourselves. You only take the decisions and the rest is automatically calculated for you. An extended algorithm calculates your occupancy rate depending on your decisions, your coach's evaluation (related to the quality of your explanations) and some other elements. Depending on your occupancy rate, you'll get more revenues from food & beverage and banqueting & other revenues as well. You will have to analyse the results, and use this to support your decisions! The history gives you information on how the hotel performs as you take over, you cannot influence this, of course.
After each year they will be ready for you in your Team file tab results. Your results presented there will be divided into the next parts:

Please take into account that your hotel has 364 days (not 365) and some figures are rounded; we never use decimals, neither should you.

Hotel price decisions

The operating review first shows the decisions you took for your hotel on prices, so your decisions 1 till 5.

Operating review

Divided into revenues and costs. In the entire game we refrain from any VAT, Value added tax as this is linked very much to liquidity which we leave out as well. So no worry about this. So consider the revenues and the costs (investments) to be without any VAT.

All Revenues

Revenues comprise the average (sales) prices your team had decided to chose, times the number of booked rooms (occupancy rate). You can influence the prices because you set them. The occupancy rate is defined by all of your decisions and your explanations through an algorithm. The appreciation your coach has for your performing as a team is influencing your occupancy rate heavily. The maximum occupancy rate would mean all 100 rooms occupied during all days, so 52 weeks x 100 rooms x 7 days = 36,400 room nights which is an illusion. Check the situation for real via benchmarks and you will see that the margin in somewhere between 50% to 70% occupancy rate.
All food and beverages are considered to be caused by these guests: so the higher the occupancy rate, the more revenues you get from food and beverages.
Banqueting and other revenues are a separated revenue unit in the hotel. The sales prices in the past varied from a minimum of € 25 to a maximum of € 30 per person. You decide on the price of banqueting, so you do have some control. On the Banqueting page, you can find some more info, pictures, and videos on banqueting. Other elements in this group are things like additional sales, renting out bikes, upgrades, cancellation fees etc. Altogether a bit more than 8% of the total revenues. On mouse-over the cells with the small black triangle, you will get additional information on the numbers.

Revenues overview after four years.

The above situation is just an example of the revenues as they will be shown in the complete operating review. So this example shows the history (column B, preparations - history) which is the same for all teams as they start. After each year the next column (so the next year) will be available and filled out automatically. In this example, this is just year 1 in column C. In the example all years have been filled out.

Underneath you'll find an overview which gives some more insights into the revenue structure, as far as information is available in the Bergman's administration. This all reflects the year before you take over, this will be your starting position.

 Revenues History
 Rooms Rooms revenues weekend € 704,340 24.61%
 Rooms revenues weekdays € 1,244,880 43.49% 68.10%
 Food and beverage F&B revenues weekend € 266,080 9.29%
 F&B revenues weekdays € 414,960 14.49% 23.78%
 Banqueting and other revenues  Banqueting and other revenues  € 231,636 8.09% 8.09%
 Total revenues  € 2,861,896  100% 100%

All costs

The situation below is just an example of the costs as they will be shown in the final operating review after four years. So this example shows the situations as you take over (history colored gray) which is the same for all hotels as you take over. After each year the next column (so the next year) will be available and filled out automatically.

Costs as shown after all of the years.

Underneath you'll find an overview which gives further insights into the cost structure as far as information is available in the Bergman's administration. This all reflects the situation as you take over, this will be your starting position.

 Costs
 Costs: fixed Depreciation costs of existing assets  € 525,187 34.64%
 Fixed staff costs  € 550,271 36.29%
 Costs of premises € 390,473 25.75%
 Insurance & interest costs € 50,012 03.29%
 Total fixed costs € 1,515,943  100% 62.36%
 Costs: variable Variable staff costs € 355,170 38.95%
 Laundry costs € 118,390 12.94%
 Cleaning costs € 236,780 25.88%
 F&B purchase costs € 204,312 22.33%
 Total variable costs € 914,652  100% 37.63%
 Costs: team decisions Marketing costs € 0 00.00%
 Staff development costs € 0 00.00%
 Extra depreciations costs € 0 00.00%
 Market research costs € 0 00.00%
 Other costs € 0 00.00%
 Total team decisions costs € 0  100% 00.00%
 Total all costs € 2,430,595   100%

The different costs groups are all mentioned in the operating review table above.
Keep in mind that calculations are never 'perfect'. Calculation on the revenues on rooms weekend, for instance:
is 52 weeks * 100 rooms * 43% weekdays (3 nights out of 7) * 7 days a week = 15.652 nights * occupancy rate (starts at 50%) * average price (rack rate and last-minute). There is always a difference to the outcome of this calculation an d the 'reality': caused by cancellations (yes or no refunds, double bookings, short stays, rounding-up numbers, missing one day in a year etc. This all together might bring a difference up to a view percent in the expected revenues linked to the occupancy rate.

