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Managing Availability and Overbooking

The most fundamental aspect of hotel analysis is the determination of occupancy and availability. These two
are completely opposite. In most cases, what is not occupied is available for sale. Out-of-order (OOO) rooms,
however, may twist that number somehow since these rooms are neither unoccupied nor available for sale to
guests.
Forecasting
The most important short-term planning performed by the front office manager is forecasting the number of
rooms available for sale on any future date. The room availability forecast helps in managing the reservation
process and guides the front office staff in effective room management.
The concept behind rooms inventory begins with one-to-one match between rooms in the hotel and rooms
committed to either incoming reservations or stayovers. Each day’s available rooms inventory is equal to the
number of rooms in the hotel less the total number of stayovers plus incoming reservations.
The hotel is committed to guests staying over from last night (stayovers) and to today’s reservations. If the
total of these (stayovers + reservations) is less than the total number of rooms in the hotel, there will be a plus
count. If the hotel has more commitments than rooms available for sale, there is a minus count (overbooked).
The following are the two (2) common methods in forecasting room availability:
• Simple, unadjusted room count – Often referred to as the number of rooms “on the books” or house
count, this serves as the starting point of determining availability. It does not take historical factors, market
factors, or any unknowns into consideration. The house count is an actual quantifiable number as to how
many rooms are occupied, how many are due to arrive, and how many are due to checkout.
This compares rooms available in the hotel against anticipated stayovers and expected arrivals. If any room
remains uncommitted (i.e., there are more rooms available than there are committed to stayovers and
reservations), they are considered available for sale that day.
If a hotel has rooms available for sale (a plus count), it is important to know the number and types available
so that the reservations and front desk sections can sell the remaining rooms better. Maximum rates are
charged as the hotel sells its last few remaining rooms. When no rooms are available (an even or zero
account), it is important to be prepared in cases when the hotel finds itself in an overbooked situation (a
minus or negative count).
Example 1:
Required: Develop a simple, unadjusted room count utilizing the given information.
Given: STI Hotel has 1,000 rooms wherein a total of 850 rooms have been occupied last night. Of those
850 rooms, 300 are due to check out today. There are also 325 reservations for today, but 12 rooms are
out-of-order.
Solution:
Total Number of Rooms 1,000
Occupied last night 850
– Due to check out today – 300
= Number of stayovers 550
+ Today’s reservations + 325
= Total rooms committed for today (875)
= Rooms available for sale (1000 – 875) 125 with 12 OOO
Occupancy/Forecast is 875 ÷ 1,000, or 87.5%.

• Adjusted room count – In this method, the reservations department collects data over time, which
becomes the basis for historical adjustment statistics. Such adjustments include understays, overstays,
cancellation, no-shows, and early arrivals.

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These change day by day, depending on the day of the week and the week of the month. Percentages
change and affect the historical adjustment statistics because of these factors: weather, type of group
registered, bed bug infestations, state of country’s economy, and even with the major events brought by
news. Sometimes referred to as “wash factors,” historical adjustments are vital to an accurate
determination of availability.
Example 2:
Required: Develop an adjusted room count utilizing the given information and historical adjustments.
Given: STI Hotel has 1,000 rooms. A total of 850 rooms was occupied last night. Of those 850 rooms, 300
are due to check out today. In addition, there are 325 reservations for today and 12 rooms that are out-
of-order. The hotel has also developed the following historical adjustment statistics: 6% understays, 2%
overstays, 4% cancellations, 5% no-shows, and 1% early arrivals.
Solution:
Total Number of Rooms 1,000
Occupied last night 850
Due to checkout today 300
+ Understays (6%), i.e., 300 x 0.06 = 18 + 18
– Overstays (2%), i.e., 300 x 0.02 = 6 – 6
= Adjusted number of rooms to check out today 312
= Adjusted number of stayovers (850 – 312 = 538) 538
Today’s reservations 325
– Cancellations (4%), i.e., 325 x 0.04 = 13 – 13
– No-shows (5%), i.e., 325 x 0.05 = 16.25 – 16
+ Early arrivals (1%), i.e., 325 x 0.01 = 3.25 + 3
= Today’s adjusted reservations 299
= Adjusted total of rooms committed (538 + 299 = 837) (837)
= Adjusted total number of rooms available for sale (1000 – 837 = 163) 163 With 12 OOO
Occupancy/Forecast is 837 ÷ 1,000, or 83.7%.

