I won’t beat around the bush; the budget portion related to expenses is the most challenging part of the story. But, to keep your attention while reading, let’s outline the path we’ll take. What are the main expense categories according to the USALI standard?
- Direct costs
- Payroll expenses – operational departments
- Other departmental expenses
- Salary expenses – administration, sales and marketing, technical department
- Other unallocated expenses – including administration, sales and marketing expenses, technical department expenses and energy costs.
Direct costs are the first group of expenses and, in my opinion, the easiest to plan. These costs generally need to meet predefined participation percentages and as soon as you have revenues, it is not difficult to calculate direct costs based on these percentages. They are further divided into direct accommodation costs, direct food and beverage costs and direct sports and wellness costs.
This first subgroup – direct accommodation costs – is always somewhat debatable. Why? Most hotels leave this category empty, although some hoteliers include agency commission costs as a direct consequence of accommodation realization, as well as the cost of a welcome drink or welcome package. I advocate for the latter group because we wouldn’t have any of these costs if the reservation and accommodation weren’t realized and all revenue from the accommodation realization goes into accommodation revenue.
Direct HIP costs are divided into direct HIP board costs, direct à la carte food costs, direct à la carte beverage costs and other direct HIP costs, which usually include the direct cost of trade goods. The percentages mentioned earlier are quite well-defined depending on the hotel category, BB, HB or FB service, predefined unit costs per meal and offerings in à la carte (it is not the same if we offer pizzas and pasta or if we focus more on meat and fish menus) or our drink menu. To avoid leaving things half-said, here are some respected percentages:
• Direct board food cost – 37-40%
• Direct board beverage cost – 19%
• Direct à la carte food cost – 26-30%
• Direct à la carte beverage cost – 19-21%
To ensure these percentages add up, it is crucial to set the standards correctly for all meals and drinks. If the board is not costed based on standards (which is most often the case), then the head chef must adhere to approved unit costs per meal and manage their buffet offerings within those boundaries. Accurate costing of the materials used is an essential prerequisite for inventory reconciliation at the end of a specific period ensuring that everything is in order – paperwork vs. stock in the warehouse.
We also have other direct costs for sports and wellness, where we usually book the purchase value of trade goods (sales of cosmetic lines).
As I mentioned earlier, these are the easiest costs to budget for. What lies ahead for us, and that’s salary, is not even half as simple – but it’s not impossible either! It is essential to know the right order to follow and that is why we are here – NIM – Your Click to Success!
