Financial Management & Budgeting Flashcards

In hotel financial reporting, 'undistributed operating expenses' typically include all of the following EXCEPT:

Answer: Rooms department labor

Rooms department labor is a direct departmental expense, not an undistributed (overhead) expense under USALI.

A hotel implements dynamic pricing and raises rates during a major convention weekend. This strategy directly targets improvement of which metric?

Answer: ADR

Raising room rates during high-demand periods directly increases the Average Daily Rate (ADR).

What is the purpose of a FF&E reserve in hotel financial management?

Answer: To accumulate funds for furniture, fixtures, and equipment replacement

An FF&E reserve sets aside a percentage of revenue specifically to fund eventual replacement of furniture, fixtures, and equipment.

Which of the following best describes a hotel's 'cost per occupied room' (CPOR)?

Answer: Total rooms department costs divided by rooms sold

CPOR = total rooms department expenses ÷ number of rooms occupied, measuring per-room operational cost efficiency.

A hotel general manager reviews the STR report and notices the hotel's MPI (Market Penetration Index) is 1.15. This means:

Answer: The hotel captures 15% more occupancy than its fair share

An MPI above 1.0 indicates the hotel is capturing more than its fair share of market occupancy; 1.15 means 15% above fair share.

When evaluating a capital investment, Net Present Value (NPV) is preferred over payback period because NPV:

Answer: Accounts for the time value of money and cash flows beyond the payback date

NPV discounts all future cash flows to present value and considers returns beyond the payback period, providing a more complete profitability picture.

A hotel's labor cost percentage is calculated as:

Answer: Total labor costs divided by total revenue, multiplied by 100

Labor cost % = (total labor costs ÷ total revenue) × 100, showing what proportion of revenue is consumed by labor.