Can the hotel's 100-yuan profit margin be improved? Take the cost management of Wuhu Guoxin Hotel as an example.
September 26 03:11:17, 2025
Can we take the cost management of Wuhu Guoxin Hotel as a case study? The cost management at Hongfan Daping Hotel is an essential part of its business operations. It involves a systematic approach that includes forecasting, planning, decision-making, accounting, analysis, and evaluation. In simple terms, it's about managing and controlling the economic activities of the hotel through cost control. According to general cost management theory, effective cost management requires conducting cost forecasts, improving cost planning, strengthening cost control, ensuring accurate and timely cost accounting, and performing cost analysis and assessment. These are proven methods, but in today’s changing environment, we believe that more advanced approaches and new cost theories must be integrated for better results.
The current situation presents a major challenge for the domestic hotel industry. Since 1997, the number of star-rated hotels in China has grown rapidly, from 57 to 282, and later reached 635. After joining the WTO, foreign hotel chains have expanded significantly, bringing more competition. For example, Shangri-La Asia Limited, one of the largest hotel groups in Asia, has 16 of its 38 hotels located in China. This expansion has put pressure on local hotel profitability. Currently, U.S. hotel stocks are valued at 100 yuan per share, with 70 yuan relying on management technology. Meanwhile, the management level of domestic hotels is relatively low, and employee quality is not always high. Most profits depend on capital investment, with only 30% coming from operational efficiency. To reduce panic caused by market fluctuations, it's crucial to manage costs effectively.
Hotel costs mainly come from human resource expenses, energy consumption, maintenance materials, and office supplies. Given these challenges, we believe that hotel cost management should focus on involving all employees. Since costs occur at every stage of the business process and involve each staff member, a company-wide cost management approach is necessary. Every employee should develop a cost-conscious mindset, keeping costs within limits and striving to minimize them. If there are significant cost fluctuations, the management team should promptly alert decision-makers. At Wuhu Guoxin Hotel, we have established cost responsibility centers, such as dining and entertainment, where each unit is responsible for its own costs, regardless of where they occur. We prioritize cost reduction efforts and plan accordingly to explore potential savings.
Using high-tech tools for cost information management is also essential. Cost information flows through different levels of management, requiring refinement and decomposition. This process is more efficient than traditional hierarchical methods and demands higher technical skills from cost managers. For instance, utilizing the internet and other advanced technologies can greatly improve the accuracy and speed of cost tracking.
Implementing cost efficiency is another key strategy. Cost efficiency measures how effectively resources are used, often reflected in ratios like cost-to-revenue, cost-to-capital, or cost-to-profit. Increasing cost efficiency involves maximizing returns while minimizing expenses. Profit analysis helps determine which options yield the best results under different scenarios, while value engineering explores ways to cut costs without compromising service quality.
At Wuhu Guoxin Hotel, we use marginal contribution analysis to make short-term decisions. Fixed costs remain stable, so we focus on the additional profit generated by each option. This method, also known as profit-making analysis, helps us choose the most beneficial strategy. We also apply cost factor control, monitoring expenses like depreciation, welfare funds, fuel costs, wages, and interest. Financial accounting methods are used to ensure accurate reporting, especially when revenue needs to be deferred. To manage accounts receivable effectively, we have set up a clear responsibility system, separating credit approval from marketing to prevent bad debt losses while maintaining turnover.