For hoteliers, lodging turnover is an important indicator of the profitability of their business. But what exactly is it and why is it so important?
Term and meaning
The lodging turnover indicates how much turnover a hotel achieves with the pure room rental.
The calculation of the room revenue is very simple.
To determine the daily room revenue, multiply the average room rate (ADR) by the number of rooms sold. For the monthly result, the results of the individual days need to be added together. With most hotel software providers, the room revenue is a parameter that is reported as a KPI anyway.
How to increase the lodging turnover?
The difference between EBIT and EBITDA lies in the additional costs that are taken into account when calculating EBITDA. Depreciation and amortization is the amortization of property, plant and equipment and intangible assets. These costs are not normally considered part of operating profit as they are not directly related to the operation of the business. EBITDA is therefore a better indicator of a company’s cash flow than EBIT. Therefore, it is often the preferred measure when it comes to valuing companies.
Conclusion
EBIT/EBITDA are important financial ratios that measure the profitability of a company. However, there are also some disadvantages to be aware of. For one, distortions can occur if the company has high debt. For another, Ebit/Ebitda is only one of many ratios that should be used when evaluating a company.