Today Final PDF

A
PROJECT REPORT ON
“AN ANALYSIS OF REVENUE AND EXPENDITURE OF

HOTEL INDUSTRY”
SUBMITTED TO
RASHTRASANT TUKADOJI MAHARAJ NAGPUR

UNIVERSITY, NAGPUR
In partial fulfillment for the award of
BACHELOR OF BUSINESS ADMINISRTATION
SUBMITTED BY
Srushti Tarale
UNDER THE GUIDANCE OF
Prof. Sheetal Arora
PRIYADARSHINI LOKMANYA TILAK INSTITUTE OF

MANAGEMENT STUDIES & RESEARCH, NAGPUR
(2020-2023)
Priyadarshini Lokmanya Tilak Institute of Management
Studies & Research, Nagpur
CERTIFICATE
This is to certify that the project entitled “AN ANALYSIS OF
REVENUE AND EXPENDITURE OF HOTEL
INDUSTRY” has been submitted by Srushti Tarale, a student of
Sixth semester of B.B.A. in “Financial Management” from
Priyadarshini Lokmanya Tilak Institute of Management Studies &
Research, Nagpur. This is a research work done by the student in
the session 2022-23 towards the partial fulfillment of the
requirement for the award of degree in Bachelor of Business
Administration under the supervision & guidance of Prof. Sheetal
Arora.
Prof. Sheetal Arora Dr. S. R. Varma

Project Guide Principal
ACKNOWLEDGEMENT
The pleasure of achievement, the glory, the satisfaction, the
rewards, the appreciation and construction of my project report
cannot be through without a few who apart from their regular
schedule spared their valuable time for me. The acknowledgement
is not just apposition of words but also an account of the indictment.
They have been guiding lights and a source of inspiration towards
the completion of this report.
I am highly obliged to express my deep sense of gratitude and

grateful thanks to my faculty guide, Prof. Sheetal Arora for the
valuable guidance and support which led to the successful and
timely completion of my project.
I am grateful to Dr. S. R. Varma, Principal, PLTIMSR for his moral

support, encouragement and generous assistance.
Last but not the least, I am very much thankful to all those who
helped me directly or indirectly in the successful completion of the
project.
Date: Srushti Tarale

Place: Nagpur SEM VI, BBA
DECLARATION
I, Srushti Tarale of BBA studying at Priyadarshini Lokmanya Tilak
Institute of Management Studies & Research, Nagpur declare that
the project work entitled “AN ANALYSIS OF REVENUE AND
EXPENDITURE OF HOTELS INDUSTRY” was carried by me
in the partial fulfillment of BBA program under the guidance of
“Prof. Sheetal Arora” at Priyadarshini LokmanyaTilak Institute of
Management Studies & Research, Nagpur.
This project was undertaken as a part of academic curriculum
according to the university’s rules and norms and it does not have
any commercial interest and motive. It’s my original work and it is
not submitted to any other organization or university for any other
purpose.
Date: Srushti Tarale

Place: Nagpur SEM VI, BBA
INDEX
Chapter Chapter Name Page No
No
1 EXECUTIVE SUMMARY 1
2 INTRODUCTION TO FINANCIAL ANALYSIS 2-21
3 COMPANY PROFILE 22-29
4 OBJECTIVE OF THE STUDY 30-41
5 RESEARCH METHODOLOGY 42-44
6 DATA ANALYSIS AND INTERPRETATIONS 45-55
7. CONCLUSION & FINDINGS 56
8. SUGGESTIONS & RECOMMENDATIONS 57
BIBLIOGRAPHY 58
ANNEXURE- QUESTIONNAIRE 59-62
I. EXECUTIVE SUMMARY
The study covers The analysis of the income statement involves comparing the
different line items within a statement, as well as following trend lines of individual line
items over multiple periods. This analysis is used to understand the cost structure of a
business and its ability to earn a profit.
Finance is the management of monetary affairs. Analysis is the separation of an

intellectual or substantial whole into its parts for individual study. These definitions are also
from Webster’s dictionary. We combine the two definitions, and our definition of financial
analysis is the separation of the management of monetary affairs of a business into parts for
individual study.
The core objective of doing the study is to increase our practical knowledge and develop
our analytical ability in practical life.
The other objectives are:
 To get an overview of the income and expenditure statements of the hotel industry.
 To analyze the financial condition of the hotel industry
 To evaluate the overall performance of the hotel industry
 To understand the growth rate of the hotel industry
Project Report of Ms. Srushti Tarale Page 1

The procedure adopted for conducting the research requires a lot of attention as it has direct
bearing on accuracy, reliability and adequacy of results obtained. It is due to this reason that research
methodology, which we used at the time of conducting the research, needs to be elaborated upon. It
may be understood as a science of studying how research is done scientifically. So, the research
methodology not only talks about the research methods but also considers the logic behind the method
used in the context of theresearch study. Research Methodology is a way to systematically study and
solve research problems. If a researcher wants to claim his study as a good study, he must clearly state
the methodology adapted in conducting the research the research so that it may be judged by the reader
whether the methodology of work done is sound or not.
Fundamental arithmetic is all that is required to use and apply numbers to understand
business operations. Accounting concepts and methods of financial analysis generally sound
intimidating and complicated. The visions of CPAs, financial advisors, tax laws, attorneys, big
ugly books, spreadsheets, paperwork nightmares, and migraine headaches regularly accompany
any mention of accounting and finance. And this is often the case. However, entry-level
hospitality managers need to be able to use accounting concepts and methods of financial analysis
to conduct the daily operations of their departments. They need to understand themand be
able to effectively apply them to their department operations.
Numbers are also used to measure a company’s performance in meeting expected

strategies, goals, and objectives.
This study introduces fundamental accounting concepts and explains how numbers are
used to apply these accounting concepts to daily operations. It likewise introduces fundamental
methods of financial analysis and explains how numbers are used to perform financial analysis.

II. INTRODUCTION TO FINANCIAL ANALYSIS
Financial Analysis
Finance is the management of monetary affairs. Analysis is the separation of an intellectual

or substantial whole into its parts for individual study. These definitions are also from Webster’s
dictionary. We combine the two definitions, and our definition of financial analysis is the separation
of the management of monetary affairs of a business into parts for individual study.
Fundamental arithmetic is all that is required to use and apply numbers to understand business
operations. Two of the most important formulas in financial analysis only require multiplication and
subtraction:
Revenue = Rate x Volume
Profit = Revenues - Expenses
Although these two formulas can be applied to many market segments, departments, and
volume levels and can become rather detailed, the fact remains they are each calculated with
arithmetic and not calculus, trigonometry, or college algebra.
There is a common theme in today’s business world about how to measure the success of a
company or business. It involves satisfied customers, satisfied employees, and satisfactory
profitability. As an example, we can look at one of the largest and most successful companies in the
world to examine these concepts.
By two important measurements market capitalization and recognition—General Electric

(GE) is a company we can learn from. In 2003, GE was the largest company in the world in terms
of market capitalization. The formula for market capitalization is the stock price times the number of
shares of stock outstanding. To be the largest capitalized company in the world means that more
individuals and institutions are investing in GE than in any other company, which is quite an
accomplishment. GE was also the Most Admired Company in the United States from 1997 to 2001
and in 2005 was #2 on the Most Admired Company List according to Fortune magazine.

 Management/Leadership Skills
The first promotion provides a manager with the opportunity to manage others in getting the
job done. The knowledge and skills needed include working with other managers as well as hourly
employees. This step involves the progression from managing (we manage things) to leading (we lead
people) (Covey). A manager is now paid to get other people to do the job. This includes the typical
management responsibilities of planning, organizing, and control, but has now progressed to the
leadership responsibilities of motivating, challenging, engaging, supporting, and recognizing
employees. The real definition of a leader is the ability to teach and inspire the people he or she works
with to do the best job that they can do.
Leaders also have the responsibility to allocate company resources. This includes allocating
time, money, labor, and ideas to the most productive or profitable areas. They do this by listening to
employees and customers, then prioritizing projects or job responsibilities, and then supporting them
with sufficient resources.
Effective leaders take the time to organize their work and make sure that they are spending
as much of their time as possible operating in Covey’s Quadrant 2—important but not urgent. Most
managers operate in Quadrant 1—important and urgent—which can best be defined as putting out
fires and going from one situation to another. By shifting to Quadrant 2, a manager has more time to
plan, prioritize, and organize the work to be done. Quadrant 2 is proactive; Quadrant 1 is reactive.
What does this have to do with accounting and finance? Everything! Specifically, the more
knowledgeable and comfortable managers are working with numbers and completing the accounting
and financial analysis part of their job, the more time they will have to spend with their customers
and employee their top priorities.
Unfortunately, the careers of many managers slow down or stop at this point. They do not
have the interest, knowledge, or ability to learn the next skills that will help them to do a better and
more complete job and advance to taking on more and wider levels of responsibility. It is not enough
to have technical skills and management/leadership skills when attempting to advance to higher
positions within a company. These positions require knowledge and the ability tounderstand and use
accounting concepts and marketing concepts in the daily operations of the company.

