14100252 Front Office Management Function
- 1. Bali Hospitality Professional Service Drs. Agustinus Agus Purwanto, MM Senior Consultant Jl. Tukad Batanghari VIII/7A Denpasar – Bali – Indonesia E-mail: agustinus.aguspurwanto@ehotelier.com Web: www.linkedin.com/in/aguspurwanto
- 2. Chapter 8Chapter 8 The Functions ofThe Functions of ManagementManagement
- 3. POSDCORBPOSDCORB P Planning O Organizing S Staffing D Directing CO Coordinating R Reporting B Budgeting
- 4. Front Office BudgetingFront Office Budgeting The most important long-term planning function FOM is responsible for: 1. Forecasting Rooms Revenue Use historical trend data 2. Estimating Expenses Vary directly with rooms revenue
- 5. Forecasting RoomsForecasting Rooms RevenueRevenue Forecasted Annual Rooms Revenue = Rooms Occupancy Average Available Percentage Daily Rate Rooms Available = Total Rooms X 365 Days
- 6. Forecasting Rooms RevenueForecasting Rooms Revenue ExampleExample 100 Room Hotel 100 x 365 days = 36,500 Rooms Available 75% Occupancy Percentage .75 $50 Average Daily Rate 36,500 x .75 x $50 = $1,368,750
- 7. Room ForecastingRoom Forecasting Ten-Day Forecast Done by FOM and Reservations Manager House Count Expected number of guests in the hotel Divided into group and non-group Three-Day Forecast
- 8. Forecasting RoomForecasting Room AvailabilityAvailability The most important short-term planning function Hotel Occupancy History The past few months and last year at this time Reservation Trends How far in advance are reservations being made? Scheduled Events City-wide conventions; sporting events, etc.
- 9. Forecasting DataForecasting Data No-shows Expected guests who did not arrive. Walk-ins Guests without reservations. Overstays Guests who stay beyond their departure date. Understays
- 10. Percentage Of No-Percentage Of No- showsshows Number of Room No-Shows Number of Room Reservations Purpose: Helps front office managers decide when (and if) to sell rooms to walk-in.
- 11. Percentage Of Walk-Percentage Of Walk- insins Number of Room Walk-Ins Total Number of Room Arrivals Purpose: Helps front office managers know how many walk-ins to expect.
- 12. Percentage OfPercentage Of OverstaysOverstays Number of Overstay Rooms Number of Expected Check- Outs Purpose: Alerts front office managers to potential problems when rooms have been reserved for arriving guests.
- 13. Percentage OfPercentage Of UnderstaysUnderstays Number of Understay Rooms Number of Expected Check-Outs Purpose: Alerts front office manager to additional room availability. 20% of hotels charge understay
- 14. Rooms Availability FormulaRooms Availability Formula Total number of guestrooms - Out of order rooms - Stayovers - Reservations + Reservations x no-show percentage + Understays - Overstays Number of Rooms Available for Sale
- 15. Rooms AvailabilityRooms Availability Formula ExampleFormula Example 150 Guestrooms - 5 Out of Order - 45 Stayovers - 50 Reservations + 10% No-show + 5 Understays - 20 Overstays 40 Rooms Available for Sale
- 16. Establishing RoomEstablishing Room RatesRates Marketing Positioning Statement Room rates reflect service expectations to the hotel’s target markets. 1. Market Condition Approach 2. Rule-of-thumb Approach 3. Hubbart Formula Approach
- 17. 1. Market Condition1. Market Condition ApproachApproach Common sense approach. Often used, but has many problems. Base room rates on your competitions’ rates. Doesn’t take into account new properties and construction costs. Allows the local market to determine the
- 18. 2. Rule-of-thumb Approach2. Rule-of-thumb Approach Sets the minimum average room rate at $1 for each $1,000 of construction & furnishing costs per room. Assumes 70 % occupancy $125,000 in construction and furnishings - $125 room rate Doesn’t take inflation into account
