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Staff to Room Ratio – indicator at best

Staff to Room Ratio is one of the critical factors that determines an optimum level of
balance between permanent staff and hotel room capacity. This influences the labor
cost which happens to be the single biggest expense line item in a hotel Profit and
Loss Statement.

How to calculate Staff to Room Ratio

Staff to Room Ratio in a hotel is computed using the following formula:

Full-Time Employees / Total Number of Available Rooms

What does Staff to Room Ratio do?

The function of the Staff to Room Ratio is to provide an indication of the balance
between the number of full time (permanent) employees and the rooms available in
a hotel.

You might well ask: What is the connection between full time employees and rooms
available in a hotel? Well, the answer to that is: There is no direct correlation
between the two which actually depends upon many factors like:

Is it for a city hotel or a resort?

This question basically addresses the fact that a city hotel is often a vertically
oriented building structure with multiple floors. This means that the structure has
various levels to it but area wise is not spread out. Contrast this to a resort which is
spread out mostly and thus covers a wider area.

When the resort is spread out (and even in the case of a city hotel which is
horizontally spread out), the logistics of staff movement becomes critical. Whereas,
in a vertically oriented city hotel structure, movement of staff from one level to
another may not take as much "time" as in the case of a resort. This has a direct
bearing on the number of staff required to service a particular operation area for the
simple reason that it takes more time to get from one point to another. In effect, it
may dictate the hotel's manning requirements particularly the housekeeping
function and more specifically the public area attendants.

How many restaurants does the hotel or resort have?

This is another important factor determining the Staff to Room Ratio in a hotel or
resort. The more the number of restaurant outlets that the hotel or resort has, the
more the staff complement needed. This will further be influenced by factors like
how many of the restaurants are food restaurants (this brings the element of
kitchens into the equation) and whether each of those have a dedicated kitchen
etc.,

Whether the hotel is located in a developed country or a developing country?

This factor literally determines the labour cost factor of the hotel vis-a-vis rooms
available. For example, a hotel or resort located in an emerging market like Brazil or
Russia or a developing country like China or India will have a higher Staff to Room
Ratio than in developed countries like US, Canada, Australia. This is mostly driven
by the fact that basic salaries and wages are very high in developed countries.
Additional factors could be better educated, trained staff etc.,

What is the degree of Multi-tasking?

Even in developing countries, salaries and wages are on the rise constantly which
have a significant bearing on the bottom line performance of the hotel or resort.
Since bottom line is driven by the top line, generating revenues faster than the
increase in labour costs becomes paramount. When revenue increases cannot keep
pace with labour cost increases, manning cuts are inevitable.

However, considering that the hotel industry is a service industry, keeping service
levels high according to customer expectations may well determine sustained
revenue growth and in this scenario multi-tasking has become a powerful tool to
tackle perennially rising labour costs. By training staff to do more than one task
(often at the same time), the Staff to Room Ratio can be kept in check. Multi
tasking can also mean combining functions currently performed by different
individuals so that these can be done by one person.

Staff to Room Ratio Examples

Staff to Room Ratio can range all the way from 2.5:1 (2.5 full time staff for every
room available) in underdeveloped countries like Brazil, Russia through a ratio of 2:1
in developing countries like China, India (in fact, it is around 1.75:1 in India) to less
than 1:1 in developed countries like US, Canada, Australia, UK.

Combined with a low staff to room ratio in developed countries, the labour cost % to
gross operating revenue is very high, in the region of 40% to 50%. This compares
with less than 30% in developing countries and less than 20% in emerging markets.

Staff to Room Ratio – an indicator at best

It is thus paramount to understand that the Staff to Room Ratio is at best an
indicator. It is to be used more to verify if the ratio is significantly above or below
the norm according to some of the factors stated earlier (city hotel or resort, how
many restaurant outlets, whether in a developing or developed country) rather than
apply as a rule of thumb.

What the ratio certainly provides however is a quick indication of the balance
between the complement of full time employees and the rooms available. This is

very useful in the case of a new hotel project where the owners or investors would
like a quick and dirty way of knowing what this balance is like. And as stated earlier,
it has a major influence on the ultimate labour cost.

Operating Hotel Staff to Room Ratio

In the case of an operating hotel, the staff to room ratio can change over a period of
years as the hotel or resort matures and the staff becomes more and more trained
(of course assuming that they stay with the hotel over these years). This can result
in significant improvement in the staff to room ratio.

Hotel Management: What is the correct ratio between number of rooms/ number of
room cleaning staff?

The question originally read '...room cleaning ladies.' Changed to room cleaning
staff, since I don't believe the purpose of the question was actually to assess the
proportion of rooms to specifically female members of staff :-)

There are great answers here and I want to add mine.

I am working in a detergent&disinfectant manufacturing company and some of our
customers are hotels. Moreover, we help them to develop their structure to reduce
costs.

Please find the direct answer in bottom :-) If you interest, you can continue here:

The most important part of the answer is behind of the organization of the hotel, as
mentioned in some answers.

Question 1: Does hotel has a team working under House Keeping Department to
clean general areas?

In most 5 star hotels, there are special teams to clean lobby, glasses, organize
around pool and more important polishing marbles. If House Keeping Manager has a
different team for these works; the need for maids to clean rooms will decrease.

Question 2: What is the type of hotel-business hotel, vocation, all inclusive or
casino?

If hotel is business hotel the need for maid will decrease too because generally
business people are accepted the least dirty (sorry for the phrase) customer
segment.

On the other hand, if hotel is all inclusive and accepts children; here the fun start.
The need for maids nearly two times more in this situation when you compare to a
business hotel.

Question 3: How big are the rooms? Are they empty ones or full?

This is another important point to discuss. Bigger rooms need more maids and if
there are a lot of things in the room to clean, you need more and more maids to
clean.

Question 4: Can you organize your maids when cleaning?

This is very important point to discuss. There are 2 types of situation when we think
about a maid cleaning the room.

A) Check Out Cleaning: This is the time after customer left the hotel. Maid should
clean every places, disinfectant all surfaces and maid must be sure that room is
ready for the next customer. This process can take 45 minutes and Agusti Curto
gave a detailed information about this calculation.

B) Daily Cleaning: This is daily cleaning of the room. stayovers where they don't have to do much more than tidy up and change out the dirty towels. 1 maid for 14 room is ideal as Michael Forrest Jones explained. simply divide the number of rooms by 14. even if most of their rooms are nice. easy. 1 maid for 18 room is ideal. 2 maids go to room for a check-out cleaning and they finish in 26 minutes in average with a 4 minutes deviation. 1 steward for 30 room is ideal. If you can organize your maids to work together and catch your check-in chek- out schedule very well with your maids holidays. by organizing maids together you can decrease this time to 30 minutes. Maid should wash the bathroom. In this case you need to hire other team for general areas. divide the number of rooms you rent on your busiest night each week by 14. In our own research with our customers. For this team. and they feel that you're screwing them on hours. and mop every where. 1 maid for 20 room is ideal. Give them too many fewer. So how many housekeepers do you need altogether for a given hotel? If you're usually full on the weekend. . 1 maid for 21 room is ideal. Here is the short answer for your question: If maid cleans all hotel. Give your housekeepers too many more than 14 rooms a day to do. Fourteen is the magic number. Otherwise. 1 maid for 16 room is ideal If hotel is business hotel with small rooms with less furniture. they complain that you're overworking them. change the bed-linen. If maid is just responsible for room and corridors.Moreover. If hotel is all inclusive and accepts children with big and full rooms. even if most of their rooms were occupied by a wild party rock band that left them trashed. This should take maximum 15 minutes.

you remove everything from the room and clean it. But everyone likes a weekend off once in awhile. Room attendants need 30min to prepare their trolleys based on the cleaning sheet they take and another 15min to tidy their trolleys when they finish. The same room as a stayover should be 3/4 (estimation) of this time therefore 0.. Opera can calculate by credits but not all PMS can.) You'll need another one working on laundry (I'd give her a list of stayovers to make up close to the laundry room). and you'll need to allow for deep cleaning every three months or so when things are slow (this is similar to a 'Chinese field day' in the military . This would be qual to 9 departure rooms or 13 stayovers.. If you add one or two housekeepers to accommodate this. Then depending of the size of your suites credits may vary to 1.. and let them go in turns at having weekend days off. then it could cause all of them to have a reduced number of hours available. So 1 credit is 45 min. the best is to calculate 1 credit as how long does a room attendant to clean one of your standard size rooms as departure. you need to allow for cleaning of common areas. Example: 1 room attendant may take 45min (5* Luxury Hotel.5. If we take that 1 credit is 45min the maximum credits per day then the maximum credits per day should be 9. . and set off a fogger for odor removal.Then maybe add one.) It is more about the credits than the rooms. and make it not quite a full time job. mandatory. 45sqm) to clean a standard room as departure. You should establish your credit value. We all understand that a larger room may take longer to clean so this has to be reflected when you calculate the number of rooms to clean. etc... 2 or 3.75 credits. (This assumes that all housekeepers work both Saturday and Sunday. take the drapes down and wash them. steam the carpets. allow 15min extra for morning briefing.3 (in 7 hours od cleaning). What I'll generally do is put it to a vote and let the housekeepers themselves decide. So this is the best way to adapt to the different standards and sizes of the rooms.

