Front Office Sem V Notes PDF

(UNIT 1)- CHAPTER 1 (SEM V PG 41) Planning Operations 1.1 Management Function Resources available to Front Office managers include people, money, time, materials, energy and equipment. All these are in limited supply, and an important part of the front office managers job involves the planning of...

(UNIT 1)- CHAPTER 1 (SEM V PG 41) Planning Operations 1.1 Management Function Resources available to Front Office managers include people, money, time, materials, energy and equipment. All these are in limited supply, and an important part of the front office managers job involves the planning of the allocation of these limited resources to achieve the departmental objectives. An equally important part of the job is evaluating the end result of the front office activities in meeting these objectives. 1.1.1 Planning, Organising, Planning is probably the most important management function in any business. Without the direction and focus planning provides, the front office manager may become confused and may waste resources towards tasks that are unrelated and inconsistent with achieving the departmental goals. A Front Office managers first step in planning is to define the departmental goals. A good manager identifies both short term goals and long term goals and develops a plan to meet them. An example of a short term goal is to raise the occupancy to 85% for the month, while the long term goal might be achieve a consistent minimum 85% occupancy by improving room forecasting techniques in anticipation to future demands and trends and overall guest satisfaction. An important component of planning is communication. An effective manager will not only communicate his planning strategy to his superiors but also his subordinates and department members, seeking their feedback. Communication is most effective when put in writing, so ideas can be thought over, documented, brainstormed, illustrated, as well as the response can be catalogued. There are several benefits to communication and sharing of ideas. Firstly the departmental staff members who contribute to the planning process take responsibility of contributing towards the subsequent steps of the action phase. Secondly staff members have the opportunity to give their constructive comments and criticisms to the manager before the plan can be finalized. If staff members have concerns about certain issues regarding the plan, the manager can address these issues before finalizing the plans. Thirdly, once the plans are finalized, all concerned will have a more comprehensive understanding of the goal or the objective. If several different viewpoints emerge leading to competing perspectives, all valid and keeping the department and organizational goals in focus, the plan will have to be reformed and modified so that those involved can share the onus of carrying through the ‘action’ phase with a higher degree of involvement and responsibility as they were a part of the process since the beginning. 1  (SUPERIORS-GM/ FOM) (VERTICAL) (HK, S&M) COMMUNICATION (HORIZONTAL) (SUBORDINATES- RECEPTIONISTS/ BELL BOYS) (ORGANIZING) Using the planned goals as a guide, the FOM organizes the department by dividing the work among the front office staff and distributing the workload and keeping in mind that everybody gets his assignment as per his expertise, duties and responsibilities and the time frame within which the tasks have to be completed. Organizing also involves determining the sequence in which the tasks are to be performed establishing completion deadlines for each group of tasks. 1.1.2 Co-ordinating, (Co-ordinating) This involves bringing together available resources to achieve and attain the planned goals. A front office manager must be able to coordinate the efforts of his team to ensure that they perform efficiently effectively and on time. Coordinating may involve working with other departments such as Sales & Marketing, HK and Accounting. Many front office goals may depend on the close coordination with the liaising department’s assistance to achieve them. Eg the role of the HK is to ensure the hand over vacant and inspected rooms to the front desk for the quick and speedy check-ins’. Hence the front office manager’s ability to coordinate with not only his front office team, but also with HK, Room Service & Sales & Marketing, goes a long way to achieve the desired goals and targets. 1.1.3 Staffing, Leading, 2 STAFFING This involves recruiting applicants and selecting those best qualified to fill available positions. This requires the development and creation of job descriptions that thoroughly describe the position and the essential qualities and experience required to fulfill the duties the job position entails. The Front office manager liaises with the human resource department to develop job descriptions for Front office positions. Usually the H.R. department is involved in the first level of qualifying and interviewing job applications. In hotels the HR department liaises with the training department to create an initial induction schedule for trainees and new recruits which involves a certain period in each of the operations’ areas (F&B service and Food production POS outlets, Front Office & HK, as well as Sales, Maintenance, HR & Personnel and the Accounts department). This induction is essential for the new recruits to know the specific areas of the hotel as well as the personnel at these areas. LEADING ‘a manager leads by example’. For a manager, leadership involves overseeing, training, motivation & disciplining, as well as setting an example for the other staff. To direct the work of others, the manager has to analyze the work to be done, organize the tasks in logical order and consider the environment in which the staff will perform the tasks. If the department has not met the time schedules set for the completion of the tasks on hand, the FOM will actively involve himself and lead by example till such time that the schedule is back on track. A manager should not hesitate to do the job which he has delegated to his subordinates if the situation demands so. It is often necessary for the department heads to participate in the day to day operations to demonstrate their expertise and job knowledge especially when the work load is excessive and the stress levels are high. This is a common occurrence in hotels where the manager involves himself in greeting guests, checking-in and checking out guests, pre- blocking rooms, liaising with the housekeeping and controlling the position of the house to ensure maximum occupancy and at the same time not keeping the guests waiting to check-in beyond the permissible time. 1.1.4 Controlling, Evaluating CONTROLLING Every hotel has a system of internal controls in place to protect the interests of the hotel. One such control measure is the requirement of a witness who signs when the when the cashier makes his deposit at the end of his shift. Another control measure is the establishment of the pre-determined house limit beyond which a guest is asked to settle existing dues before he can avail further credit. Internal controls work only when the manager believes in the systems importance and follow the guidelines established for the procedures for their use. The control procedure ensures the actual results of operations closely match planned results. 3 EVALUATING Evaluating determines the extent to which the planned goals and targets are attained. Evaluating involves reviewing and when required modifying the initial planning strategy keeping in mind the ever changing trends and market conditions. INITIAL PRE-OPERATING OPERATING APPRAISAL ACTIVITIES ACTIVITIES ACTIVITIES ACTIVITIES PLANNING ORGANIZING LEADING EVALUATING COORDINATING CONTROLLING STAFFING CHANGE IN PROCEEDURES THE THREE IMPORTANT PLANNING FUNCTIONS ARE 1 ESTABLISHING ROOM RATES 2 FORECASTING ROOM AVAILABILITY 3 BUDGETING FOR OPERATIONS 1.2 ESTABLISHING ROOM RATE The front office will have more than one room rate category for each of its guest rooms. Room rate categories correspond to the types of rooms which are basically four types 1 suites, 2 two beds rooms 3 one bed(queen/ king) 4 studio room (studio bed) varying in area location and furnishing. 1.2.1 Different Approaches for pricing rooms The difference in the room rates are based on two criteria 4  1 Sales Mix which consist of the different market segments having business dealings with the hotel (rack/ corporate/ package/ travel agents & wholesale operators/ airline crews & layovers/ regulars guests and FIT guests.). 2 The time of the year (peak period and lean period) There are three methods for determining room rates 1 MARKET CONDITION APPROACH 2 RULE OF THUMB APPROACH 3 HUBBART FORMULA 1.2.2 1 MARKET CONDITION APPROACH This approach is based on the room rates of comparable hotels in the geographical area and what they are charging for the same product. The properties are often called the ‘comparative set’, which comprises of 8-10 hotels competing with the property in the vicinity. The competition is based on location, property rating and type and brand identification. Not every property in the location is the competitor, as guests who research for moderately priced lodging will look for price range rather than location. The thought behind this approach is that the hotel will charge only what the market is willing to pay and the price for the accommodation is usually dictated by the competition faced by each other in the locality. A competitive analysis usually focuses on the following questions - how do our rates compare with those of the competition ? - are our rates lower or higher than those of the competition? Does increasing or decreasing our rates affect our revenue and our share of business - what is our occupancy %? What is the occupancy% of the competitive set? Will our total revenue increase if we increase / decrease our rates? - What trends have emerged in the previous 6 month period. 