An Expert Guide to Hotel Financial Statements

The hospitality industry is rife with challenges, many of which stem from fluctuating
customer demand and the unreliable cash flow that accompanies it. Beyond anticipated
seasonal changes, unforeseen events like flight or convention cancellations can swiftly
transform an average hotel week into fully booked or unexpectedly vacant nights. And with
the hotel industry market valued at $524.1 billion in 2021, and an estimated annual growth
rate of 17.4% from 2022 to 2030, hotel management must have a firm grasp on their financials
to meet these challenges or risk getting left behind.

With accurate and detailed financial data, typically organized into standardized financial
statements, hotel managers and decision-makers can weather unpredictability and ensure that
they always have the supplies and funds necessary to provide the optimal guest experience
— all while finding ways to improve processes, reduce costs and increase
profitability.

What Are Hotel Financial Statements?

Hotel financial statements, like other industries’ financial statements, are
comprehensive documents that provide an overview of financial performance and position
during a specific period. These statements give a detailed view of the hotel’s
operations and profitability and help inform future prospects, decisions and forecasts.

The four primary financial statements used by hotels are the balance sheet, the income
statement, the cash-flow statement and the statement of changes in equity. Each provides
insights into specific aspects of financial standing and when viewed together add context
and create a comprehensive snapshot of the hotel’s health. Internal analysts and
stakeholders use these statements to make operational improvements and set budgets, and
external parties, such as lenders or investors, rely on them to assess a hotel when deciding
whether to provide funding, and how much.

Key Takeaways

• The four primary hotel financial statements are the balance sheet, the income statement,
  the cash-flow statement and the statement of changes in equity.
• Analysis of these financial statements helps hotel management and decision-makers
  improve operations, increase profitability, prepare for the future and better serve
  their guests.
• Accurate financial statements are crucial for hotels to weather future demand shifts,
  seasonality and other financial variances that create unique challenges for the
  hospitality industry.

Hotel Financial Statements Explained

Hotel financial statements will typically look similar to their analogs in other industries
because many hotel accountants follow Generally Accepted Accounting Principles (GAAP) when
preparing their financial statements. Additionally, hotels usually follow the Uniform System
of Accounts for the Lodging Industry (USALI), a more comprehensive set of rules specifically
targeted at simplifying hotel accounting for easier comparison and accountability.

Even small, private hotels and bed-and-breakfasts, which may not be required to follow the
same GAAP regulations as large or public hotel companies, often follow these standardized
formats to simplify and streamline their financial statement processes. Disorganized, obtuse
or abstract financial statements invite misunderstandings, leading to potentially damaging
results when operational changes are implemented or audits are
conducted, so following GAAP and USALI is beneficial to hotels of all sizes. Additionally,
unique nuances are likely to appear on hotel financial statements, and understanding these
particulars ensures that hotel leaders use the most accurate and relevant data when making
decisions. For example, accurately tracking “food and beverage” and
“rooms” as distinct sections of revenue in the income statement can help
managers track the profitability of both operations separately and inform pricing and cost
analysis.

The Hotel Balance Sheet

The hotel balance sheet is an important
financial document that offers a snapshot of a hotel’s financial standing up to a
specific point. This statement serves as an outline of the business’s financial health
and its ability to meet obligations by detailing what the hotel owns (assets), what it owes
(liabilities) and the difference between them (equity). The balance sheet should always
“balance” the equation Assets = Liabilities + Shareholders’ Equity. By
juxtaposing assets against liabilities, hotel proprietors and managers can gain valuable
insights into their financial position and plan future strategies, such as servicing debt or
securing external financing. The balance sheet is often compared with prior periods to track
any changes in a hotel’s financial position over time and identify trends.

Key Components

Balance sheets for hotels follow the same model as most other industries and include many of
the same components. Here are the three primary components of the balance sheet:

• Assets are the tangible and intangible resources that a hotel owns. Short-term, or current, tangible assets can be
  converted to cash within a year and include cash, inventory (including food and
  beverages) and accounts receivable. Long-term tangible assets include physical
  infrastructure, such as buildings, furniture and equipment. Additionally, intangible
  assets, like the hotel’s brand reputation, intellectual property and goodwill, are
  also included.

