Hotel Economics

Hotels have four main departments to make profits, room revenues, food & beverages revenues, telephone revenues, and miscellaneous incomes. Room and food & beverage revenues are the main drivers for the profit, while the other revenues are minor drivers. In the hotel industry, room and F&B service is very important and crucial in order to make profits. Thus increasing the customers who stayed in the hotel is also important to increase their profits. TO determine profits, main size and performance measures are used to check and maximize the profit. Examples of this are occupancy rate, annual sleepers, GUR (number of sleepers per available bed) ARR (Average Room Rate), Revenues PAR (per available room), Revenues POR (Per Occupied Room).

The cost factor are divided by elements such as administration & general, marketing, repairs and maintenance, energy costs, etc. Also fixed charges include equipment, other rent/lease, real Estate and taxes, and various types of insurance.

Recently there are new factors to make the profit such as internet based booking and the new real estate financial structures. Internet based booking can reduce the costs of booking and also increase marketing for hotels. Therefore, the result is an increase in the overall hotel occupancy rate with no decrease in the Average Room Rate. The other factor is new real estate ownership, where the trend is changing that financial investors increasingly owned ownerships of the hotel real estate. They consider more for the financial cash flow and profits like stockholders than the characteristic of the industry’s professional manager. In fact they want a large profit by taking the risk of the long term investments.

In this hotel industry, supply and demand is increasing. For example, JW Marriott plans to build 40 hotels in India by 2013 and Ritz-Carlton President Simon Cooper gives insight into new hotels emerging in Asia and the Middle East. Also hotel, room prices in Europe from Trivago (a booking website), rooms are selling for increased rates, which means both the demand of the hotel room and the supply of the hotel room increases together - a good sign for a hotel industry.

http://www.gadling.com/2010/04/15/hotel-economics-more-hotel-groups-plan-global-expansion-at-the
http://www.articlesbase.com/management-articles/hotel-financial-control-how-to-improve-your-hotel-pl-structure-based-on-new-revenues-and-costs-816287.html

Economics Impacting the Casino Industry

Las Vegas has always had the reputation as being a vibrant and unique city. When people go to visit Las Vegas, they often leave saying, “What happens in Vegas, stays in Vegas,” for a reason. This phrase stems primarily from the gambling scene, when people spend lots of money hoping to leave rich. This is the foundation of the gambling business, and there are many factors that play into the economics of a successful Casino.

In a place like Las Vegas, where everything is expensive, the casinos are able to charge what they want to play games because they know that the casinos are one of the attractions for tourists to partake in. The casino’s have to upkeep their buildings and appear to be professional, so that people want to come back and develop new clients.

There are not very many costs that casino’s have to bear. They simply have to keep their casinos modern, and pay their employees. More significantly, however, they have to pay a certain amount of money to the government. Since casino’s do not “manufacture” goods, they do not have to bear that cost. Casinos work in many ways like an insurance company. The casino relies on the fact that most people will not win big money, so when someone does win, they can afford to pay them out. It is an industry based on odds. When there are enough people (supply) to pay money at the casinos, the more money they have to give out to people, and the better the reputation the casino has.

A poor economy, however, has the potential to impact the revenue casino’s make. When the economy is in the middle of a recession, people are less likely to gamble their money, because they are unsure about when they will be able to make the money back. According to an article from the New York Times called, “Lost in Las Vegas,” Las Vegas was impacted severely due to the economy. It said, “Then, about two and a half years ago, as you may recall, the entire American economy collapsed. And with it went Las Vegas: those mega-hotels, where millions of people gambled away money they didn’t have, were suddenly empty; so were the newly built, now foreclosed-upon McMansions. Today the city’s unemployment rate is 14.9 percent, possibly the highest in the nation. Las Vegas had been humbled.” When there aren’t enough people going to the casinos, they cant afford to give out that much money. It is an ongoing cycle; whenever the economy is doing well, the casinos do well.