1.2.3 Rule of Thumb Approach This approach sets the rate of a room at Re 1 for each Re. 1000 of construction and furnishings cost per room, assuming a 70 % occupancy. For. E.g., assume that the average construction cost of a hotel is 5 Lakhs (5,00,000). Using this approach results in an average selling price of 500/- per day single occupancy, double occupancy and other types of rooms would be priced differently but the minimum average room rate would be Rs.500/-. The emphasis placed on hotel's construction cost fails to consider the effects of inflation. For e.g., a well maintained hotel worth Rs.10 Hundred Thousand 5 (10 Lacs) per room today might have been constructed at Rs. Two Hundred Thousand (2 Lacs) per room 25 / 30 years ago. The 1 per Rs.1000 approach would suggest an average selling price of 20/-per room; however, a much higher rate would appear to be appropriate. As the rate does not take into consideration the inflation rates, increased labour costs, furnishings and supplies cost. In these cases management might consider the current, replacement cost of a hotel, rather than the original cost, as a basis for the rule of the Thumb application. Another way of accounting for inflation would be to index current costs against original costs. E.g. if a hotel was built five years ago and inflation has increased at an annual rate of 3%, the Re 1 per Rs. 1,000 would require Re 1.15 per Rs.1000 today. This approach also fails to consider contribution from other revenue areas like F & B. laundry, telephone and other services. The rule of thumb approach should also consider occupancy level at the hotel. This approach assumes 70% occupancy to determine average room rate. If lower occupancy is expected, the hotel will have to capture a higher average room rate to generate same amount of revenue. The manager must take into consideration the rate of occupancy level. 1.2.4 HUBBART FORMULA THE HUBBART FORMULA IS A COST APPROACH TO DETERMINE THE AVERAGE PRICE PER ROOM. THE ENTIRE APPROACH IS A ‘BOTTOM UP’ APPROACH WHICH CONSIDERS ROI (DESIRED PROFITS), INCOME TAX, FIXED EXPENSES, OPERATING OVERHEAD EXPENCES, MANAGEMENT FEES AND OTHER DIRECT OVERHEAD EXPENCES. IT IS CALLED BOTTOM UP BECAUSE THE FIRST ITEM DESIRED PROFITS (ROI) IS AT THE END OF ANY INCOME STATEMENT. THE SECOND ITEM –INCOME TAXES IS USUALLY THE SECOND LAST ITEM AND SO ON. THE APPROACH INVOLVES THE FOLLOWING STEPS 1. CALCULATE THE DESIRED PROFIT BY MULTIPLYING THE ROI BY THE OWNERS INVESTMENT. 2. CALCULATE PRETAX PROFITS BY DIVIDING DESIRED PROFIT BY 1 MINUS TAX RATE 3. CALCULATE THE FIXED CHARGES AND MANAGEMENT FEES (ESTIMATING DEPRECIATION, INTEREST EXPENCES, PROPERTY TAXES, INSURANCE, MANAGEMENT FEES 4. CALCULATE OPERATING EXPENCES (ADMINISTRATIVE & GENERAL, HUMAN RESOURCES, ADMINISTRATIVE & GENERAL, MAINTENANCE AND ENERGY COSTS) 5. ESTIMATE NON ROOM DEPARTMENT INCOME / EXPENDITURE (F&B/ TELEPHONE) 6. CALCULATE THE REQUIRED ROOMS DEPARTMENT INCOME (SUM OF PRETAX PROFITS , FIXED CHARGES AND MANAGEMENT FEES, UNDISTRIBUTED OPERATING EXPENSE AND OTHER OPERATING DEPARTMENT INCOME / EXPENCES) 6  7. DETERMINE THE ROOM DEPARTMENT REVENUE (ADD DIRECT EXPENCES) 8. CALCULATE THE AVERAGE ROOM RATE BY DIVIDING ROOMS DEPARTMENT REVENUE BY EXPECTED ROOMS TO BE SOLD ILLUSTRATION The Harkins hotel, a 200 room property is projected to cost 99,00,000/-, inclusive of land, building, equipment and furniture. An additional 1,00,000/- is needed for working capital. The amount is financed with a loan of 75, 00,000/- (@ 12%interest) and the owners providing 2,500,000/-. The owners desire 15% annual return on their investment. A 75 % occupancy is estimated : 54,750/- rooms are sold throughout the year. (200 x0.75x 365). The income tax rate is 40%. Other additional expenses are estimated as: Property taxes 2,50,000/- Insurance 50,000/- Depreciation 3,00,000/- Administrative & General 3,00,000/- Data Processing 1,20,000/- Human Resources 80,000/- Transportation 40,000/- Marketing Expenses 2,00,000/- Property operation & maintenance 2,00,000/- Energy costs 3,00,000/- The other operating department income/ expenses F&B (income) 100,000/- Rentals and other income 100,000/- Rooms Department direct expenses are $10 per room CALCULATE THE AVERAGE ROOM RATE _____________________________________________ ITEM CALCULATION AMOUNT Desired Net Income Owners investment x ROI 3,75,000/- 2,500,000/- X.15 =3,75,000/- Pre Tax Income Net Income 6,25,000/- 1 – Tax 3,75,000/- 1-.4 = $625,000/- Interest Expense PrincipalX Interest Rate x 900,000/- Time= 7,50.0000/- x.12 x1 =900,000 Income before Interest & 15,25,000/- 7  Tax Fixed Expenses 6,00,000/- (Estimated Depreciation, Property taxes & Insurance) Income before Fixed Exp 21,25,000/- Operating Expenses (Adm, DP, HR, 12,40,000/- Transportation, Mkt Exp, Prop Op &Mnt, Energy) REQUIRED OPERATING DEPARMENT INCOME 33,65,000/- LESS F&B INCOME 100,000/- RENTALS & OTHER 100,000/- - (200,000/-) INCO 31,65,000/- Direct Expenses @ $10/ 54,750/- x $10 = 547,500 547,500/- room ROOM REVENUE (EST) 37,12,500/- 54,750/- $67.81- ARR , THE SINGLE AND DOUBLE RATES CAN BE ASCERTAINED The double occupancy is 40% (4 out of every 10 rooms sold is at the double rate. The room rate difference is 10$. Establish the rate for a single room and a double room. DOUBLES SOLD = DOUBLE OCC X NUMBER OF ROOMS X OCC% DAILY 0.4X200(.75) = 60 SINGLES SOLD DAILY = 200X.75 – 60 = 90 USING THE REQUIRED AVERAGE RATE OF $67.81 THE SINGLE AND DOUBLE RATES CAN BE ASCERTAINED AS FOLLOWS SINGLES SOLD DOUBLES SOLD X (X AVERAGE ROOM DAILY (X) + RATE DIFFERENCE) RATE NUMBER OF ROOMS SOLD 90X - 60(X+10$) $67.81 150 + = X 8 90(X) + 60X +600 = (67.81)(150) 150 X = 10,171.5 -600 150X = 9571.5 X = 9571.5 150 X = 63.81 SINGLE ROOM RATE X + $10 = 73.81 DOUBLE ROOM RATE SIMILARLY A % PRICE DIFFERENTIAL CAN BE ALSO SET WHERE IF THE DOUBLE ROOM RATE IS 15% MORE THAN THE SINGLE ROOM RATE 90x + 60(x)(1.15) =($67.81)(150) 90 x + 69x =10.171.5 159 x = 10.171 x = 10.171 159 x = 63.97 SINGLE ROOM RATE 63.97 (1.15) = $73.57 DOUBLE ROOM RATE 1.3 The RACK RATE is the price for overnight accommodation as determined by the front office management for a particular room type. The rack rate is listed on the room rate schedule to inform front desk agents of the standard selling price of each guestroom in the hotel. The rack rate is applicable unless the guest qualifies for a discount or belongs to particular category where a predetermined rate is applicable.(corporate, crew, group, package, regular guest/ VIP). Rack rates are assigned as per the room type category. A standard room with no special amenities and services(butler services/attached living room & kitchenette) is assigned the lowest rack rate. Larger rooms (mini suites) are assigned higher rack rates while deluxe and super deluxe suites have the highest rack rates. Concierge and club floor rooms with butler services and facilities included in the room tariff package specially to suit the business traveler have a special rack rate to commensurate the services rendered and facilities offered. When a property includes a meal plan in its room pricing(eg Bed & Breakfast/ Full American Plan/ Modified American Plan) the rack rate depends on the number of persons occupying the room and the characteristics of the room. A very small % of the rooms are sold on rack basis. Rates are mainly dictated by competition and demand as well as the season (lean or peak) guests may ask for and qualify for discounted rates especially in periods of low demand 9 where it is the buyers market. More so ever hotels may include a host of ‘add ons’ to make rate attractive. An ‘add-on’ is an inclusion in the package that does not result in an obvious cost to the hotel e.g. early check-in and late check-out at no extra charge, complimentary business lounge access for a certain period subject to availability, WiFi ) Given below are certain rates applicable as per the competition faced and the demand generated by a property as per the services rendered and facilities offered. 1.3.1 - Corporate or Commercial Rate The rate offered to companies that provide frequent business for the hotel or its chain. GCR & CCR (Core Corporate Rate The Core Corporate Rate is an added incentive by hotels who offer to corporate entities a further reduction in the negotiated rates as they avail accommodation in more than two properties of the hotel chain. The guaranteed corporate rate is the negotiated rate for corporations availing accommodation in up to two properties in the hotel chain. 1.3.2 - Group rate The rate offered to groups meetings and conventions using the hotel for their functions. 1.3.3 - Promotional Rate The rate offered to individuals who may bring future volume business for the hotel. The rate may also be extended during special low occupancy periods to any guest to promote occupancy 1.3.4 - Incentive rate The rate offered to guests in affiliated organizations such as travel agencies and airlines because of the potential referral business. The rate may also be offered to promote future business: it is often extended to group leaders, meeting planners, tour operators and others capable of providing the hotel with additional room sales. 