Forecasting Room
Availability:
Room availability is the actual or projected number of rooms not yet occupied
or reserved on a given date. Because rooms continually turn over, is almost
impossible to compute the exact number that will be unoccupied. A room
availability report is an estimate base on information about past reservations
and occupancy.
The following information is required to prepare an accurate room availability
report.
Room Inventory
Previously Night Occupancy
Departures
Reservations
Under Stay
Over Stay
Cancellation
No-Shows
Early arrivals
Room Inventory
The total number of rooms
that could theoretically be sold on a given date is called rooms that could
theoretically be sold on a given date is called room inventory. The inventory
does not include rooms that are out of order for maintenance or redecoration or
rooms that are currently under construction.
Previously Night Occupancy:
The total numbers of rooms
were occupied by the guest on the previous night.
Departures:
A departure is a guest who
is scheduled to check out on the current date.
Reservations:
The report must take into
considerable that the total numbers of rooms for which reservations have been
received for the current date.
Under Stay:
Guest who indicated their
intention to remain inn the hotel but checked out before their scheduled
departure date is called under stay.
Over Stay:
Guest who remains in the
hotel beyond the scheduled departure date is called over stay.
Cancellation:
Reservation may be canceled
for many different reasons. Bad weather and labour strikes almost always create
high cancellation percentage. The average rate of a typical hotel is about 2%
of reservation.
No-Shows:
Besides cancellation there
is a small percentage of people who make reservations and never check – in. The
average number show rate is about 5% of reservations.
Early arrivals:
There is also a possibility
that a guest will check in prior to the estimated arrival date.
FORECASTING DATA
The process of forecasting room availability generally relies on historical
occupies data as well as business already committed. Historical data is used to
take some of the guess work out of forecasting. To facilitate forecasting
the following daily occupy data should be collected.
Number of expected room
arrivals:
Based on existing
reservations and historical trends for few reservations and on cancellations
prior to the arrival date.
Number of expected room
walk-ins:
Based on historical records
Number of room stay over:
(rooms occupied on
previous night that will continue to be occupied for the night
in
Question)
Based on existing
reservation
Number of expected room
no-shows:
Based on historical records
Number expected rooms under
stays:
(checkouts occurring before
expected departure date)
Based on historical data
Number of expected room
check out:
Based on existing
reservation
Number of expected rooms
over stays:
(Check out occurring after
the originally reserved departure date)
Based on historical records.
Some hotels with a very high double occupancy percentage may be as concerned
with guest counts. For example, an all inclusive resort with a large
amount of business from vacationing couples may want to forecast guest as well
as room count activity. Conventional hotels may often have the same
concerns.
Chances are good that much of information is available in reports, documents
and other data sources at the property. The hotels daily reports will
likely be invaluable in this research these reports should summarized and
stored in a way (that is) easily accessible.
Over all these data are important to room availability forecasting. Since
they are used in calculating various daily operating ratios that help determine
the number of available rooms for sale. Ratios are a mathematical
expression is a relationship between two numbers that is determined by dividing
one by the other. Most statistical ratios that applied to front office
are percentage of no-shows, walk-in, over stays, under stays. Occupancy
history data from the fictitious property are used to illustrate the
calculation of each front office ratio. Manager should look for
consistency in ratios. Consistency may roughly the same ratio every day
or identifiable patterns without consistency, forecasting ratios and projecting
operating performance very difficult.
Percentage of Walk – in:
PERCENTAGE OF WALK-INS
|
The percentage of walk-ins is calculated by dividing the number of rooms
occupied by walk-ins for a period by the total number of rooms’ arrivals for
the same period.
Walk-ins guest occupy available rooms that are held for guests with
reservations often, hotels can sell rooms to walk -ins guest at a higher rate,
since these guests may have less opportunity to considered to alternate
property. Front desk agents are some times asked to show a guest groom to
a walk-in guest which tends to be much more effective than trying to sell rooms
over the telephone or through a website. Walk-in guest sales help to
improve both occupancy and room revenues. However, from a planning
perfective, it is generally considered better to have reservations in advance
than to count on walk-in traffic.
Note that other ratios can dramatically affect the walk-in ratio.
Example, if a hotel has 10 no-shows beyond forecast it may accept more walk-ins
than usual to make up for the last business. When this information is
tracked for historical purposes, it is essential that the other ratios also be
tracked to show how they affect one another. One effective way to predict
walk-ins is to know what is going on in the market place. Their will be a
better opportunity for walk-ins (and a higher rate). If near by hotels
are experiencing high demand.
