2. WINDSOR PLAZA HOTELWINDSOR PLAZA HOTEL
STANDARD OPERATING PROCEDURESSTANDARD OPERATING PROCEDURES
BUDGET FORECAST ANALYSISBUDGET FORECAST ANALYSIS
• Forecasting is a concise version of the budget , Budget is a well planned Document ,
with details worked out meticulously , the budget has a base logic to support any
revenue or cost decision , budgets are usually worked on brain storming sessions , of
the concerned department heads and the financial controller , its purely a financial
tool ,offering guidelines and tracks the revenue and cost for a period of time
normally synchronizing with the financial year of the company entity , the budget
is a business plan document ,it’s a quantification of the sales and marketing plan
defined for a period of time normally a year,
• Forecast is the short term Quantification of the business plans, it harnesses the
marketing trends, of a current month or quarter, it’s the concise version of a budget
plan
A budget for a given period of time is worked during a period back may be 2 or 3
months earlier , the conditions market and cost conditions , existing at that point of
time ,the forecast is set on the basis of budget plan , at the current trend , it is
analyzed from the current market event happening in the city ,country, with the
available for sale room nights, and food average checks , from conferences , tour
operator promotions , government diplomatic happening s , wedding functions ,
special events , sales and marketing strategies are to be focused , to tap the source
of business , which are not planned , so forecast is a more contingent planned
document , projecting the sales trends ,which are missed out in the master budget
plan
3. Budget and forecast –comparisonBudget and forecast –comparison
• Forecast is conceived totally on the budget , variances
between the two are only compensatory for budget
revenue or cost can be postponed , due to an event
getting postponed , at the end of the period, say one year
, budget and forecast would not show any variance to
actuals
• Although the budget is always the target, each
month, each hotel submits a detailed line by line
quarterly forecast.
• This is an extremely important tool which
provides management with a firm grip on the future
and allows timely actions to offset losses through
expense controls and maximize revenue
opportunities.
• Forecasting accuracy is tracked monthly by hotel.
compare results versus forecast and budget as well
as other operational issues/concerns
4. Budget and forecast –Budget and forecast –
comparisoncomparison
• Budgets are compiled for the long term , but forecast are short
term analysis
• Vision for budget is more than 3months , but for forecast vision is
for the immediate
• Budget assumptions are many forecast there need not be
assumptions at all
• Budget KRA.KPI are projections for a period of time , forecast
KRA and KPI are realistic
• Budget cash flows are derivative projections , but forecast and
actual cash flows ensures positive liquidity decisions , like holding
to optimum inventory and receivables , thus forecast are
normally cash flow decisions , and budget are profit maxims.
5. • Budget and forecast complementary ---a
quantified forecast of operations, for a specified
period, prepared for management control
purposes; a quantitative, financial expression of a
programme of measures planned for a given
period. The budget is drawn up with a view to
planning future operations and to making ex post-
facto checks on the results obtained
• Budget is a financial tool analysis for the year ,
and forecast is a monthly analysis tool projected
with almost meeting the actuals
• Variances of budgets and forecasts are only
compensatory every month , variances of actuals
to forecast should be justified , corrective
measures to be taken ,
6. • Forecast are the direct foresight of the Departmental planner,
whether there a revenue surplus or a cost saving
• Forecast enables monthly Revenue management analysis more
effective
• Forecast Enables costs and value analysis more effective
• Forecast enables the management planner to achieve yearly
budgeted Targets , variances are justified and corrective
measures are taken
• BUDGETS are based on statistical tools Trend Analysis ,
• Mean , mode , median—Least square methods
• Market Research Analysis --Demand forecast –Delphi technique,
