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Cornell Researchers Develop Standard Measurement of Expenses

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ITHACA, N.Y.—A team of three researchers has developed a standard measurement of expenses for energy and supplies that can be used as a sustainability gauge for the hotel industry. The researchers, Jie Zhang and Nitin Joglekar, of Boston University, and Rohit Verma, of Cornell University, explain their measurement in a new report from Cornell’s Center for Hospitality Research, “Developing Measures for Environmental Sustainability in Hotels: An Exploratory Study.” The report is available at no charge from the center.

“Looking at the hotel chart of accounts, we see that managers have to analyze expenses in at least five areas of their operating statement to get a sense of their energy and resource use, which affects their operation’s sustainability,” said Zhang, a doctoral candidate at Boston University. “We analyzed operating-statement accounts for 984 U.S. hotels over the span of 2001 to 2008 to develop a scale that would apply to all hotels, regardless of chain segment. We compared the expenses as a percentage of revenue per available room, to develop a normalized scale. Managers need only plug their cost figures into the measurement to see where they stand.” Data were supplied by PKF Hospitality Research, which has data from hotels’ operating statements data back to 1936.

The result of this analysis was two factors. One factor includes linen, laundry, and supplies from both the rooms and food and beverage operations. This factor is termed the behavioral factor, because it is heavily influenced by guests’ activities—particularly if they participate in linen reuse programs. The other factor, termed the operating factor, is more subject to management control. This factor includes expenses for electricity, water and sewer, and maintenance, from several accounts in the Uniform System of Accounts for the Lodging Industry.

With this analysis, managers can compare their sustainability scores on these two factors against their competitors and also over time, to see the financial effects of a hotel’s sustainability efforts. For example, hotels operated by the franchise brand or chain tended to have lower resource use than did hotels operated by third-party management firms. The factor analysis also quantified the additional expenses incurred by hotels that offer food and beverage service.

Click here for the report.

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