• Liabilities are the financial obligations that a hotel must pay. Like
  assets, these are separated into current and long-term. Current liabilities include
  accounts payable, wages, accrued expenses and short-term loans. Long-term liabilities
  include financial commitments, such as mortgages or other loans not due within one year
  of the balance sheet’s date.

• Equity represents the hotel’s net assets after all liabilities
  have been settled and may also be labeled as owners’ or shareholders’ equity
  on the balance sheet. Equity serves as a
  measure of the hotel’s overall net worth, health and long-term sustainability, as
  ongoing negative equity points to a hotel’s inability to pay its debts, wages and
  other obligations. Hotels with negative equity can improve their operations by
  increasing revenue, reducing liabilities, seeking appropriate external funding or more
  effectively managing their assets to earn a higher return on investment.

Hotel Example

The balance sheet of hypothetical boutique hotel The Bow Tea Room shown below includes all
three of these sections:

• Assets: Current assets include accounts receivable for unpaid guests,
  cash reserves and food inventory. Long-term assets include the property value, room
  furniture and intangible assets, like brand value.
• Liabilities: Current liabilities include accounts payable for vendors,
  taxes, short-term loans and due wages. Long-term liabilities include the property
  mortgage.
• Equity: By adding all assets and subtracting all liabilities, the
  boutique hotel can calculate the overall net worth of the company.

The Hotel Income Statement

The income statement, also
known as the profit and loss (P&L) statement, reports a hotel’s
revenue, costs,
gains and losses over a specific time frame to ultimately determine net income. This net
figure shows whether the hotel earned more than it spent over the financial period and is
also known as the bottom line, as it is the final line of the financial statement. The
income statement illustrates the flow of money, beginning with the total revenue before
subtracting costs, including cost of goods sold (COGS), operating costs and other
miscellaneous expenses. After these calculations are made, the income statement can show
different profitability measures to focus analysts and decision-makers on areas for
improvement to reduce expenses and increase earnings.

Key Components

The income statement is often the first document viewed when assessing a hotel’s
financials. Analysts must understand the statement’s key components to gain an
accurate view of performance and create actionable
strategies to increase revenue, reduce
costs and grow profits. Here are the key components of the income statement:

• Revenue represents the cumulative income that the hotel earns from its
  goods and services. Many hotel income statements will segment this section into
  different revenue streams, such as room rentals, food and beverage sales, events and
  other supplementary services. These sales are typically considered the lifeblood of the
  hotel, as the income generated here must fund the rest of the operation.
• Costs denote the expenditures that the hotel incurs during operation.
  These are often separated into COGS, such as room amenities that accrue costs only when
  sales are made, operational expenses like administrative overhead and other costs, such
  as taxes.
• Profits show the funds left over after all expenses are paid. Income
  statements often have intermediary profit measures before the net profit, including
  gross profits (revenue – COGS), operating profits (gross profit – operating
  expenses) and EBITDA (earnings before interest, taxes, depreciation and amortization).

Hotel Example

The Bow Tea Room’s sample income statement includes detailed information for all three
of these categories, as shown below.

• Revenue: The income statement shows room sales, food and beverage
  purchases and additional income from a gift shop located in the lobby for the month.
• Costs: The costs listed on the income statement include COGS for room
  supplies, worker salaries and wages, interest payments on loans and taxes.
• Profits: To understand where costs are accruing, the hotel chooses to
  list gross profits to track direct sales profitability and net profits to see the bottom
  line.

The Hotel Cash Flow Statement

The cash flow statement
tracks the inflow and outflow of cash from three main activities: operations, investments
and financing. This helps assess a company’s liquidity and shows changes in income,
accounts receivable/payable and any other factors that influenced cash flow, typically by
showing the beginning, net change and end cash levels over a given financial period. For
hotels, monitoring cash flow is critical as guests traditionally pay at the end of their
stay — accruing expenses before the hotel recoups costs, especially for long-term
guests. Even a fully booked hotel may struggle to make ends meet while it waits for checkout
and payment.

