Case Study: Operating Expenses in Orlando's Full-Service Hotels
- michalmohelsky
- Apr 18
- 2 min read
his case study provides an analytical overview of the operating expenses for full-service hotels in Orlando, using comprehensive financial data from 2023.
Overview of Operating Expenses
In 2023, operating expenses significantly impacted the profitability of Orlando's full-service hotels. Examining the detailed breakdown, we observe a clear distribution pattern across various operational segments.
Rooms Expenses
Room expenses constituted 25% of the total revenue, averaging $14,711 per available room (PAR) and $55.20 per occupied room (POR). Compared to 2022, these expenses saw a moderate increase of 10.1% PAR and 4.9% POR, suggesting increased costs in housekeeping, amenities, or maintenance.
Food & Beverage Expenses
The food and beverage (F&B) department, a major contributor to revenue, had the highest expense rate at 59.1%, translating to $29,878 PAR and $112.11 POR. This represents a significant rise from 2022, with a 17.7% increase PAR and 12.2% POR, indicating substantial inflation in food costs, supply chain disruptions, or elevated staffing expenses.
Other Departments
Operating expenses for other departments notably decreased by 11.2% PAR and 15.4% POR, at $2,859 PAR and $10.73 POR. This suggests improved cost management strategies, efficiency enhancements, or possibly reduced service offerings.
Administrative & General Costs
Administrative expenses accounted for 5.9% of revenues, totaling $7,347 PAR and $27.57 POR. Year-over-year growth was recorded at 9.8% PAR and 4.6% POR, reflecting rising salaries, training investments, or increased general administrative costs.
Information & Telecommunication Systems
This sector experienced modest growth, rising 12% PAR and 6.7% POR to $1,188 PAR and $4.46 POR, likely due to upgrades in technology and digital infrastructure enhancing guest experience and operational efficiency.
Sales & Marketing
Expenses in sales and marketing grew 11.7% PAR and 6.4% POR, reaching $7,973 PAR and $29.92 POR. Increased competition and marketing activities aimed at driving occupancy and revenue per available room (RevPAR) likely contributed to these increases.
Property Operations & Maintenance
Property maintenance expenses stood at $4,342 PAR and $16.29 POR, an increase of 11.2% PAR and 5.9% POR. Continuous hotel refurbishments, safety upgrades, and preventive maintenance could explain this upward trend.
Utilities
Utility expenses showed a notable rise at 17.0% PAR and 11.4% POR, amounting to $3,160 PAR and $11.86 POR. This increase might reflect higher energy costs, fluctuating fuel prices, or more extensive energy usage driven by higher occupancy rates or intensified energy-intensive amenities.
Key Insights and Recommendations
Cost Control in Food & Beverage: Hotels should explore vendor renegotiations and menu engineering to manage the high costs in F&B, balancing quality and profitability.
Energy Efficiency Initiatives: Given rising utility costs, investing in sustainable technologies like energy-efficient lighting and HVAC systems could yield long-term savings.
Leveraging Technology: Enhancing digital infrastructure and automation may further improve cost management, particularly within administrative functions and telecommunication systems.
In conclusion, Orlando’s full-service hotels experienced significant operational expense growth in critical areas, underscoring the need for proactive cost management strategies to maintain profitability in a competitive hospitality market.
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