Rooms division management

Chapter 1
Paragraph 1.1

A process is a series of related tasks that yields a product or service to satisfy a guest.

A typical hotel has the following core processes:

- Guest’s selection of a hotel

- Guest’s arrival at the hotel
- Guest’s stay at the hotel
- Guest’s departure

The selection proceeds through the introduction of the hotel which can be done in 3
ways:

- On Internet through a hotel’s website (one of the most important sources of

reservations for hotels)
- An advertisement in a newspaper or magazine
- Hotel guides

The 4 major GDSs (Global Distribution Systems) are:

- Amadeus (airlines, hotel operators, travel agents and car rental companies)
- Galileo (airlines, travel agencies, hotels, tour-operators, car rental companies
and cruise lines)
- Sabre (has its own online travel service, an electronic network for travel buyers
and sellers and consulting services to airlines to optimize their operations and
reduce costs.)
- Worldspan (provides travel information for travel agencies, tour-operators, car
rental companies and corporations)

A travel agency is a company that arranges transportation, itinerary, and

accommodation for travellers. A tour operator is a company whose main business is
the planning, packaging, selling, marketing and promotion of multiple vacation
components for a tour.

A hotel representative helps customers worldwide to find and book hotel

accommodations. Some of the main representatives are:

- Utell: provides instant global connectivity by Pegasus’ voice reservation

network, GDS and the Internet.
- Supranational: offers online availability, information about the member hotels
and room rates for the corporate and leisure travellers.

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A reservation form should include the following information:

- Full name
- Room type
- Date of arrival and departure
- Room rate
- Extra requests
- Contact details

Procedures hotels have taken to avoid ‘no-shows’ are mainly changes in the
reservation process. In the future a guest has:

- To give his full name, private address and business address, telephone number,
fax number and email address.
- To indicate date and estimated time of arrival and departure, and if applicable,
flight number.
- To indicate if he is a member of a group booking or an individual.
- To indicate the accommodation required.
- To indicate the room rate.
- To indicate any special requests.

The payment agreements in case of an arrival later than 6 p.m. are the following:

- Pre-payment
- A credit card (the name of the credit card company, the credit card number and
period of validity)
- Company guarantee (must always be in writing and signed)
- City ledger (guests to whom applicable only have to sign their bill and the rest
gets taken care of by a billing towards the company)

‘Upgrading’ means that the guest will get a bigger or more luxurious room for the same
price as the type of room he has reserved.

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Paragraph 1.2

The doorman is the first person the guests get to see when they arrive and is one of
the associates of the Bellstand.

- A doorman will welcome them with a warm smile and friendly greeting.
- Is dressed immaculately in a conspicuous uniform.
- Is always well groomed and has a charming face.
- He must make eye contact with every guest entering the building and greet
them, preferably by name.
- Keeps thieves and prostitutes out.
- He is a source of information about places of interest.
- He has to speak several languages and be very resourceful.
- Will help the guests get out of the car or bus, will unload their luggage and
escort them to the reception.

Bellcaptain

Doorman Bellman/Bagagist Piccolo/Chasseur Liftboy

The Continental Club Service/Tower Service offers an extra accommodation on a

number of floors is transformed into superior guest rooms and suites and special
guest-relations staff is trained to provide these very important persons (VIPs) with the
personalized attention and service they have come to expect.

If the guest’s name is not included on the list of arrivals, it may be for one of the
following reasons:

- The reservation is entered under the name of a company, a group or person

who made the reservation.
- The reservation was made for a wrong date.
- The reservation was not made at all.

If the reservation has not been made and the hotel has enough rooms available, the
front office clerk will simply allocate a room to the guest and proceed with the
registration. If there is no room available the front office
clerk can:

- Put the guest on a waiting list

- Recommend a hotel of the same class, preferably nearby.

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It is very important the guest signs the registration form since, this served as a
contract and is proof of his stay at the hotel.

At the check in you have to arrange a couple of things:

- Make sure the registration form gets signed

- Make sure the hotel agreement on the loss of personal valuables gets signed
- Make sure they sign the agreement in which payment is ensured.

(Other ways to ensure payment:

- Make an imprint of the guest credit card and verify the validity
- A written and signed guarantee, in which a company gives permission for the
invoice of specified costs to be charged to the company.
- A prepayment for the entire stay
- A MCO (Miscellaneous Charges Order), a voucher provided by airlines for
stranded passengers
- A voucher of a travel agency. )

European plan = Room only

Continental plan = Room and Breakfast
Modified American plan/ Half board = Room, breakfast and lunch/dinner
American plan/ Full board = Room, breakfast, lunch and dinner

In-house selling entails:

- A recommendation of the hotel outlets
- A reservation for the guest
Is only successful if the hotel revenue is increased and the individual guest’s wishes
are recognized and fulfilled.

To be a successful sales person you need to have a thorough knowledge of the

following things:
- The products and services offered by the hotel.
- Get to know the guest

Information given on the keycard will be the following:

- The name of the guest
- Room number
- Room rate
- Date of arrival and departure
- Guest’s signature
- Clerk’s initial

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 The key cards can be used to charge costs made to the hotel room, to identify yourself
as a hotel guest, and in the advance of the hotel as a business card of the hotel.

In the case of a group check-in you need to avoid chaos. The separate room check in
costs time, so you need to find a way to keep the people occupied while you
accompany the group to a separate room or either store their luggage for a while.
The Tour Coordinator/Group Manager is responsible for the preparation and
organization of these group bookings. He will:
- Collect a rooming list and all data for a pre-registration of the group from the
tour leader.
- Fill out a registration form for each member of the group before arrival
- Fill in the key card and provide the electronic keys with a code
- All together with a welcome letter are put in separate envelopes with the group
name.
- The envelopes are arranged alphabetically
- A possibility is to let the group leader fill in the forms
- Make sure that all activities are registered with the following information:
 name of group
 number of participants
 time and date of arrival
 time and date of departure
 time/place of dinners
 selected menu or buffet
 special requests or diets
 location, date, time of the activities
 pre-paid costs and which costs are for their
personal account
 way of payment: cash, credit card, charged to the
room
- group members can count on his assistance
- take care of the internal communication regarding the groups

5
Paragraph 1.3

6 categories to classify institutes are:

- products and services
- size
- target group -> business or leisure or both
- independent hotels or hotel chains
- location
- quality -> budget to luxury or even super luxury

A motel = a roadside hotel for motorists.

A zotel = hotel located near a hospital where patients may recuperate
All suite hotel = luxury hotel with suites only
Hotel garni = a hotel that only offers lodging and breakfast

One can say that investing in a hotel accommodation is a more profitable business
than investing in a labour intensive because you only have to refurbish the rooms
every 5-8 years and clean-up after the guests, while a restaurant brings much higher
expenses on labour and stocking of food which can be spoiled when not eaten.

Las Vegas is the home of the largest hotels of the world, because it has the largest
tourism flow and need for accommodation.

Investors adapt the number of rooms to the market situation and their financial
means. Before making a commitment to invest they let specialist to do a market
investigation for a chosen location to research the need of a new hotel, the price
ranges, what product and resources the suitable target group would need and how
much competition they have.

The main target groups in the hotel industry are business and leisure.

Hotels try to create unique experiences, the Desa Seni Resort located on Bali is an
example of such an hotel where houses in various Ethnic styles have been imported
from different regions of Indonesia and rebuilt in the bucolic tranquility of this island,
amid rice fields.

When choosing a location for a hotel, a lot of considerations should be made. There
are 5 main points that count in this decision:
- Financial risks
- Political consequences

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 - Consequences for their reputation
- Holiday destination
- Or either an important business location.