Hotels must track and manage their cash flow to ensure that they have enough cash reserves to
cover obligations and maintain inventory levels until payments are made. Through regular
reporting, hotels can track cash flow seasonality and more effectively forecast their cash
sources and needs, creating a more resilient operation that can better meet obligations and
deliver great customer experiences throughout both busy and slow seasons.

Key Components

Not every hotel cash flow statement will look the same, even within the same company, as
individual hotels may use different kinds of investments or financing during a given
financial period. Here are the three primary components of a standard cash flow statement:

• Operating activities involve day-to-day business processes, such as
  booking rooms, selling food and beverages and renting event spaces. This metric
  typically starts with net income, carried over from the income statement. However, this
  figure must be adjusted to compensate for any changes in accounts receivable and
  payable, as those represent sales and expenses that have been transacted but are yet to
  be recorded. For example, income may track revenue when sales are made, but until
  customers pay their bills, those balances are reflected in accounts receivable, not
  cash-in-hand, and the overall income level needs to be adjusted to reflect this lag
  between the two measures. Operating activities may also include other factors, such as
  depreciation, that can impact operational cash flow.

• Investing activities include cash from long-term investments, such as
  property and equipment purchases and sales, mergers and acquisitions and other
  non-current asset transactions. While the funds earned through investing activities may
  ultimately go toward running the hotel, they are often atypical and non-repeating and do
  not reflect the profitability of core hotel operations.

• Financing activities include financing from lenders and creditors and
  principal debt payments. Depending on how much debt a hotel uses to finance operations,
  this section may have a major impact on cash flow. This section also includes payments
  to owners and cash raised from stock transactions.

Hotel Example

The cash flow statement for the hypothetical Bow Tea Room Hotel, shown below, segments cash
flow into the three primary categories. As expected for this smaller hotel, operating
activities make up the bulk of the cash flow for the financial period.

• Operating activities: The Bow Tea Room Hotel earned $64,500 from its
  primary operations, and that figure is adjusted for changes in accounts
  payable/receivable. The hotel also spent $9,000 on new inventory purchases, reducing its
  overall cash supply.
• Investing activities: The investing activities done during this period
  were $40,000 in new equipment purchases and $30,000 earned from selling old equipment,
  creating a net loss of $10,000 in cash.
• Financing activities: The hotel took out a new $10,000 loan and made a
  $3,000 debt payment during this period, increasing cash flow by $7,000.

The Hotel Statement of Changes in Equity

The statement of changes in equity shows any changes in ownership structure or equity values
over a given period. This statement is used by hotels that want to provide additional
context connecting some of the information on their income statement and balance sheet and
gives shareholders and investors information to inform their investment decisions. This
document shows the starting and final equity for a financial period and any changes,
including profits and losses, distributed dividends, stock transactions and prior period
adjustments to correct errors.

Key Components

The statement of changes in equity is less likely to be included in a set of financial
statements than the balance sheet, income statement and cash flow statement and is not
considered as essential as the other documents. However, if a hotel generates this
statement, it will likely include the following key components:

• Opening equity is the equity value at the beginning of the financial
  period covered by the statement. This serves as a baseline for adjustments and
  comparison.
• Profits often come from the income statement (listed as net income in
  the prior example) and are added to the opening equity. These profits may be distributed
  to owners further down the statement or held as retained earnings, increasing the equity
  of the hotel.
• Losses may decrease equity if the net income is negative. Other losses
  (and gains) can include prior period adjustments, share capital changes and asset
  revaluation.
• Distributions include all profits distributed to shareholders or owners
  and they are subtracted from the overall equity. High distributions can signify to
  investors profitable periods and a healthy return on investment, but too many
  distributions can reduce equity and hurt the hotel’s sustainability.

Once all these items are recorded, the final equity balance can be calculated and written at
the bottom of the statement of changes in equity.

