PLANNING & EVALUATING FRONT OFFICE OPERATIONS

Factors for Evaluating Front Office Operations

A successful front office manager shall continuously evaluate the results of department
activities on a daily, monthly, quarterly, and yearly basis. While evaluating, the following
items and tools shall be used:

 Daily operations report

 Occupancy ratios
 Rooms revenue analysis
 Hotel income statement
 Rooms division income statement or schedule
 Rooms division budgets report
 Operating ratios
 Market Share Index
 Evaluation by Guest

Daily operations report

 It is a summary of the hotel’s financial activities during a 24 hrs period. The daily
operations report provides a means of reconciling cash, bank account, revenue and
accounts receivable.
 Daily operations reports are uniquely structured to meet the needs of individual hotel
properties. The information is not restricted to the front office manager or general
manager, copies of the daily operation reports are generally distributed to all
departments and division managers in the hotel.
 It is also known as the manager’s report, the daily report, and the daily revenue report.
This very report contains a summary of the hotel’s financial activities during a 24-Hour
period.
 Moreover, it serves as to reconcile cash, bank accounts, and revenue and accounts
receivable, and as an important data that must be input to link front and back office
computer functions.

Occupancy Ratios

Occupancy ratios measure the success of the front office in selling the hotel’s primary
product (i.e. guestrooms). Below are some common ratios used in the front office
department.

 Occupancy percentage = (number of rooms occupied) / (total number of rooms

available for sale)
 Multiple occupancy percentage = (number of rooms occupied by more than one
guest)/ (total number of rooms occupied)

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 Average guests per rooms sold = (total number of guests) / (total number of rooms
sold)
 Average daily rate = (total rooms revenue) / (total number of rooms sold)
 Average rate per guest = (total rooms revenue) / (total number of guests)
 Bed occupancy percentage= number of bed sold/ total no of guest beds*100
 Local guest occupancy percentage= total no. of domestic guest staying/ total no. of
guest staying in hotel * 100
 Foreigner guest occupancy percentage= total no of foreigner guest staying/ total no
of guest staying * 100

Rooms Revenue Analysis:

 One main report to enhance control over room revenue is the room rate variance
report, which is the one that lists those rooms that have been sold at rates other than
their rack rates.
 Front office staff is expected to sell rooms on the rack rate unless a guest qualifies for an
alternate room rates. A room rate variance report lists those rooms that have been sold
at other than the rack rates.
o Average Guests Per Rooms Sold = (Total Number of Guests) / (Total Number of
Rooms Sold)
o Average Daily Rate = (Actual Room Revenue) / (Total Number of Rooms Sold)
o Average Rate per Guest = Revenue Per Available Customer (RevPAC) = (Actual
Room Revenue) / (Number of Guests)
o Revenue Per Available Room (RevPAR) = (Actual Room Revenue) / (Number of
Available Rooms)
 Another form is the yield statistic, which is the ratio of the actual revenue to the total
possible potential revenue if all rooms are sold at rack rates.

Yield statistic = (actual room revenue) / (potential room revenue)

Hotel Income Statement:

 The hotel income statement provides important financial information about the result of
hotel operations for a given period of time. The period may be one month or longer, but
it should not exceed one business year.
 Since a statement of income reveals the amount of net income for a given period, it is
one of the most important financial statements used by the management to evaluate
the overall success of the operations.
 The hotel’s statement of income is often called the consolidated income statement
because it presents a composite picture of all hotels’ financial operations.

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Rooms Division Income Statement

The rooms division income statement (sometimes called a schedule) shall be referenced on
the hotel’s income statement. Moreover, the rooms division schedule shall be prepared by
hotel’s accounting division not the hotel’s front office accounting staff.

Rooms Division Budget Reports

 These reports are monthly budget forms that compare actual revenue and expense
figures against budgeted amounts depicted both in dollar values and percentage
variances. The hotel’s accounting department also prepares monthly budget reports that
compare actual revenue and expense figures with budgeted amounts.
 These reports can provide timely information for evaluating front office operations.
Front office performance is often judged according to how favourably the rooms
division’s monthly income and expenses figures compared with budgeted amount.
 A typical budget report format should include both monthly variance and year to date
variance for all budget items.

Operating Ratios

Operating ratios (ex. occupancy ratios, yield statistic…) assist managers in evaluating the
success of front office operations. Moreover, for ratios to be meaningful they should be
compared against proper standards such as prior periods, competitors, and/or budgeted
ratios.

Market Share Index

 RevPAR is a useful tool to measure the performance of a hotel. It uses occupancy % and
ADR for comparing the performance of hotels. However in a competitive environment,
hotels may not provide information about ADR.
 In such situation, the evaluation of hotel’s performance is done by using market share.
Market share is defined as a hotel’s occupancy performance in relation to other hotels
within the predetermined competitive set.

Let’s suppose there are 4 hotels in a competitive set:

HOTEL No of rooms Total market Rightful share

potential
A 100 1000 10%
B 200 1000 20%
C 300 1000 30%
D 400 1000 40%

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If we feed the actual occupancy data of all the participating hotels of the competitive
set, we will be able to know the actual market and share taken by each hotels, and
can compare the performance of each hotel.

hotel No of No of Market Actual rightful difference

rooms rooms share percentage share
sold/ day
A 100 60 60/860 7% 10% -3%
B 200 150 150/860 17% 20% -3%
C 300 270 270/860 32% 30% +2%
D 400 380 380/860 44% 40% +4%
TOTAL 1000 860

On comparing the actual market share one can find out that hotel D’S performance
is better than Hotel C, Hotel C is better than Hotel A & B.

Evaluation by Guest

Guests also evaluate hotels on various criteria like location, hotel staff, service levels,
cleanliness etc. It can be done online, through mail or by filling up the feedback form at the

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