For bedrooms only . This allows for 1 major clean per shift . A fair deal is to consider if you are giving them too many family rooms. . will keep you out of overtime. the lower. . Too few rooms to clean and housekeepers tend to be non-productive and clean too slowly. I use a formula in the Hotel the PMS cannot calculate credits. lean towards the higher number.17 per shift per housekeeper. Then I take the number of occupied rooms and I divide them by this theoretical number of rooms they should clean that day. Theoretically a stayover should take less time to clean but some guests create a real mess. If your Hotel is not full the day you calculate how many staff you need allow some % of last minute pick up. if you have 200 rooms to clean. This gives you a range of 13-17 housekeepers for cleaning. there is nothing you can do and I don't blame them. When you have more stayovers than departure rooms then increase the number of potential rooms they can clean. more stay-overs. and quality suffers. If you cannot calculate by credits check how many stayovers you have in a specific day and how many departure rooms. More checkouts. 12-15 per day is about right and with cart stocking and side- work. Is it an all suite property and is it all stay- overs or all checkouts? Suites will take longer as will check-outs. So when you calculate how many staff members you need you should take a report that tells you how many credits you will have to clean X day and divided by maximum number of credits they can clean. divide by both numbers. .ie spills / vomit / smoking in a non-smoker etc .Room attendants will never be happy. So. It depends on the property and the day. specially families with children). If you include general use areas that can drop dramatically to an average of 10 -12. depending on amount of general areas. You should be fine within that range. Too many. I project how many rooms they can clean per day based of the ratios Stayovers Vs Departure rooms. you need less staff.

players will need to evaluate their services and processes and work out ratios accordingly.5 ratio. Thus. The fact of the matter remains that today. there are hotels which work on the 1:0. In the future. This situation leaves us with vague numbers and industry estimates and assumptions. Amidst talks about skilled manpower. However.- All the arrival rooms should be ready by 1200 . with the industry’s development.” states Andrews. On the other hand. Andrews adds.1500 hrs . Eastern hospitality is renowned for its warmth.1300 hrs Most of the rooms would be available for servicing post 0930 hrs All occupied rooms should be services by 1400 . this is considered difficult in the Indian context. There are different -2 food media courses in hotel industry in which all these functions learnt. is the ALOS (Average length of stay per guest). “Internationally. who visit hotels in the West expect a certain amount of coldness from hotel staff. However. the staff room ratio issue has moved beyond mere numbers. Most industry experts analyse the Indian market stating that the country’s culture and the service standards will not allow the country to match ratios in the West.“Indians have been trying to ape the 1:1 service ratio. “While most people talk about the room staff ratio.5. productivity and wage analysis. which is highly unlikely in India. these define service standards. Guests. as it determines the number of back to back (Check out rooms) versus stay overs. the hotel sector needs access to surveys determining the present ratio standards at which various parts of the industry operate. of Hotel Room to No. The industry’s changing dynamics have led to various hotel formats emerging across India. which basically requires more time of preparation. the minimum ratio for the five-star segment hotels will remain up to 1:1. of Room cleaning Staff (chamber maids / Room Boys) keeping mind few points as below . there has not been a single national productivity survey performed for the industry. Equation: Number of occupied rooms per night / Number of arrival in a given month or year = ALOS. The appropriate ratio to be maintained between the No. today. there is a range of ratios available across the marketplace. most believe that in India.” Simon opines. One major factor to consider.

00 Dhs. an ideal ratio should be 5 : 1 and Room to Supervision Staff ratio 20 : 1. plus the average occupancy of 85% and the room size of 200 sqmts of a 3 star hotel. Staff to be relieved for morning tea & lunch Periodic cleaning schedules should be maintained. We thank you for your enquiry and happy to quote for you Per Hour System Casual work Staff F&B Description Per hour Amount Male 11. Per Hour / Per pax . Considering above points. Date: apr-29-2012 Quotation Dear Sir / Madam.

Kitchen Assistance. Waiter. Waitress. Utility Boy. Stewarding. On Yearly. · Transportation provided by our company(Raara) · The invoice will be submitted every 15 days of the month for casual staff Yearly contract and monthly basic Description Day off Total days Total Hours Total Amount Per monthly House keeping work . Helper. Housekeeping.Female 12. Bell boy. Monthly and Per hour system contract basis Term and Condition: · We required signed contract copy from both parities. Per Hour /per pax Please find the work force as follows Assistance.00 Dhs.

500.300.Friday 26days 10 hours a day 2.00 per person Waiter Friday 26days 10 hours a day .00 per person Bell boy Friday 26days 10 hours a day 2.

00 per person Handy man Friday .400.2.00 per person Stewarding Friday 26days 10 hours a day 2.500..00 per person Helper Friday 26days 10hours a day 2.500.

00 per person Kitchen assistance Friday 26day 10 hours a day 2.00 per person .500.400.500.00 per person Utility boy Friday 26day 10 hours a day 2.26day 10 hours a day 2.

. · Transformation provided by our company · The invoice will be submitted every 28. It goes without saying that the more rooms they have to clean. Some hotels even pay the maids per room which in my opinion lowers standards as the maids want to cram in a maximum number of rooms..L.Payment Term and Condition: · We required signed contract copy from both parities.C · Payment will be paid after 15 days of submitting the invoice Thanks & Best Regards. room floor layout and # of service elevators are huge factors in the calculation.. .. Rouf choudhury Managing Director 0507169912 raaraeventsandc@yahoo... with overnight stay hotels the ratio is less. And if the hotel is union staffed that's a negotiated contracted number. and how are the checkins being assigned to each floor.the style of hotel if it's a destination hotel the cleaning staff have more rooms. 30.com The size and complexity of the room interior furnishings. the lower the standards get. Well it depends what kind of standards you want to uphold.. I've worked in hotels where each maid cleaned 5 rooms per day and I've worked in others where they cleaned 20 rooms per day. and 31 days end of the month · Payment will paid in the name of the company Raara events and cleaning services L..

For an 8 hour shift it would be 24 rooms (but not figuring for breaks. If you have a 100 room hotel that runs an annual occupancy of 50%. Is there a standard employee-to-room ratio for hotels? I haven't ever heard of a standard ratio for the entire staffing model of the hotel. you would need ten . If you charge $100 for food.000. If you need to book $3. To figure your ratio: 3 rooms cleaned per hour x 6 hour in a housekeeping shift (6 being an example) = 18 rooms for every housekeeper. drying and folding included I have worked for big motels and was never this over worked due to having more staff this work is slowly killing me I'm sure I'm 22 and already have serve back and knee problems It would vary based on the type of hotel.In Housekeeping. that gives you a total of 18.so 3 rooms per hour.000. and there are standard profit margins. $30 of those dollars need to be profit. you have four hours of labor to devote to preparing and serving that food. Here are some simplified examples: . you would want another one or two staff to cover all the days. and $30 of those dollars go to covering food cost.. Food cost is between 25-30%. although that doesn't mean one doesn't exist. Since people don't work seven days a week. one room attendant can usually clean between 14 and 16 rooms in a single shift. but generally.In Food and Beverage. industry standard hovers somewhere around 20 minutes spent cleaning each room. 50 rooms per day would take about three room attendants to clean.000 in revenue through the sales office. If you staff's hourly wage is $10. .I am the only cleaner where I work and on average I have 14 to do every Friday thats a full clean and every Monday is a half we have 29 rooms in total I do this all by myself washing.Sales managers should be able to sell at least six times their salaries. lunch. etc).. the expected profit margin is between 30% and 35%. . There are standard ratios in different departments. That leaves $40 for labor.000 in revenue. maybe 20:1. so a total of five room attendants. s/he should be able to book $300. So if you pay someone $50. So I'd posit that your ratio is probably somewhere in the middle. or about 50 per day. and the size of the rooms.250 rooms to clean each year.

