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6th Sem L Front Office L Solved Papers L 2013-14
6th Sem L Front Office L Solved Papers L 2013-14
Table of Contents
Q.1. Explain how yield management enhances forecasting and seasonal pricing of inventory
in hotel industry.
Yield management
The role of yield management in forecasting the seasonal inventory in the hotels .
Or “applying yield management improvises the co-ordination between the front office and
sales department”. Justify.
Applying yield management improvises the co-ordination between the front office and the
sales department.
Question 2 : Write short notes on the following: (a) capacity management (b) duration
control
Capacity management
Duration control
Question 3 :(a) State three different formulas to calculate yield statistics. (b) State two types
of formula to calculate equivalent occupancy.
Formula to calculate the yield statistics
Yield statistic:
Equivalent occupancy:
Q.4. Discuss the reports generated by the revenue management software.
Revenue management software
Revenue management software generated reports:
Benefits of revenue management software’s
Or Give the formula for the following: (a) Rate spread (b) CMRw (c) Potential average rate
Question 5: What strategies will you adopt when room demand is low?
Potential low demand techniques
Question 6: Define timeshare. Explain the types of timeshare business.
Forms/types/classification of timeshare ownership
Question 7: Highlight the historical development of timeshare and condominium business in
India.
Important features
Or Elaborate on the facilities offered by condominium resorts to their guests.
Main amenities that are provided by condominiums are
For families
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It helps the reservation or revenue manager to project the future volume of business and the
revenue that would be generated by the hotel.
The volume of the reservation will help the front office manager and the management of the
hotel to plan the following:
Staff requirement inn each dept for the smooth functioning of the operations.
Minimum inventory of the items required by each department to carry out their task
efficiently.
Allocation of the resources to serve the guest in the best possible way.
Special arrangements to be made for the arrival of groups, commercially important persons,
and VIPs.
Maintenance and replacement requirement of the furniture, fixtures, and ultimately the
property, as the wear and the tear of these, depends on the number of people using it.
The reservation forecast will provide the necessary data to the reservation manager to
practice yield management.
The reservation manager will be able to take the selective overbooking, based on the
reservation forecast.
The forecast data provide information about the lean days when the occupancy will be low;
the sales dept may take the necessary actions to attract the business for those durations.
The forecast data will also reveal the sold-out dates, which will ensure that the reservation
agent does not accept reservations for those days.
As the yield management deals with the maximization of the revenue of the hotel inventory
that is the rooms, there it is very important to forecast the upcoming room inventory which
will give the idea of the room revenue for the sales dept. By selling the right product at the
right time.
Forecasting demand: Without an accurate forecast, pricing and yield tactics cannot be
effectively applied. Demand forecasts are an essential part of a revenue management
system. For example in a hotel, a demand forecast is usually calculated by taking the actual
number of reservations on hand (actual number of rooms booked) and adding the predicted
number of rooms that will be booked (this is sometimes known as a pickup). Historical
demand and booking patterns per market segment should help managers predict peaks and
troughs in demand and assist the hotelier in more effectively aligning demand with supply.
Improved seasonal pricing and inventory decisions: It helps in deciding the season and off-
season pricing for accommodation products and also in making important inventory decisions
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like renovation.
Or “applying yield management improvises the co-
ordination between the front office and sales
department”. Justify.
Applying yield management improvises the co-ordination between
the front office and the sales department.
Ideally, the hotel’s plan for rate positioning is developed as part of the overall business and
marketing plan developed by the hotel’s dosm (director of sales and marketing) who heads
the sales and marketing department and approved by the general manager. The plan should
consider the hotel’s competitive set, group bookings history, rate resistance as reported by
the property’s in-house reservationists and the demand forecasts include the period of time
covered by the plan.
Note: Rate resistance-refusal to make a reservation because the rate quoted is perceived to
be too high.
The revenue manager and the DOSM need not schedule tedious meetings, but they must be
able to make decisions, coordinate their efforts, and adjust rate strategies as conditions
dictate.
The DOSM should recognize that the revenue manager can provide important input about the
number of rooms to be sold by group sales and the number to be held for transient guests.
Every individual reservation made through the hotel’s front office, as well as every group
room sale made by a hotel’s sales department, affects the property’s revenue forecasts and
therefore affects rate management, majority of room reservations
(group/corporate/crew/transient).
