In the hotel industry, expenses are divided into two main categories: Direct Expenses: These are the expenses that vary with the level of production. For example, in the Food and Beverage department, the Cost of Food Sales is a direct expense. For, the more dishes we serve, the more cost of Food Sales the Hotel incurs.

In the hotel industry, direct expenses—often referred to as "departmental expenses"—are those costs that can be specifically attributed to the operation of a particular revenue-generating department. The most prominent category is Labor Costs, which include the wages, salaries, and benefits for staff working directly in departments like Housekeeping, Front Office, and Food & Beverage. Another major component is Cost of Sales, which specifically applies to the cost of food and beverages sold in the hotel's restaurants and bars. Additionally, direct expenses include "Guest Supplies" such as linens, towels, toiletries, and in-room coffee, as well as "Operating Supplies" like cleaning chemicals and specialized uniforms. Unlike "Fixed Costs" (like property taxes or insurance) or "Undistributed Operating Expenses" (like marketing or administrative costs), direct expenses fluctuate in direct proportion to the hotel's occupancy levels. If a hotel is at 90% occupancy, the direct expense for laundry and guest amenities will rise accordingly, making these costs a critical metric for managers focused on departmental profit margins.