 Financial Skills
Financial knowledge and skills begin with understanding numbers, having the ability to
communicate or teach what the numbers mean, and finally having the ability to apply what is learned
from numbers to improve the operations of the business. Specifically, it is the ability to interpret and
discuss the information contained in all types of financial reports with all levels of management. A
manager must be comfortable talking about the financial aspects of his or her department with the
hotel’s Director of Finance and the General Manager. Explaining revenues and expenses, comparing
actual results to budgets and forecasts, and adjusting improve operations are all important financial
skills for any manager to possess.
The rest of this textbook is devoted to developing an understanding of accounting concepts

and methods of financial analysis. At this point it is important to understand that any manager must
have a fundamental understanding of accounting and finance to grow and advance with a company.
Managers do not have to be Certified Public Accountants or Directors of Finance. But they must be
able to understand and intelligently discuss their department operations and financial performance
with senior management.
 High-Performance Organizations
When a manager is knowledgeable and comfortable with these four individual skills—
technical, management and leadership, financial, and marketing—then he or she has the potential to
be a part of a high-performance organization. A manager with strong individual skills and knowledge
and with a positive and proactive attitude can then create or be a part of an organization that not only
meets but exceeds the expectations and goals it has established. This should be an important career
goal.
The goal of any department within a hotel or restaurant is to achieve outstanding performance
and results. This requires a team effort by all involved in the operation. The greater the degree of
knowledge and skill in these four areas, the greater the contribution a manager can make.

 REVPAR: Revenue per Available Room
The most important measurement used to evaluate room revenues is REVPAR, or revenue per
available room. The reason it is so important is because it considers both rate and volume in
identifying the amount of revenues generated by a hotel. It is only used to evaluate room revenue and
is expressed as a dollar rate. For example, suppose REVPAR is Rs. 88.43. Two formulas can be used
to calculate REVPAR. The first formula is the most accurate, but the second formula will also be very
close, and it is acceptable to use either one.
Total Room Revenue / Total Rooms Available or Average Rate x Occupancy Percentage
Let’s calculate our REVPAR using the information from our previous revenue example.
Room revenue was Rs. 14,850 with an average rate of Rs. 99 and 150 rooms occupied. We need to
include the total number of rooms in our hotel to calculate the occupancy percentage. If we have a
200-room hotel, we can calculate our occupancy percentage by dividing rooms sold by total rooms
or 150/200 = 75% occupancy. Now we can calculate our REVPAR:
Rs. 99 Average Rate x 75% Occupancy = Rs. 74.25 REVPAR or Rs.
14,850 Room Revenue/200 Total Rooms = Rs. 74.25 REVPAR
For example, if we use occupancy as the main measurement of maximizing room revenue,
running a hotel with 99% occupancy but with a Rs. 25 average rate is not maximizing room revenue.
The hotel is probably selling its rooms too cheap. Likewise, if a hotel has a Rs. 175 average rate but
is only running a 15% occupancy, it also is not maximizing room revenue. It is probably pricing its
rooms too high. If we use occupancy as the most important measure, the hotelin our first example
is doing an excellent job and our second hotel is doing a terrible job. If we use average rate as the
most important measure, the hotel in our first example is doing a terrible job and our second hotel is
doing an excellent job. REVPAR combines rate and occupancy to measure management’s
performance more effectively in maximizing revenue! It shows how well management can achieve a
high occupancy percentage as well as attain a high average room rate and effectively use both to
maximize total room revenues.

 Market Segments
REVPAR tells us how the total hotel is doing to maximize total room revenue. To provide
more specific information on room revenue maximization, the hotel separates its customers into
market segments. Market segments define the customer in terms of expectations, preferences, buying
patterns, behavior patterns, and why the customer is traveling. Each market segment has distinctive
characteristics. Three of the main market segments used in hotel operations are illustrated next.
 Trends in Financial Analysis
Trends are important because they show the direction or movement of business operations,
industry, and national and international economies. Understanding the different types of trends and
how they affect the operations of a business is an important part of financial analysis. We will discuss
four types of trends that affect a business.
 Short- and Long-Term Trends
It is important to look at both short-term and long-term trends. Short-term trends (less than 90
days) often involve seasonality or the expected cycles of a business or industry. A business that is
slowing down because of seasonality or an industry cycle should be evaluated differently from a
business that is slowing down because of increased competition, product or service quality, or pricing
issues. A long-term trend is a better evaluator of products or services, especially when compared to
competitors and industry performance.
When looking at the month-to-month performance of a business, it is important to distinguish

between one month of poor financial performance and several months of poor financial performance.
It is typical for a business to have a problem or one-time event that results inperformance below
expectations for a month. One month by itself does not make a trend or signal a major or long-term
problem. However, it is important to correct any poor performance to prevent it from becoming an
ongoing problem.
If a business has several months of poor performance, this is a trend that could signal
continuing major long-term problems. Management might have to make major evaluations and
analyses to determine what is causing the ongoing poor performance and how it can be corrected.
Correcting the cause of several months or years of poor performance is a much larger task than
correcting a problem that has affected only one month.

 Revenue, Expense, and Profit Trends
These trends are all shown in the P&L Statement. Each individual trend is compared to the
other two to determine if financial performance is improving or declining. For example, if revenue
is trending up and expenses are staying flat, the profit trend should also be up. These are good trends
and good relationships between revenues, expenses, and profits. However, if revenues are trending
up but expenses are trending up at a faster rate, that will result in lower profits. That is not a good
trend. Most important, are revenues or expenses trending in the direction of increasing or decrease
profits? Equally important is which of the three trends is increasing or decreasing fasteror slower
than the other two. For example, if sales are increasing 5% but expenses are increasing

10%, profits will decrease. The best case for increasing profits is if sales are increasing and
expenses are decreasing.
Favorable and unfavorable trends that affect productivity and profits are demonstrated here:
Trends That Increase Profits Trends That Decrease Profits
Revenues increasing, expenses decreasing Revenues decreasing, expenses increasing
Revenues increasing, expenses flat Revenues flat, expenses increasing
Revenues increasing faster than expenses Expenses increasing faster than revenues.
 Profitability: The Best Measure of Financial Performance
Profits are defined as revenues minus expenses—a rather simple formula that is very
important in measuring financial performance. In actual hotel operations, this formula is used in a
variety of ways that result in specific profitability measures. Profits can be measured at several levels
of any business. Let’s review some of the key profit levels that are included in hotel Profit and Loss
Statements (P&Ls):
Department Profit = All of a Department’s Revenues - All of a Department’s Direct Expenses
Total Department Profits = The Sum of All Hotel Department Profits,
Which Is the Same as the Sum of All Revenue or Profit Centers
House Profit or Gross Operating Profit = Total Department Profits - the Total of All Expense
Departments
or
Total Department Profits - Deductions from Income
Net House Profit or Gross Operating Profit = House Profit - Fixed Expenses
Profit before Taxes = Net House Profit or Adjusted Gross Operating Profit – Owner Fees or
Management Fees
Profit after Taxes = Profit before Taxes – Taxes

Profits are the best measure of financial performance because they include the two major
factors of financial performance: maximizing revenues and minimizing expenses. Maximizing total
hotel revenues is important, but it is only one step. Controlling and minimizing expenses is also
important and is the second step. Maximizing profits requires management to be efficient in both
areas. Together, revenue and profit analysis explain virtually everything about the financial
performance of a hotel or restaurant.
 The Difference between Analyzing Profits and Analyzing Revenues
Analyzing revenues is totally focused on the relationship between rate and volume in the effort
to maximize total hotel revenues. It involves establishing rate structures, defining market segments,
utilizing yield management information, setting selling strategies, and comparing rate and occupancy
results with internal and external reports. Specific hotel managers are responsible for maximizing
hotel revenues.
Analyzing profitability not only includes revenue analysis but also expense analysis in all
department and expense line item accounts. Each specific expense category is evaluated on the effect
it has on the hotel’s ability to efficiently provide products and services for its customers. These
expenses include fixed and variable expenses, direct and indirect expenses, and operating and
overhead expenses. Specific hotel managers have the direct responsibility for managing specific
revenue segments and controlling specific expense line accounts to maximize the profits of their
departments. The most important expenses to be analyzed and controlled are food cost and wage cost.
These are two big expense accounts and can become major problems and drains on profits if they are
not properly managed and controlled. Wage costs are even more important because they directly
affect the benefit costs. If wage costs go up and are over budget, benefit costs will also go up and be
over budget.
Finally, there are many more expense line accounts to be managed than revenue lineaccounts.
This requires the attention of all hotel managers in every department in the hotel. Each must be
effective in managing and controlling expense accounts if hotel profits are to be maximized. If each
manager effectively controls his or her department expenses, the total hotel expenses will be in line
and total hotel profits will be maximized.

