A bit on hotel management

Students of hotel management are taught about the number of room-nights of a hotel. For example, a 100-room hotel has a maximum of 36,500 (365 days x 100) room-nights in a year. The objective of hotel management is to maximise occupancy rate ( up to 100%) as much as possible. There is a physical limit to the amount of revenue which could be earned. If the average room rate is Rm100 per night, then the maximum revenue for a year is Rm3,650,000 (Rm100 x 36,500).

What the students are not taught is the practice of small hotels which cater to day-use guests. This would throw out the earlier statement of a maximum of 100% occupancy, as well as the maximum revenue based on that assumption.

We know why some budget hotels indulge in catering for day-use guests, though there are some genuine cases of people who needed a room for a couple of hours to catch up on sleep and to freshen up before they proceed on a long journey. It is obvious that such hotels with hourly rates cater mainly for prostitution, with the management or staff secretly providing it or 'closing one eye and shut the other' where arrangements are made elsewhere. There are also cases of married men or women indulging in adultery using such facilities.

It is therefore understandable that there is a certain stigma attached to hotel management, especially in small budget hotels. The set-up is such that it is so convenient to indulge in illicit sex in the privacy of a room. In terms of maximising revenues, the limitations based on strict conventional rules are lifted when management indulges in illegal practices. Just imagine the hypothetical case of maximum hours of use in a year! Using the above example, 24 hours x 365 days x 100 rooms, is equal to 876,000 hours! Even at Rm10 an hour, theoretically, the maximum revenue can reach Rm8,760,000! This is more than double that based on room nights. Or, using a more practical 2-hour example, even at Rm10 per two-hour, the maximum revenue is Rm4,380,000, which is also more than that based on room nights. Of course, we must also bear in mind and provide for the increase in variable costs like room maids' wages and laundry charges.

From a practical point, whether a hotel is suitable for a conventional hotel, a day-use hotel or a mix of both, would depend on the location and the people's preference. This could be gauged on a trial basis. If morality is not a problem, and management is involved in prostitution as well, the revenues could skyrocket!

Is it any wonder why some small hotel operators are laughing all the way to the bank, with most of their incomes unreported and therefore untaxed, while 5-star and above hotels report losses mainly because of extremely huge initial capital outlays and very high overheads and operating expenditures? I always believe big international hotels are owned by wealthy people who wish for status and high profile visibility, and not profitability, at least not according to what is shown in the accounts.

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