Tag Archives: Springwood Hospitality

Good Citizenship

Young Life York Sponsorship Sign
At Springwood Hospitality we firmly believe that we are to make a difference in the communities we serve. That’s why we’ve teamed with Young Life York County as the Event Sponsor for their annual banquet this year.

Young Life is an international not-for-profit that reaches out to adolescents of all stripes to show them love and encouragement in 1 on 1 relationships, in “Club” meetings where they can be crazy and just be kids, and at summer camps, where most kids say they had “the best week of my life”.

All of this effort is geared to showing adolescents the love of Christ. Volunteers and staff do this to earn the right to be heard, to share the story and power of Jesus Christ. Regardless of response, kids are loved and supported by Young Life leaders and staff. Many of these special relationships last a lifetime.

Young Life is a special organization that is making a difference in the lives of thousands of teens. We are honored to play a part.

Dave Hogg

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Service Got You Down?

Service photoI’d hate to be in the shoes of a millionaire who wanders into this establishment with “only” a $100,000-limit Visa card and a wallet full of $50 bills.

“NO ICE CREAM FOR YOU!”

The following words of wisdom are strictly for those of us who elect – of our own free will – to go into the service business.  If you ever feel like posting something as uninviting as these signs at your primary guest interface, please do one or more of the following instead:

  1. Take a beach vacation.  (Maybe some “chill time” will knock some sanity back into you.)
  2. Go home and kick your pet.  Or go to a gym and kick a heavy bag.  Please, just kick something other than your guest.
  3. Visit a church on Sunday morning (God loves people more than anything;  perhaps you’ll learn from His example.)
  4. Find a different occupation.  (I hear they’re hiring 5,000 new IRS agents…)

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Recovering Economy Lifts Business Travel

A July 15, 2013 article in The New York Times says that travelers in the United States will spend about $273.3 billion on the road in 2013.  That’s a 4.3 percent increase over last year, and a reflection of stronger growth in domestic travel as the national economy stabilizes.

Of the estimated $273.3 billion, about $117.1 billion will be spent on group travel — meetings and conventions, conferences, incentive trips and the like. And $33.1 billion will be spent in the United States on international travel.  The information comes from a report that trade group Global Business Travel Association has released preceding its annual convention, which will be held early August in San Diego.

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U.S. hotel revenue gains expected in 2013

Reprinted from an article by Danny King today in Travel Weekly:

Steady growth in U.S. hotel demand won’t be tapering off soon, according to reports released Monday by PricewaterhouseCoopers (PwC) and Smith Travel Research (STR).

Growth will keep a steady pace through next year predominantly on room-rate increases, according to PWC.

Revenue per available room for 2013 will rise 5.6% in 2013 on a 4.8% increase in room rates, PwC said. Occupancy will hit 61.7%, which would mark four straight years of occupancy increases from a 54.6% rate in 2009.

As for 2012, PwC maintained its forecast for 6.5% RevPAR growth. U.S. RevPAR increased 8.2% last year.

Such forecasts were echoed, albeit cautiously, by hotel leaders speaking at the New York University International Hospitality Industry Investment Conference in New York on Monday morning.

“Performance still looks really good, but we’re worried about Europe, and we’re increasingly worried about domestic politics,” said Marriott International CEO Arne Sorenson on a conference panel. “Let’s hope that, like last year, business continues to perform strong.”

Dave Hogg – “Good news!”

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Maximizing House Profit using Flex/Flow Calculations Part 5: Final Considerations.

This is the last post in the series and I wanted to discuss some items that should be considered when reviewing flex/flow numbers.  Each period is unique and should be evaluated that way.  It is impossible to discuss all of the different issues that can skew flex/flow numbers from month to month, but I am going to discuss a couple situations below that will be helpful in analyzing flex/flow calculations. 

How did we get the extra revenues?

This is one of the most critical situations to consider when reviewing flex/flow numbers.  As discussed in part one, there are a lot of expenses that are budgeted and measured based on per occupied room (POR).  However, flex/flow measures the dollars from the revenue variance to the house profit variance.  So what would happen if the property exceeded revenues for the month but sold fewer rooms than budgeted?  Well if you consider that your POR costs should have been lower due to fewer rooms sold, the additional revenue had to come from either ADR or another revenue department, so your flow through percentage should actually be higher than your goal.  The opposite is also true if you exceeded revenues by selling more rooms than budgeted while the ADR was less.  The rooms sold will cause the POR costs to increase but the lack of ADR will hurt the flow through percentage because you got less revenue per room sold.  The same should be considered when you fall short of revenues as well.  There are numerous scenarios on this, but the point is that you should consider how you got the revenue variance to determine if the goal should have made and if the goal should have been higher.