Advantages and disadvantages of owning an own lodge:

+ Guests enjoy the character and special service found in a Bed & Breakfast or
inns.
+ Proprietor gets a modest income from it
+ In economic crises, these hotels do better than the luxury hotels
- Requires an large initial capital investment, as well as necessary improvements
and renovations.
- Business is often seasonal.

Many countries have developed their own standards, while international guests
demand the same facilities and services they had at one of the other hotels from the
same hotel chain. This is why they have chosen to standardize their product.

There are a lot of rating systems, a couple of examples:

- AAA (USA)
- English Tourism Council’s star rating system (UK)
- Benelux Hotel Classification (Benelux)
- Michelin (France)
- International Hotel & Restaurant Association

The six main criteria to classify hotels in the Far East are:
- Location
- Architectural design
- Facilities and service conveniences
- Services and service qualities
- Staff
- Hygiene

5 of these requirements that deal with safety and security are:

- All areas must be well illuminated
- In case of an electricity breakdown, emergency lights must provide the
necessary lighting
- Electricity must be available at all times
- Sufficient water supplies for hotel services and to extinguish a fire at all times
- Must have a sprinkler system, fire extinguishers, fire alarms and emergency
lights.

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The staffing ratio in Asia is higher than in Europe because of the difference in labour
expenses.

8
The 4 criteria a guest room gets rated on would be:
- Rating of the hotel
- Room rate
- Location
- Style of the hotel

Examples of 5 different room types may be:

- Single with single bed
- Double with double bed (king- or queensize)
- Twin with two single beds
- Triple with three single beds or one double and a single bed
- Suite – a double bedroom with separate living room

The fixed expenses for a hotel are a refurbishment every 5-8 years, labour expenses,
inflation of the costs for building and furnishings.

In a multi-purpose building things included other than the hotel itself may be
restaurants, bars, casinos, parking fees, et cetera.

7 modern trends in hotel interior decoration are:

- Multifunctional furniture
- Use of natural materials and colors
- Flexible control of daylight of roller blinds or Venetian blinds, achieved by two
transparent materials joined together.
- Thermastop blinds keep heat inside during winter and when turned they keep
heat outside in summer.
- Roller blinds with a coating that cleans the air in the room from smoke and
other undesirable smells.
- Curtains with coatings that are dirt and moisture resistant
- Materials used in hotels should be flame retardant.

The essence of a lifestyle hotel is that the physical characteristics aside, what really
differentiates them is their ability to feel special and exclusive, and to give their guests
a warm sense of personal belonging.
5 advantages of owning a lifestyle hotel would be:
- Smaller properties
- More flexible buildings with possibility of changing the style
- Fewer leisure activities
- Smaller public space

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 - Lower staffing ratios.
One mayor disadvantage would be that most properties are too small to generate
sufficient profit to support these high fixed costs.

All colors have a main effect, as for the following this counts:
- Red: Stimulating, friendly and lively color.
May be perceived as demanding an aggressive
- Blue: Serene and mentally calming color, the favorite one of most people
May be perceived as cold and unfriendly
- Yellow: Confidence and optimism
Too much can cause anxiety
- Green: Harmony, rest and balance.
May cause boredom and blandness
- Violet: Luxury, truth, contemplation and quality
When used in access may have a cheap and nasty effect
- Orange: Warmth, security, sensuality and fun.
Too much has a frivolous effect on people
- Pink: Feminine color with a soothing effect on people.
Too much can be emasculating and tiring.
- Grey: Neutral color, which suppresses the effect of other colors.
Too much can cause a depressing effect on people.
- Black: Glamorous, sophisticated which expresses efficiency and security
May have a cold and scaring effect on people.
- White: Hygiene, clarity, purity and simplicity.
Sterility, coldness and unfriendliness.
- Brown: Warmth, nature, earth, reliability.
Can cause heaviness and lack of sophistication.

Red, yellow and white are warm colors, so are likely to be used in hotel rooms.

3 ways to use mirrors to change the shape of a room:

- Place strips of vertical mirror from ceiling to floor on the walls next to a glass
door.
Effect: extra light
- Fix a mirror from ceiling to the floor on the back wall.
Effect: extra length
- Install a sunken mirror in the ceiling
Effect: extra height

5 criteria for the selection of ceilings, walls, window coverings, furniture and fixtures:
- Easy to clean

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 - Flame-resistant
- Acoustics
- Durability
- Aesthetic

Amenities for the bathroom of a two-star hotel are likely to be shampoo, conditioner,
shower cap, soap and a toothbrush and shaving-kit on request.
To make sure the snacks and beverages taken from the mini-bar get paid, they get
checked every morning and charged to the guest’s account. Another way might be by
the use of an connected computerized accounting system that charges everything on
the account as soon as it gets removed from its place.

Top hotels offer a turn-down service so they can check on:

- The guest’s wellbeing
- The condition of the room
- To make the stay more pleasant.

Some personalized services implemented to make the guest feel special would be:
- Turn-down service
- Reservations
- A shuttle bus
- Do not disturb card
- City map provided
- Clearing frost of guest’s cars service
- Hot water bottle (keeping account with climate changes)
- Organization of trips, with amenities provide for the unpreparedness’ of guests

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Paragraph 1.4

Hotels take measures to avoid ‘skippers’ by demanding some kind of payment

guarantee when the guest checks in and make an imprint of their credit card. If a
guest leaves the building without paying, the bill gets send to the credit card company.

The segregation between operational and financial duties is to detect or prevent errors
and theft (fraudulent parties).

A cashier has a lot of different functions. An abbreviated job description would be:
Main tasks:
- Prints out invoices of guests departing the next day
- Checks the guest’s invoices
- If asked, gives explanation about items on invoice
- Makes sure that he receives the correct payment from the guest
- Changes foreign currency according to the hotel rules
- Handles questions and complaints in polite and courteous manner.
Competencies:
- Good head for numbers
- Meticulous, efficient and accurate worker
- Eye for detail
- Service-minded
- Honest and trustworthy
- Courteous
- Able to handle stress
Skills:
- Knowledge of hotel accounting
- Knowledge of foreign currency exchange
- Knowledge of computerized accounting systems
- Well-spoken in local language
- Knowledge of foreign language(s) used by the majority of guests at the hotel
- Communication skills and able to handle guest complaints.
Reports to the Front Office Manager and for the financial part to the Financial
Department.

To speed up the check-out procedure hotels can make use of pre-billing. The bill will
be printed out the day before departure and handed over to them in an envelope so
they can get a first impression of the costs and argue about issues at that time and
not during rush hour.

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Another possible way is by installing a in-house program so you can see every charges
on the television screen in your room.
A third possible way is by installing a self service express check-out machine where
people can handle things on their own.
You can check guest satisfaction in 3 different ways:
- By filling in a questionnaire
- By checking trip advisors
- Check Internet for columns.

How to handle in case of guest complaints:

- Listen actively to the complainer
- Show empathy
- Repeat the complaint to check whether you understood it correctly
- Make notes
- Do not ever blame another colleague or department
- Apologize even if you yourself are not the blame.
- Try to keep a ‘noisy complainer’ away from the other guests
- Let the guest sit down, offer some refreshment and then sit down yourself
- Remove the barrier between you and the guest
- Do not start a discussion about who is right and wrong
- Use humor carefully
- Try to find out the reason why the guest is complaining
- Inform the relevant departments and colleagues
- Make a note of the complaint, so it can be discussed in the next department
meeting.
- If you are unable to solve the problem yourself, call your supervisor
- Do not let a guest leave dissatisfied
- Be grateful towards the guest for bringing up the matter.