 The Impact of Department Profits on Total Hotel Profits
As we mentioned earlier, all department profit dollars are not created equally. This means that
each department that is a profit center has a different expense structure. Some have more expenses
that result in lower department profits, and some have fewer expenses that therefore result in higher
department profits. The larger convention hotels and resorts have more profit departments and profit
centers than typical full-service hotels and therefore can generate a larger Total Department Profit.
Let’s look at two examples of full-service hotels and identify the profits associated with each
department. Remember that a revenue center and profit center are the same and we can use these
terms interchangeably. There are two terms that describe operating departments that produce revenues
and profits. Also remember that the department profit percentage shows how much of a department
revenue dollar will make it to the “bottom line” as a profit dollar.
The Rooms Department has the highest profit percentage because there is no cost of sales. The
rooms are re-rented every night, not consumed (like food and beverage items) or purchased (like gifts
and clothing); therefore, there is no cost of sales. In other revenue departments, cost of sales can range
from 30% to 40% for food and be about 50% for clothing, so it is a major expense category. This
explains why the Rooms Department profit is so much higher than the other profit departments. The
room rates of the Rooms Department generally are much higher than the average checks in restaurants
or gift shops. This also increases the Rooms Department profit percentage.
Convention hotels and resorts generally have higher average room rates and higher food and
beverage menu prices that help to increase their department profit percentages. The more revenue
departments in a hotel, the more sources of profits to increase Total Department Profits, House
Profits/Gross Operating Profit, and Net House Profit/Adjusted Gross Operating Profit. Restaurant
departments have the lowest profit percentage because of the many expenses required to prepare and
serve food. Both food cost and wage cost will run between 30% and 40% each, benefits will range
between 10% and 15%, and other direct operating costs will range between 10% and 15%. This leaves
little room for error if the restaurant is to be profitable. Specialty restaurants are generally more
profitable because they have higher average checks. It is financially beneficial for restaurants to serve
liquor because liquor has lower wage costs and lower cost of sales, resulting in

higher liquor profitability. This helps the overall financial performance of the total food andbeverage
outlets including banquets. The Banquet or Catering Department is more profitable because its food
functions can be planned with specific prices and customer counts, resulting in more efficient
operations and higher profitability. For example, a dinner banquet for 500 people with a set menu
and Rs.30 average check can be planned for and produced with greater efficiency than opening a
restaurant for the evening and waiting to see how many customers come, what the average check will
be, and what the total revenues will be.
The Director of Finance and the General Manager of a full-service hotel generally spend a great
deal of their time on the rooms and food and beverage operations for two very different reasons. First,
the Rooms Department is important because it generates the most revenues and profits. A well-run
Rooms Department means there will be higher cash flow and greater financial resources to operate
the rest of the hotel successfully. The Rooms Department is a good example of a department that
focuses on maximizing revenues. Second, the Food and Beverage Department is important because
of the complexity and detail of its operations.
Food and beverage operations must be well managed to control all of the different expenses to
achieve a profit. If this department is not operating well, operations could produce a loss rather than
a profit. Restaurant departments are good examples of departments that focus on controlling and
minimizing expenses in addition to maximizing revenues. The different department profit percentages
discussed here provide a good example of mixed percentages. One dollar of revenue in each of these
departments will produce different dollar amounts of profit. The management team of a well-operated
hotel knows and understands this and plans daily operations to consider the department profit that
will result from the forecasted department revenues for the week. To maximize hotel profitability,
expenses must be minimized, and revenues maximized.
 Maximizing and Measuring Total Hotel Profitability
There is a partnership in a hotel that enables the hotel to use all the operating and financial
resources available to maximize profitability. This partnership is between the staff departments and
the operating departments. The goal of the four staff departments (Sales and Marketing, Repairs and
Maintenance, Human Resources, and Accounting) is to provide specialized support for the

operating departments (Rooms, Food and Beverage, Golf, Spas, Retail). The operating departments
are responsible for taking care of guests and generating revenues and profits for the hotel. Their focus
should be on providing the best products and services to the guests of the hotel and ensuring that the
guests want to come back.
The partnership and support that the Accounting Office and the Director of Finance provide are
the operating managers is extremely important in successful hotel operations. Because accounting
and finance can become complicated and demanding, it is important that the Director of Finance
provides these services and knowledge to both department managers and senior management. It is
equally important that the department managers provide accurate numbers to the Director of Finance
so that together they have all of the knowledge and resources necessary to identify problems and
trends, develop corrective action, and determine the best way to implement changes so that
improvements are made, and goals met. It is a true partnership with specialized knowledge and
experience brought to the relationship by each manager and department. A strong financial and
operating team is essential to the successful operations of the hotel.
It is also important to understand the services and support the other staff departments contribute
to the successful operations of a hotel. The Sales and Marketing Department works hard to establish
good rate structures, implement successful selling strategies, attract profitable group business, and
develop good marketing and advertising programs. The Repairs and Maintenance Department works
constantly to ensure that the equipment in the hotel is working efficiently, andthat the hotel looks
sharp both inside and out. This is a big job! The Human Resource Department ensures that good
employees are hired, provides training and development, handles employeeproblems, and takes care
of payroll and benefit administration. If each of these departments does its job, the hotel will operate
at a high level and have a much better chance of meeting the goals and budgets established to measure
hotel performance and profitability.

 Foundations of Financial Analysis
The fundamental accounting concepts and methods of financial analysis that are used to analyze
numbers and results. We will now use this material and these methods to analyze internal operations,
including both revenues and profits. We are also able to use this information to compare individual
company performance with industry standards and external reports.
We will now focus on applying the foundations of financial analysis presented in our company
performance. Variation analysis utilizes all of these fundamentals. Let’s review them again.
Comparing Numbers/Results to Give Them Meaning Numbers need to be compared to a standard and
to other numbers to give them meaning. Variation analysis expands this definition by providing ratios
and formulas that assist managers in comparing a company’s monthly, quarterly, or annual
performance. Variation analysis helps in two ways. First, it allows for an internal comparison of
company performance to last year’s results, to established plans such as the annual budget and current
forecast, or to the previous month’s performance. Second, it allows for an external comparison of
performance to averages of like hotels in a company, to industry standards and averages, or to external
reports such as the STAR Market Report.
 Measuring and Evaluating Change in Financial Analysis
Changes in company performance are identified by comparing actual performance to previous

performance or to an established goal or measure. Variation analysis expands this definition by
identifying changes in company performance in terms of dollars, units, or percentages. The
comparisons mentioned in the previous paragraph identify and calculate the amount of both positive
and negative changes. Companies plan on improving their operations and performance from year to
year, and actual results are compared to these planned changes (budgets and forecasts).
 Percentages as a Tool in Financial Analysis
Percentages measure relationships and changes in operating performance. They always involve
two numbers and provide another measurement in financial analysis beside dollar or unit changes.
Percentages identify the size of a change compared to a standard. This is very important information.
For example, a Rs.1,000 change in revenues compared to Rs.50,000 in revenues is a 2% increase.
That same Rs.1,000 change in revenues compared to Rs.200,000 in revenues is only a
0.5 % increase. These percentages tell us that the Rs.1,000 change in the first example is a larger and
more significant change than the Rs.1,000 change in the second example.
 Company and Industry Trends
It is important to compare the trend of a company with the trends of the industry and general
economy. Are the company trends the result of the success or failure of your business operations, the
result of conditions that are affecting the entire industry, or the result of the general economic
environment? Trends can result from any or all these conditions, and it is important to identifythe
causes of trends for business and industry. Then appropriate action can be implemented.
For example, if your business profits are down 10% from the previous year and the industry
average is down 8% to 12%, then you can safely say that your business profits are down because of
industry conditions and nothing specific to your business. However, if your profits are down 10%
from the previous year and the industry average is up 2%, then you can safely say that the reason your
business profits are down because of problems or the inferior performance of your business and not
any industry factors. The causes of the 10% decrease in profitability are different from what is
occurring in the industry and should be treated in different ways to correct problems and improve the
efficiency of the company so that it gets back to the desired profit levels. The four types of
percentages used most often in financial analysis are cost percentage, profit percentage, mix
percentage, and percentage change. Each of these percentages is an important part of variation
analysis.
Trends are important because they show the size, direction, or movement of businessactivity,
industry averages and standards, and national and world economies. Variation analysis compares the
operating and financial trends of a company with the trends of other hotels orrestaurants in the
company, industry trends, stock market trends, or national or world economy trends. Variation
analysis also identifies both positive and negative changes in the operating and financial trends of a
company. Particularly valuable is comparing a company’s revenue, expense, and profit trends in
seeking to improve operating results and financial performance.

This 422-room resort that opened in January 1979, was the first resort built and operated by
Marriott Hotels and Resorts. It is a part of the Rancho Las Palmas Country Club development that
included 27 holes of golf, 25 tennis courts, and over 850 club home owners and members. In 1999,
a second ballroom was added, bringing the total meeting space to 41,000 square feet. A two-story
20,000-square-foot spa was also added as part of the resort’s expansion and renovation. It was also
the first resort to open east of Palm Springs and opened the expansion into the Coachella Valley.
Today there are more than eight other major resorts including another Marriott, a Renaissance,
Westin, Hyatt, and La Quinta resorts.
The original competitive set would have included resorts in Southern California and Arizona.
Now the competitive set is located in the Coachella Valley and includes a wide range of amenities,
meeting space, and room rates. If you were asked to identify the current competitive set, would you
focus on similar room rates, similar number of guest rooms, similar meeting facilities, similar
recreational activities, similar room rates, or location? All of the above would be a safe answer, but
how would you identify your primary competition and create a valuable competitiveset?
 Variation Analysis
Variation analysis involves identifying the difference between actual operating performance
and established standards. These standards can be last year’s actual performance, the previous
month’s actual performance, the budget for this year, or the most current forecast. Variationanalysis
relies on accurate financial information to identify both good and bad variations in operating
activities. Therefore, variations can be positive, reflecting better performance than the standards, or
they can be negative, reflecting worse performance than the standards.
Variation analysis also includes identifying and examining the causes of changes in
operations. It identifies the variations of each line account, which collects all the financial information
for a specific expenses category. The variations in the operating results of a hotel or restaurant are
described and measured in the line accounts contained in the financial statements produced each
month or accounting period. Variation analysis is used to describe the results in revenue, expense,
and profit accounts. Some of these accounts have several variables and some.

