by Kirby D. Payne, CHA

In the process of managing hotels there are a tremendous amount of data that owners and management need to analyze, interpret and act on. Graphing some of those data can ease the process.

Graphs present numerical information in a way that makes it easy to study and understand. They can be used to summarize information in order to convey a specific message to the user. The relationships that are clarified by a graph can also give fresh insight into the analysis of data.

Graphing is an effective way to analyze revenue components and market data in order to make yield management and marketing strategy decisions. Expenses and their relationships to revenue and units of sale can be easily graphed so that the facts can be more easily visualized by supervisors who are weak with apparently abstract numbers.

The following two graphs detail Average Daily Rate (ADR) and Occupancy (OCC%) over the last two years for a hotel we have been involved with since February 1995.

The ADR graph clearly shows months of May and beyond have been fairly flat and show only very modest movement over the years. January, however, is very interesting and shows wide fluctuation between 1995 and 1996 where ADR was $54.00 and $73.85 respectively. It should be carefully compared to the OCC% graph for the same periods. Note January 1995 and 1996 occupancies were 96.1% and 70.7%.

Now look at the Room Revenue graph (RRG$) which follows and note that the revenues for January 1995 and 1996 is almost equal. The revenue in 1995 was $164,121 and 1996 it was $165,094. As a result of this ADR strategy carrying through to February in 1996 revenues were up about $23,000 on the same occupancy as the year before.

As a sage pointed out to me many years ago, "ADR is profit - Occupancy is expense!" Clearly in 1996 the Rooms Department profit was higher than it was the previous year because less rooms were cleaned to achieve the same revenue.

The graphs also show a small occupancy peak each July and November. Neither of those months show a significant ADR increase. This would indicate that there are some ADR opportunities on peak days if they can be anticipated. An examination of daily and weekly occupancy, reservations and walk-in patterns would help implement a yield management plan which contribute to a revenue increase those two months.

The graphs also show the staff what the ADR and Occupancy goals are for 1996 relative to how the hotel did the previous year, 1996. By seeing that the increases are not drastic they can be motivated to work towards them because they appear achievable. Behind the front desk, where all our GSAs can see them, are bar graphs, like United Way thermometers, showing the staff how close they are to achieving that month's goals.

We also graph market penetration data and yield data so the General Managers of the hotels and our corporate staff can visualize the trends more clearly. An upward curve on a graph can engender very positive feelings.

Graphs of laundry, cleaning and guest supply usage or room attendant minutes per occupied room also serve a purpose. In the case of the supplies, when they are expensed directly, the graph will show when excessive amounts of supplies have been purchased in addition to expense trends. Excessive amounts means money is tied up in inventories that could be used for other purposes.

Caution needs to be taken when graphing items which may not fluctuate as anticipated. Administrative and General Expenses, for instance, include significant items that do not fluctuate with occupied rooms or revenues. Thus, graphing this item as a percentage of revenues or per available room would not be meaningful. It would only be meaningful if graphed in dollars and compared to previous years or budget.

It may be useful to graph some items as year to date by month. This would take out major monthly fluctuations while showing trends.

If you are not using spread sheets on a personal computer to analyze your operation I encourage you to do it. You'll be surprised at the insights it gives you, especially when the graphing features are used. Besides the analysis mentioned here they also assist in market planning, business and market plan presentations and loan applications.

Here is a list of a few different types of graphs and what you might use them for:

• Bar Graphs are good for depicting revenues compared to the same period the previous year or comparing things to budget when visual continuity from period to period the same year is not important.
• Line Graphs are most useful when the point of the graph is to demonstrate trends or when the amount of data makes a bar graph impractical.
• Area Graphs are good when you want to demonstrate both trends and the idea of an accumulation of volume or mass.
• Pie Graphs represent proportions very well. This might include the allocation of major expense items or market mix, for instance.
• There are about 15 additional types of graphs which are more technical in nature and one is unlikely to use them except in unusual circumstances. For instance a hi-low graph which is used to plot stock prices could be used to track ADRs for a special analysis.

Any book store will have books on the subject which will be helpful. Happy graphing and don't get addicted!