Upselling entails recommending and making a reservation for product/services of your

own department in your hotel.
Cross-selling is if a colleague in the restaurant recommends the hotel rooms to a
restaurant guest and confirms this reservation for him at the Reception Desk.
This can only be done if you make a perfect match between your products/services
and the guest’s needs.

Duties of a Night Auditor:

- Will verify all charges made during the last 24 hours and see whether the
charges were debited to the right account.
- Check the room status of every room

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- Verify all no-shows (book bills on their credit cards) after checking the reasons
ofcourse.

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Chapter 2
Paragraph 2.2

Other names for a Housekeeping Manager would be an Executive Housekeeper

or a Accommodation Manager.

General goals set by management for housekeeping are:

- The hotel is at all times clean and fresh
- The housekeeping payroll is in line with the hotel occupancy
- And the operating expenses are in line with the hotel occupancy

The Housekeeping Manager has to prepare 3 budgets for management:

- Pre-opening budget
Lists all the fixed assets and operating assets that a housekeeping department
will need to operate the hotel once it is ready to receive the guests. Have a life-
span of over a year.
Fixed assets are divided in furniture, fixtures and equipment needed for the
guest rooms/ textile needed for the guest rooms (excluding bed linen)/
housekeeping equipment.
Operating assets are used in daily operations of Housekeeping include: guest
supplies, cleaning supplies, bed and bathroom linen, uniforms.
- Operating budget (usually part of the rooms division budget)
A financial overview in which the management allocates funds to each
department for expenses for the duration of a year. The expenses for operating
assets are deducted from the total room sales mentioned in the rooms division
operating budget, allocated a percentage of the daily room revenue.
- Capital expenditure budget
List of fixed assets with prices that Housekeeping need or the coming year,
which includes machinery. (replacements in guest rooms)
- Pre-opening and post-opening budget for contractors
Solemnly prepared for contractors (outsourcing of linen, laundry, florist etc.)

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The number of associates in Housekeeping depends on:
- The number of hotel rooms
- The size of public areas
- Additional responsibilities such as laundry, spa, swimming pool, fitness
rooms, florists, landscaping etc..
- Labour costs
- Rating of the hotel
- Quality standards
- Hotel occupancy
- Outsourcing of some or all cleaning activities, laundry, dry cleaning,
florists, landscaping.

Security problems that may occur in public areas might be:

A Room Status Report gives an overview of:

- Rooms occupied
- Number of occupants per room
- VIP’s
- Expected check-outs
- Stay-overs
- Expected arrivals
- Special requests.

The duties of a Floor Manager are:

- Smooth organization of the work on guest floors
- Control and maintenance of the quality standards
- Print out the Room Status Report in the morning
- Handing out the keys of guest rooms to Housekeeping
- Check the rooms afterwards, change status and check defects etc.
- Check the number of guests in a room

Possible discrepancies between the Room Status Report and a physical check
are:
- Walkouts or skippers
- Sleepers (mostly city-ledgers. Don’t check out because of company
payment)
- Sleep-outs
- Number of guests (actually staying in the room)

16
The number of rooms to be cleaned per Room Attendant depends on:
- Labour costs
- Qualifications of the room attendants
- Size of rooms, suites or apartments for long stay guests
- Furniture and fixtures
- Rating of the hotel
- Quality standards.

For security reasons, Room attendants must follow 5 security rules while
cleaning a guest room:
- Leave the door open
- Leave the trolley standing in front of the entrance.
- Ask for a guests name and key card when he enters.
- The room must never be left open when the Room Attendant is not
present
- All windows and doors must be securely locked when the Room
Attendant has finished cleaning the room.

External cleaning contractors base their prices on the:

- Size of the area to be cleaned
- Easy to clean or elaborate and work-intensive fixtures and furniture
- Frequency of cleaning
- Time of cleaning (during weekends, night or day)
- Method(s) of cleaning
- Quality standards.

The advantages of outsourcing are:

- The contract cleaners provide trained cleaners
- The contract cleaners take care of recruitment, selection, training and
payroll activities.
- The contract cleaners provide the necessary equipment and supplies.
- Flexible use of manpower in accordance to the hotel occupancy
- No need to hire additional personnel for highly specialized cleaning work
which will only be executed occasionally.

The disadvantages are:

- Less control over quality standards.
- Security risks, as the hotel had not selected the personnel

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 - The associates may not feel and behave as representatives of the hotel.

To calculate the labour costs for cleaning the guest rooms on a particular day
the Housekeeping Manager will need to consult the forecasted occupancy for
that date.

Total guest rooms x occupancy percentage = number of rooms to be

cleaned

Number of rooms to be cleaned x standard cleaning time per room =

number of hours required.

Total number of hours = the number of housekeeping associates

The number of room to be cleaned required (part-timers) includes
By one housekeeping associate
during one shift.

The abbreviation FTEE stands for Full Time Equivalent Employee.

Turnover percentage in personnel:

Number of associates that left the company during the year x100%
Total number of associates during the same year

When making work schedules, the following should be taken in account:

- Maximum working hours and days per week dictated by local law and
the company’s standard procedures regarding human resources.
- Religious and public holidays
- Arrangements and promises made in the employment contract.
- Hotel occupancy
- Schedules are made for a whole week and should include information
about time off and holidays.
- The schedules should be published at least seven days before the next
schedule begins.
- The unpopular tasks should be delegated evenly and fairly. The
Housekeeping Manager should not favor one associate above another.

The organization and execution of the skills trainings consists of six steps:
- Analyze the training needs
- Prepare for the training

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- Present the correct procedure
- Present opportunity to practice
- Follow-up
- Evaluate the training

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The advantages of cross training (training associates in different work to assure
the ability to keep working) are:
- associates feel proud of the new skills they have learned, which increases
their motivation.
- Associates with more diverse skills are more valuable for the hotel and
increase their chance for a promotion to a higher position.
- Associates with a diversity in skills can be scheduled for different tasks,
which leads to more flexibility in scheduling.
- Cross training increases the understanding and co-operation between
colleagues in Housekeeping or related departments.

Empowerment refers to the process of giving associates the means and

resources to be more in control of their own work in order to better serve the
interests of the guests, as well as those of the hotel. Advantages and
disadvantages are:
+ sign of trust by management makes them more motivated ro do a good job,
increases their feelings of self-confidence, pride and self-reliance and improves
their ability to solve problems on their own.
+ Might increase in salary in case of ‘self-controlling Room Attendants’.
+ Reduction in labour costs and the guests are better served if they can dispose
of their rooms sooner if the floor supervisor does not have to be called to check
the room.
- The added responsibility might frighten off some associates.

Measures that can be taken to protect the health of guests and associates are:
- Develop quality standards regarding health and cleanliness
- Develop standard working procedures regarding health and cleanliness
- Check the quality standards regularly
- Train all personnel in cleanliness and (personal) hygiene on a regular
basis
- Promote the importance of (personal) hygiene and cleanliness for guests
and associates.
- Motivate and coach associates to follow the hygiene rules
- Implement strict hygiene rules and regulations for the associates
- Regularly check if the rules are followed
- Discipline associates who do not follow the standard working procedures.

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In a cleaning and maintenance plan a Executive Housekeeper had to define
the:
- Areas that fall under the responsibility of Housekeeping
- Degree of cleanliness for each area
- Cleaning methods
- Cleaning accessories and equipment
- Cleaning frequency
- Number of cleaning hours
- Number of cleaners required
- Time when the cleaning activities will take place.

On a Area cleaning inventory form the following information should be

mentioned:
- Contact person, function of contact person
- Purpose of calculation
- Type of area
- Occupancy
- Working week
- Preferred cleaning time
- Type of activity in area
- Quality standards
- Floor plans
- Initial inspection
- Special requests.

