Managerial

Accounting
PROJECT REPORT – TG INNS: NEW BHARAT HOTEL
CONTENTS
1. Executive Summary
2. Introduction
3. Objectives of the study
4. Data Analysis
5. Recommendations
6. Conclusion
Executive Summary
This project aims to understand the practical application of management accounting concepts in
TG Inns: New Bharat Hotel through Cost Sheet Analysis.
The project contains all relevant information related to TG Inns: New Bharat. We collected
information from the various Cost sheets maintained by the management and conducted a cost
analysis for the month of June. We made a Cost Sheet for the June month and segregated the
costs into fixed and variable costs to calculate the Costs for Premium Category rooms in the
Hotel.
The detailed analysis of the results have been explained further.

Introduction
TG inns –New Bharat .Built in 1966 property has been operational for almost 50 years now, In
early days it was designed as a pocket friendly vacation rental home for people fond of spending
summers in a hill station wherein people stayed for a week to two months, it had facility of
independent kitchens with interlinked rooms and dormitories for student & independent
travellers.
Post emergency days: 2 more floors were added which became operational in 1980, business
transformed from long stayers to short stayer’s. Property was renovated as per the need of time.

Business strategy:
No aggressive strategy existed, it was primary through reference and word of mouth. With
commission agents business flourishing the business relied more on these agents on maintaining
occupancy rates and also remain profitable.

Turnaround:
After the new generation took over the business in 2005 property was renovated with basic
upgrades, aggressive marketing started with participation in TTF (Travel & tourism fairs) held in
Indian metros. The Internet platform helped in tapping the market of travelers who look for
Budget options. The sales started growing and thus increasing the revenue and also the
occupancy rates of the rooms. The company was awarded by various online consolidation
platforms like makemytrip.com, travelguru & yatra.com.
Early mover advantage gave the company a steady growth of 15-20% for 7-8 years. The market
dynamics changed with new consolidators like OYO rooms, TG Rooms, ZYO etc. coming in. More
players in budget category entered using these platforms and the pressure was on management
to revisit the room pricing and remain profitable. The new platforms provide greater reach and
an opportunity to grow the business manifold.

New Strategy and need for effective costing structure:

In process of reinventing itself the management started looking at the options. All consolidators
wanted them to reduce the Average Room Rate (ARR) with growth projections on Occupancy
rates by 20%. The challenge was that to take the decision by how much the ARR can be reduced
the company didn’t had any cost system. The management needs cost system to compete and
be profitable, so that the don’t need to blindly trust the proposals given by these consolidators.
The cost structure will also help them to be ready if the growth projections are changed during
future years.

Objectives of Study
TG Inns has 3 categories of rooms:
1. Standard Room
2. Premium Room
3. Family Room

The bookings received by TG Inns are through various channels:

1. Online booking
2. Tele-Sales by Hotel Staff
3. Walkin
4. Travel Agent
As part of this project we are calculating the total costing of the “Premium Room - Category” by
understanding all the cost parameters involved and suggest to the Hotel owners whether the
current Tariff are profitable for the business or how much cushion the management has in
providing deals to regular customers. 22(13 Premium, 6 Standard, 3 Family) rooms are in total
available in the hotel. We have used a multiplier factor and considered all rooms as Premium
Room so the total number for rooms considered is 23 for hotel. Total carpet area for rooms is 4140
sq ft.

