Costs basics

This Costs basics Info Guide explains the types of costs incurred in running your accommodation business and identifies the three factors that drive your costs.

Costs

Costs vary hugely with each individual business. Your costs and other outgoings may include the following:
 

Staff costs

Marketing

Overheads

Overheads include all the other expenses which are incurred in running your business, eg, rent and rates, electricity and heating, accountancy fees, insurance and bank charges. 


 

Taxes

Taxes include:

• VAT (if your sales are over €37,500 you need to charge VAT to your customers).
• PAYE and PRSI payable on wages and salaries.

Your business profits are liable to Income Tax or Corporation Tax.

Capital expenditure

Loan repayments

You may also be making repayment over an agreed period to an investor or to the person from whom you bought your accommodation business.

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Cost drivers

Costs are driven by three factors:

• Costs incurred at fixed times
• Costs driven by sales volume (costs incurred as sales are made)
• Costs driven by decisions you make (discretionary or one-off costs)

Costs incurred at fixed times

 
These costs are fixed on a weekly, monthly or annual basis – you have little scope to avoid them although you may be able to reduce them.
 

Costs driven by sales volume

Variable costs include purchases of goods for resale, part-time staff costs, electricity, heating, gas, VAT and PAYE. These costs vary depending on your level of business activity. The more sales you make, the more variable costs you incur.

Costs driven by decisions you make

Decisions you make to improve performance, enhance customer experience or increase capacity, eg adding more accommodation units, will give rise to:

• One-off costs
• Other discretionary costs

One-off costs

One-off costs often require a significant outlay. Finance usually needs to be arranged from lenders to fund one-off costs including:

• Fitting out new guest-rooms 
• New accommodation units 
• Games room, laundry and other customer facilities

Other discretionary costs

You can control the timing and amounts of discretionary costs. These are often incurred when you want to increase capacity by improving performance or by enhancing the customer experience.

Examples of discretionary costs include:

• Marketing and promotional spend
• Instructor / staff training and development

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