Hotel & Hospitality management

1. Managing Front
Office

2. Planning and Evaluating Operations
Management Functions
Establishing Room Rates
Forecasting Room Availability
Budgeting for Operations
Evaluating Front Office Operations
Planning for Disasters

3. Management Functions
Planning Organizing Coordinating Staffing
Leading Controlling Evaluating

4. Management Functions
Planning
•Process of thinking about & organizing activities required to achieve desired goal
•Involves creation & maintenance of plan, such as psychological aspects require
conceptual skills
Organizing
• Systematic process of structuring, integrating, coordinating task goals, & activities to
resources in order to attain objectives

5. Management Functions
Coordinating
• Synchronization & integration of activities, responsibilities, &
command & control structures to ensure resources of
organization are used most efficiently in pursuit of objective
Staffing
• Process of hiring suitable candidates according to their
knowledge & skills in an organization

6. Management Functions
Leading
• Act including how to inspire & motivate individuals, manage talent,
influence without authority, & lead teams
Controlling
• Function of establishing benchmarks or standards, comparing actual
performance against them, & taking corrective action, if required
Evaluating
• To judge or calculate quality, importance, amount, or value of
something

7. Front Office Planning Function
Establishing
Room Rates
Forecasting
Room Availability
Budgeting for
Operations

8. Room Rate Categories
Rack
Corporate/commercial
Group
Promotional
Incentive
Family
Package plan
Internet rate
Distressed-inventory rate
Complimentary

9. Pricing
Room
Pricing
Market
Condition
Rule-of-
Thumb
Hubbart
Formula
Planned Rate
Changes

10. Market Condition Approach
How do our rates compare to those of our competition
Are our rates much lower or higher than those of competition
How are our rates affecting our revenue & our share ofbusiness
What is our occupancy percentage
What is occupancy percentage of competitive set
Will our total revenue improve if we increase/decrease rates
Have any trends emerged during past six months

11. Rule of Thumb
• Approach$1 for each $1000, 70%
Occupancy
• Considerations
• Inflation Rate
• Old Value / Current Value
• Extra Services Profitability

12. Hubbart Formula Approach
Calculate hotel’s
desired net income or
return on investment
Calculate pretax
profits
Calculate all operating
costs
Calculate all fixed
expenses
Calculate non room
profit / loss
Determine room
revenue needed to
cover costs & NI / ROI
Forecast rooms to be
sold based on
estimated occupancy
Calculate hotel’s
required ADR

13. Planned Rate Changes
Rates are likely to change during calendar year depending on factors
such as location, seasonality or major event
Hotels may publish Rack Rate Range
Factors reflecting rates
• Peak, high demand
• Off-Peak, low demand

14. Forecasting Room Availability
Thorough
knowledge of hotel
& surrounding
Market profiles of
constituencies
served
Reservation trend &
history lead times
List of special events
scheduled
Business & historical
profiles of groups
Room availability of
competing hotels
Plans for hotel
renovations impact
no of rooms
Plans of competitive
hotels

15. Forecasting Room Availability
Sample Forecast Forms
Forecast Formula
Forecasting Data

16. Forecasting Data
Based on Historical Trends & Records
Based on Existing Reservations
• Number of Expected Arrivals
• Number of Walk-ins
• Number of Stay overs
• Number of No Shows
• Number of Under stays
• Number of Expected Check outs
• Number of Overstays

17. Rooms Available Formula
Total number of guestrooms
– Out-of-order rooms
– Stay overs
– Reservations
+ Reservations  no-show percentage
+ Under stays
– Overstays
Number of rooms available for sale

18. Sample Forecast Forms
10 Day Forecast
Developed jointly by
FOM & Resv.
Manager, perhaps in
conjunction with a
room availability
forecast committee
Consists of: daily
forecasted
occupancy, groups
commitments &
comparison of
previous period’s
forecasted & actual
room counts &
occupancy %
Prepared for F&B,
banquet, & catering
operations
Help departmental
managers plan their
staffing & payroll
levels for upcoming
period, should be
completed &
distributed in
advance of coming
period
Automated systems
have programs to
help managers
accurately forecast
business

19. Sample Forecast Forms
3 Day Forecast
Updated report that
reflects more current
estimate availability
Details significant
changes or events not
highlighted on ten-day
forecast
Guide management in
fine-tuning labor
schedules & adjusting
availability
Daily revenue meeting is
held to focus on
occupancy & rate
changes for next several
days; results of this often
reflect in forecast

20. Sample Forecast Forms
Room Count Considerations
Control books, charts,
software applications,
projections, ratios, &
formulas can be essential
in short & long-range
room availability planning
Each day in some hotels,
front office management
performs several physical
counts of rooms occupied,
vacant, reserved, &
expected to check out, to
complete occupancy
statistics for that day
Automated system may
reduce need for most
physical counts, since
system can be
programmed to
continually update room
availability information
Important for front desk
agents to know exactly
how many rooms are
available, especially if
hotel is expected to
operate at nearly 100%
occupancy

