Planning & Evaluating

Front Office Operations

Dr Jai Sonker
 Setting Room Rates
Forecasting

Component
Budget
Planning & evaluating are two of the functions of a manager.
 Functions of a Manager
1. Planning

5. Evaluating 2. Organizing
&
Controlling

4. 3. Staffing
Leading/
 Functions of a Manager
Planning Deciding on the goals of the organization, the best way to
achieve those goals and the necessary resources needed.

Organizing Organizing is about creating a human resource structure

(hierarchy), that will be able to achieve the planned goals.

Staffing After setting up a workable organization, staffing function

deals with filling the different positions with the right
people.
Leading/ Leading function is to guide, train, motivate and supervise
the efforts of the people working in the organization, so as
to achieve the goals.
Directing
Evaluating & Evaluating is to examine the performance of the individuals,
departments and whole organization. Then, compare with
Controlling the planned goals. Controlling is to make corrections for
 Corporate rate
Room rates
Special rate

Seasonal rate

Advance purchase rate

Half day rate

Group rate

CUGR/ CVGR
 Employee rate

Room rates
Members rate

Introductory rate

Complimentary rate

Airline / crew rate

Internet rate

FHRAI rate
 • Every business must decide on the
Establishing price it will charge from its customers,
for the goods & services it sells.
Rates: • For a customer, price may be one of the
Pricing most important basis for
selecting/rejecting a product or
Strategy service.
• The “Law of Demand” & “Law of Supply”
affect the final price in the market.
When demand is more than supply,
price increases and vice-versa.
Methods of Pricing

• In the chapter on “Room Tariff”, we have discussed two main

methods of calculating the best price for any business;
• Market- based pricing (competition based)
• Cost-plus pricing method- The business has to first calculate the cost
of supplying one unit of the product or service, and then add a
mark-up % of profit to find the final price. (Rule-of-Thumb &
Hubbart’s Formula)
• Best price is that price-point, where both, the buyer and seller,
are satisfied (value).
Room tariff
fixation Cost + fixed profit% = selling price
Thumb rule 1:1000
Hubbart formula
Market based
Factors
affecting Cost
Quality standard of services
room tariff Amenities
Food
Competition
Target market
Location
Surroundings
 Forecasting & Pricing is Planning

• Calculating tariff and creating a wide range of

discounts, come under the planning stage.
• “Forecasting” which deals with the concept of
dynamic/changing pricing (tariff).
• Forecasting is estimating the level of demand for the product/
services of the hotel, with the help of Statistics, Mathematics
and experience.
• Dynamic pricing is adjusting prices with expected changes in
 • Forecasting is estimating the
demand for the products/ services
of a hotel/ business, in future. It is
based on the past data and present
Forecasting trends .
• It is a planning tool to
minimize the
uncertainty in business.
 Effective room management

Occupancy forecast- occ % on a given date

Benefits of
forecasting Determining operating cost

Helps in budgeting

Minimum inventory of items required by each

department to carry out their tasks effectively
• Maintenance and replacement
requirements of the furniture, fixtures and Benefits of
ultimately the property, as the wear and
tear of these depend on the number of
people using it
forecasting
• Special arrangements to be made for the
arrivals of groups, commercially important
people (C.I.P’s) and VIP’s.
• The reservation forecast will provide the
necessary information to the FOM so as to
practice YIELDMANAGEMENT.
Benefits of forecasting
• The forecast provides information
about the lean days when occupancy
is low. The sales department may
take necessary action to attract
business for those durations.
• The forecast data will also reveal the
sold-out dates, which will ensure
that the reservation agent does not
accept any reservation for those
dates.
 Forecasting techniques

Quantitative technique: This technique is Qualitative technique: This technique is

used when past/historical data of the used by new businesses that do not have
business is available. The data is analysed any past data to analyse.
to understand a pattern or trend that may
repeat in future.
 • Quantitative technique:
• Last period demand.
• Simple and weighted n- period moving average
• Simple exponential smoothing
• Poisson process model- based forecasting.
Forecasting • Multiplicative seasonal indexes.

techniques • Qualitative technique:

• Executive Opinions
• Delphi Method
• Sales Force Polling
• Consumer Surveys
 Forecasting Room Availability
Forecasting helps a hotel manager in
following ways;
• Proper staff scheduling and duty roster.
• Right level of stock (inventory) to be maintained.
• Allocating rooms to different market segments
at most profitable rates. Rooms are a highly
perishable product/service!
• Estimate the cost of repair & maintenance
Information required for accurate room availability
forecast

Thorough knowledge of the hotel and surroundings areas

Market profile of the people to whom the hotel provides services

Occupancy data for the past several months and for the same
period of the previous year 4.Reservation trends and history of
Information required for accurate room availability
forecast

A list of special events scheduled in the geographical area

Business profile of specific groups booked for the forecasted

data

Number of Non-guaranteed and guaranteed reservations and

estimate of no snows

The percentage of rooms already reserved, cut off dates

 Impact of hotel groups
and their potential
Information influence on the
forecasted dates
required for
accurate room
Plan of renovating the
availability hotel that would
change the number of
forecast rooms available for sale

Construction or
 In order to forecast room availability
on any date, the following past data
on the same date are needed:
• Number of expected
Forecasting arrivals
• Number of expected walk-ins
Room • Number of expected stay-over
Availability • Number of expected no-shows
• Number of expected cancellation
• Number of expected under-stays
• Number of expected check-outs
• Number of expected overstays
 • Total Number of Guest Rooms
• Number of Out of Order Rooms
• Number of Stayover Rooms
• Number of Reserved Rooms
Forecast •+ Number of No-show Rooms

Formula •+ Number of Cancellation Rooms

•+ Number of Check-Out Rooms
•+ Number of Under stay Rooms
•– Number of Overstay Rooms
•= Number of Rooms Available for Sale
 • When it is
acceptable and
safe to do
overbooking?
History of
cancellation...
• When is the right
Forecasting time to open and
close discounts?
Room How much discount
Availability for which segment?
Watch the demand
at that price point...
• When is it okay to demand that
guest must buy at least these
many rooms or be refused?
•Demand is expected to exceed
supply of rooms...
Types of Long-term: forecasting
Forecast in the demand for a time
after 30 days to 1 year.

Hotel
Business
Short-term: forecasting
demand in the
immediate future, from
10 days to 3 days in
advance.
 Hotel ASH Jaipur
Ten Day Occupancy Forecast

Week ending

Date Prepared Prepared By

To be submitted to all Department Heads at least one week before the first day listed on forecast

Fri Sat Sun Mon Tue Wed Thu Fri Sat Sun

1. Date & Day

2. Estimated Departure

3. Reservation Arrivals – Groups

4. Reservation Arrivals –

Individuals

5. Future Reservations (after the forecast is

complete)
10. Occupancy Multiplier (based
on no of guests per occupied room for average of the
same day for last 3 weeks)

11. Forecasted no of guests

12. Actual Rooms Occupied

13. Forecasted Variance

(difference between actual & forecasted occupancy)

14. Explanation ( to be completed by FO Manager & submitted to GM)

APPROVED Date: General Manager’s Signature

Hotel Performance
Evaluation
 Hotel Performance Evaluation
Measuring the performance of a hotel is
important for it’s investors, owners, and
managers.
Investors want to know if they will earn some profit
by investing, owners are keen to find out if the
business will generate enough revenue to cover all
expenses and managers want to prove that they
have successfully achieved their planned goals.
 Key Performance Indicators

ALL DEPARTMENTS OF AN EXAMPLE OF SUCH HOTEL BUSINESS

ORGANIZATION, THAT DEPARTMENTS ARE; ALSO USES SOME
DEAL WITH FINANCE
(INCOME OR MARKETING & KPI.
EXPENDITURE) ARE SALES, FINANCE,
ALWAYS EVALUATED BY PROJECT &
SOME COMMON “KEY OPERATIONS.
Methods of measuring hotel performance
Methods Of Measuring Hotel
Performance

Average Daily Revenue Per

Rate (ADR) Available Room
Average (RevPAR)
MarketShare
Room Rate
Occupancy Ratio Index
Per Guest
(ARPG)
 Occupancy Ratio
It is one of the oldest method of evaluating a
hotel’s performance.

Occupancy % = Number of rooms occupied X 100

Total number of rooms in hotel
High occupancy would indicate some degree of
 Average Daily Rate
Average daily rate (ADR) is the average rental
income per occupied room for a given time period.

