PREFACE

All praise to God, Allah SWT, who has blessed us with every

spiritual blessing in the heavenly. Because of His Gracefullness, we

finally finished this report punctually.

In this report, the writers aim to provide a clear description about Front

Office Formula. The writers realizes during the process of compiling the

report, the writers receive many support. At this opportunity, the writers

would like to thank the lecturer, Mr. Andre and the fellow class members

of Room Division Management 5A.

The writers also realize that during the process of compiling this

imperfect report, there are still many mistakes. Nevertheless, the writers

hope that this report would be advantageous for the reader, and any critic

also advices would be gladly accepted for the feedback.

Bandung, April 2018

Writers

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 TABLE OF CONTENT

COVER

PREFACE...................................................................................1

TABLE OF CONTENT.............................................................2

I. Front Office Formula.............................................................4

1. Occupancy...............................................................................4

1.1 Room Occupancy...................................................................4

1.2 Sleeper Occupancy.................................................................4

1.3 Income Occupancy.................................................................5

1.4 Equivalent Occupancy...........................................................6

2. Average Rate...........................................................................8

3. Revenue Achieved..................................................................8

4. RevPar.....................................................................................9

5. GopPar..................................................................................10

6. Average Guest Stay..............................................................11

7. Average Expenditure...........................................................12

8. Average Guests Per Room Sold..........................................12

9. Average Daily Rate..............................................................12

10. Average Room Revenue.....................................................13

11. Average Revenue per Guests.............................................14

12. Potential Average Single Rate...........................................14

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13. Potential Average Double Rate.........................................15

14. Yield Management.............................................................15

14.1 Potential Average Single Rate...........................................16

14.2 Potential Average Double Rate..........................................17

14.3. Multiple Occupancy Percentage........................................18

14.4. Rate Spread.......................................................................18

14.5. Potential Average Rate......................................................19

14.6. Room Rate Achievement Factor.......................................19

14.7. Yield Statistic....................................................................20

15. House Count.......................................................................20

16. Total Number of Guests in the Hotel................................21

17. Overstay Percentage..........................................................21

18. Understay Percentage........................................................22

19. No-Show Percentage..........................................................22

20. Cancellation Percentage....................................................23

21. Foreign guest occupancy percentage................................24

II. Bibliography........................................................................25

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I. Front Office Formula

1. Occupancy

Occupancy is usually expressed as a percentage. By using the percentage

it is possible to make meaningful comparisons. Income alone, for

example, is unreliable, for while a hotel may be taking more than

previous year, there is no allowance for any increases in prices that may

have occured.

1.1 Room Occupancy

To calculate room occupancy, express the rooms sold as a percentage of

the room available:

Room Occupancy = (Total Rooms Sold / Total Rooms Available) x

100%

For Example, for the 31 days in July,

 Total Rooms Sold = 2480

 Total Rooms Available = 3100

Room Occupancy = (2480 / 3100) X 100% = 80%

1.2 Sleeper Occupancy

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Sleeper occupancy is sometimes referred to a guest occupancy. This is a

useful statistic for calculating restaurant staffing levels and predicting

sales of food and drink.

Sleeper Occupancy = (Actual Sleepers / Potential Sleeper) x 100%

For example,

ABC Hotel has 50 double room and 50 twin room, of the 85 rooms sold,

60 have been sold at the double rate and only 50 were occupied by two

people. The other 10 were charged at the double rate but only occupied

by one person. So,

 Actual Sleepers:

No. of Rooms No of Guests

50 x2 = 100

10 x1 = 10

25 x1 = 25

85 135

The actual sleepers are 135.

 Potential Sleepers:
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No. of Rooms No of Guests

50 double x2 = 100

50 twin x2 = 100

200

The potential maximum number of sleepers is 200.

