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by: Robert Mandelbaum, February 2007
As the lodging industry goes through its cycles, the major sources of
revenue (room, food, beverage) for U.S. hotels fluctuate dramatically.
For example, rooms revenues during the recent industry recession declined
16.1 percent from 2000 to 2003. On the other hand, some of the �minor�
revenue sources for hotels show more stability over the long term.
During the same 2000 to 2003 period, the combined revenue from Other Operated
Departments and Rental and Other Income declined just 2.7 percent.
Given the relative consistency of sales generated by such outlets as health
clubs, movie rental, parking, and commercial leases, managers can depend
on these departments to provide the hotel with a more predictable source
of revenue.
2005 Dollars per Available Room Note: Data for each revenue source derived from unique sample Source: PKF Hospitality Research . To analyze the revenue generated by Other Operated Departments and Rental and Other Incomes, we have extracted data from our proprietary Trends in the Hotel Industry database of hotel financial statements. Data was pulled solely from those hotels that operated a given revenue source consistently from 1999 through 2005. For example, our analysis of golf course revenues relied solely on data taken from hotels that reported golf revenue for each year from 1999 through 2005. Consistent And Strong Growth Not only has the revenue generated by the minor departments been more consistent, it has grown at a greater pace than the larger sources of revenue. From 1999 to 2005, the combined revenue generated by Other Operated Departments and Rental and Other Income grew at a compound annual basis (CAGR) of 2.8 percent. Concurrently, rooms revenue increased at a CAGR of 1.2 percent, while total hotel revenues grew at 1.4 percent. Not all minor operated revenue sources have enjoyed growth in the past six years. During this period, revenue from a typical hotel�s parking garage, gift shop, commercial leases, and health club has increased. Conversely, sales from a hotel�s movie rental, guest laundry, and golf course operations have declined. The following paragraphs provide insight into revenue trends for five selected Other Operated Departments. Parking/GarageAs we enter a period of peak performance in U.S. lodging industry, it is anticipated that most hotel managers will push room rates at the potential expense of occupancy. With somewhat fewer occupied rooms and hotel guests, one would expect a corresponding decline in movie rental income, gift shop purchases, and spa treatments. However, recent history has shown that the relatively lower priced services (compared to room rates) of the Other Operated Departments are voluntarily, or reluctantly, absorbed by hotel guests. Hotel managers need to either apply their yield management practices to the Other Operated Departments, or consider the expansion of alternative revenue sources. . Compound Annual Change 1999-2005 Note: Data for each revenue source derived from unique sample Source: PKF Hospitality Research -- . Annual Change In Other Hotel Revenue Sources 2000-2005 Note: Data for each revenue source derived from unique sample Source: PKF Hospitality Research Robert Mandelbaum is the Director of Research Information Services for PKF Hospitality Research (www.pkfc.com). He is located in the firm�s Atlanta office. This article was published in the January 2007 edition of Lodging Magazine. 3 charts saved at pkf |
Contact:
Robert Mandelbaum
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Also See: | Resort Hotels; Wanted: Eaters, Golfers, and Shoppers / Robert Mandelbaum / June 2006 |
Phones, Cars, and Movies - the Other Revenues / Patrick Quek / PKF / Nov 2001 |
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