Front Office

Front Office Management

Specialist sources of business

In order to maximise occupancy and revenue, the hotelier needs to think in

terms of what markets he can tap into - not only in terms of which markets or

countries can provide sustained business, but also in terms of the source of

business. The two main traditional sources of tourism business are holidaymaking

(tourist) and business. There are however a growing number of more

specialist, sometimes niche, sources of business which should be looked

into.

Conference

· There were over 250 international conferences in Malta in 1999.

· These often occur in the shoulder months, boost room occupancy that

would often otherwise remain low.

· Malta's central position in the Mediterranean encourages more

conference business.

· Conferences provide a high yield in all areas - accommodation, room hire,

Food and Beverage etc.

· Stays range from a few days to more than a week, and are sometimes

extended by delegates for holiday-making.

Incentive

· An incentive is an award given to the employee of a company who has

performed exceptionally well, or has achieved an agreed sales target.

· Incentive travel originated in the United States, and has become popular

in Europe over the last decade.

· Average stay of incentive guests is up to a week.

· Incentives are a volatile source of business: companies often have to

suspend incentive programmes in difficult financial times.

Airline

This source of business is split into two types:

Passengers

· Usually transit passengers in a hub airport.

· Lead time is often very short and demand for rooms is normally heavy and

at short notice.

· Due to short lead time, rates are often at rack or slightly discounted.

· Very short stays, normally no more than one night.

Crew

· Normally crew on long haul who need to rest before completing a route.

· Back-to-back bookings at heavily discounted rates (up to 60%) are usual.

Timeshare

· Timeshare is a limited ownership of a unit of accommodation.

· Timeshare has one distinct advantage for the operator: it injects funds into

the business even before it starts operating.

Front Office Management

· This specialist source now accounts for about 10% of the tourism market.

· The overwhelming majority of timeshare owners in Malta are UK residents

- some 95%

· Guests in timeshare accommodation normally use Food and Beverage

facilities and are also required to contribute to a maintenance fund.

· Malta is a popular exchange destination.

Casino

· With three casinos now operating on the island and within the vicinity of

luxury accommodation, casino business is a very lucrative source.

· The business has the potential to attract Italians and North Africans on

gambling trips.

· Gamblers tend to spend a lot of money not only in a casino, but also in

fine dining and accommodation.

Weekend breaks

· Weekend breaks are becoming increasingly popular with local tourists,

especially in Gozo and the Northern areas in Malta.

· Weekend rates or a special package complete with dinner and use of

facilities etc. are normally offered to lure the business in.

· In Northern Europe the sudden rise in popularity of weekend breaks has

helped boost room occupancy. This trend is not yet common in Southern

Europe.

Diving

· Malta is a popular diving centre, partly crippled by what diving centres

consider archaic regulations.

· Divers spend money in the hire of diving equipment, boat trips, etc.

Archaelogy

· A niche source of business, Malta has the potential of attracting

professional and amateur archaelogists on "digs" and summer courses in

archaelogy.

· Archaelogists or students of archaelogy will often stay on the island for a

period of at least two weeks and also participate in the discovery of the

island's heritage.

Front Office Management Page 1

Front Office staffing levels and Rotas

· Job descriptions

The constitutive parts of a job description

· Personnel specification

· Staffing levels

The Activity Pattern

Scheduling alternatives

· Staff rotas - employee scheduling

EU Working Time Directive

Legal Notice 43 of 1990

Job descriptions

A job description lists all the tasks and related information that

make up a work position. It may also outline -

· reporting relationships

· responsibilities

· working conditions

· equipment and material to be used

Job descriptions must be worded in sufficiently clear terms as to

identify the specific duties of the employee. It must however be

made clear within the job description itself that the description is

not exhaustive and the employee may be required to regularly

undertake other duties. Job descriptions serve at least two

purposes:

1. An important selection tool.

When recruiting a new member of staff, the interviewer and the

prospective employee are immediately aware of the duties the

latter is expected to perform. The interviewer may use the

description to gauge the suitability of applicants.

2. A job description is useful in analysing a particular job and a

person carrying out that job. This more or less depends on how

detailed the job description is. In some cases a job description

may be supplemented by a job list, which deals with each specific

tasks. Go et al (page 204) consider a job analysis as an instrument

which "identifies both the tasks comprising a specific job as well as

the skills, knowledge, and attitudes required for that position." By

producing a job analysis for an existing employee, a manager may

then tweak a job description to cover duties that had been

previously omitted (eg. specific tasks using IT) or remove tasks

which are not in practice required (eg. references to a Whitney

board system). More importantly a job analysis will assist the

Front Office Management

manager to define training requirements (eg. a Front Office

manager may find that a front desk clerk needs training on

handling guest complaints).

The constitutive parts of a job description

Job descriptions differ from each other. However, one normally

expects the description to be worded in a format similarly to this

sample description provided by Abbott & Lewry (page 248):

Job title: Senior Receptionist

Place of work: Queen's Hotel Manchester

General scope of job:

To carry out reception duties as laid down in the

hotel's operating manual, and to assist the front

office manager in maintaining an efficient, helpful

and sales oriented department.

Responsible to: Front Office Manager

Responsible for: Receptionists, telephonists, reservations staff

Main duties:

1. To have full knowledge of, and be able to act in accordance with, the hotel's

fire plan and the Fire Act 1971

2. To be fully converstant with, and be able to implement, the Hygiene and

Safety Act of 1974 to the highest possible levels.

3. To ensure that all guests and their requests are dealt with efficiently,

courteously and promptly.

4. To maintain a high standard of personal hygiene and appearance.

5. To ensure that strict security is maintained in respect of all monies, keys,

guest property and hotel equipment.

6. To ensure that all reservation, registration and check-out duties are carried

out as laid down in the hotel's operating manual.

7. To carry out the duties of reservations clerk, receptionist or telephonist as

necessary.

8. To be responsible for the reconciliation and banking of all receipts and floats

as laid down in the hotel's operating manual.

9. To prepare all relevant statistics as laid down in the hotel's operating

manual.

10. To carry out any reasonable duty required by management for the efficient

operation of the hotel.

Occasional duties:

· To carry out general clerical or administrative duties as required by

management.

· To assist management with the induction and training of new front office

staff.

Front Office Management

Personnel specification (or job specification)

Whereas a job description describes what a particular job entails, a

personnel specification will describe the qualities required in a

person to be suitable to carry out that job description. When a job

vacancy arises, the personnel specification will assist the

interviewer in conducting an effective and comprehensive

interview.

Abbott and Lewry (page 248) suggest that an interviewer should

consider the "seven point interview plan" adopted by the National

Institute of Industrial Psychology. The plan recommends

considering the following points:

1. Physical requirements

· A front office job has few physical requirements, but

receptionists do rather more standing than is usual in other

clerical jobs.

· Physical appearance is important, as front office personnel

are representatives of the hotel.

2. Attainments

· Previous experience at a hotel front desk may well prove

useful.

· Clerical experience or a position involving a degree of

customer interaction will help.

· Interviewer should read a curriculum vitae with an eye to

spotting significant unexplained gaps.

3. General Intelligence

· Staff should be literate and numerate.

· A Certificate in Accommodation Operations or City & Guild's

should definitely be considered an asset!

4. Special skills and aptitude

· Keyboard skills

· Linguistic skills

5. Interests

· Interests will provide clues as to an applicant's personality

traits.

6. Disposition

· Personality traits or qualities required by front office staff, eg.

being conscientious, methodical, accurate, friendly,

sympathetic, understanding, knowledgeable, enthusiastic,

persuasive.

Front Office Management

7. Circumstances

· A person's circumstances (eg. single, married, with children

etc.) may indicate whether a person is likely to remain in the

job and perform regularly and efficiently.

· Discrimination on the basis of a disability is illegal -

3. (1) A person shall be discriminating against another person on the

grounds of disability in any circumstances relevant for the purposes of any

provision of this Act, if:

(a) in circumstances which are similar or not materially different, he treats or

proposes to treat a person who has a disability less favourably than he treats

or would treat a person who does not have such a disability; or

(b) he treats or proposes to treat a person less favourably on the basis of a

characteristic that appertains generally to persons who have such a disability

or a presumed characteristic that is generally imputed to persons who have

such a disability.

Equal Opportunities (Persons with Disability) Act, 2000

Abbott & Lewry provide us with a sample personnel specification.

This can be modified to suit our own local requirements.

Post: Junior receptionist

Essential Preferred

1 Physical

Age 18-25

Health Good

Appearance Neat, well groomed Attractive

Voice Pleasant, clear Acceptable accent

2 Attainments/Experience Full time work in

equivalent hotel

Good reference

3 General Intelligence

Secondary GCSE or equivalent

with English and Maths

4 Special Skills/Aptitudes

Secondary Typing

Language(s)

Computer Studies

Advanced

Further C&G Reception

BTEC Diploma

First Aid certificate

Higher

5 Interests Sociable, gregarious Persuasive,

fluent, self-reliant numerate

6 Disposition Honest Initiative, mature

7 Circumstances Local Live-in

Front Office Management

Staffing Levels

One of the major difficulties for a manager in any hotel

environment is that of determining adequate staffing levels.