have just one variable. Variables are the different components involved in an account and can be
revenue or expense. Two variables mean that two components can be managed and analyzed.
Variation analysis shows the impact that each component has on the total of each account. For
example, examining average room rates and volume in room revenues or average wage rates and
labor hours in hourly wage analysis both include two variables. Let’s look at some of the main
accounts and the variables that are measured in analyzing revenue and expense accounts.
Most of the remaining expense accounts involve only one variable. Examples are food cost,
China, glass, silver, guest supplies, linen, and so on. The total expenses in one variable account
involve purchase amounts, inventory variation amounts, and transfer amounts in and out of an
account. Larger line accounts such as food cost are more complicated, have many entries, and can be
more difficult to manage and control. For example, total food cost for a restaurant could involve more
than 100 entries each month to accurately identify the total food cost for the month. Compare that to
linen cost, which will probably have fewer than five entries for the month.
 Formulas and Ratios Used in Variation Analysis
Five major classifications of ratios are used in financial analysis. Each classification involves one or
more of the three financial statements: the P&L Statement, the Balance Sheet, and the Statement of
Cash Flow. There are a few ratios that involve information from two of these financial statements.
The five classifications are as follows:
1. Activity ratios. A group of ratios that reflect hospitality management’s ability to use the property’s
assets and resources. These ratios primarily involve dollars and statistics from the P&L Statement.
Consider the following examples:
a. Total Occupancy Percentage = Rooms Occupied / Total Rooms
b. Available Occupancy Percentage = Rooms Occupied / Total Available Rooms for Sale
c. Average Occupancy per Room = Total Guests / Total Rooms Occupied
d. Food Inventory Turnover = Cost of Food Sold / Average Food Inventory

2. Operating ratios. A group of ratios that assist in the analysis of hospitality establishments
operations. These ratios are also primarily from the P&L Statement.
Examples are as follows:
a. Average Room Rate = Total Room Revenue / Total Rooms Sold
b. REVPAR = Total Room Revenue Π Total Rooms or Average Room Rate ¥ Occupancy
Percentage
c. Average Food Check = Total Food Revenue Π Total Customers
d. Food Cost Percentage = Total Food Cost Π Total Food Revenue
e. Wage Cost Percentage = Department Wage Cost Π Department Revenue
3. Profitability ratios. A group of ratios that reflect the results of all areas that fall within
management’s responsibilities. These ratios involve information from three areas: the P&L
Statement, the Balance Sheet, and information from publicly traded stock exchanges. Examples are
as follows:
a. Profit Margin = Profit Π Revenue (This can be for a department or the entire hotel.)
b. EBIDTA = Earnings before Interest, Depreciation, Taxes, and Amortization
c. Return on Assets = Net Profit Π Average Total Assets
d. Return on Owner Equity = Net Profit Π Average Owner Equity
e. Earnings per Share = Net Profit Π Average Common Shares Outstanding
f. Price Earnings Ratio = Stock Price per Share Π Earnings per Share
4. Liquidity ratios. A group of ratios that reveal the ability of an establishment to meet its short-
term obligations. These ratios are from the Balance Sheet and P&L Statement.
Examples are as follows:
a. Current Ratio = Current Assets Π Current Liabilities
b. Acid Test Ratio = Cash and Near Cash Assets Π Current Liabilities

c. Accounts Receivable Turnover = Total Revenue Π Average Accounts Receivable
5. Solvency ratios. A group of ratios that measure the extent to which the hospitality operation has
been financed by debt and is able to meet its long-term obligations.
These ratios are also from the balance sheet. Examples are as follows:
a. Solvency Ratio = Total Assets / Total Liabilities
b. Debt-Equity Ratio = Total Liabilities / Total Owner Equity
 General Economic Trends—National and International
The world is indeed shrinking, and problems in other countries or other parts of the United
States can affect the performance of an individual business operation. Inflation rates, interest rates,
unemployment rates, consumer confidence indexes, budget deficits, exchange rates, and
social/political environments are all factors that may have major influences on a business. The most
dramatic and tragic example of this is the attack that took place on September 11, 2001, which
changed the economic, political, military, and social environment for every country in the world.
Each industry and business had to develop new policies, procedures, and strategies to survive in such
a turbulent and negative environment.
Another element of national economic influences is the understanding of business cycles.

Economic growth, bull markets, bear markets, and stable social and political environments do not
go on forever. There are business cycles as short as six months and as long as five to eleven years
that occur in normal business and economic activities. Financial analysis can assist a business in
identifying business cycles and their causes and determining best practices to permit the best
possible operations in any economic environment. Today’s major impact player is China. It is such
a large and undeveloped market that major companies throughout the world are planning ways to tap
into this new and emerging business environment. Yesterday’s major impact player was technology.
How it will affect business in the next few years is also a major factor for a company or industry to
consider in its plans and strategies for the future.

III. COMPANY PROFILE
Radisson Blu is an international chain of hotels operated by Radisson Hotels. With roots
dating back to the 1960s, the Radisson Blu brand name came into existence in 2009 with a
rebranding from Radisson SAS. Its hotels are found in major cities, key airport gateways and leisure
destinations.
 History
Radisson Blu has roots dating back to the opening of the SAS Royal Hotel in Denmark in
1960. Designed by Arne Jacobsen for SAS Group, it was the world's first designer hotel. The hotel
was initially under the catering division of the group but merged with the hospitality division to
become SAS Catering and Hotels. In 1982, the hotels were spun off as a separate division, operating
under the name SAS International Hotels. and became known as SAS International Hotels in 1985.
In 1994, Radisson SAS was created as a partnership with Radisson and SAS International
Hotels for operations in Europe, the Middle East and Africa. By the year 2000, the brand was
operating 100 hotels.
2009 to present; Rebrand as Radisson Blu
The Radisson Blu brand first came into being in 2009 when Radisson SAS rebranded and
changed its name to Radisson Blu. The name ‘Blu’ was chosen as part of a research project to find a
new visual identity as the company looked to replace the familiar SAS blue box.

Radisson Blu entered the United States market with the opening of its first hotel inChicago,
Illinois in 2011. The hotel occupies part of the Aqua skyscraper developed by Studio Gang
Architects. In 2013, it opened its second location. It is connected to the Mall of America in
Bloomington, Minnesota. In 2010, Radisson Blu was named the largest upper upscale hotel chain in
Europe.
Hotels play the role of providing guests a home away from home. And it is this facility that
facilitates the further attraction of guests towards a place because it makes their visit more convenient.
A hotel refers to a commercial establishment providing lodging and meals on temporarybasis to its
customers. In 1902 the "Indian hotels company" was incorporated by the founder of the Tata group
Mr. Jamshedji Nusserwanji Tata and the company opened up its first property The Taj Mahal Palace
and Tower, Mumbai. After this there was an upsurge in the Indian hotel industry as many otherIndians
followed the footsteps of Mr. Tata like Mr. Mohan Singh Oberoi who started by taking over the grand
hotel Calcutta and expanded his business. Later companies like ITC and Air India also ventured into
this field.
In the last few years, the hotel industry has changed and developed considerably in terms of
the services it provides. India is an attractive destination for tourists because of its rich heritage, which
includes the famous Taj Mahal, various temples and caves and many other famous monuments. Also
there are a lot of businessmen and officials who visit India for business purposes because of the trade
relations that our country has with the world. Similarly, within our country also there are people who
travel from one state to another or from one city to another for business or leisure. Rourkela also
known as the steel city. It is home to some big companies like RSP, Adhunik Metals, L&T etc.
Because of it being an industrial city, it has a lot of business travelers from all over the world. And
thus it requires not only a good number of hotels but also good quality hotels to accommodate these
travelers (Thapar, 2007). All these hotels vary in the kind and extent of services they provide like
accommodation, food and beverage services, entertainment, recreation, communication,
transportation, room service, laundry service, conference, and meeting arrangements, first aid, etc.

 TYPES OF EXPENSES
 Food Cost – The cost associated with preparing food for sale. Not only do we need to account
for entrees, and side dishes, but we also need to account for make-up costs as well. Make-up
costs are all those little extras that come with a dish or can be requested by the customer.
These can range from the ketchup, mustard, and pickle spear that may come with a sandwich,
to the roll and butter that might accompany an entrée. We need to look at the full picture of
our costs before we can price an item on our menu appropriately.
 Beverage Cost – The cost associated with preparing a beverage for sale, and in many cases
we are referring to alcoholic beverages. We need to account for make-up costs here as well.

An example may be the olives garnishing a martini, the soda in a mixed drink, or the celery
in a bloody Mary.
 Labor Cost– Labor is one of the two highest expenses of any foodservice operation. Examples
of labor costs would be salaries, wages, benefits, unemployment taxes, and any applicable
bonuses. If our labor costs are too high, then profits will suffer. If our labor costs are too low
then customer service will suffer. A skilled manager will be able to determine the amount of
labor needed daily and adjust as needed.
One easy way to see if you need to cut labor is by monitoring the first and last hour of the
business day. If employees are standing around, then you could consider staggering in your
employees at the start of each day, “punching in” instead of bringing them all in at once. The use of
time and attendance software and hardware can also help by setting limits on how early an employee
can “punch in” before each shift. You could also have them “punch out” on a staggered basis.
Controlling overtime will also be vital to control labor costs. Managers should only allow
employees to go into overtime if it is truly warranted. In many cases, overtime may be warranted, and
therefore budgeted accordingly.
Labor costs are on the rise, and attracting, and maintaining a steady workforce is more
challenging than ever before. Many operations are investing in equipment that can automate as many
tasks as possible. Robotics, which were one time only considered a thing of the future, are now finding
their way into operations in many forms.
 Other Cost – Other expenses are any expenses except food, beverage, and labor. Together
these costs can represent nearly 15% or more of your operation’s revenues. Some examples
of other expenses: equipment (both small and large), furniture, tableware, occupancy
expenses, repairs and maintenance (deferred and preventative maintenance), administrative
costs, and associated marketing costs. Most of the costs will either fall into one of the two
categories: “Controllable” or “non-controllable” expenses.

