14100252 Front Office Management Function

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14100252 Front Office Management Function

  1. 1. Bali Hospitality Professional Service 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. 2. Chapter 8Chapter 8 The Functions ofThe Functions of ManagementManagement
  3. 3. POSDCORBPOSDCORB P Planning O Organizing S Staffing D Directing CO Coordinating R Reporting B Budgeting
  4. 4. Front Office BudgetingFront Office Budgeting The most important long-term planning function FOM is responsible for: 1. Forecasting Rooms Revenue  Use historical trend data 2. Estimating Expenses  Vary directly with rooms revenue
  5. 5. Forecasting RoomsForecasting Rooms RevenueRevenue Forecasted Annual Rooms Revenue = Rooms Occupancy Average Available Percentage Daily Rate Rooms Available = Total Rooms X 365 Days
  6. 6. Forecasting Rooms RevenueForecasting Rooms Revenue ExampleExample 100 Room Hotel 100 x 365 days = 36,500 Rooms Available 75% Occupancy Percentage .75 $50 Average Daily Rate 36,500 x .75 x $50 = $1,368,750
  7. 7. Room ForecastingRoom Forecasting Ten-Day Forecast  Done by FOM and Reservations Manager House Count  Expected number of guests in the hotel  Divided into group and non-group Three-Day Forecast
  8. 8. Forecasting RoomForecasting Room AvailabilityAvailability The most important short-term planning function Hotel Occupancy History  The past few months and last year at this time Reservation Trends  How far in advance are reservations being made? Scheduled Events  City-wide conventions; sporting events, etc.
  9. 9. Forecasting DataForecasting Data No-shows  Expected guests who did not arrive. Walk-ins  Guests without reservations. Overstays  Guests who stay beyond their departure date. Understays
  10. 10. Percentage Of No-Percentage Of No- showsshows Number of Room No-Shows Number of Room Reservations Purpose:  Helps front office managers decide when (and if) to sell rooms to walk-in.
  11. 11. Percentage Of Walk-Percentage Of Walk- insins Number of Room Walk-Ins Total Number of Room Arrivals Purpose:  Helps front office managers know how many walk-ins to expect.
  12. 12. Percentage OfPercentage Of OverstaysOverstays Number of Overstay Rooms Number of Expected Check- Outs Purpose:  Alerts front office managers to potential problems when rooms have been reserved for arriving guests.
  13. 13. Percentage OfPercentage Of UnderstaysUnderstays Number of Understay Rooms Number of Expected Check-Outs Purpose:  Alerts front office manager to additional room availability.  20% of hotels charge understay
  14. 14. Rooms Availability FormulaRooms 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. 15. Rooms AvailabilityRooms Availability Formula ExampleFormula Example 150 Guestrooms - 5 Out of Order - 45 Stayovers - 50 Reservations + 10% No-show + 5 Understays - 20 Overstays 40 Rooms Available for Sale
  16. 16. Establishing RoomEstablishing Room RatesRates Marketing 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. 17. 1. Market Condition1. Market Condition ApproachApproach  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. 18. 2. Rule-of-thumb Approach2. 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. 19. 2. Rule-of-thumb Approach2. Rule-of-thumb Approach Average 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. 20. 3. Hubbart Formula3. Hubbart Formula ApproachApproach “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. 21. 3. Hubbart Formula3. Hubbart Formula ApproachApproach Average 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. 22. EvaluatingEvaluating Front Office OperationsFront Office Operations Occupancy Percentage  The most commonly used operating ratio Average Daily Rate (ADR)  Average of all room types and rates Revenue per Available Room (RevPAR)  Measures revenue capabilities of hotel
  23. 23. Occupancy PercentageOccupancy Percentage Number of Rooms Occupied Number of Rooms Available What does rooms occupied include?  Rooms sold + comp rooms What does rooms available include?  Use the rooms availability formula 2001= 59.20%
  24. 24. Occupancy PercentageOccupancy Percentage ExampleExample Number of Rooms Occupied Number of Rooms Available  Sold 95 rooms with 5 comps  150 room hotel with 25 out of order 95 + 5 = 100 = 150 - 25 = 125 80%
  25. 25. Daily Occupancy RatesDaily Occupancy Rates 47.8 62.4 67.7 68.3 65.3 66.5 70.1 0 10 20 30 40 50 60 70 Sun Mon Tues Weds Thurs Fri Sat
  26. 26. Average Daily Rate (ADR)Average Daily Rate (ADR) Rooms Revenue Number of Rooms Sold  Number of Rooms Sold includes comps
  27. 27. Average Daily Rate ExampleAverage Daily Rate Example Rooms Revenue Number of Rooms Sold  $10,000 Rooms Revenue  Sold 95 rooms with 5 comps $10,000 $10,000 = 95 + 5 = 100 $100
  28. 28. Revenue per Available RoomRevenue per Available Room (RevPAR)(RevPAR) Actual Rooms Revenue Number of Available Rooms or: Occupancy Percentage x ADR 2001 = $49.36
  29. 29. RevPar ExampleRevPar Example Actual Rooms Revenue Number of Available Rooms  $10,000 Rooms Revenue  150 room hotel with 25 out of order $10,000 $10,000 = 150 - 25 125 $80
  30. 30. Revenue per Available RoomRevenue per Available Room ExampleExample Occupancy Percentage x ADR 80% x $100 = $80 RevPAR 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. 31. RevPAR IndexRevPAR 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. 32. RevPAR Index - ExampleRevPAR 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. 33. RevPAR IndexRevPAR Index Missed Revenue ExampleMissed 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 Month Ex.
  34. 34. RevPAR IndexRevPAR 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

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