Three is ideal for Friday and Saturday night. there are around 150 rooms and over 600 employees. require much more hand-holding . I personally work at a luxury boutique hotel in downtown Portland. However. In the US it is less because you have to pay the employees more. (This is an inexact calculation because many sales people can book more than that in the course of a year. We recently had a new owner buy the hotel and skeleton crewed the staff. In Europe the number of employees at luxury hotels has gone way down in the last 10 years while the price of guestrooms has risen. In Thailand the number of employees per guestroom is very high at luxury hotels and they are much better trained. and banquet business as well as containing four different restaurants/bars. at a mid level hotel and a luxury hotel? (including all departments) The ratio of guests to employees at a luxury hotel in a developing country is 1-1. a luxury hotel that I stay at regularly. while some types of business. this hotel does a substantial wedding. At the Park Hyatt Tokyo. like weddings. This is especially obvious at the front desk.000 to do it. .) What is the average guestroom to employee ratio say.the place is no longer a fun place to work. and they are cutting pay to the people . conference. The position of concierge at luxury hotels in the US over the last 20 years has gone down.so the time invested by the sales person might be greater and thus preclude them from booking as much. It has 150 rooms and two employees handle it well over night. often replaced by much younger fake concierges who are really shills for local restaurants and tourist sites.sales people at $50. The fake concierge does not really work for the hotel.

5 For a 4 star hotel will be 1 : 2 For a 5 star hotel will be 1 : 2. . You need a lot more than two people manning the front lines. a mid. and it is over working the staff. front desk. Over worked people. When we were truly the best. Now I am not allowed to do in room dining.- For a 3 star hotel (mid level hotel) will be 1 : 1. This place has become toxic.just upon request..but everything else. and turn down for every one. We no longer have turndown service for all. in room dining. we had four auditors. I used to do night audit. a mid shift and a little less in the evenings.20 cent raise. This staffing would be ok for a place of about 50 rooms or less. security customer service. and an operator. Now we have only two peeps on shift. working four ten hour shifts on graveyard. and maybe a front desk manager if she isn't the other person in the two people team. I'm not talking about corporate. In India the ratio of Guest Room to Employee will be as. but a two and a half dollar an hour cut in pay by then dividing the shift and cutting my in room dining tips out.who have been there longest. had a reservation line outside the hotel we could direct calls to if we were busy. so keep that in mind. I have not mentioned anything about housecleaning. if it even gets done. We had a librarian. in the morning we had five employees and a operator. . No outside reservation lines means placing people on hold for way too long. personal concierge. I received a . because they always have a place behind the scenes. and under pay wage.not a successful combination in my opinion. The place had become toxic and it reflects in the sheer drop in trip advisor placement. and reservations .75 For a Luxury hotel will be 1 : 4 . valet.

Luxury hotels: 0. the first thing that you need to do is make calculation on the number of employees the hotel needs to have. For better luxury resorts like Aman.In Addition there are few HRD / Apprentice Trainees. Or the general one in a three star hotel is 8 persons per 10 rooms. There is a pretty common ratio to determine the number of the employees. 2014 When you have the position as HR Manager. Is your hotel a budget hotel. You need to decide how many employees that are needed in each department. It depends.5 . such as in developing country the number can be higher. this is a link from a website giving the insights to Indian hospitality that may be helpful Room to staff ratio: The numbers game Obviously as Fred Landis mentioned. number of room. The ratio falls from 0.15 % of the employees. therefore allow a higher effective ratio. 10 or 12 persons per 10 rooms in five star hotels. Adding a little region specific information. employees generally cost less to employ. Usually in the country where the employees are cheap. a five star hotel? Different type of hotel have different in size.1. The number of the employees depends on the type of hotel that you run.1 rooms per employee. facilities and soon.2 .5 to 2 employees per room. Hotel Manning Needs March 1. service. in less developed countries. Based on my personal experience: Mid-level hotels: 1. the staff:guest ratio may be 3:1. a three star hotel. on a average 10 . For .5 rooms per employee.

plus additional 1 person for day off. the total is 12 persons. So. In the front office In the front office department.11. Let’s say that Hotel A has 136 rooms in 9 floors with four meeting rooms. That’s why employees have to be able to do a multi-tasking job. up scale is 2. with 8 hours of working.7. the trend right now is not the big number employees that count. It will also need 2 telephone operators and reservations. 2 in the afternoon (as there will be more check outs) and 1 in the night. than one housekeeper can clean up 16 rooms. a coffee shop. mid-market is 1. and a swimming pool. How about the needs in Housekeeping. than the hotel will need 9 room attendant minimum. the hotel will need 1 reception in the morning. the total it will need minimum 15 people. However. So. If one housekeeper can clean up 30 minutes per room. b. let’s say there are three floors. housekeeping department The hotel has 136 rooms. and budget is 0.5.72. but on how to utilize the employees to deliver the highest service with proportionate number. And it needs 1 person to handle as order taker and 1 person laundry. And it also needs 2 supervisors in charge. Now how about to calculate the need of employee per department? I’m going to give you an example of how a three star hotel manages the number of the employee. the Restaurant (capacity of 70 pax) . Front office and other operational department? a. than at least the hotel needs a minimum of 3 persons of public area. Therefore 136 rooms are divided into 16. c. And it will need 2 supervisors. The question is how many employees needed? If we use the calculation of 8 employees per 10 rooms than the hotel will need 108 employees. In the public area. It will need minimum 3 concierges.example: In India employee per room in the luxury hotel is 2.

It will also need 1 person supervisor. Engineering Department In the engineering department. it will needs 2 persons in the morning. This influences the labor . It is also need to consider by the human resources to keep the labor costs under budget. 1 pastry cook. 1 in the afternoon. 1 cashier/greeter in the morning. Staff/Room Ratio Staff to Room Ratio is one of the critical factors that determine an optimum level of balance between permanent staff and hotel room capacity. 3 stewards. In order to overcome the situation. and a chef the party. 2 waiters and 1 cashier/greeter in the afternoon. and 1 additional cook for day off. 2 banquet waiters.The hotel will need 2 waiters. and a supervisor. 1 person in the evening. and minimum staffing is normally the case. it is often the hotel hires trainees and daily workers to assist in the hotel operation. Minimum. In total it will need 9 kitchen staffs. Minimum the restaurant will need 12 people. d. e. 1 in the evening. it will need 6 persons of engineering and maintenance. plus additional 1 waiter extra for day off. Human resource also needs to have an evaluation on the effectiveness on the number of the employees hired. Usually the hotel is very busy. The result is normally there are sick employees. 2 persons in the afternoon. Kitchen In the kitchen it will need 1 cook in the morning. this is by doing a calculation of man days lost. 1 waiter and 1 cashier/greeter in evening. The expected labor budget is under 25% of the total costs.

in a vertically oriented city hotel structure. movement of staff from one level to another may not take as much “time” as in the case of a resort. How to calculate Staff to Room Ratio Staff to Room Ratio in a hotel is computed using the following formula: Full-Time Employees/ Total Number of Available Rooms What does Staff to Room Ratio do? The function of the Staff to Room Ratio is to provide an indication of the balance between the number of full time (permanent) employees and the rooms available in a hotel. the logistics of staff movement becomes critical. When the resort is spread out (and even in the case of a city hotel which is horizontally spread out). This has a direct bearing on the number of staff required to service a particular operation area for the . Contrast this to a resort which is spread out mostly and thus covers a wider area. Whereas. This means that the structure has various levels to it but area wise is not spread out.cost which happens to be the single biggest expense line item in a hotel Profit and Loss Statement. You might well ask: What is the connection between full time employees and rooms available in a hotel? Well. the answer to that is: There is no direct correlation between the two which actually depends upon many factors like: Is it for a city hotel or a resort? This question basically addresses the fact that a city hotel is often a vertically oriented building structure with multiple floors.

trained staff etc.simple reason that it takes more time to get from one point to another. a hotel or resort located in an emerging market like Brazil or Russia or a developing country like China or India will have a higher Staff to Room Ratio than in developed countries like US. For example. How many restaurants does the hotel or resort have? This is another important factor determining the Staff to Room Ratio in a hotel or resort. In effect. Canada. Additional factors could be better educated. The more the number of restaurant outlets that the hotel or resort has. Since bottom line is driven by the top line. considering that the hotel industry is a service industry. This is mostly driven by the fact that basic salaries and wages are very high in developed countries. However. What is the degree of Multi-tasking? Even in developing countries. manning cuts are inevitable. By training staff to do more than one task . it may dictate the hotel’s manning requirements particularly the housekeeping function and more specifically the public area attendants. generating revenues faster than the increase in labour costs becomes paramount. When revenue increases cannot keep pace with labour cost increases. salaries and wages are on the rise constantly which have a significant bearing on the bottom line performance of the hotel or resort. This will further be influenced by factors like how many of the restaurants are food restaurants (this brings the element of kitchens into the equation) and whether each of those have a dedicated kitchen etc... the more the staff complement needed. Whether the hotel is located in a developed country or a developing country? This factor literally determines the labour cost factor of the hotel vis-a-vis rooms available. Australia. keeping service levels high according to customer expectations may well determine sustained revenue growth and in this scenario multi-tasking has become a powerful tool to tackle perennially rising labour costs.

