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# Rooms Division Basic Theories I - Rate Set up and Forecasting

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Rooms Division Basic Theories I - Rate Set up and Forecasting

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• Hi all, I just got back access to my slideshare account. Sorry for not replying you all, please feel free to use my slide.

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• I wrote a RevPar Calculator at - http://www.hoteloutsourcing.com/calculators/revpar-calculator. Please let me know any feedback you have for it. I'd love to hear from you and learn how it can be improved to become a very helpful tool.

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• I have a question if your rooms is occupied twice with in 24 hours with different guest, are you going to count no. of rooms occupied twice also?

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• Interesting how did you get that result Lars? Why would you use the total revenue for rooms anyway?
If you sell 150 rooms per night then in a year you sell 365 times 150, or? So the numbers are just fine in Eugene's work.

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• Hi Lars, Thanks for the feedback, though, if 75% of 200 rooms would be 150 rooms per night x 365, it comes 54750 room nights per year.

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• It fails to consider the effect of inflation, increase cost of labour, furnishings and supplies.
• Do some examples
• Hotel’s Occupancy Rate = 195 / (204 - 4) * 100 = 97.50 %
• Multiple Occupancy Ratios to forecast for F&amp;B revenue, linen requirements, and analysis ARR
• Single Occupancy Rate = 94 / (99-4) * 100 = 98.95 % Double Occupancy Rate = 58 / 60 *100 = 96.67 % Triple Occupancy Rate = 43 / 45 *100 = 95.56 %
• RevPAR, provide statistical comparison of similar hotels. RevPAC provide avarage spending figure per guest. Most resort hotels are often interested in ARG.
• Average Guest Per Room Sold = 127 / (85 – 2) = 1.53 Average Daily Rate = \$ 6,960 / (85-2) = \$ 83.86 Average Rate Per Guest (RevPAC) = \$ 10,000 / 127 = \$ 78.74 RevPAR = \$ 6,960 / (120 – 4) = \$ 60.00
• Important for forecasting room occupancy
• Overstays % = (number of overstay rooms) / (number of expected check-outs) * 100 40/380=10.53%
• ### Rooms Division Basic Theories I - Rate Set up and Forecasting