Methods used by the revenue manager, FOM, and the DOSM to share information and to
coordinate their activities vary between properties, sales and marketing designs special
packages and offers so that hotel gets regular business even during the off-season.
Accurate room availability for the next 3/6/12 months, Closed dates (0 rooms available), total
house count of the day. guest history, reservation history.
Revenue managers maximize room revenue by managing room inventories while applying
analytical and technical knowledge of hotel reservation and f o systems. They develop,
implement, monitor and control revenue and sales strategies and interact with DOSM to
ensure proper mix of transient, group and other guest room allocations to maximize Rev -Par.
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Minimum length of stay: Requires that a reservation must be for at least a specific number of
nights. Some resorts use the approach during peak occupancy or hotels during special events
or high occupancy periods.
Closed to arrival: Strategies allow a reservation to be taken for a certain date as long as the
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guest arrives before that date e.g. 100 arrivals on 30th July, therefore, any arrival on 28th and
Sell through: Strategy works like a minimum length of stay requirement except that the
length of the stay can begin before the date the strategy is applied e.g. If a 3-night sell-
through is applied on Wednesday, then the sell-through applies on Monday, Tuesday, and
Wednesday. Arrivals on each of those days must stay for 3 nights in order to get accepted. It
is effective when 1 day is peak and management does not want the peak to affect either side
reservation.
All the three strategies may be combined together e.g. Duration control can be combined
with discount allocation and so on.
Yield statistic:
Yield statistic = (actual rooms revenue) / (potential rooms revenue)
Yield statistic = ((rooms nights sold) / (rooms nights available)) x ((actual average room rate)
/ (potential average rate))
Yield statistic = occupancy percentage x achievement factor
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Equivalent occupancy:
Equivalent occupancy = (current occupancy percentage) * ((rack rate – marginal cost) / (rack
rate * ((1 – discount percentage)) – marginal cost)
Equivalent occupancy = (current occupancy percentage) * ((contribution margin) / (new
contribution margin))
Q.4. Discuss the reports generated by the revenue
management software.
Revenue management software
The most effective way of handling data and generating yield statics is through a computer.
Sophisticated revenue management software is available that can integrate room demand
and room price statics and can stimulate high room revenue-producing scenarios. The
software provides information and supports managerial decisions. Computers store, retrieve,
and manipulate large data and can help management create models that produce the
probable result of the decision. Decision models are based on historical data forecast and
booked business.
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Potential average double rate = (double room revenue at rack rate) / (number of rooms sold
as double)
Potential average single rate = (single room revenues at rack rate) / (number of rooms sold
as single)
The breakeven calculation is based on the weighted average contribution margin ratio (CMR)
for all non-room revenue. While a detailed discussion of this topic is beyond the scope of this
chapter, a simple formula for determining the CMRw for all non-room revenue centers is as
follows
CMR w = Total Non-Room Revenue – Total Non-Room Revenue Center Variable Costs
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Encourage upgrades.
Offer stay – sensitive price incentives.
Remove stay restrictions.
Establish a relationship with competitors.
Lower the rates to attract more guests and generate more revenue for the hotel.
Carefully design a flexible rating system that permits sales agents to offer lower rates under
certain situations
Strive to accurately project expected market mix
Management shall closely monitor group bookings and trends in transient business Þ do not
close off lower rate and market segments arbitrarily
As low occupancy periods become inevitable, open lower rate categories, solicit price-
sensitive groups, promote corporate, government, and other special discounts, and develop
new rate packages.
Consider maintaining high room rates for walk-in guests.
A non-financial technique involves upgrading guests to nicer accommodations than they are
entitled to by virtue of their room rate.
Question 6: Define timeshare. Explain the types of
timeshare business.
The timeshare or vacation ownership strategy or concept has recently become very popular
and timeshare properties are another preference of vacationers. It is an expanding part of
the hospitality industry.
The world tourism organization defines timeshare as: “the advance purchase of time in
holiday accommodation. The purchaser pays a capital sum to acquire the timeshare and then
pays an annual contribution towards the maintenance of the property. The period of time sold
is usually based on modules of a week.”
A timeshare is a form of vacation property ownership. With timeshares, the use and costs of
running the resort are shared among the owners. While the majority of timeshares are
condominiums or cooperatives at vacation destinations, developers have applied the
timeshare model to houseboats, yachts, campgrounds, motor homes, cruises, and private
jets.