Inadequate staffing levels jeopardise the quality of service and may

in the long run affect business adversely, over staffing will on the

other hand cause an unnecessary expense. There is no magic

formula to determine staffing levels. There are however a number

of factors to bear in mind when determining staffing levels for your

front office department. Abbott and Lewry (page 245) suggest at

least six important factors:

1. Number of occupied rooms

Empty rooms will not generate clerical work or customer

contact.

2. Average length of stay

The shorter the average length the larger the number of

arrivals and departures.

3. Pattern of activity

Since the majority of guests in Malta travel by air on regular

scheduled and chartered flights it is easier to analyse a

regular pattern of activity when it comes to the arrival and

departure of guests.

4. Amount of personal contact required

The presence of concierge and/or guest relations may

minimise personal contact, as will automated check-in and

check-out processes.

5. Character of the hotel

In a leisure resort a guest may well be willing to wait a few

minutes at check-in, but business guests in what is perceived

as a hotel catering for business clients will often expect faster

service. Luxury hotels in particular need to avoid exposing

guests to the indignity of having to queue.

6. Technology employed

Computerisation (automation of business processes) means

less time is spent on clerical jobs and hence affects staffing

level.

The activity pattern

An activity pattern requires a series of shifts to handle the various

Front Office tasks, and may vary from weekdays to weekends. On

weekdays there is increased morning activity when a hotel's

accounts department, purchasing, sales and marketing, as well as

reservations are fully manned. On weekends the strain of handling

Front Office Management

calls, visitors and enquiries for these departments may be replaced

by substituting for reservations etc as the case may be.

A front office shift pattern may create a few problems. Generally

front office shifts are split into two: morning shifts or early shifts,

and afternoon/evening shifts referred to as late shifts. In some

cases hotels also utilise a supplementary "middle shift" which

covers normal business hours, provide a continuum from one shift

to another, providing backup for breaks and generally assisting the

busier periods of the day. The first shift normally starts early, and

the last shift finishes later than most jobs.

Shift patterns and staff positions have a direct effect on staffing

levels. If a hotel adopts the once traditional method of employing

separate cashiers and receptionists then the staffing requirements

will reflect this. If however a hotel encourages the more modern

approach whereby a front desk employee is in effect a "front office

clerk (or agent)" then the number of employees required may be

different. If the hotel adopts a day in/day out system (sometimes

referred to as compressed schedules) the number of staff required

may be even less.

There are other scheduling alternatives:

Part-time scheduling

Part-timers can replace staff on vacation leave, provide seasonal

employment to supplement full-time staff during busy periods.

They may and should ideally be scheduled regularly and not simply

on demand.

Flextime scheduling

Some employees may be willing to work flextime which is ideal for

situations where managers need to cover the varying workloads of

all shifts.

Compressed schedules

This is akin to the day in / day out shift - and normally means that

the front office employee will work four days in week and three

days in another. In one week the number of hours may exceed 40

hours and in the other week will be less than 40 hours. Under our

legislation when an employee exceeds 40 hours in such a situation

s/he is not entitled to overtime as the hours or offset in subsequent

weeks.

Front Office Management

Staff rotas - employee scheduling

Employee scheduling affects payroll costs, employee productivity

as well as staff morale.

Front Office managers must be sensitive to the needs of their staff.

Every employee will tend to have his preferences, but sometimes

such preferences may be due to the circumstances of the employee

in question. It is undoubtedly difficult to suit the needs of every

member of staff, but the roster must be seen to be fair and in

relation with the expected level of business.

Kasavana and Brooks (Page 398) provide us with a few helpful tips:

· A schedule should cover a full workweek, typically defined as

Sunday through Saturday.

· Schedules should be posted at least three days before the

beginning of the next workweek.

· Days off, vacation time, and requested days off should be

indicated on the posted work schedule.

· The work schedule for the current week should be reviewed

daily in relation to the anticipated business volume and

unanticipated changes in staff availability.

· Any scheduling changes should be noted directly on the

posted work schedule.

· A copy of the posted work schedule can be used to monitor

the daily attendance of employees. This copy should be

retained as part of the department's permanent records.

The EU Working Time Directive

When scheduling staff managers may be required to take note of a

number of legal requirements. Member states of the European

Union have been required to follow Council Directive 93/104 known

as the Council Directive concerning certain aspects of the

organisation of Working Time.

The aim of the Directive is to protect employees against the

adverse effects on their health and safety caused by working

excessively long hours without adequate rest. It provides for:

· a maximum 48 hour week averaged over a period of four

months.

· a minimum daily rest period of 11 consecutive hours a

day.

· a rest break (established by national law) where a working

day is longer than six hours.

· a minimum rest period of one day a week.

Front Office Management Page 8

· a right to annual paid holidays of 4 weeks, and

· night work cannot exceed eight hours a night on average.

The Directive requires that all Member States in the Union enact

legislation which provides the minimal protection as outlined in the

Directive. Malta will have to adjust its legislation to adhere to this

Directive if it joins the Union.

Legal Notice 43 of 1990

In Malta, Legal Notice 43 of 1990 provides the minimum working

conditions for employees in hotels and restaurants. The Legal

Notice also sets minimum wages for employees in industry.

Legal Notice 43 provides as follows:

· Minimum wages are calculated over a 43-hour week during

the summer months spread over 6 days, and a 39-hour week

during the rest of the year.

· When a working day exceeds five and a half hours an

employee is entitled to an aggregate break of one hour for

meals and rest. (4(i))

· All employees in the industry are entitled to a day off in each

week as a weekly day of rest. (27)

· Full-time employees are entitled to four working weeks and

four days paid vacation leave, in addition to National and

public holidays. (32(1))

The Legal Notice makes no mention of minimum daily rests, nor

does it provide for minimum conditions for night work (although in

some cases these have been established in collective agreements).

Front Office Management

Establishing Room Rates

· Market-based pricing

Market Condition Approach

Top-down pricing

Rate-cutting

Prestige product pricing

· Cost-based pricing

Rule-of-thumb approach

Bottom-up approach

Differential rates

Market-based pricing

Market Condition Approach

This approach can also be termed the “common sense” approach or

“price followership”. By adopting this approach a hotel considers

what comparable hotels within the same geographic area are

charging for similar rooms or products. The philosophy behind this

approach is that a hotel can only charge prices which the market

will accept, and therefore prices are dictated by the competition.

The market condition approach is really a marketing approach that

allows the local market to determine the rate. This approach fails

to take into account what a strong sales effort may accomplish.

Can hotels determine their rates after directly discussing their rates

with each other?

Hoteliers cannot meet directly “in collusion” to determine prices. If

they were to do so they would be in breach of our Competition Law.

5. (1) […] the following is prohibited, that is to say any agreement

between undertakings, any decision by an association of undertakings

and any concerted practice between undertakings having the object or

effect of preventing, restricting or distorting competition within Malta or

any part of Malta and in particular, but without prejudice to the generality

of this subarticle, any agreement, decision or practice

which:

(a) directly or indirectly fixes the purchase or selling price or other

trading conditions;

Chapter 379, Competition Act, Laws of Malta

Top-down pricing

This approach is often used by companies entering a new market or

trying to identify a gap which is unfilled. This method of pricing

Front Office Management Page 2

will still require an element of cost-based pricing in order to ensure

that the prices being charged are realistic and will result in an

overall return on investment.

Rate-cutting

This approach assumes that demand will increase if prices are

lowered – but we do know however that rate cutting can be risky

and may also lead competitors to cut their rates – a situation which

would result in everyone making losses.

Prestige product pricing

This approach takes that the view that raising the price of a room

will make a hotel more exclusive and thus change the nature of the

overall product. This method seems to defy the laws of economics,

and will work only if the market is not price conscious. Prestige

product pricing is more or less a psychological activity.

Cost-based pricing

Rule-of-thumb Approach

This approach sets the rate of a room at Lm 1 for each Lm 1,000 of

construction and furnishings cost per room, assuming a 70%

occupancy. As an example, let us assume a 200-bedroom hotel

cost us Lm5,000,000 to construct and furnish. Each room therefore

cost us Lm25,000 and using this approach the average room rate

will be Lm25.00 per room. As Abbott & Lewry point out (page 190)

this rule was devised quite some time ago when rates of interest,

tax levels and expectations about appropriate rates of return were

different.

However the main difficulty in adopting this approach is that it

does not reflect the fundamental importance of fixed and variable

costs in determining a hotel’s profitability.

When can this approach be taken?

This approach was intended for newly constructed hotels to

determine a starting average price. However it can be used for any

hotel provided that the hotel operator revalues the property and

calculates the rates accordingly. A hotel that was constructed in

the seventies at a certain cost will have almost certainly

appreciated in value.

Is this approach a valuable approach?