 Controllable expenses (aka non-fixed, or variable) – Are expenses that vary
depending on how busy or slow the operation is. Food and beverage costs, for instance,
should go up when you are busy and serving more customers, and down when you are
slower and serving fewer guests. Hourly wages would be another example. An
operation would typically have more labor when they are busy than when slow.
Utilities, for the most part, should also vary depending on how busy or slow the
operation is.
As a manager, you will be responsible for controlling and in many instances reducing the cost
of controllable expenses. If for example, your food cost percentage is higher than it should be, you
will need to determine why, and fix the issue. Some things to look at would be:
o are you charging enough for the items?

o are you purchasing correctly?
o do you have excessive waste?
o are you utilizing leftovers effectively?
o are you over-portioning?
o do you have any theft?
 Non-controllable (aka fixed, or non-variable) expenses are expenses that remain the same
despite the volume of business the operation experiences. Salaried managers, for example, are
paid the same despite the volume of business. Rent in most cases would be another example
of fixed costs. Landscaping and a monthly pest control service would also be examples of
fixed costs.

 PROFIT
Profit (aka the bottom line) is the benefit that is gained when revenue exceeds expenses.
Revenue minus expense equals’ profit. The owner, or owners, will decide whether, or how much
will be invested back into the operation. Typically, the general manager will earn a bonus tied to
profits. This creates an incentive to drive revenues while controlling costs. In non-profit onsite
foodservice operations revenue exceeding expenses is typically not called profit, but something like
net excess/deficit.
 Two Basic Financial Documents
 Profit and Loss Statement (P&L) or Statement of Activities
A food service operation’s profit and loss statement show the revenue (sales) and expenses
(costs) for a specific time. This statement can be used weekly, monthly, quarterly, or yearly. The
foodservice operation’s profit and loss statement typically have three sections.
A detailed breakdown of revenues. This will help to determine where there are variances from
the budget. For instance, if revenues are down, where are they down? Catering? Food? Beverage? Or
perhaps a particular day part, such as breakfast, lunch or dinner?
A list of your cost of goods sold, as well as your salaried, and hourly wages. A final section,
which includes your operating expenses: insurance, and occupancy costs. This section will vary in
non-profit foodservice operations.
 The Budget
The budget is simply an estimate of expected revenue, expenses, and profit. This is your
“plan” or “roadmap” for the week, month, quarter, or year. This will determine how much revenue
you expect to bring in, and how much you expect to spend. Typically, foodservice managers are
expected to bring in more revenue each year. There are of course exceptions. Will the operation be
closing down for a renovation, are new competitors entering the same market, or maybe a major event
will not be returning to the area, think Olympics, or a Super Bowl. In these situations, you may
actually be budgeting to make less money than you did the prior year. In the onsite
foodservice segment, school enrollments could be increasing or decreasing, a business dining
operation might be experiencing company growth, or a health care facility might be expanding. A
formula similar to the one explained earlier also applies to budgeted revenue and expense.
Budgeted Revenue – Budgeted Expense = Budgeted Profit
A manager needs to be constantly monitoring the budget and adjusting accordingly. If for
example, revenues are down from what was budgeted, then spending would need to be reduced as
well.
 SOME BASIC FINANCIAL ANALYSIS RATIOS & CALCULATIONS
 Calculating Cost Percentages (Ratios)
One of the most important ratios used in foodservice operations is the cost percentage of
revenue. This ratio compares expenses to revenue to identify what percentage of revenue is going to
the different categories of expenses. To calculate any cost percentage the dollar cost (expense) is
divided by the revenue dollars for the same period. An example of a common cost percentage that
is calculated on a regular basis is food cost percentage. If the food cost for a given month is Rs.20,000
and the revenue for the same month is Rs.64,000, the food cost percentage would be 31.25%.
Rs. Cost divided by Rs. Revenue = Cost Percentage
Profit can also be expressed as a percentage of revenue. The calculation is basically the same
as above. Many people are surprised to learn that the profit percentage for commercial foodservice
operations is in the range of 2% to 7% (3). Sometimes those in the industry say the average profit is
a “nickel on the dollar.”
Profit Dollars divided by Revenue Dollars = Profit Percentage

 Calculating Ideal Expense
Sometimes it is valuable to be able to figure out how much you can spend on a particular
category of expenses or on a menu item given financial goals of the operation. If a foodservice
manager has a profit goal and revenue forecast, or a price and a desired cost percentage, then a figure
termed ideal expense can be calculated. This is the amount that can be spent on all costs to produce
the full menu or just an item.
Example: If the desired profit for the chicken entrée is Rs.2.00 and the selling price is
Rs.12.00, then the ideal total expense for the chicken entree is Rs.10.00.
Revenue minus Profit = Ideal Expense
Example: If the selling price of the chicken entrée is Rs.12.00 and the desired food cost
percentage is 30%, then the ideal food expense for the chicken entrée would be Rs.3.60.
Selling price multiplied by desired cost percentage = Ideal Expense
 Calculating Performance to Budget (Ratios)
Since the budget is a plan for an operation’s financial performance, it is useful to monitor the
budget from time to time, often on a monthly basis, though it might be done more frequently. One
analysis typically performed is a performance to budget calculation. This compares actual revenue
and actual expenses to the same categories in the budget for a given time period. The actual amount
is divided by the budgeted amount to calculate the performance to budget ratio. An example would
be to look at the actual amount spent on labor for a given month, and then compare that to the budget
figure for labor in the same month. If a higher amount was spent on labor than was budgeted, then
the performance to budget figure would be above 100%. If less money was spent on labor than was
budgeted, the performance to the budget would be under 100%.
Actual expense (or revenue) divided by Budgeted expense (or revenue) equals Performance
to Budget ratio. This calculation might also be used to analyze actual revenue and expenditure
performance for a portion of a yearly budget.

IV.
 OBJECTIVES OF THE STUDY

1. To understand the three most common measurements of a company’s success.
2. To recognize how important understanding accounting and finance is to the
career of any hospitality manager.
3. To learn about and describe the three fundamental financial statements.

4. To become familiar with fundamental revenue accounting concepts.
Research Design
 The controlling plan for a marketing research study in which the methods and procedures for
collecting and analyzing the information is to be collected is known as Research Design or A
framework or plan for a study that guides the collection and analysis of the data.
Descriptive Research
 A research design in which the major emphasis is on determining the frequency with which
something occurs. For example, How often users access the Internet in a given month. The
focus of descriptive research is to provide an accurate description for something that is
occurring.
Primary sources
The primary data was collected through questionnaires. They were filled using the scheduled method
of data collection by the researcher. Primary data is data which have been collected originally for the
first time. in other words, primary data may be outcome of an original statistical inquiry, measurement
of facts or a count that is undertaken for the first time. For instance, data of population census is

primary. Primary data being fresh from the fields of investigation is very often referred to as raw data.
In the collection of primary data, a good deal of time, money and energy are required.
The following are the method of collecting primary data:
 Collection directly by personal investigation.

 Collection indirectly by oral investigation.
 Collection by questionnaires and schedules.
 Collection from statistical reports of correspondents and from local sources
Secondary sources
The secondary sources were used only for collecting information regarding the sample, they were,
however, not used for analysis. Secondary data is data that has already been collected and examined
earlier by other investigators. Secondary data can either be published or unpublished data.
The following are the method of collecting secondary data
 Publications of the central, state, or local governments

