Hotels are a subset of the lodging industry. Most chains utilize three revenue streams – franchising, managing, and directly owned units. A typical chain will have from a dozen to two dozen brands. The main company provides a reservation system and negotiates the third party booking agreements (booking.com, trivago, priceline, and kayak).
Choice Hotels – Value Investing Price Points Choice Hotels is one of the six potential Value Investment Fund members within the Hotels Industry pool of investments. There are four standard value investing price points for the reader to consider, along with three key performance indicators. A value investor takes into consideration all of these price […]
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Purchased Choice Hotels This morning, 03/05/24, the Value Investment Fund purchased 100 shares of Choice Hotels. The market price is $109.46 per share at opening. The Fund pays a $1 per share transaction fee into an accounting pool account that covers the costs of actual broker fees, website activity, professional fees, and maintenance fees
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There is one unique financial characteristic that is synonymous with the hospitality industry; that is high fixed costs. Or another way of stating the same financial attribute is to simply state that the hospitality industry has low variable costs.
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The hotel business has one tenet that stands above all other hospitality based business standards. Get heads on beds. Why does this one business standard have so much more value than any other? Well, it is simple, the fixed cost of operations for hotels are over 70% of all costs. Therefore any additional guest sleeping in one of the rooms adds significantly to the potential profit of the hotel.
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In the hospitality industry, there is one financial tenet that takes precedence over any other business perspective. In this industry, it is about putting the maximum number of dollars (ABSOLUTE DOLLARS) in the register after each day. One of the most misunderstood business dynamics of this industry is the higher than average fixed cost to run the company.
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