It is certainly indicative, even if not precise. If, for instance, a

group of 4 hotels has a value of Lm 15,000,000 and a stock of 500

rooms, then one can assume with some confidence that the

average room rate is closer to Lm 30 per night than Lm 20 or Lm

70.

Front Office Management Page 3

The bottom-up approach

This approach was formerly known as the Hubbart formula and was

introduced in the United States in the 1950s. It is known as the

bottom-up approach because, contrary what we do in normal

accounting practice, we first decide how much profit is required

(return on investment) and then determine the expenses for the

following period (usually one year).

The Hubbart formula can be summed up as:

Operating Costs + required return – income ex other departments

= average room rate

Expected number of room nights

The steps are best described as follows:

1. Calculate the total amount invested in the hotel.

2. Decide on the required annual rate of return on the

investment (this may be a percentage of the amount

invested)

3. Estimate the overhead expenses.

4. Combine 2 and 3 to find the required gross operating income.

5. Estimate the probable profits from all other sources (i.e.

restaurants, bars etc)

6. Deduct 5 from 4 to find out how much profit you need to

make from room lettings.

7. Estimate accommodation department’s expenses (include

fixed and variable costs based on the occupancy forecasted)

8. Add 6 and 7 to find out how much you need to make from the

rooms.

9. Estimate the number of room nights you are likely to achieve

per annum (based on occupancy forecasted)

10. Divide 8 by 9 to find out the average room rate you should

charge.

Example

A hotel company operates a 150-room hotel. The capital invested

is Lm2,500,000 and the company is expecting a net profit of 10%

after paying tax at the rate of 50%. We expect an average

occupancy rate of 70%. Department expenses are expected to

amount to Lm375,000 and profits from other departments are

expected to be in the region of Lm 200,000. These are the

overhead expenses:

Administrative and general 120,000

Advertising and promotion 75,000

Utilities 50,000

Repairs and maintenance 95,000

Front Office Management Page 4

Depreciation 205,000

Insurance, licences and local taxes 80,000

Loan Interest 140,000

Step 1

Total Invested in Hotel = Lm 2,500,000

Step 2

10% of Lm 2,500,000 = Lm 250,000

Tax = Lm 250,000

Step 3

Overhead expenses = Lm 765,000

Step 4

The required gross operating income is Lm 500,000 and Lm

765,000 is Lm 1,265,000.

Step 5

Profits from other sources are expected to amount to Lm 200,000

Step 6

We need a total room revenue of Lm 1,065,000

Step 7

To this amount we need to add Lm 375,000 which is the

departmental cost.

Step 8

In total we need to make Lm 1,440,00 from rooms.

Step 9

150 rooms x 365 days = 54,750 = 100% room occupancy

Therefore = 38,325 = 70% room occupancy

Step 10

Average room rate = Lm 1,440,000 ÷ 38,325 room nights

Lm 37.57

The Hubbart formula can be used for varying percentages of

occupancy. To do so we would simply need to review Steps 7 to 9.

Front Office Management Page 5

Differential room rates

One of the problems with both the rule-of-thumb and bottom-up

approaches is that they only produce an average room rate. This

would be a sound approach if a hotel had only one room type, but

we know that this is not the case. Having determined an average

room rate we now need to calculate differential rates.

Let us assume we have a 60-bedroom hotel, with an overall

average of 65% occupancy and three room types -

Type Rms Occ%

Single, single occupancy S 20 68%

Double, single occupancy D(s) 30 20%

Double, double occupancy D(d) 60%

Luxe D, single occupancy LD(s) 10 9%

Luxe D, double occupancy LD(d) 48%

Total 60

Average 65%

We must now determine appropriate weightings for the different

rates. If, for instance, a Single room has a weight of 1, a double

room will have a weight of 1.8, but if occupied by one person a

weighting of 1.4. The weightings are purely a matter of

judgement.

Type Rms Occ%

Average

Occupied

Rooms Weight

Single, single occupancy S 20 68% 13.6 1

Double, single occupancy D(s) 30 20% 6 1.4

Double, double occupancy D(d) 60% 18 1.8

Luxe D, single occupancy LD(s) 10 9% 0.9 1.8

Luxe D, double occupancy LD(d) 48% 4.8 2.4

Total 60

We now need to calculate the average revenue target per night

which is Lm 1,365 (average rate Lm 35 x 60 rooms x 65%

occupancy)

Type Rms Occ%

Average

Occupied

Rooms Weight

AO x

Weight

Revenue

Expected

Room

rate Rounded

Total

revenue

S 20 68% 13.6 1 13.6 274.86 20.21 20.00 272.00

D(s) 30 20% 6 1.4 8.4 169.77 28.29 28.00 168.00

D(d) 60% 18 1.8 32.4 654.81 36.38 36.00 648.00

LD(s) 10 9% 0.9 1.8 1.62 32.74 36.38 36.00 32.40

LD(d) 48% 4.8 2.4 11.52 232.82 48.50 48.00 230.40

60 67.54 1365.00 1350.80

Front Office Management Page 6

The other columns in the spreadsheet above are explained below:

AO x Weight

Average occupancies times weight. This produces a combined

weighting which reflects both the ‘value’ of the room and the

expected occupancies.

Revenue expected

This divides the nightly revenue expected (Lm 1365) into the

proportions shown in the previous column. For the first row

(Single) we calculate

13.6

1365 x = Lm 275

67.5

Room rate

The room rate is now calculated by dividing the Revenue expected

for the particular room type by the number of average occupied

rooms. The figure is then rounded up.

Seasonal rates

We may need to take differential rates a step further, because

differential rates do not deal with the issue of seasonality. In this

example we are considering two seasons: a high season with a

weighting of 4 and a low season with a weighting of 3. The

difference is now that the AO x Weight column now multiplies the

Average Occupied Rooms by Room and Seasonal Weight.

Type Rms Occ%

Average

Occupied

Rooms

Room

Weight

Seasonal

Weight AO x Weight

Revenue

Expected

Room

rate

Round

Total

revenue

Low

S 20 63% 12.6 1 3.0 37.8 106.41 16.89 17.00 214.20

D(s) 30 18% 5.4 1.4 3.0 22.68 63.85 23.65 24.00 129.60

D(d) 50% 15 1.8 3.0 81 228.03 30.40 31.00 465.00

LD(s) 10 6% 0.6 1.8 3.0 3.24 9.12 30.40 31.00 18.60

LD(d) 30% 3 2.4 3.0 21.6 60.81 40.54 41.00 123.00

High

S 20 73% 14.6 1 4.0 58.4 164.40 22.52 23.00 335.80

D(s) 30 22% 6.6 1.4 4.0 36.96 104.05 31.53 32.00 211.20

D(d) 70% 21 1.8 4.0 151.2 425.65 40.54 41.00 861.00

LD(s) 10 12% 1.2 1.8 4.0 8.64 24.32 40.54 41.00 49.20

LD(d) 66% 6.6 2.4 4.0 63.36 178.37 54.05 55.00 363.00

60 65% 484.88 1365.00

Lecture Notes Lecture 4

Front Office Management Page 1

Contracting Rates

· Introduction

· Setting a price for a group

· Net rates

· Negotiating with a tour operator

· The Contract

Introduction

One of the major sources of hotel business in Malta as well as

worldwide is that of Tours and Groups. A group or tour will consist

of a minimum of 5 rooms, but there can also be several hundred

rooms. Not all groups are holidaymakers – some groups will

consist of conference delegates, sports teams, trade fair attendees

etc. Usually groups arrive en masse, and depart together.

Although the group members may be billed separately, the general

rule is that the bill is footed by the company.

Setting a price for a group

Generally tour operator rates and group rates are identical, but

there may be situations where a group approaches a hotel directly.

In reaching a rate the hotelier will invariably consider the following

factors:

· Time of year and week

· Length of stay

· Number of guests and rooms

· Facilities and services requested (eg. Conference room hire,

meals etc)

· Identity of the group

· Yield techniques (this is to be discussed in another lecture)

Lower rates are normally quoted during off-peak seasons. When

deciding on the rate to be agreed, the previous year’s occupancy

for the corresponding period must be considered.

Net rates

Bookings made through agents or by agents are normally subject

to commission. When quoting rates for groups however, most

hotels quote a net rate on which there is no commission. It is

then up to the agent to charge the appropriate commission.

Lecture Notes Lecture 4

Front Office Management Page 2

Tour operators

Contracts with tour operators are generally negotiated 12-18

months in advance, although the current trend is to negotiate in

the short term. The aims of the hotelier and the tour operator are

conflicting:

· The operator wants many rooms at a cheap price during the

peak season/s.

· The hotel wants the operator to sell off-peak space at the

highest rates possible.

The hotelier will normally negotiate a “series” of rate packages

covering the entire year. The negotiations may also allow for

quantity discounts, or complimentary/free rooms for certain

amounts sold. Generally the tour operator will not commit himself

to selling rooms, but will request an allocation of rooms available.

Hotels will normally allocate more rooms than they have available.

