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.
  1. 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
  1. 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
  1. 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 DEPARTMENTSSCHEDULENET REVENUECOST OF SALESPAYROLL & RELATED EXPENSESOTHER EXPENSESINCOME (LOSS)
Rooms1607035610683834734874528486
Food22017928733057617705168794498372
Beverage377897116225820589778783332033
Telecommunications42137441672983142117309-2284
Rentals & Other Income5188092188092
Total Operated Departments9269091106261319234067383735544699
Undistributed Operating Expenses
Administrative And General6227635331546559181
Marketing7116001422295538296
Property Operation And Maintenance8204569163880368449
Utility Costs9546331546331
Total Undistributed Operating Expenses54820514640522012257
Totals92690911062613247161122024253532442
Income After Undistributed Operating Expenses3532442
Rent, Property Taxes And Insurance641029
Income Before Interest, Depreciation, Amortization And Income Taxes2891413
Interest Expense461347
Depreciation And Amortization552401
Income Taxes469810
Gain On Sale Of Property (+)1574
Net Income     1409429
  1. 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 12/31/2012Current Period
Revenue6124991
Allowances54635
Net Revenue6070356
Expenses
Salaries and Wages855919
Employee Benefits212464
Total Payroll and Related Expenses1068383
Other Expenses
Internet/Satellite Television20100
Commissions66775
Complimentary Guest Services2420
Contract Services30874
Guest Relocation1241
Guest Transportation48565
Laundry and Dry Cleaning42495
Linen12140
Operating Supplies122600
Reservations40908
Telecommunications12442
Training7122
Uniforms60705
Other5100
Total Other Expenses473487
Total Expenses1541870
Departmental Income4528486
  1. 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
ActualBudgetAmount%
Revenue
Room Sales156240145080111607.69
Allowances437300137(45.67)
Net Revenue155803144780110237.61
Expenses
Salaries and Wages2082618821(2005)(10.65)
Employee Benefits40155791177630.67
Total Payroll and Related Expenses2484124612(229)(0.93)
Other Expenses
Commissions43775231541.89
Contract Cleaning921873(48)(5.50)
Guest Transportation17501200(550)(45.83)
Laundry and Dry Cleaning1218975(243)(24.92)
Linen19061875(31)(1.65)
Operating Supplies19371348(589)(43.69)
Reservation Expenses1734201227813.82
Uniforms374292(82)(28.08)
Other Operating Expenses51567215723.36
Total Other Expenses107929999(793)(7.93)
Total Expenses3563334611(1022)(2.95)
Departmental Income120170110169100019.08%

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