1.3.5 - Family Rate A rate reserved for families with children 1.3.6 10 - Package Plan rate this rate includes a guest room in combination with other events, activities or services such as breakfast/ club floor facilities/ transfers Internet rates (also usually packaged) & Distressed- Inventory Rate (also usually packaged) Internet Rate: A special discounted rate that many hotel companies offer through their own internet websites. A web rate is usually classified as the ‘best available rate’, and is available to guests making their on line reservations themselves. Many hotels companies guarantee that the best available rate is at their own web site and often offer a bonus plan for guests who find lower rates elsewhere. During projected lower occupancy business cycles, web rates tend to be discounted rates. Since the hotel company incurs less expense selling a guest room through its own web site, its rates will naturally be lower. Comparatively GDS, Travel Agency sites, and other distribution channels list higher room rates as it involves a commission component Distressed- Inventory Rate A rate offered when a hotel projects or experiences low occupancy. This rate usually represents a significant discount on the rack rate and is implemented to help build occupancy. The idea behind Distressed- Inventory Rate is that the discount will be sufficient to attract guests who seek lower rates. These rates are usually offered at opaque internet web sites which offer hotel rooms based on targeted prices and not on a specific hotel property; in fact the guest commits to the rate even before learning of the hotel property or brand. Most hotels restrict the use of Distressed- Inventory Rate to only those times they expect extremely low occupancy. 1.3.7 Complimentary rate A room rate provided to special guests and/ or industry leaders. The term complimentary rate usually means that the guest will not be charged for the room during the stay. However, the guest may receive charges for dining, telephone calls, etc The front office manager should examine the circumstances under which special rates are granted and ensure that the front office staff adhere to standard procedures and prescribed policies when quoting these rates. All policies should be properly explained to the front office staff who should obtain proper approval when applying the room rate. 11  Establishing rack rates for room types and determining discount categories and special rates are some of the revenue manager’s major duties. The revenue manager recommends rack rates to the hotel senior management after analyzing forecasted occupancy and business conditions. Rack rates are usually determined on a yearly basis and are a major factor in the annual hotel budgeting process. Determining discounted rates and special rates is a more tactical decision often taken by the revenue manager/ more often after consultation with the revenue committee. While determining rack rates or discounted rates, the manager should consider factors such as operating expenses, guest demand, market conditions, inflationary factors and break even levels. Room rates often serve as market positioning benchmarks since they directly reflect service expectations to the hotels target market. Room rates can be critical to the hotels success. Eg a property offering economy or limited service will not succeed if its rates are positioned in the upscale levels. 1.4 FORECASTING ROOM AVAILABILITY The most important short term planning that the FOM does is forecasting the number of rooms available for future room reservations. Room availability forecasts are also used as occupancy forecasts. Since there are a fixed number of rooms in the hotel, forecasting the number of rooms available for sale and the number of rooms expected to be occupied forecasts the occupancy % expected on a given date. The forecasted availability and occupancy numbers are very important to the daily operations of the hotel. Occupancy forecasts are the foundation for making room pricing decisions. They also influence when rooms are to be placed on out of order status for maintenance or deep cleaning. Without an accurate forecast the rooms may go unsold or may be sold at inappropriate rates. Room occupancy forecasts can be useful to the FOM attempting to schedule the necessary number of employees for an expected volume of business. These forecasts may be helpful to other hotel department managers as well. Eg, the HK dept manager needs to know how many rooms a front office expects to be occupied to properly schedule room attendants. The maintenance department will schedule short term and long term renovation plans depending on these forecasts. Restaurant managers must know the same information to better schedule service staff. The chef requires this figure to determine the meals to prepared. Obviously a forecast is only as reliable as the information on which it is based. Since forecasts can serve as a guide in determining operating costs, every effort should be made to ensure forecasting accuracy. Forecasting is a difficult skill to develop which is acquired through experience, effective record keeping and accurate counting methods. Experienced FOM have found that several types of information can be helpful in room availability forecasting: 12   a through knowledge of the hotel and its surrounding area  market profiles of the constituencies the hotel serves  occupancy data for the past several months and for the same period of the previous year  reservation trends and a history of reservation lead times (how far in advance reservations are made)  a listing of special events scheduled in the surrounding geographic area  business and historical profiles of specific groups booked for the forecast dates  the number of non guaranteed and guaranteed reservations and an estimate of the number of expected no shows  the% of rooms already reserved and the cut off date for group room blocks held for the forecast dates  the room availability of the most important competing hotels for the forecast dates  the impact of citywide or multi-national hotel groups and their potential influence on the forecast dates  plans for re modeling or renovating the hotel that would change the number of available rooms  construction or renovating plans for competitive hotels in the area 1.4.1 FORECASTING DATA The process of forecasting room availability generally relies on historical occupancy data as well as business already committed. Historical data is used to take some of the guesswork out of forecasting. To facilitate forecasting the following daily occupancy data should be collected;  number of expected room arrivals: based on existing reservations and historical trends for new reservations and on cancellations prior to the arrival date  number of expected room walk-ins: based on historical records  number of expected room stay overs ( rooms occupied on previous nights that will continue to be occupied for the night in question based on existing reservations.)  Number of expected room no shows: based on historical records  Number of expected room under stays (check outs occurring before expected departure dates) : based on historical data  Number of expected room check-outs: based on existing reservations  Number of expected room overstays ( check outs occurring after the originally reserved departure date) 13  Some hotels with a very high double occupancy% may be as concerned with guest counts as room counts. Eg an all inclusive resort with a large amount of business from vacationing couples may want to forecast guest as well as room count activity. Convention hotels may often have the same concerns.  Much of this information is available in reports documents and DAY DATE GUESTS ROOM ROOM ROOM ROOM NO OCC OVERSTAY UNDERSTAY ROOM ARR WALK- RESV SHOWS/ ROOMS ROOMS ROOMS CHECK INS (LM XXL) OUTS MON 4/1 118 70 13 63 6 90 6 0 30 TUE 4/2 145 55 15 48 8 115 10 3 30 WED 4/3 176 68 16 56 4 120 12 6 63 THU 4/4 117 53 22 48 17 95 3 18 78 FRI 4/5 75 35 8 35 8 50 7 0 80 SAT 4/6 86 28 6 26 4 58 6 3 20 SUN 4/7 49 17 10 12 5 30 3 3 45 TOTAL 766 326 90 288 52 558 47 33 346 other data sources at the property. The hotels daily reports are useful for this research. These reports are summarized and electronic stored. This data is important for room availability forecasting since it is used in calculating daily operating ratios that help determining the number of available rooms for sale. Ratios are mathematical expression of relationships between two numbers that is determined by dividing one by the other. Most ratios that apply to front office operations are expressed in %. The ratios examined in the following sections are % of no shows, walk ins overstays and under stays. Managers look for consistency in ratios. Consistency is an identifiable pattern. Without consistency forecasting ratios and projecting operating performances may be difficult OCCUPANCY HISTORY FOR THE FIRST WEEK OF APRIL 14 1.4.1.1(1.4.1.2) PERCENTAGE OF NOSHOWS/ LAST MINUTE CANCELLATIONS The % of no shows indicates the proportion of reserved rooms that the expected guests did not arrive to occupy (and did not cancel in advance) on the expected arrival date. The ratio helps the front office manager when (and if)to sell already committed rooms to walk in guests. The % of no shows is calculated by dividing the number of room no shows for a specific period of time ( day week month or year)by the total number of room reservations for the same period. Using figures from the above table the % of no shows for the hotel during the first week of April can be calculated as follows. % OF NOSHOWS = NUMBER OF ROOM NOSHOWS NUMBER OF ROOM RESERVATIONS 52 = 288 =0.1806 X 100 = 18.06% OF RESERVED ROOMS Certain hotels track noshow/ last minute cancellations statistics in relation to guaranteed and non guaranteed reservations. Non guaranteed reservations typically have a higher no show %/ last minute cancellations than guaranteed reservations since the potential guest has no obligation to pay for the accommodation if he/ she do not register at the property. A property incorporating the no show/ last minute cancellations probability into room availability forecasts depends on the hotels sales mix. Eg corporate guests have a much lower no show %/ last minute cancellation last minute cancellations than individuals. A hotel that has a larger corporate segment business will have a lower noshow % /last minute cancellations, than a hotel with very little corporate group business. Resort hotels make the reservation guarantee as a precondition for room conformation by the payment of an advance deposit and hence the possibility of noshows and last minute cancellations is very little unless the cancellation occurs well in advance and is governed by the cancellation terms laid down by the property. Even commercial hotels make the pre-payment guarantee for the first night as a precondition for confirmation of the reservation. The most common guarantee is the credit card guarantee where the hotel informs the guest/ corporate of the same and requests for the credit card number along with a signed photocopy of the front and the back of the CC. an authority letter allowing the hotel to debit the amount for the first room night is also required. 