Note that mathematical rules in rounding off are applicable to get a correct count. With the same data
given in Example 1, the adjusted room count calculation incorporated a series of adjustments like
understays and overstays, to name a few. The net result of 163 rooms available for sale in Example 2 is far
different from the 125 rooms found on the simple, unadjusted room count in Example 1. For that reason,
recomputing the count with the historical adjustments makes a substantial change in room availability.
The actual number of rooms available for sale varies day by day as shown in both examples. Some rooms
are removed from availability and are categorized into two (2):
• Out-of-order (OOO) rooms – These rooms are generally repairable within a short time. A minor
problem such as poor TV reception, a clogged toilet, a malfunctioning minibar, or a noisy air
conditioning unit will usually classify a room as out-of-order. These rooms are, by nature, minimally
inoperative. Meaning, the problem that placed the room to such state is minor or small.
When a hotel is close to sold-out, OOO rooms are actually sold to the public on an “as is” basis.
Management will then just have to sell the room with a minimal discount to compensate the guest for
the inconvenience.
Because OOO rooms can be readily returned to market, these are included in total rooms available for
sale. When calculating room count and occupancy statistics, OOO rooms are treated as if there is
nothing wrong with them.
• Out-of-inventory (OOI) rooms – These rooms are not sold “as is.” These rooms have significant
problems that cannot be repaired quickly, thus cannot be available for sale/letting to guests.

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Examples of OOI situations include a carpet destroyed by flood and drywall in a room, a fire that
blackened the walls and left a strong odor, a broken guestroom door lock, an inoperative sliding glass
door, or even a criminal investigation in which the police have ordered the room to be sealed until
further notice. By their very nature, OOI rooms are not marketable—not until it has been repaired.
Therefore, these rooms are not included as rooms available for sale (marketable rooms).
In Examples 1 and 2, 12 rooms are indicated as OOO. These are not removed from rooms available for
sale when calculating room count and occupancy. On the other hand, OOI rooms are removed from
rooms available, resulting in a change in both the room count and occupancy statistic. See changes
below if OOO is replaced with OOI:
Example 1 including Out-of-Inventory Rooms:
Total Number of Rooms 1,000
– Out-of-inventory rooms 12
= Marketable rooms 988
Occupied last night 850
– Due to check out today 300
= Number of stayovers 550
+ Today’s reservations 325
= Total rooms committed for today 875
= Rooms available for sale (988 – 875 = 113) 113 with 12 OOI
Occupancy/Forecast is 875 ÷ 988, or 88.56%.

Example 2 including Out-of-Inventory Rooms:

Total Number of Rooms 1,000
– Out-of-inventory rooms – 12
= Marketable rooms 988
Occupied last night 850
Due to check out today 300
+ Understays (6%) i.e., 300 x 0.06 = 18 + 18
– Overstays (2%) i.e., 300 x 0.02 = 6 – 6
= Adjusted number of rooms to check out today – 312
= Adjusted number of stayovers (850 – 312 = 538) 538
Today’s reservations 325
– Cancellations (4%) i.e., 325 x 0.04 = 13 – 13
– No-shows (5%) i.e., 325 x 0.05 = 16.25 – 16
+ Early arrivals (1%) i.e., 325 x 0.01 = 3.25 + 3
= Today’s adjusted reservations 299
= Adjusted total of rooms committed (538 + 299 = 837) (837)
= Adjusted total number of rooms available for sale (988 – 837 = 151) 151 With 12 OOI
Occupancy is 837 ÷ 988, or 84.72%.
Overbooking
Based on the availability on any given night, a hotel may sell more rooms than there actually are in the
inventory. This practice is called overbooking or overselling. Overbooking is a strategic decision made by the
reservations manager in coordination with the front office manager, sales manager, and the general manager.
The goal is to project how many reservations will cancel, have a no-show, and so on, and to overbook the hotel
just enough to result in full occupancy on the day of arrival.
Even though hotels show 100% occupancy, there are usually a few rooms still left unoccupied. They show
100% occupancy because they sold every single available room, not necessarily because every available room
is physically occupied. Using the historical record, hotels may overbook in order to offset the effects of the
negative or minus (–) factors that determine availability. One obvious drawback of this practice is not having
enough rooms for guests with confirmed reservations.