Strong acidic and alkaline solutions should be used very sparingly because
they may:
- Damage the surface to be cleaned
- Be hazardous for the cleaner’s health
- Be detrimental to the environment
- Be costly.

A cleaning schedule gives the following information:

- Area to be cleaned
- Frequency – daily, weekly, periodically
- Product and accessories/machines to be used.
- instructions for usage of cleaning products.

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A time norm indicates the work that an experienced associate can execute in
one minute, working at a normal pace and taking the usual time for rest and
personal grooming.

There are two methods of calculating the number of cleaning hours:

- a detailed time calculation for each area, adding the standard times for
cleaning different objects, each with its own cleaning method and
frequency. This method is too time consuming to be used regularly.
- Calculation with standard cleaning norms is the most popular and
practical method of calculating the work hours.

The following things must be mentioned in a crisis plan:

- Standard operating procedures
- Allows for proactive planning and training, so that all associates involved
know and are able to execute the special duties allocated to them during
a crisis.
- Instructions about how to recover and continue business after the crisis
is finished.
- Most practical and efficient rules and regulations (through evaluation
and debriefing)

Insurance companies require written evidence that hotels have taken all
reasonable measures to protect their guests and associates from criminal
activities that are foreseeable and to ensure a reasonably safe stay at the hotel
in the form of:
- Safety manuals
- Safety rules and regulations
- Strict key control
- Fire regulations
- Regular maintenance for fire equipment
- Regular maintenance for elevator
- Regular maintenance for electrical and gas equipment
- Regular control of storerooms for dangerous chemicals
- Safety and fire trainings for all associates
- Regular hotel evacuations
- Security must make regular tours through the whole hotel with a
checklist
- Documentation of all accidents, thefts and any incidents involving drugs,
weapons, excessive consumption of alcohol et cetera.

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- Pictures of the accident scene
- Statements from witnesses with their signature on the accident report
- A plan of action for follow-up
- Serious offences have to be reported to the police
- Review all accidents and compensation claims and implement proactive
practices which will reduce potential accidents.
- Introduce an incentive program and reward good behavior and
suggestions for improving safety in the work environment.
- First aid boxes in all departments
- A hotel doctor should be on call day and night
- Involvement of ALL associates in improving and maintaining a safe work
environment.

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Energy saving options a hotel can take:
- Revolving doors at the entrance
- Roof and wall insulation
- Roofs planted with grass and plants
- Water taps and shower heads that mix water with air bubbles and thus
cut the water flow in half.
- Occupancy sensors in room for switching on/off lights, airconditioning
and heating.

Energy saving options for the housekeeping:

- No television while cleaning
- Open drapes and shades to make advantage of the light and warmth
from outside
- Use low-power bathroom and foyer night lights
- Clean debris from outside air vents
- Lamps should be dusted regularly. Dirty lamps and fixtures may reduce
effective light output by as much as 50 percent.

24
Paragraph 2.3

The front office is literally and emotionally the centre of the hotel because:
- Deals with incoming telephone calls
- reservations
- welcomes guests and
- handles room allocation
- billing and payments.

The disadvantages of a high front desk is that is presents a barrier between the
associates and the guests and makes a welcome more formal.

The reason why overbooking of long term reservations of 10% can change to a
small percentage of only 1-2% is because companies like to shop around for
the best rates. They make reservations at several hotels to later cancel them
again.

Mr Lam selects his staff on the following criteria:

- Smart appearance and well groomed
- Outgoing personality
- Service orientated
- Positive attitude to their work

The difference in percentage of revenue generated by Food & Beverage

Department compared to Rooms Division between hotels in Shenzhen and
Hong Kong differ a lot because of their location. In Shenzhen there are not a lot
of options so most hotel guests choose to eat in the hotel, the room revenue is
lower though because it’s a smaller city. In Hong Kong the offer of restaurants
in the city is so big, they lose a lot of clients to it. The Room Revenue is higher
though because of the size of the city itself.

Yield management: A technique used by hotels to increase their room revenue;

to optimize their room occupancy as well as their average room rate.

Upselling: To promote and sell the guest more expensive accommodation than
the guest had reserved or to make a new reservation when the guest checks
out.

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Cross-selling: To promote and sell the guest benefits from another outlet in the
hotel, for example food & beverage, hotel Spa, golf course, or sell benefits for an
affiliated property.

Room sales generate more revenue than Food & Beverage and it is more
profitable because it is less complicated and expensive. The rooms are a one-
time investment while the restaurant needs to be updated and has higher
expenses of labor, selling of ingredients, storage and cleaning.

The four core processes in a hotel are:

- Selection & reservation (front office, housekeeping, reservations

department)
- Arrival (front office, housekeeping)
- Stay (F&B, housekeeping, front office)
- Departure (front office)

Planboard: listed all the rooms of the hotel, the dates of the month and the
names o the guests.
Blocking system: divides rooms into a number of types, with each reservation
the count of the remaining free rooms of that types was showed.

Increasing competition, globalization, GDS, the use of websites and computer

channels have necessitated a closer co-operation between Reservations, Sales
& Marketing and the Revenue Department.

The CRS (Central Reservation System) leads reservation calls to a call center,
where calls from several hotels are entered. Here the associate enters the
requested dates and personal data of the caller into the system and the system
indicates at what price the room may be sold, if a particular length of stay is
acquired or if there are other restrictions. All exceptions are recorded and the
number of permitted exceptions is limited.

A hotel should provide the following features on its website:

- Branded URL and e-mail address, for example www.marcopolohotels.com
- Site navigation tools
- Information on hotel facilities and room rates
- Multilingual
- Interactive
- Room availability check
- Reservations requests
26
 - Modification and cancellation of reservation
- Download and/or print information
- Information about culture, sports and entertainment
- Use of credit cards
- Latest news and press releases
- Directions and a map or hyperlinks to external information
- Privacy statement or SSL (Secure Sockets Layer is used to secure
transactions on internet)
- On-line guest book.

It is important to keep in contact with the guest after departure in order to

provide costumer-centered service and assure returning guests. (have to built a
feeling of trust and loyalty and try to get to know the preferences of the guest to
be able to deliver a as well as possible service.) Also it allows you to offer a
loyalty program to returning members.

What are the criteria for success in keeping contact with guests through e-
mail?:
- All e-mails have to be answered within 12 hours
- The response must be complete. Nothing frustrates a customer more
than receiving only an answer to part of his question.
- Some relevant up-selling and/or cross selling, for example special offers
- It must contain no spelling or grammar mistakes. (use of standard texts
in different languages, that can be adapted for each different situation to
make it personal)
- The message must be personalized by addressing the costumer by name.
- The costumer must be thanked for contacting the hotel. After all that is
the whole purpose of giving an e-mail address!
- The person answering the e-mail must mention his name and function
- Provide the full name and address of the hotel, as well as a digital
brochure.

The 5 biggest internet based internet distribution companies are :Expedia

( accounts for 70% of online reservations not made directly at the hotel),
Priceline.com, Hotwire, Travelocity, Hotels.com

Advantages and disadvantages of a merchant agreement for a hotel:

+ the costumer must always prepay his accommodation and no cancellation is
allowed.

27
+ these sites reach many travel agencies, even the smallest, and consumers all
over the world, saving the hotel distribution costs.
- The number of rooms made available may not be changed, as these are
confirmed in a contract.
- If a hotel wants to have a prominent place on the list it must offer low
room rates.

Examples of GDS (Global Distribution Systems) are: Sabre, Galileo, Amadeus

and Worldspan.

Distribution Service Providers provide switches that link Central Reservation

Systems of hotels with Global Distribution Systems and on-line sites. They also
provide services to travel agencies and travel divisions of major companies.

