ASSIGNMENT OF FRONT

OFFICE MANAGEMENT

(HOSP 1050)
 PLANNING AND EVALUATING
OPERATIONS
INTRODUCTION:
An important part of a front office manager’s job involves planning
how to apply limited resources to attain the department’s objectives.
An equally important function is to evaluate the success of front
office activities in meeting then department’s objective.

Planning and Evaluating Operations 2

 MANAGEMENT FUNCTIONS

The process of front office Planning

management can be divided
into specific management Organizing
activities.
Coordinating
Staffing
Leading
Controlling
Evaluating
3

Planning and Evaluating Operations

 PLANNING
 Planning is probably the most
important management
functions in any business yet
managers.
 A front office manager’s first
step in planning should involve
determining the department's
goals .
 Managers should identify both
near-term goals and long-term
goals and develop a plan for
achieving them.
 An important component of
planning is communication.

Planning and Evaluating Operations 4

 ORGANIZING
 Using the planned goals as a
guide, front office manager can
organize the department by
dividing the work among front
office staff.
 Managers should distribute work
so that everyone participants and
the work can be completed in
timely manner.
 Organizing includes determining
the order in which tasks should
be performed and establishing
completion deadline foe each
group and subgroup of tasks.

Planning and Evaluating Operations 5

 COORDINATING
 Coordinating involves bringing
together and using available
resources to attain planned goals.
 A front office manager must be able
to coordinate the efforts of many
individuals to ensure that work is
performed efficiently.

Planning and Evaluating Operations 6

 STAFFING
 Staffing involve recruiting applicants
and selecting those best qualified
to fill available positions.
 To properly recruit employees, it is
essential to develop job description.
 The front office manager will work with
the human resources department
to develop job descriptions.

Planning and Evaluating Operations 7

 LEADING
 Leading is a complicated
management skill that is
exercised in a wide variety of
situations.
 For a front office manager,
leadership involves
overseeing, motivating,
training, disciplining, and
setting an example for the
front office staff.

Planning and Evaluating Operations 8

 CONTROLLING
 Every front office
department has a system
of internal controls to
protect the hotel’s assets.
 The controlling process
ensures that the actual
results of business
operations closely match
planned results.

Planning and Evaluating Operations 9

 EVALUATING

 It begins by examining three important front office planning

functions:
 Establishing room rates

 Forecasting room availability

 Budgeting for operations

Planning and Evaluating Operations 10

 ESTABLISHING ROOM RATES

 The rack rate is the price for an overnight accommodation, as

determined by front office management, for a particular room or
room type. The rack rate is posted on the room rate schedule to
inform front desk agents of the standard selling price of each
guestroom in the hotel.
 Room rates are normally assigned by room type category:

Planning and Evaluating Operations 11

 ROOM RATE CATEGORIES

 Corporate or commercial rate

 Group rate

 Promotional rate
 Incentive tare
 Family rate
 Package plan rate
 Internet rate
 Distressed-inventory rate

 Complimentary rate

Planning and Evaluating Operations 12

 TYPES OF ROOM RATES:

 Corporate or commercial rate: the rate offered to companies

that provide frequent business for an individual hotel or hotel
chain.
 Group rate: the rate offered to group, meeting, and convention
attendees staying at the hotel.
 Promotional rate: the rate offered to individuals who may belong
to an affinity group such as the American automobile
association or American association of retired persons, to
promote their patronage.
 Incentive rate: the rate offered to guests in affiliated
organizations such as travel agencies and airlines because of
potential referral business.

Planning and Evaluating Operations 13

 Family rate: a rate reserved for families with children.
 Package plan rate: a rate that includes a guestroom in combination
with other events, activities, or services, such as meals, golf, tennis,
or parking.

 Internet rate: a special discounted rate that many hotel companies

offer through an internet website. A web rate is usually classified as
the “beat available rate” and is available to guests making an online
reservation.
 Distressed-inventory rate: a special room rate offered when a hotel
projects or experiences low occupancy. This rate usually
represents a significant discount off the rack rate and is
implemented to help build occupancy.

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 Complimentary rate: a room rate provided to
special guests, important industry leaders as a
sales incentives, and those guests who have
experienced a problem at the hotel to the point
where management wishes to give them a
complimentary rate as compensation.

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 GUESTROOM PRICING STRATEGIES

 Marketing condition approach

 Rule-of-thumb approach
 Hubbart formula approach

Planning and Evaluating Operations 16

 MARKET CONDITION
APPROACH
 Management shall look at
comparable hotels in the
geographical market, see
what they are charging for
the same product, and
“charge only what the
market will accept.