1.4.1.3 PERCENTAGE OF WALK-INS 15 The % of walk ins is calculated by dividing the number of rooms occupied by walk-ins for a period by total arrivals for the same period. As per the above table, the % of walkins for the hotel is calculated as follows. PERCENTAGE OF WALK-INS= NUMBER OF ROOM WALK INS TOTAL NUMBER OF ARRIVALS =90 326 =.2761 =27.61% Walk in guests occupy available rooms that are not held for guests with reservations. Often hotels can sell rooms to these guests at a higher rate since these guests do not have an opportunity to consider alternate properties. Front desk agents sometimes show a guest room to a walk in guest and this strategy can be more effective than trying to sell rooms over a telephone or through a web site. Walk in guest sales improve both the occupancy and the average room rate as the room is sold mostly at the rack rate. However from the planning perspective, it is generally better to have reservations then walk-ins. The no show ratio has a direct bearing on the walkin ratio as the number of no shows will have a direct effect on the number of walk ins as the hotel will have to accept more walk ins to make up for the lost business. One effective way to predict walk ins is to be aware of the competitors occupancy situation as a higher demand for the competing hotel will lead to higher walk-ins for the property by way of booking out or referral business/ spillover. There is a better opportunity for walk ins if the nearby hotels are experiencing high demand. 1.4.1.4 PERCENTAGE OF OVERSTAYS Overstays represent rooms occupied by guests who stay beyond their originally scheduled departure dates. Overstay guests may have arrived with guaranteed or non guaranteed reservations or even as walk ins. (Stay over rooms are occupied by guests who stay for at least one additional room night which could extend for more room nights.) The % of overstay guests is calculated by dividing the actual number of overstay rooms for the period with the expected room check outs for the same period. The number of expected room check outs is the number of occupied rooms shown by the front office system due for departure on that date before the designated check out time or advance intimated late check outs. 16  IMP NOTE to calculate the forecasting of the % of overstays it is important to take into consideration the addition of overstays for that period to the expected departures for the same period and deducting the under stays for the same period. The forecasting of the overstays from the above table for the hotel is as follows PERCENTAGE OF OVERSTAYS= NUMBER OF OVERSTAY ROOMS NUMBER OF EXPECTED CHK-OUTS _____________47____________ 346-33+47 = 0.1306 = 13.06% OF EXPECTED CHECK-OUTS To help regulate room overstays, front desk agents are trained to verify an arriving guests departure date at check-in. such verification can be critical especially when the hotel is at near full occupancy and there are no provisions for overstay guests. Overstays can also create problems when specific accommodation has been blocked for arriving guests, especially suites for VIP’s as per their profile and these suites are still occupied by the overstaying guest. 1.4.1.5 PERCENTAGE OF UNDERSTAYS Under stays signify rooms occupied by guests who check-out before their originally scheduled departure dates. Under stay guests may have arrived at the hotel with guaranteed or non guaranteed reservations or even walk-ins. IMP NOTE to calculate the forecasting of the % of understays it is important to take into consideration the addition of overstays for that period to the expected departures for the same period and deducting the under stays for the same period. The forecasting of the understays from the above table for the hotel is as follows PERCENTAGE OF UNDERSTAYS= NUMBER OF UNDERSTAY ROOMS NUMBER OF EXPECTED CHK-OUTS _____________33____________ 346-33+47 = 0.0917 = 9.17% OF EXPECTED CHECK-OUTS 17 Guests leaving before their stated departure date create empty rooms that typically are difficult to fill. Under stay rooms may represent permanently lost room revenue. Overstays on the other hand may boost room revenue in lean periods, when the hotel is not operating in full capacity. In an attempt to regulate overstay and understay rooms, the front desk agent should:  Confirm or re confirm each guests departure date at registration. Some guests may already know a change in their plans or a mistake may have been made at the time of taking the reservation and the entry of an incorrect departure date. The sooner the incorrect data is rectified the greater the chance for improved planning  Convey to the guest that an arriving guest has the same room assigned to him and request the existing guest to move to an alternate room. A polite note by the duty manager on the morning of the scheduled departure date explaining the situation can be placed in the room.  Review the history of conference clientele staying in the hotel. There could be a strong possibility of understays as some guests usually check out before the final day of the conference which entails the closing ceremony. The wash factor/ wash down where the manager reduces the group block can be considered. While it is difficult for the hotel to hold guests for the number of nights that they have reserved, Some hotels that have dealings with business houses whose guests have a transient history of departing before their scheduled departure date as mentioned may apply the reservation deposit to the last night of stay and not the first night.  Contact potential overstay guests about their scheduled departure date to confirm their intention to check-out. Room occupancy data should be examined each day and the expected departure rooms should be flagged. Guests who have not left by the check out time should be contacted and asked about their departure intentions. This procedure enables the manager to revise the estimate the overstays. 1.4.2 FORECAST FORMULA Once relevant occupancy statistics have been gathered, the number of rooms available for sale on any given date can be determined by the following formula: TOTAL NUMBER OF GUESTROOMS LESS NUMBER OF OUT OF ORDER ROOMS LESS NUMBER OF ROOM STAYOVERS 18 LESS NUMBER OF ROOM RESERVATIONS ADD NUMBER OF ROOM RESERVATIONS X % OF NO SHOWS ADD NUMBER OF ROOM UNDERSTAYS LESS NUMBER OF ROOM OVERSTAYS__________________ NUMBER OF ROOMS AVAILABLE FOR SALE NOTE: this formula does not include walk-ins as the number of walk-ins that the hotel can accept is determined that the number of rooms that remain available for sale. If the hotel is full due to existing reservations , stay overs and other factors, it cannot accept walk-ins. On April 1st , in a 120 room property 3 rooms are OOO and 55 stay overs. On that day there are 42 guests with reservations scheduled to arrive. Since the % of no shows has been calculated at 18.06 %, the Front Office Manager calculates that as many as 8 guests with reservations are not likely to arrive (42 X 0.1806 = 7.59 rounded to 8). Based on historical data, 6 under stays and 15 overstays are also expected. The number of rooms projected to be available for sale on April 1st is as follows TOTAL NUMBER OF GUESTROOMS 120 LESS OOO ROOMS - 3 LESS NUMBER OF ROOM STAYOVERS -55 LESS NUMBER OF ROOM RESERVATIONS -42 ADD NUMBER OF ROOM RESV X NO SHOW% +8 ADD NUMBER OF UNDERSTAYS +6 LESS NUMBER OF ROOM OVERSTAYS -15 NUMBER OF ROOMS AVAILABLE FOR SALE 19 Therefore the hotel is considered to have 19 rooms available for sale on 1 st April. Once this figure is determined, the front office management can decide whether to accept more reservations and can determine its levels of staffing. Front office planning decisions must remain flexible: they are subject to change as the front office learns of reservations, cancellations and modifications. Room availability forecasts are based on assumptions that may vary form day to day. 1.4.3 SAMPLE 10 DAY AND 3 DAY FORECASTS The front office may prepare several different forecasts depending on its needs. Occupancy forecasts are developed on a monthly basis. And reviewed by the Rooms Divisions and the F&B departments to forecast revenues, project expenses and develop labor schedules. A ten day forecast may be used to update labor scheduling and cost projections which is later 19  supplemented by a current 3 day forecast. These forecasts ensure that there is adequate staff levels for the expected business and contains costs by anticipating the occupancy and meal covers. TEN DAY FORECAST Most hotels develop a 10 day forecast where the FOM and the Reservations Manager analyze  Daily forecasted occupancy figures, including room arrivals, room departures, rooms sold and number of guests  The number of group bookings: the group name/ arrival & departure date/ number of rooms reserved / number of guests/ meal plans/ quoted rates  A comparison of the previous period ratio of forecasted and actual room counts / occupancy % (10 DAY FORECAST) ROOMS DIVISIONS DATE PREPARED________________TILL________ 20 PREPARED BY__________________ (TO BE SUBMITTED TO THE DEPARTMENT HEADS AT LEAST ONCE A WEEK BEFORE THE FIRST DAY LISTED ON THE FORECAST DAY & DATE (SAME AS FRI SAT SUN MON TUE WED THU FRI SAT SUN PAYROLL SCHEDULE ESTIMATED DEPARTURES RESERVATION ARRIVALS (GROUP) RESERVATION ARRIVALS (INDIVIDUALS) FUTURE RESERVATIONS RESERVATIONS RECEIVED AFTER FORECAST IS COMPLETED EXPECTED WALK INS (% OF WALK INS BASED ON ARRIVALS (SAME DAY OF THE PAST TWO WEEKS) TOTAL ARRIVALS STAYOVERS TOTAL FORECASTED ROOMS MULTIPLE OCCUPANCY % RMS OCC BY> 1 GST ÷ OCC ROOMS ( AVERAGE OF SAME DAY FOR LAST TWO WEEKS) FORECASTED NUMBER OF GUESTS ACTUAL ROOMS OCCUPIED (TAKEN FROM DAILY REPORT FOR ACTUAL DATE TO BE COMPLETED BY FRONT OFFICE SUPERVISOR FORECASTED VARIANCE (DIFFERENCE BETWEEN FORECAST AND ROOMS OCCUPIED ON DAILY REPORT) EXPLANATION(TO BE COMPLETED BY FRONT OFFICE SUPERVISOR AND SUBMITTED TO GENERAL MANAGER: ATTACH ADDITIONAL MEMO IF NECESSARY_________________________________________________________________ APPROVED (GENERAL MANAGERS SIGNATURE ) DATE______________________ THREE DAY FORECAST 21  THREE DAY FORECAST DATE OF FORECAST____________FORECAST PREPARED BY_________________ TOTAL ROOMS IN HOTEL (TOTAL ROOMS LESS TONIGHT TOMMOROW 3RD NIGHT OOO/ UR ROOMS) PREVIOUS NIGHTS OCCUPIED ROOMS(STAY OVERS) EXPECTED DEPARTURES EARLY DEPARTURES UNEXPECTED STAYOVERS (OVERSTAYS) UNOCCUPIED ROOMS ROOMS AVL FOR SALE EXPECTED ARRIVALS WALKINS & SAMEDAY RESV NOSHOWS OCCUPIED ROOMS OCCUPANCY PERCENTAGE EXPECTED HOUSE COUNT 1 Previous nights occupied rooms is determined from the actual number of rooms occupied the previous night. 