The contract

Once rates have been agreed with a tour operator, agent or group,

a contract must be entered into. The contract will include the

following:

· Dates of agreement

· Companies involved in the agreement

· Room types and services included

· Rates agreed

· Booking procedure

· Cancellation policy

· Payment method and terms of payment

(including prepayment/deposit)

· Contact names and numbers

· Expected room nights / allocation

Lecture Notes Lecture 5

Front Office Management Page 1

Lecture 5

Occupancy reports and forecasts

Occupancy and revenue figures

Occupancy percentages

Average rate figures

Income occupancy percentages

Daily Occupancy Reports

Forecasts

Occupancy and revenue figures

These reports are normally prepared during Night audit and are

aimed at gauging a hotel's performance. Although some of the

figures produced are specific to revenue from rooms, other figures

for other revenue departments (eg. restaurants, bars) are also

produced and generally compared to occupancy levels.

Occupancy percentages

These percentages are self explanatory

1. Room Occupancy (%)

Rooms occupied x 100

Total rooms available

2. Beds (or sleeper occupancy) (%)

Beds occupied x 100

Total beds available

3. Double occupancy (%)

Double/Twins let to two (or more) people x 100

Total doubles/twins available

The third percentage may not be required where a hotel has a per

room tariff.

What should be used as a base figure?

The issue here is which figure we should use as the "available"

figure. Some hotels have a policy to consider as available only

those rooms which are in service, i.e. may be sold. Hotels with this

policy will therefore not consider unserviced rooms and rooms

unavailable for maintenance/refurbishing or staff use in

determining the above percentages - arguing that such rooms are

not available for letting. Not including out-of-order rooms may

Lecture Notes Lecture 5

Front Office Management Page 2

allow managers to artificially increase the calculated occupancy

percentages by improperly classifying unsold rooms. Abbott and

Lewry (page 231) suggest that the base figure should be constant,

thereby allowing easier comparison of figures. This way one is able

to see:

· The real level of occupancy, even in off peak seasons (when

it is expected that a number of rooms be unavailable due to

refurbishment)

· The proportion of rooms being used for complimentaries or

staff use.

· Proportion of rooms out of service.

Similarly, it is suggested that when a room is given out on day let

or is occupied with an additional bed (a Z-bed) the base figure

should not be adjusted. The sleeper occupancy percentage may

reveal a percentage higher than 100% in such cases - but this

would merely reveal that the hotel has managed to "squeeze in"

even more sleepers!

Average rate figures

Average rates figures indicate how successful a hotel has been in

selling rooms at the highest yield possible (the highest normally

being a hotel's rack rate). These figures are expressed in currency

and not percentages.

1. Average room rate (Lm)

Total room revenue

Total rooms let

2. Average sleeper rate (Lm)

Total room revenue

Total sleepers

When complimentary rooms are counted within the occupancy

figures these should be taken into consideration when considering

average rate figures.

Income occupancy percentages

Abbott & Lewry suggest the use of income occupancy percentages

to allow us to compare a hotel's performance over a period of

years.

Lecture Notes Lecture 5

Front Office Management Page 3

Income occupancy percentage (Yield statistic) %

Total/Actual room revenue x 100

Optimum/Potential room revenue

Optimum room revenue is the maximum obtainable given 100 per

cent occupancy at full rack rates. The optimum room revenue is

seasonally adjusted.

Abbott and Lewry point out that:

Income occupancy percentages assess both our ability to fill

the hotel and our ability to obtain something close to the full

rates for the rooms. A high but heavily discounted occupancy

pattern would produce a relatively low percentage, as would

a low occupancy pattern at the full rack rate. (p. 233)

This indicates the importance of interpreting an income occupancy

percentage by comparing it to room occupancy percentages. The

income occupancy percentage is also known as the Yield statistic.

Daily occupancy reports

These reports vary from one hotel to another. However, this report

should clearly indicate:

· the hotel's performance in terms of rooms, sleepers and room

revenue on the given day

· a comparison with forecasted or budgeted figures.

Additionally the report should indicate:

· complimentary rooms and rooms occupied for internal use

· groups and conferences

· comments about the day itself (i.e. events which could have

had a bearing on the occupancy levels, eg. major exhibition)

Forecasts

Here we are concerned with short-term forecasts, normally of

between five and days, which are produced on a daily basis by

front office. The forecast is prepared daily and should be

frequently updated. This short-term forecast will indicate expected

arrivals and departures. However, it may also be possible (by

referring to previous data) to anticipate and forecast:

· the number of extra or unplanned departures likely

· the likely no show rate

· the likely number of chance guests

Lecture Notes Lecture 5

Front Office Management Page 4

Source: Abbott and Lewry

Day: Daily Occupancy report Date:

Actual Budget

Today To date Today To date

Rooms sold:

Singles

Twins (single rate)

Twins (double rate)

Total rooms sold

Complimentary

Company Use

Out of service

Vacant

Total rooms

Sources of business:

Individual

Travel Agent

Airline

Group tour

Conference

Total guest

Room revenue:

Room occupancy %

Guest occupancy %

Average room rate

Average guest rate

Income occupancy %

Company and complimentary use

Room Name Company Explanation

_____________________________________________________

Groups:

_____________________________________________________

Comments:

_____________________________________________________

Lecture Notes Lecture 6

Front Office Management Page 1

Lecture 6

Yield Management

Part I

Defining Yield Management

Capacity management

Discount allocation

Duration control

Measuring Yield

Formula 1: Potential Average Single Rate

Formula 2: Potential Average Double Rate

Formula 3: Multiple Occupancy Percentage

Formula 4: Rate Spread

Formula 5: Potential Average Rate

Formula 6: Room Rate Achievement Factor (AF)

Formula 7: Yield Statistic

Formula 8: Identical Yields

Formula 9: Equivalent Occupancy

Defining Yield Management

Yield management is a tool to maximize yield (revenue, and

ultimately profit) based on a hotel’s performance. Most of us

consider the average daily rate (ADR) and occupancy percentages

as indicators of how successful a hotel is. Whilst they certainly

provide us with the basic tools, we can take these figures a step

further by utilizing them – together with a number of other

formulae – to plan our pricing and booking strategies.

Yield management seeks to maximize revenue by controlling

forecast information in three ways:

. capacity management

Capacity management involves various methods of controlling and

limiting room supply. In some cases a hotel may well choose to

accept more bookings than it can actually accommodate. In such

instances a hotel would be making selective overbooking by

balancing the risks of overselling guest rooms against the potential

loss of revenue arising from room spoilage (rooms going

unoccupied after the hotel stopped taking reservations for a given

date).

Other forms of capacity management include determining how may

walk-ins to accept on the day of departure, bearing in mind

projected cancellations, no-shows and early departures.

Lecture Notes Lecture 6

Front Office Management Page 2

discount allocation

Yield management will attempt to get the right sales mix. On most

nights, it will be next to impossible for a hotel to sell at rack rate.

A hotel must therefore have a discounting strategy which will allow

it to protect enough rooms at the best rates to satisfy the projected

demand for rooms at that rate, whilst at the same time filling

rooms that would have otherwise remained unsold.

Limiting discounts also has the objective of encouraging upselling.

. duration control

Duration control places time constraints on accepting reservations

in order to protect sufficient space for multi-day requests. Under

yield management one may for instance refuse a one-night stay

even though space is available for that night, on the basis that

taking such a reservation will block occupancy on adjacent days.

Measuring Yield

In a previous lecture, by comparing actual room revenue against

potential revenue, we came up with a yield statistic percentage.

We will now take this step forward by looking additional yield

management formulae.

We will illustrate the new formulae by using a particular scenario:

Tower Hotel has 300 guest rooms with an average room rate of

Lm35. It is currently operating at 70% average occupancy. The

hotel has 200 standard double bedrooms, and 100 double deluxe

rooms. At rack rate, the standard rooms sell at Lm 40.00 at single

occupancy and Lm 50.00 at double occupancy, whilst the deluxe

rooms sell at Lm 50.00 at single occupancy and Lm 60.00 at double

occupancy.

Formula 1: Potential Average Single Rate

The hotel has varied its single rate by room type, so we need to

calculate the potential average single rate:

Room type Number of

rooms

Single Rack

rate

Revenue at

100%

occupancy

Standard 200 Lm 40 Lm8,000

Deluxe 100 Lm 50 Lm 5,000

300 Lm 13,000

Potential Average Single Room Revenues at Rack Rate

Single Rate =

Number of Rooms Sold as Singles

Lecture Notes Lecture 6

Front Office Management Page 3

= Lm 13,000

300

= Lm 43.33

Formula 2: Potential Average Double Rate

Since we also have varied rates by room type the potential average

double rate must be calculated:

Room type Number of

rooms

Double Rack

rate

Revenue at

100%

occupancy

Standard 200 Lm 50 Lm10,000

Deluxe 100 Lm 60 Lm 6,000

300 Lm 16,000

Potential Average Double Revenues at Rack Rate

Double Rate = Number of Rooms Sold as Doubles

= Lm 16,000

300

= Lm 53.33

Formula 3: Multiple Occupancy Percentage

This is the proportion of a hotel’s rooms that are occupied by more

than one person. This percentage indicates sales mix and helps

balance room rates. If 168 rooms from the total of 210 rooms sold

(70% of 300 rooms) are sold at double occupancy then the

computation is as follows:

Multiple Occupancy 168

Percentage

210

= 80%

Formula 4: Rate Spread

The determination of a room rate spread among various room types

can be essential to the use of yield decisions in targeting a hotel’s

specific market. The mathematical difference between the hotel’s

average single rate (Formula 1) and potential average double rate

(Formula 2) is known as the rate spread.

