How to Perform a Hotel Revenue Audit in 4 Steps

how to perform a hotel revenue audit
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The hospitality world has turned sideways during the Coronavirus pandemic. Many hotels, motels, and restaurants have fizzled out during the pandemic, but others who are better established have used this time to improve their existing offer.

A lot of this boils down to the sheer numbers – so many people have to perform a hotel revenue audit. In this article, we’ll cover a basic hotel revenue audit, explain the process and its benefits in their entirety, and give you a step-by-step approach on how you can perform a hotel revenue audit, as well as some of our insider top tips.

What Is the Purpose of a Hotel Revenue Audit

Performing a hotel revenue audit includes far more than following simple financial statements. People perform an internal audit for hotels for a range of things, and it always involves more than a few procedures.

The general purpose is to verify all revenue transactions through the hotel in a preset period. That involves putting all of the transactions on a balance sheet, consolidating, and consulting to find out which part is earning money and which could be earning more money.

In essence, it’s an analytical process that helps hotels streamline their cash flow, improve their internal and external business dealings, and calculate the profits and costs of different hotel parts.

What Are the Benefits of a Hotel Revenue Audit

There are more than a few benefits of performing a hotel revenue audit. For demonstration purposes, let’s take the Marriott as an example. The Marriott international group is well known for meticulously performing hotel revenue audits to streamline as many aspects of their business as possible. Have you ever seen a Marriott hotel that isn’t performing as intended? Well, that’s likely because they pay a lot of attention to detail when it comes to a hotel revenue audit.

In essence, the benefits of performing regular hotel revenue audits are:

  • Improving your internal and external business dealings
  • Streamlining the flow of finances
  • Improving your current offer
  • Gaining critical insight into your corporate finances
  • Developing data-driven decisions later down the line
  • Improving or creating proper market segmentation
  • Streamlining inventory management.

And these are just some of the highlights. There are more benefits of performing a detailed hotel revenue audit, and all of them serve to improve the hotel in one way or the other.

How Often Should You Do a Hotel Revenue Audit

There’s no preset rule about how frequently you should perform a hotel revenue audit, but large-scale hotel chains perform it at least once a month. Now, depending on the size of your hotel, the number of customers you have, and many other metrics, you’ll want to perform a hotel revenue audit as much as you need to.

It can be once a month, once a quarter, or even once a year if you’re running a small-scale operation. Every country has different taxation on hotel revenue, and you should perform an audit as much if not more than the government requires you to.

How Will You Audit the Transactions of a Hotel?

To audit a hotel’s transactions, you’ll need to take all of your hotel’s transactions and organize them in an audit sheet or audit strategy. Some of the most common transactions in the hotel industry based on type are:

  • Cash sales
  • Card sales
  • Stocks
  • Travel Agents
  • Payment to Laborers
  • Assets
  • Miscellaneous items

Depending on the size, type, and kind of your hotel, motel, or BnB – you’ll likely have different expenses and transactions to take into account.

Step by Step on How to Perform a Hotel Revenue Audit

Performing a hotel revenue audit is surprisingly straightforward. The first thing you’ll need to do is gather all the transactions from your last hotel revenue audit. Once you have all the transactions, technicals, and numbers – you’ll need to organize them into distinct categories.

Depending on the types of transitions, you’ll want to organize them into different categories. When everything is laid out before you, it’s time to put the information to good use in your audit strategy.

There are more than a couple of ways to go about it. The safest and easiest way is to do some simple calculations to determine what has changed for the better and the worst.

1. Segmentation

First of all, you’ll have to start by segmenting. Segmenting everything makes it more spread out, accessible, and easier to work with. Once you’ve segmented everything, you can gain a good overview of who your customers are, what they are doing, and what they bring to your business.

2. Comparison

The second step of a good hotel revenue audit is to compare yourself to your competition. There are more than a few hotels and hotel chains out there, and picking one of similar size and type will give you a good perspective.

Use the data of other hotels and compare it with the data you’ve garnered through proper market segmentation to understand which parts of your hotel need improvement, attention, and investment.

3. Analysis

Once you know what’s what in terms of competitors and your overall data, you’ll have to look into your internal operations. That includes all currently used technologies, employees, and the payroll overall. A revenue audit should highlight where the money is going and how it’s being used, and by overviewing your staff, existing infrastructure, and technology, you can manage revenue more efficiently.

Improving your existing infrastructure and streamlining revenue go hand in hand, but it doesn’t necessarily have to be profitable all the time. You’ll have to audit the current state of your tech solutions and see which parts can be optimized.

KPIs, or Key Performance Indicators, are among the most important metrics you’ll have to audit when performing your revenue audit. They define the overall success of your hotel or business practices – so make sure to overview them diligently to maximize your RevPAR.

After you compare your data to previous data, you can have a good insight into your hotel’s business dealings and an accurate perspective that will allow you to make better-informed data-driven decisions in the future.

An audit will show up on your annual report, which is crucial for taxation purposes, so you’ll have to be extra careful when you’re crunching the numbers to get them right. Always double-check your work to make sure your math is correct.

4. Overview

The last step of the process is to overview your pricing, revenue, and finances. Once every cog is well-oiled and set in motion, you’ll have to give it a final polish by overviewing your existing pricing strategies.

If you want to make this process as simple as possible, many software solutions will allow you to insert data and calculate it automatically, taking a significant amount of labor from the entire process.

Tips on Performing a Hotel Revenue Audit

Here are some of our top tips for performing a hotel revenue audit to do the job that much easier. While these won’t revolutionize how you perform the audit, they will do the job that much simpler.

  • Use software to segment and calculate your transactions
  • Make sure to double or even triple check everything
  • Always keep your data on hand to analyze it later on
  • Make data-driven decisions based on the audit results
  • Try to use the data from your audit to streamline some parts of your hotel
  • Take your KPIs into account when using the data from the audit

In Conclusion

Performing a hotel revenue audit is a crucial part of running a hotel, and you should perform it as often as possible, not just when it comes to taxes. A thorough audit can give you crucial data that you can use to improve your business in more ways than one. Considering that data-driven decisions drive modern companies, you should garner as much data from your audit as possible. 

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Graduated from Standford University, Arielle has over 5 years of experience in the Hospitality industry. She holds an MBA in business administration from the IDC Herzliya, Israel. She currently works as Account Manager at Upstay, building and maintaining strong, long-lasting customer relationships. She is deeply passionate about helping hoteliers unlock significant new revenue streams from unsold premium inventory.

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