What the ratio certainly provides however is a quick indication of the balance between the complement of full time employees and the rooms available.75:1 in India) to less than 1:1 in developed countries like US. Russia through a ratio of 2:1 in developing countries like China. the Staff to Room Ratio can be kept in check. the staff to room ratio can change over a period of years as the hotel or resort matures and the staff becomes more and more trained . This is very useful in the case of a new hotel project where the owners or investors would like a quick and dirty way of knowing what this balance is like.(often at the same time). whether in a developing or developed country) rather than apply as a rule of thumb.5 full time staff for every room available) in underdeveloped countries like Brazil. This compares with less than 30% in developing countries and less than 20% in emerging markets. UK. Staff to Room Ratio Examples Staff to Room Ratio can range all the way from 2. in the region of 40% to 50%. Operating Hotel Staff to Room Ratio In the case of an operating hotel. India (in fact. the labour cost % to gross operating revenue is very high. it has a major influence on the ultimate labour cost. Australia. Combined with a low staff to room ratio in developed countries. It is to be used more to verify if the ratio is significantly above or below the norm according to some of the factors stated earlier (city hotel or resort. it is around 1. Staff to Room Ratio – an indicator at best It is thus paramount to understand that the Staff to Room Ratio is at best an indicator. Multi-tasking can also mean combining functions currently performed by different individuals so that these can be done by one person.5:1 (2. Canada. And as stated earlier. how many restaurant outlets.

HVS Consulting.(of course assuming that they stay with the hotel over these years). things are set to change in India.52 Budget 0.72 (The global average is almost half the Indian average) . But. contrary to the Indian hospitality scene.70 Upscale 2. Similar arrangements had been made with water dispensers. This hotel is no exception. The idea was to do away with the concept of a bell boy. which is significantly higher than the international norm of one per room in the luxury category. and so on. but hotels have started reducing their employee-to-room ratio in India to cut costs. experts say.11 Mid-market 1. managing director. employs close to three staff members for every room. as most international chains in the budget and upper categories keep the staff-to-room ratio low. Lalit Hotels. the payroll expenditure as a percentage of revenue has increased from 10-12 per cent to 18-20 per cent over the past year. for instance. Hotel chains might cut staff-to-room ratio A senior executive in an audit firm checked into a budget hotel on his recent trip to Canada. With costs under pressure. The hotel had installed an ironing table on each floor for its guests to use themselves. But. GLOOMY PICTURE Employee per room in India Luxury 2. too.” says Kaushik Vardharajan. “It’s not an easy process. This can result in significant improvement in the staff to room ratio. or room service. we are still on the higher side when compared with chains abroad.

That . it is only around 0. saw a 32.8.” said Jyotsna Suri. As the hotel inventory in India increases. chairperson. Room rates have been subdued and it has not been generally possible for hotels to revise room rates upwards. Intercontinental Hotel Group. has double the staff-room ratio in India compared to its global markets.” said Pankaj Arora. “Despite encouraging signs in the first half of 2011. are also looking at rationalising their staff-to-room ratio.75 staff per room by next year. Therefore. which is bound to bring about rationalisation of costs as well as rates. “The level of attention can be significant in India. an industry analyst said EIH Ltd. managing director. hotels are expected to pay a lot more attention to quality and training of employees rather than adding number to the manpower. recovery has been fragile during 2011. including the luxury chains like Taj and Oberoi. hotels across categories. even the hiring would be done very judiciously.7 per cent decline in the net profits for the quarter ended March.” P R S Oberoi. but it has not translated into any visible change yet. had stated earlier. Experts say in the current economic climate there is nothing much that the companies can do to improve their top line.7 to 1. Oberoi Group.8 staff per room. The ratio for Holiday Inn is in the range of 1.5 to 1. Industry watchers say expectations of the business traveller have changed with so many more options available across different segments.Source: HVS Indian hotels manpower survey 2011 edition “Our aim is to bring our ratio down from 2. We are already encouraging multi-tasking in order to manage our employee costs and going forward. chairman. while in the US. making cheap labour unsustainable. As costs come under pressure.6 to 0. which operates the brands Crowne Plaza and Holiday Inn in India. Protiviti Consulting. the cost of labour is expected to rise alongside. “Companies are facing pressure on the bottom line. because it has been coming cheap till now. there was growing uncertainty during the latter part of the year. for factors beyond control. As a result. There is consciousness among hoteliers not over employ labour. Lalit Suri Hospitality Group. which operates the Oberoi Hotels and Resorts.

chief operating officer-southwest Asia. THE STAFF TO ROOM RATIO IDELLY WILL BE BETWEEN 1.does not necessarily mean we don’t deliver service to our global customers. The rule of thumb calculation is not exacting or based on in-depth analysis. then short term staffing will include keeping the same number of supervisors when there is turnover. The interaction between each individual is equally important. BUT THAT AGAIN WILL DEPEND ON WHETHER THE HOTEL IS IN A CLASS CITIES (METROPOLIES) OR B / C CLASS CITIES THANKS. Human resource planning focuses on staffing the organization with the right number of personnel with the required skills when needed to meet business objectives in the short and long term. PRAFUL Formula for Calculating Staffing Needs Calculating staffing needs is part of human resource planning.” said Chris Moloney. the process of analyzing and identifying staffing gaps and surpluses. Ads by Google Rule of Thumb The rule of thumb method of calculating staffing needs is based on general organizational structure. Various formulas are used to estimate and predict staffing needs. if the organization has set up its structure to have one operations manager per five line supervisors. Delphi Technique . THE EMPLOYEE COST SHOULD NOT EXCEED 10 % TO 12 % OF THE TURNOVER.5 TO 1. based on the company's historical and estimated performance data such as sales and production numbers. BUT IT WILL ALSO DEPEND ON WHETHER IT IS AN OLD PROPERTY OR A NEW ONE. but on maintaining the organizational structure. For example. Long term staffing will include planning five supervisors for every manager added. IHG.8. It doesn’t matter how many people you have.

The group doesn't get together physically.The Delphi Technique is a method of human resources forecasting that uses input from a group of experts to analyze staffing history and staffing planning. For example. or must at least maintain a staff of 25 production workers to meet current sales. business consultants or a combination of related business people familiar with the organization's staffing history answers questions about staffing. Gross sales per year over the past five years and staffing during that time are analyzed as sufficient or insufficient to support sales in the next five years. Statistical Regression Analysis Statistical regression analysis compares relationships in historical data for forecasting staffing needs. if the company has an administrative pool of five secretaries for every 20 senior managers. This ratio will enable the organization to compare with others within their industry through national surveys to determine whether the organization is in line with those . Ratio Methods Two different ratio methods are used in human resource forecasting: staffing ratios and productivity ratios. The experts are kept anonymous from each other to prevent bias and group-think and get information that is as objective and accurate as possible. compiles answers and returns the information to the panel participants for further review until there is a refinement of the staffing forecasting needs. Ads by Google Absence Rate What is It? Calculating the absence rate helps an organization determine the number of days lost as a result of all absences from work during a given period. that ratio is used to estimate recruiting for secretaries. A company that sells 2 million widgets per year and employs 25 production workers needs to hire more production workers if an increase in sales is expected. Productivity ratios use estimates of units produced per employee and applies them to sales forecasts for hiring needs. and their answers are compiled and used for the group to review individually. A group of senior managers. but is coordinated by a facilitator who distributes the questionnaires. Staffing ratios are used to predict hiring need based on established organizational form.