2 Unoccupied rooms = total number of rooms less number of rooms occupied 3 Expected House count = forecasted Single Occupancy% & + Multiple Occupancy % for the day (this data is generated by the PMS) DISTRIBUTION: GM’S OFFICE, FRONT DESK, HK, F&B OUTLETS, BANQUETS, ACCOUNTING, SALES & MARKETING, SECURITY 22 1.4.4 REFINING FORECASTS The FORECASTS are discussed with the F&B manager and the executive housekeeper, for group arrivals on meal plans, room bookings for conferences & conventions so that the restaurants and banquets have an idea of the anticipated meal covers. For practical purposes the ‘housecount’ is divided into group and non group categories where the group would include, meetings and seminars sponsored by corporates involving stay for the attendees, groups sponsored by travel agents and wholesale tour operators on specific meal plans and packages (stay with meals) created by the sales department to boost occupancy during the lean periods. To help various departments in their payroll & staffing , this forecast is to be completed and circulated to the various departments by mid week. The various steps to refine the forecast include  The current number of occupied rooms to be reviewed  The estimated number of overstays and expected departures which are noted  Relevant reservation information for each room(and guests) by date of arrival, length of stay and date of departure  The projected % of no shows and anticipated understays will determine the walk-ins which can be accommodated  Finally conventions and other groups listed on the forecast will enable the various department managers to anticipate heavy or light guest movement. IMP NOTE: (the above projections are based on the hotels recent history, the seasonality of its business and the known history of specific groups scheduled to arrive.)Most automated systems provide a summary of recorded data in a report format for the front Office manager to use. Forecasting is done by Revenue Management software which is more sophisticated with special trend analysis and regression analysis programming built in. 1.5 BUDGETING FOR OPERATIONS The most important planning function that front office managers perform is budgeting front office operations. The hotel annual operations budget is a profit plan that addresses all revenue sources and expense items. Annual budgets are divided into monthly plans that in turn are sometimes divided into weekly and even daily plans. These budget plans can become standards against which the management can evaluate the actual results of operations. In most hotels, room revenues are greater than Food & Beverage / Banquet and other revenues. In addition, rooms division profits are usually greater than those of other departments. Therefore an accurate rooms divisions budget is 23  vital to create the hotels overall budget. The budget planning process requires the closely coordinated efforts of all management personnel. While the front office manager is responsible for the rooms divisions forecasts, the accounting division staff will be counted upon to supply the department managers with statistical information essential to the budget preparation process. The accounting division staff is also responsible for coordinating the budget plans of individual managers into a comprehensive property wise operations budget for the top managements review. The General Manager and controller typically review departmental budget plans and prepare an overall hotel budget report for approval by the hotels owners. It the budget is not satisfactory, elements requiring change may be returned to their respective department managers for review and revision. The Front Office Manager’s primary responsibility in budget planning are forecasting Rooms Revenue and estimating related expenses. Rooms Revenue is forecasted with inputs from all department managers in the rooms divisions. 1.5.1 A three day forecast is an updated report that reflects a more current estimate of room availability. It details any significant changes from the 10 day forecast. A three day forecast is intended to guide management for fine tuning labor schedules and adjusting room availability information. In some hotels a brief daily revenue meeting is held to focus on occupancy and rate changes for the next few days. The summary of discussions of this meeting is included in the 3 day forecast form as given below 1.5.2 FORECASTING ROOMS REVENUE Historical financial information often serves as the foundation on which the Front office Managers build rooms revenue forecasts. One method of rooms revenue forecasting involves an analysis of rooms revenue from past periods. Actual and budgeted differences are noted and the rooms revenue for the budgeted year is predicted. There are two ways of forecasting rooms revenue YEAR ROOMS REVENUE PROJECTED INCREASE PRIOR YEARS % 2007 1,000000 10% 2008 1,100000 100000 10% 2009 1210000 11,0000 10% 2010 1331000 121000 10% The above shows a yearly increase of 10% every year from 2007 to 2010, where the revenue increased from 1,000000 to 1331000. If future conditions are similar, the subsequent years forecast (2011) will project the revenue as 1,464,100, a 10 % increase over 2010. 24 Another approach to forecasting rooms revenue is based on past room sales and average daily room rates. YEAR ROOMS SOLD ADR NET ROOMS OCCUPANCY REVENUE % 2007 30660 50 1533000 70% 2008 31974 52 1662648 73% 2009 32412 54 1750248 74% 2010 32850 57 1872450 75% The rooms revenue statistics for a 120 room hotel from 2007 to 2010 shows the occupancy % increased by 3% in the year 2007-2008, and one % for every subsequent year till 2101. average daily room rates increased by 2, 2 and 3 euros in the same periods. The rooms revenue forecasts for 2011 can be projected as a 1% increase in occupancy for 2011 (76%), and a 3 euro increase in the Average Daily Rate(60 euros). (as per the trend of the last year and the current year) The forecast can be calculated as follows. FORECASTED = ROOMS X OCCUPANCY X AVERAGE ROOMS REV AVAILABLE PERCENTAGE DAILY RATE = 43,800 (120 X 365) X.76 X 60 EUROS =1997280 EUROS This calculation assumes that all rooms will be available for sale throughout the year which will not be the case, but this is the starting point for the projection. The trend of declining occupancy may also be considered as new competitors enter the market, taking some of the market share of the property. The same logic applies to projecting rate growth. The management may decide to maintain or reduce rates to maintain or improve occupancy when new competitors enter the market. This may be difficult with inflation and rising costs but possible due to better management techniques and controlling costs. It is the practice of most hotel managers to review the performance of the hotel monthly by comparing the monthly Profit & Loss figures with those predicted in the yearly budget. WHAT IS A BUDGET? 1. BUDGET: this is the amount of money that the hotel predicted would be made (with regard to revenue) or spent (with reference to costs) or predicted rooms sold(with regard to sales mix) 25  2. ACTUAL: this is the amount of money that the hotel actually made (revenue) spent (costs) and actual room sales (sales mix) 3. VARIANCE: the difference between the actual and the budget VARIANCE= ACTUAL-BUDGET Each source of Revenue, Costs & Sales Mix is assessed under three headings. ***Rooms Division Revenue Breakdown-the seven categories 1 Room Revenue-Room Charge/Rate 2 Mini Bar 3 Telephone/ facsimile /internet /wi-fi (wireless internet) 4 Business Center: hire charges – Tele Conferencing/ Video Conferencing/ Panaboard (facilities used) Secretarial services- Interpreter(charges as per duration/ Translator(charges as per document size and number.) 5 Laundry and Dry-cleaning and other services rendered 6 Pay Channels accessible on the TV network (latest systems include movies on demand where the guest can choose upto 500 digital movies and have total control(stop FF/ Rew/ Play) *Abroad by far the most frequently hired movies are adult x rated. 7 Health Club- Massage Parlor/ Yoga Instructor/ Note: Few hotels abroad even charge for concierge services, car parking charges and porterage separately. 