Overall, the economics of the casino industry are much more complex that many other industries. The casino industry is a high risk, high reward industry for both the customers, and the employees of the casino. When a casino is doing poorly, the casino will most likely lay more employees off. Casinos have such a crucial part in making money for the state, so often times the government will help them out when times are bad, but the economics of the casino industry are very shaky as a whole.
http://travel.nytimes.com/2011/02/06/travel/06lasvegas.html?pagewanted=1&sq=hotels&st=cse&scp=7

The cost of opening a restaurant in USA

The material is about the cost of opening a restaurant in San Francisco, but it is also applied to other places in USA.

One huge part of the cost is renting the space and building out the restaurant itself. For the sake of simplicity, let’s use the number of $900 a square foot to build out your kitchen and dining room. For 2,500 square feet the build out will cost you $2,250,000. (Remember these are just theoretical numbers, for a high-end place.) For your space, take improvement and upgrades you intend to make and divide by the total square footage. Plus, your rent on a space in the city — maybe as much as $6 per square foot — on 2,500 square feet could be as much as $15,500 per month. Of course, If you want to buy a space instead of renting, it will be much more expensive.

Another big part of the cost is the liquor license. A full liquor license in San Francisco will cost you as much as $250,000. In other cities of USA, it is quite expensive too. Furthermore, you will need a contingency fund in case you run into some problems and delays throughout your investment.

What delays could there be:
• Certificate of occupancy on your restaurant from the City
• Construction delays
• Delay in approval of a liquor license
• Construction delays
• Health department sign off
• Fire department sign off

There are many other aspects in which you need to spend money when opening a restaurant:

• A restaurant designer
• A public relations firm
• A lawyer to put together your partnership and operating
agreements.
• Liquor and wine inventory
• Food inventory
• China glass and silverware
• Music system
• Two weeks of staff training before you open the doors

Operating a restaurant need the following costs:
1. direct cost : insurance, direct labor (salary and bonus of service stuffs), direct material ( food, liquor, napkin)

2. indirect cost (include overhead and period cost) : insurance, depreciation on the equipment, advertising fee, salary and bonus of stuffs and managers , utilities

The cost of opening and operating a restaurant has a close connection with the gross profit. So if the managers of restaurant can find some legal ways to low the cost, it will be a significant increase in profit even the revenue is stay the same.
http://insidescoopsf.sfgate.com/tjjacobberger/2011/01/21/the-cost-of-opening-a-restaurant/

UK FOOD AND DRINK COMPANIES TAKE MEASURES AGAINST INFLATION

Many food and drink companies in the United Kingdom have been raising prices by attempting to persuade customers to use more costly products in order to protect their profit margins from high inflation.

Mitchells & Butlers, a UK based restaurant and pub chain, was deemed “the best-placed pub operator to pass through price inflation of both food and whet sales”. According the the company's Chief Executive, Adam Fowle, steps taken in order to protect their margins include persuading customers to invest in higher quality products, as simple as investing in more expensive dishes.

As a result, the market predicts a small rise in Mitchells & Butlers net operating profit margin this year.

Similarly, Britvic, a leading UK soft drinks group, is following the trend at a slower pace, since it will have to wait until the second half of the year to pass on the costs of higher commodity prices. Britvic stated that “it expects to grow its earnings before profit, taxes, depreciation and amortization margin by 50 basis points a year over the medium term”.

Even though the U.K. Economy is in a fragile state, and is putting a significant amount of pressure on these food and drink companies, their profits are predicted to be rising at a slow yet steady pace.

http://online.wsj.com/article/BT-CO-20110127-705613.html

STARBUCKS CARES ABOUT THE ENVIRONMENT

Starbucks is one of the leading Fair Trade certified companies in the United States, as well as in the world. Their mission statement expresses high ethical values; one of their most respectable statements being: “It's our goal for all of our coffee to be grown under the highest standards of quality, using ethical trading and responsible growing practices. We think it's a better cup of coffee that also helps create a better future for farmers and a more stable climate for the planet.”

Starbucks raises relevant environmental concerns, and aspires to provide farmers with incentives to reduce the environmental impact of coffee production while simultaneously providing support centers and loan programs to their farmers in such countries as Costa Rica and Rwanda.

In addition, Starbucks is “committed to significantly reducing the waste [their] stores generate-especially when it comes to recycling”.