fiscal year or other 12 month reporting period by the average employee population in that calendar.is the appearance of every hotel. maître d'hôtel. Experiment with pairs of maids working together specializing in tasks. maid. technician. . department or job group. fiscal year or other 12 month reporting period. You may find that where one maid alone could do 14 rooms per shift on average whilst 2 maids together could do 30 or more rooms on average. form the attitude of the clients to the hotel no less than the interior or the menu. security guard. Hotel Staff Hotel staff . Big hotels hire animators. working in the hotel. How is it Calculated? For purposes of this calculator. People. manager of the hotel. fiscal year or other 12 month reporting period multiplied by the number of work days available per employee in that calendar. waiter. Absence Rate = Workdays Lost Due to Absence ( Average Employee Population x Number of Work Days Available per Employee ) How many rooms should a maid clean in an 8 hour shift? Most hotel chains will limit the number to 14-16 rooms per shift. Among the most common jobs represented in the hotel are: concierge. The absence rate can be calculated by organization. Calculating the absence rate is the first step in determining how absences affect an organization in terms of productivity and actual cost. the Absence Rate ratio is calculated by dividing the worker days lost through absence in a calendar. doctors.averages or if further investigation is needed. Of course room size and type affects this so do average the time that your fastest and slowest maid takes without compromising quality. cook. It is considered a sign of a good tone for a modern hotel to have an independent specialist for public relations and PR-manager. dealers as permanent employees. masseurs. doorman.

bonus and award systems in some hotel chains. is rather wide: from financiers to specialists in the field of spa. the average payment level ranges from 36 thousand dollars per year for a reception manager to 57 thousand dollars per year for the hotel manager. which are taught in the hotel industry. seasonality. In <<Hotel Staff>> column we will tell you about the main occupations in the hotel business. belonging to a major corporation. With some degree of certainty we can tell you about the level of salaries for managerial staff in the hotels. there is still no common approach. Therefore. where specialists for the hotel industry are being trained. If you take an American hotel market as an example. in 5 star hotel – 20 person. the optimum number of staff per 10 rooms in three star hotel – 8 person. Among the basic skills. Major hotel chains create special schools. There is a special programs for career advancement. The amount of salary depends on a wide array of factors: country. The amount of the staff engaged in hotel activity largely depends on the status of the hotel. Like Marriott or Hyatt. that a professional engaged in hotel business must have. According to the recommendations of the World Tourist Organization. in four star hotel – 12 person. Nowadays. etc.Hotel business is an independent branch of the hotel industry. punctuality. the question of hotel staff training is of a great importance. There are hundreds of different external programs. What regards the level of payment. which help to obtain skills of various professions in hotel business. Those requirements are universal for managerial staff as well as service staff. are: the ability to handle stress. many universities have special departments. The range of professions. 5 thousand dollars in the 3 star hotel to 4 thousand dollars in the 4-5 star hotel. In Russia the hotel manager gets from 1. familiarize you with a number of professional nuances and provide you . Switzerland can be distinguished. knowledge of foreign languages. the standards of education in hotel business are Swiss and French schools. where hotel business is studied. recruitment and telephone conversations. Among the most eminent institutions for staff training Hotel School in Lausanne. Nowadays. and attention to details.

com/165/hotel-staff-en. Please include a link to the source page: http://www. Posted online for a week the same day. Benefit: That metric can help measure HR effectiveness. HR-to-employee ratios are a somewhat controversial metric that can help establish HR staffing and determine how well HR delivers services. or don't use it at all. . but only if interpreted and used correctly." says James Hatch. then use the number as a guide for future staffing." One key danger: Executives may use ratios as a reason to cut HR staff. Action: Recalculate your ratio using the advice below.html What’s the Correct HR-to-Employee Ratio? Used in HR Weekly -. "The ratio is very helpful if you know what you're doing. � by city-of-hotels. which specializes in HR metrics. "But it can be very dangerous if you don't know what you're doing. a partner with PricewaterhouseCoopers' Saratoga Institute. Issue: It can be easy to misuse or misinterpret the controversial HR-to-employee ratio.with the information about the level of salaries and demands for different hotel jobs all around the world. 2007.com.July 24.city-of- hotels. But you should calculate and use the number correctly.

If your department's goal is asset creation—an ongoing alignment with business strategy— then the ratio could be near . The ratio should exclude payroll and training-and-development employees. examine your HR department's role. But once that baseline is met.4 ratio 250 But HR professionals often include or exclude the wrong HR jobs in the formula. Here's how to do it right: Divide the number of HR full-time equivalent (FTE) positions by the total number of employees (FTEs). then multiply the outcome by 100. . High HR-to-employee ratios in smaller organizations (see chart below) may mean that it takes a minimum HR baseline to deliver primary HR services. says Hatch. Example of a six-employee HR department at a 250-employee company: 6 × 100 = 2. The ratio should include HR professionals who work as generalists and those in areas such as benefits.60 (1 per 166 employees). compensation. the incremental amount of HR staff required to support more employees doesn't increase at the same rate. If your ratio is higher than average.00 (1 per 100 employees) for large employers is the standard benchmark. labor relations and organizational effectiveness. cutting HR costs and outsourcing—then a ratio of 1. If the role is primarily organizational asset preservation—preventing litigation by overseeing policies. Looking for more information to advance your skills as an HR professional? — Get The Complete Compliance Guide to Federal & State Employment Law now! Many HR professionals don't calculate the ratio correctly.

79 . and she made sure to measure the number accurately.26 250 to 499 1. but isn't a strategic partner and has few automated HR services. 80 ratio compared to 1. by Organization Size Fewer than 100 2. have mature self-service technology and decentralized HR departments. "A low ratio might mean you get things done quickly. but if you're getting the wrong thing done quickly.499 0. principal of HR Results consulting firm. However. Suppose your HR department has a high ratio.70 100 to 249 1. Schwartz once used a high ratio to ask for more employees when she headed the HR department at a 10.000 to 2.High HR ratios aren't necessarily bad for departments that are strategic partners.000-employee company. she used the ratio as only one piece of the information to make her case." says Claudia Schwartz. Low HR-to-employee ratios can be misleading. Look to streamline services and possibly outsource. it has no value.07 500 to 999 0.82 1.3 for competitors. Average HR-to-Employee Ratio. Example: A hotel chain with a core strategy to provide intimate customer service maintains a .

499 0. That company knew that HR management was important to an extent. it starts to get a little more difficult to keep on top of things. Many federal laws. but not enough to provide extra help. "(The ratio) depends on how much the company understands and appreciates what HR professionals do. there should be some other HR assistance within the department. Michigan 2. I was the only HR person in the store.42 Source: SHRM Human Capital Benchmarking Study __________________________ What's the Ideal HR-to-Staff Ratio? Comments from participants in our HR Specialist Weekly forum: 1.500 to 7.500 or more 0." — Chris EVALUATING FRONT OFFICE OPERATIONS .B. After 100. New Jersey 3." —Casey.2. "I think a good ratio is one HR employee to every 100 employees." —S. I had between 170 and 215 employees.53 7. change once your company moves from a small group to a midsize group. When I was working in retail.. as well as benefit practices. "I strongly believe that once your company reaches 50 employees.

The daily operations report Occupancy ratios Rooms revenue analysis The hotel income statement The rooms schedule Rooms division budget reports Operating ratios Ratio standards THE DAILY OPERATIONS REPORT The daily operations report. revenue and accounts receivable. quarterly. Daily operations reports are uniquely structured to meet the needs of individual hotel properties. Copies of the daily operations . Enriched by commends and observations from the accounting staff. managers will not know whether the front office is attaining planned goals. and the daily revenue report. statistics about the number of guests using the hotel’s valet parking services take on added significance when remarks indicate that valet sales are down while occupancy is up. The following sections examine important tools that front office managers can use to evaluate the success of front office operations. monthly. The information provided by the daily operations report is not restricted to the front office manager or hotel general manager. Without thoroughly evaluating the results of operations. Successful front office managers evaluate the results of department activities on a daily. bank accounts. Room statistics and occupancy ratios from an entire section of a typically daily operations report. Evaluating the result of front office operations is an important management function. The report also serves as a posting reference for various accounting journals and provides important data that must be input to link front and back office automated functions. statistics shown on the daily operations report may take on the more meaning. For example. These tools include. the daily report. and yearly basis. The daily operations report provides a means of reconciling cash. The front office manager may assume that the front office is not properly promoting available guest valet parking services. summarizes the hotel’s financial activities during a 24 hour period. also known as the manager’s report.

