Front Office

Budgeting

Yvonne Yang - RDM HAIII LRJJ

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 Contents
• Forecasting room revenues
• Estimating expenses for rooms
• Evaluating front office operations

Yvonne Yang - RDM HAIII LRJJ

www.lrjj.cn
 FO Budgeting
The Front Office budgeting:
• is a long-term planning functions for FOM
and RDM
• is normally on a yearly base (annual budgets),
but commonly divided into monthly, then
weekly, even daily plan
• is mainly focus on forecasting rooms revenue
and estimating expenses

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 Forecasting Rooms Revenue

Forecasted Annual Rooms Revenue =

Rooms X Occupancy X Average

Available Percentage Daily Rate

Rooms Available = Total Rooms X 365 Days

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Forecasting Rooms Revenue
Example
100 Rooms Hotel
100 x 365 days = 36,500 Rooms
Available

75% Occupancy Percentage

0.75

$50 Average Daily Rate

36,500 x0.75 x $50 = $1,368,750
Yvonne Yang - RDM HAIII LRJJ
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 Estimating Expenses in Rooms
• According to the historical data, each expense item
may represent a approximate percentage of rooms
revenue
• Expenses in Rooms are:
- Payroll and related expenses
- Laundry (linens + guest laundry)
- Guest supplies (bathroom amenities + stationeries)
- Commission and reservation expenses
- Other expenses (telecommunications, satellite cables,
transportation, guest relocation, training, uniforms,
complementary guest services, operational supplies )

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 Rooms Division
Income Statement
• Provide important financial information
about the results of hotel department
operations for a given period of time.
• Departmental income statements are
called “schedules” and are referenced on
the hotel’s statement of income.
• Example: Exhibit 17 on Page 457

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 Evaluating Front Office
Operations
Important tools that FOMs could use to evaluate the
success of FO operations, to check if FO reaching
planned goals:

The daily operations report

Occupancy ratios
Rooms revenue analysis

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 The Daily Operations Report

• Also called as “ Daily revenue report” or “Manager’s

report”
• A summary of a hotel activities during 24 hours
• Served as a posting reference for various accounting
journals
• Including occupancy summary (different room types,
revenue summary (all the outlets), Rooms revenue
analysis (different rate groups), Group analysis (MICE
+ Tour), Food & Beverage analysis, Complimentary
rooms, OOO rooms
• Distributed to all division heads

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 Occupancy Ratios
 Occupancy Percentage:
Number of Rooms Occupied/
Number of Rooms Available

 Average Daily Rate (ADR):

Total Room Revenue/
Number of Rooms Sold
Including
from single to suites
both individual and group
both weekday and weekend

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 Occupancy Ratios

 Multiple Occupancy Percentage:

Number of Rooms Occupied by
more than One guest/
Number of Rooms Occupied

 Average Guests per Room Sold:

Number of Guests
/Number of Rooms Sold＞1

To forecast food and beverage revenue and

indicate clean linens requirements
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 Occupancy Ratios
 Revenue per Available Room (RevPAR):
Total Room Revenue/
Number of Available Rooms
Benchmark for comparison with similar hotels

 Revenue per Available Customer (RevPAC):

Total Revenue/
Number of Guests

 Average Rate per Guest (ARG):

Total Room Revenue/
Number of Guests
Used often by Resort
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 Exercise of Occupancy Ratios
 The Hilton Hotel has 100 rooms and a rack rate is
1100￥RMB.
 2 rooms are out of order.
 75 rooms were sold at varying rates.
 78 rooms were occupied including 3 complimentary
rooms.
 8 rooms were occupied by 2 guests, therefore, a total of
86 guests were in occupancy.
 66080￥RMB in rooms revenue were generated.
 81860￥RMB in total revenue were generated, including
rooms, food beverage, telephone calls, meeting room
rental, laundry and other.

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 Calculation
Occupancy percentage

Multiple Occupancy Percentage

Average Guests per Room Sold

Average Daily Rate (ADR)

Revenue per Available Room (RevPAR)

Revenue per Available Customer (RevPAC)

Average Rate per Guest (ARG)

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 Answers
Occupancy percentage
78/100-2=79.6%
Average Daily Rate (ADR)
66080/75=881.07
Multiple Occupancy Percentage
8/78=10.3%
Average Guests per Room Sold
86/75=1.15
Revenue per Available Room (RevPAR)
66080/98=674.29
Revenue per Available Customer (RevPAC)
81860/86=951.86
Average Rate per Guest (ARG)
66080/86=768.37
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