To make sure regular guests do net enter the special rates intended for
travelling agencies and corporate guests on their website, they secured it with a
login and password that is only granted to the organizations with which the
hotel has contracts.

The main benefits of a CRS for the hotel are:

- Reduced administrative work in confirming, cancelling and modifying
reservations.
- Minimization of distribution costs
- Maximization of room occupancy
- Direct contact with costumers worldwide
- Easy to apply the hotel’s strategic market and revenue plan
- Easy to monitor the productivity of travel agencies and corporate clients.
- Easy to modify and control rates, conditions and restrictions
- Easy management of allotments
- Less chance of human errors in rates
- A selection of reliable payment possibilities for international customers
- All reservations are guaranteed or pre-paid
- Easy group check-in because names and types of accommodation are
indicated on the reservation list in the system.
- Reduction of distribution costs
- Access to more markets worldwide
- Time and cost saving

The main benefits of CRS for costumers are:

28
 - Possibility to make reservations, modifications and cancellations online
without time restrictions
- Instant confirmation
- Reliable updates of rates and availability
- Time and cost saving
- Reduction of administrative work
- Efficient and quick group check-in procedure
- Additional information about the property may be included
- Map and directions to the hotels are included in the e-mail confirmation.

The administrative guest cycle:

- Reservation
- Registration
- Guest accounting
- Check-out
- Night audit
- Guest history

Once a Property Management System (PMS) has been selected, the following
factors have to be considered:
- The computer data bases must be shared by different departments.
- Access to some sections must be limited to a selected number of persons.
- A good maintenance contract with the supplier is essential, as a break-
down of the system will inconvenience guests and will lead to loss of
revenue.
- In case of a power cut battery-powered temporary energy units must
keep the system going
- The installation of the system with the necessary electronic cables will
disrupt work.
- Inform hotel staff when the hotel will be on-line and connected to the
GDS wholesaler and hotel (chain) website.
- To function properly computer equipment needs air-conditioned rooms
- Ergonomic factors need to be taken in account.
- All associates who will work with the system need to be trained.

Managers can ensure rate parity between a multitude of reservation channels,

which include GDS (Global Distribution System), website of the hotel and of
the hotel group, call center, tour operators, airlines, travel agencies and other
intermediaries.

29
A commercially sound match between service supply and service demand can
be found in:
- Effective scheduling
- Intensive training of Front Office Associates, so that they can execute the
check-in procedure quickly, efficiently and in a friendly, hospitable
manner.
- Crosstraining associates.
- Employing part-time employees for the peak hours.
- Keep waiting guests at resort hotels busy by playing a video on a large
screen of tourist attractions in the neighbourhood etc..
- Arrange for a number of convention halls for checking in and checking
out guests at peak hours, especially for groups.
- Installing electronic check-in kiosks.
Personal data of the guests are requested on the registration form for the following
reasons:
- It is required by law in most countries which want to keep track of the where-
abouts of inhabitants and especially foreigners.
- Hotels like to keep into contact with guests in order to try and convince them to
return for another visit.
- Hotels like to register guests’ preferences, so that they can make their next visit
even more enjoyable.
- Hotels want to trace guests who did not pay their bill or who caused damage to
the hotel property.
- Before admitting guests to their room, hotels want to check the personal data to
make sure that the guests are not on the black list.
- During check-in the Front Desk Associate can verify the date of departure,
which is essential when the hotel is (nearly) fully booked.
- A check-in form is similar to a contract as it contains important statements by
the hotel.

(Electronic) key cards have the advantage that they can be used several times, but also
that they don’t have the room number on it. When a guest loses his key card it would
be no problem since a possible thief doesn’t know the room number. By asking for a
new one the old key card gets blocked and no longer provides access.

Managers should stage the guest experience by:

- Deciding which play will be stayed (mission statement, strategy)
- Attracting the audience (sales & marketing, PR)
- Providing the theatre, costumes and props (hotel building, products, services,
uniforms)

30
 - Finding the right actors to play the parts (selection procedures)
- Writing the good scripts (policies and standard procedures)
- Staging the guest experience (organizing culinary, cultural and sports events,
social evenings)
- Inviting the guests to participate in the play (associates and guests intermingle)
- Rehearsing the play (training and development)
- Directing the play (team building and managing the service process)
- Keeping the memory alive (send brochures, and keep guests up to date with
memorable events at the hotel, personal greetings and messages sent after the
guests’ departure).

According to Doug Kennedy a good Front Office manager should be able to:
- Compete with the needs of stakeholders ranging from the executive-level
managers through frontline employees.
- Being called upon to handle the most difficult guests.
- Close the gap between hotel standards and procedures that exist in memos and
training manuals versus what transpires daily on the frontlines.
- Mentor new associates
- Inspire the next level of hospitality recruits onward and upward.

The night auditor is responsible for:

- Prints out and checks the financial transactions that took place during the
preceding day
- Compare occupancy rates with room rates of competing hotels in the
neighbourhood.
- Checks accounts for in-house guests, city ledger accounts, split bills and
expense account for management. Also does the debet and credit bookings and
the automatic postings of room rate and tax.
- Must be able to check-in and check-out late or early guests.
- Plays security guard for the hotel.
- Prepares the report for management in the morning with any notes on
peculiarities.

31
Chapter 3
Paragraph 3.1

Strategy is a pattern or plan that encapsulates the main goals and policies of an
organization while also establishing a coherent sequence of actions to be put into
practice.

3 strategy opinions would be:

- Reducing their costs as much as possible.
- Offering the guest a unique product and/or service, creating guest loyalty
- Focusing on a specialized market (business hotels, long stay accommodations,
limited service hotels, accommodation for a special age group)

For a hotel company there are 3 main possible ways to achieve a rapid growth:
- A merger with another company
A joining of two companies of similar size, which merge into one new company
- An acquisition of another company
When a company buys another company or shares in it, taking full control over the
purchased company.
- A joint venture
An agreement between two or more companies that set up a firm with its own juridical
status. They provide assets to the new company and share the profit that the newly
formed company makes.

Both mergers as well as acquisitions are carried out by companies for reasons of
obtaining:
- Financial synergies:
The company will have access to more capital and can borrow at lower costs
- Operational synergies:
Combination of marketing, reservation and other services improve the operations and
save costs.
- Managerial synergies:
Managers of the acquired company join the new company, bringing with them their
particular talents and skills.

Real Estate Investment Trusts (REITs)  another source of funding hotels which may
enable them to spend more cash on updating or renewing hotel buildings. Sales
activity is being driven by:
- The large amount of capital seeking real estate investments
- Inexpensive debt
- The emergence of private equity firms both selling and buying properties

32
- Less attractive returns on other types of real estate

33
The lease back construction  Hotels are selling and leasing back the properties they
sell from the institutional investors. They release equity from the hotel but continue to
manage it therefore collecting a management fee. This reduces the debt level, improves
the overall return on investment.

Franchise contracts  developers (franchisees) finance the construction of a hotel, but

leave the management of the hotel to a hotel company (franchisor). Need substantial
amounts of capital to achieve market penetration. Sometimes this happens through
mergers from hotel companies with non-hotel companies (like Sheraton with ITT).

Product franchise agreement  The hotel owner pays fees for the right to use the hotel
company’s name. Disadvantage for the franchisor is that he has little or no control
over the way the hotel is managed and that is the reason why he has lost his
popularity.