Planning and Evaluating Operations 17

 RULE-OF-THUMB APPROACH

 The rule of thumb

establishes the
minimum average
room rate at $1 for
each $1,000 of
constructions and
furnishing cost per
room.

Planning and Evaluating Operations 18

 HUBBART FORMULA
APPROACH
 Hubbart formula approach considers operating
costs, desired profits and expected number of
rooms sold.
 In other words, this approach starts with desired
profit, adds income taxes, then adds fixed charges
and management fee, followed by operating
expenses.

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 THE EIGHT STEPS OF HUBBART
FORMULA
1.Calculate desired profit
2.Calculate pre-tax profits
3.Calculate fixed charges and management fees
4.Calculate undistributed operating expenses
5.Estimate non room operated department profit/ loss
6.Calculate required rooms division income
7.Determine room division revenue
8.Calculate average room rate

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 PLANNED RATE CHANGES

 Room rack rate are likely to during a calendar year,

depending on market factors such as location,
seasonality, or major events in the area.
 Resorts, for example, may have several different
rack rates for the same room types during the year
reflecting how demand for the rooms vary during
the year.

Planning and Evaluating Operations 21

 FORECASTING ROOM
AVAILABILITY
 The most important short-term planning that front office managers
engage in is forecasting the numbers of rooms available for future
reservation.
 Room availability forecasts are used to help manage the
reservations process and guide front office staff in effective rooms
management.
 Experienced front office managers have found that several types of
information can be helpful in room availability forecasting.

Planning and Evaluating Operations 22

 A through knowledge of the hotel and surroundings attractions
 Market profiles of the targeted guests
 Occupancy data for the past several months and for the same
calendar period of the previous period
 Reservation trends and a history of reservation lead times (how
far in advance reservation are made)
 A listing of special events schedule in the surrounding
geographic area
 Business and historical profiles of specific groups booked for
future days
 The number of guaranteed and non-guaranteed reservations
and an estimate of the number of reservation expected to be no-
show

Planning and Evaluating Operations 23

 FORECASTING DATA

 Expected arrivals
 Expected walk-ins
 Expected stayovers
 Expected no-shows
 Expected understays
 Expected check-outs
 Expected overstays

Planning and Evaluating Operations 24

 FORECAST FORMULA

Total Number of Guestrooms

- Numbers of Out-of-Order Rooms
- Number of Room Stay-Overs
+ Numbers of Rooms Reservations
+ Number of Room Under stays
- Number of Room Overstays

Number of Rooms Available for Sale

Planning and Evaluating Operations 25

 TEN-DAY FORECASTS

 At most lodging properties, the ten-day forecast is developed

jointly by the front office manager and the reservations
managers, possibly in conjunction with a room availability
forecast committee. A ten-day forecast usually consists of:
Daily forecasted occupancy figures, including room arrivals,
rooms departures, rooms occupied, and number of guests.
 Most automated systems have programs to help managers
accurately forecast business.

Planning and Evaluating Operations 26

 REFINING A FORECAST
 A yearly forecast provides an excellent starting point for developing shorter-
term, more accurate forecasts.

 List all group booking and transient reservation on the books.

 Examine arrivals, departure, and group information for the given period.

 Determine if demand for this particular period of time is high or low.

 Chart the peaks and valleys on a graph to better identify high/low demand

 Have sales agents call competing properties for rates and consider
adjusting your rates.

 Make decisions to maximize revenue during each time period.

Planning and Evaluating Operations 27

 BUDGETING FOR OPERATIONS

 The most important long-term planning function that front

office managers perform is budgeting for front office
operations. The hotel’s annual operations budget is a profit
plan that addresses all revenue sources and expense items.
 The hotel’s annual operations budget is a profit plan that
addresses all revenue sources and expenses items.

Planning and Evaluating Operations 28

 FORECASTING ROOM REVENUE

 Historical financial information often serves as the

foundation on which front office manager build rooms
revenue forecasts. One method of rooms revenue
forecasting involves an analysis of rooms revenue from past
periods.

Planning and Evaluating Operations 29

 ESTIMATING EXPENSES

 Most expenses for front office operations are variable

expenses in that they vary in direct proportion to rooms
revenue.
 Historical data can be used to calculate an approximate
percentage of rooms revenue that each expense item may
represent.
 These percentage can then be applied to the total amount of
forecasted rooms revenue, resulting in dollar estimates for
each expense category for the budget year.

