Glossary

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Average collection period (or debtors days)

Average number of days you are required to wait until invoices issued by your business are paid.

Average payment period (or creditors days)

Average number of days’ credit that you take before you pay invoices issued to your business.

Average spend

Average expenditure by each guest (excl. VAT) over a specific time period. Relates mainly to food and beverage sales.

Average occupancy rate (%)

Percentage of bedrooms sold over a specific period out of the total number of bedrooms available. Average occupancy rate is a key performance indicator and is widely used for benchmarking purposes.

Average room rate (ARR)

Average room rate (also called Average Daily Rate (ADR)) is the average rate charged per paid room occupied. It is calculated by dividing rooms revenue by the number of paid rooms occupied. Average room rate is calculated exclusive of VAT and any deduction for breakfast, lunch, dinner etc. The ARR is a key industry benchmark and it is widely used for hotel benchmarking purposes.

Administrative and general (A&G) expenses

In hotel accounting, A&G payroll and related expenses includes general manager, personnel and training, security, clerical staff, controller and accounting staff. Non-payroll A&G expenses include office supplies, computer services, accounting and legal fees, liability insurance, bad debt expenses, travel insurance, credit card commissions and telephone charges.

Allocations

A number of rooms allocated by an accommodation provider on an ongoing basis to a tour operator, travel agent or online hotel reservation service.

Acid test ratio

Acid test ratio (also known as Quick ratio) is an indication of the business's ability to meet its immediate liabilities at short notice. It is calculated by dividing the current assets (LESS stock) of the business by the current liabilities. Ideally, the ratio should be at least 1 to 1 (ie for every €1 of current liabilities, there should be €1 in cash and debtors).