FRONT OFFIVE OPERATIONS & MANAGEMENT

Sem V
Topic: Planning & Evaluating Operations
1. Application Of Management Functions in Front Office
Planning:
It is the basic function of management. It deals with marking out a future
course of action & deciding in advance the most appropriate course of actions
for achievement of pre-determined goals. A plan is a future course of actions.
Planning is determination of courses of action to achieve desired goals. Thus,
planning is a systematic thinking about ways & means for accomplishment of
pre-determined goals. Planning is necessary to ensure proper utilization of
human & non-human resources. It is all pervasive, it is an intellectual activity
and it also helps in avoiding confusion, uncertainties, risks, wastages etc. A
front office manager’s first step in planning should be to establish department
goals, both near-term and long-term.

Organizing:
Using planned goals as a guide, front office managers can organize the
department by dividing the work among front office staff. Managers should
distribute work so that everyone participates, and the work can be completed
in a timely manner. Organizing includes determining the order in which tasks
should be performed and establishing completion deadlines for each group
and subgroup of tasks. Organizing as a process involves:
 Identification of activities.
 Classification of grouping of activities.
 Assignment of duties.
 Delegation of authority and creation of responsibility.
 Coordinating authority and responsibility relationships.

Staffing:
It is the function of manning the organization structure and keeping it
manned. Staffing has assumed greater importance in the recent years due to
advancement of technology, increase in size of business, complexity of
human behavior etc. The main purpose of staffing is to put right man on right
job. Staffing involves:
 Manpower Planning (estimating man power in terms of searching,
choose the person and giving the right place).
 Recruitment, Selection & Placement.
 Training & Development.
 Performance Appraisal.
 Promotions & Transfer.

Directing/Leading:
Direction is that inert-personnel aspect of management which deals directly
with influencing, guiding, supervising, motivating sub-ordinate for the
achievement of organizational goals. Direction has following elements:
 Supervision- implies overseeing the work of subordinates by their
superiors. It is the act of watching & directing work & workers.
 Motivation- means inspiring, stimulating or encouraging the sub-
ordinates with zeal to work. Positive, negative, monetary, non-monetary
incentives may be used for this purpose.
 Leadership- may be defined as a process by which manager guides and
influences the work of subordinates in desired direction.
 Communications- is the process of passing information, experience,
opinion etc from one person to another. It is a bridge of understanding.

Controlling:

Establishing Room Rates:

 A front office revenue management system will almost always have

more than one room rate category for each guestroom.
 Room rate categories generally correspond to types of rooms (suites,
two beds, one bed, etc.).
 Differences in a hotel’s room rates are based on criteria such as room
size, location within the hotel, view, furnishings, and amenities.
 The “rack rate” is the standard price for an overnight accommodation,
as determined by management, for a particular room or room type.
Unless a guest qualifies for an authorized room rate discount, the rack
rate will apply.
 Front office employees are expected to sell rooms at the rack rate
unless a guest qualifies for a discounted room rate.

Forecasting Room Availability

The most important short-term planning that front office managers engage in
is forecasting the number of rooms available for future reservations.
 Room availability forecasts are used to help manage the reservations
process.
 The number of rooms available on any given night, forecasting the
number of rooms available for sale and the number of rooms expected to
be occupied can be useful in computing an expected occupancy
percentage.
 Occupancy forecasts may be an important consideration for making
room rate pricing decisions.
 Without an accurate forecast, rooms may go unsold or be sold at less-
than-optimal rates.
 Room occupancy forecasts can be useful when scheduling employees.
 Forecasting skill is acquired through experience, effective
recordkeeping, and accurate counting methods.

Forecasting Data

 Expected arrivals
 Expected walk-ins
 Expected stayovers
 Expected no-shows
 Expected understays
 Expected check-outs
 Expected overstays
Percentage of No-Shows: Helps front office managers decide when (and if)
to sell already-committed rooms to walk-in guests. The percentage of no-
show indicates the proportion of reserved rooms that the expected guest did
not arrive to occupy on the expected arrival date.
                                                 Number of No-Show Rooms           
Percentage of No Show =     ——————————————- X 100
                                                 Number of Room Reservations
Percentage of Walk-Ins: Helps front office managers know how many
walk-ins to expect, especially when the hotel is near full occupancy.
                                               Number of rooms occupied by walk-ins for a
period
Percentage of Walk-In =    
——————————————————————– X 100
                                              Total number of room arrivals for the same
period
Percentage of Overstays: Alerts front office managers to potential problems
when the hotel is near full occupancy and rooms have been reserved for
arriving guests. Overstay represent rooms occupied by guests who stay
beyond originally scheduled departure dates. The percentage of overstays is
calculated by dividing the number of overstay rooms for a period by the total
number of expected room check-outs for the same period.
Number of expected check-outs =      Number of actual check-outs  –
Under stays + Overstays
                                                 Number of Overstay Rooms                       
Percentage of Overstays =    ——————————————– X 100
                                                 Number of Expected Check-Outs
 Percentage of Understays: Alerts front office manager to probable
additional room availability when the hotel is near full occupancy. Under stay
represents rooms occupied by guests who check-out before their scheduled
departure dates. The percentage of understays is calculated by dividing the
number of understay rooms for a period by the total number of expected
room check-outs for the same period.                               
                                                    Number of Under Stay Rooms     
Percentage of Under Stays =   ———————————————-X 100
                                                    Number of Expected Check-Outs
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:

Number of rooms available for sale = Total no of guest rooms

                                                           – Number of out-of order rooms
                                                           – Number of room stayovers
                                                           – Number of room reservations
                                                          + Number of room reservations x
Percentage of no shows + Number of room under stays
                                                           – Number of room overstays
Number of walk-ins is not included because the number of walk-ins a hotel
can accept is determined by the number of rooms available for sale. Front
office planning decisions must remain flexible; they are subject to change as
the front office learns of reservation cancellations and modification. It should
also be noted that room availability forecasts are based on assumptions whose
validity may vary on any given day.
Ten-Day Forecasts
A ten-day forecast usually consists of: daily forecasted occupancy figures, the
number of group commitments (with details about the groups), and a
comparison of the previous period’s forecasted and actual room counts and
occupancy percentages. A special ten-day forecast may also be prepared for
food and beverage, banquet, and catering operations. To help departmental
managers plan their staffing and payroll levels for the upcoming period, the
ten-day forecast should be completed and distributed in advance of the
coming period. Most automated systems have programs to help managers
accurately forecast business.

Three Days Forecast:

Evaluating Front Office Operations:
Evaluating the results of front office operations is an important management
function; without evaluation, managers will not know whether the front office
is attaining planned goals. Front office managers should evaluate the results
of department activities on a daily, monthly, quarterly, and yearly basis.
Important tools that front office managers can use to evaluate the success of
their operations include the following: daily report of operations, occupancy
ratios, rooms revenue analysis, income statement, rooms schedule, rooms
division budget reports, operating ratios, and ratio standards.

Daily Report of Operations:

The daily report of operations is also known as the manager’s report, the
daily report, and the daily revenue report. The daily report of operations
summarizes the hotel’s financial activities during a twenty-four-hour period.
The daily report of operations provides a means of reconciling cash, bank
accounts, revenue, and accounts receivable.

Occupancy Ratio:
Occupancy ratios measure the effectiveness of the front office and
reservations, sales staffs in selling guestrooms. The following rooms
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, and net rooms revenue. This information is usually
available in the daily report of operations. Common occupancy ratios
include occupancy percentage, multiple occupancy, average daily rate,
revenue per available room, revenue per available customer, and average
rate per guest. The front office system typically generates occupied rooms
data and calculates occupancy ratios for the front office manager to review.
Occupancy Percentage:
The most commonly used operating ratio in the front office is occupancy
percentage. Occupancy percentage relates the number of rooms either sold or
occupied to the number of rooms available during a specific period of time.
Some hotels use the number of rooms sold to calculate occupancy
percentage, while others use the number of rooms occupied. Out-of-order
rooms may or may not be included in the number of rooms available,
depending on the hotel.
The calculation of occupancy ratio requires the following data
 Total number of sale-able rooms
 Number of rooms sold
 Number of guest (House Count)
 Net room revenue generated

Occupancy Percentage = (Number of Rooms Sold / Total Number of Rooms

Available for Sale) x 100

House Count:
House count is the total number of resident guest present in the hotel
Average Daily Rate:
Most front office managers calculate an average daily rate even though room
rates within a property can vary significantly depending on the type of room,
type of guest, day of the week, and season. Some hotels include
complimentary rooms when calculating average daily rate, to show their
effect on the rate.

ADR is the average rental income per occupied room for a given time period

 Average Daily Rate = Total Room Revenue/ Total Number of Rooms

Sold

Average Rate per Guest (ARG): 

 ARG = Total Room Revenue/ Total Number of Guests

Revenue Per Available Room:

Rev Par is used to measure and compare the performance of two or more
hotels. Revenue per Available Room (Rev PAR) is one of the most important
hotel statistics, because it provides a statistical benchmark for comparison
with similar hotels.

 Rev PAR = ADR x Occupancy percentage

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2. Establishing Room Rates :

 Cost Based Pricing : 1. Rule Of Thumb

& 2. Hubbart Formula
 Market Based Pricing: 1. Competitors Price
2. Rate Cut Down/ Off season
3. Meal plans
4. Guest requirements (arriving late, foody,
long staying guest, adventurous etc)

Rule Of Thumb: In this System “One Rupee” Rate is fixed for every Rs
1000/- Spent on Room construction cost. Also known as “Cost Rate Formula
Eg: Assume that average construction cost of a room is $80,000.00. Using
this approach comes average selling price of $80.00 per room. Set up
different rates for different room types, but ARR would be $80.00
 Hubbart Formula approach considers operating costs, desired profits
and expected number of rooms sold. In other words, this approach
starts with desired profit, adds income taxes, then adds fixed charges
and management fee, followed by operating overhead expenses and
direct operating expenses. It is consider a Bottom-up approach.
 

3. Budgeting for Operations:

Budget : The term budget means “ An annual estimate of revenue and
expenditure”. A budget is a statement expresses in monetary or
quantitative terms reflecting the policy of a business and determining
business operations in respect of a particular trading period. Budget
are prepared in monetary terms.
Types Of Front office Budget:
⦿ Refining Budget
⦿ Forecasting Room revenue
⦿ Estimating Expenses
Refining Budget:
1. Also known as amending the budget/ modified budget.
2. Forecasted figures in budget can be changed.
3. It helps to protect organization to suffer from loss
 4. Information from government, tourism authorities etc can be taken to
know tourist statics.
Forecasting room revenue: Gets the information from past periods.
⚫ Mostly 3 previous years data is taken for reference.
⚫ Approx there is 15% increase on revenue every year.

Estimating Expenses:
1. There are various expenses in front office like, Labor cost, bath room
items, bed room decorations, linen cost, labor taxes etc,
2. To prepare the budget according to expenses.