Sleeper Occupancy = (135/200) x 100 % = 67.5% Sleeper Occupancy

1.3 Income Occupancy

Income Occupancy = Actual Income / Total Possible Income x 100%

For Example, for the 31 days in March,

 Actual Income = $400

 Total Possible Income = $750

Income Occupancy = ($400 / $750) x 100% = 53%

1.4 Equivalent Occupancy

Management can use the equivalent occupancy formula when it wants to

know what other combinations of room rate and occupancy percentage

provide equivalent net revenue.

The equivalent occupancy formula is very similar to the identical yield

occupancy formula, but takes marginal costs into account by

incorporating gross profit or contribution margin.

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The cost per occupied room ( also called the marginal cost ) of providing

a room is the cost the hotel incurs by selling that room (for example,

housekeeping expenses such as cleaning supplies); this cost would not be

incurred if the room were not sold ( as opposed to fixed costs, which are

incurred whether the room is sold or not).

The contribution margin is that portion of the room rate that is left over

after the marginal cost of providing the room has been subtract out.

To find the equivalent occupancy, use either of the following formula

(which are equivalent versions of the same equation).

 Equivalent Occupancy =

Rack rate - Marginal cost

Current occupancy % X

Rack rate X (1-discount %) – Marginal Cost

 Equivalent Occupancy =

Current Contribution Margin

Current Occupancy % X

New contribution Margin

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Example :

Casa Vana Inn is currently operating at 70 percent occupancy with an

average rate of $80, and considering strategies designed to raise its

average rate to $100.

Further assume that the marginal cost of providing a room is $12. What

occupancy percentage must the Casa Vana Inn achieve to match the net

room revenue it currently receives?

Equivalent Occupancy = 70% x $80 - $12

$100 - $12

= 54.1 %

Recall from the discussion of identical yields that the Casa Vana Inn

needs a 56 percent occupancy to produce an identical yield statistic – that

is, equivalent gross revenue. However, the Casa Vana Inn does not need

to match its gross revenue to achieve the same net revenue, since by

selling fewer rooms ( at the higher price), it incurs fewer associated

operating costs.

Example :

What is the equivalent occupancy to 70 percent with an $80 average room

rate if the average room rate is discounted by 20 percent (to $64)?

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Answer :

Equivalent Occupancy = 70% x $80 - $12

$64 - $12

= 91.5 %

2. Average Rate

The average rate shows how much a room is being sold for across the

hotel.

Average Rate = (Room Revenue / Rooms Sold)

To calculate the average rate when, for example, room income is $3400

and total rooms sold is 85 rooms:

Average Rate = (3400/85) = $40.00

Figures are normally expressed excluding VAT or local sales tax

3. Revenue Achieved

Average rate alone does not give a measure of performance against the

potential of the hotel. To do that, many hotels look at the revenue as a

percentage of the possible maximum.

%Revenue Achieved = (Actual Revenue / Potential Revenue) x 100%

In the example hotel, the tariff (excluding VAT and sales tax) is as

follows:

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Room type 1 Guest 2 Guests

Double $60.00 $75.00 + VAT

Twin $55.00 $80.00 + VAT

The actual revenue was $3400

The potential maximum revenue is

50 Double x $75.00 = $3750

50 Twin x $80.00 = $4000

$7750

Revenue Achieved = (3400/7750) x 100% = 43.87%

4. RevPar

Even average rate and percentage revenue achieved do not provide a

measure against competitor hotels. For this reason, many hotels now use

a combination of average rate and occupancy.

This is referred to as ‘Revenue Per Available Room’ or RevPar. Another

term for this is ‘rooms yield’

RevPar = Average Rate x Occupancy%

For the sample hotel,

Average Rate = $40.00

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Occupancy = 85%

RevPar = 40.00 x 85 = $34.00

This allows comparison to be made with competitor hotels with different

tariffs and number of rooms. RevPar for a typical month for a competitor

hotels in a European city could be as follow:

Hotel No. of rooms RevPar($)

A 200 43.70

B 130 29.92

C 140 25.39

D 105 25.82

E 165 37.14

5. GopPar

Revenue is only one part of the story. Costs are equally important, and to

be profitable the hotelier needs to ensure that there is a gap between the

two.