Questionnaire, Interviewing Method, Empirical studies, Historical
or past figures
• Cost saving concepts and Devices –FB costs, Energy cost,
Maintenance cost, like preventive Maintenance ,material costing
7. Modality of forecast implementationModality of forecast implementation
Introspection to Departmental HeadIntrospection to Departmental Head
• HOW DO YOU SET YOUR FORECAST FOR THE
NEXT THREE MONTHS
• Forecast is an financial adjustment statement ,
when you know your Budgeted Revenue and
Expenses , and if you have Digressions in the
budgeted targets , than forecast would be the
adjusted financial tool , where increases or
decreases in income and expenses are justified ,
The extent of decrease is only an adjustment
compensation , if the forecasted revenue is less
in January 2009 than the budget , that difference
would be adjusted in future months may be in
march may or june 2009,
8. Forecast can be derivedForecast can be derived
from the following sourcesfrom the following sources
• 1 sales call reports of the sales and marketing department
• 2 Reservation
• 3 Tour operators
• 4 chamber of commerce activity spurt or postponement of events
• 5 major events in the country city not taken into account in the
budget analysis
• 6 The latest trends from the market share analysis report
• 7 Revenue Par forecast
• 8 Power cuts
• 9 Renovations in the hotel
• 10 wedding events in the city
• 11 Shuffles in major conferencing to another date already fixed
• 12 Happening of New events after the budget finalization
• 13 any feature of revenue management feature which you would
subsist your revenue
• 14 Revenue Management Analyses
9. • REVENUE is budget Achieved thru
forecast analysis With the
budgeted Revenue and Budget
Departmental GOP –
• Thus Revenue centers apart from
Revenue should also control the
expenses budgeted achieved
through Forecast
10. COST SAVING -GUIDELINES TOCOST SAVING -GUIDELINES TO
FORECASTFORECAST
• Expenses on non Revenue Centers
such as Engineering, Administration,
Sales and Marketing, IT Department,
Human Resources, Security, Human
Resources would be monitored by
the relevant cost centre Department
Heads
• Revenue center Heads –would
Analyze the cost tabulated to their
respective departments
11. Revenue departmentRevenue department
savingssavings
• From –1, Cost of sales—Thrust areas of control could be
food and beverage cost
Daily market list purchases, value analysis, control of
breakages, finished food wastage
• 2. Payroll related expenses /deployment of contract and
casual labor
• 3. Other Expenses –power and fuel cost
From cost centre departments savings
• 1 payroll related expenses
• 2 other expenses power and fuel cost , wasteful
advertisement expenses ,
sales expenses to be measured with results
12. REVENUE
Budget
Jan
2009
Forecast
Jan 2009
Budget
feb
09
forecast
Feb
2009
Budget
mar
ch0
9
F
orecast
march
09
Airlines Non-Crew 1,232 1,353 1,915
Airlines Crew 64,146 59,376 65,112
Corporate 220,990 154,825 231,446
Internet 119,435 105,213 127,081
Travel and tour 416,259 409,903 436,734
Others 4,910 5,455 4,107
Sub-Total Revenue 826,972 736,125 866,395
Less: Rebates /Discounts
Room Allowances 5,000 4,500 5,500
Breakfast Board Transfer - Food 95,579 85,641 99,243
Breakfast Board Transfer - Beverage 7,194 6,446 7,470
Breakfast Board Transfer - F&B 102,773 92,087 106,713
Add: Room Sales - Other 7,440 6,720 7,440
Add: 5% Service charge 41,349 36,806 43,320
NET ROOM REVENUE 767,988 683,064 804,942
13. VAT Taxes Contra not Evaluated As Rev 82,697 73,613 86,639
Room Nights Sold 9,522 8,517 9,874
Average Room Rate 86.85 86.43 87.75
Room Available 11,966 10,808 11,966
Revenue Penetration 69.11 68.11 72.40
Occupancy % 79.57% 78.81% 82.52%
Breakfast Board Transfer 102,773 92,087 106,713
Breakfast Walkin 109,967 98,533 114,183
Guest Number 15,860 14,211 16,468
Room statisticsRoom statistics
18. • Cost reduction—all department heads
• Value analysis
• Value engineering
• Electricity power consumption –lights to be switched off,
water saving
• Optimum use of gas , good quality procurement of diesel
and petrol
• Recycle of paper, of files , -In house training programmes to
be conducted for all down the line staff on how to recycle,
procurement of low cost paper for administrative use
• Set up your own printing press for guest stationery
• Recycle of food, portion control , beverage checks thrice a