21. Budgeting for Operations
Forecasting Room Revenues
• Important long-term planning that FOM performs
• Annual operations budget is profit plan that addresses all revenue sources & expenses
• Annual budgets are commonly divided into monthly plans that, in turn, are divided
into weekly & daily
• Budget are standards against which management can evaluate actual results of
operations
• Room revenues & profits are usually greater than for other hotel revenue areas,
accurate rooms division budget is vital to creating hotel’s overall budget
• Budget planning process requires close cooperation of all managers

22. Budgeting for Operations
Forecasting Room Revenues
• FOM’s primary responsibilities in budget planning are forecasting rooms revenue & estimating
related expenses
• Historical financial information often serves as foundation on which FOM build revenue forecasts
• Method of rooms revenue forecasting involves analysis of rooms revenue from past
• Approach to forecasting revenue bases revenue projection on trends of past room sales &
average rates
• Detailed approaches to forecasting rooms revenue consider variety of different rates
corresponding to room types, guest profiles, days of week, seasonality of business, & other
factors

23. Budgeting for Operations
Estimate Expenses
• Expenses are variable, they vary in direct proportion to rooms
• Historical data can be used to calculate approximate % of rooms revenue that each expense item may represent
• These % figures can then be applied to amount of forecasted rooms revenue, resulting in $ estimates for each expense
category for budget year
• Rooms division expenses are payroll & related expenses, guestroom laundry, guest supplies, hotel merchandising,
travel agent commissions & direct reservation expenses, & other
• When rooms division expenses are totaled & divided by number of occupied rooms, cost per occupied room is
determined
• Cost per occupied room is often expressed in dollars & as %
• Method of estimating expenses is to estimate variable costs per room sold & multiply these costs by number of rooms
expected to be sold

24. Budgeting for Operations
Refining Budget Plans
• Budget plans commonly supported by detailed information gathered in budget preparation
process & recorded on worksheets & summary
• Support documents should be saved to provide explanation of reasoning behind budget; may help
resolve issues that arise during budget review & may assist in preparation of future budgets
• Many hotels refine their budgets as they progress through the year: reforecasting is normally
suggested when actual operating results start to vary significantly from budget
• Significant variations may indicate that conditions have changed since budget was first prepared

25. Evaluating Front Office Operations
Evaluating results is management
function; without evaluation,
managers will not know
attainment of planned goals
FOM should evaluate results of
department activities daily,
monthly, quarterly, & yearly basis
Tools use to evaluate success of
operations include: daily report of
operations, occupancy ratios,
rooms revenue analysis, income
statement, rooms schedule,
rooms division budget reports,
operating ratios, & ratio standards

26. Evaluating Front Office Operations
The Daily Operations
Report
Occupancy Ratios
Room Revenue
Analysis
The Hotel Income
Statement
The Rooms Schedule
Rooms Division
Budget Report
Operating Ratios Ratio Standards

27. Evaluating Front Office Operations
Daily Operations Report
• Report of operations is also known as manager’s report, daily report, daily revenue
report
• Summarizes hotel’s financial activities during 24 hours
• Provides means of reconciling cash, bank accounts, revenue, & accounts receivable
• Serves as posting reference for accounting journals & provides data that must be
input to link front & back office automated functions
• Structured to meet needs of individual properties
• Copies are usually distributed to GM & department/ division managers

28. Evaluating Front Office Operations
Occupancy Ratios
• Measure effectiveness of front office & reservations sales staffs in selling
guestrooms
• Include occupancy percentage, multiple occupancy, average daily rate,
revenue per available room, revenue per available customer, & average rate
per guest
• Front office system typically generates occupied rooms data & calculates
occupancy ratios for FOM to review

29. Evaluating Front Office Operations
Occupancy Percentage
• Commonly used operating ratio in front office is occupancy %
• Occupancy % relates number of rooms sold to number of rooms available during specific period of time
• Hotels use number of rooms sold to calculate occupancy percentage, while others use number of rooms
occupied
Multiple occupancy
• Forecast F&B revenue, indicate clean linen requirements, & analyze average daily room rates
• This ratio is also referred to as double occupancy ratio
• Multiple occupancy can be calculated by determining multiple occupancy percentage or by determining
average number of guests per room sold

30. Evaluating Front Office Operations
Average Daily Rate
• FOM calculate average daily rate even though rates within property can vary
significantly depending on type of room, type of guest, day of week, & season
• Hotels include complimentary rooms when calculating average daily rate, to show
their effect on rate
Revenue per Available Room
• Important hotel statistics, provides statistical benchmark for comparison with similar
hotels
• Divides total room revenue of hotel by number of available rooms