Cost Accounting Method:

We will be using Operating cost method for calculating the Direct Costs, Direct Labor and
Overheads to the Room of Premium Category. Following are the steps:

1. Customer books the room in hotel through any channel

2. The Customer is allotted a Unique Booking ID
3. The booking ID is also associated with the Source of booking i.e. Channel Agent Code

Data Analysis

Marketing & Advertising Charges

Channel Manager 5700
Payment gateway charges 6% of booking
Just dial 7500
SEO 3333
Adwords 30000
Printing 2083
Operating Expenses:
Kitchen House keeping General Operating Expenses
Administration
Salaries 29500 19800 50150 Payroll and Employee
Benefits
Electricity Geyser line 0 0 33000 H/L/P (Heat, Light, Power)
electricity 1 1200 600 10200 H/L/P (Heat, Light, Power)
Nagar palika 0 0 1800 Administrative and General
Water charges 4500 0 18000 Administrative and General
Cable & entertainment 0 0 6500 Administrative and General
tax
Telephone & internet 0 0 12900 Telephone Department
Laundry 0 12000 0 Room Dept.
Diesel jeep 0 0 16000 Administrative and General
diesel Gen 5000 H/L/P (Heat, Light, Power)
Maintenance jeep 0 0 2000 Administrative and General
housekeeping 0 5000 0 Room Dept.
consumables
Repair maintenance 0 0 24000 Repairs and Maintenance
Payment gatway 24000 Administrative and General
Idle time salary 14500 9700 16450 Payroll and Employee
Benefits
49700 47100 220000

Payroll & Employee Benefits:

Sr. Employ Dept. Salary Other Activities Activity Other Accom
No. ees benefit Salary benefit modati
s on Cost
food accom acc
modati om
on cost mo
dati
on
typ
e
1 Manage General 14000 1500 5000 1 30% in 8400 1500 5000
r Administration hot guest
el service &
roo 30 % in
m operatio
 ns &
40% idle
2 Front General 7000 1500 nil 30% in 4200 1500 0
desk 1 Administration guest
service &
30 % in
operatio
ns &
40% idle
3 Front General 7000 1000 nil 30% in 4200 1000 0
desk 2 Administration guest
service &
30 % in
operatio
ns &
40% idle
4 Stores Kitchen 3500 500 40% 1400 500 0
house
keeping
and 60%
idle
4 stores House keeping 3500 500 nil 80% 2800 500 0
Kitchen
and 20%
idle
5 Driver 1 General 7000 1000 nil 40% 3500 1000 0
Administration guest
service,
10%
hotel Job
, 50%
idle
6 Driver 2 General 3500 1500 nil 40% 1750 1500 0
Administration guest
service,
10%
hotel Job
, 50%
idle time
7 Watch General 6000 1500 1000 sha 6000 1500 1000
Man Administration red
8 houseke House keeping 6000 1500 1000 sha 50% 3000 1500 1000
 eper red guest
service ,
50% idle
service
9 House House keeping 6000 1500 1000 sha 50% 3000 1500 1000
Man 1 red guest
service ,
50% idle
service
10 House House keeping 6000 1500 1000 sha 50% 3000 1500 1000
Man 2 red guest
service ,
50% idle
service
11 chef Kitchen 9000 1500 nil 60% 5400 1500 0
kitchen
activities,
40% idle
12 Utility 1 Kitchen 5000 0 nil 60% 3000 0 0
kitchen
activities,
40% idle
13 Utility 2 Kitchen 5000 1500 1000 sha 60% 3000 1500 1000
red kitchen
activities,
40% idle
14 Waiter 1 Kitchen 6000 1500 1000 sha 60% 3600 1500 1000
red kitchen
activities,
40% idle
15 Waiter 2 Kitchen 6000 1500 1000 sha 60% 3600 1500 1000
red kitchen
activities,
40% idle
16 electrici General 3000 200 nil 3000 200 0
an Administration
17 plumbe General 3000 200 nil 3000 200 0
r Administration
18 civil General 1500 200 nil 1500 200 0
Administration
Total 108000 20100 12000
Cost Sheet:
TG Inns Cost Sheet
Operating Expenses:
Rooms Department 17,000.00
Telephone Department 12,900.00
Administrative and General 68,300.00
Payroll and Employee 96,100.00
Benefits
Advertising and Promotion 50,000.00
H/L/P (Heat, Light, Power) 48,800.00
Repairs and Maintenance 24,000.00
Total Operating Expense 317,100

