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Percentage of profit per bed / room / square meter

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Jonathan Leroux started this discussion 6 years 5 months ago

Hello everybody,

I am Jonathan, a 30 years old man, who just recently bought a hostel in Mont-Tremblant, Québec Region, Canada. I will open it on the 01st November 2018, low season. It's going to be the first hostel for backpackers and other guests with a low budget, since the rest of the accomodation in this village are very high, starting 130 USD onward. The general aspects of the hostels are the following one:

20 rooms
10 private rooms
10 shared rooms
70 beds
80 people max.

819 square meters built in 3 floors (the area of each floor is almost the same)
Floor 0: reception, welcome/waiting room, bar, kitchen, laundry service, toilettes, mechanical room,
Floor 1: 9 rooms, toilettes and showers, 1 office room
Floor 2: 11 rooms, toilettes and showers,

I was wondering, what should the percentage of profit per bed should I think of. Of course, after discounting salaries, electricity/water/gas expenses, taxes etc... Should I think profits in terms of beds, rooms, or square meter but only the rooms, or the whole building?

The bar used to represent 12% of the revenues but I want it to between 20 and 25% of the total net profits. I am working on a new menu limiting the variety of alcohol that backpackers and young local people, Millennials, usually drink here. If I can make it to 20% I would be more than happy.

Also, the old hostel wouldn't provide any service such as kayak, bike, ice-skating renting. I will add this to my hostel, and I want it to represent 5-10% of the total net profits. Is it too crazy what I am saying, or should I think a lower % like 3-4%?

Finally, Mont-Tremblant has 2 high seasons. Winter season which is: December-January-February-March | Summer season: June-July-August-September. I am opening the hostel the 01st November 2018, the quietest time of the year in this place. At the moment, we will be 2-3 persons working. But then I am planning to hire 1 or 2 more people during the high season. Is it reasonable to think of 5-6 persons for 819sqm at a 80% of occupancy in average during high season? And 3-4 persons at a 25% of occupancy in average during low season?

Looking forward to hearing from you,

Jonathan Leroux

[FR-EN-SP-PT speaker]

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John Moriarty

6 years

Hi Jonathan,

Great to hear about your new startup. Quebec is a beautiful region and I hope you have success in your business.

It is good firstly to work out profit in regards the whole business to make sure your expectations are met. Try to figure our normal percentage occupancy levels which might be difficult for you as it is the first hostel in the area but even something as simple as checking on booking.com and it should give you a percentage of properties booked out for that night so it will give you some indications.

You can also work out the cost per bed. So you can work out say that each bed costs you 5 dollars in running costs so then. You will probably divide this per season so different costs by time of year so anything above this that you charge is profit. You then know what is your minimum pricing for that bed for that bed at that time.

Because you have a bar and maybe you make 2 dollars per guest so you could technically still sell the bed at cost but know you will make money off them in the bar. The thing you also have to work our is your style of guest and which type of guest you are targetting. This might evolve over time. So maybe selling the bed at 5 dollars gets you a cheap guest who doesnt spend money at the bar but the guest who will pay 20 dollars spends a lot more money at the bar. You could do some interesting analysis if you tracked bar tab by room and guest type and really hone in the guest you are looking for.

For me in regards bike rental etc. You work out the profit made per rental and then say take a figure maybe 10% of your guests will rent one item in their stay. So number of guests x .1 x average profit per item. Also two other revenue streams might be vending machine and commission from tours. Commission from tours can be a very easy way of adding to your bottom line.

I guess in regards your staff figures there are a few things you have left out. One being the hours of reception/bar. If the reception is 24 hours or not which would make a difference and if the bar is being run from reception. Work out average cleaning time per guest or per bed. Private rooms obviously take longer . Will the cleaners have to strip the beds or will the guest do this. Do the cleaners have to do laundry?

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