Percentage of Over Stay:
The over stays
represent rooms occupied by guests who stays beyond their originally schedule
departure dates. Over stay guests may have arrived with guaranteed
reservations or as walk-ins. Over stays should not over confuse with over
stays. Stay over rooms are room occupied by guests who arrived to occupy
a room before the day in question and whose scheduled departure date isn’t
until after the day in question.
The percentage of over stays is calculated by dividing the number of expected
room check outs for the same period. The number of expected room check
out equals the number of actual check outs on the books minus under stays plus
over stays stated another way, the numbers of expected room check outs is the
number of rooms shown by the front office system or the manual count of
occupied room as due for departure.
Number of over stays rooms
% of over
stays
=______________________________________________ x
100
Room check outs – under stay
rooms + over stays room
= 47 / 346 – 33 + 47 x 100
= 47 / 313 + 47 x 100
= 47 / 354 x 100
= 13.06 %
To help regulate room over stays, front office agents are trained to verify an
arriving guest’s departure date at check-in. Such verification can be
critical, especially when the hotel is at or near full occupancy and there are
no provisions for over stay guests. Over stay may also prove problematic
when specific rooms have been blocked for arriving guest. This is
especially important for suit or rooms that may have special importance to an
incoming guests.
Percentage of Under Stay:
Under stay represents rooms
occupied by guest who checks out before their originally scheduled departure
dates. Under stays guests may have arrived at the hotel with guaranteed
or non-guaranteed reservation or as walk-ins.
The percentage of under stay is calculated by dividing the number of under stay
rooms for a period by the total number of expected room check outs for the same
period.
Numbers of under stay rooms
% of Under
stay =
______________________________________________ x 100
Room check outs – under stays rooms + over stay rooms
= 33 / 346 – 33 + 47 x 100
= 33 / 346 + 47 x 100
= 33 / 360 x 100
= 9.17 %
Guest leaving before their stated departure date create empty rooms that
typically are difficult to fill. Thus, under stay rooms may represent
permanently lost rooms revenue. Over stay, on the other hand, are guest
staying beyond their started departure date and may best room revenues.
When the hotel is not operating at full capacity, over stays result in additional,
unexpected room revenues. In an attempt to regulate under stay and over
stay rooms, front office staff should.
Confirm or reconfirm each
guest’s departure date at registration. Some guests may already know of a
change in plans, or a mistake may have been made in the original processing of
the reservation. The sooner data are corrected the grater the chance for
improved planning.
Present an alternate guest
room reservation form to a registered guest, explaining that an arriving guest
holds a reservation for his/her assigned room. A note card may be placed
in the guest room a day before or the morning of the scheduled day of the
registered guest departure.
Review group history, many
groups, especially associations, hold large closing events, for the entire
group on the last day of the meeting. Guest may make reservation to
improve attending the final event. However changes in plans or other
priorities may required guest’s to leave early. While it is difficult for
the hotel to hold guest to the number nights they reserved. Managers may
be better able to plan for early departure, based on the groups departure
history. Some hotels that have a lot of association business or a history
of transient guests departing before their schedule day may apply the
reservation deposit to the last of the night of the stay not the first night.
Contact potential over stay
guests about their scheduled departure date to continue their intension to
check out. Room occupancy data should be examined each day, rooms with
guest expected to check out should be flagged. Guest who have not left by
check out time should be contacted and asked about their departure and intensions.
This procedure permits airlines an early revised count of over stay and allow
sufficient time to modify previous front office planning if necessary.
FORECAST FORMULA
Once relevant occupancy statistics has been gathered, the number of rooms
available for sale on given date can be determine by the following formula.
Total Number of guest room
(-) Number of out order
rooms
(-) Number of rooms
reservation
(+) Number of rooms
reservations (x) % of no show
(-)Number of rooms over
stays
(=) Number of rooms
available for sale
Note that this formula does
not include walk-ins. They are not included because the number of
walk-ins a hotel can accept id determined by the number of rooms that remain
available for sale. If a hotel is full due to existing reservations, stay
over and other factors. It can’t accept walk ins.
As an example, consider the hotel is a 120 room property where on April
1st there are 3 out of order rooms and 55 stay over. On that day, there
are 42 guests with reservations scheduled to arrive since the percentage of
no-show has been recently calculated at 18.06 % the front office manager
calculates that as many as 8 guests with reservation may not arrive (42 x
.1806=7.59, rounded to 8 ). Based on historical data, 6 under stays and
15 over stays are also expected. The number of rooms projected to be
available for sale on April 1st can be determined as follows.
