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Administration costs

Administration costs or administrative expenses (also referred to as overhead or fixed costs) are the ones that companies incur to maintain daily operations, e.g., rent, utilities, executives’ wages, etc. 

These costs aren’t directly tied to a company’s core function like production or sales but support the mere functioning and administration of a business. As opposed to variable expenses, administration costs are incurred regardless of whether a company sells anything or not.

In hospitality, administrative expenses include 

  • utilities, 
  • facilities maintenance, 
  • taxes, 
  • rent, 
  • office supplies, 
  • insurance, 
  • licensing fees, 
  • wages of accounting, IT, legal, administrative staff, and so on. 

The aim of hotel owners and revenue managers is to keep such fixed costs lower than gross profit, otherwise the business suffers losses and may be at risk of going bankrupt.