Far too many hotel owners and operators ignore this exercise and do not know their variable and fixed costs. You should spend time calculating this! The more accurate you can be, the better view you will have of your hotel's financials and the easier decisions will be to make down the road.

This list is intentionally detailed, but every hotel is unique and there may be line items we’ve left out depending on your property’s size, services, and market. The key takeaway is knowing which costs are fixed (largely constant regardless of occupancy) and which are variable (rise and fall with room nights sold). That distinction matters because it allows you to calculate important benchmarks like your break-even RevPAR (Total Operating Expenses ÷ Available Room Nights) and to model how changes in ADR, occupancy, or expenses impact profitability. Learn here how to determine your break-even RevPAR. In practice, breaking costs into fixed vs variable also helps with scenario planning, forecasting, and identifying where efficiency gains will most improve NOI and long-term valuation.

Fixed Costs

(largely occupancy-independent)

These don’t change much if you sell 1 room or 100.

• Property costs

  • Mortgage / debt service (though technically below NOI, owners still account for it)

  • Property taxes

  • Insurance (property, liability, business interruption, workers’ comp)

  • Lease/rent (if applicable)
    

• Utilities (baseline portion)

  • Electricity (common areas, baseline load)

  • Gas/heat

  • Water/sewage (common areas, landscaping, baseline consumption)

  • Internet/Wi-Fi infrastructure contracts

  • Telephone lines, security system monitoring
    

• Salaried Staff (non-hourly)

  • General Manager

  • Assistant managers / department heads

  • HR / accounting / admin staff

  • Sales & marketing managers

  • Engineering/maintenance supervisors
    

• Corporate / Overhead

  • Franchise or brand affiliation fees (base franchise fee, not % of revenue)

  • Management company base fee (if flat vs % of revenue)

  • Licenses, permits, certifications

  • Legal and audit fees

  • Office supplies, software subscriptions (PMS, accounting, payroll)

  • Membership dues (hospitality associations, chambers, etc.)
    

• Maintenance & Facilities (baseline)

  • Preventive maintenance contracts (HVAC, elevators, fire systems)

  • Landscaping, pest control

  • Trash/recycling contracts

  • Property upkeep & depreciation (CapEx reserves usually excluded from NOI, but many owners factor it)
    
    

Variable Costs

(scales with occupancy and usage)

These rise as you sell more rooms or host more guests.

• Housekeeping & Rooms

  • Housekeeping hourly wages

  • Cleaning supplies (detergents, soaps, chemicals)

  • Laundry (linen, towels, uniforms)

  • Guestroom amenities (shampoo, soap, coffee pods, toiletries)

  • Replacement of consumables (toilet paper, tissue, stationery)
    

• Food & Beverage (if applicable)

  • Raw food and beverage costs (breakfast, minibar, restaurant)

  • Banquet/event supplies

  • Disposable items (cups, napkins, cutlery, condiments)

  • Beverage licensing tied to sales
    

• Utilities (variable portion)

  • Incremental electricity for occupied rooms (HVAC, lighting)

  • Incremental water for showers, laundry, pools/spas

  • Gas (cooking, heating per occupied room)
    

• Labor (hourly or demand-based)

  • Front desk overtime or extra shifts

  • Additional housekeeping staff

  • Banquet servers, bartenders, kitchen hourly staff

  • Valet, bell staff on demand
    

• Commissions & Distribution

  • OTA commissions (Booking.com, Expedia, etc.)

  • Credit card processing fees

  • Travel agent commissions

  • Channel manager / GDS transaction fees
    

• Guest Services & Amenities

  • Pool/spa usage supplies (towels, chemicals)

  • Fitness center supplies

  • Transportation/shuttle fuel and maintenance

  • Complimentary items (breakfast, happy hour drinks, cookies, bottled water)
    

• Maintenance (usage-related)

  • Wear-and-tear repairs from higher occupancy

  • Room refresh items (lightbulbs, small furniture replacements)

  • Higher laundry machine cycles (maintenance & parts)

Semi-Variable / Mixed Costs

Some expenses have both fixed and variable components.

• Salaried staff with bonuses tied to performance (e.g., GM with incentive pay)

• Franchise/management fees → often % of revenue (variable), plus base fee (fixed).

• Marketing → baseline budget fixed, but extra campaigns may be tied to occupancy or season.

• Utilities → baseline fixed, incremental variable.

• Maintenance → routine fixed, heavy wear-and-tear variable.

Rule of Thumb:

• Fixed costs are mostly about keeping the property open (baseline expenses).
  

• Variable costs are mostly about serving the guest (room nights sold).
  

• Break-even RevPAR is driven by how much fixed cost must be spread across available rooms + the contribution margin after variable costs.

Resources and Further Reading

• “Decoding The Hotel P&L: Managing Fixed, Capacity, and Variable Costs” (Demand Calendar)
  Good breakdown of how hotels classify costs, including “capacity” costs as a middle category. demandcalendar.com

• “Fixed & Variable Income and Expense Analysis” (Cornell University / eCommons)
  A more methodical treatment including forecasting & categorization of revenues/expenses. eCommons

• “Updated Benchmarks for Projecting Fixed and Variable Components of Hotel Financial Performance” (Cornell Hospitality Quarterly)
  Academic & useful for comparing your fixed vs variable cost ratios against industry averages. ResearchGate

• “Hospitality Financial Management: A Complete Guide” (NetSuite)
  Broader resource that includes sections on budgeting, forecasting, and categorizing expenses (fixed/variable). Good for getting non-financial readers up to speed. NetSuite

• “How to Manage Hotel Operating Expenses Effectively?” (International Hospitality Institute)
  Helps with managing and reducing costs, with good examples of what’s generally fixed vs. variable. internationalhospitalityinstitute.com

• “Hotel Budgeting and Forecasting: Key Steps and Best Practices” (Oaky)
  Useful guide, includes process for separating fixed and variable when forecasting. Oaky EN

• “Reducing Variable Costs Per Occupied Room in Hotel Industry – Strategies and Tips” (Catala Consulting)
  Practical advice on managing the variable cost side, useful for illustrating the impact of those costs per room. Catala Consulting

• Uniform System of Accounts for the Lodging Industry (USALI)
  A standardized framework used globally; useful for cost classification and consistency (fixed vs variable, departmental accounting) in hotel finance. HFTP

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Do you have any clarifying questions? Did we forget to include a cost that your hotel factors into these calculations? Let us know!