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Fixed week method/fixed week ownership: The most basic timeshare unit is a fixed week; the
resort will have a calendar enumerating the weeks roughly starting with the first calendar
week of the year. An owner may own a deed to use a unit for a single specified week. If an
owner owned week 26 at a resort, he or she could use that week every year.
Floating week method/ ownership: Sometimes a timeshare is sold as floating weeks. The
ownership will be specific on how many weeks the owner owns and from which weeks the
owner may select for the owner’s stay. An example of this, a timeshare may be a floating
summer week where the owner may request any week during the summer season generally
weeks 22 through 36.
The split week method/ split in time share: Is also now available where the owner can split
his/ her week/period into smaller units, provided the cancellation of timeshare use has been
made well in advance. A week’s holiday can be split in two parts for two different properties
and locations for a period of 3-4 days each. In fact, a two weeks holiday can also be clubbed
if the owner has not availed his vacations during the last year and he had intimated about his
desire to club two weeks vacations during the year.
Rotating week method/timeshare: Some timeshares are sold as rotating weeks. In an attempt
to give all owners a chance for the best weeks, the weeks are rotated forward or backward
through the calendar, so one year the owner may have use of week 25, then week 26 the
next year and then week 27 the year after that. This method does give each owner a fair
opportunity for prime weeks but it is not flexible.
Points- based programs: Under a point-based system, consumers at chain timeshare
properties purchase a number of points that are redeemed each year for a number of
accommodation nights that vary depending on the season, day of the week, size of unit and
location. These points can be redeemed in any of the hotels and timeshare product base.
The number of points required to stay at the resort will vary based on a points chart. The
points chart will allow for factors such as:
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Resort- based points programs are also sold as deeded and as the right to use. Points
programs annually give the owner a number of points equal to the level of ownership. The
timeshare owner in a points program can then use these points to make travel arrangements
within the resort group. Many points programs are affiliated with large resort groups offering
a large selection of options for the destination. Many resort point programs provide flexibility
from the traditional week’s stay. Resort point program members, such as world mark, may
request from the entire available inventory of the resort group.
• assign their usage time to the point system to be exchanged for airline tickets, hotels,
travel packages, cruises, and amusement park tickets;
• instead of renting all their actual usage time, rent part of their points without actually
getting any usage time and use the rest of the points;
• rent more points from either the internal exchange entity or another owner to get a larger
unit or more vacation time or at a better location;
Some developers, however, may limit which of these options are available at their properties.
6. Vacation clubs: Vacation clubs are another time sharing variation. A vacation club is an
organization that owns multiple timeshare properties in different locations. If you are a club
member, you can reserve space at the various resorts that are part of the club in accordance
with club rules. You pay annual fees, and there is an initial cost to join the vacation club. As
with a right-to-use property, the vacation club contract will either contain the timeshare
program documents or will incorporate them by reference.
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The timeshare or vacation ownership strategy or concept has recently become very popular
and timeshare properties are another preference of vacationers. It is an expanding part of
the hospitality industry.
The world tourism organization defines timeshare as: “the advance purchase of time in
holiday accommodation. The purchaser pays a capital sum to acquire the timeshare and then
pays an annual contribution towards the maintenance of the property. The period of time sold
is usually based on modules of a week.”
Important features
These properties are normally found in resort areas – hills and beaches, etc. Which offer
attractive climate and a variety of recreational amenities throughout the year.
Vacation ownership properties typically involve individuals who purchase the ownership of
accommodation for a specific period of time- one or two weeks or more, in a year usually at a
one-time price. The lifetime term of timeshares varies from 20, 25, 30, 50, or 60 years. This
means, for example, the owner has the right to the property for one week every year for 25
years.
The timeshare business is divided into 52 weeks and each week is a unit. The price of the
unit depends on the season for which one is buying a unit. For different resort locations, the
peak and low seasons will vary depending on the demand. In hill stations, the summer may
be the peak while for a ski resort the winters will be the peak season. The seasons are usually
designated with colour codes and a resort may use different colours to describe peak and low
seasons.
Typically the following colour code is used:
Purple: Peak season
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Blue: Off season
Condominium hotels or units are similar to timeshare properties with the only difference
being in the kind of ownership and the accommodation is usually in the form of apartments.
