Income statement fundamentals for vacation rental managers and short term rental companies. Presented by Ben Edwards, President of Weatherby Consulting and President of the Vacation Rental Managers Associaion

1. Ben Edwards
UNDERSTANDING THE INCOME STATEMENT
Ben Edwards
Weatherby Consulting, LLC
Office: (888) 304-1405
Fax: (888) 304-1405
Cell: (850) 496-7360
WeatherbyConsulting.com

2. Understanding the Income Statement
About Ben Edwards
As a respected and innovative industry leader, Ben Edwards has been positively affecting
the real estate and vacation rental industries for over 15 years. From managing small
resorts, to financial and operational auditing, to opening large scale resort developments,
Edwards’s unique background provides a multi-level approach to consulting, transaction
and advisory services.
Edwards’s experience includes:
 President, Vacation Rental Managers Association
 VP Business Development, Newman-Dailey Resort Properties, Inc.
 President of Weatherby Consulting, LLC
 Vice President, Royal Shell Vacations, 2,000+ properties
 HomeAway Advisory Board Committee
 Flip Key Advisory Board Committee
 President, Waterstone Resorts and Vacation Homes, 1,000+ properties
 Board of Directors, Florida Vacation Rental Managers Association
 GM, ResortQuest SW Florida, 2,400+ properties
 Board of Directors & Treasurer, VRMA, 6 years
 Advisory Board Member, Vacation Rental Expo

3. Understanding the Income Statement
Session Focus
• Designed to provide more information about the
Income Statement, providing vacation rental
managers the tools necessary to get the most out of
your business and financial reporting
• Proper financial management of your operation
helps to make the business more sustainable,
while managing expenses and increasing the
bottom line
• Before we get started….

4. Understanding the Income Statement
One Size Doesn’t Fit All
• Some of the suggestions made in this session may not fit
the size and scope of your operation or your market.
• As such, please remember that the assumptions made
throughout this session are designed to represent an
average vacation rental company.
• We encourage you to speak up and share your
experience as another point of view.

5. Understanding the Income Statement
Let’s get started….
Nomenclature:
•Income Statement
•Statement of Earnings, Revenues and
Expenses
•Profit & Loss Statement
•P&L

6. Understanding the Income Statement
What is the Income Statement and what does it do?
• Summarizes a company's revenues (sales) and
expenses
• Revenue/Expense accounts are nominal accounts,
which means that they’re closed out on an annual
basis and the net income of the business is
transferred from the income state to the balance
sheet in the form of Owner’s Equity
• This closing process allows the nominal accounts to
start the next accounting year with zero balances.

7. First things first….
• Garbage in…Garbage out…
• Accounting systems and financial reports are only as reliable
as the information and processes used to create them.
• Ensure proper accounting setup
• Chart of accounts
• Reservation system coding and setup
• Proper coding at the local level
• Consistency in coding
Understanding the Income Statement

8. Chart of Accounts – Summary Rental and Fee Revenue
Account Classification
• Gross Lodging Revenue Income
• Payments to Owners (Contra) Contra Revenue
• Rental Management Commissions Income
• Guest Resort Fee Revenue Income
• Guest - Cancellation Fee Revenue Income
• Guest - Amenity Fee Revenue Income
• Guest – Damage Waiver Revenue Income
• Guest - Pet Fee Revenue Income
• Guest - Other Revenue Income
• Sample Chart of Accounts
Understanding the Income Statement

9. Income Statement Format
Understanding the Income Statement

10. Income Statement Accounts – Multi Step Format
• Gross Rental Revenue – It is imperative to track GRR at this
business level. Most VR companies are not tracking this and are
missing a key component and driver of the business
• Payments to Owners – It is important to understand the $
payout to Owners, but more importantly the % payout as
compared to GRR.
• Rental Management Commissions– It is important to understand
the Commission/Company $, but more importantly the % payout
as compared to GRR.
Understanding the Income Statement

11. Income Statement Accounts – Multi Step Format
• Total Revenue – Gross Rental Revenue, Total Revenue and Profits
are the true measure of a Vacation Rental Business.
• Direct Operating Expenses – Generally, those expenses that are
tied to reservation. Most reservation systems track direct
operating expenses such as housekeeping expense, maintenance
expense, guest satisfaction expense, owner satisfaction expense,
damage wavier expense, etc.
• General & Administrative Expenses – represents that static or
fixed expenses in the business
Understanding the Income Statement

12. Income Statement Accounts – Multi Step Format
• EBITDA – Earnings before Interest, Taxes, Depreciation and
Amortization. Generally used as a basis to value companies.
• Net Income – Cash expenses less Depreciation, Amortization,
Interest Expense…
Understanding the Income Statement

13. • High-level Income Statement Review
• Calculate all things a a % of Gross Rental Revenue or Total Revenue.
• Establishing a % of Revenue will allow you to manage certain line items
more acutely, ensuring the finances are properly reviewed.
• Work towards proper increases and decreases as a % of revenue.
• As revenue increases, certain direct operating expenses should go up
• As revenue decreases, certain direct operating expenses should go down
• The key is to ensure increases and decreases in revenue properly
correlate to expenses
• Sample Income Statement
Understanding the Income Statement

14. Statistics & Key Performance Indicators
• Now that you’ve created consistency and reliability in your income
statement, your ready to move forward in your review.
• As you begin to review the company’s financials, it is important to focus on
the metrics and statistics that comprise to form Gross Rental Revenue.
• Gross Rental Revenue/Occupied Nights = Average Dailey Rate
• Occupied Nights/Net Available Nights = Occupancy %
• As Gross Rental Revenue increases or decreases, it is being driven by
either the rate or occupancy…it is important to know which.
• Sample Statistics….
Understanding the Income Statement

15. Budgeting Basics
 Start conservative
 Use prior year Occupancy and Average Daily Rates to budget for
Revenue and work form there…
 All accounts have a metric in which to effective budget
 Housekeeping cleans (Avg clean fee * projected # of reservations)
 Look at actuals and the percentage of revenue to deliver accurate
projections
 As accounts are to be updated throughout the year, revised and
create a forecast to ensure projections are met.
 Note Stats Model (can be used for Budgeting)
Understanding the Income Statement

16. Accounting Review
• Financial management
• Start with intensive financial review each month
• Review key accounts in total and as a % of gross rental
revenue or total revenue. This helps to create
benchmarking.
• Reduce financial summary to writing
• Establish monthly meetings/conference calls
• Actual vs. Forecast/Budget should be a focus
Understanding the Income Statement

17. In conclusion, successful Vacation Rental Managers know their
financial results, profitability and key operating statistics acutely.
Knowing this information and using it to make informed, data driven
decisions will ensure your company remains a sustainable and
profitable operation for the benefits of all stakeholders.
Ben Edwards
Weatherby Consulting, LLC
Office: (888) 304-1405
Fax: (888) 304-1405
Cell: (850) 496-7360
WeatherbyConsulting.com
Understanding the Income Statement