Understanding of Flow through in Hotel Business

Understanding of Flow through in Hotel Business udemy course free download

Flow through concept by describing the business scenarios, benchmarks, calculation methods, and effectiveness

Any business owner, investor, manager, or consultant needs to understand the concept of flow-through. In technical terms, it refers to how much of your period's revenue is converted into profit, compared to the budget or previous periods.

It is important to know how flow-through is calculated in various situations. a solid understanding of this concept will give individuals an advantage in managing their business effectively, as this lecture explains the key factors that impact profit conversion.

While comparing any period, there will be only four situations

Revenue UP and Profit UP

Revenue UP and Profit DOWN

Revenue DOWN and Profit DOWN

Revenue DOWN and Profit UP

The calculation methods for the above four situations are different and defined differently.

Management needs to decide whether to continue or change the working model. They can make strategic decisions after the flow-through is calculated.

This makes 'Flow-through' calculation a unique tool not only for owners or investors, but also for the managers and the team responsible for running the business efficiently.

Also, if any business has a negative flow-through, which is because of lower revenue with the compered period, then the 'recovery of loss' is calculated.

So, a ratio below -50% is considered a better recovery because it shows the percentage of costs and expenses recovered in an adverse situation.