All international chain hotels, and many larger privately owned hotels,

prepare their accounts in the same manner. GopPar refers to ‘Gross

Operating Profit Per Available Room’. GopPar is defined as the profit of

the hotel before allocating central charges such as bank interest,

depreciation and property taxes to the total number of rooms available

during the period.

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GopPar = Gross Operating Profit / Rooms Available

For example,

GOP Rooms Available

Hotel A 45.000 3100

Hotel B 82.000 5600

GopPar A = 45.000 / 3100 = 14.51

GopPar B = 82.000 / 5600 = 14.64

This shows a clear comparison between the hotels even though they are

different sizes, and have different accounting periods in the same month.

6. Average Guest Stay

The average guest stay will affect a number of decisions in the hotel.

These concern mainly staffing levels, facilities offered, and even the

number of towels placed in the guest rooms.

Mean Average Guest Stay = No. of Sleeper Nights Sold / No. of

Guests

The period used for calculating this is generally one month. Normally the

figure will not be an exact number of nights, so many hotels will talk of

their average guest stay being 2.65 nights, which although useful, is not

clear.

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An alternative to this is to produce a statistic which shows the most

common length of stay. Obviously, no guest stay for 2.65 nights

The table below shows the number of nights spent in a hotel by 200

guests.

Length of Stay No. of Guests Guest Nights (1x2)

1 night 40 40

2 nights 80 160

3 nights 30 90

4 nights 20 80

5 nights 20 100

6 nights 10 60

200 530

Mean Average Guest Stay = 530 / 200 = 2.65

By dividing 200 into 530, the average stay of 2.65 nights is found. So,

although the mean average is 2.65 nights, over a half the guests stay for

two nights or less.

7. Average Expenditure

The amount spent by guests is often calculated. This can only be done

effectively where expenditure is posted onto a guest’s account. Any

puchases in cash will be recorded under chance business of the

departement concerned.

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Average Expenditure = Total Posted to Guest’s Account / No. of

Guests

For Example, total posted to Mr. Andy’s account is $110.00 and the guest

is staying with his wife.

Average Spenditure = 110 / 2 = $55.00

8. Average Guests Per Room Sold

Average Guests Per Room Sold = Total Number of Guests

Total Number of Rooms Sold

For example,

Type of Room Room Sold No of Guests

Single (x1) 70 70

Double (x2) 80 160

150 230

Average Guest Per Room Sold = 230 / 150 = 1.53

9. Average Daily Rate

Average daily rate use to calculate the average price or rate for each hotel

room sold for a specific day.It is one of the most common financial

indicators to measure how successful the performance of the hotel is

against other hotels that have similar characteristics such as size, clientele

and location and/or its own previous figures.

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ADR = Room Revenue

Rooms Sold

Example :

A boutique hotel’s revenue today is $20.000, of which the rooms sold for

today is 100 rooms. Using the data provided, a hotel wants to know its

Average Daily Rate so it can accurately assess its performance.

Answer :

ADR = 20.000 = $200

100

10. Average room revenue

ARR can also be used to measure the average rate for a longer period of

time (weekly, monthly).

ARR = Total Room Revenue

Total Rooms Occupied

Example :

In 1 month, a boutique hotel has previous revenue $10.000.000, and total

rooms occupied in that month is 100.000 rooms. Using the data provided,

a hotel wants to know its Average Room Revenue so it can accurately

assess its performance.

Answer :

ARR = 10.000.000 = $100

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 100.00

Average revenue per guest / average spent (ARG)

It is the ratio of room income to the total number of guests staying in the

hotel.