Business-format franchise  in case the franchisee agrees to follow the hotel

company’s business directions and maintain its operating standards.
The advantages for the business-format franchisee are:
- the use of the brand name, profiting from the franchisor’s good reputation\
- assistance with architectural matters and interior design
- training of staff before the hotel opening
- sales, marketing and public relations assistance
- worldwide, computerized reservation system linked to global distribution
system (GDS)
- toll free reservation telephone lines
- purchasing assistance
- the good reputation helps in convincing financial institutes to provide loans
- quality control
- use of a fully developed business concept that has been tried and tested

The advantages for the franchisor are:

- inexpensive way to grow
- rapid market penetration
- franchised hotels serve as booking agents for each other and thus increase the
number of reservations for the whole chain.

Conversion franchising  used by existing independent hotels. For a fee they can make
use of the worldwide reservation system and marketing programs of a hotel chain.

34
Franchising fees  are based on room revenue:
- An initial fee is charged per room to cover the costs of inspection before the
hotel is accepted. An average fee of $300-$400 is usual, with a minimum of
$40,000-$50,000.
- A yearly fee of 4-6% of the gross revenue per room. This entitles the franchise to
use the name and logo of the brand.
- A marketing fee of 1-3,5% of the gross revenue per room for participating in
marketing and promotion programs.
- A reservation fee of $1,25-1,75 for each booking made for the franchisee. Helps
to cover the costs of use of GDS and the commission paid to travel agencies,
hotel representatives etc.
- Further fees are charged for training, participation in quality control programs
and other specialized assistance from head-office experts.

Disadvantage of franchising  hotel operators have their doubts about whether local
owners who purchase franchising will comply with the strict quality standards of the
brand itself.

Management contracts  A management contract is an agreement between a hotel

management company and the owner(s) of a hotel whereby the management company
manages the hotel in exchange for a fee. The investors will supply the building and
capital.
A couple of advantages for independently managed hotels are:
- assistance of highly specialized experts for a reasonable fee
- access to capital which might be more difficult to obtain for an independent
hotel
- worldwide computerized reservation system
- jointly arranged promotion
- bulk buying
Advantages for remaining and independent companies are:
- no high costs for a head office
- operational flexibility.
The advantages for a hotel company to work with management contracts instead of
owning its properties are:
- possibility of rapid growth
- brand recognition
- each managed hotel serves as a reservation centre, resulting in ‘referrals’
- no capital investment for land, construction costs and mortgage interest
- no loss of capital in case of a war or revolution

35
Shareholders may require the following capital investments from the management
company:
- pre-opening costs
- initial working capital
- a loan from the management company (usually 10-20% of the total investment)
- shares in the investors’ company
- cash investments
- Furnishing, fixtures and equipment
- Lease of an empty building or a so called ‘turn-key project’, a completely
furnished hotel
During a lease contract a management company does not owe any responsibility to the
shareholders.

Some of the essential subjects that have to be included in a management contract are:
- Financial participation of the management company
- Financial control procedures by the shareholders
- Length of the contract
- Terms of cancellation
- Possible penalties for breach of contract
- Fees for services supplied by the management company
- Fees for consultancy by hotel management head office
- Possible bonus for extra profit
- Right to put in a first bid for the property if the shareholders want to sell the
hotel
- Competition clause (describes under which conditions the management
company may buy or manage another hotel in the same area, rules out unfair
competition for shareholders in case of 2 hotels managed by the same
management company)
- Responsibility for the labor contracts and remuneration. (Contracts signed with
the management company, in case of a take-over or bankruptcy, the
management company has to find new jobs for their personnel.)
- The lease contracts for the shops and offices in the hotel
- Insurance. (Shareholders are responsible for insuring the building. The
management company will take care of indemnity insurance and legal liability
insurance)

There are three types of management fees:

- Basic fee:
May be as high as 5% of the gross revenue. It encourages a management
company to increase its sales, but is no incentive to control the costs.
- Basic fee plus incentive fee:

36
 The following variations are possible:
- A basic fee of less than 5% of hotel revenue plus an incentive fee of about 10%
of the gross operating profit.
- A basic fee which is based on percentage of room revenue and a separate basic
fee based on food & beverage income plus incentive fee consisting of a
percentage of the gross operating profit.
- A basic fee based on a fixed sum per available room plus incentive fee
consisting of a percentage of the gross operating profit.
- A basic fee plus an incentive fee based on the hotel’s cash flow.
- Basic fee or incentive fee, whichever is the highest.

The time-share business is a co-operation between a number of shareholders,

investors and hotel management company in which shareholders will offer hotel
apartments for sale for separate periods of time even before construction starts. The
time-share owners can make use of all hotel facilities, but will find that the
maintenance costs are quite high and will increase over the years.
The advantages for hotel owners are:
- Little capital investment, as apartments are often sold before construction
starts
- Growth of the time-share market (can offer time-sharers to switch to another
location)
- Multiple visits by the time-share guests each year
- Substantial spending power of time-share guests, which benefits all outlets of
the hotel
- Guest loyalty
- Less costs for advertising, reservations, marketing and labor.

A brand is a combination of a name, symbol, and design that a hotel company uses to
identify the type of accommodation and services that distinguish its hotels from those
of the competition.
Hotels offer a lot of different brands, the Marriott International is an example of this:

Budget Mid-price Top price Super de

luxe
Fairfield Inn Courtyard Marriott Ritz-Carlton
TownePlace Residence Inn New World
Suites Renaissance
Spring Hill Suites Ramada RJW Marriott

There are two different ways to calculate the average room rate, the rule-of-thumb
calculation and the Hubbart Formula.

37
The rule-of-thumb calculation sets the room rate at $1 for every $1000 of costs for
construction and furnishing, assuming that the hotel has a 70% occupancy.
The Hubbart Formula approach starts with the profit the shareholders and
management desire and then calculates it back to the room rate.

It is necessary to check these room rates regularly to check whether the average rate
is still satisfactory. This is done by using the following formula:

Total net room value = Average room rate

Total number of occupied rooms

The rate might not be satisfactory any more as result of one of the following reasons:
- Sales & Marketing and the Reservation Department may not promote the more
expensive accommodation enough.
- Maybe the difference between the more expensive rooms and the average rooms
is too small that the guests are not tempted to choose the expensive rooms.
- Maybe the hotel is not offering the right accommodation for their target group.
- The associates from the Reservation Department are not selling enough rooms
with double occupancy. Double occupancy not only means a higher room rate,
but also a higher income for the Food & Beverage and other departments.

38
Paragraph 3.2

A hotel has many room rates for different target groups, some of these rates are:
- Rack rate
The official maximum price of a room that a hotel publishes in its brochures, on
its website, at the reception desk and in the hotel room itself. They can reduce
this price, but may never increase it.
- Best Available Rate (BAR)
Making sure all channels present the same rates. BAR rates are established by
the Revenue Manager for the duration of a year, but can be changed any time.
Booking directly with the hotel itself offers the chance of special offers or loyalty
programs.
- Commercial, corporate or executive rate
Mainly for business guests, they are offered a membership card for that specific
hotel company (chain). The corporate rates are established for a while season
and may give a 8-15% reduction on accommodation for its management and
associates. Depends on the number of rooms booked, applies:
- Always for very big accounts.
- For standard rooms and if no standard rooms are available, best available rate
for luxury rooms.
- Only if the hotel occupancy remains below a certain level.
- Group rate
A hotel will accord special rates for groups. Reduction on room rates given by
hotels depends on the number of room nights and the season.
- Packages
Include travel, accommodation, meals, car rental and possibly excursions. The
discounts differ for business hotels and resorts because they have different
occupancy patterns.
- Day use rate
A charge of 50% of the room rate to make use of a late check-out. Usually when
the hotel has enough space for arriving guests, this is not charged.
- Confidential rate
A guest books through a travel agency or on a on-line intermediary and pays an
all-in price for travel and accommodation with or without meals and/or
excursions. The guest is not able to have an insight in the room rate.