 Publications of foreign governments
 Technical and trade journals
 Books, magazines, and newspapers
 Key Hotel Ratios That Measure Financial Performance
Many ratios are used in analyzing and evaluating the financial performance of a hotel. The
main ratios are divided into revenue, profit, and expense categories. We will discuss and prioritize
the most important ratios in each category. Notice that most of these ratios were mentioned in the five
ratio classifications previously discussed.
 Revenue
Variation analysis is used to examine two different aspects of the actual revenues generated
by the hotel. It seeks to identify where differences occurred and what caused them. The first analyzes
rate and volume. The second compares actual performance to another standard such as budget,
forecast, last year, or last month. The three primary measurements used in revenue variationanalysis
are rooms sold or occupancy percentage, average rate, and REVPAR. Let’s examine the rate and
volume.
1. Rooms sold or occupancy percentage. This is the volume measurement of the revenue
equation:
Revenue = Rate x Volume.
Variation analysis measures the actual number of rooms sold each night compared to the
budget, forecast, or last year’s rooms sold. The difference between the actual number of rooms sold
and the budgeted number of rooms sold, for example, is the rooms sold variation. In our 400-room
hotel, if the budgeted number of rooms sold is 360 and the actual number of rooms sold is 375, the
rooms sold variation is +15. The hotel sold 15 more rooms than budgeted, which is a positive
variation—more rooms sold than the budget anticipated. Rooms sold can also be stated in percentage
terms, which is the occupancy percentage. In our example, the hotel’s budgeted rooms sold prediction
of 360 equates to a 90% occupancy rate. The actual rooms sold, 375, equates to a 93.8% occupancy
rate (notice that we round to one decimal from the 93.75%). Our analysis of room sold variation now
has a second measurement—15 more rooms sold, or 3.8% higher occupancy. We have now identified
what part of any room revenue variations were the result of volume—selling more rooms.
2. Average rate. This is the rate measurement of our revenue equation:
Revenue = Rate x Volume.
Variation analysis measures the actual average room rate compared to the budget, forecast, or
last year’s average room rate. The difference between the actual average room rate and the budgeted
average room rate is the room rate variation. In our 400-room hotel, if the budgeted average room
rate is Rs.75 and the actual average room rate is Rs.74, the average room rate variation is Rs.1. The
hotel’s average room rate is Rs.1 lower than budgeted, which is a negative variation—a lower average
room rate than the budgeted average room rate. We have now identified what part of any room
revenue variations were the result of average room rate.
3. REVPAR. Revenue per Available Room (or REVPAR) combines both rate and volume into one
measurement. It is the first operating and financial statistic that managers examine when analyzing
total room revenues because it includes both rate and volume—the average room rate and the rooms
sold/occupancy percentage. The difference between the actual REVPAR and the budgeted REVPAR

is the REVPAR variation. An analysis of our example shows that actual REVPAR of Rs.69.41 was
Rs.1.91 above the budgeted REVPAR of Rs.67.50. Stated as a percentage,
TheRs.1.91 variance is 2.8% over the budgeted REVPAR. That is a positive variation. The next step
is to identify whether rate or volume or both contributed to this positive variation. In our example,
there is a positive occupancy or volume variation but a negative average rate variation. The fact that
the overall REVPAR variation is positive tells us that the positive occupancy variation of 3.8
percentage points has a larger impact on REVPAR than the negative average rate variation of -Rs.1.
The second aspect is the comparison of actual performance to a standard. We already started
this process in our example. The importance of comparing the actual occupancy percentage, average
room rate, and REVPAR to a standard is that it describes the direction and degree of actual
performance. Comparing actual performance to last year’s performance shows where and how
much operations have improved or declined from the previous year. It compares yearly actual
financial results. Comparing actual performance to the budget shows how actual results compare to
the operating plan or budget for the year. It compares actual performance to planned or budgeted
performance. Comparing actual performance to the forecast involves the most current operating
plan that includes the current trend and current economic environment. The forecast updates the
budget and is the most recent plan, so it should be the most accurate plan. It compares actual
performance to the latest plan.
The best financial situation is to have actual operating and financial performance exceed all
three measures: last year, the budget, and the forecast. The next best situation is to exceed last year
but not meet the budget. This comparison shows that operations have improved over last year,
which is always important, but did not improve enough to meet the budget. This could be because
an aggressive budget was set. Another good situation is to meet or exceed the forecast. This is because
the forecast represents the most current plan or projection. To meet or exceed last year and the forecast
is very good financial performance even if the budget is missed. It is important to show improvement
in at least one comparison because that indicates operations are moving in a positive direction.

 Profit
Variation analysis is used to examine hotel profits at several different levels. The formula
for profit is revenue minus expenses. Revenues have already been analyzed at this point, so the focus
of profit variation analysis will be on the expense accounts. There are three aspects of profit variation
analysis. The first analyzes the impact of revenues and expenses on profit. The second defines what
profit level is being analyzed—department profits, house profit or gross operating profit, and net
house profit or adjusted gross operating profit. The third compares actual performance to another
standard such as last year, the budget, or the forecast.
The first step is to examine revenues and expenses:
1. Revenues. This part of profit analysis was completed in the previous section as rate, volume, and
REVPAR were examined and compared. Refer to number 1 under “Revenue” for the details.
2. Expenses. The next step of profit variation analysis involves examining the different expense
categories. The details of operating expenses are included in the Department P&L and include the
major cost categories of cost of sales, wages, benefits, and direct operating expenses.
The second step is to define what profit level is being analyzed. Following are the different profit
levels that are examined as a part of variation analysis:
1. Department Profits. This is the dollar profit for the revenue/profit centers, and the formula is
department revenues minus department expenses.
2. Total Department Profits. This is the sum of the department profits for all the revenue/profit
centers in the hotel.
3. House Profit. This is the dollar profit that measures management’s ability to control all the
operating expenses in the hotel. The formula is Total Department Profits minus total Deduction
Department Expenses/Total Expense Centers.
4. Net House Profit. This is the final profit measure that includes all hotel revenues and expenses.
The only remaining expense is the distribution of profits between hotel owners and hotel management
companies and taxes due. The formula is House Profit minus fixed or overhead expenses.

The third step is to compare the actual performance to a standard. This analysis is the same as
described in the revenue section. The actual profit performance at each level is compared to last year,
the budget, and the forecast. Any differences or variations are then identified. The revenue variations
were identified in the revenue analysis, so the focus is on examining the differences inthe expense
categories of the different profit levels and the impact that has on each of the profit measurements.
 Expense
In the “Profit” section above, we discussed how expenses are analyzed. Managing expenses is a
critical part of any hospitality manager’s job. Let’s look at what she or he will be expected to manage
in each of the major expense categories:
1. Cost of sales. Managers will be expected to meet the budgeted food cost in dollars and percentages
each month and year to date. This will require that they effectively manage food and beverage
purchases and inventory levels, assist in taking accurate physical inventories and
reconciling these totals with the book inventory, oversee storeroom rotation to ensure quality and
freshness, organize transfers to other food departments, and coordinate all numbers and financial
information with the Accounting Department.
2. Wage cost. Managers will be expected to be able to forecast and control the hourly wage expense
given weekly increases and decreases in expected revenue volumes. This includes maintaining
productivity levels as well as acceptable customer service levels. Overtime is also an important wage
expense to manage.
3. Benefit cost. Managers control this major expense category by controlling hourly wages.
4. Direct operating expenses. This cost category can have many line accounts that managers must
control. This includes purchasing, verifying and processing invoices, taking physical inventory,
processing transfers, and critiquing monthly operating expenses compared to budget. Examples of
these accounts are China, glass, silver, linen, cleaning supplies, guest supplies, and paper supplies.
A detailed understanding of controlling all expenses and the ability to adjust them up or down
given business levels is an important skill for any hospitality manager. There will always be pressure
to maintain productivity and stay within the expense budget. A manager’s ability to skillfully control

expenses will have a major impact on department profits.
The ability to effectively manage and critique revenues and expenses is an essential skill for
all hospitality managers. Making or exceeding budgeted profits is equally important for maintaining
customer satisfaction in the successful operations of a business. Both are important for maximizing
profits. Profits are the most examined financial measurement used both internally by the senior
management of a company and externally by investors, bankers, and other financial agencies.
Variation analysis is the process of examining financial results to identify differences or

variations from expected results and performance. Identifying where variation occurs and
determining the size and cause of variations are important elements of financial analysis. Specific
ratios and formulas are used to determine the effectiveness of actual operations to the historical
performance of established budgets or forecasts. Ratios can be divided into five types:
(1) activity ratios,
(2) operating ratios,
(3) profitability ratios,
(4) liquidity ratios, and
(5) solvency ratios.
Variation analysis applies the methods of financial analysis presented in the actual
performance of a company. These key methods of financial analysis are (1) comparing numbers to
give them meaning, (2) measuring and evaluating the change in numbers and financial results, (3)
using percentages as a tool for describing financial performance, and (4) utilizing trends to evaluate
current financial performance. Management is also expected to use external information to evaluate
financial performance. This includes comparisons to hotels or restaurants within the company,
comparisons to industry averages, and comparisons to competitive sets within the company’s market.
The STAR Market Report includes several types of revenue management reports that enable a
company to compare its performance with the average performance of competitors within its primary
market. This is called the competitive set, and it provides a specific hotel with average operating
information for a group of competitors in its market.