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When this happens, hotels must “walk” the confirmed guests. Walked guests are transients with confirmed
reservations who must stay somewhere other than where they are initially booked to be.
In 2014, a survey designed by American Express Global Business Travel (GBT) 1, Trends Monitor, showed that
22% of the travelers stated they have arrived at a hotel with confirmed reservations only to find the hotel did
not have a room available for them or did not have the exact room preference originally reserved. As a follow-
up item, they were asked how their situation was handled. The results are shown in Figure 1.

Figure 1. Hotel Overbooking Solutions

Note that many of these overbooking problems were handled internally because other room types were
available to accommodate the guest. However, a “depressing” 13% of these situations were poorly handled
because the overbooked hotels were “unable to offer assistance.”
The perfect fill or perfect sell-out occurs when every available room is physically occupied and makes no
record of walked guests. When faced with such circumstance, the hotel must honor its obligations by
compensating these walked guests in some way, but most reputable hotels will do the following:
• Pay for the room at another facility of the same or better quality.
• Pay for a phone call so that the individual can notify others of the change in accommodations.
• Provide transportation to the new facility and back, if applicable. (A guest who is part of a group will
want to return in the morning to attend group functions. A transient guest who has more than one-
night stay should be allowed to return to the original hotel to complete the stay, if they wish.)
• Other incentives may include free breakfast, room upgrade upon return, an in-room amenity, and an
apology from the management.
It is up to the reservations section to monitor the extent to which a hotel may oversell. A hotel that is oversold
many days in the future may find that wash factors have reduced the number of reservations as the date
approaches. Had that hotel not oversold in the first place, it would find itself with too few reservations.
Some hotel managers feel the risk of walking guests does not justify the potential return of a sold-out hotel.
After all, a guest who is upset about being walked may never return. To reduce the risk of walking, some hotel
managers accept a 95–98% occupied hotel as fully sold.

1 American Express is a global travel enterprise established in 1850s which started as a travel agency that operates in more than 140
countries worldwide to date.

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Cancellations and No-Shows

Majority of big, reputable hotels have established fair and consistent overbooking policies. Websites have
done the same in terms of their cancellation policies. Such policies differ by hotel, chain, market, and location.
The cancellation policy adopted by a hotel often reflects the quantity of walk-ins it has experienced.
Hotels overbook, in part, to compensate for no-shows. Industrywide, no-shows run about 8% and can reach
as high as 25% in some cities on some occasions. There is a direct correlation between no-shows and the types
of reservations a hotel accepts. Lower-quality, nonguaranteed reservations have the highest rate of no-show.
The following guidelines may be considered to manage no-shows better:
 Accept only guaranteed or advance-deposit reservations. Accept few nonguaranteed reservations.
 All reservations guaranteed against credit cards should be carefully documented – name, card number,
expiration, security code, and billing address. Consider charging the card during the reservation to
ensure its accuracy.
 The hotel faxes, scans, e-mails, or downloads the form to the guest for signature; once the form has
been returned, the guaranteed reservations become activated.
 To minimize clerical errors, front office staff must always restate reservations details before finalizing
the reservation.
 Be certain that any front office staff who does reservations always explains the hotel’s cancellation and
no-show charge policy with each reservation.
 Provide guests with a confirmation number and recommend that they keep this number in their records.
 Fax, e-mail, scan, or mail the confirmation to ensure all information has been provided to the guest.
 In the event a no-show or cancellation fee is charged, the hotel should immediately send a copy of the
charge to the guest via fax, e-mail, or mail.
 Guests who cancel in an appropriate timeframe should be provided with a distinct cancellation number
and be advised to keep the number on file.
Managing Room Revenues
The reservations department of the hotel has the biggest responsibility for attaining the best selling prices of
the room. Yield management, also known as the reservation management process, represents the procedure
of understanding, forecasting, and impacting the behavior of customers to maximize the revenue or profit per
available unit of sales in a specific unit of time. The objective is to sell a hotel room to the right customer at
the right time and at the right price. It is a flexible tool that allows for continual adjustments as business factors
change.
One can increase the hotel’s revenue either by securing higher occupancy (letting more rooms) or by raising
the rate at which rooms are let. But if both can be done, the hotel can get the best possible returns. To tackle
the problem of uncertain demand and lost revenue, hotels need to consider the following:
• Prioritizing the most profitable type of booking or business transaction
• Securing profitable, guaranteed bookings in advance to provide a “base” revenue
• Using different room rates to secure bookings from the most profitable markets
• Using flexible room rates and bookings to manipulate demand; charging higher rates when demand is
strong, and lower rates when demand needs to be stimulated to increase occupancy.
The simplest way to understand yield management is to assign a numerical value to all the rates within a rate
structure. If one were to assign the rates a number, say 1 through 7, corresponding to their value, the practice
of yield management becomes easier to understand. Figure 2 illustrates the concept of assigning a numerical
value to room rates. As each rate nears rack rate (the highest published rate a hotel can charge for a specific
room), its number value goes up. A target rate (an average rate goal a hotel sets to achieve for a certain day
or market segment) is created for the reservations staff to quote for each remaining room.

