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Hotels are far more than just a nice-to-have at China’s Meituan Dianping.

While food delivery dominates Meituan Dianping’s transactions and revenue, as part of its “Food + Platform” strategy the Chinese e-commerce and lifestyle giant now claims to process more domestic hotel-room nights than any of its competitors, including Ctrip.

In reporting its fourth quarter and full-year 2018 results, its second such quarterly exercise since executing an initial public offering, Meituan CFO Shaohui Chen said “we continue to maintain our leading position in terms of domestic room nights.” He said the domestic hotel business is profitable.

In 2018, Meituan saw its domestic room nights jump 38.5 percent to 283.9 million. As part of the IPO process, Meituan claimed last year that it was just ahead of leading online travel agency Ctrip in domestic room nights booked with 33.6 percent market share for Meituan versus 33 percent for Ctrip.

It’s tough to tell whether Meituan widened that gap, as claimed, because Ctrip doesn’t disclose its domestic room night numbers. Ctrip executives pointed to high growth in the fourth quarter in its low-end; mid- to high-end, and international hotel segments. It didn’t mention domestic hotels specifically.

Hotels are just one of the add-on services, including wedding, spa, and gym services, that Meituan offers to its huge food delivery user base, and offers hotels as a cross-sell.

Meituan’s food delivery clout — it claims 60 percent market share of delivery orders in China — is a competitive advantage. Chen said that more than 90 percent of its first-time hotel bookers have used either Meituan’s food delivery or in-store dining services.

Chen said most of the company’s hotel bookers do so for leisure travel, but there could be more lucrative future trends as Meituan aggressively expands into higher-end hotels.

“So as this younger user grew in age, they also grow in income and grow in spending power,” Chen told analysts during an earnings call Monday evening local time. “And their total booking demands naturally move up to higher-end hotels.”

In 2018, Meitiuan saw revenue from its in-store dining, hotel and travel segment jump 46 percent to $2.35 billion. Revenue from the company’s core food delivery service grew even faster, 81.3 percent to  $5.67 billion.

“So it’s very important to remember that we operate our hotel booking business just as one category of our whole in-store business, and our overall strategy for us is more on increasing the profitability of the business segment,” Chen said.

He maintained that Meituan doesn’t have to pay undue attention to what competitors are doing “because we have the largest user platform” and “a very good infrastructure for connecting with the hotels.”

Bloomberg, however, pointed out that Meituan is facing inroads from competitors such as Alibaba in Meituan’s smaller businesses, including bike-sharing and travel, where “profitability shrank.”

Food Delivery Growth Maturing?

Chen said he expected to Meituan’s food delivery growth to be “modest” in 2019 compared with the prior “explosive” expansion. He said there is still “a lot of room for growth” as the company transitions to “long-term relatively slower, but a more sustainable growth stage.”

For full-year 2018, Meituan saw its adjusted earnings before taxes, depreciation and amortization loss widen 76 percent to $700 million on revenue of $9.7 billion, a 92 percent leap.

When it comes to hotels, though, Ctrip, which went on an acquisition spree of rivals several years ago, clearly faces a new, formidable competitor.

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Hospitality Financial Leadership - The Matching Principle

I tell my Introductory Hospitality Financial Leadership Workshop participants that the concept behind the matching principle is 'the most important concept today.' Why? When it comes to producing financial information, it’s the cornerstone of understanding why we do almost everything the way we do it in the business world. The profit and loss statement cannot exist and be in any way accurate without using the matching principle every step of the way. Grasp this and you are well on your way to understanding the other principles and most importantly putting these principles to work in your day-to-day hotel leadership role.

Some of you are probably thinking this is for the bean counters and the propeller heads to chew on. Nothing could be further from reality. Being a financial leader means you understand and employ business principles. These principles are universal and without them, you’re akin to a plumber who doesn’t understand why water flows the way it does. So read on and get your schtick together.

You most likely have endured the wrath of someone when the financial statement came out in your hotel and you had expenses that month from a few months back. This was probably because someone else lost the invoice or failed to put it through to accounts payable. That is the matching principle getting abused! Here is what it’s all about and how to use it properly.

What does the matching principle mean? Why is it so important to grasp if you want to be a leader who has or wants financial leadership skills? The matching principle, because of its name and the definition, is a bit confusing at first glance. The matching principle states, in order to have meaningful financial information we must match all revenues with their costs at the time the revenue was earned. Here comes the confusing part, match all revenues with costs “regardless of when the money exchanges hands.”

