Understanding The HotelBusiness Model - TODAY

Loss of $22 Billion Loss of $22 Billion Loss of $22 Billion Loss of $22 Billion From PeakFrom PeakFrom PeakFrom Peak

The Great Recession

� Rooms And F&B Almost Equal� Other Revenues Only 15% of Total

Hotel Revenues

Direct Cost

� Rooms – 75% Lost Profit Figure� F&B – Highest Direct Cost Center

� Other – Smallest Profitability

� Salaries and Wages

� Payroll-Related Expenses

� Laundry, Linen and Supplies

� Reservation ExpensesReservation ExpensesReservation ExpensesReservation Expenses

� Complimentary Services and Gifts

� Other Expenses

� Net Cost of Food (22% – 24%)

� Net Cost of Beverage (19% - 22%)

� A/V Costs (50%)

� Other Costs (18%)

� Salaries and Wages

� Payroll-Related Expenses

� Laundry, Linen and SuppliesLaundry, Linen and SuppliesLaundry, Linen and SuppliesLaundry, Linen and Supplies

� Music and EntertainmentMusic and EntertainmentMusic and EntertainmentMusic and Entertainment

� Other Expenses

Lettuce - +298%Tomato - +84.7%Turkey - + 14.7%

Price Of CornPrice Of CornPrice Of CornPrice Of Corn

� Credit Card Commissions

� IT Systems

� Doubtful Accounts ($65K – $95K)

� Legal Fees ($20K – $50K)

� Contract Services ($500K)

� Other POM Expenses ($1 - $1.5Mil)

25% to 35%

50% to 80%

80% to 100%

$20,000 Food & Food & Food & Food &

Beverage Beverage Beverage Beverage SpendSpendSpendSpend

200 Total Total Total Total

Room NightsRoom NightsRoom NightsRoom Nights

Your Your Your Your Expected F&B Expected F&B Expected F&B Expected F&B Contribution Contribution Contribution Contribution

Per Group Per Group Per Group Per Group Room NightRoom NightRoom NightRoom Night

$100$100$100$100

Hotels Hotels Hotels Hotels Expected Expected Expected Expected

F&B F&B F&B F&B Contribution Contribution Contribution Contribution

Per Group Per Group Per Group Per Group Room NightRoom NightRoom NightRoom Night

$150$150$150$150

You have less leverage with rate and concessions

Your Your Your Your Expected F&B Expected F&B Expected F&B Expected F&B Contribution Contribution Contribution Contribution

Per Group Per Group Per Group Per Group Room NightRoom NightRoom NightRoom Night

$200$200$200$200

Hotels Hotels Hotels Hotels Expected Expected Expected Expected

F&B F&B F&B F&B Contribution Contribution Contribution Contribution

Per Group Per Group Per Group Per Group Room NightRoom NightRoom NightRoom Night

$150$150$150$150

You have a ton of leverage with rate and concessions

� Labor is the #1 Cost in a Hotel/ResortLabor is the #1 Cost in a Hotel/ResortLabor is the #1 Cost in a Hotel/ResortLabor is the #1 Cost in a Hotel/Resort� Separate locations for Reception/Dinner� Outdoor Spaces run more labor typically � Turning rooms (Labor Intensive)(Labor Intensive)(Labor Intensive)(Labor Intensive)� Good Information (Manifest/Arrival Times)(Manifest/Arrival Times)(Manifest/Arrival Times)(Manifest/Arrival Times)� Turndown Service (VIP only)(VIP only)(VIP only)(VIP only)� Smaller Groups using Restaurant for Meals� Roll-in Buffets

� Tell Chefs about budgets up front (Honest)(Honest)(Honest)(Honest)

� Ask CM for Suggestions (Value Menus?)(Value Menus?)(Value Menus?)(Value Menus?)

� Match Menus (Menu of the Day)(Menu of the Day)(Menu of the Day)(Menu of the Day)

� Be creative with food as décor

� Serve family style (Chef controls portions)(Chef controls portions)(Chef controls portions)(Chef controls portions)