ARG = Room Income

Total number of guests staying in the hotel

Example :

Suppose a hotel has 260 rooms, and suppose on a particular night all

rooms are sold and 436 guest are in the hotel, and suppose the total

revenue received is $874.380

Answer :

ARG = 874380

436

= $ 2005,45

Potential Average Single Rate

The hotel has varied its single rate by room type, so we need to calculate

the potential average single rate.

Potential Average Single Rate = Single Room Revenues at Rack Rate

Number of Rooms Sold as Singles

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For example,

Room Type Number of Rooms Single Rack Rate Revenue(100% OCC)

Standard 200 $40 $8000

Deluxe 100 $70 $7000

300 $15000

Potential Average Single Rate = 15000 / 300 = $500

13. Potential Average Double Rate

Since we also have varied rates by room type the potential average double

rate must be calculated.

Potential Average Double Rate = Double Room Revenues at Rack

Rate

Number of Rooms Sold as Doubles

For example,

Room Type Number of Rooms Double Rack Rate Revenue(100% OCC)

Standard 200 $50 $10000

Deluxe 100 $80 $8000

300 $18000

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Potential Average Single Rate = 18000 / 30 = $600

14. Yield Management

Yield Management is a Technique used to Maximize Room Revenues.

Yield Management (Revenue Management) presents a more Basic

Measure of Performance because it combines Occupancy Percentage with

Average Daily Rate (ADR) into a Single Statistic called the Yield

Statistic

Yield Management is an evaluative Tool that allows the Front Office

Manager to use Potential Revenue as the Standard against which Actual

Revenue can be Compared.

THE CONCEPT OF YIELD MANAGEMENT:

Yield Management is based on Demand and Supply. The Hotel

Industry’s Focus is shifting from High Volume Booking to High Profit

Booking.

The Commodity that the Hotel sells is Time in a Given Space, and if it is

Unsold, Revenue is lost forever. Yield Management is composed of a set

of Demand Forecasting Techniques used to determine whether Room

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Rates should be raised or lowered, and whether a Reservation should be

accepted or rejected in order to maximize Revenue.

In order to maximize Revenue, the Front Office Manager needs to

forecast Information concerning Capacity Management, Discount

Allocation, and Duration Control.

Measuring Yield:

The Yield Statistic is the Ratio of the Actual Revenue (Generated by the

Number of Rooms Sold) to Potential Revenue (The amount of money that

would be received from the Sales of Rooms in the Hotel at a Rack Rate)

14.1 Potential Average Single Rate:

Potential Average Single Rate = (Single Room Revenues at Rack Rate) /

(Number of Rooms Sold as Single)

 Example 1 - Potential Avg. Single Rate (Where the single rate

is same for all room types):
Total Number of Rooms sold in Single     = 25
Rack Rate / Published Tariff for Single     = 125.00
Single Room Revenue at Published Tariff = 25 * 125.00 
                                                           = 3125.00
Potential Avg. Single Rate : 3125.00 / 25 = 125.00
 Example 2 - Potential Avg. Single Rate (Where the single rate
varies as per room types):

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 Deluxe Room - Rack Rate / Published Tariff for Single    = 125.00
Deluxe Room Number of Rooms Available in the hotel   = 100
                                                                               = 125.00 * 100
                                                                               = 12500.00 
Suite Room - Rack Rate / Published Tariff for Single      = 168.00
Suite Room Number of Rooms Available in the hotel      = 30
                                                                               = 168.00 * 30
                                                                               = 5040.00 
Single Room Revenue at Published Tariff = (12500.00 + 5040.00)  
                                                           = 17540.00
Potential Avg. Single Rate: 17540.00 / 130 = 134.92

14.2 Potential Average Double Rate:

Potential Average Double Rate = (Double Room Revenue at Rack Rate) /

(Number of Rooms Sold as Double)