Taxes and Insurance

Real Estate and Personal 5,000.00
Property Taxes
Taxes and Fees(service tax, 218,470.00
luxury tax, audit fees)
Insurance on Building and 3,483.33
Contents
Equipment and/or Vehicles 21,100.00
EMI
Total Taxes and Insurance 248,053

Depreciation at Book Value Yearly Monthly Rate

Building 100,000 8,333 10%
Furniture & fixtures 30,000 2,500 10%
Equipment 225,000 18,750 15%
Total Depreciation 29,583

Fair Market Return on Investment (ROI) of Property Market

Value
Land 40,000,000
Building 1,000,000
FF&E 1,800,000
Total Fair Market ROI 285,333
Assumed Director’s salary 200,000
TOTAL: 1,080,07
0

Deduct (Income from

sources other than rooms)
Income from other sources 15,000.00
(ancillary revenue)
Total Income from Other Sources 15,000

Amount Needed from Room Revenue to

Cover Costs and Realize a Fair Market ROI 1,065,07
0
Cost Sheet Schedule II:
Cost Sheet Schedule II

1. Amount Needed from Guest 1,065,070

Room Sales (Schedule I)
2. Number of Guest Rooms 23
Available
3. Number of Rooms Available on
an Annual Basis
Item 2 multiplied by 30 (23*30) 100% 690
4. Less Allowance for Average 30% 207
Vacancy
5. Number of Rooms to be Occupied
Based
on Average Occupancy 70% 483
6. Average Daily Rate Required to
Cover Costs and
Provide Reasonable ROI (Item 1 2,205
divided by Item 5)

Cost Sheet Schedule III:

Cost Sheet Schedule II

1. Amount Needed from Guest Room Sales (Schedule I) 1,065,070

2. Square Foot Area of Guest Rooms 4,140
3. Less Allowance for Average Vacancy (4140 x 30%) 1,242
4. Net Square Footage of Occupied Rooms (4140 x 70%) 2,898
5. Average monthly Rental per Square Foot (Item 1 divided by Item 4) 368
6. Average Daily Rental per Square Foot (30 divided by Item 5) 12
Organization Chart
Demand Forecasting

Family Room for 4 people Premium Room Standard Deluxe Room

January 45 195 105
February 41 179 97
March 36 156 84
April 54 234 126
May 72 312 168
June 63 273 147
July 50 215 116
August 45 195 105
September 41 176 95
October 54 234 126
November 50 215 116
December 59 254 137

Demand forecast in No. of Nights

350

300

250

200

150

100

50

Family Room for 4 people Premium Room Standard Deluxe Room

Recommendations
1. The cost optimizations can be done among the staff having idle times like Drivers, Store
keepers
2. Some of house keeping stuff can be outsourced to save on cost during Off season
3. Break-even analysis was not done and could be a good tool to further optimize the cost
structures for the management
4. Kitchen expenses were not considered during the analysis and should be included for
further analysis by management

Conclusion
Room Suggested Rack rate Consolidat discount discount discount discount
category daily rate ed with 20% 25% 30% 35%
to cover taxes 13.5%
cost

standard 2,205 2,000 2,270 1,816 1,703 1,589 1,476

premium 2,205 2,500 2,838 2,270 2,128 1,986 1,844
family 2,205 3,500 3,973 3,178 2,979 2,781 2,582

1. Law of demand is critical in this industry because unlike other managers hoteliers don’t
have luxury to increase the supply of rooms
2. The hospitality business is competitive business and the new aggregators and the Deals
culture involves a lot of competition in each category
3. The cost optimizations can help in quick management decision making and respond to
fast paced environment
4. Owner’s should work on reducing the Idle time of employees which could result in cost
optimizations
5. The owners are enjoying a decent profit during the peak season
6. The data should be used for calculating the off season expenses