The Impacts of Variety On the Costs and Profits of a Hotel Chain's Properties

Abstract

In the hotel industry, undistributed operating expenses represent a significant portion of the operating costs for a hotel. Exactly how most of these expenses arise is not well under stood. Using data from more than 40 hotels operated by a major chain, the authors examine the links between the variety of a hotel's products and customers and its undistributed op erating expenses and revenues. Their findings show that undistributed operating expenses are related to the extent of the property's business and product-services mix. The results suggest that although increasing a property's product-service mix results in higher undis tributed operating expenses, the incremental costs are compensated for by higher reve nues. However, increasing business mix while increasing undistributed operating expenses does not result in higher revenues.