The Variance in the Monthly P&L
Your 120-room hotel budgeted 78% occupancy and $142 ADR for March. Actuals: 74% occupancy, $138 ADR, rooms revenue $18,000 under budget. Housekeeping labor came in $6,500 over budget, and guest supplies $3,200 over. The GM asks you to explain the shortfall at Friday's review. You notice the housekeeping overtime line is $4,100, concentrated in the last two weeks, and the schedule shows two room attendants out on leave with no replacements scheduled. Guest-supply usage per occupied room rose from $4.10 to $5.30, and a new amenity was added mid-month without a budget update.
1. Build the variance explanation, separating volume, rate, and controllable cost effects.
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Decompose the revenue gap:
- Volume effect: 4 points of occupancy on 120 rooms over 31 days is about 149 room-nights lost. At budgeted $142 ADR, that is roughly $21,000 of lost revenue.
- Rate effect: $4 ADR shortfall on actual occupied rooms (74% of 120 x 31 ≈ 2,753 room-nights) is about $11,000.
- These partly offset in the reported $18,000 net gap; show both so the GM sees the drivers.
Cost variances:
- Housekeeping labor +$6,500, of which $4,100 is overtime. Root cause: two attendants on leave with no backfill scheduled, so remaining staff absorbed the work at overtime rates. This is a scheduling/coverage failure, largely controllable.
- Guest supplies +$3,200: usage per occupied room rose $1.20 (from $4.10 to $5.30) on ~2,753 room-nights ≈ $3,300, consistent with the un-budgeted amenity added mid-month. That is a budget-process issue, not waste.
Present as: revenue shortfall (volume + rate), labor overage (coverage/overtime), supplies overage (unbudgeted amenity).
2. What corrective actions do you recommend, and which are quick wins versus structural?
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Quick wins (next 30 days):
- Build a cross-trained coverage pool and pre-schedule relief for known leaves; cap overtime with a weekly approval threshold. This directly attacks the $4,100 overtime.
- Either formally budget the new amenity or pause it; reconcile the supply par levels to the new usage rate.
- Review rate positioning: a $4 ADR shortfall at 74% occupancy suggests discounting or mix shift; check whether the corporate account rate is dragging ADR and whether weekend pricing can recover it.
Structural (60-90 days): 4. Institute a change-control step so amenity or service additions trigger a budget revision before launch. 5. Add a mid-month variance review so overtime and supply drift are caught in week two, not at month-end. 6. Set a demand-forecast review with sales to close the 4-point occupancy gap (group or corporate base).
Measurement: track overtime dollars weekly, supply cost per occupied room monthly, and ADR versus budget at each review. Hold the standard that variances get a named owner and a date, not just an explanation.