Condominium hotels have only one owner per unit as opposed to multiple owners of a
timeshare.
When the ‘condo’ owner wishes to occupy the unit, he informs the management of his intent
and they may rent out the unit for the rest of the year when it is vacant.
When the unit is rented out, the revenue goes to the owner. The management takes the
responsibility of the unit’s safety and the major portion of the rent is given to the owner.
The management can also request the owner to rent out the unit in case of major
conferences and earn a tidy amount by renting out the conference hall and providing
catering services for the event.
In both timeshare and condominium properties management charges an annual maintenance
fee on a pro-rata basis to cover on-going operational costs that include the charges incurred
for advertising, rental, housekeeping, landscaping services, and maintenance cost of the
condominium, etc.
Each unit normally consists of a living room, a dining area, kitchen facilities, one or more
bedrooms with bathrooms.
Or Elaborate on the facilities offered by condominium
resorts to their guests.
Condominium hotels or units are similar to timeshare properties with the only difference
being in the kind of ownership and the accommodation is usually in the form of apartments.
Condominium hotels have only one owner per unit as opposed to multiple owners of a
timeshare. When the ‘condo’ owner wishes to occupy the unit, he informs the management
of his intent and they may rent out the unit for the rest of the year when it is vacant. When
the unit is rented out, the revenue goes to the owner. The management takes the
responsibility of the unit’s safety and the major portion of the rent is given to the owner. The
management can also request the owner to rent out the unit in case of major conferences
and earn a tidy amount by renting out the conference hall and providing catering services for
the event.
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Condo hotels are typically high-rise buildings developed and operated as luxury hotels,
usually in major cities and resorts. these hotels have condominium units that allow someone
to own a full-service vacation home. When they are not using this home, they can leverage
the marketing and management done by the hotel chain to rent and manage the condo unit
as it would any other hotel room.
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Founded in 1974, RCI has grown to become one of the larger brokers of timeshare trades.
RCI has over 4,000 affiliated resorts in over 100 countries around the world. Its membership
base is just over 3 million members worldwide. It has 30 vacation accommodation brands
including vacation ownership condominiums, villas, cottages, city apartments and second
homes, fractional interest and private residences clubs, etc. And 50 worldwide offices. It has
37, 922 rooms worldwide and more than 7, 50,000 owners worldwide.
Currently, RCI’s biggest competitors in the timeshare market are interval international and
trading places international. RCI provides the following services:
A. Exchange services
B. Rental programmes
C. Club services
RCI weeks
RCI weeks is RCI’s traditional exchange system. Vacation exchange adds flexibility and
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variety to vacation ownership by allowing timeshare owners to trade their vacation week for
another similar unit.
B. Owner buys a fixed week or floating week booked within a certain season based on the
resort
To use the services of RCI it is necessary to hold a membership of the company which is valid
for one to 5 years up to a maximum of 5 weeks at each affiliated resort. In order to process
an exchange, a deposit has to be made in advance. Then an exchange request has to be
made. This request can be confirmed immediately depending on availability. If unavailable,
the request keeps pending for a stated period and if nothing comes up later as well, the
deposited week remains in the space bank and the member can add another request for
future use.
For the exchange, the trading power of the unit depends on the size of the unit, the
popularity of the location of the resort, the quality of the resort, and the popularity of week or
season. RCI keeps records of seasons and demand and usage of a resort to appreciate its
value. Bonus weeks may be offered when there is a surplus in the space bank and the
members can enjoy an extra week as a bonus without depositing any week.
Some of the areas where government plays a pivotal role in timeshare industry are listed as
below:
Security: Safety and security is an important concern for any industry and specifically so for
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the tourism industry. No tourist wants to visit a destination where he perceives a threat to his
life or belongings. It is the government’s duty to ascertain that law enforcement agencies
such as police and para-military work properly to maintain security at the destination. At
some places, the government has also started a concept of tourist police who are specifically
responsible for policing in tourist areas.
The government must take the following steps in order to encourage the growth of
timeshares:
• industry recognition
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•regulator)’ framework
The referral groups also extend benefit of more extensive reservation and expanded
advertising through pooled resources.
A referral hotel chain is a type of hotel franchise. It is a type of hotel that operates
independently but maintains affiliation with a given chain. To stay within the chain, the hotel
must meet certain minimum criteria.
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