1. 1. Part I By Eugene Win CRDE For Kabul Serena Hotel 2009 Copyright. Eugene Win CRDE 2009
2. 2. <ul><li>At the end of this session, trainee will know : </li></ul><ul><li>- basic knowledge on establishing room rates </li></ul><ul><li>- how to calculate Daily Operational Ratios. </li></ul><ul><li>- how to Forecast Room availability and basic formulas </li></ul>Copyright. Eugene Win CRDE 2009
3. 3. <ul><li>There are various approaches to pricing rooms. We will examine three popular approaches. </li></ul><ul><li>The Market Condition Approach </li></ul><ul><li>The Rule-of-thumb approach </li></ul><ul><li>The Hubert Formula </li></ul>Copyright. Eugene Win CRDE 2009
4. 4. <ul><li>This approach is the commonsense approach. Management looks at comparable hotels in the geographical market and sees what they are charging for the same product. </li></ul><ul><li>How do our rates compare to those of our competition? </li></ul><ul><li>Are our rates much lower or higher than those of the competition? </li></ul>Copyright. Eugene Win CRDE 2009
5. 5. <ul><li>How are our rates affecting our revenue and our share of the business? </li></ul><ul><li>What is our occupancy percentage? What is the occ % of the competitive set? Will our total revenue improve if we increase (decrease) our rates? </li></ul><ul><li>Have any trends emerged during the past six months? </li></ul>Copyright. Eugene Win CRDE 2009
6. 6. <ul><li>The Rule-of-Thumb approach sets the rate of a room at \$1 for each \$1,000 of construction and furnishings cost per room, assuming a 70% occupancy. </li></ul><ul><li>Eg. Assume that average construction cost of a room is \$80,000.00. Using this approach comes average selling price of \$80.00 per room. Set up different rates for different room types, but ARR would be \$80.00 </li></ul>Copyright. Eugene Win CRDE 2009
7. 7. <ul><li>Hubbart Formula approach considers operating costs, desired profits and expected number of rooms sold. In other words, this approach starts with desired profit, adds income taxes, then adds fixed charges and management fee, followed by operating overhead expenses and direct operating expenses. It is consider a Bottom-up approach. </li></ul>Copyright. Eugene Win CRDE 2009
8. 8. <ul><li>Hubbart formula (basic) 200 ROOMS HOTEL </li></ul><ul><li>Desired net income yearly: \$ 1,525,000.00 </li></ul><ul><li>Plus depreciation, taxes +600,000.00 </li></ul><ul><li>Plus operating expenses +1,240,000.00 </li></ul><ul><li>Total required operated income = 3,365,000.00 </li></ul><ul><li>Less other department incomes: - 200,000.00 </li></ul><ul><li>Total Rooms Division income: = 3,165,000.00 </li></ul><ul><li>Rooms direct expenses +547,500.00 ( base on estimated </li></ul><ul><li>Total = 3,7 12,500.00 75% occ of 200 rms </li></ul><ul><li>Number of rooms sold in a year 54,750 1 year: 54,750) </li></ul><ul><li>Required average room rate : \$ 67.81 </li></ul>Copyright. Eugene Win CRDE 2009
9. 9. <ul><li>Available Rooms = Total rooms – out of order rooms. </li></ul><ul><li>Occupancy % = (number of occupied rooms) / (number of rooms available for sale) * 100 </li></ul><ul><li>depends on management decisions , most of the hotels maintain fixed number of available rooms without deducting out of order rooms. </li></ul>Copyright. Eugene Win CRDE 2009
10. 10. <ul><li>Palace Hotel has 204 rooms: 45 are triple, 60 are double and the remaining is single. On the night of May 9th, 09 the night auditor counted 195 rooms occupied, 43 are triple, 58 are double, and the remaining are single. Moreover, the housekeeping department communicated only 4 rooms (all single) out of order for the night of May 09th, 09 </li></ul><ul><li>What is palace Hotel's Occupancy Rate for the night of May 09th, 09? </li></ul>Copyright. Eugene Win CRDE 2009
11. 11. <ul><li>Occupancy Percentage = (Number of Rooms Occupied) / (Total Number of Rooms Available For Sale) * 100 </li></ul><ul><li>Multiple Occupancy Percentage = (Number of Rooms Occupied by More Than One Guest) / (Total Number of Rooms Occupied) * 100 </li></ul><ul><li>Single Occupancy Percentage = (Number of Single Rooms Occupied) / (Total Number of Single Rooms Available For Sale) * 100 </li></ul><ul><li>Double Occupancy Percentage = (Number of Double Rooms Occupied) / (Total Number of Double Rooms Available for Sale) * 100 </li></ul><ul><li>Triple Occupancy Percentage = (Number of Triple Rooms Occupied) / (Total Number of Triple Rooms Available For Sale) * 100 </li></ul>Copyright. Eugene Win CRDE 2009
12. 12. <ul><li>Palace Hotel has 204 rooms: 45 are triple, 60 are double and the remaining is single. On the night of May 9th, 09 the night auditor counted 195 rooms occupied, 43 are triple, 58 are double, and the remaining are single. Moreover, the housekeeping department communicated only 4 rooms (all single) out of order for the night of May 09th, 09 </li></ul><ul><li>What is Palace Hotel's Single, Double, and Triple Occupancy rates for the night of May 09 th , 09? </li></ul>Copyright. Eugene Win CRDE 2009
