Key Costs for Marriott and Hotel Industry:
Property lease/mortgage, property taxes, insurance, technology and software, employee wages and benefits, utilities, housekeeping and maintenance, guest amenities/supplies, food and beverage costs, security costs, marketing/advertising, furniture/equipment, legal/compliance costs, construction/renovation, loyalty program, real estate development/land acquisition, guest transportation/shuttle services, in room entertainment/wifi, emergency preparedness, staff training/staff development
Measure of Operation:
Unit of Activity - number of hotel guests.
This metric is important because in order to keep track of how well the hotel operations is running it is important to understand how many guests are in the hotel. By utilizing hotel guests as a unit of activity, Marriott can easily see if they are reaching their target amount of guests each day throughout the year while accounting for the busy and slower season.
Fixed, Variable and Mixed Costs
Property lease/mortgage - fixed cost - this fee is paid regardless of how many hotel guests there are
Property taxes - fixed cost - this cost is determined by the government and has nothing to do with hotel guest count
Insurance - fixed - premium amount for insurance does not change depending on how many guests stay at the hotel
Technology and software - fixed - subscriptions fee for hotel management system does not change based on guests
Corporate marketing/advertising - fixed - set budget for how much Marriott markets each year
Furniture and equipment - fixed - planned capital expenditures
Legal and compliance costs - fixed - licensing, contracting, and regulatory fees are at a set price
Real estate development/land acquisition - fixed - long term capitol investment and is independent of daily guest fluctuations
Licenses and Permits - fixed - no matter the amount of guests in the hotel, the licensing and permits are paid regardless
Emergency preparedness - fixed - fire safety systems, backup generators, and drills are planned in advance
Guest amenities and supplies - variable - if there are more guests, then more toilet paper, linens, room supplies, etc are needed
Food and Beverage costs - variable - the more guests staying at the hotel, the more food and beverage is needed to accommodate these guests
Loyalty program - variable - more guests, means that more points/rewards are redeemed
Guest transportation/shuttle services - variable - more guests, more shuttles services, increasing gas costs, etc
In room entertainment/wifi - variable - higher guests usages means more streaming service expenses
Employee wages and benefits - fixed - managers salaries are fixed per year, but housekeeping, front desk, kitchen staff, etc are paid by the hour which is a variable wage (depends on how many hours per week these employees work)
Utilities (electricity, heating/cooling) - mixed - base cost to keep hotel running is fixed but increases usage of utilities from guests means that utilities will be more expensive, making this a variable cost
Housekeeping and maintenance - mixed - some staff are needed even when the hotel isn't busy so there is a fixed baseline cost of employees but extra shifts being required for more rooms being filled up is a variable cost
Security costs - mixed - regulatory security staffing is a fixed cost but extra security for events is variable
Staff training and development - mixed - mandatory annual training for hotel is fixed but additional training for seasonal staff or high demand periods is a variable cost
Cost Affected by the Learning Curve:
Food and Beverage costs (at Plough, Marriott in Lancaster, PA)- As kitchen staff become more skilled and equipped with recipes, chefs and kitchen staff will become more efficient at their job, leading to less food waste, better portion control, and overall better customer service. This means that the service teams will deliver food/drinks quicker, increasing customer turnover in the restaurant, making more money. Also, the restaurant will learn to bulk purchase and have more efficient inventory management, meaning that there will be overall better efficiency throughout the entire restaurant. Also as staff become more trained, costs will go down as they will be better at their job and there will be less costs attributed to overtime pay. Lastly, as employees are more skilled, they can share tricks, meaning that training time costs will also reduce.
CVP Template:
https://docs.google.com/spreadsheets/d/18hzNtsyGwXr4d0ocUEbhAldNNo-mB9fpceMx_GYIz1k/edit?usp=sharing