week of all outlets
• TRAINING OF STAFF
• Contract and casual labour dependence to offset seasonal
variation in business
• Retention of good quality staff
19. PAYROLL & RELATED EXPENSES budget forecast Budget forecast Budget forecast
Salaries & Wages - Local 8,710 8,710 8,710
Salaries & Wages - Expat 4,750 4,750 4,750
Casual Labor - Local 0 0 0
Service Charge 3,932 3,697 3,998
Bonus 7,040 0 0
Employee meals - Local 609 609 609
Officer Coupon - Expat 310 310 310
Allowances 3,300
Social Insurance contribution - Local 660 660 660
Health Insurance contribution - Local 88 88 88
Unemployment Insurance - Local 44 44 44
Union Fees - Local 88 88 88
Employee benefit - Local 250 250 250
Air Ticket - Expat 1,480
Rental accommodation - Expat 0 0 0
Visa extension fee - Expat 350
Cell phone - Expat 18 18 18
Provision for Increment - Expat 152 152 152
Provision for Bonus - Expat 3,040
Others 21 21 21
20. • VALUE ANALYSIS
• To save cost by retaining the value of the
product
• For eg in one of the hotels I did value
analysis
• Guest stationery paper was used for
administrative purposes, ordinary quality
paper was ordered the cost saving was about
10% on the printing and stationery budget
• similarly files , were reused
• Recycle of used paper –training should be
given
21. • Value Engineering
• Is the method by which you retain the value at economic costs
• Value Engineering (VE) is a means of evaluating the function, cost, and objectives of a design or
construction project with the purpose of improving the value (function) of the design of its
components, or reducing the project cost.
• The traditional energy system transfer to solar energy system is VE
• Energy Efficient Equipment
• Energy Efficiency Considerations
• The hotel industry is equipped with energy intensive equipment and lighting. Air conditioning,
heating, lighting,ventilation, refrigeration, motors, cooking, laundry, cleaning and office equipment
• re necessary for hotel operations.Choices made when purchasing equipment can have a major impact
on the hotel’s operating expenses and on theenvironment; therefore, it is important that efficiency be
considered before purchasing energy intensive equipment.
• Air conditioning (A/C) Efficiency
• Purchase A/C equipment sized for the area of use.Look for a high Energy Efficiency Rating (EER); a
• Seasonal Energy Efficiency Rating (SEER) of 10 or higher is recommended.Use high efficiency motors
for A/C air handling unit fans (fan speeds).Install heat recovery units on large A/C systems to
• preheat water. Compare efficiency of gas and electric air conditioning systems before making a
selection.Purchase washable, commercial grade A/C filters and change them every four weeks during
hot humid months.
• Lighting Efficiency--In purchasing light bulbs, as a general rule, the bulb cost is the smallest cost.
Energy costs over a bulb’s useful life are many times the original purchase cost. Evaluate bulbs by
comparing lumens per watt. Convert inefficient incandescent bulbs to efficient fluorescent bulbs in
exit signs, guest room lamps and other areas where incandescent bulbs are used. The newer 95-watt
incandescent bulb replaces the older type 100-watt incandescent bulb.16 Replace incandescent
reflector bulbs with lower wattage ellipsoidal reflector bulbs .Install lighting controls (timers or
occupancy sensors) to turn off lights in unoccupied areas such as storage rooms, employee rest
rooms, walk-in coolers, etc
22. • Increase the energy efficiency of
• fluorescent lighting systems by
• purchasing:
• high efficiency fluorescent bulbs; for example, replace aT-8 with a T-12 bulb,energy efficient ballasts that provide a
more efficient energy transfer,reflectors that direct more light out of the fixture into theroom,high intensity discharge
bulbs (Low Pressure and High
• Pressure Sodium and Metal Halide) for parking lot lighting, security lighting, and for select indoor use,photovoltaic
lighting systems for lighting advertising signs, walkways, plants, trees, decorative water fountains and remote out-
door areas.
• Electric Motor Efficiency
• Choose high efficiency motors with variable speed controls. Consider the hours the system needs to operate before
selecting motor sizes.Consult with a qualified energy engineer for a costsavings analysis; two small motors may
operate more efficiently than one large motor.