 Example 1 - Potential Avg. Double Rate (Where the Double

rate is same for all room types):
Total Number of Rooms sold in Double    = 55
Rack Rate / Published Tariff for Double    = 175.00
Double Room Revenue at Published Tariff : 55 * 175.00  =
9625.00
Potential Avg. Double Rate: 9625.00 / 55 = 175.00

 Example 2 - Potential Avg. Double Rate (Where the Double

rate varies as per room types):
Deluxe Room - Rack Rate / Published Tariff for Double  = 185.00
Deluxe Room Number of Rooms Available in the hotel   = 100
= 185.00 * 100
= 18500.00 

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 Suite Room - Rack Rate / Published Tariff for Double     = 215.00
Suite Room Number of Rooms Available in the hotel      = 30
= 215.00 * 30
= 6450.00 
Double Room Revenue at Published Tariff: (18500.00 + 6450.00)
= 24950.00
Potential Avg. Double Rate: 17540.00 / 130 = 134.92

14.3 Multiple Occupancy Percentage:

Multiple Occupancy Percentage = (Number of Rooms Occupied by more

than 1 Person) / (Total Number of Rooms Sold) * 100

 Example Multiple Occupancy Percentage Calculation (Based

on Rooms Occupied)
Total Number of Rooms with More than One Adult on 10th
September 2017 = 115
Total Number of Rooms Occupied on 10th September 2017                        
= 207
Hotel's Occupancy Percentage = 115 / 207 *100
                                            = 55.55 %

14.4 Rate Spread:

Rate Spread = (Potential Average Double Rate) – (Potential Average

Single Rate)

 Example Rate Spread

Potential Average Double Rate : 175

Potential Average Single Rate: 135

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 Rate Spread: (Potential Average Double Rate – Potential Average

Single Rate) = 175 – 135 = 40

14.5 Potential Average Rate:

Potential Average Rate = (Multiple Occupancy Percentage * Rate

Spread) + (Potential Average Single Rate)

 Example Potential Average Rate

Multiple Occupancy Percentage: 55%

Rate Spread: 40

Potential Average Single Rate: 135

Potential Average Rate : (55% * 40) + 135 = 157

14.6 Room Rate Achievement Factor:

Room Rate Achievement Factor = (Actual Average Rate) / (Potential

Average Rate) * 100

 Example Room Rate Achievement Factor

Actual Average Rate: 200

Potential Average Rate: 300

Room Rate Achievement Factor: 200 / 300 * 100

= 66.66%
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‘

14.7 Yield Statistic:

An important element in revenue management is the yield statistic.  The

yield statistic calculation incorporates several of the previous formulas

into a critical index.  There are various ways to express and calculate the

yield statistic, all of which are equivalent.

Yield Statistic = ((Rooms Nights Sold) / (Rooms Nights Available)) *

((Actual Average Room Rate) / (Potential Average Rate))

 Example Yield Statistic

Occupancy percentage * Achievement factor

Occupancy percentage = Rooms night sold / rooms night

available

= 70 / 100 = 0,7

Achievement Factor = Actual Average Room Rate / Potential

Average Rate * 100

= 200 / 300 * 100 = 66,66%

Yield Statistic = Occ. Percentage * Achievement Factor

= 0,7 * 66,66 % = 0,46662 = 46,662%

15. House count (H.C)

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(the number of guests staying on a particular night)

H.C = previous H.C + Arrivals – departures

Example :

A boutique hotel has previous house count 72 guests, of which the guests

arrived today is 80 guests and departure guests is 54 guest. Using the data

provided, a hotel wants to know its House Count so it can accurately

assess its performance.

Answer :

House Count = 72 + 80 – 54

= 98 guests

16. Total number of guests in the hotel

Total guests = single rooms + 2 x (double rooms) + extra beds

Example:

A boutique hotel has 40 guests stay in single rooms, 35 guests stay in

double rooms and 4 of them requests extra beds.The hotel wants to know

its Total Guests today so it can accurately assess its performance.