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The manager would then assign a

higher number to each night as the
hotel nears sold-out status.
Smaller hotels use this numerical
pricing strategy in their application of
yield management because of its
simplicity. Large and mega-size hotels
need more tools to maximize their
room revenue best. Due to the
complexity of managing room
inventory, the reservations manager
Figure 2. Assigning numerical values to room rates
may expand yield management tools by
Source: Front Office Operations and Management, 2010. p. 272 using a limiting criterion called rate
restriction.
Hotels incorporate these two (2) main restrictions into their yield management strategy:
• Rate availability restriction – This is the most widely used type of restriction. As availability changes, the
reservations manager may input certain rate triggers that alter which rates are to be quoted. A rate trigger
is a signal programmed into the reservation system that instructs it to change the rate based on preset
criteria. As rooms are booked or canceled, different rate triggers become active or inactive. Driving rate is
an approach that attempts to maximize the room rate revenue by “turning off” or “opening up” rates.
In situations where demand is thought to be approaching, the reservations manager may restrict a rate
before any rooms are booked. The manager is said to have “turned off” these rates. Normally, once
occupancy reaches a favorable prespecified number, discounted rates are turned off automatically.
However, there are cases where a large, citywide convention or major sporting event is known to be
coming long before any reservations are made. Here, the manager becomes proactive by turning off
discounted rates early. In some cases, the hotel may have never sold discounted rates, and thus may have
them restricted from the start.
If too many rates are restricted too early, the hotel may find itself empty when it had hoped to fill. In
these situations, the reservations manager may have to “open up” all rate restrictions at the last minute
to try gaining occupancy.
• Length of stay restriction – This attempts to limit imbalances in occupancy during the week. These two
(2) situations may occur:
o Spike – This is a situation where one (1) night, for whatever reason, has a higher demand than others
do. This can be problematic for hotels because if a spike occurs to such extent that a night becomes
sold out, but the following night is wide open, no new reservation can be taken for both nights. It
precludes any additional occupancy on the night the hotel really needs it. The same spike can affect
various hotel types in different ways.
Based on common demand levels, a spike on a Wednesday is not as big of a problem for a resort as
it is for an airport hotel. A Friday night spike may not be an issue for that same airport hotel because
Friday is a traditionally low-demand night for such hotel type. But a Friday spike for the resort would
preclude two (2) night stays, and weekend nights are in high demand for the resort in season.
o Hole – This is the opposite of a spike. This is a period of low demand that may result in low occupancy,
which can also be a problem for hotels.
A hotel that has spikes and holes in succession must take another look at their yield management strategy
because that situation is very difficult to address.