Rate Spread = Potential Average Double Rate –

Potential Average Single Rate

Lecture Notes Lecture 6

Front Office Management Page 4

= Lm 53.33 – Lm 43.33

= Lm 10

Formula 5: Potential Average Rate

This is a collective statistic that effectively combines the potential

average rates, multiple occupancy percentage, and rate spread.

Potential

Average

Rate

= ( Multiple

Occupancy

Percentage

Rate

Spread ) +

Potential Average

Single Rate

= (0.8 x Lm10) + Lm 43.33

= Lm 51.33

Formula 6: Room Rate Achievement Factor

The percentage of the rack rate a hotel actually receives is

contained in the hotel’s achievement factor, also referred to as the

rate potential percentage. This factor is best computed using yield

management software which will use the weighted average of the

rack rates of the rooms actually sold. For our purposes the nonweighted

computation will suffice:

Achievement factor = Actual Average Rate Potential Average Rate

= Lm 35

Lm 51.33

= 68%

Formula 7: Yield Statistic

This is perhaps the most important element in yield management.

We have already seen how to express and calculate this statistic.

Here we will use the following computation:

Yield Statistic = Occupancy percentage x Achievement factor

= 0.7 x 0.68

= 0.476

= 48%

Lecture Notes Lecture 6

Front Office Management Page 5

Formula 8: Identical Yields

This is the point where we can ask “What if …?” questions to

determine how discounting will affect our revenue. If we were to

decrease or increase our rate, what occupancy percentage would

we need to achieve to produce the same yield? Let’s suppose that

our hotel wants to decrease its rate by Lm 2.00 to Lm 33.00.

Identical Yield Current rate

Percentage = Current Occupancy

Percentage x

Proposed rate

= 70% x (Lm 35 ¸ Lm 33)

= 0.742 or 74%

To achieve the same yield the hotel must have an occupancy of

74%.

Formula 9: Equivalent Occupancy

There is however one major flaw with Formula 8. It does not

consider operating costs. When a hotel sells a room, it will incur

variable costs to service that room (eg. Housekeeping supplies).

This is called the marginal cost or the cost per occupied room. The

contribution margin is that portion of the room rate that is left over

after the marginal cost of providing that room has been subtracted.

Let us assume that our marginal cost is Lm 4.00. To find the

equivalent occupancy we have the following formula:

Equivalent Current contribution margin

Occupancy =

Current

Occupancy

Percentage

New contribution margin

Lm 35.00 – Lm 4.00

= 70% x

Lm 33.00 – Lm 4.00

= 0.748 or 75%

A discount grid (refer to Discount_Grid.xls) can help management

evaluate room rate discounting strategies.

Lecture Notes Lecture 6

Front Office Management Page 6

Discount Grid

Rack rate Lm51.33

Marginal cost Lm4

Current

Occupancy

Equivalent Occupancy Percent required to maintain profitability if rates

are discounted.

5% 10% 15% 20% 25% 30% 35%

100% 105.7% 112.2% 119.4% 127.7% 137.2% 148.2% 161.2%

95% 100.4% 106.6% 113.5% 121.3% 130.3% 140.8% 153.1%

90% 95.2% 100.9% 107.5% 114.9% 123.5% 133.4% 145.1%

85% 89.9% 95.3% 101.5% 108.5% 116.6% 126.0% 137.0%

80% 84.6% 89.7% 95.5% 102.2% 109.8% 118.6% 128.9%

75% 79.3% 84.1% 89.6% 95.8% 102.9% 111.2% 120.9%

70% 74.0% 78.5% 83.6% 89.4% 96.0% 103.8% 112.8%

65% 68.7% 72.9% 77.6% 83.0% 89.2% 96.3% 104.8%

60% 63.4% 67.3% 71.7% 76.6% 82.3% 88.9% 96.7%

55% 58.2% 61.7% 65.7% 70.2% 75.5% 81.5% 88.6%

50% 52.9% 56.1% 59.7% 63.8% 68.6% 74.1% 80.6%

45% 47.6% 50.5% 53.7% 57.5% 61.7% 66.7% 72.5%

40% 42.3% 44.9% 47.8% 51.1% 54.9% 59.3% 64.5%

35% 37.0% 39.3% 41.8% 44.7% 48.0% 51.9% 56.4%

30% 31.7% 33.6% 35.8% 38.3% 41.2% 44.5% 48.4%

25% 26.4% 28.0% 29.9% 31.9% 34.3% 37.1% 40.3%

20% 21.1% 22.4% 23.9% 25.5% 27.4% 29.6% 32.2%

15% 15.9% 16.8% 17.9% 19.2% 20.6% 22.2% 24.2%

Front Office Management

Code of Practice

· Introduction

Scope of the code of practice

Definition of the hotel contract

· Reservations

Vouchers

Rates

Commissions

Groups and Individuals

· Cancellation

General Terms

Cancellation of Groups

Cancellation of Individuals

· Information Required

To the Travel Agent and Client

Quality of Services Provided

Force Majeure

Multiple Bookings

Introduction

Scope of the Code of Practice

The code of practice is intended to govern contracts known as “hotel contracts”

between travel agents and hoteliers.

If any of the articles of the code of practice conflicts with national or international

law, the signatories acknowledge that such article would not apply.

Definition of the Hotel Contract

The “hotel contract” is a contract by which a hotelier agrees with a travel agent to

provide hotel services, at a specified price, to a traveller or a group of travellers

who are client/s of the travel agent.

Front Office Management Lecture Notes – David Vella 2

Reservations

Vouchers

If so agreed between the hotelier and the travel agent, the hotelier must accept a

voucher.

The travel agent acknowledges that the voucher issued to his/her client – for the

hotelier - is guarantee of payment, unless clearly specified otherwise.

Services to be specified on the voucher should include at least: dates of arrival

and departure, hotel services to be provided and possibly the means of transport.

Vouchers covering an extension of hotel services are subject to prior written

agreement between the hotelier and the travel agent.

Rates

The hotelier shall abide by the agreed contractual rates in the currency of the

country where the hotel is located or any other currency stated in the contract.

Long term contracts may contain a clause concerning adjustment of the rates.

Commissions

The hotel policy regarding payment of commission and terms of such payment

must be clearly indicated and agreed upon by the travel agent before or at the

time of the confirmation.

Information regarding commission policy should normally include:

Whether a commission will be paid and on which services.

The rate/s of commission.

Whether commissions are payable on any extension of stay agreed by the

hotel and/or on reservations effected by the client during his stay, for a

further period where the payment is guaranteed by the travel agent.

Groups and Individuals

Groups

A group is minimum of fifteen (15) persons arriving and departing together,

considered by the travel agent and the hotelier as one entity.

Allotments, congresses, conferences, seminars, incentive tours, exhibitions…etc.

may require specific written agreements.

The group confirmation from the hotelier shall specify identical services for each

member of the group. The total charge shall be presented in one invoice.

Front Office Management Lecture Notes – David Vella 3

If, after the confirmation the group is reduced to less than fifteen persons, the

hotelier must notify the travel agent whether he/she still considers this party as a

group.

Individuals – (FIT)

An individual client is the person who cannot benefit from group conditions.

Invoices will be prepared individually even if the traveller arrived with other

persons belonging to the same travel agent and having the same staying details.

Cancellations

General Terms

The terms and time-limits governing total or partial cancellation of the hotel

contract, together with the amount of any possible compensation due in case of a

late cancellation, shall be agreed upon at the time of confirmation.

All cancellations shall be signified in writing and dated. Where applicable, the

hotelier may issue a cancellation reference number to be retained by the travel

agent.

Cancellation of Groups

In the absence of agreement to the contrary the following rules shall apply in the

event of a group cancellation;

The entire group (100%) may be cancelled validly up to thirty (30) days

prior to the arrival date.

A maximum of 50% of the initial reservation may be cancelled at least

twenty-on (21) days prior to the arrival date.

A maximum of 25% of the initial reservation may be cancelled at least

fourteen (14) days prior to the date of arrival.

Cancellation Fees

When cancellations are made outside the above-mentioned time-limits, the

hotelier is entitled for compensation as follows;

A fee which has been agreed in advance.