Answer :

Total guests = 40 + (2 x 35) + 4

= 114 guests

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17. Overstay Percentage

This is the percentage of scheduled departures who remain on in the

hotel, even after their scheduled date of departure.

Overstay Percentage = Number of overstays

X 100 %
Total number of scheduled departures

Example :

A boutique hotel has previous 15 guests want to longer their stay in the

hotel, of which the scheduled guests departure today is 80 guests. Using

the data provided, a hotel wants to know its Overstay Percentage so it can

accurately assess its performance.

Answer :

Overstay Percentage = 15
X 100 %
80

= 18,75

18. Understay percentage

This is the percentage of those guests who leave before their expected

date of departure or don’t stay until the announced date of their departure.

Understay Percentage = Understay

X 100 %
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 Stayovers

Example :

A city hotel has previous 5 guests leave before their date of departure, of

which the guests stay over is 50 guests. Using the data provided, a hotel

wants to know its Understay Percentage so it can accurately assess its

performance.

Answer :

Understay Percentage = 5
X 100 %
50

= 10%

19. No – show percentage

This is the percentage of those guest who don’t come in their expected

date of arrival or they don’t come until the announced date of their

arrival.

No-show percentage = Number of did-not arrive guests (DNA)

X 100 %
Number of confirmed reservation guests

Example :

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A city hotel has previous 5 guests didn’t come in their arrival date, of

which the confirmed reservation guests is 50 guests. Using the data

provided, a hotel wants to know its Understay Percentage so it can

accurately assess its performance.

Answer :

No-show percentage = 5
X 100 %
50

= 10 %

20. Cancellation percentage

It is the percentage of total number of cancellations as against total

number of reservations.

Cancellation Percentage = Total number of cancellations

X 100 %
Total number of confirmed reservations

Example :

A city hotel has previous 3 guests cancelled their reservation, of which

the total confirmed reservation guests is 50 guests. Using the data

provided, a hotel wants to know its Understay Percentage so it can

accurately assess its performance.

Answer :

Cancellation Percentage = 3
X 100 %
50

27
 =6%

21. Foreign guest occupancy percentage

Total guest H.C – no. of locals = number of foreign guests

Their percentage is calculated by

Number of foreign guests in hotel

X 100
Total number of guests in hotel (H.C)

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 II. BIBLIOGRAPHY

 Andrews, S. (2007). Front Office Management & Operations.

McGraw Hill Education (India) Private Limited.

 Hay-Walters, N. (2014). Retrieved from

https://www.slideshare.net/nicolehaywalters/chapter-13-revenue-

management

 Sugiarto, E., & Haryadi, I. (2008). Manajemen Kantor Depan

Hotel. Jakarta: PT. Gramedia Pustaka Tama.

 CRDE. Win, Eugene. (2009). “Rooms Division Basic Theories,

Formulas and Concepts Part I”. Slideshare. 1 May 2010. Accessed

26 October 2017. Retrieved from

https://www.slideshare.net/eugenewin/rooms-division-basic-

theories-i-rate-set-up-and-forecasting

 CRDE. Win, Eugene. 2009. “Room Division Baic Theories Series

II – Revenue Management”. Slideshare. 1 May 2010. Accessed 26

October 2017. Retrieved from

https://www.slideshare.net/eugenewin/rooms-division-basic-

theories-ii

 Dix, Collin & Baird, Chris. 2007. Front Office Operations.

London: Longman, 2007.

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 A. Bardi, James. 2007. Hotel Front Office Management. USA :

Wiley, 2007.

 Andrews, Sudhir. 2009. Hotel Front Office A Training Manual.

India : Tata McGraw-Hill Education, 2009.

 Kumar Yadav, Manoj. 2010. Textbook of Hotel Front Office :

Management and Operations. India : Aman Pub, 2010.

 Mackenzie, Murray. 2009. Introduction to Hospitality. Hong

Kong : Hong Kong Polytechnic University Press, 2009.

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