How to Maximize the Value of Current and Noncurrent Assets in Hotels. Part 1

How to Maximize the Value of Current and Noncurrent Assets in Hotels. Part 1

Posted by Hotels4humanity on Jan 8th 2023

When it comes to financial management, understanding the different elements of assets on a hotel's balance sheet is essential for success. Assets are the resources owned by a business that can be used to generate revenue or provide future economic benefits. Assets can be classified into two categories: current assets and non-current assets.

As a hotel owner, you may have heard the term “current assets” thrown around but not fully understood what these assets are and why they are important. The current assets presented on the balance sheet of a hotel are the financial resources that can be converted into cash or used to pay current liabilities within one year of the balance sheet date.

The most common current assets on a hotel’s balance sheet are cash, accounts receivable, inventory, and prepaid expenses.

  • Cash: Cash is the most liquid form of asset. This includes funds in a checking or savings account, as well as cash on hand.
  • Accounts Receivable: Accounts receivable are amounts owed to the hotel from customers for goods or services provided.
  • Inventory: Inventory is the value of all the items the hotel has in stock at the balance sheet date. This includes materials, supplies, and finished goods.
  • Prepaid Expenses: Prepaid expenses are expenses that have been paid for in advance and for which the services or goods have not yet been received.
  • Other current assets that may appear on a hotel’s balance sheet include accrued interest receivable, deposits, and deferred income taxes.
  • Accrued Interest Receivable: Accrued interest receivable is the interest earned but not yet received from investments.
  • Deposits: Deposits are payments received by the hotel in advance of providing goods or services.
  • Deferred Income Taxes: Deferred income taxes are taxes that have been paid in advance but have not yet been recognized on the income statement.

Current assets are important to the financial health of a hotel as they provide the necessary funds to pay the hotel’s current liabilities. Knowing how to manage and monitor current assets is key to a hotel’s success.

Noncurrent assets are an important element of a hotel’s balance sheet. These assets are those that are not expected to be converted into cash within one year, and they provide the hotel with the means to generate revenue over a longer period of time. The main elements of noncurrent assets on a hotel’s balance sheet include noncurrent receivables, investments, property and equipment, and intangible assets such as goodwill and trademarks. Additionally, cash surrender value of life insurance, deferred charges, and deferred income taxes can also be considered noncurrent assets.

  • Noncurrent receivables are amounts owed to a hotel for services rendered but are not expected to be collected within one year. 
  • Investments may include stocks, bonds, and other investments. 
  • Property and equipment may include buildings, furniture, fixtures, and machinery that are used to generate revenue at a hotel. 
  • Intangible assets such as goodwill (brand recognition, reputation and loyalty) and trademarks help to give a hotel a competitive edge and customer lists can be used to target potential customers. 
  • Cash surrender value of life insurance, deferred charges, and deferred income taxes are also considered non-current assets.

Non-current assets are very important to a hotel’s financial health and stability. Without these assets, a hotel would not be able to generate revenue over time and could potentially struggle financially. It is important for hotels to know how to properly value their non-current assets in order to stay financially healthy and successful.

Understanding the different elements of assets on a hotel's balance sheet is an important part of effective financial management. Knowing which assets are current and which are non-current, as well as understanding the differences between tangible and intangible assets, will help hotel owners make informed decisions about how to best allocate and manage their resources.

Disclamer: This blog is intended as a GUIDE only and DOES NOT constitute financial advice, please verify and discuss your finanical statements with a qualified accountant, solicitor or financial advisor.