Total number of guest
rooms
120
( - ) Number of out of
order rooms
3
( - ) Number of stay
over
55
( - ) Number of room
reservation
42
( + ) Number of room
reservation X Percentage of
No-show
8
( + ) Number of rooms under
stay
6
( - ) Number of rooms over
stays
15
= Number of rooms available
for sale
19
rooms
BUDGETING FOR OPERATIONS
The most important long terms planning function that front office perform is
budgeting front office operations. The hotels annual operations budget is
a profit plan that addresses all revenue sources and expenses items.
Annual budgets are commonly divided into monthly plans that, is terms are
divided into weekly ( some times daily ) plans. These budget plans
becomes standards against when management can evaluate the actual results of
operations.
In most hotel, room revenues are greater than food, beverage, banquet or any
other revenues. In addition, rooms division profits are usually greater
than those of any other division. There fore, an accurate rooms division
budget is vital to creating the over all budget of the hotel.
The budget planning process requires the closely coordinated efforts of all
management personnel. While the front office manager is responsible for
room revenue forecast. The accounting division staff will be counted on
to supply department managers with statistical information process. The
accounting division staff is also responsible for co-ordinating the budget
plans of individual department wide operations budget for top management’s
review. The General Manager and controller typically a budget report for
approval by the hotels owners. If the budget is not satisfactory,
elements requiring charges may be written to the appropriate division managers
for review and revision.
The front office manager’s primary responsibility in budget planning are
forecasting rooms revenue and estimating related expenses. Rooms revenue
is forecasted with input from the reservations manager’s, while expenses are
estimated with input from all department manager’s in the rooms divisions.
FORECASTING ROOM REVENUE
Historical financial information often serves as the foundation on which front
office managers build rooms revenue forecasts. One method of rooms
revenue forecasting involves an analysis of rooms revenue from past
periods. Dollar and percentage differences are noted and the amount of
rooms revenue for the budget years is predicted.
For example, the table shows yearly increases in net rooms revenue for the
Emily Hotel. For the years 2001 to 2004, the amount of rooms revenue
increased from $1,000,000 to $1,331,000, reflecting a 10 percent yearly
increase. If future conditions appear to be similar to those the past,
the rooms revenue for 2005 would be budgeted at $1,464,100 a 10 percent
increase over the 2004 amount.
Rooms Revenue Summary for
the Emily Hotel
YEAR
|
ROOMS REVENUE
|
INCREASE OVER
DOLLAR
|
PRIOR YEAR %
|
2001
|
$1,000,000
|
-
|
-
|
2002
|
$1,100,000
|
$1,00,000
|
10%
|
2003
|
$1,210,000
|
$1,10,000
|
10%
|
2004
|
$1,331,000
|
$1,21,000
|
10%
|
Another approach to forecasting rooms revenue bases the revenue projection on
past room sales and average daily room rates. The table presents rooms
revenue statistics for the 120 room Bradley hotel from
2001 to 2004. An
analysis of these statistics shows that occupancy percentage increased three
percentage points from 2001 to 2002, one percentage point from 2002 to 2003,
and one percentage point from 2003 to 2004. Average daily room rates increased
by $2, $2, and $3 respectively over the same periods. If future
conditions are assumed to be similar to those of the past, a rooms revenue
forecast for 2005 may be based on a one percentage increase in occupancy
percentage (to 76 percentage) and a $3 increase in the average daily room rate
(to $60). Given these projections, the following formula can be used to
forecast rooms revenue for the year 2005 for the Bradley Hotel.
Rooms Revenue Statistics
for the Bradley Hotel
YEAR
|
ROOMS SOLD
|
AVERAGE DAILY RATE
|
NET ROOMS REVENUE
|
OCCUPANCY
%
|
2001
|
30,660
|
$50
|
$1,533,000
|
70%
|
2002
|
31.974
|
$52
|
$1,662,648
|
73%
|
2003
|
32,412
|
$54
|
$1,750,248
|
74%
|
2004
|
32,850
|
$57
|
$1,872,450
|
75%
|
Forecast rooms revenue =
rooms available X occupancy percentage X Average daily rate
= 43,800
X
.76%
X $60
=
$1,997,280
The number of rooms available is calculated by multiplying the 120 rooms of the
Bradley Hotel by the 365 days of the year. This calculation assumes that
all rooms will be available for sale each day of the year. This will
probably not be the case, but it is a reasonable starting point for
projection. Note also that at some point occupancy will not be able to
grow any further, and may actually decline. For example, new competitors
may enter the market, taking occupancy away from the hotel. Management
needs to anticipate this shift and adjust its forecast to take into account
the increased competition. The same logic applies to projecting
rate growth. Hotel management may decide to hold or even reduce rates to
maintain or improve occupancy when new competitors enter the market.
