Every hotel group buys some IT once and uses it everywhere: the property management system contract, the org-wide productivity and security licences, the group firewall, the wide area network. None of it arrives with a property name on the invoice. It lands in a central cost centre, and at some point somebody in finance decides how much of it each hotel should carry.
There are three models in common use, and the choice between them is worth more money than most groups realise. Here is the arithmetic on a small portfolio.
The worked example
A group of four hotels with AED 600,000 of shared IT cost in a year. The properties differ in size, and their IT estates differ in a way that does not track size exactly, which is the situation that makes the choice of model matter.
| Property | Rooms | IT assets |
|---|---|---|
| Hotel A, city centre | 300 | 900 |
| Hotel B, airport | 180 | 500 |
| Hotel C, beach resort | 120 | 380 |
| Hotel D, serviced apartments | 90 | 260 |
The three models, side by side
Allocating by rooms divides the AED 600,000 across 690 rooms, which is AED 869.57 per room. Allocating by asset count divides it across 2,040 assets, at AED 294.12 per asset. An even split gives each of the four properties AED 150,000 regardless of what it is.
| Property | By rooms | By assets | Even split |
|---|---|---|---|
| Hotel A | 260,870 | 264,706 | 150,000 |
| Hotel B | 156,522 | 147,059 | 150,000 |
| Hotel C | 104,348 | 111,765 | 150,000 |
| Hotel D | 78,261 | 76,471 | 150,000 |
Figures are rounded to the nearest dirham, so a column can differ from AED 600,000 by a dirham or two. Rounding differences of that size are not worth engineering away; differences of the size in the next paragraph are.
What the numbers show
Hotel D, the smallest property, pays AED 78,261 under the rooms model and AED 150,000 under an even split. That is 92 per cent more for being in a group with three larger hotels. Hotel A, the largest, pays AED 260,870 by rooms and AED 150,000 evenly, so it is subsidised by AED 110,870 a year by the three properties beneath it.
This is why an even split causes arguments. It is the easiest model to agree to in the first meeting, because it looks impartial and requires no data, and it is the model most likely to be challenged in year two by whichever general manager works out that their property is carrying somebody else's cost. Impartial between properties is not the same as proportionate to consumption.
Rooms and assets produce similar answers here, within about seven per cent of each other for every property, which is typical when an estate is reasonably uniform. They diverge when it is not: add a head office, a laundry facility or a staff accommodation block with no rooms and a serious amount of equipment, and the rooms model will charge it nothing at all.
Choosing a model, and defending it
- Use rooms when the estate is mostly hotels of comparable type. Rooms are the unit the rest of the business is already budgeted and benchmarked in, so the allocation lands in a language the property already speaks.
- Use asset count when the portfolio mixes property types, or when some sites carry equipment out of proportion to their size. It is harder to explain and more accurate.
- Use an even split as an explicit interim measure while the data is being assembled, not as a permanent answer, and say that out loud when it is agreed.
- Whichever model is chosen, show each property the inputs and the line items behind its share. A number without its workings is an assertion, and assertions get disputed annually.
The last point matters more than the choice of model. Groups that publish the workings stop having the argument, because the conversation moves from whether the number is fair to whether the group should be buying the thing at all, which is a far more useful conversation to be having.