Controlling Operations

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CHAPTER 8
CONTROLLING OPERATIONS
ACCOMMODATION OPERATION
AND SERVICE

OBJECTIVE
• Understanding the purpose of operating budgets in the
housekeeping department.
• Learn the process of compiling operating budgets.
• Explain the process of calculating the justification for section
housekeeper man-hours.
• Explain the structure of the profit and loss statement.
• Discuss how to obtain productivity indicators in the
housekeeping department.
• Learn how to work out the weekly forecast for section-
housekeeper work.
• Describe how to control payroll.
• Learn about automation in the housekeeping department.

OVERVIEW
• Useful Tips on Budget Interpretation
• Housekeeping Operating Budget
• Consolidated Room Sales
• Rooms Division Budget
• Section Housekeepers’ Man-Hour Justification
• Useful Tips on P&L (P&L) Statement Interpretation
• The Profit and Loss and Variance Analysis
• Productivity Control
• Weekly Labor Forecast
• Computerized Housekeeping Management

Useful Tips on Budget Interpretation (I)
• Revenue is the amount of dollars generated from
selling rooms.
• Expenses are the costs of the items required to
operate the rooms division.
• Profit is the amount of dollars that remain after
all expenses have been paid.
Revenue - Expenses = Profit

Useful Tips on Budget Interpretation (II)
The following terms are synonymous:
• revenue and sales
• expenses and costs
Revenue - Expenses = Profit

Useful Tips on Budget Interpretation (III)
• Labor Costs
–Cost of all employees, including taxes.
• Other Expenses
–All expenses not associated with
payroll.

Useful Tips on Budget Interpretation (IV)
• Percent (%) means “out of each hundred.”
• There are three ways to write a percent:
–Percentage Form
• “%” sign is used, as in 10%
–Fraction Form
• the part, or a portion of 100, as in 10/100
–Decimal Form
• the decimal point (.), as in 0.10

Useful Tips on Budget Interpretation (V)
• Percentage of revenue that a particular expense
costs:
Expense
Revenue = Expense %

The Housekeeping Operating Budget
• The purpose of the operating budget is twofold:
1. To allocate funds for expenditures for a
determined period of time, generally one year.
2. To measure and control the department’s
performance.
• The housekeeping operating budget is part of
the rooms division budget, which also includes
the front office.

Consolidated Rooms Sales
• The projected revenue of the rooms
division consists of the dollars to be
generated by the sales of rooms at a
certain unit price.
• Sales = Number of rooms sold X Average
daily rate (ADR)

SECTION HOUSEKEEPERS’ MAN-HOUR
JUSTIFICATION
• Used to ascertain the wages of section
housekeepers and laundry workers, as
these employees report to work based on
number of rooms that need to be
serviced daily.
• Purpose of this statement is to warrant
the amount that must be obtained in the
upcoming budget.

Useful Tips on P&L Statement Interpretation
• The P&L lists actual revenue, payroll
costs, other expenses, and profit for a
certain period of time, usually
monthly.
• The P&L is important because it
indicates the financial performance of
the rooms division operation.

Sample Percentages Used
in a Rooms Division P&L Statement
1. Labor Cost
Revenue = Labor Cost %
3. Other Expense
Revenue = Other Expense %
4. Total Expense
Revenue = Total Expense %
5. Profit
Revenue = Profit %

Variance Analysis
• The variance analysis is a report
indicating the changes in revenue and
expenses from each budget category.
• The purpose of the variance analysis
is to alert department heads of
percentage changes from budget.

COST PER OCCUPIED ROOM
• The cost per occupied room is a good
determinant of expenses per room sold.
• The cost is obtained by dividing each
expense category for a certain period of
time by the rooms sold during that
period of time.
– For example, if rooms sold = 9,672 and
expense = $17,830, the cost per room
would be $1.84

Productivity Control
• Productivity is a measure of output
compared to input.
• A useful ratio to control productivity is:
–Revenue : Hours of work = dollars per labor
hour.
• Another indicator of productivity is:
–Hours of works : rooms cleaned = mean
hours per room serviced

Weekly Labor Forecast
• The weekly labor forecast projects the section
housekeeper hours needed to service the
forecasted occupied rooms for a particular
week.
• By dividing the estimated revenue for the week
by the section housekeeper hours, the revenue
generated per hour worked is obtained.
• The result is compared to the amount stated in
the yearly budget.

Payroll Control
• If significant variations with planned
results occur, management must:
–Determine if there is too much
overtime or over scheduling of workers
–Take corrective action

Computerized Housekeeping Management
• Executive housekeepers use technology to
perform tasks such as controlling inventory
supplies, scheduling operational routines,
tracking departmental man-hours and costs.
• Software packages exist that perform
personnel management tasks, track inventory
supplies, establish quality assurance programs,
schedule guestroom maintenance, or print
daily work schedules.

Computerized Housekeeping Management (Cont.)
• Steps in selecting a computerized
housekeeping management software
system are:
–Determine the needs of the department
–Select a system that will fulfill the
requirements to have the job done
–Ensure that the vendor will provide technical
support and employee training

TUTORIAL

Controlling Operations

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