• Kitchen equipment considerations include
• purchasing: air-miser hoods that use outside air as make-up air instead of discharging conditioned inside air, a
timer for the kitchen exhaust hood that turns off the system when the kitchen is closed, smaller convection ovens to
replace oversized conventional ovens,
• an air-to-water heat pump water heater for kitchen use,refrigeration equipment with high energy
efficiencyratings,Note: Compare energy efficiency ratings before making a purchasing decision. Consult with
refrigeration experts when replacing old compressors and motors to
• guarantee proper sizing.
• Water use considerations:
• Water use in hotels varies depending on geographical location, occupancy, property type and season of the year. The
average water use is 218 gallons per occupied room per day. Larger properties use more water due to the water
intensive facilities often found in the larger hotels, i.e., pools, laundries and restaurants. Excessive use of water
increases the cost of operation, increases electrical energy required for pumps, depletes the water supply and puts
extra demands on waste water disposal plants.
• Increase water use efficiency by
• purchasing:
• dishwashing machines that use final rinse water for the prewash of the next load of dishes, water-saving
showerheads and sink faucet aerators: 2.5 gallons per minute (GPM) showerhead and 1.5 GPM aerators are
recommended for water savings and guest satisfaction spectively. Showerheads with less waterflow often increase
the number of guest complaints, a food-thawing machine instead of running water over foods for faster thawing,
laundry washers which use final rinse water for prewashing of the next load of laundry, Note: Reduce the number
of laundry loads per day by asking guests how often they would like their bed linens and towels laundered.. Some
hotels are changing sheets every two to three days and towels every other day.
• Plan landscapes with plants requiring low maintenance. Xeriscaping ideas are available from the Cooperative
Extension Service, The University of Georgia and/or The Georgia Water Wise Council.
• Office equipment considerations include
• purchasing:
• computers, monitors and printers with power down features that consume 60% less energy when machines are idle.
Look for the EPA “Energy Star” sticker on the computer. Additional information concerning the “Energy Star” can be
obtained from the U.S. EPA by ordering EPA document # 430-K-94-006, July 1994.The U.S. EPA telephone number
for Energy Star Computers is (202) 233-9114. copy and fax machines which have power down/stand-by
• features that operate when machines are idle.
23. • Power and fuel
• To use dimmers to control the flow of electricity
• To switch of lights in all non operational Areas , back office
areas
• To monitor the power in front offices
• Lower lobby upper lobby by switching of power during late
nights and midnights
• Petrol diesel to be measured and utilised most effectively
• Generators to be serviced periodically to avoid any excessive
consumption due to valve in efficiency
• Petrol consumption to be controlled with reboring of Engines
24. • Monitor cost of guest supplies and Room amenities
• n the hotels I generally stay in, there are small bottles of shampoo,
conditioner, body lotion and in some cases mouth wash provided with the
room. In addition there is usually a small bar of soap neatly wrapped in
some packaging. There are also towels - a bath towel, hand towel and
flannels but more often that not there are more towels than I actually need.
To provide these items costs the hotel money.
• However, many of the hotels are now providing bottled shampoo and
conditioner in dispensers attached to the wall of the bathroom. Gone are the
little bottles and the package of soap. As a customer, I noticed that these
items had gone. However, the provision of the shampoo and conditioner in a
dispenser - and quite good quality products at that - meant that my
customer experience was not affected unduly. Indeed, I reflected that it was
a very sensible policy by the hotel. The number of pieces of soap, for
example, that get thrown away when they have only been used once must
be huge - they cannot really be used again!
• This, therefore, is another good example of value engineering in practice.
The hotel might have looked at its operation, identified the costs involved in
providing all these items and arrived at a decision that there could easily be
another way in which the same functionality can be provided but at a
significantly reduced cost. The crucial point is making sure that customers
do not feel that they are being 'cheated' out of a service or being provided
with a sub standard or inferior product or service.
