Evaluating Front Office Operations
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Transcript Evaluating Front Office Operations
Evaluating Front Office Operations
It is an important management function
Without thoroughly doing so, managers will
not know whether the planned goals is
attained or not
Successful FOMs evaluate the results of
department activities on a daily, monthly,
quarterly and yearly basis
The tools that FOMs can use to evaluate the
success of front operations include:
Evaluating Front Office Operations
The Daily Operations Report
Occupancy Ratios
Rooms Revenue Analysis
The Hotel Income Statement
The Rooms Schedule
Rooms Division Budget Reports
Operating Ratios
Ratio Standard
The Daily Operations Report
Also known as Manager’s Report / Daily
Revenue Report
It summarizes the hotel’s financial activities
during a 24 hour period
It provides a means to reconcile cash, bank
accounts, revenue and accounts receivable
Occupancy Ratio
It measures the success of the front office in
selling the hotel's primary product, i.e.
GUESTROOMS
The following rooms statistics must be
gathered to calculate basic occupancy ratios:
•No. of rooms available for sale
•No. of rooms sold
•No. of guests
•No. of guest per room
•Net rooms revenue
Occupancy Ratio
•Occupancy Percentage =
No. of Rooms Occupied
No. of Rooms Available
• Multiple Occupancy Ratio =
No. of Rooms Occupied by
More Than One Guest
No. of Rooms Occupied
Occupancy Ratio
•Average Guests per Room Sold =
No. of Guests______
No. of Rooms Sold
• Average Daily Rate =
Total Room Revenue_____
No. of Rooms sold
•RevPAR (Revenue per Available Room) =
Total Room Revenue_______
No. of Available RoomsSold
Occupancy Ratio
•RevPac (Revenue per Available Customer =
Total Revenue______
No. of Guests
•Average Rate per Guest =
Total Room Revenue_____
No. of Rooms Guests
Room Revenue Analysis
FO staff members are expected to sell rooms
at rack rate unless a guest qualifies for an
authorized discounted room rate
A room rate variance report lists those rooms
that have been sold at other than their rack
rates
This report helps FO mgmt. to review the
performance of the FO staff
The other way to evaluate the sales
effectiveness of the FO staff by FOM is to
generate a YIELD STATISTIC
Room Revenue Analysis
Yield Statistic is the ratio of actual rooms
revenue to potential rooms revenue
In other words, it is the amount of room
revenue that can be generated if all the rooms
in the hotel are sold at rack rate on a given day,
month or year
•Yield Statistic =
Actual Room Revenue____
Potential Rooms Revenue
The Hotel Income Statement
It provides important financial information
about the results of hotel operations for a given
period of time that is used by the management
to evaluate the overall success of operations
It is an important financial indicator of
operational success and profitability
The hotel income statement relies in part on
detailed FO information that is supplied through
the room schedule
The Hotel Income Statement
The amount of income generated by the
rooms division is determined by subtracting
payroll and related expenses
Revenue generated by the rooms division is
usually the largest single amount produced by
revenue center with in a hotel
The Rooms Schedule
The hotels statement of income shows only
summary information
The separate department income statement
prepared by each revenue center provide more
detail
Departmental income statements are called
‘Schedules’ and are referenced on the hotel’s
statement of income
Rooms Division Budget Report
Hotel’s accounting division prepares monthly
budget reports that compare actual revenue
and expense figures with budgeted amounts
It helps in evaluating front office operations
whether it is favorable or unfavorable
A typical budget report format should include
both monthly variances and year to date
variances for all budget items
Rooms Division Budget Report
Favorable Variance:
•Revenue: Actual exceeds budget
•Expenses: Budget exceeds actual
Unfavorable Variance:
•Revenue: Budget exceeds actual
•Expenses: Actual exceeds budget
For e.g. the actual amount of salaries and
wages for Room Division personnel for a given
month was $20, 826, while the budgeted
amount was $18, 821
Rooms Division Budget Report
It resulted in an unfavorable balance of
$2,005
Percentage variances alone can also be
deceiving
Any budgeting process is unlikely to be
perfect
So FOM should analyze only significant
variances and take action
GM and Controller normally provides criteria
and determines which variances are significant
Operating Ratios
It assists managers in evaluating the success of
front office operations
Payroll and related expenses tends to be the
largest single expenses for the entire hotel
For control, labor costs must be analyzed on a
departmental basis
Room sales fluctuates but payroll and related
expenses relatively remains constant
Hence any differences between actual and
budgeted labor cost percentages must be
carefully investigated
Ratio Standards
Operating ratios are meaningful when compared
against useful criteria such as:
Planed ratio goals
Corresponding historical ratios
Industry averages
Ratio standards are only indicators and not solution
When ratios vary significantly form planned goals,
previous results, or industrial averages, they indicate
that problem may exist
More analysis and investigations are necessary to
determine appropriate corrective actions