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  • 1. Bali Hospitality ProfessionalService Drs. Agustinus Agus Purwanto, MM Senior Consultant Jl. Tukad Batanghari VIII/7A Denpasar – Bali – Indonesia E-mail: agustinus.aguspurwanto@ehotelier.com Web: www.linkedin.com/in/aguspurwanto
  • 2. Chapter 8The Functions of Management
  • 3. POSDCORBP PlanningO OrganizingS StaffingD DirectingCO CoordinatingR ReportingB Budgeting
  • 4. Front Office BudgetingThe most important long-term planning functionFOM is responsible for: 1. Forecasting Rooms Revenue  Use historical trend data 2. Estimating Expenses  Vary directly with rooms revenue
  • 5. Forecasting Rooms RevenueForecasted Annual Rooms Revenue =Rooms Occupancy AverageAvailable Percentage Daily RateRooms Available = Total Rooms X 365 Days
  • 6. Forecasting Rooms Revenue Example100 Room Hotel 100 x 365 days = 36,500 Rooms Available75% Occupancy Percentage .75$50 Average Daily Rate 36,500 x .75 x $50 = $1,368,750
  • 7. Room ForecastingTen-Day Forecast  Done by FOM and Reservations ManagerHouse Count  Expected number of guests in the hotel  Divided into group and non-groupThree-Day Forecast
  • 8. Forecasting Room AvailabilityThe most important short-term planning functionHotel Occupancy History  The past few months and last year at this timeReservation Trends  How far in advance are reservations being made?Scheduled Events  City-wide conventions; sporting events, etc.
  • 9. Forecasting DataNo-shows  Expected guests who did not arrive.Walk-ins  Guests without reservations.Overstays  Guests who stay beyond their departure date.Understays
  • 10. Percentage Of No- shows Number of Room No-Shows Number of Room ReservationsPurpose:  Helps front office managers decide when (and if) to sell rooms to walk-in.
  • 11. Percentage Of Walk- ins Number of Room Walk-Ins Total Number of Room ArrivalsPurpose:  Helps front office managers know how many walk-ins to expect.
  • 12. Percentage Of Overstays Number of Overstay Rooms Number of Expected Check- OutsPurpose:  Alerts front office managers to potential problems when rooms have been reserved for arriving guests.
  • 13. Percentage Of Understays Number of Understay Rooms Number of Expected Check-OutsPurpose:  Alerts front office manager to additional room availability.  20% of hotels charge understay
  • 14. Rooms Availability Formula Total number of guestrooms- Out of order rooms- Stayovers- Reservations+ Reservations x no-show percentage+ Understays- Overstays Number of Rooms Available for Sale
  • 15. Rooms AvailabilityFormula Example 150 Guestrooms - 5 Out of Order - 45 Stayovers - 50 Reservations + 10% No-show + 5 Understays - 20 Overstays40 Rooms Available for Sale
  • 16. Establishing Room RatesMarketing Positioning Statement  Room rates reflect service expectations to the hotel’s target markets. 1. Market Condition Approach 2. Rule-of-thumb Approach 3. Hubbart Formula Approach
  • 17. 1. Market Condition Approach Common sense approach. Often used, but has many problems. Base room rates on your competitions’ rates. Doesn’t take into account new properties and construction costs. Allows the local market to determine the
  • 18. 2. Rule-of-thumb Approach Sets the minimum average room rate at $1 for each $1,000 of construction & furnishing costs per room. Assumes 70 % occupancy $125,000 in construction and furnishings - $125 room rate Doesn’t take inflation into account
  • 19. 2. Rule-of-thumb ApproachAverage per-room cost for hotel development:Segment Per-room cost Budget/Economy $52,800 Midscale w/o $85,600 Midscale with F&B $103,100 Full Service $165,900 Luxury/Resorts $516,300
  • 20. 3. Hubbart Formula Approach“Bottom-up”approach Begin with desired profit based upon expected Return on Investment (ROI) Calculate pretax profits, fixed charge, management fees, & operating expenses Estimate other departmental income Determine the required rooms department income
  • 21. 3. Hubbart Formula ApproachAverage Room Rate = Rooms Department Revenue Expected Number of Rooms Sold Sets a “Target” Average Price Lets you determine if your target is too high You may have to finance the difference
  • 22. Evaluating Front Office OperationsOccupancy Percentage  The most commonly used operating ratioAverage Daily Rate (ADR)  Average of all room types and ratesRevenue per Available Room (RevPAR)  Measures revenue capabilities of hotel
  • 23. Occupancy Percentage Number of Rooms Occupied Number of Rooms AvailableWhat does rooms occupied include?  Rooms sold + comp roomsWhat does rooms available include?  Use the rooms availability formula 2001= 59.20%
  • 24. Occupancy Percentage Example Number of Rooms Occupied Number of Rooms Available Sold 95 rooms with 5 comps 150 room hotel with 25 out of order95 + 5 = 100 = 80%150 - 25 = 125
  • 25. Daily Occupancy Rates 67.7 68.3 66.5 70.1 65.370 62.460 47.85040302010 0 Sun Mon Tues Weds Thurs Fri Sat
  • 26. Average Daily Rate (ADR) Rooms Revenue Number of Rooms Sold Number of Rooms Sold includes comps
  • 27. Average Daily Rate Example Rooms Revenue Number of Rooms Sold $10,000 Rooms Revenue Sold 95 rooms with 5 comps$10,000 $10,000 $100 =95 + 5 = 100
  • 28. Revenue per Available Room (RevPAR) Actual Rooms Revenue Number of Available Roomsor: Occupancy Percentage x ADR 2001 = $49.36
  • 29. RevPar Example Actual Rooms Revenue Number of Available Rooms $10,000 Rooms Revenue 150 room hotel with 25 out of order$10,000 $10,000 = $80150 - 25 125
  • 30. Revenue per Available Room Example Occupancy Percentage x ADR 80% x $100 = $80RevPAR Limitations:* Does not include Revenue & Costs from F&B and other outlets Is RevPAR higher or lower than ADR ? When will they be equal?
  • 31. RevPAR Index Hotel RevPAR Competitive Set RevPAR You decide what hotel’s make up your competitive set of hotels that you compare yourself too. Get your Comp Set RevPAR figures from the
  • 32. RevPAR Index - Example Hotel RevPAR Competitive Set RevPAR Your Hotel’s RevPAR is $58; Comp Set is $60 $58/$60 = .966 x 100% = 96.6% Below 100% = Under Performing Hotel 100% = Fair Share Above 100% = Over Performing Hotel
  • 33. RevPAR Index Missed Revenue Example If your Hotel’s RevPAR is $58 and your Comp Set’s is $60, you are losing $2 per room in potential revenue Calculate your potential lost revenue per month RevPAR Difference x Number of Rooms x Days in MonthEx.
  • 34. RevPAR Index You need to select a realistic Comp Set of hotels Comparing a luxury hotel to economy hotels inflates your RevPAR Index but doesn’t help your revenues A consistent increase in RevPAR Index is your goal