(for simplicity. Computed occupancy percentage and average daily rate may also appear on a property’s daily operations report. on this particular day. average daily rate. or problems. revenue per available customer (Rev PAC). When analyzing the information. patterns. revenue per available room (Rev PAR). the front office manager must consider how a particular condition may produce different effects on occupancy. these data are presented on the daily operations report. (Rooms sold does not equal rooms occupied by guests because. monthly. and yearly basis. The front office system typically generates occupied rooms data and calculates occupancy ratios for the front office manager. Occupancy ratios that can be computed from these data include occupancy percentage. the average daily room rate may also increase. For example. The Gregory Hotel has 120 rooms and a rack rate of $98. and average rate per guest. the average room rate per guest decreases. This is because.report are generally distributed to all department and division managers in the hotel. OCCUPANCY RATIOS Occupancy ratios measures the success of the front office in selling the hotel’s primary product: guestrooms. weekly. The following sections examine how daily occupancy ratios are calculated for the Gregory Hotel. when a room is sold to more than one person. we will assume in this example that this rack rate is applicable to both singles and doubles) Eighty-three rooms were sold at varying rates. as multiple occupancy increases. the room rate for two people in a room is usually not twice the rate for one person. Eighty-five rooms were occupied by guests. single guests occupied two . The following rooms statistics must be gathered to calculated basic occupancy ratios: Number of rooms available for sale Number of rooms sold Number of guests Number of guests per room Net rooms revenue Generally. Rooms division data needed for the calculations are as follows. who analyzes the information to identify trends. multiple (or double) occupancy ratio. These ratios typically are calculated on a daily.

Sometimes out-of-order rooms may be included in the number of rooms available. telecommunications. This discussion will use rooms occupied to illustrate the occupancy percentage calculation. Using rooms sold. OCCUPANCY PERCENTAGE The most commonly used operating ratio in the front office is occupancy percentage. it should be used consistently. It is important to note that some hotels use the number of rooms sold to calculate this percentage. Occupancy percentage relates the number of rooms either sold or occupied to the number of rooms available during a specific period of time. such as average room rate. thereby generating no rooms revenue. Including complimentary rooms in the calculation can change certain operating statistics. including those rooms may unfairly penalize the front office staff. At properties that evaluate management performance partly on the basis of occupancy percentage. beverage.75 in total revenue was generated. Some properties do not include out-of-order rooms because the rooms are not available for sale.960 in room’s revenue was generated. a total of 95 guests were in occupancy. while other hotels use the number of rooms occupied to calculate the statistic. depending upon the needs and history property. to the extent that the occupancy percentage is used to evaluate the performance of front office staff having no control over out-of-order rooms. $6. food. and other. Including all rooms also provides a consistent base on which to measure occupancy. including out-of-order rooms in the number of rooms available provides the manager with incentive to get those rooms fixed and recycled more quickly. including rooms. not including out-of-order rooms may allow managers to artificially increase the calculated occupancy percentage simply by improperly classifying unsold rooms as out-of-order. Note that the handling of complimentary rooms may differ among hotel properties) Ten rooms were occupied by two guests. rooms occupied both is valid. Regardless of the approach chosen. The occupancy percentage for the Gregory Hotel is calculated as follows: Number of rooms occupied Occupancy Percentage =_________________________ X 100 Number of rooms available = 85 / 120 X 100 . therefore. Conversely. $7. Also.rooms at a complimentary room rate.363.

indicate clean linen requirements. and analyze average daily room rates. Multiple occupancy can be calculated by determining a multiple occupancy percentage or by determining the average number of guests per room or occupied (also called the occupancy multiplier or the multiple occupancy factor). Number of rooms occupied by more than one guest Multiple occupancy percentage =______________________________________ X 100 Number of rooms occupied = 10 / 85 X 100 = 11. The multiple occupancy percentage for the Gregory Hotel is calculated as follows. calculated by dividing room revenue by rooms sold. although this phrasing may not always be accurate) is used to forecast food and beverage revenue. The average rate per guest for the Gregory Hotel is calculated as follows: Total Room Revenue Average Rate per Guest = _____________________ Number of Guests . = 70. ADR = Room Revenue / Rooms Sold AVERAGE RATE PER GUEST: Resort hotels. This rate is computed inclusive of every guest in the hotel. in particular.8% MULTIPLE OCCUPANCY RATIO The multiple occupancy ratio (frequently called the double occupancy ratio. are often interested in knowing the average rate per guest (ARG). including children.8% AVERAGE DAILY RATE (ADR) A measure of the average rate paid for rooms sold.

They work by calculating how full the hotel is likely to be on a given date in the future. room rate category. and group buying power.26 YIELD MANAGEMENT: Hotel yield management systems have developed as a separate add-on to normal reservation systems. When applied to accommodation. Sunday evening for example. This has the effect of smoothing peaks and troughs of demand and ensuring that rooms are sold at the best possible price. and at what rate. space (the room) and time (the date). The revenue generated by sale on discounted rate. The reservation is then advised whether or not top take a booking. the system would recommend accepting a rate lower than rack to ensure the booking and gain revenue for the hotel. If a room is not sold on a particular night then it is never sold. and the term yield management means output. it is perishable.960 / 95 = $73. It should be recognized that the hotel room can never be sold twice like an airline or coach seat. Measuring yield: It is divided into two types: Actual Revenue. In a period of low demand. Concept of yield management: The word yield means to produce or give forth an output or return. Actual Revenue. It id imperative that hoteliers understand the importance of the basic factors of yield management. Uses of yield management Yield management has now caught on in the hotel industry. = $6. Revenue which could be generated if all rooms were sold at rack rate. the term means the management of revenue generation from rooms. This is because there are two elements. The goal of revenue . Potential Revenue. Potential Revenue. This is done by constantly measuring previous occupancy and booking patterns and projecting them forward into the future. room inventory.

When the single rate differs by the room type. For the Casa Vana Inn. FORMULA 1: POTENTIAL AVERAGE SINGLE RATE If Casa Vana Inn had not varied its single rate by room type (for example. of Rooms Single rack rate Revenue at 100% Occupancy singles 1 bed 100 $90 $9000 2 beds 200 $100 . It is computed by multiplying the number of rooms in each room type category by its single room rate and dividing the sum total by the number of potential single rooms in the hotel. the potential average single rate is computed as follows: Room Type No.management is twofold: to maximize profit for guest room sales and to maximize profit for the hotel services. as in this case. if all single were $90). the potential average single rate is computed as a weighted average. the potential average single rate would equal its rack rate.

67 FORMULA 2 : POTENTIAL AVERAGE DOUBLE RATE If the hotel had not varied its double rate by room type.000 / 300 = $ 96. For the Casa Vana Inn.$20. of Rooms Double rack rate . When the double rate differs by room type. as in this case. It is found by multiplying the number of rooms in each room type category by its respective double room rack rate and dividing the sum total by the number of potential double rooms in the hotel.000 Single room revenues at rack rate Potential Average single rate =____________________________ Number of rooms sold at singles = $ 29. this computation is as follows: Room Type No. the potential average double rate is computed as weighted average. the potential average double rate would equal its rack rate.000 - 300 - $29.

000 2 Beds 200 $120 $24.000 Double room revenues at rack rate Potential average double rate =________________________________ No.000 - 300 - $35.Revenue at 100% occupancy doubles 1 Bed 100 $110 $11. of rooms sold as doubles .

