Question

Question 1 2.5 pts is the best measure of financial performance because it includes the two major factors of financial per ormance: maximizing revenues and minimizing expenses. Variation Profitability Total Revenue RevPAR

Answer 1

1) The correct option is RevPar.

The financial performance of a company basically indicates the financial health of a company. It provides an insight into how well a company or a business concern can optimally use its primary assets & earn maximum revenue from it basic mode of operations. The financial statements ( like, income statement, balance sheet, cash flow statement etc.) depict the financial performance of a company over a definite period. There are various financial performance measures used in different industries profitability ratios, gross profit margin, operating cash flow, current ratio, net profit, return on investment etc.

In the hospitality industry, a key performance indicator for measuring a hotel's performance is Revenue Per Available Room or RevPar. In the hospitality industry it is a widely used financial performance metric because it shows how well a hotel can fill up its available rooms at an average rate. It is calculated by multiplying a hotel's average daily room rate by its occupancy rate. It also can be calculated by dividing the hotel's total room revenue by the total number of available rooms for a specified period of time. An increase in the Revpar of a hotel means its average room rate is rising or its occupancy rate is increasing or both are improving. Revpar helps a hotelier to measure the overall success of his/her hotel over the specified period of time. Revpar also helps a hotel to compare its financial performance with its competitors. It helps the hotel to set accurate prices for its rooms by measuring its revenue generating performance.

For example, if a hotel's occupancy rate is 70% and its average daily room rate is $100. Hence, its RevPar is =($100 * 70%) = $70.
It can also be calculated as:-
In a 300 room hotel with 70% occupancy means 210 rooms are occupied. The avg, daily room rent is $100. That is the total room revenue generated $21,000. Hence, the Revpar = Total revenue generated / total no. of rooms available = $21,000 / 300 = $70.

Hence, Revpar is considered as one of the most important metrices for hotel's revenue management & for evaluating & improving a hotel's financial performance.

2) The correct option is Wage Cost.

In the hospitality sector, customer satisfaction and quality of service is the ultimate deciding factor for survival, growth & success. Hence, by careful planning, evaluation, monitoring & control techniques a hotelier can manage & optimize the food & labor (wage) costs to ensure profitability without sacrificing on quality.

Food costs account for 25 - 30% of a total hotel / restaurant costs and the labor costs account for another 25 to 30%. Generally hotels & restaurants aim to have prime costs in the 60-65% range, Hnece, the food costs & the wage costs are the two primary costs that needed to be analyzed & controlled.

Food costs include the cost of raw materials. purchase & delivery costs, carrying costs (spoilage, theft, interests on those purchases etc,), return costs, food making costs etc. Hence, by optimizing all these costs,regulating inventory, carefully selecting vendors & suppliers, reducing wastage & theft etc., one can successfully control food costs.

Labor or wage costs can also be controlled and optimized by carefully selecting staff, imparting regular training to improve their efficiency & productivity, efficient scheduling of staff, cross-training staff to improve their performance quality and productivity etc. Because the properly trained and efficient staff can achieve quality service & customer satisfaction.

3) The correct option is Operating ratio.

The operating ratio is an important metric to measure the efficiency of a company's management and its financial performance. It is defined as a ratio of the company's total operating expenses & cost of goods sold to its net sales. Hence, it measures the company's operational efficiency over a period of time.

Revpar or revenue per available room is one of the most popular metrices for measuring the performance in the hospitality sector and a hotel's financial results at the end of the financial year. Revpar is an important ratio to measure the operating efficiency of a hotel. Higher the Revpar, the more efficient the hotel is. An increase in the Revpar of a hotel means its average room rate is rising or its occupancy rate is increasing or both are improving. As Revpar takes into account both the occupancy rate & the average daily rate, it is a relevant operating performance measure for any hospitality concern. Revpar helps the manager to ascertain how to improve the occupany rate of the hotel while maintaining an acceptable room rent at the same time. It helps the manager to evaluate how well the hotel is being able to fill up its rooms and how much it is able to charge during the specified period of time.