Hotel Example

The hypothetical Bow Tea Room Hotel has a short statement of changes in equity, as it did not
have major stock transactions for the year measured. But equity was changed when net income
contributed to an increase, despite some of those profits being distributed to owners.
Additionally, due to an error in a previous financial period that was discovered after
close, there are some adjustments, shown below. This statement serves as a link between the
balance sheet and the income statement and helps stakeholders gain more information on some
of the data found on those financial statements.

Importance of Hotel Financial Statements

Financial statements help hotel proprietors and managers understand the reality of a
hotel’s standing, which isn’t always clear from a quick glance or an external
perspective. For example, a bustling hotel may be experiencing losses from an inefficient
food and beverage department, while a small hotel only half-booked may be earning healthy
profits from high margins and a lean operation. Through detailed and organized financial
statements, decision-makers can gain deeper insights into what’s working and what
needs to be improved by finding inefficiencies and places to cut costs and/or improve
processes. By regularly generating financial statements, hotels can detect problems early,
establish a data-driven way to track trends over time and understand how changes impact the
hotel’s performance. Here are four areas where hotel financial statements play a key
role:Strategic Planning

Hotel financial statements improve strategic planning by giving analysts and decision-makers
a detailed evaluation of the company to inform resource allocation and investment decisions.
These statements also highlight areas of financial risk, enabling proactive risk management
and mitigation, and provide the historical financial data necessary to set realistic
financial goals. Viewing these statements over time can help hoteliers understand what has
worked in the past so that they can more effectively
forecast results, avoid
repeating
missteps and ensure the hotel’s long-term financial stability and growth.

Performance Measurement

The fluctuating demand and seasonality of the hospitality industry requires regular
performance reviews to ensure that the hotel’s structure, offered services and staff
can keep up with evolving guest expectations. Hotel financial statements play a pivotal
role, offering tangible metrics that track the impact of any changes in the hotel’s
operations and tactics. These documents empower decision-makers to see how
operational
changes impact key financial
metrics, such as room revenue, inventory expenses, cash flow and more. By diligently
tracking these figures, hotel proprietors can discern patterns, gauge progress toward goals
and benchmarks and make informed decisions based on prior successes. And when performance
falls short of expectations or begins trending in the wrong direction, regular analysis of
financial statements can ensure that these problems are identified and addressed quickly
before they heavily impact the guest experience and the hotel’s bottom line.

Investor Relations

Investors play an important role in many hotels’ expansion and long-term success, and
hotel financial statements help facilitate clear communication between hotel leaders and
their investors. These documents show a hotel’s financial vitality, operational
prowess and growth potential, helping investors assess its business model, the efficacy of
its strategies and how it stacks up in the competitive landscape of the industry. Financial
statements can also help investors understand complex financial periods by providing
additional context for changes in a hotel’s finances. For example, if a hotel makes a
large real-estate investment to expand into a new region, overall financial metrics,
including net income or cash flow, may show losses. But by including additional details,
such as those found under assets and liabilities on the balance sheet, the hotel can provide
investors with the necessary perspective to see that the company is effectively reinvesting
profits into its future. Detailed financial statements show exactly how a hotel has been
earning and spending its money, and investors can use this information to more confidently
choose their prospects and put their money to good use.

Legal and Regulatory Compliance

Hotels must follow all relevant legal and regulatory compliance requirements or risk fines
and legal consequences. Financial statements give transparency to regulatory bodies and help
ensure that all reported finances are accurate and up to date. For larger and public
companies, following GAAP is required, but smaller hotels can also benefit from the
structured layout and standardized information on GAAP-compliant financial statements. Many
hotels choose to go above and beyond these standards with more regular reporting to
spotlight performance from specific revenue streams, expenses or any other metric that a
hotel can benefit from tracking. And if errors occur or an audit is needed, detailed
financial records can help make the reconciliation or auditing process smoother, letting the
hotel focus on growth and revenue, rather than digging through old files and putting out
fires.