67 NOTE: For lodging properties basing potential revenue on 100% double occupancy. = $35.67 . In the case of the Casa Vana Inn. The determination of a room rate spread among various room types can be essential to use of yield decisions in targeting a hotel’s specific market. another intermediate computation is important to yield statistics.5 or 50% FORMULA 4 : RATE SPREAD In addition to multiple occupancy percentage. The mathematical difference between the hotel’s potential average single room rate ( formula 1 ) and potential average double rate ( formula 2 ) is known as the rate spread.$ 96. if 105 of the 210 rooms sold (at 70% occupancy) are normally occupied by more than one person.67 = $ 20 FORMULA 5: POTENTIAL AVERAGE RATE . the multiple occupancy percentage. For the Casa Vana Inn. the multiple occupancy percentage is computed as follows: 105 Multiple occupancy percentage = _____ 210 = 0. this step is all that is necessary to determine potential average rate ( see formula 5).000 / 300 = $ 116. FORMULA 3: MULTIPLE OCCUPANCY PERCENTAGE An important element in determining a hotels yield statistics is the proportion of the hotel’s rooms that are occupied by more than one person that is. the rate spread is computed as follows: Rate spread =Potential average double rate – Potential average single rate = $ 116. This information is important because it indicates sales mix and helps balance room rates with future occupancy demand.

the discount is 25 percent. By calculating its achievement factor. A very important element revenue management formulation is the potential average rate. When revenue management software is not being used. Potential average rate = ( Multiple occupancy % X Rate Spread) + Potential average Single rate = (.67 FORMULA 6 : ROOM RATE ACHIVEMENT FACTOR The percentage of the rack rate that the hotel actually receives is expressed by the hotel’s achievement factor (AF). A hotel’s potential average rate is the collective statistic that effectively combines the potential average rate. In this case. the room rate achievement factor is computed as follows: Actual average rate Achievement factor = _____________________ Potential average rate = $ 80 / $ 106. For the Casa Vana Inn. the achievement factor can be used in one method of determining the yield statistic. the potential average rate is computed as follows. the achievement factor is an important statistics in its own right because it allows management to monitor and therefore better control the hotel’s use of discounting. For the Casa Vana Inn. The first steps involves multiplying the rate spread by the hotel’s potential average single rate to produce a potential average rate based on demand (sales mix ) and room rate information. It is not necessary to calculate the achievement factor. also called the rate potential percentage. management discovers how much its actual room rates from varied from established rack rates. multiple occupancy percentage.67 = $106. because the yield statistic can be determined without it. Nonetheless. The actual average rate equals total rooms revenue divided by either rooms occupied (depending on hotel policy). . As shown below. and rate spread.67 = 0. The potential average rate is determined in two steps.750 or 75% The achievement factor is also equal to 100% minus the discount percentage. the achievement factor is generally calculated by dividing the actual average rate the hotel is currently collecting by the potential average rate.5 X $20) + $96.

For the Casa Vana Inn. the calculation is as follows: Yield = Occupancy Percentage X Achievement Factor = 0.75% = 0.5% FORMULA 9: EQUIVALENT OCCUPANCY . many hotels calculate the achievement factor as part of their revenue management efforts. FORMULA 7: YIELD STATISTIC An important element in revenue management is the yield statistic.For this reason. Yield = ___________________ X _______________________ Room Nights Available Potential Average Rate 3. all of which are equivalent. The third equation is illustrated below. The self-explanatory second equation is not demonstrated here.525 or 52. Yield = Occupancy percentage X Achievement factor The first equation is used for a hotel that offers all its rooms at a single rack rate. When (as far more common) a hotel uses more than one rack rate for different room types and / or occupancies. regardless of occupancy. Actual Rooms Revenue Yield = ____________________ Potential Rooms Revenue Room Nights Sold Actual Average Room Rate 2. potential rooms revenue equals total room nights available times the potential average rate. The yield statistic calculation incorporates several of the previous formulas into a critical index.7% X 0. There are various ways to express and calculate the yield statistic.

The equivalent occupancy formula is very similar to the identical yield occupancy formula. Now assume that the Casa Vana Inn is currently operating at 70 percent occupancy with an average rate of $80. The contribution margin is that portion of the room rate that is left over after the marginal cost of providing the room has been subtract out. Rack rate . To find the equivalent occupancy. housekeeping expenses such as cleaning supplies). Further assume that the marginal cost of providing a room is $12. which are incurred whether the room is sold or not). Management can use the equivalent occupancy formula when it wants to know what other combinations of room rate and occupancy percentage provide equivalent net revenue. but takes marginal costs into account by incorporating gross profit or contribution margin. this cost would not be incurred if the room were not sold ( as opposed to fixed costs. use either of the following formula (which are equivalent versions of the same equation). The cost per occupied room ( also called the marginal cost ) of providing a room is the cost the hotel incurs by selling that room (for example.Marginal cost Equivalent occupancy = Current occupancy % X __________________________ Rack rate X (1-discount %) – Marginal Cost Equivalent Current Contribution Margin Occupancy = Current Occupancy % X ____________________________ New contribution Margin Recall the example discussed under identical yield statistics. and considering strategies designed to raise its average rate to $100. What occupancy percentage must the Casa Vana Inn achieve to match the net room revenue it currently receives? Current Contribution Margin Equivalent Occupancy = Current Occupancy % X_________________________ .

What is the equivalent occupancy to 70 percent with an $80 average room rate if the average room rate is discounted by 20 percent (to $64)? $80 . equivalent gross revenue. My feeling is that if you do not know generally what something should be then you cannot tell if there is a problem.com – by Eric Hertha) Usually.$12 = 70% X _________ $100 .$12 = 0. Although rack rates are raised relatively infrequently. Revenues decrease and profit goes down. The opposite is also the norm.1 % Recall from the discussion of identical yields that the Casa Vana Inn needs a 56 percent occupancy to produce an identical yield statistic – that is. Let’s say that you introduce a new menu into your . However.5 % Flow-Through Analysis McCaysville GA – May 25. profit goes up.$12 Equivalent occupancy = 70 % X _________ $64 . discounting is a common practice in the lodging industry. New Contribution Margin $80 . But how much should profit go up and how much should it go down? The analysis of this is most often called “Flow- Through” and sometimes “revenue conversion”. it incurs fewer associated operating costs.915 or 91.541 or 54. the Casa Vana Inn does not need to match its gross revenue to achieve the same net revenue. since by selling fewer rooms ( at the higher price). when revenues increase.$12 =0. 2013 – (hospitalitybusinessnews.

first revenues and next costs. Logic would tell you that the more precise you are the better the result will be. We can come up with formulas that will compare the variance between budget (for example) and actual and then pinpoint potential problem areas. If. the commission expense will not affect rooms’ department profit. we have two areas to look at. it will increase G&A costs. Dig deep? When performing the Flow-Through analysis you can create formulas that analyze your business down to the penny. For example if room revenues increase and the guest pays with a credit card. in a nut shell. Let’s say that we have the following situation: .000 foot” perspective and simply make good estimates of costs and profitability and then go from there. it is to point you down the right road. Depending on the type of revenue. Actual results may show that good estimates will give you the results that you are looking for. how do we do this? Well. you can take a “30. And what are these results? The whole purpose of this exercise is to guide you. This being said I am sure that many people reading this document will come up with alternative options that add value to their situation and ultimately make this analysis more beneficial to them. The same can be done for the overall revenue and profit of the hotel or restaurant. So. A point should be made here. at the end of the first month.restaurant and all items are cost out with a 30% food cost. or. you show a food cost of 40% then you would know that something is not right and a further investigation would need to be done in order to determine why the discrepancy exists. Take rooms revenue as an example. it is to show you where there are potential problems within your organization. This is probably fairly obvious so let’s look further. Some of these costs are accounted for within the department and others are accounted for in overhead departments. it is to make you aware. simply because revenues increase you should not always expect that profit should too. For the purpose of our discussion we will try to give examples of what you should look at. different costs will change.

Some people seem to think that a Flow-Through at GOP vs. So. budget of 65% is the target number. we need to know which costs reside in the rooms department and which costs reside elsewhere.500) = 243. What happens in a month where the increase in revenue is all attributable to room rate? In this case. what should your Flow-Through be? The answer to this is that there is no answer. If you simply say we want a 65% Flow-Through. This is due to the difference in profit margins on a $1 increase in room rate (95%) vs. we need to determine what profit we can expect from each of our room segments if the rate increases or if occupancy increases. which is recorded in the Rooms Department. Rooms Department Flow-ThroughFlow-Thorugh 2 Let’s start with the rooms department and put together the basic worksheet for our Flow-Through analysis. To begin with. the profit on one additional room occupied (70%).500.750 In the above example we would expect that the Rooms’ Department profit and GOP would decrease even though revenues have gone up. on a monthly basis you need to calculate what your target GOP is and then compare this to the actual and go from there. Additionally. depending on your variables costs wouldn’t you expect a Flow-Through in the vicinity of 80%-90%? So. but on a month-to-month basis the target will change. There could also be an increase in Credit Card Commissions and this cost resides in G&A. Variance due to occupancy: – $130 * (6. then perhaps you will lose some upside profit. there could be an increase in travel agent commissions. Its fine to have a target.Flow-through 1 Note: Variance due to rate: – ($175-$130)*4. if our room rate increases by $1. .375-4.500 = $202. For example.