In case of a merchant agreement sites such as Expedia buy rooms at a reduced rate
and sell them at a small mark-up. Both room rate and mark-up are confirmed in a
contract, so that the hotel can ensure a rate parity. A disadvantage for the hotel is that
the number of rooms made available cannot be changed.
In case of a commissionable agreement the intermediary does not ask for a pre-
payment. The costs for accommodation are paid at the front desk of the hotel which

39
pays a commission to the intermediary. Is expensive due to labor and administration
costs. The hotel can close the availability of accommodation at any time though.

Tour operators are travel wholesalers who design and operate tours around the world
and market them through retail travel agencies or airlines. Tour operators make the
packages which they sell to the travel agencies.

Allotment contracts, where a number of rooms are left at the disposal of the agency,
specify the following relevant items, such as:
- Reservation periods for the allotment
- Number and type of rooms allotted within each period of the contract
- Rates, discounts and commissions
- Special conditions (free service, et cetera)
- Form and final date of payment, currency, possible guarantee deposit
- Regular information on the development of sales during the whole period of the
contract
- Time limit for rooming lists
- Release date (The date the travel agencies return the unsold accommodation to
the hotel)
- Tour operators like to make back-to-back bookings for their packages. (a new
group arrives when the other one just left that morning)

A guaranteed contract is a contract in which a tour operator or other intermediary

agrees to pay for the fixed number of guest rooms and/or restaurant seats throughout
the season, irrespective of how many are sold. There are 5 different kinds of
guaranteed contracts:
- Full guarantee
The agency pays everything, regardless of the occupancy. Hotels don’t like this
because empty rooms do not generate revenue in the bars, restaurants and
shops.
- Minimum room occupancy agreement
The agency guarantees a minimum room revenue throughout the allotment
season
- Minimum room revenue guarantee
The agency guarantees a minimum room revenue throughout the allotment
season
- Minimum bed occupancy agreement
Covers room revenue only while a high bed occupancy per room increases the
number of guests staying at the hotel.
- In a long term contract a tour operator guarantees a percentage of the hotel
room occupancy or even all accommodation for a number of years.

40
A free sale agreement allows a tour operator or other intermediary to sell a certain
number of hotel rooms per night without prior consultation, as long as the fixed
number of rooms per day is not exceeded. Only used during low season. The hotel
needs to keep the tour operator up-to-date on the occupancy rates and closed dates,
while the tour operator needs to send every reservation through to the hotel
administration.

Yield management is a technique used by hotels to increase their room revenue: the
aim is to optimize their room occupancy as well as their average room rate. Another
definition would be: Yield management is the process of allocating the right type of
capacity, to the right kind of costumer, at the right price, at the right time.
Yield management is also referred to as Perishable Asset Revenue Management.
Perishable, because a room that is not sold for a particular night means loss of room
revenue, which can never be recovered.
Airlines use yield manager in their ‘last minute’ offers.

Revenue realized = 100% yield

Revenue potential

The hospitality industry and airlines have a lot in common, here are six similarities:
- Relatively fixed capacity
Seats in a plane, as well as rooms in a hotel come in fixed numbers and cannot
be changed.
- Perishable inventory
Lost income, seats or rooms not sold for a certain date, cannot be recuperated.
- Inventory can be sold in advance
The possibility to book a room or seat in advance. Rates might change when
you do this at the last moment. In case of an airline, you get the best rates
while in case of a hotel you would get the highest rates.
- Different market segments
Business guests travel for business, not pleasure. Therefore they will often book
a short time in advance, taking no consideration of the rates on that specific
date, since they need to be somewhere and the company will be paying the bill
while leisure guests do. In exchange for lower rates they are willing to accept
restrictions:
- They might decide to go on holiday before or after the high season
- Accept the uncertainty of a last minute flight
- Stay over an extra night in the weekend
- Relinquish the right to cancel or amend flights.
- Demand fluctuates substantially
The rates are following the changes in demand from the guests (think of
holidays and business facilities in the weekends)

41
 - Marginal sales costs are low and marginal production costs are high
The costs to sell one extra room/seat are just as high when you are trying to
sell 100 rooms/seats. On the other hand, it requires a substantial capital
investment if a hotel has to increase the number of their guest rooms.

Major differences between airlines and hotels:

- Airline passengers arrive and depart on specific times while hotel guests come
and go at all times of the day
- Airlines’ prices strategy is based on place of departure and destination. Hotels
base their prices on duration of guests’ stay.

42
Sequence of steps to be taken to prepare hotel associates for yield management:
- Once management has made the decision to use yield management, the
associates must be informed.
- Then management must find out which associates have previous knowledge
and experience in yield management and/or recruit personnel with a yield
management background.

Accurate forecasts are very useful tools for the operational departments, enabling
them to:
- Maximize the occupancy and the average room rate
- Calculate the number of personnel required
- Make work schedules
- To purchase the correct quantities of food, drinks, linen, amenities etc..

Information required for long term forecasting:

- Comparison of occupancy and average room rates between the hotel and the
competition in the area.
- Historical data regarding occupancy and rates
- Historical data regarding lead times (how far in advance reservations were
made)
- Historical data regarding cancellations, refusals and no-shows
- Information of coming special events in the area
- Number of non-guaranteed and guaranteed reservations
- Cut-off date for room blocks held for groups
- Number of rooms out of order, due for renovation or refurbishment.
- Renovation plans in hotels in the same area. This will increase the demand for
rooms in the other hotels.

Walk-ins = people who arrive without reservation

No-show = a guest who has made a reservation, but who does not register or cancel
his reservation.
Stayovers = guests who stayed at the hotel last night and will be staying the next
night(s) as well.
Overstays = guests who should have checked out today, but decide to prolong their
stay.
Understays = guests who check out earlier than expected.

A revenue manager in addition to the yield of the hotel accommodation, also checks
the revenue from the food & beverage, meeting rooms, telephone, parking, internet
etc.. Is responsible for the revenue of the whole hotel.

43
Lieberman describes revenue management as: using information, historical and
current, in combination with policy supports, procedural supports and statistical
models, to enhance a hotel’s ability to carry out a number of business practices and
thereby increase both its revenues and its customer-service capabilities.

Revenue management encompasses the maximization of the total revenue of a hotel.

Yield management concentrates on the revenue maximization of accommodation, such
as guest rooms, meeting and convention rooms or restaurant space.

The latest trends in revenue management:

- Upgrading in low demand days
- Negotiation power of the guest has been reduced by the BAR rates and rate
parity.
- Length-of-stay controls
- Registering all no-shows and denial reservations will increase the accuracy in
future forecasts
- Total commitment of the management and staff is essential.
- Encouraged to invent creative new ideas for revenue improvement.

44
Chapter 10

Chapter focus points:

- Importance of the night audit in a hotel
- Night audit process
- The daily flash report
- Reading the night audit.

The night audit is the control process whereby the financial activity of the guests’
accounts is maintained and balanced. This process tracks charges and payments
(debits and credits) and the departmental receipts and charges on a daily basis. The
front office manager monitors the credit activity of the guests, projects daily cash flow
from room sales, and monitors projected and actual sales for the various departments.
It gives the necessary objective overview to evaluate the hotel’s financial activity. Based
on that review, the general manager must determine how the night audit should be
adapted o meet the expenses and profit foals for the accounting period. It also allows
the general manager to see if marketing plans and operational activities have
accomplished their stated profit goals.
It provides an insight into how each department must be monitored to produce an
acceptable income statement. Ultimately, the night audit allows general managers to
make good financial decisions based on current and cumulative data.

The night auditor must check in and check out guests who arrive or depart after
11.00 p.m., process reservations, perform the duties of security guard, monitor fire
safety systems, act as a cashier for banquet functions, and perform the work of
manager on duty. Works between 11:00 P.M. and 7:00 A.M. shift.