In the absence of any agreements: two/thirds of the price of the reserved

services *(minimum of one night)

In the case of a cancellation three days prior to the date of arrival then the

compensation will be of three/quarters of the price of the reserved

services. *(minimum of one night)

Front Office Management Lecture Notes – David Vella 4

*(All cancellation fees are p.p.p.n)

Reclaiming of Rooms by Hoteliers

When a reserved group occupies more than 30% of the total room capacity, the

hotelier will notify the travel agent between 30 and 60 days prior of the arrival,

that he (the hotelier) intends to dispose of all or some of the rooms which the

travel agent does not guarantee.

The hotelier cannot dispose of any rooms that the agent has guaranteed.

Cancellation for FIT

In the absence of a contractual condition which states the contrary, the following

rules shall apply:

Fourteen (14) days prior to the date of arrival in low season.

Thirty (30) days prior to the date of arrival in high season.

Guaranteed and non-guaranteed reservation

In the case of a non-guaranteed reservation the hotelier is obliged to keep the

room until 1800hrs of the date of arrival unless it is stated in advance that it is a

late arrival. In the contrary the hotelier can dispose of the room.

In the case of a guaranteed reservation where the travel agent has paid an

amount in advance, the hotelier is bound to keep the room until 1200hrs of the

next day from the date of arrival. In this case after, the hotelier can dispose of the

room.

Premature departure (Under stay)

In the event of a premature departure, the travel agent shall compensate the

hotel for the actual loss suffered, except in those cases where the hotelier is

responsible for the premature departure of the guest.

Other solutions can be agreed upon by both parties concerned.

Information Required

To the Travel Agent and Client

The hotelier shall provide the travel agent with relevant, precise information

concerning the category/standards, location and services of the hotel.

The travel agent is obliged to transmit to his client the information exactly as

supplied by the hotelier.

Quality of Service

The service provided by the hotelier to the travel agent’s clients, in accordance

with the hotel contract, shall be of the same quality as those provided by the

Front Office Management Lecture Notes – David Vella 5

hotelier, on the same conditions, to his direct clients, unless otherwise stated in

the contract.

Force Majeure

Whenever one of the parties to the hotel contract finds it impossible to fulfill his

obligations owing to a case of force majeure that is a “circumstances that are

unforeseen, irresistible and beyond his/her control” he/she is exonerated from the

obligations without having to pay any compensation.

When the hotelier or the travel agent find him/herself unable to fulfill his/her

obligation for reasons of force Majeure, he/she shall immediately notify the other

party by all means of his/her disposal in order to limit potential damages.

Multiple Bookings

Even if a travel agent has simultaneously requested reservations for the same

stay of a client or a group from different hotels he/she shall refrain from finalizing

several hotel contracts for the same stay of a client or a group, with the intention

of canceling, at a later date and within the time-limits mentioned, the reservations

he/she decides not to retain, he shall refrain from finalizing more than one

contract.

In such cases the hotelier can unilaterally cancel the reservation concerned and

not refund any paid reservation fee.

In the case of a series of group reservations, all reservations concerned may be

cancelled.

The above notes are extracts from the

Code of Practice

on relations between the

Hoteliers and Travel Agents drawn up by the International Hotel &

Restaurant association (IH&RA) and the

Universal Federation of Travel Agents’ Associations (UFTAA)

Lecture Notes Lecture 10

Front Office Management Page 1

Lecture 10

The Night Audit

· Introduction

· The Night Auditor

· End of day

· Operating Modes

· The Night Audit Process

1. Complete outstanding postings

2. Reconcile room status discrepancies

3. Balance all departmental accounts

4. Verify room rates

5. Verify no-show reservations

6. Post room rates and taxes

7. Prepare required reports

8. Prepare cash receipts for deposit

9. Clear or backup the system

10. Distribute reports

Introduction

Night audit routines vary from one hotel to another, depending on

various factors: the size of the establishment, its accounting

practices and the use of Management Information Systems. In this

lecture we will look at a common automated routine, but this is not

to be taken as a standard of what occurs in Industry – but rather

what can be typically expected.

The Night Auditor

A night auditor is not simply a night receptionist, although some

may say that some automated routines have in fact downgraded

the night auditor’s role to one of a night receptionist or keyboard

operator.

Even where the night audit is heavily automated the night audit

still requires attention to accounting, procedural controls and guest

credit restrictions. The auditor is also expected to be familiar with

the nature of transactions affecting the front office accounting

system, and will invariably also produce a number of standard

operating statistics.

Does the night auditor belong to the Accounts department or he is

an integral part of Front office?

This will depend on the organisational setup of the hotel, but there

are some instances where the night auditor is responsible to the

Accountant or Financial Controller – especially where the Auditor is

simply employed to run the Night Audit and perform audit checks.

In cases where the auditor also performs front office tasks –

Lecture Notes Lecture 10

Front Office Management Page 2

including check-in, guest cashiering and check-outs he will almost

certainly report to the Front Office Manager.

End of day

The end of day is simply that time defined by hotel management

which is considered the end of an accounting (hotel or business)

day. This does not necessarily coincide with the beginning of a

new calendar day, as often it will be established as either the

closing time of food and beverage outlets or the last guest arrivals.

Where the hotel has a 24-hour catering operation, the closure of

the majority of catering outlets will normally indicate the close of

the business day. Typically the business day ends when the night

audit begins.

From the moment the night audit commences and until it is

finished any transactions that occur (including telephone charges,

food and beverage charges etc) are charged on the following

business day. The period when the night audit is taking place is

referred to as audit work time.

Operating modes

Night audit procedures may be performed manually (nonautomated),

mechanically (semi-automated) or electronically

(automated). The manual method makes no use of electronic

systems, the semi-automated process refers to the use of the

account posting machines whilst the automated method refers to

the use of Management Information Systems.

The Night Audit procedures adopted will depend on the operating

mode used – however the process itself has common

characteristics described below. It is generally agreed that where

the process is fully automated the night audit routine will allow the

auditor to concentrate on auditing specific transactions.

The Night Audit Process

The Night Audit process focuses on two areas:

· the discovery and correction of front office accounting

errors.

The audit ensures the integrity of front office accounts using

a cross-referencing process. Guest and non-guest accounts

are compared with source folios/documents from revenue

centres. Discrepancies found are tracked and corrections

made to ensure the system is in balance.

· the creation of accounting and management reports.

These will invariably include statistics and important

operating information that will include average room rate,

occupancy percentages, usage of package plans, number of

rooms assigned to groups, complimentary rooms etc.

Lecture Notes Lecture 10

Front Office Management Page 3

Do we have to have a night audit process?

The question is valid especially when one considers that most

computer based systems will allow for continuous online reporting.

In such instances the audit may take place at any time during the

day, however there will be always be system checks and reports

that must wait till the end of the business day.

We will now look at the steps that are common to the sequence of

a night audit from an operational perspective. (For more detail

refer to Kasavana, p. 277)

1. Complete outstanding postings

The auditor must ensure that all postings have been affected. This

normally means waiting for the arrival of all food and beverage

(including banqueting) bills and more importantly ensuring that

they have been posted. Unless transactions are posted on that

same day, there will be errors in account balancing and summary

reporting will be complicated unnecessarily. To ensure that all

postings have been made the Night Auditor may place the

department chits in numerical order and check that they have all

been accounted for.

2. Reconcile Room Status Discrepancies

In manual systems the night auditor will compare the daily

housekeeper’s report and the front office room status system. The

auditor must then review front office and housekeeping department

reports to reconcile and finalise the occupancy status of all rooms

for a given night. Where there is a discrepancy the Night Auditor

must follow the audit trail to ascertain the true status of the room

– it will often be simply a case of misreporting and a physical check

may solve the problem. However, it may be the case that whilst

Housekeeping are reporting a room to be vacant there is still a

pending guest folio of a guest who left without intending to check

out (i.e. a walk-out). In a computerised front office system the

processes are normally linked together, and few room status

discrepancies should occur.

3. Balance all departments

To discover posting errors, it is recommended that departments are

first balanced. This is the process that ensures that front office

accounts (room folios, city ledger folios, cash accounts etc) balance

against departmental transaction information. By checking that the

accounts balance we are not assured that the transaction has

necessarily been made to the correct account. Unless each

Lecture Notes Lecture 10

Front Office Management Page 4

individual transaction is checked there is no way of auditing

whether a correct charge has been made to the correct room.

Where the front office accounts and the revenue department

account do not tally the night auditor must investigate the anomaly

and correct it. In automated systems the balancing is done

automatically as the system will ensure that whenever a posting is

made on a room or other account it originates from a department.

4. Verify room rates

In manual and semi-automated systems this is essential. Some

hotels using automated systems may require that room rates are

completely or randomly checked against the original reservations.

It is important that the right room charges are made to ensure that

statistical reports are correct.

5. Verify no-show reservations

It is the night auditors’ responsibility to verify no-shows and where

applicable affect no-show charges (this will apply where the

reservation had been guaranteed). Sometimes no-show

reservations are duplicate bookings, in other cases the room may

actually be physically occupied but the check-in process has not

been completed. It is important therefore that the auditor ensures

that no shows are indeed no shows!