To be clear. The cost of towels and sheets are a variable cost. But is it accounted for as such? By this I mean. In connection with rate . This should give the reader a good idea of how to adapt this to their situation. what about suites and “Executive Floor” rooms? But. In our example here the reservation fee is a fixed amount. for either a change in occupancy or rate. Then on an annual basis an inventory is done then circulating stock is trued up. you will need to identify each expense as either fixed or variable and then calculate the associated cost. In order to do a comprehensive analysis.In our example. You will need to look at your own situation to determine whether these variances need to be accounted for in this analysis. This is presented to give the reader an idea of how to go about this calculation.A. There are a lot of exceptions to look at. For example. then you will most likely throw out a lot of product where the Wholesaler room (with an average stay between 3-7 days) uses it.R. how many hotels have come up with a “wear and tear” cost per room occupied for towels and sheets and then accrue this amount on a monthly basis? To my knowledge most hotels budget a monthly amount. Also. we have one variable in Rooms and one in G&A. should we take into accoFlow-Through 3unt the number of guests in a room? In our example Corporate rooms would be 95% single occupancy while Wholesaler rooms would be 95% double. for the variable costs. Corporate and Wholesaler. we will use a limited number of market segments.). window washing: maybe this is done on a quarterly basis and budgeted as such. In a lot of cases they will not matter. We have put together a table that shows some of the variable costs associated with a change in occupancy. If Corporate stays average one day. The segments that we will use are Transient (B. Additionally there are some “fuzzy” areas. . If your corporate average stay is longer maybe there is a reason to look at this. So the cost is the same. in this example we have not included energy costs. perhaps based on occupancy and then expense what is put into circulation. Finally. for example linen expense. There is absolutely no reason why your fixed costs cannot change on a monthly basis. These will have to be added in order to come up with your final report. So these costs may very well be treated as fixed for this analysis. I will get back to our original premise. The purpose here is to point someone in the right direction so that potential cost issues will be investigated. So shouldn’t there be a difference in Guest Supplies? The answer is maybe.

One final point here is that you will need to determine if your fixed costs come into play. three outlets with very different costs. I have normally looked at total food revenues and calculated the Flow-Through. For example. but in general the following will be affected. by market segment. if your hotel has “other revenue” in the rooms department. this will change the Flow-Through calculation. . Food volume variance When the number of covers served changes. A suggestion would be to prepare an excel sheet so that on a monthly basis the actual and budget figures could be input and then the analysis would be performed automatically. If you have a situation where there are. Now we can perform our Flow-Through analysis for the rooms department by comparing our actual figures against these budgeted ones. This comparison can be done by market segment or in total. if your revenues do not cover your fixed costs. How you analyze this is up to you.So we now have our variable profitability calculated for both occupancy and rate. then this will need to be included in the analysis too. for example. then perhaps you will need to split them out. what does this effect? This depends on your situation to some degree. Food and Beverage Department Food revenue is somewhat similar to rooms in that you have both volume and price variances in your revenue and you can have different market segments. Also. For our examples I have added estimated costs to each one: – Food Cost – 30% – Payroll – 20% (You may want to put this in $ terms) – Expenses – 5% (For this example we have a percentage for our variable costs associated with each additional cover). For our discussion here we will look at this department on an overall basis.

there may be an additional cost for that as well. You need to be careful and look at all of your costs. and how many are cleaned by the stewards. Maybe the 65% isn’t right. . Additionally. perhaps you find that you are not achieving the profit levels than you projected. variable profit. we will have increased utility costs and an increase in credit card commissions. If the average cover increases. In order to calculate the payroll cost you will need to know how many covers are being served per hour by the wait staff. within the department. Based on the above. In the context here an increase in the average cover is due to a change in the market mix. Therefore our net. For example. The idea then is that you may need to adjust your figures based on the analysis. we would look for a profit of 65% on each $1 increase in the average cover within the F&B department. In addition to these costs. on each additional cover is 45%. how many are cooked by the kitchen staff. if your hotel participates in a loyalty program. In some cases the loyalty program is a percentage of “qualifying revenue”. Average Cover dollar increase It should be made clear that an increase in menu pricing is different from an average cover increase.Based on the above we have calculated that our profit. you need to be careful. I have added estimated costs to each one: – Food Cost – 30% – Expenses – 5% (I have put in 5% but perhaps this will not change at all. the following costs need to be calculated. maybe you introduced a special “appetizer” program in the restaurant. As with other areas of this analysis. then the profitability would be higher as food cost would not increase. For our examples. on a volume increase will be somewhere between 40% and 45%. When you do your analysis. If the cover increase came as a result of a menu price increase.

Beverage Sales As beverage sales are not normally broken out by average covers. there may be an additional cost for that as well. if my variable beverage payroll is 30% the I would use a percentage between 9%-15% for the incremental sales. if you find that this does not give the proper results then you may need to make an adjustment. In addition to these costs. but because the average cover increase is due to additional food items being served. Therefore our net. The major issue here will be to estimate the increase or decrease in payroll. If I sell one more dollar. So here are some cost estimates for the beverage department: – Cost of Sales – 25% – Payroll – 15% . if your hotel participates in a loyalty program. In some cases the loyalty program is a percentage of “qualifying revenue”. variable profit. we may have increased utility costs. the Flow-Through analysis must be based simply on the change in total sales. What I have normally done is to take my variable payroll percentage for the beverage department and then take 30% – 50% of that amount and come up with a percentage for it compared to total sales. Of course. how much does my payroll increase? The answer to one dollar is most likely that no increase exists in payroll costs.This has increased sales dramatically. there will be an increase in credit card commissions and. the average cover has gone up. on a volume increase will be somewhere between 60% and 65%. you need additional kitchen staff and thus payroll has increased more than our initial estimate. For example. At some point the increase in sales is going to require an additional bartender or server.

GOP goes up $0. You simply need to go line by line and determine what costs are affected by each change in revenue just as we have done above. You have a 60% Flow- Through. Minor Operating Departments / Other Income Depending on what other departments you operate. loyalty program. we would have a Flow-Through of between 50% and 55% Other F&B income If you derive any income from room rental.40 then you saved $0.60 and your Flow-Through is 60%. When revenues go down Flow-Through represents your savings. etc you will need to determine the incremental profit on each source of income. Again we would probably expect that at the GOP level. Positive Flow-Through is good. we can expect that for every additional dollar in sales we will see a profit of 55% within the Beverage department. Negative Flow-Through is bad. you will need to come up with the formulas to calculate Flow-Through for each of them.60.– Expenses – 5% (as with food you will need to break out the variable expenses and come up with an accurate percentage) Based on the above. Additional overhead costs will consist of credit card commissions. . Calculating the Flow-Through Percentage Flow-Through is defined as the amount of money that you keep for every dollar that sales increase. So if revenues go down by $1 and GOP goes down by $0. and utilities. audio visual rentals. Revenues go up $1.

Revenue Down $100. Never accept a number or percentage until you understand what it means.So let’s take a look at the different scenarios 1. Remember that Flow- Through is based on the revenue mix so a Flow-Through percentage of 10% one month may be a better performance than one of 60% a month later. you should be able to set up a monthly report that will calculate the Flow-Through for your property and thus give you a better understanding of where potential areas of concern exist. Revenue Up $100. Revenue up $100. In the case if the GOP change was Zero then you would have 100% flow-through. GOP up $60 Flow Through 160% 60/100 = 60% 1. Your GOP went down $60 so it is Negative 60% Flow-Through 60/100 = 60% + 100 = 160%. GOP down $40 Flow-through 60% 3. Revenue down $100. or (60/100)+1 = 160% . Conclusion By using the information above. ––––––––––––––––– –––––– . GOP down $60 Flow-Through (60%) 4. GOP up $60 Flow-Through 60% 2. Your costs were 40% you saved 60% If your GOP change was ZERO you would have a Flow-Through of zero.(40/100) = 60% .

A. The Caribbean. with Fairmont. U. During this time he has worked at hotels in Canada. .Eric Hertha has worked in the hospitality industry since 1981. Wyndam and privately owned branded and unbranded properties.S. Hilton. and Latin America.