- 19. 2. Rule-of-thumb Approach2. Rule-of-thumb Approach Average per-room cost for hotel development: Segment Per-room cost Budget/Economy $52,800 Midscale w/o $85,600 Midscale with F&B $103,100 Full Service $165,900 Luxury/Resorts $516,300
- 20. 3. Hubbart Formula3. Hubbart Formula ApproachApproach “Bottom-up”approach Begin with desired profit based upon expected Return on Investment (ROI) Calculate pretax profits, fixed charge, management fees, & operating expenses Estimate other departmental income Determine the required rooms department income
- 21. 3. Hubbart Formula3. Hubbart Formula ApproachApproach Average Room Rate = Rooms Department Revenue Expected Number of Rooms Sold Sets a “Target” Average Price Lets you determine if your target is too high You may have to finance the difference
- 22. EvaluatingEvaluating Front Office OperationsFront Office Operations Occupancy Percentage The most commonly used operating ratio Average Daily Rate (ADR) Average of all room types and rates Revenue per Available Room (RevPAR) Measures revenue capabilities of hotel
- 23. Occupancy PercentageOccupancy Percentage Number of Rooms Occupied Number of Rooms Available What does rooms occupied include? Rooms sold + comp rooms What does rooms available include? Use the rooms availability formula 2001= 59.20%
- 24. Occupancy PercentageOccupancy Percentage ExampleExample Number of Rooms Occupied Number of Rooms Available Sold 95 rooms with 5 comps 150 room hotel with 25 out of order 95 + 5 = 100 = 150 - 25 = 125 80%
- 25. Daily Occupancy RatesDaily Occupancy Rates 47.8 62.4 67.7 68.3 65.3 66.5 70.1 0 10 20 30 40 50 60 70 Sun Mon Tues Weds Thurs Fri Sat
- 26. Average Daily Rate (ADR)Average Daily Rate (ADR) Rooms Revenue Number of Rooms Sold Number of Rooms Sold includes comps
- 27. Average Daily Rate ExampleAverage Daily Rate Example Rooms Revenue Number of Rooms Sold $10,000 Rooms Revenue Sold 95 rooms with 5 comps $10,000 $10,000 = 95 + 5 = 100 $100
- 28. Revenue per Available RoomRevenue per Available Room (RevPAR)(RevPAR) Actual Rooms Revenue Number of Available Rooms or: Occupancy Percentage x ADR 2001 = $49.36
- 29. RevPar ExampleRevPar Example Actual Rooms Revenue Number of Available Rooms $10,000 Rooms Revenue 150 room hotel with 25 out of order $10,000 $10,000 = 150 - 25 125 $80
- 30. Revenue per Available RoomRevenue per Available Room ExampleExample Occupancy Percentage x ADR 80% x $100 = $80 RevPAR Limitations: * Does not include Revenue & Costs from F&B and other outlets Is RevPAR higher or lower than ADR ? When will they be equal?
- 31. RevPAR IndexRevPAR Index Hotel RevPAR Competitive Set RevPAR You decide what hotel’s make up your competitive set of hotels that you compare yourself too. Get your Comp Set RevPAR figures from the
- 32. RevPAR Index - ExampleRevPAR Index - Example Hotel RevPAR Competitive Set RevPAR Your Hotel’s RevPAR is $58; Comp Set is $60 $58/$60 = .966 x 100% = 96.6% Below 100% = Under Performing Hotel 100% = Fair Share Above 100% = Over Performing Hotel
- 33. RevPAR IndexRevPAR Index Missed Revenue ExampleMissed Revenue Example If your Hotel’s RevPAR is $58 and your Comp Set’s is $60, you are losing $2 per room in potential revenue Calculate your potential lost revenue per month RevPAR Difference x Number of Rooms x Days in Month Ex.
- 34. RevPAR IndexRevPAR Index You need to select a realistic Comp Set of hotels Comparing a luxury hotel to economy hotels inflates your RevPAR Index but doesn’t help your revenues A consistent increase in RevPAR Index is your goal