1.5.3 ESTIMATING EXPENCES Most front office expenses are direct expenses that may vary in direct proportion to rooms revenue. Historical data can be used to calculate the approx % of room revenue that each expense may represent. The % figures can be applied to the total amount of forecasted rooms revenue resulting in actual estimates for each expense category for the budget year. ***Rooms Division Operating costs breakdown 26  1 Payroll-salaries and wages(HK-Front Office- Telephones-Business Center, -laundry /HR/ Accounts/ maintenance/ time office(apportioned proportionately) 2 Telephones-call costs from rooms and offices- internet costs and wi-fi-/ internet on TV 3 Laundry & Dry Cleaning-costs of laundering and maintenance of machinery (guest) staff (apportioned proportionately) 4 In- House Movies- Cost of service provider (normally outsourced ) and maintenance of the system. NO DIRECT REVENUES TO OFFSET THE FOLLOWING COSTS 5 Cost of repair to guest items, Cost of equipment used to perform tasks. Car wash materials and wages to cleaner –materials for shoe shine. packing & packaging materials 6 Flowers- Cost of Flowers for public areas (not for guest use) 7 Uniforms- Cost of uniforms and their up-keep 8 Guest Supplies- Cost of all items in room for the guest.-Soap- shampoo- conditioner , stationery and newspapers etc 9 Linen- Cost of Laundering and Purchasing linen. 10 Vip program-Similar to guest supplies but only given to some guests and not all. 11 Travel Agents and GDS commission-Percentage of room rates given to travel agent and GDS 12 Miscellaneous costs- first aid kits-umbrellas for guest use etc SALES MIX THE MARKET SEGMENTS THAT GENERATE BUSINESS FOR THE HOTEL FIT/ FREE INDIVIDIAL TRAVELLERS/ FIXED ITINERARY TOURIST/ FREE INDEPENDENT TRAVELLER (RACK) CORPORATE: GCR/ CCR / AIRLINE BOOKINGS (CREWS/ LAYOVERS) TRAVEL AGENTS: (IIT) INDIVIDUAL INCLUSIVE TARIFF INDIVIDUALS AND FAMILIES (DESIGNER HOLIDAYS/ FRIENDS GLOBAL/) 27  GROUP (GIT): GROUP INCLUSIVE TARIFF- LARGE GROUPS SPONSORED BY WHOLESALE TOUR OPERATORS SUCH AS SOTC/ SITA HRG/ THOMAS COOK PACKAGE: CREATED AND OFFERED BY THE SALES & MARKETING TEAMS OF HOTELS TO BOOST SALES DURING LEAN PERIODS OR PEAK PERIODS EG: WEEKEND PACKAGES FOR BUSINESS HOTELS (REDUCED RATES) CHRISTMAS AND NEW YEAR PACKAGES (ABOVE RACK RATES) CONFERENCES & CONVENTIONS 1.5.4 REFINING BUDGET PLANS Departmental budget plans are commonly supported by detailed information gathered in the budget preparation process. These documents provide an explanation of the reasoning behind the decisions made while preparing departmental budget plans. These records help to resolve issues and justify points of opinion that arise during the budget review. These documents are also used in the preparation of future budget plans. Many hotels review expected results of operations and revise operations budgets as they progress through the budget year. Modifying the forecast is normally done when operating results may start varying from the ‘actuals’, and these variances may indicate that the conditions have changed since the budget was first prepared. While operating budgets are rarely changed once the management has approved them, re forecasting provides a more realistic picture of current operating conditions. 1.6 KEY TERMS (REFER TO DEFINITIONS) 28 UNIT 2 (CHAPTER 2) EVALUATING FRONT OFFICE OPERATIONS Evaluating the results of front office operations is an important management function. Without thoroughly evaluating the results of operations, the managers will not know whether the front office is attaining the planned goals. Successful front office managers evaluate the results of department activities on a daily, monthly, quarterly and yearly basis. The important tools that Front Office managers can use to evaluate the performance of the Front office are  The Daily Operations Report  Occupancy Ratios  Rooms Revenue Analysis  The Hotel Income Statement  The Rooms Schedule  Rooms Divisions Budget reports  Operating Ratios  Ratio Standards  Planning for disasters 2.1.1 THE DAILY OPERATIONS REPORT (FORMAT OF D.O.R.) This is also known as the managers report, the daily report, the daily revenue report, and it summarizes the hotels financial activities during a 24 hour period. The daily operations report provides a means of reconciling cash, bank accounts, revenue and accounts receivables. The report also serves as a posting reference for accounting journals (city ledger), and provides important data that must be input to link front & back office automated functions. These reports are unique to each property. This report features room statistics and occupancy ratios in one entire section. 29 2.1.2 THE MONTHLY INCOME STATEMENT This provides important financial information about the results of hotel operations for a given period of time. The period may be one month or longer but should not exceed one business year. Since the statement of income reveals the amount of net income for a given period, it is one of the most important financial statement the management uses to evaluate the overall success of operations. Although front office managers may not directly rely on the hotels statement of income, it is an important financial indicator of operational success and profitability. The hotel income statement relies in part on detailed front office information that is supplied through the rooms schedule. The hotels statement of income is called the consolidated income statement because it presents a composite picture of all the hotels financial operations. 2.1.3 OCCUPANCY RATIOS Occupancy Ratios measure the success of the front office in selling guest rooms. The following room statistics must be gathered to calculate basic occupancy ratios.  Number of rooms available for sale  Number of rooms sold  Number of guests  Number of guests per room  Net rooms revenue Generally this data is presented on the daily operations report. Occupancy Ratios include  Occupancy %  Multiple (double) occupancy ratios  Average Daily Rate-ADR(ARR)  Revenue per available room (revPAR)  Revenue per available customer(revPAC)  Average Rate per Guest 2.1.3.1 OCCUPANCY % The most commonly used ratio in the front office is the occupancy %. occupancy % relates to either the number of rooms sold or occupied to the number of rooms available during a specific period of time. It is important to note that some hotels use the number of rooms sold to calculate this %. While other hotels use the number of rooms occupied to calculate this %. (the occupied rooms would include complimentary rooms versus the sold rooms which means revenue). Including complimentary rooms in the calculation can 30 change certain operating statistics such as average room rate. Both these methods are valid as long as either is followed consistently. Sometimes out of order rooms will be included in the number of rooms available. Sometimes properties that evaluate management performance based on the occupancy %, including the OOO rooms in the number of rooms available, creates a certain amount of pressure on the manager to get these rooms fixed and make them into available rooms ASAP. Including all rooms provides a consistent base on which to measure occupancy. Conversely not including OOO rooms may allow managers to artificially increase the calculated occupancy % simply by improperly classifying unsold rooms as OOO. Some properties do not include OOO rooms because the rooms are not available for sale. Also if the occupancy % includes OOO which are genuinely ‘unlettable’, and if the management goes strictly by the occupancy % the front office staff maybe unfairly penalized. The occupancy % is calculated as follows OCCUPANCY % = NUMBER OF ROOMS OCCUPIED (INCLUDING HOUSE USE & COMP STAY) X 100 TOTAL NUMBER OF ROOMS (INCLUDING OOO ROOMS) 2.1.3.2 ROOM COUNT Each day, the Front office performs several physical counts of rooms occupied, vacant, reserved and due to check out to complete the occupancy statistics for that day. Most hotels have automated systems that are programmed to continually update room availability information. It is important for the reception to know how many rooms are available especially if the hotel expects to operate at 100% occupancy. The following criteria have to be fulfilled for an accurate room count. - On high occupancy days the count is made thrice a day (7am, 3pm & 6pm) while on normal days the count is made twice a day(7am & 6pm) - Check housekeeping report against the folio bucket to detect sleepers and skippers - Check for rooms that are due out but have balances in their folios especially if the mode of payment is by credit card - Check reservations for any duplications (reservations made in the name of JAMES GEORGE could have already been checked in under GEORGE JAMES - Follow up with the Reservations to ensure that all cancellations are transmitted - Call the local/ international airport for a report on cancelled flights - If the reservation was made through the Reservation Manager/ Sales Manager/ Executive of the hotel and the property is full call the person and ensure that the guest is a confirmed arrival and note if it’s a late arrival. 