{"id":22436,"date":"2020-04-07T08:44:53","date_gmt":"2020-04-07T08:44:53","guid":{"rendered":"https:\/\/www.xotels.com\/uncategorized\/administration-costs\/"},"modified":"2024-12-23T09:22:29","modified_gmt":"2024-12-23T09:22:29","slug":"administration-costs","status":"publish","type":"post","link":"https:\/\/www.xotels.com\/en\/glossary\/administration-costs","title":{"rendered":"Administration Costs"},"content":{"rendered":"

What is the meaning \/ definition of Administration Costs?<\/p>\n

Administration costs, also known as overhead costs or fixed costs<\/a> are the costs which incur on a business or hotel<\/a> solely from running.<\/p>\n

These overhead costs are not directly impacted by manufacturing, production or sales volume and can therefore be described as fixed costs.<\/p>\n

They can be seen as the basic costs that occur without a sale having to be made.<\/p>\n

Examples for administrative costs are taxes, rent, insurance, licensing fees, utilities, accounting and legal teams, administrative staff, facility upkeep, etc.<\/p>\n

On the contrary to these fixed costs stand the variable costs, which vary per product\/ service sold.<\/p>\n

How to calculate Administration costs?<\/strong><\/p>\n

Total Fixed Costs = Overhead costs<\/strong><\/p>\n

Add together all costs that are fixed costs \u2013 and you will receive the total amount of your overhead costs.<\/p>\n

Keeping administration costs low is a priority among hotel owners. They want to see their profits grow which can only increase if administration costs are lower than gross profit<\/a>. If costs are too high a hotel may be at risk of going bankrupt or accumulating debt. Hotels are notorious for having high fixed costs and low variable costs \u2013 they therefore are known to have a high operating leverage, as the variable costs that incurr per room sold (cleaning, refilling of mini bar etc.) are generally small in comparison to rent, equipment costs and staff.<\/p>\n

See also:<\/strong><\/p>\n