hamptoninnsider

Following along Hhonor Gguard's day in the life lead, I'll give a worst case scenario of some of the costs that your room rate could go to. This is based on a 100 room Hampton. The employee & mortgage costs are figured as if the hotel sold out every night. Obviously the per room costs to cover those 2 things would be higher if the hotel was only half full.

Rate = $100
AAA/AARP -10%
Adjusted Rate = $90
Travel agent commission -10%
Franchise fee -9%
HHonors fee - 5%
Promo fee (double points, have a night on us, etc) - 4%
Mortgage -$13.50 (could be up to $20ish, don't have the numbers right now)
Payroll - $10.50
Breakfast average - $3

Comes out to $37.80 left. That has to cover electric, water, cable and anything else I can't think of. And most of that doesn't go straight to the owner's pockets, it goes to savings. The regular maintenance and repair work isn't cheap so money has to be set aside in advance.

Like I said, this is worst case based on some of the numbers from my hotel. Not everyone is HHonors, AAA or books thru a travel agent. Hope it was mildly interesting.

Braindrain

Thanks for the info. Yes, definitely interesting!

JDiver

Makes me glad I am AARP/AAA and Diamond - and not an investor in HH properties. OTOH, I never use travel agents, so...

cordelli

So lets continue.

$38 a room a night, not counting the extras like the ten times markup on the vending machine soda, the pay per views, the pantry, and everything else. Also figure not everybody is using all those discounts every night.

There's 100 rooms, so the hotel is clearing $4,000 or so a night. There's 365 days in a year, that's about a $1.4 million dollar deposit at the end of the year.

Toss in the movies, the vending, the people who don't use discounts, the ad revenue from the brochure rack, the function room rentals, etc and everything else, it's really not a bad business to be in, no wonder they are springing up like flied everywhere.

dcstudent

Wow, I appreciate this very much! Makes me wonder whether some of the Hampton's I tend to stay at make any money off me at all. The lion's share of my stays are at Hampton's and I hardly ever pay more than $70 per night!

Minneapolis

Does Hilton corporate QA come through on periodic visits? Do they require you to fix/repair/change any items reactively to those visits?

hamptoninnsider

We don't get any money from the vending machines or brochure racks, at least at my place. The people who provide those things take all the money in exchange for doing all the work. Same with the in room directories. A company prints and gives them to us for free in exchange for getting all the ads together. And since we're not a HI & Suites we can't have a pantry nor do we have pay per view. I could have factored in all the toiletries we give out, or the free wi-fi everyone gets costs us $900/month. Or having to order new linens every few months. In fact, business has been so slow some nights this past winter we we're making less than $4k a night before factoring in the expenses. The $38 was before utilities, which cost more than we get from selling out meeting room.

I'm not saying we don't make money, if we didn't we wouldn't have been around for 20 years. I pointed out that this was merely a worst case scenario and used the $100 rate as an example. I still get people who say that they paid $50/night ten years ago and don't believe that rooms should cost any more than that.

hamptoninnsider

Yes on both counts. Inspections can be as often as 4 times a year but since my place has been doing so well on them we will only get visited twice, maybe 3 times. Part of the inspection focuses on things that need fixing, either from being damaged or because they don't meet standards. Most of the times the problems will only count against you a little. At the next inspection they'll check those problems again to see if you fixed them and if you didn't they'll be major deductions.

dwcatty

My IRA has the same amount of money in it that it did ten years ago, so why shouldn't a hotel room cost the same?

Osteomata

Very interesting worst case scenario. I'm a bit more interested in the average case scenario, which might start with a higher rate, and exclude a good number of those discounts.

hamptoninnsider

That's fair, and what I was about to post anyway Best case would be summer, selling the room for $150 with only the franchise fee to pay. However, most of our guests do have AAA/AARP and while I don't have our numbers in front of me, I believe the brand average is 40% of all guests have HHonors. Summer is where we make money and where most of the saving comes from for renovations. Our winter rates do average around $100.

My hotel has the benefit of being indepently owned. While it gives us more freedom we do tend to spend more on our hotel than many others. I know of a Hampton where the desk clerks top out at $8.25/hour. We start at $9. We just replaced almost every light in the building because they were starting to fail and get dim. I was just in a Hampton that had a third of the bulbs in the hallway burnt out and the rest were mismatched. We could make a lot more money if we pinched pennies but thankfully we don't. It makes us a much more pleasant place to stay and work. $1 million profit a year? It's never happened. Around a few hundred thousand is more likely.

The first post was meant to be casual and interesting, not an attempt at a complete financial breakdown.

Motorskills

It was great stuff, thanks!

Keyser

thanks again hamptoninnsider....interesting thread....it really makes you wonder....

MilesMonster

They don't; those people are just lost. Tell them the Super8/Motel6 is at the next exit.

Helsinki Flyer

If I book through a TA I don´t get any points or trigger any promos. Do you have to pay the TA comission AND HH and promo fees? If yes, I´d start negotiations with Hilton.