31  - Close to the property’s cutoff time follow up with non guaranteed reservations to ensure their arrivals/ late arrivals/ no shows. - After the property’s cutoff time all non guaranteed reservations can be considered as no shows in the absence of information that the guest will be a late arrival. - If any rooms are under repair check if the room has been room fault has been rectified. Some rooms are placed under repair for very minor reasons which are rectified by the maintenance or housekeeping dept. let the HK and maintenance know that a heavy day is expected so they can do the job ‘on the double’ - Communicate in writing all follow up information/ instruction pertaining to the room count to the incoming duty manager. (formula) ROOM COUNT a) TOTAL ROOMS – OOO/UR ROOMS = AVAILABLE or LETTABLE ROOMS AVAILABLE ROOMS – VACANT ROOMS = OCCUPIED ROOMS b)TOTAL NO OF OCCUPIED ROOMS ON PREVIOUS NIGHT + NUMBER OF NEW ARRIVAL ROOMS – NUMBER OF ROOMS VACATED BY DEPARTURE GUESTS 2.1.3.3 HOUSECOUNT This refers to the total number of guests staying in the hotel at a particular time This can be calculated by taking into consideration Overstays- this represent rooms occupied by guests who stay beyond their originally scheduled departure dates. Stay overs- Stay over rooms are occupied by guests who stay for at least one additional room night which could extend for more room nights. Walk ins-Walk in guests are those guest that inquire room availability at the time of check-in, and occupy available rooms that are not held for guests with reservations. Early arrivals-guests who arrive before their scheduled date and time of arrival Understays or earlys (guests who leave before their scheduled date of departure. Guests with Complimentary meal & stay vouchers Permanently blocked rooms (corporate and long staying guests) House Guests (House use rooms) 2.1.3.4 DOUBLE/ MULTIPLE OCCUPANCY RATIO The multiple occupancy ratio ( frequently called the double occupancy ratio) is used to forecast F&B revenue indicate linen requirements, and analyze average daily room rates. Multiple Occupancy can be calculated by 32 determining a multiple occupancy % ( also called occupancy multiplier or a multiple occupancy factor) / determining the average number of guests per rooms sold or occupied MULTIPLE OCCUPANCY % = NUMBER OF ROOMS OCCUPIED BY MORE THAN ONE GUEST X 100 NUMBER OF ROOMS OCCUPIED 2.1.3.5 BED OCCUPANCY The ‘Bed Occupancy’ is important for hotels with a very high multiple/ double occupancy% not just for forecasting linen requirements and scheduling housekeeping but also to provide indicators for breakfast covers, lunch and dinner covers.. This will in turn reflect on restaurant, room service and kitchen staff rota scheduling, indenting for kitchens and overall H.R. planning. Eg an all inclusive resort with a large amount of business from vacationing couples if the hotel promotes inclusive packages and for on season and off season periods. (formula) BED OCCUPANCY % (CAN ALSO BE REFERRED TO AS GUEST OCCUPANCY OR SLEEPER OCCUPANCY) NUMBER OF BEDS SOLD X 100 NUMBER OF BEDS AVAILABLE FOR SALE 2.1.3.6 Foreigners occupancy % This is the ratio of the total number of foreign guests to the house count. This is an indicator to proportion of domestic guests to foreign guests The formula is FOREIGNERS OCCUPANCY %= NUMBER OF FOREIGN GUESTS X 100 HOUSE COUNT NOTE: foreigners occupancy% = 100 – domestic occupancy % 2.1.3.7 AVERAGE DAILY RATE or AVERAGE RATE PER ROOM 33  Most front office managers calculate an average daily rate even though room rates vary significantly from single rooms to suites, from individual guests to groups and conventions, from weekdays to weekends and from busy to slack season. AVERAGE DAILY RATE (ADR) = TOTAL ROOMS REVENUE NUMBER OF ROOMS SOLD Some hotels include complimentary rooms in the denominator to show the true effect of complimentary rooms on the average daily rate. This is also called the ‘average house rate’ 2.1.3.8 REVENUE PER AVAILABLE ROOM (revPAR) RevPAR is one of the most important hotel statistics because it provides statistical comparison of similar hotels. Rev PAR divides the total rooms revenue by the number of available rooms RevPAR= TOTAL ROOMS REVENUE AVAILABLE ROOMS Alternate analysis of RevPAR = ADR X Occupancy% RevPar can analyze the performance of the hotel over any time frame-daily weekly, monthly, quarterly or yearly. The RevPAR analysis can be used to compare hotels of different sizes. 2.1.3.9. AVERAGE RATE PER GUEST Resort hotels are often interested in knowing the average rate per guest(ARG) this rate is computed inclusive of every guest in the hotel including children.. AVERAGE RATE PER GUEST= TOTAL ROOMS REVENUE NUMBER OF GUESTS Note: the REVENUE PER AVAILABLE CUSTOMER (RevPAC) is a very important statistic which divides the total revenue generated by the hotel by the number of guests staying in the hotel. This is an indicator of the average revenue generated by each guest. For hotels with high multiple occupancy, 34 this figure is especially important since it provides an average spending per guest. Resort hotels plan their F&B budgets and Spa budgets based on the average spending of in house guests which are their main source of revenue RevPAC = TOTAL REVENUE NUMBER OF GUESTS 2.1.4 YIELD STATISTIC For the determination of ideal revenue realization, the occupancy % itself is not sufficient, as a high occupancy may not necessarily mean high revenues.(the rooms have to be sold at below rack rates due to competition from similar properties/ periods of low demand in the lean season.) For establishing a more realistic picture of the rooms division department in terms of revenue generated, the yield which considers the achievement factor along with the occupancy percentage is a more accurate benchmark. The achievement factor considers the actual result in terms of revenue in proportion to what could have been the ideal revenue if all rooms were sold at the maximum rates. By considering the latter as a benchmark(100) the yield can be measured to indicate the actual revenue as a % of the ideal revenue(100) YIELD=NUMBER OF ROOMS NIGHTS SOLD X ACTUAL AVERAGE RATE NUMBER OF ROOMS AVL POTENTIAL AVERAGE ROOM RATE OCCUPANCY % X ACHIEVEMENT FACTOR 2.1.5 Market Share Index =the market share index is the share of the sold rooms of that particular hotel in comparison to the total of rooms sold by all the comparable hotels in the vicinity(competitive set). This indicator is important for each hotel in that category to ascertain the reputation and influence of that hotel with reference to the quality of service offered, and position and ranking vis a vis competing hotels. Fair Market Share- This is referred to the performance of the hotel in terms of revenue, in comparison to the competing hotels in that category and vicinity. There are 5 hotels in the competitive set A-200 rooms B-300 rooms C-400 rooms 35 D-500 rooms E-600 rooms. The total market potential will be 2000 rooms The individual market potential will be equal to the number of rooms available for sale in that hotel. The rightful market share or the fair market share can be summarized as HOTEL NO OF TOTAL MARKET RIGHTFUL SHARE (NO OF ROOMS POTENTIAL ROOMS/ TOTAL MARKET POTENTIAL) A 200 2000.10 OR 10% B 300 2000.15 OR 15% C 400 2000.20 OR 20 % D 500 2000.25 OR 25 % E 600 2000.30 OR 30 % The weekly sale of the above hotels is A-1300 rooms, B-1500 rooms, C-2100 rooms, D-2600 rooms, E-3000 rooms. The actual and potential market share of these hotels is HOTEL NO OF POTENTIAL ACTUAL ROOMS A 200 1400 1300 B 300 2100 1500 C 400 2800 2100 D 500 3500 2600 E 600 4200 3000 14,000 10500 The performance of the entire set can be evaluated as under 10500 =.75 OR 75% 14000 The actual market share can be ascertained as under HOTEL MARKET SHARE % 36 A 1300/10500 12.38% B 1500/10500 14.28% C 2100/10500 20.00% D 2600/10500 24.76% E 3000/10500 28.57% On comparing the actual market share with the rightful market share the performance of each hotel can be gauged in the competitive set HOTEL ACTUAL MARKET RIGHTFUL DIFFERENCE SHARE SHARE A 12.38% 10% +2.38 B 14.28% 15% -0.72 C 20.00% 20 % NIL D 24.76% 25 % -0.24 E 28.57% 30 % -1.43 Market share index enables managers to assess the hotels performance with respect to its competitors. UNIT 3 (CHAPTER 3) 3.1 & 3.2 HANDLING FOREIGN CURRENCY & FOREIGN CURRENCY EXCHANGE (Advance Deposits from non regular guests) Sir, would you be paying by Euro, USD or Pound Sterling. Guest: USD Ask the guest for the amount in the stated currency along with a request for his passport. ‘Could I please have USD 300 along with your passport. As per the management policy and the statutory requirement of the government of India, I would be required to photocopy your passport. 37 We will be issuing to you a Foreign Exchange Encashment Certificate indicating that you have utilized foreign currency.’ The receptionist will count the currency and will check the passport for the following -the photo id of the guest -the guests signature -the validity of the passport and the visa -if the visa is invalid, he will ask for the residency permit/ certificate of registration and fill in the required details on the reg card. He will make a photocopy of the passport and give the copy and currency to the cashier to make a Foreign Exchange Encashment Certificate and an advance deposit receipt (the photocopy will be used by the cashier to fill in the pp details in the FOREX certificate) ‘Sir, your Passport your FOREX certificate and your advance deposit receipt. We will be keeping the photocopy of your passport’ THE RECEPTIONIST ENTERS IN THE REG CARD, THE BILLING INSTRUCTIONS/ REMARKS ‘CASH FOREX-USD, ADVANCE DEPOSIT RECEIVED USD 300 /RECT NO 8727. DT ___________FOREX CERT NO_____________ Settlement of a/c at the end of stay Sir could I have your room number.- The cashier will enter the room number and will get the display of the guests folio on the PMS. He will inform the guest of the billing instructions if any- including bill routing/ bill to company/ non guest & city ledger instructions. In the absence of these, he will ask the guest the mode of settlement-cash /credit card/travellers cheques/ for cash in foreign exchange, the procedure is as follows Sir, would you be paying by Euro, USD or Pound Sterling. Guest: USD Ask the guest for the amount in the stated currency along with a request for his passport. The cashier will print the bills and state the final amount including taxes, requesting for the cash in USD. He will make a Foreign Exchange Encashment Certificate and fill in certain guest details from the passport. He will request the guest for the amount in USD He will count the currency and ask the guest to sign on the bills. He will return the passport and balance amount in INR, informing the guest to preserve the FOREX certificate and use it at the airport to reconvert the unspent INR back to FOREX before leaving India. He will insert the guest copy of the bills into an envelope. (he will give the clearance on the departure errand card authorizing the bell captains desk load the luggage into the vehicle) TRAVELLERS CHEQUES If the guest states that he would like to settle the a/c in travellers cheques, the receptionist will ask the guest for the name of the Travellers Cheques and the currency indicated on them. He will check for its acceptability. He will ask for the guest’s passport and the travellers cheques equivalent to the total amount chargeable on the bills. He will check their authenticity by entering the serial numbers on the travellers cheque issuing company site link and checking if they are not in the list of lost/ stolen/ misplaced or invalid. He will check the passport for the following -the photo id of the guest -the guests signature on the passport with the signature existing on all the travellers cheques -the validity of the passport and the visa -if the visa is invalid, he will ask for the residency permit He will ask the guest to countersign all the Travellers Cheques in his presence. He will compare the current signature with the existing signature on the travellers cheques and the signature on the passport. 