 REVENUE STREAMS FOR THE HOTEL INDUSTRY
 Sales of food and alcohol
The selling of food and beverages is obviously the main source of revenue. Proper marketing
of the foodservice operation is also vital. Simply put, there are four different ways to make more
money in the food service industry.
2) Bring in more customers.
3) Get them to come back or purchase them more often.
4) Get them to bring others with them.
5) Get them to spend more while they are there (increase the average check).
 Upselling
Employees should be trained in proper techniques as they relate to upselling. Upselling is

when we get customers to order “extra items”. An example of unsellable items would be appetizers,
desserts, coffee, both alcoholic, and non-alcoholic beverages, or menu add-ons, like mushrooms for
their steak, extra or higher priced sides for their meal, such as fries instead of chips, etc. Can you
think of a time when a server practiced upselling on you?
 Meeting Room Rental Space, or “Buy-outs”
One way that a foodservice operation can bring in more revenue is by collecting money for
private dining rooms. Buy-outs are another way that a restaurant can make more money. A buy- out
is where the food service operation sells the entire property for the evening. It is important to
understand what you would charge on a particular day, to ensure that this would make financial sense.
 Off-Premises Catering
Off-premises catering is another area where the operator can bring in additional revenue. Off-
premises catering is where the restaurant brings the food, beverage, and service to another location.
Another benefit is that the event does not utilize seats in the restaurant. Off-premises catering

is also a great way to build the reputation of your business.
 Delivery, drive-up
Delivery is a popular service to offer to your customers. Another benefit of delivery is that it
does not take up any space in your dining room. Many restaurants offer delivery, and third party
delivery is a growth area in the foodservice industry. Many restaurants also take advantage of drive-
up as well. This is where the customer can order their food by phone, or online and drive to the
property and be met by an employee when they pull up. The employee then brings the food to the car,
and can process the payment via a wireless system.
 Service Charge
For tax purposes, tips and service charges are two completely different things. A service
charge can be added to the guest check, and typical amounts can vary from 15-20%. Often a portion
of the service charge goes to the employee and a portion stays with the “house”. The portion that
stays with the house can be considered revenue and can be utilized in any manner the owner or
manager wishes. This money is often used to off-set sales and marketing costs and can also be added
to the employee’s compensation in the form of “gratuity.” Tips, on the other hand, are.
money left for the server, should not technically be pooled, nor should a portion be held back from
the server. Tips would not be considered a revenue source for the foodservice operation.
 Merchandise
Many restaurants bring in additional revenues through the selling of merchandise. This can
be as simple as selling hats and t-shirts at the cashier’s station, to operating elaborate stores and online
purchases in places like Hard Rock Café, and Cracker Barrel.
 Gift Cards
Gift cards are another great way to bring in additional revenue. Many restaurants offer gift
cards, and this can be particularly popular during the holiday season, and can also be an “up-sell”
item. Another benefit could be that many of the gift cards sold will never be redeemed, and would
then be nearly 100% profit.

 Revenue/Yield Management
In the past, the prices of menu items were the same whether it was on a Friday or a Monday.
Now, restaurants are applying a similar dynamic pricing strategy that is utilized by the airline
industry, and hotels. In this model foodservice operations can charge different amounts based on
supply and demand. They can even separate the cost of the seating from the food and beverage.
For instance, you might pay a premium price for a certain table based on the day of the week,
and/or time of the day.
Some foodservice operations even sell “tickets” for a particular time slot. The ticket price
would vary based on supply and demand. Foodservice operations can use a company such as Tock
Tickets link to Tock Tickets, to handle the ticket purchase/distribution. Typically, this model only
works if your restaurant is in high demand such as Per Se, or Eleven Madison Park in NYC.
Some other examples would be non-peak, and seasonal promotions. The classic “early- Bird-
special” is one example where a lower price point is offered to entice customers to come in during
slower time periods. An operation that is catering to a seasonal crowd like a ski resort, or beach
setting, may lower or raise prices depending on the season.

 Guest Loyalty Programs
Loyalty programs are structured marketing strategies designed by merchants to encourage

customers to continue to shop at or use the services of businesses associated with each program. These
programs exist for most types of commerce, each one having varying features and rewards schemes.
In marketing, generally, and in retailing more specifically, a loyalty card, rewards card, points
card, advantage card, or club card is a plastic or paper card, visually similar to a credit card, debit
card, or digital card that identifies the cardholder as a participant in a loyalty program. Loyalty cards
(both physical and digital) relate to the loyalty of business-model.
 Definition of Expense
An expense is an outflow of money to pay for a product or service. The following section
describes the most pertinent expenses as they relate to the foodservice industry. Labor and food costs
are typically the most significant of all expenses. A manager should possess the knowledge and skill
to both understand and control their expenses. Below we will look at the various expenses associated
with the food service industry.
 SOURCES OF DATA COLLECTION
Secondary Sources
 Journals, Articles, etc.
 Websites

V. DATA ANALYSIS & INTERPRETATION
1. What was the profit expressed as a percentage for Radisson Blu Hotels?
Locations Profit gained Percentage.

%
2-3% 15%
4-5% 30%
6-10% 20%
11-15% 35%
35%
30%
25%
20% 2-3%
15% 4-5%
10% 6-10%
11-15%
5%
0%
Profit
The outcome of the research conducted shows that the majority of the participants of the
research have voted in favor of 11-15% to be the margin of Radisson Blu Hotels.

2. The best performance to budget of Radisson Blu hotels
Locations Performance of BudgetPercentage %
Initial Phases of the year 10%

Mid-Year 15%
Year End 30%
During the period of Vacations 45%
45%
40%
35%
30%
Initial
25%
Mid-Year
20%
Year End
15%
Vacation
10%
5%
0%
Performance
The best performance of the company can be seen over the vacation phase of the year when the
majority of the people use the services of the Radisson Blue Hotel.

3. The labor cost percentage for hotel industry are:
Locations Labor cost Percentage %
10-15% 45%
15-20% 15%
20-25% 20%
25-30% 20%
45%
40%
35%
30%
10-15%
25% 15-20%
20% 20-25%
15% 25-30%
10%
5%
0%
Labor cost Percentage %
The data of the research shows that the labor cost is around 10-15% of the total cost
contributed towards labor of the total cost recovered from the consumer of the goods and services.

4. Food and beverages expenses considered at every location, by consumer, in percentage
Locations Food and beverages

expenses Percentage %
15-20% 20%
20-25% 15%
25-30% 45%
Above 30% 20%
45%
40%
35%
30%
25% 20%
20% 15%
15% 25-30%
10% Above 30%
5%
0%
Food and beverages expenses
Percentage %
The data shows that general expense did by a consumer on food is around 25-30% of the
overall cost paid by the consumer.

5. Cost percentage ratio that compares expenses to overall revenue.
Locations Cost percentage ratio

Percentage %
1:7 20%
1:6 15%
1:6.5 35%
1:5 30%
35%
30%
25%
1:7
20%
1:6
15%
1:6.5
10% 1:5
5%
0%
Cost percentage ratio Percentage %
The survey states that the cost to expense ratio for the hotel industry is around 1:6.5
i.e., that the hotel industry keeps a margin of 35% of the cost it charges from its customers.

6. Key revenue sources for restaurants and other food service operations works better to
generate the estimated revenue.
 Sales of food and alcohol
 Upselling
 Guest Loyalty Programs
 Food and Beverages
Key Revenue Sources Contribution Percentage %
Sales of food and alcohol 35%

Upselling 15%
Guest Loyalty Programs 20%
Food and Beverages 30%
35%
30%
Sales of food and
25% alcohol
20% Upselling
15% Guest Loyalty

10% Programs
Food and
5%
Beverages
0%
Contribution Percentage %
Sales of food and alcohol are most prominent revenue generation aspect to the Radisson’s
hotels then it is followed by the food and beverages provide in campus of the hotels and
complimentary services in the Loyalty and Membership programs.

7. How is the quality service maintained with the feedback of customers over the service
and the expensiveness and luxuries amenities
Location Quality of service
Percentage %
Dissatisfied 20%
Neutral 15%
Satisfied 20%
Highly Satisfied 45%
45%
40%
35%
30%
Dissatisfied
25%
Neutral
20%
Satisfied
15%
Highly Satisfied
10%
5%
0%
The majority of the consumer base of the hotel industry have a positive opinion towards the
industry, the data collected shows that the majority of the participants of the research are highly
satisfied i.e., 45% of the consumer are highly satisfied.

8. Most expensive Radisson’s hotels ranges
Location Expensive hotels

Percentage %
40K-50K 20%
35K-40K 25%
45K-50K 15%
20K-25K 40%
40%
35%
30%
25% 40K-50K
20% 35K-40K
15% 45K-50K
20K-25K
10%
5%
0%
Expensive hotels
The data shows that the major of the expensive hotels of Radisson Blue range from 20K-25K
, the majority of the hotels of the company has its luxury pricing between this range .

9. Which controllable categories of expenses of food service operations effects more to the
profit statements
 Extra charges for the items
 Uncalculated purchasing
 Excessive waste
 Leftovers food utilization
 Food theft threatening
Key controllable expenses Expenses

Percentage %
Extra charges for the items 25%
Uncalculated purchasing 25%
Excessive waste 20%
Leftovers food utilization 15%
Food theft threatening 15%
25%
Extra charges for
20% the items
Uncalculated
15% purchasing
Excessive waste
10%
Leftovers food
5% utilization
Food theft
0% threatening
Expenses Percentage %

The controllable categories of expenses such as Extra charging for the items service may have
chance to increase the profit ratio with the more revenue to be counted, and the Upselling of the other
food and beverages can cause Uncalculated purchasing by the customer to get the more money in
accounts. Managing the Excessive waste of food and Leftovers food utilization may save the money
and other costing for the hotels accounts.

10. The parameters of monthly budgets over the financial statement the group of Radisson’s Blu
struggling over the cost cutting in-
 Food Cost
 Beverage Cost
 Labor Cost
 “Controllable” or “non-controllable” expenses
Costing factors Cost cutting Percentage %
Food Cost 25%
Beverage Cost 25%
Labor Cost 20%
“Controllable” or “non- 15%

controllable” expenses
25% Food Cost
20%
Beverage Cost
15%
10% Labor Cost
5%
“Controllable” or
0% “non-controllable”
Cost cutting Percentage % expenses
The food and beverage making time may reduce by the skilled labor recruitment over the unskilled
and irresponsible. The controllable cost components used to reduce the expenses in the monthly budget over
the financial statement.