Planning and Evaluating Operations 30

 EVALUATING FRONT OFFICE
OPERATIONS
Evaluating the results of front office operations is an important management function.
Without thoroughly evaluating the results of operations, managers will not know whether
the front office is attaining planned goals.
These tools include:
 Daily report of operations
 Occupancy ratios
 Rooms revenue analysis
 Income statement
 Rooms schedule
 Rooms division budget reports
 Operating ratios
 Ratio standards

Planning and Evaluating Operations 31

 DAILY REPORT OF OPERATIONS

 The daily report of operations, also known as the manager’s

report, the daily report, and the daily revenue report.
 The daily report of operations summarizes the hotel’s
financial activities during a twenty-four-hour period.

Planning and Evaluating Operations 32

 OCCUPANCY RATIOS

Occupancy ratios measures the effectiveness of the front

office and reservations sales staffs in selling the hotel’s
primary product: guestrooms the following rooms statistics
must be gathered to calculate basic occupancy ratio:
 Number of rooms available for sale
 Number of rooms sold
 Number of guests
 Number of guests per room
 Net rooms revenue

Planning and Evaluating Operations 33

 ROOMS REVENUE ANALYSIS

 A room variance report lists rooms that have been sold at

other than their rack rates.
 Managers use the room variance report to review the use of
various special rates to determine whether staff has
followed front office policies and procedures.
 One way for front office managers to evaluate the sales
effectiveness of front office staff is to generate a yield
statistic, which is actual rooms revenue as a percentage of
potential rooms revenue.

Planning and Evaluating Operations 34

 INCOME STATEMENT

 A hotel’s income statement provides important financial

information about the results of hotel operations for a given
period of time.
 The income statement reveals the amount of net income for a
given period, so it is one of the most important financial
statements managements uses to evaluate the hotel’s
success.
 Rooms division information appears on the first line, under
the category of operated departments.

Planning and Evaluating Operations 35

 ROOMS SCHEDULE

 The hotel’s income statement primarily contains summary

information; the separate department income statement
prepared by each revenue centre, called “schedule,” provide
more detail.
 The hotel accounting division, not the front office accounting
staff, usually prepares the rooms schedule.
 By carefully reviewing the rooms schedule, the front office
managers may be able to improve the division’s financial
condition and services.

Planning and Evaluating Operations 36

 ROOMS DIVISION BUDGET
REPORTS
 The hotel’s accounting division prepares monthly budget
reports that compare actual revenue and expenses figures
with budgeted amounts.
 Budget reports can provide timely information for evaluating
front office operations.
 A budget report should include both monthly variances and
year-to-date variances .
 Percentage variances are determined by dividing the dollar
variances by the budgeted amount.

Planning and Evaluating Operations 37

 OPERATING RATIOS

 Operating ratios assist

managers in evaluating the
success of front office
operations.
 Dividing the payroll and
related expenses of the
rooms division.
 Operating ratios should be
compared against
standards such as
budgeted percentage.

Planning and Evaluating Operations 38

 RATIO STANDARDS

 Operating ratios are meaningful only when compared against

useful criteria such as planned ratio goals, historical ratios
and industry averages.
 Ratios are best compared against planned ratio goals.
 Industry averages van be found in publications prepared by
the national accounting firms and trade associations
servings the hospitality industry.

Planning and Evaluating Operations 39

 REFERENCES
 Kasavana, L. M. (2013). Managing front office operations. Michael: American
hotel & lodging educational institute. Retrieved from
 Wallstreetmojo (2014). Planning and Evaluating Operations.. Retrieved from
https://images.app.goo.gl/gZoroTTRbmbot1hQ6
 Himanshu Rajak. Planning and Evaluating Operations. Retrieved from
https://hmhub.me/hubbart-formula-market-condition-approach-thumb-rule/
 Vambe software blog (2018) . Planning and Evaluating Operations. Retrieved
from https://www.google.com/imgres?imgurl=http://vambe.com/wp-
content/uploads/2018/07/selfSelection.png&imgrefurl=http://vambe.com/self-
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 Skip Prichard (2013) . Planning and Evaluating Operations . Retrieved from
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 SD TIMES (2019) . Planning and Evaluating Operations . Retrieved from
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p-content%2Fuploads%2F2019%2F06%2Fteam-3373638_640-1-
490x320.jpg&imgrefurl

Planning and Evaluating Operations 40

 PRESENTED BY:

Pawanpreet Singh (19020)

Amandeep Singh (19030)

Gurpreet Singh (19009)

Abhay Singh (19032)
Nimerpreet kaur (19019)

Gurwinder Kaur (19011)

Planning and Evaluating Operations 41

 THANK YOU

Planning and Evaluating Operations 42