38 He will make a Foreign Exchange Encashment Certificate using the passport to enter the guest details. He will request the guest to sign on the Forex certificate and the hotel bills ‘Sir, your passport your FOREX certificate and your copy of hotel bills Thank you for staying with us. Have a pleasant journey THE RECEPTIONIST ENTERS IN THE REG CARD, THE BILLING INSTRUCTIONS/ REMARKS ‘TC AMEX-USD/ ADVANCE DEPOSIT RECEIVED 300 /RECT NO 8727. DT_______ ___________FOREX CERT NO_____________’ 3.3 Procedure for accepting foreign currency Hotels have to take a valid license from the RBI to deal in foreign exchange. The RBI issues two types of licenses one for the Purchase of foreign currency and one for the sale of foreign currency. A hotel with a purchase license can only purchase foreign currency and the refund amount if any will be made in Indian Rupees accompanied by a Foreign Exchange Encashment Certificate PROCEEDURE - the guest contacts the front desk cashier for foreign exchange - the cashier requests for the guest to produce his passport to verify his identity - the cashier asks the guest for the amount of foreign currency which is acceptable by the hotel as per the RBI guidelines - the cashier checks the exchange rate from RBI or a leading nationalized bank in town - the cashier asks the guest for the amount of foreign currency in cash and travellers checks - the cashier prepares the currency exchange certificate and requests the guest to sign the same - the cashier calculates the total to be paid to the guest in local currency as per the exchange rate - the cashier gives the amount to the guest along with the original exchange certificate, attaches the duplicate to the currency and leaves the statutory third copy in the book - the cashier fills the details of the daily foreign currency exchange transactions in the foreign currency control sheet. FOREIGN CURRENCY CONTROL SHEET SR DATE NAME NAT PP £ € $ OTHER RATE RUPEE NO OF NO EQUIVALENT GUEST 39 CURRENCIES ACCEPTED BY RBI 40  3.5 (NAME & LOGO OF HOTELRBI LICENSE NO________ We hereby certify that we have purchased today foreign currency from ____________________ holder of passport no ___________________Nationality________________ and paid Rupee equivalent as per details given below (rupee equivalent in words)________________ (A) Currency purchased (indicating clearly Amount Rupee equivalent Exchange rate notes/ coins & travelers checks separately (1) (2) (3) (4) Notes / coins (enter currency note number) Travelers Cheques (enter travelers cheque number) (B)Details of adjustments made towards settlement of goods supplied & services rendered Bill nos Date Amount (C)NET AMOUNT PAID IN RUPEES_______________ AMOUNT IN WORDS____________________________________________________ (total under (A) minus Total under (B)) Authorized Signatory____________ Name____________________Designation_______ Note : this certificate should be preserved by the holder to facilitate re conversion of the rupees balance from the amount dispensed in ( C ) at the time of departure from India, or to make payment in Indian currency for the services rendered 3.6 FOREIGN EXCHANGE SETTLEMENT USING CREDIT CARD Certain hotels ask for the guest’s credit card after checking its acceptability by the hotel, informing the guest that as per the management policy, the hotel will charge the guest in advance one nights room tariff on the credit card on a daily basis depending on the duration of the guest’s stay. The guests card is asked for, checked by the receptionist for the validity and the authenticity and verified by the electronic draft capture for the authorization number and the credit availability. 41  The charge slips are then generated and the guest asked to sign on them. The signatures are compared after which the original is retained and the duplicate given back to the guest for the guest record. The credit card is returned and the amount is debited to the guest account indicating an actual transaction sale. This is done on a daily basis till the guest checks out when the guest is asked for the credit card for the final time and is charged for the balance due indicated in the final bill. A standard ‘All Payments Direct’ instruction is given to all the POS departments when the check-in is registered in the computer. The guest is not allowed to sign for any meals /services or facilities he avails of in the outlets of the hotel and is requested to settle the bills either by cash or by his credit card. The only credit which the guest gets is for telephone calls, facsimile, and mini bar in the room. The hotel faces a small risk of the guest leaving the hotel without checking out at the front desk with these charges unpaid. Many hotels have introduced certain checks to prevent these situations. They seal the minibar for non- regular guests who come in the above category. If the guest wants to utilize the mini bar he is asked for a separate advance on his credit card. For the above, the guest status and the duty managers discretion are the sole deciding factors. SETTLEMENT OF A/c AT THE END OF STAY Sir could I have your room number.- The cashier will enter the room number and will get the display of the guests folio on the PMS. He will inform the guest of the total amount due to the hotel and of the billing instructions if any- including bill routing/ bill to company/ non guest & city ledger instructions. in the absence of these, he will ask the guest the mode of settlement (Credit Card) Could I please have your credit card? I would be charging the entire amount to your card? Would that be acceptable to you? Yes (the cashier checks the card for (a)photograph (b) 3 dimensional hologram (c) 16 cc number embossed on the face of the card with the first 4 digits printed again either above or below the 16 digit number under the laminated sheen.(d) check the embossing to be clear and uniform (e)check card for the magnetc stripe and run thumbnail on the edge of the stripe to ensure that it does not peel(f) check that there are no signs of alteration on the signature panel (nail polish or paint(g) check the card number printed on the signature panel and the card name printed in the background at an angle) The cashier swipes the card through the EDC stripe reader supplied by the credit card company The credit card number will feature on the electronic display the cashier enters the amount of equivalent indian rupees (for foreigners) as per the exchange rate of that foreign currency The EDC will print the charge slips in duplicate (after getting approval of the transaction from the main CC computer) The cashier retains the credit card in one hand and give the charge slips to the guest for his signature He confirms the signatures with the specimen signature on the front and back of the card The cashier hands over the duplicate charge slip to the guest along with the credit card. Sir , can I have your signature on the bills. Sir, this is your copy of the bills Thank you for staying with us have a safe journey 42 3.7 Export Promotion & Capital Goods Scheme (EPCG) The Department of Tourism classification functioning hotels under the star system, into five categories from 1-star to 5-star for this purpose a permanent Committee, the Hotel and Restaurant Approval and Classification Committee has been set up which inspects the applicant hotels to assess their suitability or otherwise for award of the star category and are placed on the approved list. Approved hotels become eligible to various fiscal relief and benefits. The department intercedes on behalf of such hotels whenever necessary to ensure that their needs get priority consideration from various concerned authorities. These hotels also get worldwide publicity through tourist literature published by the Department of Tourism and distributed by the Government of India Tourist Offices in India and abroad. Approved hotels become eligible for foreign exchange for their import of essential equipment and provisions and for their advertising, publicity and promotion under the Hotel Incentive Quota Scheme. This includes importing of heavy machinery such as (diesel generators) kitchen equipment ranging from industrial use combination ovens and heavy duty electrical cooking and hot plate ranges, tilting pans and steam based cooking equipment, dough sheeters and planetary mixers, industrial refrigeration systems, without the additional custom duty component. The fleet of cars which may include German and Japanese deluxe limousines are also exempt of the additional duty component as they are to be utilized by the hotel to enhance foreign exchange earnings. The hotels utilize this foreign exchange for having stalls at international trade fairs and conventions taking place in Europe, North America, Middle East and S.E. Asia. These conventions are visited by tour operators, travel agencies, event management bureaus, meeting planner organizations. This gives a worldwide exposure to India as a favourable tourist destination, having the advantage of a favourable currency conversion factor leading to affordable holidays, an excellent climate especially in the winter months, and a stable political environment. 43