When the economy spiraled downward in 2009, it forced hotel chains to make tough decisions in an effort to achieve their profit goals. For example, Wyndham Hotels and Resorts decided to take sewing kits, mouthwash, and showercaps out of its rooms—instead, requiring customers to ask for these amenities at the front desk. Intercontinental Hotels Group stopped delivering newspapers to loyalty-program members’ rooms; Marriott International cut back its breakfast offerings; and theRitz-Carlton reduced operating hours at its restaurants, spas, and retail shops. In addition, many hotel chains reduced their rental rates.


A flexible budget performance report can help hotel managers analyze how the changes described above impact net operating income. It isolates activity, revenue, and spending variances that help identify the underlying reasons for differences between budgeted and actual net operating income.


Source: Sarah Nassauer, “No Showercaps at the Inn,” The Wall Street Journal, January 22, 2009, pp. D1–D2.

Performance Reports in Nonprofit Organizations

The performance reports in nonprofit organizations are basically the same as the performance reports we have considered so far—with one prominent difference. Nonprofit organizations usually receive a significant amount of funding from sources other than sales. For example, universities receive their funding from sales (i.e., tuition charged to students), from endowment income and donations, and—in the case of public universities—from state appropriations. This means that, like costs, the revenue in governmental and nonprofit organizations may consist of both fixed and variable elements. For example, the Seattle Opera Company‘s revenue in a recent year consisted of grants and donations of $12,719,000 and ticket sales of $8,125,000 (or about $75.35 per ticket sold). Consequently, the revenue formula for the opera can be written as:


where q is the number of tickets sold. In other respects, the performance report for the Seattle Opera and other nonprofit organizations would be similar to the performance report in  Exhibit 9–7 .

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