That’s right! We want to consistently match the revenues with costs at the time the revenue is earned, regardless of when the money comes or goes. This is technically the definition of accrual accounting which is the polar opposite of cash accounting. Cash accounting realizes revenues and expenses when the money changes hands. You can compare the cash accounting system to the old shoe box. Money goes in the shoe box when people pay us, and money comes out when we pay for our costs. If there is money left in the shoe box that’s our profit.

The matching principle provides a much clearer and very precise picture of profitability because we don’t need to take into consideration the timing of payments either coming or going. It’s not the case that the payments are not important. It’s just not necessary to take the payments into consideration when we calculate our profit using the matching principle and accrual accounting.

So how does all of this relate to hotels? Here is an example from a client who I recently helped convert from the cash basis to the accrual basis in his four hotels. He was confused because his monthly financial statements didn’t always make sense. We discussed why the statements seemed too good to be true certain months and downright awful in other months. He knew that he paid his people every two weeks, which means that every month you’re only recording two pay periods. It also means that every six months you come across a month with three pay periods (that’s just the way the calendar works). He also knew that annually, in June, he needed to pay the real estate taxes that covered the first half of the year and the next six months. Other items also made the statements wonky, like insurance, utilities, and benefits. What he knew was the statements were bogus because he had a timing problem. What he didn’t know was how to fix it.

Introducing the two stars of this matching principle show: Mr. Pre-Paid and Mrs. Accrual. These might sound like ominous characters but really they are simple and straightforward. Mr. Pre-Paid acts to allow the insurance payment to be paid now and then split the cost evenly into the next 12 months. This allows for a smooth ride of the profit and loss statement rather than having it all show up this month, which is what would happen under the cash system. Mr. Pre-Paid only goes one way, pay it up front and then spread the cost evenly into the months that are covered. This is the matching principle in action.

Now let’s look at Mrs. Accrual. She is a bit different in that she must go two ways. Any time she goes one way she must eventually go the other way. Let’s use payroll as an example. Every month I have two pay periods and to properly match my revenues and expenses I need to accrue for the missing days. Well, guess what? Next month I need to do the same thing, but I also need to reverse the previous month’s accrual, so I match that month’s costs to the revenues. Accruals bring expenses into my month’s statement before I have the actual invoice, or with the example of payroll into my P&L before I pay people. In both expenses and payroll, I need to include everything that has been spent this month regardless of whether I have paid for it yet. Once the accrual is booked I’m now matched and expenses line up with the revenue earned. Once the accrual is recorded it’s normally reversed the next month because the actual invoice showed up and the payroll got paid.

I’m going to repeat myself, but it’s worth it because it is so important to understand this. The matching principle works on the idea that expenses and revenues all need to be included in each profit and loss reporting period, regardless of when the money is collected for the revenue earned or when the cash is paid out for the expenses or payroll.

Get this into your DNA and make sure all your departments’ expenses get booked properly or accrued each month. Those invoices and packing slips on your desk need to be sent down the hall so they are included in this month’s results. Without the matching principle working smoothly and completely in your hotel you will be in for a rough ride.

If you would like a copy of any of the following send me an email at [email protected]

• RevPar Index Spreadsheet
• Incentive Plan Template
• EFTE and Productivity Exercise
• Hotel Financial Policy Manual – Inventory of “Sections”
• Hotel Financial Coach “Services Sheet”
• A White Paper – Creating a Hotel Policy Manual
• F&B Productivity Spreadsheet
• Rooms Productivity Spreadsheet
• Financial Leadership Recipe F TAR W
• A White Paper – A Six Month Workshop and Coaching Assignment
• Hotel Financial Coach – “Speaking Sheet”
• Flow Thru Cheat Sheet – Enhanced

Visit my website today for a copy of my FREE guidebook
The Seven Secrets to Create a Financially Engaged Leadership Team in Your Hotel
www.hotelfinancialcoach.com

Call or write today and arrange for a complimentary discussion on how you can create a financially engaged leadership team in your hotel.

Contact David at (415) 696-9593.
Email: [email protected]
www.hotelfinancialcoach.com

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Airbus SE lifted the veil on a new model, the A321 XLR, a bid by the European planemaker to capture untapped demand for long-range flights on smaller planes.

The manufacturer gave details about the jet on the first day of the Paris Air Show, seeking to take advantage of rival Boeing Co.’s woes related to two fatal crashes and drum up orders for the long-anticipated jet. The A321 XLR could fly on transatlantic routes and has a range of 4,700 nautical miles.

The XLR is a new longer-range variant of the best-selling A320neo family aimed at part of the medium-haul segment that Boeing rival is also eyeing with its New Midmarket Airplane still in development.