25. Food and beverageFood and beverage
• Controlling breakages of crockery
Including glass ware
• In many hotels the price list of all
stewarding items are projected at the
wash up areas and waiter areas to
create an awareness on the incidence
of costs due to Damages and
breakages
• Portion control
• Food reycling
• Cocktails and mocktails
26. Financial costsFinancial costs
• Cost of interest on inventory holding
• Slow moving , non moving items
• Product obseletion
• Japanese inventory from the shop windows
• GAAP ANALYSIS-Accounting and Liquidity ratios should Optimise costs
• Short term investment bank FDS etc on surplus funds , due aggressive and
surplus cash flow
• Profit volume analysis –sales = cost plus Profit
Profit = revenue –cost
PV ratio = Ascertain profit thru profit plan work out cost and make a selling
target to maximize profit optimize cost
• Break even sales point
• Access , understanding all MIS reports
• Cost control reports to be perused
27. Opportunity costsOpportunity costs
• Opportunity cost are those were cost
are tangible benefits are intangible
for eg , extending a facilitation may
be additional cost , but the benefit
drawn from it is very high magnitude
by way of guest satisfaction
• Cost Benefit Analysis
• Tax
28. Human resources managementHuman resources management
• Costs are reflected when manpower utilization are effective –dept head contribution
• To sustain costs deployment of Part time workers , contract workers , students like to
work as part-time especially in hotel where the work environment is glamorous
• Such work force should be deployed due to contingencies of work permit , seasonality
of business
• Business process reengineering and Change management
• Involving and Motivating Employees
• No matter how well planned your waste reduction and recycling initiatives may be,
they probably won't succeed without the support of the hotel department managers
and staff. Successful hotel recycling programs require employee involvement, training
and recognition. Involve all employees in the recycling program. They are already
disposing of waste as they perform their daily jobs. Recycling is simply disposing of
job related waste in a different container from the one used for trash. Seek their ideas
in organizing the recycling program and for methods of collecting and storing the
• materials. Employees are more likely to support a program that they understand and
have helped design.Develop motivational programs that create opportunities for staff
involvement and enthusiasm about the recycling program.
• Training
• Develop employee training programs that include recycling techniques specific for
various departments .Include recycling information in new employee orientation
programs.
• Inform employees of environmental issues and laws. Employees want to know why the
• hotel is recycling.
• Recognition
• Develop a system of on-the-spot, weekly and monthly incentives for employees who
• exhibit activity and leadership in recycling and waste reduction efforts. Recognize
employees and departments that show exceptional involvement in the recycling
program.
29. Sales and marketing costsSales and marketing costs
• Advertisement Timing
• Advertisement results assessing
response to advertisement cost
• Reuse or recycle of decorations
material
30. Supply chain management and savings costSupply chain management and savings cost
• ANALYZING THE HOTEL SUPPLY
CHAIN
• Supply chain in the hotel industry, like any
other
• supply chain, has three distinct cost
elements to
• optimize:
• ! Cost of Transaction
• ! Cost of Product
• ! Cost of Inventory
• In the following sections we discuss the
• relevance of these cost components
31. • COST OF TRANSACTION
• Approximately 30-50% of the products in the
hotel industry belong to the low-value, high volume
category. In Full Service hotels, many
products like vegetables and fruits have a short
shelf life and require repeat purchases. These
products increase the transaction cost.
• standardization/rationalization of the product portfolio, as well as automation in the
supply chain process
• Due to absence of standardization and central purchase non effective the cost of
transaction is high
• The indenting process in many hotels is
• manual, or at best semi-automatic, requiring
• manual consolidation (Figure 1). For example, if
• the same product is required by four
• departments, either paper indents are created
• or the system does not have the facility to
• consolidate the requests. This is usually true for
• items that get indented separately by each
• department in a hotel.
• Hotels can potentially save an estimated
• 8-20% on the cost of transaction, depending on
• the level of automation and unplanned activities
• that are present in the system.
32. • COST OF PURCHASED PRODUCTS
Cost of purchase in a hotel can range from 15-30% of sales, depending on the type
of hotel. The level of consolidation among hotels belonging to the same chain is often
nonexistent. These units lose the benefit of bulk purchase that consolidation can
provide .In cases where a central purchasing organization monitors and releases
central contracts, the adherence to the same is extremely poor. Contract leakage is a
common phenomenon in hotels. There is also a tendency to use a large supplier base
but not develop a strategic relationship with any one of them. As a result, concepts
like product value re-engineering, joint cost improvement initiatives, and so on,
which are the prevalent modes of cost reduction in the manufacturing industry, are
rarely in practice .All these factors contribute heavily towards the increase in the unit
price of products in the hotel supply chain. Hotels today may be losing an estimated
8-10% on products purchased.