31. Evaluating Front Office Operations
Revenue per Available Customer
• RevPAC divides total revenue of hotel by number of guests staying overnight
• Hotels with high volumes of multiple occupancy, RevPAC is especially
important, since it provides average room rate spending figure per guest
Average Rate per Guest
• Average rate per guest is of special interest to resort hotels
• All guests are included in this calculation; some hotels include children

32. Evaluating Front Office Operations
Room Revenue Analysis
• Room variance report lists rooms that have been sold at other than their rack rates
• Managers use room variance report to review use of special rates to determine whether
staff has followed policies & procedures
• FOM evaluates sales effectiveness of front office staff is to generate yield statistic, which
is actual rooms revenue as % of potential rooms revenue
Yield Statistic
• Potential rooms revenue is amount of rooms revenue that can be generated is all rooms
in hotel are sold at their rack rate on given day, week, month, or year

33. Evaluating Front Office Operations
Hotel Income Statement
• Provides important financial information about results of hotel operations for given period oftime
• Reveals amount of net income for given period, so it is important financial statements management uses to
evaluate hotel’s success
• Rooms division information appears on first line, under category of operateddepartments
• Amount of income generated by rooms division is determined by subtracting “payroll & related expenses” & other
expenses from amount of net revenue produced by rooms division
• Payroll expenses charged to rooms division may include those associated with FOM, front desk agents,
reservations agents, housekeepers, & uniformed service staff
• Rooms division is not merchandising facility, there is no “cost of sales” to subtract from net revenue amount
• Revenue generated by rooms division is usually largest single amount produced by revenue centers within hotel

34. Evaluating Front Office Operations
Rooms Schedule
• Income statement contains summary; separate departmental income
statements prepared by revenue center, called “schedules,” provide
details
• Accounting division, not front office accounting staff, usually prepares
rooms schedule
• By carefully reviewing rooms schedule, FOM may be able to develop
action plans to improve division’s financial condition & services

35. Evaluating Front Office Operations
Rooms Division Budget Report
• Hotel’s accounting division prepares monthly budget reports that compare actual revenue & expense
figures with budgeted amounts
• Budget reports can provide timely information for evaluating front office
• Budget report should include both monthly & year-to-date variances for all
• % variances are determined by dividing dollar variance by budgeted amount
• Dollar & % variances are shown because either type of variance alone may not indicate significance of
variances reported
• It should be expected that actual results will differ somewhat from budgeted amounts, since budgeting is
not perfect science
• Significant variances from budget should be investigated by management

36. Evaluating Front Office Operations
Operating Ratio
• Assist managers in evaluating success of front office operations
• Dividing payroll & related expenses by division’s net room revenue
yields one of most frequently analyzed areas of front office operations:
labor cost
• Operating ratios should be compared against standards such as
budgeted percentages; any significant differences should be
investigated

37. Evaluating Front Office Operations
Operating Standards
• Operating ratios are meaningful when compared against useful criteria such as planned ratio
goals, historical ratios, & industry averages
• Ratios are best compared against planned ratio goals
• Industry averages can be found in publications prepared by national accounting firms & trade
associations serving hospitality industry
• Operating ratios are only indicators; they do not solve or reveal source of problem(s)
• At best, when ratios vary significantly from planned goals, previous results, or industry averages,
they are indicating that problems may exist
• More analysis & more investigation are usually necessary

38. Planning for Disaster
Power Failures Automated System
Failure
Criminal Activities Severe Weather
Flood, Rain Fire Terrorism

39. Planning for Disaster
Disaster
planning is
often
overlooked by
managers;
nevertheless, it
is important for
managers to
have disaster
plan in place &
make sure that
staff is familiar
Types of
disasters to
consider, from
power failures
to acts of
terrorism
It is impossible
to plan for
every
conceivable
disaster, but
plans should be
in place for deal
with those that
can be foreseen
Given today’s
level of hotel
automation, it is
important for
disaster plans
to state what
corrective
actions front
office need to
take if essential
technology
applications fail
FOM should
prepare for
possible
criminal activity

40. Planning for Disaster
Severe weather,
floods, & other
natural
disasters
require special
planning to
deal with
Natural disaster
plans should be
coordinated
with local &
regional
disaster
planning
agencies
Fire, terrorism
attack, or
others may
require
complete hotel
evacuation &
shutdown of
operations
Staff must
know how to
conduct
themselves in
situations &
what their
responsibilities
are in assisting
guests &
securing hotel
Managers
should
periodically
review &
update disaster
plans for its
effectiveness,
disaster training
regularly
scheduled &
ongoing activity

41. ?
Any Questions