Airbus won a mega-order for about 100 aircraft from Air Lease Corp. that includes a mix of A321 XLRs as well as smaller A220 jetliners acquired from Bombardier Inc.

©2019 Bloomberg L.P.

This article was written by Benjamin Katz from Bloomberg and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to [email protected]

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SeaWorld’s long climb out of the Blackfish hole may finally be over.

The theme park operator reported that full-year attendance climbed to the highest number since 2013, the year the critical documentary was released. Revenue also increased in 2018 for the first time since 2013.

Those numbers didn’t just inch up; both attendance and revenue jumped 8.6 percent year-over-year.

SeaWorld Entertainment said 22.6 million people visited its properties, which include 12 theme and water parks around the United States. Revenue jumped to $1.37 billion.

The company also made a profit of $44.8 million last year, unlike the net losses it posted in 2017 and 2016.

For the fourth quarter, attendance increased 8 percent to 4.6 million visitors, while revenue was up 5.5 percent to $280 million. The company reported a loss of $11.1 million for the quarter, though that was less than the net loss in 2017.

Shares rose nearly 8 percent to close at $27.29 Thursday.

Admission fell again, by 5.6 percent, to $35.46 per person in the quarter. For the year, per-person admission was down nearly 4 percent to $35.37, though per-person spending in parks rose 6 percent to $25.40.

Total Revenue Play

The company has been promoting its value proposition — what it’s calling “new pricing strategies” —  to draw people to parks, but that has meant lower prices at the gate.

“This marks the fourth straight quarter of meaningful declines in ticket pricing, although unlike 3Q where in-park spending increases were enough to offset the ticket declines, the 6 percent ticket decline was far too much to overcome,” Wedbush analyst James Hardiman wrote in a note to investors. “Given the strong attendance numbers and overall better-than-expected top-line and bottom-line numbers, this strategy seems to be worth it.”

Chief operating officer John Reilly said during an earnings call that the company’s goal has been to drive attendance and total revenue, even at the expense of declines in per-person admissions. That strategy will continue this year, but he said there are opportunities on the pricing front.

“You can expect us to further refine our pricing strategies in 2019 to continue to drive total revenue, which we expect over the course of the year, particularly as we get to the back half of the year and lap certain strategies from 2018,” he said. “That will ultimately lead to increases in both in-park per capita and admissions per capita.”

Since the Blackfish documentary, which examined the company’s treatment of captive orcas in light of the death of a trainer, SeaWorld has ended its breeding program for killer whales. The company has also been transitioning its orca shows to highlight “natural behavior” rather than entertainment and focusing more on thrill rides and family experiences than animals.

The public backlash was harsh, but SeaWorld also faced an investigation for comments made by executives about the impact of the scrutiny. Last year, the company agreed to pay a $4 million penalty while former CEO James Atchison agreed to a $1 million fine. The CEO hired to replace Atchison, Joel Manby, resigned a year ago.

Reilly had served as interim CEO since then, before moving to chief operating officer when the new CEO, Gus Antorcha, was hired away from Carnival Cruise Line in February.

Executives didn’t spend time on the past Thursday, instead laying out a confident future. They reiterated a goal to reach $475 million to $500 million in adjusted earnings before interest, taxes, depreciation, and amortization in 2020. That figure reached $401.3 million in 2018, up 35 percent from the previous year.

“We’re early into this year, but have a lot of confidence that we will reach that goal that we laid out for 2020,” chief financial officer Marc Swanson said.

In the past year, the company has found success with its pricing strategy, incentives such as free beer in some parks, and in new rides and attractions. Reilly said season pass sales have also been a focus, especially since redesigning the program late last year with better value, flexibility, and benefits.

New Attractions

The company is trying to keep guests coming back this year with new roller coasters, attractions, rides, slides, and even lands. SeaWorld Orlando will open a new Sesame Street-themed area this year.

“We believe 2019 will be the company’s most exciting year ever for new attractions, with brand new one-of-a-kind rides and experiences coming to every market, providing many reasons to visit our parks over and over again,” Reilly said during the call.

Thursday’s results came out as larger rival Disney started revealing more details on its upcoming Star Wars lands in Orlando and California. Between those lands opening in summer and fall of this year and a new Harry Potter-themed roller coaster coming to Universal Orlando Resort in June, theme park competition will be fierce.

“We also believe that SeaWorld is smart to bring in as many season pass holders as possible ahead of an unprecedented slate of competitive rides and attractions that begins late this year with Disney’s Star Wars: Galaxy’s Edge in Orlando and Anaheim,” Wedbush’s Hardiman wrote.

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