Front Office Operations

EVALUATING FRONT OFFICE OPERATIONS

Evaluating the results of front office operations is an important management function. Without thoroughly evaluating the results of operations, managers will not know whether the front office is attaining planned goals. Successful front office managers evaluate the results of department activities on a daily, monthly, quarterly and yearly basis. Some important tools which front office managers can use for evaluating front office operations and to evaluate the success of front office operations are:

1. The Daily Operations Report for Evaluating Front Office Operations– The daily operations report also known as the manager’s report, the daily report or the daily revenue report, summarizes the hotel’s financial activities during a 24-hour period. The daily operation report has a summary of cash, bank accounts, revenue and accounts receivable. Copies of the report are generally distributed to all department and division managers.

2. Occupancy Ratios – Occupancy ratios measure the success of the front office in selling the hotel’s primary product – guestrooms. The following room statistics must be gathered to calculate basic occupancy ratios:

• Number of rooms available for sale
• Number of rooms sold
• Number of guests
• Number of guests per room
• Net rooms revenue

Occupancy ratios that can be calculated from these data include occupancy percentage, multiple or double occupancy ratio, average daily rate, revenue per available room (REVPAR), revenue per available customer (REVPAC), and average rate per guest. These ratios are calculated on a daily, weekly, monthly and yearly basis.

• Occupancy percentage = Number of Rooms Occupied / Number of Rooms Available

• Multiple Occupancy Ratio = Number of Rooms Occupied by More Than One Guest / Number of Rooms Occupied

• Average Guests per Rooms Sold = Number of Guests /Number of Rooms Sold

• Average Daily Rate = Total Room Revenue /Number of Rooms Sold

• REVPAR   =  Total Room Revenue / Number of Available Rooms

• REVPAC   =                Total Revenue /Number of Guests

• Average Rate per Guest = Total Room Revenue / Number of Guests

3. Rooms Revenue Analysis – Front office staff members are expected to sell rooms at the rack rate unless a guest qualifies for an authorized discounted room rate. A room rate variance report lists those rooms that have been sold at other than their rack rates. One way for front office managers to Evaluating Front Office Operations and the sales effectiveness of the front office staff is to generate yield statistic, which is actual rooms revenue as a percentage of potential rooms revenue.

Yield Statistic =       Actual Rooms Revenue / Potential Rooms Revenue

4. The Hotel Income Statement – The hotel’s income statement provides important financial information about the results of hotel operations and Evaluating Front Office Operations for a given period of time. The period may be one month or longer but should not exceed more than one business year. The hotel’s statement of income is also called a consolidated income statement because it presents a complete picture of all the hotel’s financial operations.

SAMPLE CONSOLIDATED STATEMENT OF INCOME

WESTVIEW HOTEL
Summary Statement of Income
For the Year ended 12/31/2012
OPERATED DEPARTMENTS	SCHEDULE	NET REVENUE	COST OF SALES	PAYROLL & RELATED EXPENSES	OTHER EXPENSES	INCOME (LOSS)
Rooms	1	6070356		1068383	473487	4528486
Food	2	2017928	733057	617705	168794	498372
Beverage	3	778971	162258	205897	78783	332033
Telecommunications	4	213744	167298	31421	17309	-2284
Rentals & Other Income	5	188092				188092
Total Operated Departments		9269091	1062613	1923406	738373	5544699
Undistributed Operating Expenses
Administrative And General	6			227635	331546	559181
Marketing	7			116001	422295	538296
Property Operation And Maintenance	8			204569	163880	368449
Utility Costs	9				546331	546331
Total Undistributed Operating Expenses				548205	1464052	2012257
Totals		9269091	1062613	2471611	2202425	3532442
Income After Undistributed Operating Expenses						3532442
Rent, Property Taxes And Insurance						641029
Income Before Interest, Depreciation, Amortization And Income Taxes						2891413
Interest Expense						461347
Depreciation And Amortization						552401
Income Taxes						469810
Gain On Sale Of Property (+)						1574
Net Income						1409429

5. The Rooms Schedule – the hotel’s income statement shows only summary information. The separate departmental income statements prepared by each revenue center provide more detail and to help Evaluating Front Office Operations. Departmental income statements are called “schedules” and are referenced on the hotel’s statement of income.

SAMPLE ROOMS DIVISION INCOME STATEMENT

ROOMS – SCHEDULE # 1
WESTVIEW HOTEL
For the year ended 12/31/2012	Current Period
Revenue	6124991
Allowances	54635
Net Revenue	6070356
Expenses
Salaries and Wages	855919
Employee Benefits	212464
Total Payroll and Related Expenses	1068383
Other Expenses
Internet/Satellite Television	20100
Commissions	66775
Complimentary Guest Services	2420
Contract Services	30874
Guest Relocation	1241
Guest Transportation	48565
Laundry and Dry Cleaning	42495
Linen	12140
Operating Supplies	122600
Reservations	40908
Telecommunications	12442
Training	7122
Uniforms	60705
Other	5100
Total Other Expenses	473487
Total Expenses	1541870
Departmental Income	4528486

6. Rooms Division Budget Reports – The hotel’s accounting division 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 performances are often judged according to how favorably the rooms division’s monthly income and expense figures compare with budgeted amounts which is very important to Evaluating Front Office Operations.

SAMPLE MONTHLY ROOMS DIVISION BUDGET REPORT

LANDMARK HOTEL
BUDGET REPORT – ROOMS DIVISION
FOR JANUARY 2013
			Variances
	Actual	Budget	Amount	%
Revenue
Room Sales	156240	145080	11160	7.69
Allowances	437	300	137	(45.67)
Net Revenue	155803	144780	11023	7.61
Expenses
Salaries and Wages	20826	18821	(2005)	(10.65)
Employee Benefits	4015	5791	1776	30.67
Total Payroll and Related Expenses	24841	24612	(229)	(0.93)
Other Expenses
Commissions	437	752	315	41.89
Contract Cleaning	921	873	(48)	(5.50)
Guest Transportation	1750	1200	(550)	(45.83)
Laundry and Dry Cleaning	1218	975	(243)	(24.92)
Linen	1906	1875	(31)	(1.65)
Operating Supplies	1937	1348	(589)	(43.69)
Reservation Expenses	1734	2012	278	13.82
Uniforms	374	292	(82)	(28.08)
Other Operating Expenses	515	672	157	23.36
Total Other Expenses	10792	9999	(793)	(7.93)
Total Expenses	35633	34611	(1022)	(2.95)
Departmental Income	120170	110169	10001	9.08%