The night audit process is used by management to verify the integrity of the guest
accounts and to review operational effectiveness, which is the ability of a manager to
control costs and meet profit goals. The six basic steps involved in preparing a
night audit are:
- Posting room and tax charges
- Assembling guest charges and payments
- Reconciling departmental financial activities
- Reconciling the accounts receivable
- Running the trial balance
- Preparing the night audit report.

Posting room and tax charges: After the night auditor reviews messages from other
front office staff, reviews guests who checked out of the hotel, extends any guest stays,

45
reviews all room rates, and prints a variance report, his first tasks is to post room and
tax charges to all account. This is mostly done automatically by the PMS.

Assembling guest charges and payments: The modules in a PMS (food and beverage,
call accounting, gift shop, etc.) allow for ease in assembling guest charges and
payments. Note how the restaurant, room service, and lounge paperwork is further
classified by meal or function, to facilitate recordkeeping and so that managers can
review the income-generation activity of each of the departments.

Reconciling departmental financial activities: The department totals option of the

night audit module in the PMS report total sales by department are compared to
posting information received from the point-of-sale system. Another department total
that must be verified is the cash tendered by guests at the front office. The cash
payment can be arranged only at the front office or on other locations as well. The
cashier option of the night audit module in the PMS reports the amount of cash, credit
cards, and coupons received and discounts processed during the shift. The total
amount of cash received by each cashier issued a cash drawer must be verified against
the total money deposited for that shift.

Reconciling accounts receivable: The city ledger, a collection of guest accounts of

persons who are not registered with the hotel, is an account receivable. They have
either received approval for direct billing privileges or paid a deposit on a future
banquet, meeting, or reception. The hotel may hold a credit balance, amounts of
money it owes guests in future services.
Another account receivable is the master credit card account, which depends on the
number of guests paying with this card, the size of the hotel and the speed of
reimbursement from the credit card agency.

Running the trial balance: A trial balance is a first run on a set of debits to
determine their accuracy compared to a corresponding set of credits. The report lists
the debits and credit activity of the front desk, receivables, and payables. It is
important that the night auditor compares the departmental totals against transfers
and paid-out slips for each department processed by desk clerks and cashiers.

Goal of preparing the night audit report: The night audit report is key in maximizing
the efficiency of a hotel. The daily figures regarding room occupancy, yield percentage,
average daily rate, and room revenue per available room (RevPAR) suggest
opportunities to improve a slow sales period.

Preparing the night audit report: Different people have different demands for a night
audit report, do notice the columns headed ‘budget’ and ‘goal’. The budget figure is
the target amount of sales planned for that day. The goal figure shows what
percentage of the budgeted figure was actually achieved.

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Department totals: Daily sales reports are to be reported to the front office, so the
general managers can determine the profitability of income-generating departments
and the success of marketing programs.

Bank deposit: Includes both cash and credit card deposits. Cash, business checks
and checks from credit card companies are received at several moments of the day.

Accounts receivable: An ongoing listing of outstanding amounts owed to the hotel.

Essential to a positive cash flow. Primary responsibility of the controller and general
manager.

Cashier’s report: Lists cashier activity including cash and credit cards an PMS totals.

Manager’s report: a listing of occupancy statistics from the previous day , such as
occupancy percentage, yield percentage, average daily rate, RevPAR, and number of
guests. Reviewed daily by the general manager, controller, front office manager, and
director of marketing and sales.

Formulas for balancing the night audit report:

Formula to balance guest ledger: Formula to balance city ledger:

Total revenue yesterday’s outstanding A/R
-paid-outs and noncollect sales + today’s outstanding A/R income
=daily revenue = total outstanding A/R
-total cash income - credit card received and applied to
A/R
-today’s outstanding A/R income - cash received and applied to A/R
=0 = balance of A/R

Formula to balance bank deposit:

Total bank deposit
-total cash sales
-credit card received A/R
-cash received A/R
=0

Room and tax: The room sales figure represents the total of posted daily guest room
charges. These totals are obtained by activating the (tax) cumulative total feature in
the PMS system, which ads all previous posted amounts into one grand total.

Total restaurant sales and sales tax: The total restaurant sales figure comprises all
sales incurred as restaurant or food outlets in the hotel. These figures are verified

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against the daily sales report, a financial activity report produced by a department in a
hotel that reflects daily sales activities with accompanying cash register tapes or point-
of-sale audit tapes from each of the restaurants or food outlets.

Tips for restaurant, room service, banquet and lounge employees: Represent an
important control feature, must be paid out from the desk clerk’s cash drawer or the
restaurant cash drawer.

Room service: If a hotel as organized a special marketing and merchandising

campaign to increase room service sales or feels careful monitoring of this potentially
service is profitable.

Banquet sales: Are checked next to the daily function sheet to check whether all
activities have been billed. Also provides information for the cash flow of the hotel.

Banquet bar and total lounge sales: Originate from the point-of-sale cash registers.

Room rental: Also think of the rental of meeting rooms etc. that get checked next to
the daily function sheet.

Valet: Dry cleaning and laundry services. Transfer slips are prepared to indicate the
charges for valet service which will be booked on the guest folio.

Telephone charges: surcharge rates, or rates for adding service charges for out-of-
state long-distance telephone service.

Gift shop sales and tax: Necessary for the accounting procedure and the insight in
cash flow and profitability of the shop itself.

Vending: the money count of the vending machines, placed in the hotel.

Spa: charged to the guest folio.

Parking: cash and charge activities from each shift with supporting documentation,
including parking tickets, cash register tapes, transfer slips, and monthly parking
permit renewals.

Total revenue and total write-offs: Represent all the cash and charge transactions
for the day, reflecting all the previously reported figures. The general manager
maintains strict control over these figures.

Cash sales and accounts receivable balance: Total cash sales today represents the
totals reported and received from the departmental daily reports and is required to

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justify the daily bank deposit. Today’s outstanding A/R is added to Yesterday’s
outstanding A/R to obtain a cumulative balance of outstanding accounts receivable
(total outstd A/R).

Credit cards and cash applied to accounts receivable: By the checks and cash
payments of the accounts receivable, they get updated.

Analysis of accounts receivable: To make sure payments are made and to operate an
overdue payment collection program.

Bank deposit and amount transferred to accounts receivable: The cash and credit
cards totals deposited must match the total cash sales plus the cash received and
applied to outstanding accounts receivable minus total paid-outs.

Cashier’s report: The cash and credit card vouchers are added to the individual
cashier’s shift report, which also includes amounts of cash and credit card
transactions received for application to accounts receivable. These figures must be
verified in the daily bank deposit. Also notes variances between actual totals and PMS
totals. Substantial overages and shortages must be investigated as to regularity and
source.

Operating statistics: This summary reviews the day’s activities and the hotel’s
success in meeting financial budget targets. The rooms sold, rooms vacant and rooms
out of order are determined by assessing the housekeeping module and the
housekeeper’s report.
Formulas for determining operating statistics:
Occupancy percentage Number of rooms sold x100
Number of rooms available

Double occupancy percentage Number of guest – number of rooms sold

x100
Number of rooms sold

Yield Number of rooms sold x average daily rate x100

Number of rooms available x rack rate

Average daily rate Room income

Number of rooms sold

RevPAR Room revenue

Number of available rooms
Or
Hotel occupancy percentage x average daily rate

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Daily flash report: a PMS listing of departmental totals by day, period to date, and
year to date, is useful to general managers and to department managers and
supervisors.

Total paid-out and noncollect sales: a total of total paid-outs, total discounts, and
total write-offs.

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