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Agustinus Agus Purwanto, SE MMwww.sunparadisehotelsmanagement.webs.comEmail: [email protected]: +62 812 9444 1224
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Bali Hospitality Professional Service
Drs. Agustinus Agus Purwanto, MMSenior Consultant
Jl. Tukad Batanghari VIII/7A Denpasar – Bali – Indonesia
E-mail: [email protected]
Web: www.linkedin.com/in/aguspurwanto
Chapter 8Chapter 8
The Functions of The Functions of ManagementManagement
POSDCORBPOSDCORB
P Planning
O Organizing
S Staffing
D Directing
CO Coordinating
R Reporting
B Budgeting
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 Payroll, laundry & supplies
Forecasting Rooms Forecasting Rooms RevenueRevenue
Forecasted Annual Rooms Revenue =
Rooms Occupancy AverageAvailable Percentage Daily Rate
Rooms Available = Total Rooms X 365 Days
Forecasting Rooms Revenue Forecasting Rooms Revenue ExampleExample
100 Room Hotel100 x 365 days = 36,500 Rooms Available
75% Occupancy Percentage.75
$50 Average Daily Rate
36,500 x .75 x $50 = $1,368,750
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 Updated with current information Identifies changes in staffing needs
Forecasting Room Forecasting 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.
Group Profiles Pickup history
Forecasting DataForecasting DataNo-shows
Expected guests who did not arrive.
Walk-ins Guests without reservations.
Overstays Guests who stay beyond their departure date.
Understays Guests who check out before departure date.
Percentage Of No-Percentage Of No-showsshows
Number of Room No-ShowsNumber of Room Reservations
Purpose: Helps front office managers decide
when (and if) to sell rooms to walk-in.
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.
Percentage Of Percentage 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.
Percentage Of Percentage 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 guests
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
Rooms Availability Rooms 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
Establishing Room Establishing 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
1. Market Condition 1. 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 rate
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
Doesn’t include other hotel services
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
3. Hubbart Formula 3. 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
Add expenses to get rooms department revenue
3. Hubbart Formula 3. Hubbart Formula ApproachApproach
Average Room Rate =
Rooms Department RevenueExpected 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
Evaluating Evaluating 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
Occupancy PercentageOccupancy PercentageNumber 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%
Occupancy Percentage Occupancy 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%
Daily Occupancy RatesDaily Occupancy Rates
47.8
62.467.7 68.3 65.3 66.5 70.1
0
10
20
30
40
50
60
70
Sun Mon Tues Weds Thurs Fri Sat
Average Daily Rate (ADR)Average Daily Rate (ADR)
Rooms Revenue Number of Rooms Sold
Number of Rooms Sold includes comps
2001 = $83.48
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
Revenue per Available Room Revenue per Available Room (RevPAR)(RevPAR)
Actual Rooms RevenueNumber of Available Rooms
or:
Occupancy Percentage x ADR
2001 = $49.36
RevPar ExampleRevPar Example
Actual Rooms RevenueNumber of Available Rooms
$10,000 Rooms Revenue 150 room hotel with 25 out of order
$10,000 $10,000 =150 - 25 125
$80
Revenue per Available RoomRevenue per Available RoomExampleExample
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?
RevPAR IndexRevPAR Index
Hotel RevPARCompetitive 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
STAR Report or the HRM (HotelRevMax) Report
RevPAR Index - ExampleRevPAR Index - ExampleHotel 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
RevPAR Index RevPAR 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.
Missed Revenue for 150 room hotel in December
$2 x 150 x 31 = $9,300
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
Ideally, you want a RevPAR Index above 100% and a positive
percentage change from month to month