You cannot influence these costs at all. These are costs which will be created no matter what the occupancy rate is. Over the years there can be small fluctuations, but the amounts will stay almost the same.

- Depreciation costs of existing assets: depreciations of all the assets especially the building, fixtures and fittings.
- Fixed staff costs: staff needed to run the hotel and which have to be paid even if there are no guests at all.
- Costs of premises: costs of maintenance, repairs on small adaptions to the building and the parking lots.
- Insurance & interest costs: costs for insurance for staff, building a liability and costs for mortgage and other loans.

The variable costs will depend on the actual number of guests in the hotel so will only be filled out (automatically) after each year is finished. So there is a ratio between occupancy rate and all of these costs. You cannot influence this, but it will be influenced by the occupancy rate you have created with your way of managing.
- Variable staff costs: the more guest you have the more work here will be to be done and the more staff is needed. So additional costs.
- Laundry costs: the more guest the more towels, bed linen etc. needed.
- Cleaning costs: rooms need to be cleaned more often because of more guests and to be cleaned better.
- F&B purchase costs: more guest means more breakfasts etc. for guest and more f&b for additional staff so the purchase costs go up.

All of your decisions numbers 6 -10 lead directly to costs which can be seen directly on the costs side. They are directly connected to the choices you make in your decisions each year. The effect of all costs will only last one year. As you can see in the past there were no costs made regarding these decisions. Of course, this was good for the profit but it will come back like a boomerang! So Christina urges you to use this costs group team decisions in an efficient way, though she knows this will probably lower the profit!
Spending the maximum on all possible costs looks like a bad idea! You have to earn back all these costs, so you will have to make clear choices and keep the profit in mind! So the numbers mentioned are not a gift, nor a budget: it just gives you an indication of the (maximum) possibilities without getting in serious financial trouble. So, if you would decide to spend to the maximum on all options you could have in extra costs (per year):

  • Decisions 6 marketing costs maximum € 200,000
  • Decisions 7 staff development maximum € 100,000
  • Decisions 8 depreciation costs maximum € 225,000 year 1 up to € 900,000 in year 4 as depreciation. Depending on your new investments.
  • Decisions 9 market research package maximum € 50,000
  • Decisions 10 other costs maximum € 100,000

The maximum grand total on additional (!) costs in the first year is a maximum of € 675,000. Keep in mind that the profit as you take over (history) was € 486,307! The total costs was € 2,430,595. Creating all these additional costs of your team decisions, will raise the total costs by more than 29%! You probably will make a loss, as the additional costs exceed the profit you made in the past. So think of how these additional costs will generate new revenues. Or compensate the costs by higher prices or a higher occupancy rate.

  • Net profit

Of course, the net profit per year is very interesting. The total costs will be deducted from the total revenues. If there is a bonus or a fine this is added or deducted from the profit leading to the net profit.

Net profit as you take over in gray headed 'history'

In this example on taking over:
- Total revenues were € 2,866,902
- Total costs € 2,430,595
- Net profit € 436,301

There is no VAT or other taxes in the city. There is no reserve and as there is no liquidity in the game, there is no need for spending them. The balance sheets just show the individual profit of each year in the operating review and the total of the net profit over the years. No worries about liquidity: you can invest and pay, though you cannot see the proper balance sheets.
A fine and/or a bonus, if applicable, will directly influence your net profit. In this case, in the History (linked to the Preparations) there is a bonus, in this case of € 5,000 so this is added to the profit.

Key metrics

Some key metrics and ratios on the operations of your hotel in this section.
Net profit once again showed here, but now linked to the total net profit. So adding up the profit of all years passed.
The number of guests gives you an indication which numbers pass through your hotel in a year.
Your hotel is ranked on net profit as well as on creativity. Both rankings are within your city. There is ranking on creativity, this is linked to what you have done in all of the years related to creativity and evaluated by your coach. You can have any position depending on the number of hotels in your city.

Top Research

If your hotel has decided to pay for market information provided by Top Research, it will show here.

Analysing

So the net profit on taking over seems to be 15.21% of the revenues, a good and interesting result.
But, the management did not make enough investments over the recent years, so the depreciation costs have been kind of low. There is no problem with liquidity at all.
Furthermore, the Bergmans did not really consider themselves to be staff, so there are hardly any wages for them in the staff costs. Their income mainly originated from the net profit which they, partly, took out of the company, being the entrepreneurs.

Calculate yourself?

If you want to make calculations yourself, you can, in the top menu download the Team File as Excel file. Store this one on your pc and you can do some calculations in this version (which now, of course, has no longer links to the real one and new changes in the online one).


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