In 2010, 70% of Starbucks stores recycled at least one type of waste. Also, in 1997, they developed a recycled-content cup sleeve in order to prevent customers from “double-cupping” as well as to keep their hands from getting burned by their hot beverages. In 2006, they launched their first paper cups for hot beverages with 10% post-consumer fiber. Starbucks aspires to have recycling available in all of its stores as well as serve 25% of its beverages in reusable cups by 2015.

Seems like a realistic goal, judging by the company's previous accomplishments!
Apparently, Starbucks serves a great cup of coffee along with a strong commitment to maintaining corporate social responsibility- can't beat that!

http://www.starbucks.com/responsibility

Today’s Leader of Corporate Responsibility: McDonald's

Every day, large companies, such as McDonald’s, must make corporate decisions regarding corporate social responsible. As a multi-million dollar international company, it is McDonald’s responsibility to establish development economically, socially, and environmentally. McDonald’s believes that “corporate responsibility is about living our values each and every day. It’s about taking action, achieving results and always maintaining open lines of communication with our customers and other key stakeholders.”

So how does a major company like McDonald’s uphold their commitment to being socially responsible?

1. Most importantly, McDonald’s has a Code of Conduct for Suppliers that specifically explains how suppliers should treat their employees. Demonstrating respect and care for its employees proves that the company values employment standards in the workplace.

2. Being the leader of the fast-food industry, McDonalds must face decisions every day that affects the environment and sometimes the safety of their workers. Recently McDonald’s created a sustainability project in order to promote ethical environmental practices in agriculture. A common tomato farm supplier that McDonald's purchases from underwent specific adjustments that improved the conditions of the farm and its workers in order to create a more sustainable business.

3. In today’s global marketplace McDonald’s must find a source for raw materials, which is often an international supplier. This ties the company to many environmental, ethical, and social concerns within the international area. By generating a sustainability program called Sustainable Fisheries Program that partners with others around the world in order to create ethical standards for wildlife. Their focus is to correctly guide and influence all worldwide purchases of wild-caught fish that contributes to the making of Fillet-o-Fish.

4. Finally, a large part to McDonald’s CSR is the concern with how the company affects the surrounding community. McDonald often views charitable activity as a marketing investment that builds stronger relationships with the community. Therefore, McDonald’s makes an enormous impact on the Ronald McDonald House by donating charitable contributions in order to support the health and well-being of children.

McDonald’s strong representation of corporate social responsibility allows the company to serve the local and global community very well. It also benefits the corporation as a whole, forcing the company to balance their moral and ethical obligations to not only their but employees but also the consumers.

http://www.suite101.com/content/corporate-social-responsibility-at-mcdonalds-a211782

Bennigan’s Assisting Families in Need

In many situations around the world, people are in need of assistance both financially and medically. Certain businesses and franchises like to reach out to these people because they know that they can make a difference. Throughout the world, there are many businesses and organizations that demonstrate good corporate social responsibility. A popular restaurant, Bennigan’s, is an example of this type of franchise.

In Saginaw Township, there have been an abnormal amount of homicides in 2010. Bennigan’s decided to support a fundraiser by donating 20% of the food and alcohol sales to the Stennett family (one of the families who was impacted by a homicide). The manager asked the employees of the Bennigans to ask their customers if they would like to donate to the fundraiser, in an attempt to raise even more money. This business had no connection to the Stennett family, but offered to help a family in need in their community, which is admirable.

These types of actions help promote a strong corporate social responsibility across the business world as a whole. When organizations see other businesses donating to good causes, it often causes a ripple effect, and businesses give back to their communities when in need.

A business having a strong reputation of consistently helping others in need can benefit to a more successful business. There are also many other restaurants that donate extra food to salvation armies. It is important for businesses to realize that they do have a responsibility to serve the community, given the amount of money many of them seem to profit. In the end, it is an ethical decision to donate. Is it more important to make more money, or to help people in need? When businesses donate, it makes the community feel more close-knit, which can result in a strong relationship amongst a business and it’s customers.


http://www.mlive.com/news/saginaw/index.ssf/2011/01/bennigans_restaurant_in_sagina.html