13. 13. <ul><li>Average Guests Per Rooms Sold = (Total Number of Guests) / (Total Number of Rooms Sold) </li></ul><ul><li>Average Daily Rate = (Actual Room Revenue) / (Total Number of Rooms Sold) </li></ul><ul><li>Revenue Per Available Room (RevPAR) = (Actual Room Revenue) / (Number of Available Rooms) </li></ul><ul><li>Revenue Per Available Customer (RevPAC) = (Actual Hotel Revenue) / (Number of Guests) </li></ul><ul><li>Average Rate per Guest (ARG) = (Total Room Revenue)/ (Number of Guests) </li></ul>Copyright. Eugene Win CRDE 2009
14. 14. <ul><li>Serena Hotel has 120 rooms: 53 of them are single and 67 are double. On the night of 09/10/09, Serena Hotel’s Night Auditor counted a total of 85 rooms occupied, 42 of which were occupied by more than one guest. Moreover, on the same night 127 guests were registered. In addition, 2 rooms were on a complimentary basis. From the Housekeeping Room Status Report (for the night of 09/10/09), there were a total of 4 rooms Out of Order, 3 of which were Single. Lastly, the Actual Room Revenue for the same night was at the order of \$ 6,960 and Actual Hotel Revenue was 10,000 </li></ul><ul><li>  </li></ul><ul><li>Calculate the Average Guest Per Room Sold </li></ul><ul><li>Calculate the Average Daily Rate </li></ul><ul><li>Calculate the Revenue per Available Customer (RevPAC) </li></ul><ul><li>Calculate the RevPAR </li></ul>Copyright. Eugene Win CRDE 2009
15. 15. <ul><li>No-shows % = (number of no-show rooms) / (number of rooms reserved) * 100 </li></ul><ul><li>Cancellation % = (number of cancellation rooms) / (number of rooms reserved) * 100 </li></ul><ul><li>Walk-ins % = (number of walk-in rooms) / (total number of rooms arrivals) * 100 </li></ul><ul><li>Overstays % = (number of overstay rooms) / (number of expected check-outs) * 100 </li></ul><ul><li>Understays % = (number of understay rooms) / (number of expected check-outs) * 100 </li></ul>Copyright. Eugene Win CRDE 2009
16. 16. <ul><li>Given the following data, calculate the percentage of overstays: </li></ul><ul><li>  </li></ul><ul><li>Number of room no-shows 30 </li></ul><ul><li>Number of room walk-ins 60 </li></ul><ul><li>Number of overstay rooms 40 </li></ul><ul><li>Number of understay rooms 20 </li></ul><ul><li>Number of room reservations 300 </li></ul><ul><li>Number of room arrivals 340 </li></ul><ul><li>Number of expected check-outs 380 </li></ul><ul><li>  </li></ul>Copyright. Eugene Win CRDE 2009
17. 17. <ul><li>Forecasting room availability is forecasting the number of rooms available for sale on any future date. This type of forecasting helps manage the reservation process, guides the front office staff for an effective rooms management, and can be used as an occupancy forecast, which is, further, useful in attempting to schedule the necessary number of employees for an expected volume of business. </li></ul>Copyright. Eugene Win CRDE 2009
18. 18. <ul><li>In order to forecast room availability, the following data are needed: </li></ul><ul><li>Number of expected room arrivals </li></ul><ul><li>Number of expected room walk-ins </li></ul><ul><li>Number of expected room stayovers </li></ul><ul><li>Number of expected room no-shows </li></ul><ul><li>Number of expected room cancellation </li></ul><ul><li>Number of expected room understays </li></ul><ul><li>Number of expected room check-outs </li></ul><ul><li>Number of expected room overstays </li></ul>Copyright. Eugene Win CRDE 2009
19. 19. <ul><li>Total Number of Guest Rooms </li></ul><ul><li>- Number of Out of Order Rooms </li></ul><ul><li>- Number of Stayovers Rooms </li></ul><ul><li>- Number of Reserved Rooms </li></ul><ul><li>+ Number of No-show Rooms </li></ul><ul><li>+ Number of Cancellation Rooms </li></ul><ul><li>+ Number of Check-Out Rooms </li></ul><ul><li>+ Number of Understay Rooms </li></ul><ul><li>– Number of Overstay Rooms </li></ul><ul><li>= Number of Rooms Available for Sale </li></ul>Copyright. Eugene Win CRDE 2009
20. 20. <ul><li>Given the following data, calculate the rooms available for sales: </li></ul><ul><li>  </li></ul><ul><li>Number of room no-shows 30 </li></ul><ul><li>Number of room walk-ins 60 </li></ul><ul><li>Number of overstay rooms 40 </li></ul><ul><li>Number of understay rooms 20 </li></ul><ul><li>Number of stay over room 300 </li></ul><ul><li>Number of room arrivals 40 </li></ul><ul><li>Number of expected check-outs 80 </li></ul><ul><li>  </li></ul>Copyright. Eugene Win CRDE 2009
21. 21. <ul><li>THANK YOU! </li></ul>Copyright. Eugene Win CRDE 2009
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