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Figure 3 illustrates how spikes and holes result in a hotel’s availability. There are three (3) types of length
of stay restrictions a hotel may employ to avoid and rectify spikes:
 Closed to Arrival (CTA) Restriction – This is useful in
slowing demand on one (1) night while increasing
demand on the previous night. This type of restriction
won’t allow any reservations for check-in on that
night but will allow for stayovers. It literally closes
new arrivals. CTA encourages reservations on the
night before where it is needed. For example, if
Tuesday were already spiking for a particular week
while Monday resembled a hole, CTA on a Tuesday
night would be a good option to even out the
demand.
 Minimum Length of Stay (MLS) Restriction – This
restriction mandates that all new reservations stay at Figure 3. Spikes and Holes
Source: Front Office Operations and Management, 2010. p. 274
the hotel for a minimum number of nights. This is
effective when demand is known ahead of time to be strong on certain nights but less on other
nights. MLS is very effective when used over holidays or for city-wide and special events. For
example, if an event falls on a Sunday, with the weekend demand, MLS on Friday would mandate
staying all three (3) nights. This will help bring the occupancy up on those days. The term “MLS” is
usually followed by the number of nights it affects. For example, MLS-3 equates to a minimum
three-night stay on a given day. MLS is also referred to as a “must stay,” as in “must stay three”
restriction.
Using the previous example, MLS on that Friday, coupled with CTA on Saturday, will ensure that
Friday does not become a hole. MLS on a Friday does not impede one-night stays, which are also
desirable in this situation. In this example, a new reservation could be for one (1) night or three
(3) nights, not two (2).
 Modified Length of Stay Restriction – Also called min/max restriction, this takes longer stays into
consideration. It is a hybrid of the MLS and CTA restrictions. It is similar to MLS in requiring a
certain number of nights and resembles CTA in restricting new arrivals.
Example: Assume that STI Hotel is full on Tuesday, Wednesday, and Saturday. Min/Max will
restrict Tuesday arrivals unless the guest is staying more than two (2) nights. This way, the hotel
will also receive demand on Thursday night, which might not be needed. But, that same Min/Max
will not allow that reservation to extend past Friday night because Saturday night is sold out. In
this example, Min/Max becomes a “must stay three, but no more than four” night reservation.
Another yield management tool used less frequently than rate restrictions is rate averaging. It simply averages
the target rates for any multiple-night reservation. Averaging rates are easier than applying restrictions. For
example, a guest wishing to stay at a hotel from Wednesday to Friday (₱ 3,500 + ₱ 2,500 + ₱ 4,200 = ₱ 10, 200)
may be quoted the average of the available transient rates (₱ 10, 200 ÷ 3 = ₱ 3,400). However, its drawback is
that it does not apply to one-night stays.
Guest, Occupancy, and Revenue Statistics
The purpose of statistics and reports is to monitor the achieved business results and compare them to the
planned figures. The dynamics of front office statistics’ monitoring and reporting depends on the
organizational structure, intensity of operations, seasonality, and ownership. Hence, it differs from one hotel
to another.

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Guest statistics are data compiled about the guests who have stayed in the hotel. Much of the data on
individual guests will be gathered in any case during reservation, registration, and guest accounting. The
following sources of information are used in guest statistics:
• Average length of stay – It determines how many people are typically staying at any one (1) time and how
long on average do they stay. These information are used to support a range of managerial decisions like
staffing levels and rosters, facilities to be offered (Is the hotel catering for short-stays or longer-staying
guests who need more varied facilities?), and housekeeping requirements (How often do linen and towels
need to be changed? How frequently are rooms prepared for re-letting?).
There are two (2) ways of calculating an average length of stay:
o Mean average – This is the total value of items divided by the number of items.
o Mode – This is the most frequently occurring item in a set of statistics.
Example: Assume that STI Hotel has the following figures for October. Determine the guests’ average
length of stay using mean average and mode.
Sleeper nights sold
Length of stay (nights) Number of guests
(length of stay x no. of guests)
1 12 12
2 25 50
3 13 39
4 6 24
5 4 20
60 145
 Mean average = total number of nights sold ÷ total number of guests
Mean average = 145 ÷ 60 = 2.42
Therefore, with a total of 145 sleeper nights sold in October and 60 guests, each stayed an average
of 2.42 nights.
 Mode = 2 nights (the most frequently occurring length of stay based on the number of guests)

