Having an outstanding customer experience and increasing revenue are the goals of every hotel owner.
NB: This is an article from Catala Consulting
But many hoteliers (both small and large) struggle with high operating costs. It is even more challenging for new hotel owners, as they do not yet know how to balance having a minimal operating cost and maximizing profit. Running your hotel business on high expenses can deplete the profit margin and threaten the financial health and the long-term viability of your hotel business.
If cost reduction is something you’ve always wanted to do or you have failed at, I’ve made it easy for you in this article. The article contains a comprehensive breakdown of hotel operating expenses and how to cut them down.
What are the Hotel Operating Costs?
In simple terms, operating cost refers to the expenses incurred while ensuring and maintaining a smooth day-to-day operation of your business.
Hotel owners can make smarter decisions when they have an insight into the amount. Spend to keep their hotel running.
Two Types of Hotel Operating Costs
Hotel operating cost involves any cost needed for your hotel’s maintenance and smooth operation. They are divided into two major categories. Let’s look at how they affect your hotel:
1. Fixed Cost
Fixed costs are always the same, irrespective of adjustments in the volume of services you render. Whether your hotel is prospering or struggling to stay afloat, fixed costs remain unchanged.
They include rent and mortgages, property taxes, staff salaries, cables and internet, hotel management software costs, health premiums for staff, maintenance fees, internet, televisions ads, and franchise fees (if applicable)
2. Variable Cost
Variable costs are costs that vary depending on the operational efficiency and demand of your hotel. Daily activities influence them—for instance, the number of guests occupying the hotel.
Further examples of variable costs include utility cost, marketing and distribution, Floral arrangement, housekeeping supplies, hourly labour, credit card commissions and other payment processing charges, hotel management software fees, food and beverage inventory, linens, cleaning materials, toiletries marketing, and distribution cost.
How to reduce Hotel Operating Cost
Although certain expenses cannot be avoided. But with the right strategy in place, you can reduce operating costs while running a profitable hotel business. The following strategies will help you manage operating costs at your hotel: