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What represents good value in a hotel stay?

Value can be such a subjective question. As a small hotel owner, I thought I would shed some light on the costs involved in running a hotel.

I have said this many times: no one is entering the small hotel business to get rich. Who is getting rich in the hospitality business are large hotels and online booking reservation systems.

Here is a summary of hotel costs that you may or may not be aware of:

IVA (sales tax): In Portugal IVA is always included in the quoted room rate (not sure why). The IVA rate in Portugal is 6%.

Commission to online booking channel: This ranges from 15% to 20% for each night you stay at a hotel. If you have booked through anywhere other than the hotel’s website, the hotel is required to pay this amount directly to the online channel. Most people have no idea how these online reservation systems make money; this is how.

Credit card fees: This averages about 2% off the top.

Laundry: Averages about €12 per night. Less if you stay more than one night and reuse your towels.

In room amenities are about €3 per night.

Breakfast cost is approximately €12 per night (assuming double occupancy, at least at our hotel). Many hotels charge extra for breakfast. Obviously, this is generates a significant rate of return for the hotel if the breakfast is an added charge.

Utilities cost is about €5 per room night.

Housekeeping cost is about €10 per room.

Communications cost (cable and wifi) is about €2 per room.


Indirect costs

People cost: There is a reason why you have to wait at most hotels. People cost money. Because this is an indirect cost, there seems to be willingness on the part of many hotels to cut back on staff as a means to reduce costs. We have generally taken the opposite approach. Our goal is to be available when you want assistance.

Repairs and maintenance: Yes, things break.

Improvements cost: If your hotel is charging too little money, there is a high likelihood they don’t have any money left over to make improvements to your experience.

Real estate cost: It may be less expensive then some other places, but the building still needs paid for.

Common area items: Flowers, candles, garden all cost money. There is a reason why you don’t see it most places.