COST OF INVENTORY
Forecasting the material consumption based on forecasted occupancy is usually not very well
managed. The lack of an interface with the sales and purchasing system and the complex
association of purchase and physical occupancy can be cited as two major reasons for poor
forecasting. The vendor-supplier relationship in the industry is also far from being perfect. As a result,
concepts like vendor-managed inventory or Justin-time inventory that have been deployed by
many industries to reduce inventory costs are generally out of context for many hotels.
In addition, a large number of SKUs and lack of standardization often lead to a waste of
valuable shelf space. This can be significant foremost hotels as they are generally located in high
value real estate areas. Engineering spares and operating supplies form the most significant part of
physical inventory in the hotel inventory cost. Usually these numbers are well reflected
in the balance sheet of many hotels where expensive inventory like wines may have
significantly high inventory. Engineering spares can have an inventory turn of almost one year.
68
33. • FOOD AND BEVERAGE COST SAVINGS
• To successfully reduce waste disposal costs, conduct a departmental audit to
determine the types and volumes of wastes generated for disposal. Plan your waste
reduction initiatives by targeting specific products or materials that contribute the
greatest volume and/or weight to your departments waste stream or which create
disposal problems.Establish short and long term departmental goals for waste
reduction and implement appropriate waste reduction
• strategies.
• Reduce Waste
• Use reusable metal or nylon coffee filters. Use only reusable dishes and flatware in
• restaurants and employee cafeteria.Install a magnet on food waste containers to
• recover silverware accidently thrown away with food waste.Use paper towel dispensers
in employee rest rooms that control the amount of paper being,dispensed or use less
than standard width paper to reduce paper waste as well as litter.Use filters in deep
fryers to extend the life of cooking oil. Distribute condiments, paper napkins, and
• straws upon request instead of offering them self-serve for take-outs.Replace
individually wrapped condiment packages with bulk dispensers in restaurants
• and employee cafeterias.Use washable hats and aprons for kitchen
• employees instead of disposable paper ones.Use only cloth napkins, tablecloths and
china for restaurants, meetings, and conventions.14 Use stained wash cloths and
towels for cleaning rather than paper towels.Redye tablecloths and napkins to match
new color schemes when remodeling; reuse worn table linens as cleaning rags or
remake into aprons, laundry bags, mattress covers.Use glass or plastic coasters to
reduce cocktail napkin waste.Eliminate paper place mats and use cloth
• ones.Reuse five gallon PVC buckets.
• Request fruits, vegetables and meats to be packaged in reusable crates, or recyclable
• boxes.
34. • Reduce Paper Waste
• Use a centrally-placed or electronic bulletin board for messages instead of
making multiple copies of memos.Shred office paper and use it to package
shipments.Eliminate fax cover sheets by using a rubber stamp or sticky
notes designed for fax use. Reuse envelopes and folders for routing inhouse
mail and correspondence.Include a statement requesting electronic
addresses on all written correspondence.Electronic mail will save on postage,
labor and paper. Decrease the number of hard copies of documents by
establishing a central filing system to store documents.Use electronic mail
for correspondence when possible.Prepare documents with small margins
and double sided printing or copying.Make double sided copies when
possible.Use the back side of paper that is printed on one side for
drafts.Make scratch pads from paper used on one side by stacking paper and
coating one end with rubber cement and cutting in half.Edit and proof read
documents on computer screens before printing.Use staff routing slips when
sharing information in-house to stop multiple copies.Purge mailing lists to
reduce returned mail. This saves on paper use, postage and recyclingcosts.
• Avoid unnecessary print-outs by faxing directly from the computer.
• Reduce unsolicited mail by sending each solicitor a postcard requesting that
they remove your hotel’s address from their mailing list;reuse their original
mailing label for your return address.
