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 ofbusiness. 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 thatwould often otherwise remain low.
·
Malta's central position in the Mediterranean encourages moreconference 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 sometimesextended by delegates for holiday-making.
Incentive
·
An incentive is an award given to the employee of a company who hasperformed exceptionally well, or has achieved an agreed sales target.
·
Incentive travel originated in the United States, and has become popularin 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 tosuspend 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 andat 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 intothe 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 Beveragefacilities 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 ofluxury accommodation, casino business is a very lucrative source.
·
The business has the potential to attract Italians and North Africans ongambling trips.
·
Gamblers tend to spend a lot of money not only in a casino, but also infine 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 offacilities etc. are normally offered to lure the business in.
·
In Northern Europe the sudden rise in popularity of weekend breaks hashelped boost room occupancy. This trend is not yet common in Southern
Europe.
Diving
·
Malta is a popular diving centre, partly crippled by what diving centresconsider 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 attractingprofessional and amateur archaelogists on "digs" and summer courses in
archaelogy.
·
Archaelogists or students of archaelogy will often stay on the island for aperiod 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 descriptionsThe constitutive parts of a job description
·
Personnel specification·
Staffing levelsThe Activity Pattern
Scheduling alternatives
·
Staff rotas - employee schedulingEU 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 usedJob 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 aperson carrying out that job.
This more or less depends on howdetailed 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 instrumentwhich "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 ReceptionistPlace of work:
Queen's Hotel ManchesterGeneral 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 ManagerResponsible for:
Receptionists, telephonists, reservations staffMain 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 bymanagement.
·
To assist management with the induction and training of new front officestaff.
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, butreceptionists do rather more standing than is usual in other
clerical jobs.
·
Physical appearance is important, as front office personnelare representatives of the hotel.
2.
Attainments·
Previous experience at a hotel front desk may well proveuseful.
·
Clerical experience or a position involving a degree ofcustomer interaction will help.
·
Interviewer should read a curriculum vitae with an eye tospotting significant unexplained gaps.
3.
General Intelligence·
Staff should be literate and numerate.·
A Certificate in Accommodation Operations or City & Guild'sshould definitely be considered an asset!
4.
Special skills and aptitude·
Keyboard skills·
Linguistic skills5.
Interests·
Interests will provide clues as to an applicant's personalitytraits.
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 childrenetc.) 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 receptionistEssential Preferred
1
PhysicalAge 18-25
Health Good
Appearance Neat, well groomed Attractive
Voice Pleasant, clear Acceptable accent
2
Attainments/Experience Full time work inequivalent hotel
Good reference
3
General IntelligenceSecondary GCSE or equivalent
with English and Maths
4
Special Skills/AptitudesSecondary 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, mature7
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 replacedby 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 asSunday through Saturday.
·
Schedules should be posted at least three days before thebeginning of the next workweek.
·
Days off, vacation time, and requested days off should beindicated on the posted work schedule.
·
The work schedule for the current week should be revieweddaily in relation to the anticipated business volume and
unanticipated changes in staff availability.
·
Any scheduling changes should be noted directly on theposted work schedule.
·
A copy of the posted work schedule can be used to monitorthe 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 fourmonths.
·
a minimum daily rest period of 11 consecutive hours aday.
·
a rest break (established by national law) where a workingday 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 duringthe 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 anemployee 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 eachweek as a weekly day of rest. (27)
·
Full-time employees are entitled to four working weeks andfour 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 pricingMarket Condition Approach
Top-down pricing
Rate-cutting
Prestige product pricing
·
Cost-based pricingRule-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 agreementbetween 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 othertrading 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 wasintroduced 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 nightsLm 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. Thiswould 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 theexpected 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
ed
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 ContractIntroduction
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 thepeak season/s.
·
The hotel wants the operator to sell off-peak space at thehighest 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 / allocationLecture 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 (whenit is expected that a number of rooms be unavailable due to
refurbishment)
·
The proportion of rooms being used for complimentaries orstaff 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 roomrevenue 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 havehad 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 guestsLecture 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 managementCapacity 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 allocationYield 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 controlDuration 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
=
( MultipleOccupancy
Percentage
x
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
x
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
·
IntroductionScope of the code of practice
Definition of the hotel contract
·
ReservationsVouchers
Rates
Commissions
Groups and Individuals
·
CancellationGeneral Terms
Cancellation of Groups
Cancellation of Individuals
·
Information RequiredTo 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 2Reservations
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 3If, 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 5hotelier, 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 theUniversal 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 Process1. 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 accountingerrors.
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 eachLecture 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 reportThis report summarises the day’s business and provides
insight into revenues, receivables, operating statistics and
cash transactions.
·
high balance report, which identifies guest accounts whichare approaching an account credit limit.
Lecture Notes Lecture 10
Front Office Management Page 5
·
group room report·
complimentary room report8. 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.
Lecture Notes Lecture 11
Front Office Management Page 1
Lecture 11
Evaluating Front Office Operations
·
Introduction·
Management functions·
Planning·
Organising·
Coordinating·
Staffing·
Leading·
Controlling·
EvaluatingIntroduction
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 EmpowermentStaff 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 retirementannouncements
·
New recruit announcements·
Performance tips·
Special recognition awards·
Birthday, marriage, engagement and birthannouncements
·
Upcoming event informationIncentive 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 problemsimmediately, 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·
ImmoralitySecurity
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 equipmentLecture 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 wouldbe 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 ahotel. 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. Ifa 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
Front Office Management Page 4
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
Front Office Management Page 5
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.