6. Post room rates and taxes

Room rates are normally charged at the end of the day, though it

may be possible on some computer systems to generate a room

charge for the entire stay, or to charge the room rate earlier in the

day if the guest would like to settle his account earlier. To ensure

accuracy of rates it is recommended that hotels with automated

systems use rate codes – these will ensure the accuracy of the

charge made as well allow for improved statistical analysis. In a

manual system the charge must be made manually … a fairly

tedious and time-consuming process!

7. Prepare reports

Typical reports prepared by night audit include:

· final department detail and summary report

· daily operations report

This report summarises the day’s business and provides

insight into revenues, receivables, operating statistics and

cash transactions.

· high balance report, which identifies guest accounts which

are approaching an account credit limit.

Lecture Notes Lecture 10

Front Office Management Page 5

· group room report

· complimentary room report

8. Deposit cash

The night auditor may be required to prepare a front office cashier

shift report with all the day’s earnings (including cash payments,

credit and debit card payments etc.) and include a cash deposit.

This report is normally then taken in the morning by an Income

Auditor who then proceeds to deposit the cash in the bank.

9. Clear or backup system

In manual or semi-automated systems all balances are cleared to

‘0’ – hence the use of the term ‘Z’ reading – Zero reading. In a

computerised system this is triggered off by the audit which

normally requires that a physical backup is taken of the data

followed by a system update, which will move the system’s clock to

the next day. Prior to the backup being taken (this may take a

while) Front Office systems are often programmed to produce endof-

day reports that will include: guest lists, room status reports,

guest ledger reports, arrivals and departures reports etc. These

reports are required in the case of an emergency during the backup

process or if due to the backup or system update the computer

system becomes inoperable. They may also be required by the

hotel’s marketing department.

10. Distribute reports

When the process is finalised the Night Auditor must ensure the

relevant reports are distributed to authorised individuals. He may

also be required to print further reports as required by individual

departments and outlets.

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Lecture 11

Evaluating Front Office Operations

· Introduction

· Management functions

· Planning

· Organising

· Coordinating

· Staffing

· Leading

· Controlling

· Evaluating

Introduction

Throughout our lectures we have studies various aspects of Front

Office management, as well issues the Front Office Manager should

be well aware of. Here we will look into the actual Management

Functions – the concepts of which apply to any manager in

hospitality operations.

Management functions

The process of front office management can be divided into specific

management functions as described by Kasavana.

Planning

This is perhaps the most important of functions. We have already

seen that before we can even start operating we have to plan our

business. This is effectively what we did when we planned our

room rates based on our required return on investment. Planning

gives us direction and focus. If a Front Office Manager does not

plan, he may become overly involved with tasks that are

inconsistent with what should be his department’s goals.

Kasavana recommends that the first step in planning is defining the

department’s goals, which should then be used as a guide to

planning more specific, measurable objectives. Planning also

includes determining the strategies that will be used to attain the

objectives.

Organising

A good Front Office Manager must be able to organise his staff, by

dividing work amongst them. Work cannot be always divided

equally – some members of staff will have certain strengths which

cannot be overlooked. However, dividing work must ensure

everyone gets a fair treatment so that work can be completed on

time. Organising will involve determining in which order tasks are

to be performed and establishing completion dates for each group

of tasks.

Coordinating

This will involve bringing together and using available resources to

achieve planned goals. It is useless to organise work without

effectively coordinating it, as it will often become apparent

(through coordinating work) that it may be necessary to make

changes to the way things are organised.

Staffing

Having determined your objectives and planned goals you need to

make sure that you have recruited the best qualified staff for your

positions. Staffing involves scheduling employees. This process

will involve determining the number of employees required to cater

for the expected demand – to meet guest and operational needs

under specified conditions.

Leading

A Front Office Manager must be a leader – capable of directing his

staff, overseeing, motivating, training, disciplining, and setting an

example. The Front Office Manager must be able to analyse the

work to be done, organise tasks in a logical order, whilst bearing in

mind the conditions within which employees are expected to

perform their work.

Lecture Notes Lecture 11

Front Office Management Page 3

A good Front Office Manager will be able to step into situations

where his staff cannot deal with the workload.

Controlling

Every front office will have a system of internal controls to keep in

check the hotel’s assets and protect its revenue. A Front Office

Manager must ensure that his staff follow established procedures.

The hotel will also have performance targets, both in terms of

revenue budgets as well as employment targets, and the Front

Office Manager will exercise a control function when keeping front

office operations on course in attaining planned goals.

Evaluating

This is the function of determining to what extent planned goals

are attained. Unfortunately this function is often overlooked or

performed without much thought. Evaluating involves reviewing

and when necessary revising front office goals. This is why these

management functions are often referred to as the “management

cycle” because management is a continuous cycle of planning,

organising, motivating and reviewing.

Operating ratios

In a past lecture we looked at occupancy ratios and how these may

be used to evaluate departmental performance. The following

operating ratios look at the financial position of front office,

evaluating for instance the major expenses incurred by the front

office operation.

Dividing the payroll and related expenses of the rooms division by

the department’s net revenue yields one of the most frequently

analysed areas of front office operations: labour cost. The table in

the next page gives us a number of operating ratios that may be

used.

Lecture Notes Lecture 12

Front Office Management Page 1

Lecture 12

Staff Motivation and Empowerment

· Staff Motivation

· Training

· Cross-training

· Recognition

· Communication

· Incentive Programmes

· Performance Appraisals

· Staff Empowerment

Staff Motivation

As Kasavana remarks the term “motivation” can mean various

things, but in our context it is –

the art of stimulating a front office staff member’s interest in

a particular job, project, or subject to the extent that he or

she is challenged to be continuously attentive, observant,

concerned and committed.

There are various motivational techniques:

Training

Training is seen by many as one of the most effective ways

to motivate employees – primarily because it is a way of

informing employees that management truly cares enough to

provide the necessary instruction and direction to ensure

their success.

Cross-training

Cross-training simply means teaching an employee job

functions other than those he or she was hired to perform. It

has advantages for both the employee and the employer: the

employee acquires additional skill which may help in his

professional development, the employer gains flexibility in

scheduling.

Recognition

Guest, managerial and peer recognition are strong staff

motivators. Staff should be aware of all positive guest

comments, especially those comments left in guest

questionnaires. Management may offer incentives to staff

who are favourably recognised by guests. In some cases

recognition is given through an employee-of-the-month

programme which gives the opportunity for managers and

sometimes employees to select an employee for special

Lecture Notes Lecture 12

Front Office Management Page 2

mention. Usually an employee qualifies for this honour by

demonstrating extraordinary commitment to the hotel, its

standards and its goals.

Communication

Keeping employees informed about front office operations

helps produce positive results. A front office newsletter or

bulletin can be an excellent way to establish and maintain

formal communications. Some items which may find

themselves into the newsletter or bulletin include:

· Job opening announcements

· Promotion, transfer, resignation and retirement

announcements

· New recruit announcements

· Performance tips

· Special recognition awards

· Birthday, marriage, engagement and birth

announcements

· Upcoming event information

Incentive programmes

Incentive programmes offer special recognition and rewards

to employees who have met certain performance standards or

defined goals. They may include commendation letters,

certificates of appreciates, recognition dinners or events, gift

certificates, complimentary weekend packages, special

parking privileges, recognition plaques. The choice of

incentive will depend on the recognition being given, but the

reward must not be arbitrary. All staff members should be

given the opportunity to participate and must be fully aware

of what is required from them to be eligible for the incentive

awards.

Performance Appraisals

Front office staff need to feel secure with respect to their job

performance. When properly conducted, a performance

appraisal can provide each member of staff with written

feedback on his or her performance. Moreover, it must be

able to identify both strengths and weaknesses in

performance and provide plans and actions for improvement.

As part of the appraisal, the manager and the employee must

be able to agree on specific goals and target dates. The

appraisal must recognise outstanding performance and the

appraiser (i.e. the manager) must commit himself to

assisting the employee in his professional developments. As

Kasavana suggests “Performance appraisals should be fair,

objective, informative, and positive.” Employees should

receive an appraisal at least once a year.

Lecture Notes Lecture 12

Front Office Management Page 3

Staff Empowerment

Employee empowerment is particularly relevant in the hospitality

industry because employees have the greatest amount of direct

customer contact. Levels of customer satisfaction can be increased

by empowering employees to handle guest requests or problems

immediately, rather than having to their supervisors or managers

every time.

Empowerment means that the employee will be able to take an

independent autonomous decision on how to deal with a particular

situation, a decision that may not necessarily be the same one

taken by his immediate supervisor or manager but a decision which

must be respected nonetheless.

If it is the manager’s duty to deal with guest problems why should

a member of staff be involved?

There are a number of reasons why in certain situations it would be

best if the supervisor or manager were directly involved, but there

may be situations where it would be best to allow an employee an

amount of discretion to deal with a particular situation.

Ideally, a hotel should have an employee empowerment scheme

allowing for structured empowerment – i.e. a scheme that will give

structured guidelines to making decisions. The following is an

example of such a scheme.