VI. CONCLUSION
FINDINGS
Analyzing revenues is totally focused on the relationship between rate and volume in the effort to
maximize total hotel revenues. It involves establishing rate structures, defining market segments, utilizing yield
management information, setting selling strategies, and comparing rate and occupancy results with internal
and external reports. Specific hotel managers are responsible for maximizing hotel revenues.
CONCLUSION
The Radisson’s Blu hotels in Delhi achieve the maximum profit in throughout the other locations
comparatively. Profits are the best measure of financial performance because they include the two major factors
of financial performance: maximizing revenues and minimizing expenses. Maximizing total hotel revenues is
important, but it is only one step. Controlling and minimizing expenses is also important and is the second
step. Maximizing profits requires management to be efficient in both areas. Together, revenueand profit
analysis explain virtually everything about the financial performance of a hotel or restaurant.
FINDINGS
FINDINGS
The labor cost is not controllable costs so skillful candidates should be recruited over every location to
reduce the other unexpected costing and the waste. At the Nagpur location the skillful candidates need to be
hired from the other locations and manage their expenses which increases the costing again in another form.
Radisson Hotels at Chennai location have the most Food and beverages expenses among all the locations with
respect to the locality and the audience visits.
CONCLUSION
When it comes to manage overall costing percentage ratio for the expenses at every station has been
calculated from the revenue the Chennai seems to have more costing in the food cost and membership passes
for the regular customers or clients over the facilities provided.

VII. SUGGESTIONS & RECOMMENDATIONS
 The Banquet or Catering Department is more profitable because its food functions can be
planned with specific prices and customer counts, resulting in more efficient operations and
higher profitability. Sales of food and alcohol are most prominent revenue generation aspect
to the Radisson’s hotels. It is financially beneficial for restaurants to serve liquor because
liquor has lower wage costs and lower cost of sales, resulting in higher liquor profitability.
This helps the overall financial performance of the total food and beverage outlets including
banquets.
 At some locations such as Delhi, where the corporates and national/ international clients visits
to the places the hotels must promote the Loyalty and Membership programs benefits for long
term relationship to serve their best facilities. Specialty restaurants are generally more
profitable because they have higher average checks.
 The capital city of India is having their most expensive hotels as compared to other locations
of Radisson’s hotels most Government and richest corporate officials using their service. This
location generates the expected budget revenues and achieved the profit margins over the other
regional hotels. Restaurant departments have the lowest profit percentage because of the many
expenses required to prepare and serve food. This leaves little room for error if the restaurant
is to be profitable.
 The controllable categories of expenses such as Extra charging for the items service may have
chance to increase the profit ratio with the more revenue to be counted, and the Upselling of
the other food and beverages can cause Uncalculated purchasing by the customer to get the
more money in accounts. Managing the Excessive waste of food and Leftovers food utilization
may save the money and other costing for the hotel’s accounts.
 The food and beverage making time may reduce by the skilled labor recruitment over the
unskilled and irresponsible. The controllable cost components are used to reduce the expenses
in the monthly budget over the financial statement.

BIBLIOGRAPHY
 Radisson website(www.radissonblu.com)
 www.radissonblu.com/en/plazahotel-oslo
 www.yahoo.com
 www.slideshare.com
 www.Scribd.com
 www.Wikipedia.org
 Abrate, G., Fraquelli, G. & Viglia, G. (2012). Dynamic pricing strategies: Evidence from European
hotels. International Journal of Hospitality Management, 31(1), 160-168.
 Anderson, C. K., & Xie, X. (2010). Improving hospitality industry sales: Twenty-five years of
revenue management. Cornell Hospitality Quarterly, 51(1), 53-67.
 Anderson, C. K., & Xie, X. (2012). A choice-based dynamic programming approach for setting
opaque prices. Production and Operations Management, 21(3), 590-605.
 Andersson, T. D. (2007). The tourist in the experience economy. Scandinavian Journal of Hospitality
and Tourism 7(1), 46-58.
 Aslani, S., Modarres, M & Sibdari, S. (2013). A decomposition approach in network revenue
management: Special case of hotel. Journal of Revenue and Pricing Management, 12(5), 451-463.
 Avinal, E. A. (2006). Revenue management in hotels. Journal of Foodservice Business Research,

7(4), 51-57.
 Aziz, H. A., Saleh, M., Rasmy, M. H. & Elshishiny, H. (2011). Dynamic room pricing model for
hotel revenue management systems. Egyptian Informatics Journal, 12(3), 177-183.
 Badinelli, R. D. (2000). An optimal, dynamic policy for hotel yield management. European Journal
of Operations Research, 121(3), 476-503.
 IndiaToday magazines

ANNEXURES
Name of respondent: …………………………………………………………………
Age: …………………………………… Location: …………………………………..
Position/Designation: ………………………………………………………………..
1. What was the profit expressed as a percentage for Radisson Blu Hotels?
a) 2-3%
b) 4-5%
c) 6-10%
d) 11-15%
2. The best performance to budget budget of Radisson Blu hotels?
a) Initial
b) Mid-Year
c) Year End
d) Vacation

3. The labor cost percentage for hotel industry are
a) 10-15%
b) 15-20%
c) 20-25%
d) 25-30%
4. Food and beverages expenses considered at every location, by consumer, in percentage.
a) 20%
b) 15%
c) 25-30%
d) Above 30%
5. Cost percentage ratio that compares expenses to overall revenue
a) 1:7
b) 1:6
c) 1:6.5
d) 1:5

6. Which key revenue sources for restaurants and other food service operations works better to
generate the estimated revenue?
i. Sales of food and alcohol
ii. Upselling
iii. Guest Loyalty Programs
iv. Food and Beverages
7. How is the quality service maintained with the feedback of customers over the service and the
expensiveness and luxuries amenities
a) Dissatisfied
b) Neutral
c) Satisfied
d) Highly Satisfied
8. Most expensive Radisson’s hotels ranges
a) 40K-50K
b) 35K-40K
c) 45K-50K
d) 20K-25K

9. Which controllable categories of expenses of food service operations effects more to the profit
statements
i. Extra charges for the items
ii. Uncalculated purchasing
iii. Excessive waste
iv. Leftovers food utilization
v. Food theft threatening
10. The parameters of monthly budgets over the financial statement the group of Radisson’s Blu
struggling over the cost cutting in-
a. Food Cost
b. Beverage Cost
c. Labor Cost
d. “Controllable” or “non-controllable” expenses

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A

“AN ANALYSIS OF REVENUE AND EXPENDITURE OF

RASHTRASANT TUKADOJI MAHARAJ NAGPUR

In partial fulfillment for the award of

BACHELOR OF BUSINESS ADMINISRTATION

UNDER THE GUIDANCE OF

Prof. Sheetal Arora

PRIYADARSHINI LOKMANYA TILAK INSTITUTE OF

REVENUE AND EXPENDITURE OF HOTEL

INDUSTRY” has been submitted by Srushti Tarale, a student of

Sixth semester of B.B.A. in “Financial Management” from

Priyadarshini Lokmanya Tilak Institute of Management Studies &

Research, Nagpur. This is a research work done by the student in

the session 2022-23 towards the partial fulfillment of the

requirement for the award of degree in Bachelor of Business

Administration under the supervision & guidance of Prof. Sheetal

Prof. Sheetal Arora Dr. S. R. Varma

I am highly obliged to express my deep sense of gratitude and

I am grateful to Dr. S. R. Varma, Principal, PLTIMSR for his moral

Date: Srushti Tarale

I, Srushti Tarale of BBA studying at Priyadarshini Lokmanya Tilak

Institute of Management Studies & Research, Nagpur declare that

the project work entitled “AN ANALYSIS OF REVENUE AND

EXPENDITURE OF HOTELS INDUSTRY” was carried by me

in the partial fulfillment of BBA program under the guidance of

“Prof. Sheetal Arora” at Priyadarshini LokmanyaTilak Institute of

Management Studies & Research, Nagpur.

This project was undertaken as a part of academic curriculum

any commercial interest and motive. It’s my original work and it is

not submitted to any other organization or university for any other

Date: Srushti Tarale

2 INTRODUCTION TO FINANCIAL ANALYSIS 2-21

3 COMPANY PROFILE 22-29

4 OBJECTIVE OF THE STUDY 30-41

5 RESEARCH METHODOLOGY 42-44

6 DATA ANALYSIS AND INTERPRETATIONS 45-55

7. CONCLUSION & FINDINGS 56

8. SUGGESTIONS & RECOMMENDATIONS 57

Finance is the management of monetary affairs. Analysis is the separation of an

The other objectives are:

 To analyze the financial condition of the hotel industry

 To evaluate the overall performance of the hotel industry

 To understand the growth rate of the hotel industry

Project Report of Ms. Srushti Tarale Page 1

Numbers are also used to measure a company’s performance in meeting expected

Project Report of Ms. Srushti Tarale Page 2

Finance is the management of monetary affairs. Analysis is the separation of an intellectual

Revenue = Rate x Volume

Profit = Revenues - Expenses

By two important measurements market capitalization and recognition—General Electric

Project Report of Ms. Srushti Tarale Page 3

Project Report of Ms. Srushti Tarale Page 4

The rest of this textbook is devoted to developing an understanding of accounting concepts

Project Report of Ms. Srushti Tarale Page 5

Rs. 99 Average Rate x 75% Occupancy = Rs. 74.25 REVPAR or Rs.

14,850 Room Revenue/200 Total Rooms = Rs. 74.25 REVPAR

Project Report of Ms. Srushti Tarale Page 6

 Trends in Financial Analysis

 Short- and Long-Term Trends