4 Financial Reporting Tips for Property Managers

When you think about the myriad of things that are rapidly changing in the hospitality sector every day, companies – especially those managing short-term rentals – need to be able to leverage data effectively in order to adapt and succeed in this dynamic environment. If you’re a property manager looking to grow your organization, and you want to understand better ways to measure your financial success, these financial reporting tips will help you gain the power to plan for the future, sharpen your company’s competitive edge and gain a deeper understanding of your business. 

Financial Reporting Tip #1: Understand top-line revenue

Understanding your top-line revenue is a key component of financial reporting for short-term rental managers. Whether you look at total room revenue or total guest fees, this section of your report will provide the basis for understanding financial relationships to other parts of the business. This is the starting point for all of the revenues that eventually flow to your bottom line, so even though it isn’t a direct measure of success, it does provide valuable context into your financial health.

For example, monthly fluctuations in room revenues may reflect seasonality, changes in your portfolio, marketing campaigns, or other events impacting market demand. Next, we will look at different ways you can use this information to dive deeper into your company’s performance.

Financial Reporting Tip #2: Incorporate calculated metrics

Calculated metrics are not financial in nature, but they are crucial to understanding how your business operates. There are four primary metrics that hospitality leaders should incorporate into their reporting.

• Number of nights stayed: The total number of nights that guests stayed over a period of time
• Employee headcount: The total number of staff members employed over a period of time
• Number of turns: The total number of reservations fulfilled over a period of time (For example: 1 turn may be equivalent to 3 nights stayed if booked by the same guest)
• Property count: The total number of active units over a period of time

A simple example of this would be to divide the total room revenues by number of turns, which results in the average revenue earned per stay. Similarly, you could calculate room revenue per unit and room revenue per night. Then, you could compare these values over several months to understand how changes in your portfolio and quantity or length of guest stays relates to changes in total room revenue. 

Next, we will examine how to analyze unit performance using elements from the profit & loss statement.

Financial Reporting Tip #3: Analyze parts of the P&L by unit

The profit and loss statement (P&L) records the company’s total revenues and expenses over a period of time and helps leaders understand how much profit the business generates. 

Analyzing parts of the P&L by unit allows property managers to understand the average profitability of their portfolios. To do this, simply divide gross profit, operating expenses (OpEx), or earnings before interest, taxes, depreciation and amortization (EBITDA) by the number of units. Then, compare how these values change on a monthly basis. If your EBITDA per unit is consistently negative, it may be an indication that operating expenses are too high. 

Watch the On-Demand Webinar: Mastering Advanced Reporting Techniques for Your Hospitality Organization

Financial Reporting Tip #4: Look at ratios 

When you focus on ratios instead of just the numbers, your financial reports begin to tell a whole new story. Calculated as percentages, ratios help financial leaders track organizational performance and efficiency over time while smoothing out the effects of seasonality. For example, management revenues and room revenues may fluctuate from peak season to shoulder season, but management revenues as a percentage of room revenues may consistently hover around 40%. 

Using this ratio, we know how management revenue will trend as a function of room revenue, which will make it easy to build a forecast and budget for the following year. Leaders can use this same approach to dive into the individual components of revenue or track the cost of revenue by breaking down housekeeping costs, labor costs, and other expenses as a percentage of room revenues. The more detail you have when recording this data, the more you will be able to drill down into different ratios and pinpoint specific areas for improvement.

Take Financial Reports to the Next Level

While reporting can be challenging for property management companies, taking the time to understand your financials and the nuances of your business can pay off in dividends. As a firm with years of experience helping short-term rental and hospitality managers solve their accounting and reporting headaches, we have the people and the technology to streamline data management and financial processes. When you work with Ximplifi, you’ll gain access to best-in-class software, trained accounting staff, and scalable workflows designed to help you break through barriers to growth and lead with confidence. 

To learn more about Ximplifi’s accounting services for short-term rental management companies, click here.