Guest complaint Authorised action

1. A guest announces during check out

that he experienced a room-related

problem.

Offer upgrade for next visit, or adjust

current bill by as much as Lm50.00

2. A guest is charged an incorrect rate. Adjust rate if it appears incorrect from

all correspondence.

Ask supervisor to make adjustment.

Other hotels may adopt a more flexible approach giving a wider

discretion to staff, but this depends on other factors, including the

reliability of employees to take a reasonable decision.

Whichever the type of employee empowerment strategy is put into

place the benefits are the same:

1. Customer satisfaction increases.

2. Cooperation increases as managers and employees work

together as a team.

3. Managers are interrupted less as frontline employees

make more decisions without managerial input.

4. Employees are “forced” to become more responsible.

Lecture Notes Lecture 12

Front Office Management Page 4

5. Employees experience personal growth and development

as they learn to make on-the-job decisions.

6. Employee satisfaction increases due to greater feelings of

involvement and importance, and improved personal

relationships among co-workers.

(Source: Go et al, Human Resource Management in the Hospitality Industry

Wiley, 1996)

Lecture Notes Lecture 13

Front Office Management Page 1

Lecture 13

Security of Guests, Staff and the Hotel

· Protecting Guests

· Fire

· Terrorist threats

· Threats to privacy

· Threats to guest property

· Confidence tricksters

· Guests themselves

· Protecting Staff

· Protecting the hotel

· Theft from hotel

· Walkouts, skippers or runners

· Immorality

Security

Security has always been a concern for hotels worldwide. The

recent increase in terrorist acts has had its toll on travel and

tourism worldwide. Whilst there is no indication that hotels are a

primary target for the perpetration of terrorist acts, hoteliers must

ensure that their properties are secure – if anything to give a sense

of security to guests and staff whilst at the same time protecting

their investment.

There are two types of security threats hotels should be concerned

with:

1. Threats that might affect a guest’s health, comfort or wellbeing.

2. Threats that affect the hotel directly, in particular its fixtures

and fittings, its revenue and its reputation.

Protecting Guests

Fire

One of the major threats is that of fire. Although we have not had

loss of life in hotels in Malta (perhaps as a result of our methods of

construction and the absence of wall to wall carpeting) hotels here

are also bound by law to take the necessary fire safety precautions.

A front office manager is duty bound to ensure that he is satisfied

with a hotel’s –

· fire detection systems

· fire containment provisions

· escape procedures

· fire-fighting equipment

Lecture Notes Lecture 13

Front Office Management Page 2

Terrorist threats

This has been dealt with in a previous module, and includes bomb

threats. There is little, if anything, a front office manager and his

staff may do if there is some kind of assassination attempt for

instance. However, bomb threats are received by someone at the

front line – a telephonist or a front office clerk – and a procedure

must be in place to ensure that all the information that can be

taken about the nature of the threat is in fact recorded.

Threats to privacy

It is the duty of front office to protect the privacy of its guests –

even and perhaps especially if they are in the public eye. It is very

tempting to tell one’s friends all about a well-know person who

might be staying at your hotel, but you will have no control over

the information passed over from your friends to their own friends.

In no time at all, your guest may be pestered by fans, autograph

hunters, paparazzi and reporters.

However, it is not only the privacy of well-known guests that must

be respected. Every one of our guests is entitled to his or her own

privacy and steps must be taken to ensure that information about

our guests is not divulged to outsiders. Giving room numbers to

individuals other than the persons being accommodated in those

rooms is unethical and should be avoided at all costs. There is a

tendency amongst representatives locally to divulge room numbers

to taxi drivers, restaurants etc. It may prove difficult to ascertain

whether the breach of confidentiality is the responsibility of the

hotel or not, but guests have every right to hold the hotelier

accountable.

Threats to guests’ property

We have already discussed in a previous lecture the hotelier’s

obligation to provide safe deposit facilities. Although the hotelier’s

liability is limited, it is in the interests of the hotel to ensure the

safety of its guests and their property – if anything to protect the

reputation of the hotel.

If the hotel is in an unsafe area, or in an area roamed by

unscrupulous characters, guests should be made aware of this –

especially if they intend to venture out of the hotel at night.

In Malta, hotels should be especially aware of the problems caused

by prostitution. Prostitution is not per se illegal but a hotel would

be acting illegally if it were to knowingly encourage or allow

prostitution within its premises. It is not for us to make a general

characterisation of prostitutes, but some prostitutes may well be

thieves and since hotel guests will often negate their involvement

Lecture Notes Lecture 13

Front Office Management Page 3

with a prostitute they may accuse hotel staff of pilfering their

property rather than admit to the fact that they hosted a girl in

their room.

Unfortunately, we must also face the fact that there are instances

where guests are robbed by staff. There may be a “social divide”

between staff and guests, which may lead the former to pilfer

money or valuable items from a guest (although this is by no

means the only reason why guests may be robbed by staff). If the

hotel has a policy of randomly checking staff’s property before they

leave the hotel, this may act as a deterrent and waive the hotel’s

liability should this arise.

Confidence tricksters or conmen may also find themselves into a

hotel. There is very little a hotel can do if a confidence trickster

makes his way into a guest’s “life”. These type of people often

settle their own room accounts and are simply guests from a hotel

point of view. However, when the identity of a conman is known

the hotel is ethically bound to blacklist him and refuse him

accommodation in the hotel.

Guests themselves may also threaten each other’s enjoyment. If

a traveller turns up in a drunken state asking for a room a hotel is

entitled to refuse him on the grounds that he is not a fit state to be

received. This is true even if he already has a booking, as he has

broken one of the implied conditions of the contract.

Similarly if the guest misbehaves throughout his stay the hotel is

not obliged to let him stay. When guests complain about being

kept awake by a noisy couple or a drunkard next door, it is not

good enough to tell a guest that “nothing can be done about that.”

One must employ considerable tact in dealing with such situations.

Protecting Staff

Staff should be able to work in a harmonious and secure

environment. In this sense, all measures taken to protect guests

will provide further security for employees.

Some guests are unscrupulous and although it is highly unlikely

that guests will rob staff property some guests may put into

question the integrity of the staff. Unfortunately this may happen

to female staff who refuse sexual advances from guests. It is in

the interest of the hotel to protect its staff by ensuring that the

integrity of employees is safeguarded and it would be unwise for a

manager to immediately accept the guest’s complaint without

hearing the employee’s version of events.

Lecture Notes Lecture 13

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Protecting the hotel

Theft from hotel

It is unfortunate even the wealthiest of guests may have a

propensity to pilfer a hotel’s property if the opportunity arises.

This normally happens at check out when a guest leaves the hotel

with a variety of items – virtually anything that is not securely

fastened down: soap, towels, mats, sheets, blankets, coathangers,

lamps, trouser presses, electrick kettles, TV sets and even

plumbing fixtures! Some hotels ask housekeepers to check rooms

for pilfering as soon as a client leaves the room to check out. This

is not however always practical. Again considerable tact has to be

employed when dealing with such situations and there are no fast

rules to follow. There are instances where a hotel will simply have

to write off stolen items rather than insist on ensuring that no

items have been stolen.

Walk-outs, skippers or runners

There a number of guests who leave without paying. These guests

can generally be divided into three groups:

1. The ‘accidentals’. These are guests who simply forget to pay,

often their extras bills. Most of these guests do not intend to

leave the hotel without paying – they simply believe their

account is being settled by someone else. When contacted

these guests pay their bill immediately and are highly

embarrassed. The hotel should deal with them courteously.

2. ‘Opportunists’. These guests check in with the intention of

paying their bill on departure, but when they realise that

they can get away with not paying their bill (or simply a

transaction that should have found itself on their bill – eg.

last minute breakfast or minibar consumption) they make a

run for it!

3. ‘Premeditators’. These are guests who, from the start, have

the intention of leaving the hotel without paying. Some of

these guests go into considerable lengths in order to avoid

paying. These guests generally stay for short periods and

will move to other hotels as soon as payment is demanded.

When hotels network between themselves they are in a

position to warn each other of such guests. Experienced

room staff can often detect premeditated walkouts because

generally they do not unpack their belongings to facilitate a

quick run. If the hotel staff communicate effectively it may

be possible for a hotel to operate like an intelligencegathering

machine, with the doubtful guest being reported on

all his activities whilst the security manager determines

whether or not he or she is a bona fide guest.

Lecture Notes Lecture 13

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Immorality

An immoral contract, under our law, is void. This will mean that if

you knowingly allow a guest to take a room with the purpose of

using it for prostitution, you will not be able to enforce the contract

because it based on an illicit purpose. A contract must be based on

a lawful consideration (Section 966 of the Civil Code) – if it is not,

then it may not be enforced in a court of law.

It is in the interest of a hotel to discourage prostitution, not only

because it has a reputation to protect but also because prostitution

may bring about a number of difficulties (as discussed earlier).

Similarly a hotel must ensure that other illegal practices, such as

illegal gambling, are not conducted on its premsises.