So you have decided to go into hotel management because you love the hospitality industry, you like leading and taking charge, and you’re ready to take your career to the next level. Management seems like the obvious next step. But many management-bound employees overlook the fact that accounting is actually a large part of a hotel manager’s job, and strong math skills are a key part of your ability to carry out the day-to-day duties and responsibilities of a hotel manager or general manager.

Aside from leadership experience and industry knowledge, good hotel managers also need to have a deep understanding of the numbers and data that are significant for the company to be successful. Hospitality is a business, after all, and business skills like accounting and finance are vital to the successful operation of any hotel, large or small. When you work as a hotel manager, you learn quickly that accounting and finance skills are not just the jobs of an accountant. 

But, when do hotel managers need to use their accounting skills the most, and what types of math skills and strengths are they expected to have? 

According to the International Council on Hotel, Restaurant, and Institutional Education (ICHRIE), here are the most common situations when Hotel Managers need to flex their accounting muscles on a daily, weekly, monthly, and yearly basis:

Daily accounting activities for hotel managers

Daily Operating Report: 

Also sometimes referred to as the “DOR,” “Daily Management Report,” or “revenue report,” this report gives the property performance from the day before and month to date and compares it to last year and the budget/forecast. Depending on the size of the property, this report may or may not have expenses on it. Each manager confirms their department’s performance and can see how other departments performed. Managers use this report to determine if adjustments are needed in not only revenue but also expenses. Management also uses this report to assist in scheduling and staffing decisions, such as having to call additional staff in or let employees leave early.

Weekly accounting activities for hotel managers

Revenue Management Meeting:

Weekly, management has a revenue management meeting with the General Manager, Front Office Manager, Revenue Manager, Director of Marketing, Sales Manager, etc. In this meeting, the discussion starts with an update from the past week, which is generally based on the STAR report (or comparable competitor analysis such as a rate shop). The STAR report is provided by Smith Travel Research to subscribers and compares your company’s performance to main competitors and the local market, also called benchmarking Top concerns from the STAR report for the company include:

• How did the company compare, for the week, to its main competitors and industry segments for occupancy percentage, average daily rate, and revenue per available room?
• How did the company compare, by day, to its main competitors and industry segments for occupancy percentage, average daily rate, and revenue per available room? 
• How are customer segments performing (ex. transient, group, contract) in comparison?
• How is the month shaping up? 
• Are there any adjustments that the company may need to make?

After discussing the competitor analysis, an update is given on rooms on the books, pace, arrivals, departures, stayovers, walk rates, and 30, 60, and 90-day forecasts and any significant variances or deviations. This information leads to pricing decisions and how rates should be increased or decreased in the future (near and far). 

Leadership/Executive meeting:

Each manager is responsible to provide any reports that pertain to their area. These reports should include the last week’s performance along with forecasts for the next week. In addition, any significant items that the entire property should know about should be discussed. In scheduling a leadership meeting, upper management needs to consider:

• What departments/managers should be represented in this meeting? 
• For each department, what information should management provide for the meeting? 
• Why is this information for the entire team to know? 
• How do the departments relate to each other and what information crosses departments?

Monthly accounting activities for hotel managers

Profit & Loss Analysis: 

Often these reports are provided to managers by the accounting department, but you still need to be able to understand and interpret the accounting data in the report to understand patterns in the business. 

General Ledger Reports: 

This shows expenses from month to month. Managers need to be able to evaluate this report for any errors so expenses that managers did not approve are not booked or should be in a different account Management uses this report to make sure invoices are approved, coded to the correct accounts, and spend is within budget. This report is then sent to accounting at the end of the month, so accounting can verify and confirm what they have and what needs to be accrued. 

Operating Forecast:

The operating forecast is a prediction of future revenue and expenses. The forecast is generally done monthly and takes anywhere from a couple of hours to a couple of days depending on the complexity of the forecast. The forecast is for the next one to three months at most.

Yearly accounting activities for hotel managers

Operating Budgets:

Operating budgets are done on an annual basis generally starting around four months before the next year starts and taking a significant amount of time and coordination with other managers. Using a bottom-up approach, which entails managers starting with a net income goal and forecasting revenue and expenses needed to meet that goal, department heads are responsible for their own budget, including every line item from the P&L. While there is guidance from the CEO or accounting on some overall company goals, such as revenue growth or expense savings, department heads are responsible for their own budget. 

Capital Budget:

A capital budget consists of budgeting the long-term assets that a company needs to purchase in the next year. This is generally conducted right before or at the early stages of the annual operating budget. The reason for this is management’s capital needs greatly affect their operations. Each department head puts together a wish list of the capital items they would like to purchase, including costs (with 3 bids if possible), the life of the project, and justification. After this analysis, managers need to determine if they still want to request the item. Upper management then evaluates all proposals and decides 1) the ones with the best return or 2) the projects that have a higher priority for the company as a whole.

What the best hotel managers do

ICHRIE also wants all future hotel managers to know, however, that being fluent in accounting and finance alone will not guarantee your success on the job. Managers must be able to draw meaningful insights from the numbers and use those insights to move the business forward. They also must be able to effectively communicate these insights to their employees and also the executive leadership. As they put it, “Understanding the context of what is occurring at the property is important. The numbers have to be calculated, but understanding what those numbers mean is key.”

Source: Repetti, T 2019, “I Don’t Need to Know Accounting, I am Going to be a Hotel Manager. Right?’, Journal of Hospitality & Tourism Cases, vol.7, no.3, pp. 9-20.