ADR = Total Revenue generated in 1 day

Total rooms sold in 1 day
The time period can range from 1 day to 1 year,
including week, fortnight, month, quarter and six
 Average Room Rate Per Guest

• It is calculated by dividing the total room revenue

by the total number of guest in the hotel, including
children above 5 years.

ARG = Total revenue generated (in a specified time)

Total guests staying in the hotel
High ARG indicates that we succeeded in attracting
 Revenue Per Available Room (RevPAR)
Rev-par is the revenue per available room. It is
calculated by multiplying the average daily rate with
the occupancy percentage. It helps in comparing
the performances of two hotels of different type,
size and operations.

RevPAR = Total Revenue (in a specified time period)

Total rooms available for sale
Gross operating profit per available room per
day(GOPPAR)

IT IS A GOOD KEY PERFORMANCE

INDICATOR FOR THE EFFICIENCY AND
GOPPAR = DEPARTMENTAL
EFFECTIVENESS OF YOUR HOTEL REVENUE-DEPARTMENTAL
 Market Share Index
it is defined as a hotel’s occupancy performance
in relation to other hotels within a pre-determined
competitive set.
Competitive set is a group of hotels in that area
who have equal star rating and same target market
For example, all business class, 5 star deluxe hotels in
Chennai.
Sl. Hotel No. of Market Fair Market Fair
No. Name rooms Potential share Market
for Competitive Calculation Share
Set %

1. A 20 200 (20/200) x 100 10%

2. B 30 200 (30/200) x 100 15%

3. C 40 200 (40/200) x 100 20%

4. D 50 200 (50/200) x 100 25%

5. E 60 200 (60/200) x 100 30%

Hotel Name No. of Market Actual no. of
rooms Potential rooms sold in 1
per week week

A 20 20 x 7 = 140 130

B 30 30 x 7 = 210 150

C 40 40 x 7 = 280 210

D 50 50 x 7 = 350 260

E 60 60 x 7 = 420 300
 Actual Market Share of each hotel
A (130/1050) x 100 = 12.38 %

B (150 / 1050) x 100 = 14.28 %

C (210 / 1050) x 100 = 20 %

D (260 / 1050) x 100 = 24.77 %

E (300 / 1050) x 100 = 28.75 %

Comparison of each hotel’s actual share with fair market share

Hotel Actual market Fair market Difference

Share Share %
%

A 12.38 % 10 % + 2.38 %

B 14.28 % 15 % - 0.72 %

C 20 % 20 % 0%

D 24.77 % 25 % - 0.23 %

E 28.57 % 30 % - 1.42 %
Fair Market Share
• Every hotel first tries to
achieve its fair market
share.
• Once it is
successful, next
goal is to increase
the market share.
• There is a general
rule-of-thumb that,
in any market, only
top 3 companies
survive in the long
 Evaluation By Guests
• We have looked at some methods by which hotels
evaluate their performance. It is even more
important to learn how guests rate a hotel.
• Guest base their evaluation of hotel on various
criteria like location, hotel staff, service level,
cleanliness, etc.
• 80 % of guests now search online for making
reservations.
 Evaluation By Guests
• This is the reason why a “Guest Cycle” in
a hotel should run smoothly & perfectly.
• A negative review has the power to spread
through “word-of-mouth” publicity and
decrease hotel sales.
• A travel portal that provides travel information,
booking and a the largest online travel
community.
• It allows map search of destinations. As the
TripAdvisor
search becomes narrow, it shows a local map of
attractions and offers from dealers in that
location.
• TripAdvisor is wiki-enabled. It is open like
Wikipedia.
• It provides direct access to OTA like Expedia,
 What makes a hotel great?
Location 30%
Comfortable beds 29%
Good Staff & Service 24%
What makes a hotel bad?
Unclean rooms 54%
Noisy hotel guest 14%
Poor hotel staff & services 11%
What was the worst experience in a hotel?
Dirty carpet 68%
Equipment not working 64%
Room not ready at check-in 59%
 What is the dirtiest part of a hotel room?
Carpet 38%
Bed Spread 37%
TV Remote 11%
Bathroom 11%

What makes a bed comfortable?

Mattress 64%

Linen 11%

Pillow 11%

Cleanliness is the top priority of most customers in a hotel.

THANK YOU