Analysis of Hotel Financial Statements

The real value found in hotel financial statements is deeper than the surface data —
though that is still important. Hotels can use these statements to gain a deeper
understanding of their operations and financial health through easy-to-understand financial
metrics and key performance indicators (KPIs). Decision-makers can compare these measures
against competitors, prior periods or other benchmarks to see what’s going right and
what needs to be adjusted to gain and maintain a competitive edge and ensure long-term
success.

Ratio Analysis

An essential way that analysts assess a business’s performance is through ratios. These
ratios compare two or more data points from financial statements to give a streamlined
value, often as a percentage or decimal, for easier comparison and analysis. Here are four
key financial ratio categories that can benefit hotels:

• Profitability ratios track how much money business processes bring in
  after expenses are paid. They include measures such as gross profit, operating profit
  and net profit that may or may not be listed on the income statement. They also include
  return ratios, such as return on equity (ROE) and return on assets (ROA), which show how
  effectively a hotel is using its resources to generate profit. These profitability
  ratios are typically found by comparing revenue and costs to show overall profitability
  of specific aspects of the hotel’s business and find areas where efficiency can be
  improved.

• Liquidity ratios show a company’s ability to pay its short-term
  debts and obligations. A hotel’s balance sheet may show more assets than
  liabilities, but if those assets are primarily long-term, such as property, the hotel
  may not be able to pay its bills on time and maintain normal operations. Common
  liquidity ratios include the current ratio — current assets / current liabilities
  — and the quick ratio — (cash + accounts receivable + marketable securities)
  / current liabilities. The higher the liquidity ratios, the more easily the hotel can
  pay its bills.

• Solvency ratios focus on a business’s ability to pay long-term
  debts and are primarily used by lenders to establish creditworthiness before issuing
  funding. There are several ways to calculate solvency, but the primary solvency ratio is
  (net income + depreciation) / all liabilities. Other, more specific solvency ratios
  include debt-to-equity — sum of all debts / total equity — and interest
  coverage — earnings before interest and taxes / interest expenses. A
  “good” solvency ratio varies by industry and how much of a business’s
  operation is funded by debt, so it’s best to compare it with direct competitors,
  not as a standardized benchmark.

• Efficiency
  ratios measure how effectively a hotel is using its resources to
  generate income. The most basic efficiency ratio is found by dividing expenses by
  revenue, but many analysts use similar ratios by isolating specific areas, such as
  turnover ratios in accounts receivable (net sales / average accounts receivable),
  accounts payable (total supply purchases / average accounts payable) and inventory (COGS
  / average inventory). If efficiency ratios are trending in the wrong direction, hotel
  managers should look for bottlenecks or areas where costs can be cut to create a leaner
  and more efficient operation.

Trend Analysis

Due to ever-shifting customer demand in the hospitality industry, hotels tracking their
financial statements over time can better identify trends than hotels managing by gut
instinct and eyeballing balances and inventory levels. These trends can help hotels identify
seasonal patterns and better allocate resources where and when they are needed. Trend
analysis also helps decision-makers and managers more quickly identify problem
areas,
letting them adjust and improve performance before serious problems arise. For example, if a
hotel starts picking up more regular bookings, cleaning expenses and room amenity orders
will likely increase as well. But if the hotel isn’t regularly monitoring these
expenses over time, it can find itself incurring heavier losses and hurting profits. With
regular expense reporting, like those found on a detailed income statement, the hotel can
find where costs are rising faster than revenue and look for ways to realign the balance,
such as changing distributors or switching to more cost-effective in-room items.

Comparative Analysis

The information contained in financial statements can be compared with benchmarks (i.e.,
forecasts, break-even points or growth goals) to track performance over time and adjust
budgets, risk assessments and pricing as time goes on and market forces evolve. Hotels can
also compare their results with competitors, especially those that publicly publish their
financial statements. This can help inform marketing campaigns and future strategies to
better compete in the industry. By regularly assessing performance and comparing results
with internal and external data, hotels can continually improve operations and adapt to new
market and demand trends.