Approach the small variances with caution.

This was purposely shown in example #2 for parts 3 and 4 of this series.  You will see that the smaller the revenue variances, the more likely you are to get an outrageous number in the flex/flow calculation.   If I told you that your property just flowed -500% for the month and nothing else; what would your reaction be?  I am guessing it wouldn’t be “great job and keep up the good work” but should it be?  What if upon further review of the statement you found that the revenues were over $200 and every other line item equaled budget, but you had a $1,000 extraordinary expense and that alone caused the house profit to be under $1,000 and the flow through to be -500%.  I think you would agree that this is not as bad as the initial -500% flow number would lead you to believe.  In my experience working with flex flow numbers, my general rule is the smaller the revenue variance the less effective the calculation.  Therefore it should not be taken literally without some further investigation.

In closing, I hope this series gave you another tool to manage your property.  As stated in part #1, the goal with flex/flow calculations is to measure the efficiency between additional revenues and bottom line profit.  Thanks for reading the series and stay tuned for posts in the future that will range widely on operational hotel topics.  If I can assist in any way, feel free to contact me directly at jshelton@springwood.net

Hospitably Yours,

Justin

Flex/Flow Calculations Poll #1

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Flex/Flow Calculations Poll #2


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Maximizing House Profit using Flex/Flow Calculations Part 4: How to calculate Flex performance.

I realize that Part 3 was a lot to take in for calculating flow.  Unfortunately, it isn’t going to get any easier with the flex calculations in this article and it is actually going to get a little more complex.  As stated previously, a flex situation is when you have fallen short of budgeted revenues and you are looking to see how well the property controlled their variable expenses. 

Here are the “Flex” calculations:

There are two ways to calculate your house profit target (HPT) when you are in a flex situation.  The first way has you determining how much you should flex or save.  To do this you multiply the revenue variance (RV) by the Flex goal percentage (GOAL%) to get the flex savings goal (FSG).  Now subtract the flex savings goal (FSG) from the revenue variance (RV) to get the house profit target (HPT).

           RV  x  GOAL%  =  FSG

           RV  –   FSG         = HPT

The second way to calculate the house profit target (HPT) is by far the easiest but it assumes the flex and flow goals equal 100% when added together.  See part 2 of this series for the reasoning behind why this should be the case.  To calculate the house profit target (HPT) just multiple the revenue variance (RV) times the flow goal percentage (FG%).  You will come up with the same numbers either way you calculate it assuming the flex and flow goals equal 100% when added together.  This is the most common (and easiest) way to calculate the house profit target when in a flex situation so I will be using this calculation in the examples to follow.

            RV  x  FG%  =  HPT

As in the flow part of the series, the next thing I recommend is determine if the property met the house profit target.  This gives you the first indication on whether you made the flex % or not.  This is calculated by subtracting the house profit target (HPT) from the house profit variance (HPV) to get the house profit goal variance (HPGV).  Remember that positive numbers for the house profit goal variance are great and negative numbers are never good.

            HPV  –  HPT  =  HPGV

To calculate your actual flex, you will need to subtract the revenue variance (RV) from the house profit variance to get the actual flex savings (AFS), then divide that by the revenue variance as a positive number (RVP) to get the flex percentage (FLEX%).  This gives you your actual flex percentage.

            HPV  –  RV    =  AFS

            AFS  ÷  RVP  =  FLEX%

Now let look at some examples of how this process works.  I am using a flex goal of 30% (therefore flow goal is 70%) in the calculations below.

Example #1:  This is a basic flex calculation.

Actual Revenue

Budgeted Revenue

Revenue Variance

$280,000

$300,000

($20,000)

 

 

 

Actual House Profit

Budgeted House Profit

House Profit Variance

$140,000

$150,000

($10,000)

Step #1 is to determine the house profit target.  We should multiply the revenue variance by the flow goal.  In this example, that would be ($20,000) x 70% which equals ($14,000).  ($14,000) is our house profit target.

