Flow Through

Flow through is the component of additional revenue that adds to additional GOP

Meaning, if you have a flow through of 80%, a 100US$ increase in revenue adds to an 80% increase in GOP.

To calculate, compare the percentage increase (or even decrease) in revenue (actual -vs- budget) with the increase in GOP (actual -vs- budget)

In rooms, the flow through (departmental profit) should be almost 90%, while at total revenue, this should be at least 50% or more - as most of the fixed costs are covered, and hence the additional revenue should mainly have a variable cost percentage

Flow through is used to calculate incremental revenues (actual versus budget) and its impact on GOP.

This is used to determine whether the "extra revenue" is actually going to your bottom line.

If you carry additional fixed expenses / overhead (e.g. staff, provided it is "fixed") because of the increase in revenue, then your operation might not be run as efficient or optimum as it could / should

Basically, any additional revenue compared to budget should lead to a proportionately higher GOP, not less

You don't list it separately, you just, separately from your monthly P&L, do a little analysis to check how efficient your operations is

If you have more revenue, is this contributing to proportionately more GOP or not... interesting excercise is to do the reverse...if there is less revenue then budget, how do we minimize the impact on GOP (e.g. how are me managing our costs)

The calculation is simple; Profit variance to budget divided by Revenue vairance to budget times 100 over 1