Bali Hospitality ProfessionalService Drs. Agustinus Agus Purwanto, MM Senior Consultant Jl. Tukad Batanghari VIII/7A Denpasar – Bali – Indonesia E-mail: firstname.lastname@example.org Web: www.linkedin.com/in/aguspurwanto
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
Forecasting Rooms RevenueForecasted Annual Rooms Revenue =Rooms Occupancy AverageAvailable Percentage Daily RateRooms Available = Total Rooms X 365 Days
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
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
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.
Forecasting DataNo-shows Expected guests who did not arrive.Walk-ins Guests without reservations.Overstays Guests who stay beyond their departure date.Understays
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.
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.
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.
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
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
Rooms AvailabilityFormula Example 150 Guestrooms - 5 Out of Order - 45 Stayovers - 50 Reservations + 10% No-show + 5 Understays - 20 Overstays40 Rooms Available for Sale
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
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
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
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
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
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
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
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%
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
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
Average Daily Rate (ADR) Rooms Revenue Number of Rooms Sold Number of Rooms Sold includes comps
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
Revenue per Available Room (RevPAR) Actual Rooms Revenue Number of Available Roomsor: Occupancy Percentage x ADR 2001 = $49.36
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
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?
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
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
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.
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