Use of Analysis in Decision-Making

The two primary categories informed by financial statements are investments and financing.
External creditors, lenders and investors analyze a hotel’s financial statements when
determining creditworthiness and setting borrowing terms, such as interest rates and
repayment periods. Hotels with detailed records of financial responsibility and growth are
more likely to obtain funding and better terms. These statements can also help
decision-makers inside the hotel system manage when and how to pay down debt. For example,
if the income and cash flow statements show healthy profits flowing into the hotel, it may
be a good time to pay down old debt. However, if these statements show the opposite, it may
be a sign to borrow more and invest in places that can increase revenue and bring in more
long-term success.

Challenges in Hotel Financial Statement Analysis

Analysts in the hospitality industry have specific challenges when generating and
understanding their financial statements, and they must fully understand and overcome these
challenges or run the risk of learning the wrong lessons, compounding problems or missing
potentially profitable opportunities. Here are common challenges that hotels need to
address.

Seasonality of the Hotel Business

Hotel revenue may
fluctuate wildly with the seasons, depending on the location of the hotel,
and businesses must prepare for this fluctuation to meet demand during busy seasons and keep
the lights on and the staff paid during slow seasons. But without detailed financial data,
understanding when those seasonal bumps will occur can be challenging. And even with that
data, changing weather patterns, evolving customer demand and other local factors can throw
unexpected wrenches into a hotel’s calendar. For example, a hotel located near a busy
ski mountain may expect a busy winter but may also have unexpected seasonal bumps throughout
the year if the mountain is used for other purposes, such as a new summer music festival. By
monitoring local announcements and tracking seasonal trends through financial reporting,
hotels can ensure that they have sufficient inventory, staff and ready-to-rent rooms when
needed, while saving costs during slower periods by reducing staff and minimizing supply
orders.

Impact of Non-operating Items

While a large percentage of a hotel’s revenue and costs will typically come from
routine operations — booking rooms and providing goods and services to guests —
some non-operating items can substantially impact a hotel’s financial health. Selling
assets can give hotels a bump in cash, especially for hotels with large amounts of furniture
and equipment. However, overreliance on these asset sales, as well as external funding
through investors, creditors and lenders, can create long-term issues for hotels if
they’re taking losses on their primary operations. Analysts can use financial
statements to see a complete picture of incoming and outgoing funds and gain a better sense
of a business’s core financial strength. Similarly, other one-time events, such as
lawsuits, settlements or insurance claims, can impact a hotel, and financial statements add
context to how finances were impacted by these non-recurring events. This can help assuage
the worries of the public or external parties after a period of losses or help managers
effectively turn a one-time cash boon into a long-term investment in the company.

Variances in Accounting Standards

Hotels have their own unique accounting challenges, and many hotels follow the
recommendations of the USALI. But as the industry evolves, so, too, do those
recommendations; the current USALI standard is the 11th edition, with the 12th nearing
completion. For example, early previews of the upcoming 12^th edition show a new
emphasis on sustainability by increasing reporting standards for energy, water and waste.
These updates recommend that hotels consolidate related records and expenses, and monitor
sustainability metrics such as energy consumption per occupied room (POR) and water
consumption POR. As new standards and regulations become accepted, both from USALI and
broader GAAP, even smaller hotels may want to track and implement new guidelines to make
comparison analysis simpler and show external parties that they are committed to following
up-to-date best practices.

The Effect of Depreciation

Depreciation, the accounting method that allocates the cost of an asset over its useful life
instead of entirely at the time of purchase, presents challenges for hotel accountants, as
depreciation is a non-cash item that can under- or overstate a hotel’s actual
profitability and cash flow month after month. For example, if a hotel makes an equipment
purchase of $120,000 at the beginning of the year and expects that equipment to remain
useful for one year, the hotel can depreciate the cost of that equipment throughout the
year’s financial statement, say $10,000 per month. Because the expense is spread out
on paper, but not in actual payments, the cash flow for the first month will seem higher
than it is (as $110,000 in expenses have not been factored in yet), and later months will
include the $10,000 depreciation expense despite no more cash changing hands.

