ECONOMICS: Cost Groups

Projected startup costs

Capital Expenditures	Soft goods guestrooms	$   280,000.00
	Soft goods guest bathrooms	$     50,000.00
	Corridors	$     12,000.00
	Lobby softgoods	$     15,000.00
	Public softgoods	$       2,238.00
	Bar/Lounge	$       3,800.00
	Meeting rooms	$       4,900.00
	Fitness room	$     17,800.00
Operating Expenses	Salaries***	$   130,000.00
	Office Equipment	$       8,000.00
	Information System	$     36,000.00
	Licenses fees	$       6,000.00
	Insurance	$     61,000.00
	Marketing & Advertising	$   160,000.00
	Operating Supplies	$   150,000.00
	Energy Expenses	$   137,000.00
	Administrative & General	$   302,000.00
	Security	$   137,000.00
	Property Operation & Maintenance	$   198,000.00
		$1,325,000.00
Total Startup Capital		$1,710,738.00

2) Revenue Drivers/Unit of analysis

The primary source of revenue for the proposed hotel is the sale of its guestrooms.    Revenue will also be derived from leasing of food and beverage, meeting and spa space.  Rental income will be generated on a monthly basis.  For the purpose of financial analysis and projection, standard projected room rates will be used for analysis.    

Fixed and Variable Costs

The majority of costs in the lodging industry are classified as mixed, and have both fixed and variable components.  Listed below are the costs relevant to the proposed hotel and the percentages that are fixed, according to industry standards.   

Table 5:  Fixed and Variable Costs

Expenses	Percentage of expenses fixed
Rooms	60.0%
Administrative & General	70.0%
Information Systems	90.0%
Security	80.0%
Marketing	70.0%
Property Operations & Maintenance	70.0%
Energy Costs	90.0%
Property Tax	100.0%
Insurance	100.0%

 3) Variable Cost per room (unit) sold. 

Number of Rooms in Hotel	100
Average Rate	$         140.00
Variable Costs Per Room/Unit	$           33.20

 4) Fixed Costs

Fixed Costs	Total	Fixed Component
Rooms	824,000.00	494,400.00
Administrative & General	302,000.00	211,400.00
Information System	36,000.00	32,400.00
Security	36,000.00	28,800.00
Marketing	270,000.00	189,000.00
Property Operations & Maintenance	198,000.00	138,600.00
Energy Costs	137,000.00	123,300.00
Property Tax	133,000.00	133,000.00
Insurance	61,000.00	61,000.00
TOTAL	$1,997,000.00	1,411,900.00