This simplified approach to forecast to forecasting rooms revenue is intended
to illustrate the use of trend data in forecasting. A more detailed
approach would consider the variety of different rates corresponding to room
types, guest profiles, days of the week, and seasonality of business.
These are just a few of the factors that may affect room revenue forecasting.
ESTIMATING EXPENSES
Most expenses for front office operations are direct expenses in that they vary
in direct proportion to rooms revenue. Historical data can be used to
calculate an approximate percentage of rooms revenue that each expense item may
represent. These percentage figures can then be applied to the total
amount of forecasted rooms revenue, resulting in dollar estimates for each
expenses category for the budget year.
Typical rooms division expenses are patrol and related expenses,
guestroom laundry (terry and linen), guest supplies (bath amenities, toilet
tissue), hotel merchandising (in-room guest directory and promotional
brochures), travel agent commission and direct reservation expenses, and other
expenses. When these costs are totaled and divided by the number of
occupied rooms, the cost per occupied room is determined. The cost per
occupied room is often expressed in dollars and as a percentage. The
table presents expense category statistics of the Bradley Hotel from 2001 to
2004, expressed as percentage of each year’s room’s revenue. Based on
this historical information and management’s current objectives for the budget
year 2005, the percentage of rooms revenue for each expense category may be
projected as follows, payroll and related expenses 17.6%, laundry, linen and terry,
and guest supplies, 3.2%, commissions and reservation expenses, 2.8%, and other
expenses, 4.7%.
Expenses category as
percentage of Rooms Revenue for the Bradley Hotel
YEAR
|
PAY ROOL &
RELATED
EXPENSES
|
LAUNDRY
LINEN & GUEST
SUPPLIES
|
COMMISSIONS & RESERVATION
EXPENSES
|
OTHER
EXPENSES
|
2001
|
16.5%
|
2.6%
|
2.3%
|
4.2%
|
2002
|
16.9%
|
2.8%
|
2.6%
|
4.5%
|
2003
|
17.2%
|
3.0%
|
2.6%
|
4.5%
|
2004
|
17.4%
|
3.1%
|
2.7%
|
4.6%
|
Using these percentage figures and the expected rooms revenue calculated
previously, the Bradley Hotel’s room division expenses for the budgeted year
are estimated as follows.
Payroll and related
expenses
$1,997,280 X .176 =
$351,521.28
Laundry, linen, terry, and
guest supplies
$1,997,280 X .028 =
$63,912.96
Commissions and reservation
expenses
$1,997,280 X .028
=$55,923.84
Other expenses
$1,997,280 X .047
=$93,872.16
In this example, management should question why costs continue to rise as a
percentage of revenue. If costs continue to rise ( as a percentage, not
in real dollars), profitability likely will be affected. Therefore, one
of the outcomes of the budget process will be to identify where costs are
increasing as a percentage of revenue. Then, management can analyze why
these costs are increasing disproportionately with revenue and develop a plan
to address the issue.
Since most front office expenses vary proportionately with rooms revenue ( and
therefore occupancy), another method of estimating these expenses is to
estimate variable costs per room sold and then multiply these costs by the
number of rooms expected to be sold.
REFINING BUDGET PLANS
Departmental budget plans are commonly supported by detailed information
gathered in the budget preparation process and recorded on worksheets and
summary files. These documents should be saved to provide an explanation
of the reasoning behind the decisions made while preparing departmental budget
plans. Such records may help resolve issue that arise during the budget
review. These support documents may also provide valuable assistance in
the preparation of future budget plans.
If no historical data are available for budget planning, other sources of
information can be used to develop a budget. For example, corporate
headquarters can often supply comparable budget information to its
chain-affiliated properties. Also, national accounting and consulting
firms can usually provide supplemental data for the budget development process.
Many hotels refine expected results of operations and revise operations budgets
as they progress through the budget year. Reforecast is normally
suggested when actual operating results start to vary significantly from the
operations budget. Such variance may indicated that conditions have
changed since the budget was first prepared. While operating budgets are
seldom changed once they are approved by a hotel’s management and owners,
reforecast provides a more realistic picture of current operating conditions.
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