Study indicates India more lucrative than China
I have always wondered how a hotel would operate financially if it were located in different parts of the world. To demonstrate these differences and show the impact on the net income, I developed the following side-by-side comparison of the revenue and expense for a proposed 200-room Marriott type hotel, assuming it was located in the following five regions: China, Europe, India, South America and the U.S.
Let’s assume the projected occupancy and average rate are the same in each market, which will produce identical rooms revenue. The rest of the revenue and expense items will be projected by my local HVS partners based on how this Marriott hotel would be designed and operated in that particular region. For example, in India, a Marriott hotel would typically have significantly more food, beverage and banquet outlets thereby generating more food and beverage revenue than a Marriott hotel in the U.S.
It is apparent there are many similarities and differences in the mode of operation and the resulting impact on revenues and expenses for hotels in various parts of the world. Let’s take a closer look.
The underlying assumption for all five markets is the subject property is a 200-room Marriott hotel in its fourth year of operation in 2014. The occupancy is 71% and the average rate is $250, which produces rooms revenue of $12,958,000.
Food and Beverage Revenue
India shows the highest food & beverage revenue of $9,517,000 compared to the lowest, with China at $6,312,000. Indian hotels typically have extensive food and beverage outlets — usually several restaurants and extensive banquet rooms. Some of the best restaurants in India are located in hotels. The large Indian weddings are often held in hotel banquet rooms. Travelers also appreciate dining in a hotel since driving in the large cities can be challenging and time consuming. Hotels in China also attract banquet business, but their restaurants don’t cater to as many locals as Indian hotels. The European Marriott is second to India in food & beverage revenue with a volume of $7,390,000. Locals in Europe will often frequent hotel restaurants and utilize their banquet facilities. South American and U.S. hotels derive similar levels of f&b revenue.
India and South America show the highest telephone revenue with a volume of $630,000 and $466,000 respectively. India hotels derive significant revenue from Internet charges, which are very expensive in this region. The U.S. telephone revenue is $96,000 and Europe is a low $22,000. China does not separately account for telephone revenue but puts it in Other Income.
Rentals and Other Income
South America and the U.S. have the highest rentals and other Income at $932,000 and $829,000 respectively. China is the lowest at $371,000.
India’s spa revenue is the highest at $950,000. Upscale Indian hotels typically have extensive spa facilities that cater to both hotel guests and the local community. Spa revenue for China, Europe and the U.S. ranged from $241,000 to $413,000. South America does not show spa revenue because hotels of this size typically have very small spas and the income is insignificant.
A hotel in China typically has garage revenue and for this property it was estimated at $307,000. The other regions did not specifically include garage revenue, but it could be included in other income.
The resulting total revenue ranges from $24,560,000 for India down to $20,361,000 for China. Europe, South America and the U.S. are similar at approximately $21,000,000.
The following page studies expenses.