This linear depreciation is not the only way to calculate depreciation, however, and other
methods may be used, such as larger expenses upfront that decrease throughout the year.
Depending on how hotels choose to depreciate their assets, it can influence analysis ratios
and how financial statements show cash flow and profitability. Therefore, it is important
for analysts and decision-makers to understand the differences between how recorded finances
differ from the on-the-ground reality before making decisions or comparing statements.

Impact of Other External Factors

The hospitality
industry is at the mercy of any number of external factors,
from changes in
local tourism trends to climate disasters. Like other industries, technology has impacted
hotels — such as online travel booking platforms that can cut into margins and allow
guests to filter results based on specific criteria to match their preferences —
forcing hotels to closely track customer behavior and feedback to remain competitive. Hotels
are also especially sensitive to natural disasters, as weather events can damage areas,
reduce tourism and take weeks, months or even years to fully recover from. For example, two
weeks after Hurricane Ida hit the Gulf region of the United States in September 2021, 75% of
the 208 New Orleans hotels researched by hotel data analytics company STR remained closed.
Meanwhile, hotels in other areas experienced an uptick in demand, as displaced residents
searched for places to stay. Weather events can be difficult to predict or plan for, as they
can impact hotels in both positive and negative ways. Hotels should plan for contingencies
and monitor external factors to mitigate risks and build a more resilient operation.

Make Hotel Financial Management Easy with NetSuite

Regular financial reporting can be a time-consuming process, and by the time the data is
collected and statements are generated, the data may be too old to be useful to address the
issues a hotel is facing right now. With NetSuite Financial Management, accountants
can quickly generate real-time customizable financial statements to show exactly what
information stakeholders and decision-makers need to improve operations and increase
profitability.

NetSuite has built-in features to manage assets, reconcile accounts, streamline accounts
payable and receivable and more, freeing up staff to focus on increasing efficiency and
growing the business rather than addressing symptoms and running damage control.
NetSuite’s Financial Management solution uses secure and real-time data to give
accountants the ability to close with confidence and report accurate and detailed financial
information to all relevant parties.

Hotel professionals face unique challenges from the dynamic nature of customer demand and the
often-unpredictable impacts it can have on a hotel’s finances. To face these
challenges and gain an edge over the competition, hoteliers must possess an intimate
understanding of their financials. By leveraging detailed financial data, organized into
comprehensive financial statements, hotel managers and decision-makers can effectively
identify areas of weakness and strength. Hotel financial statements give hotels the tools
they need to better allocate resources, increase profitability, better serve guests and
build a strong and resilient future.

Hotel Financial Statement FAQs

What are the four main financial statements in the hotel
industry?

The four main financial statements in the hotel industry are:

• The balance sheet lists the equity, assets and liabilities for a hotel
  as of a specific date.
• The income statement compiles the profits, expenses, losses and gains
  to calculate the net income for a financial period.
• The cash flow statement shows the incoming and outgoing cash flow for a
  financial period.
• The statement of change in equity shows any changes in a
  company’s net worth over a financial period, including net income/loss and
  investment contributions/distributions.

What is the P&L of a hotel?

The profit and loss statement, also known as the P&L or income statement, shows the net
income for a hotel over a financial period. This is calculated by adding all revenues and
gains and subtracting all losses and expenses. This net income is also known as the bottom
line, as it is the final line of the P&L statement.

How does seasonality impact a hotel’s financial
statements?

Hotels are especially vulnerable to seasonal fluctuations in demand and often need to rely on
busy periods to fund operations for the rest of the year. By generating and analyzing
regular financial statements, hotels can compare different periods over the year, as well as
year-over-year results, to make sure there is enough liquidity during slow periods to
maintain staff levels and keep the hotel supplied. This data also helps control expenses by
optimizing when staff levels are changed and supplies are reordered.

What is trend analysis, and how is it used in understanding a
hotel’s financial performance?

Trend analysis examines historical data to identify patterns and predict how key metrics will
change in the future. For hotels, it can inform revenue and expense forecasts to better
allocate resources and optimize operations. Trend analysis can also set benchmarks and
assess performance over time, helping decision-makers identify issues and inefficiencies
early before they affect customer satisfaction and hurt profits.