Step #2 is to determine if the property met the house profit target.  We just subtract the house profit target from the actual house profit variance.  For this situation it would be ($10,000) – ($14,000) = $4,000.  In essence we are $4,000 above our target which means we saved more than we expected and is the first indication that we met our flex goal.

Step #3 is to determine our actual flex percentage.  We just subtract the house profit variance from the revenue variance to get the actual flex savings, and then divide the actual flex savings by the revenue variance as a positive number.  For this scenario it would be ($10,000) – ($20,000) = 10,000, then 10,000 ÷ $20,000 = 50% Flex.  The 50% flex is more than our goal, but we already had that indication from step #2.

Step #4 is always to analyze the financial statement to find efficiencies and inefficiencies.  In this case it would be to analyze your financial statement to determine if all fixed costs showed up appropriately.  Pay particular attention to variable expenses to determine what the property did well in saving the $4,000 and try to replicate it in the future.

Example #2:  This is a flex calculation with a huge negative flex percentage.  This is another scenario where the best of the best sometime question themselves when they get some of these numbers.  It isn’t good, but it is accurate.

Actual Revenue

Budgeted Revenue

Revenue Variance

$279,800

$280,000

($200)

 

 

 

Actual House Profit

Budgeted House Profit

House Profit Variance

$140,000

$150,000

($10,000)

Step #1 is ($200) x 70% giving us a house profit target of ($140).

Step #2 is ($10,000) – ($140) giving us a house profit goal variance of ($9,860).  At this point you know the property fell far short of the flex goal and that this isn’t going to be pretty.   

Step #3 is ($10,000) – ($200) = ($9,800) then (9,800) ÷ $200 (use RVP) = -4900% flex percentage.  If you don’t use the revenue variance as a positive number you will get a positive 4900% which doesn’t tell the story on this one.  It is calculated just like example #1 using different numbers and it is correct at negative 4900%.

Step #4 would include investigating the cause for the huge house profit goal variance when being so close to budgeted revenues.  This is obviously an extreme case, but you are probably looking for a large item that was not budgeted.  It is important to know why there is such a huge variance and in this example that is probably fairly easy to pick out by just looking at the variances for each line item.  I’m betting something will stick out to you. 

Example #3:  This is a really good financial statement showing an outstanding flex percentage. 

Actual Revenue

Budgeted Revenue

Revenue Variance

$280,000

$285,000

($5,000)

 

 

 

Actual House Profit

Budgeted House Profit

House Profit Variance

$140,000

$136,000

$4,000

Step #1 is ($5,000) x 70% giving us a house profit target of ($3,500).

Step #2 is the same as it has been in previous scenarios, house profit variance minus house profit target.  Remember that you are subtracting a negative here so the equation is $4,000 – ($3,500) = $7,500.  Example #2 was really bad, now this one is really good.

Step #3 is to find out your flex percentage.  $4,000 – ($5,000) = $9,000, then $9,000 ÷ $5,000 gives us a 180% flex.  That is a remarkable number because you basically saved $9,000 from top line deficit to bottom line profit. 

Step #4 is always to find inefficiencies or efficiencies in the financial statement.  Although the property missed revenues by $5,000, they managed to exceeded house profit by $4,000.  In this one you would want to find the areas that were budgeted with no expense or other large savings to determine if the financial statement will get hit with some expenses at a later date.  Don’t forget to focus on the variable expenses even if you find a missed bill or something of that nature.

As you can see there are a couple different ways to determine flex, but as with flow, the formulas are the same even when the numbers change.  I encourage you to grab a financial statement where the property missed the top line revenue and run these calculations.  If the flex number looks off, just rerun the calculations and stick with it after that.

Now that we know how to calculate flow and flex performance, this series is winding down.  In the final posting, Part 5, I will discuss some final considerations that can sway your numbers and probably your opinion of the desired performance.

Hospitably Yours,

Justin

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Help Springwood Hospitality “Stick it to Hunger” Today!

Springwood Hospitality gladly supports the local food bank and is conducting a food drive April 11th to April 28th.  Thank you for joining us in the fight against hunger!

Please click on the link to read all the details and where food donations are accepted.  Springwood Hospitality Food Drive Details

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