From this example, it is seen that 37 (12 + 25) out of 60 (62%) of STI Hotel’s guests stay for two (2) nights
or less. Hence, the hotel must either focus its facilities on this type of guests or work harder to attract
long-staying guests.
• Guest origin – This determines where guests come from. The information gathered will be used to support
hotel marketing (Which areas offer “ripe” audiences for advertising and sales campaigns?) and services
offered (Which languages will most likely be spoken by guests that may require translation or the presence
of multi-lingual staff? What cultural differences will need to be taken into account?).
The guests’ nationality is logged at registration. A computerized system can automatically provide a
breakdown of guests by nationality, city, region, or postal code, although a similar breakdown can be done
manually.
𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁 𝑜𝑜𝑜𝑜 𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓 𝑎𝑎 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟/𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐
𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆𝑆 % = 𝑥𝑥 100
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛 𝑜𝑜𝑜𝑜 𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔

Based on the previous example, if 22 of the hotel’s 60 guests in October were from Thailand, this would
be 36.67% (22 ÷ 60 x 100). Hence, 36.67% of the hotel’s guests are Thai.
• Average guest expenditure – It determines how much guests spend on average during their stay. This
information can be used to identify the most profitable guest segments (e.g., business travelers, group
inclusive tours, domestic travelers, etc.), so the hotel can maximize revenue by seeking more of their
business and giving them reservation priority over less profitable segments where relevant.

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Average expenditure figures will be more useful if broken down by nationality or source of booking so that
the hotel knows which categories of guest tend to spend more, which are therefore particularly worth
attracting.
• Source of booking – This determines where the hotel’s bookings come from (corporate, travel, tour
operator, individual/personal booking, or chance/walk-in guests). The information can be used to identify
which sources offer the highest proportion of bookings and the highest revenue, so the hotel can target
its marketing to the most effective sources and can plan facilities and services for the needs of different
types of guests (e.g., corporate, personal, or chance).
Occupancy statistics is used to derive the main part of a hotel’s earnings and profit from the sale of
accommodation or lettings. It is a key measure of performance with regard to how fully occupied is the hotel.
• Room occupancy – This is the percentage of rooms occupied in a given period. This can be calculated using
this formula:
𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠/𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜
𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜 = 𝑥𝑥 100.
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛 𝑜𝑜𝑜𝑜 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟

• Sleeper or bed occupancy – This refers to the number of guests as a percentage of capacity. This is a much
less impressive figure; although a hotel has sold a good proportion of its rooms, a significant number of
twins and double have been let for single occupancy (i.e., for one [1] person), hence, wasting the potential
sale of the bed. Sleeper or bed occupancy can be calculated using these formulas:
𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁 𝑜𝑜𝑜𝑜 𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏/𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠
𝐵𝐵𝐵𝐵𝐵𝐵 𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑦𝑦 = 𝑥𝑥 100
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏/𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠

𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑜𝑜𝑜𝑜 𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 𝑙𝑙𝑙𝑙𝑙𝑙 𝑡𝑡𝑡𝑡 2 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝

𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜 = 𝑥𝑥 100.
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛 𝑜𝑜𝑜𝑜 𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑 𝑜𝑜𝑜𝑜 𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 𝑟𝑟𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜

Example: STI Hotel has the following room breakdown for November. Determine its a) room occupancy,
b) bed occupancy, and c) double occupancy.
Rooms Beds Occupancy
50 Single rooms = 50 45 Occupied
80 Twin rooms = 160 45 Occupied by two (2) persons + 30 occupied by one (1) person
70 Double rooms = 140 25 Occupied by two (2) persons + 30 occupied by one (1) person
200 350 175 rooms let (245 sleepers = 45 single; 45 x 2 twin + 30; 25 x 2 double + 30)

a) Room occupancy
𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠/𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜
𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜 = 𝑥𝑥 100
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛 𝑜𝑜𝑜𝑜 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟
175
= 𝑥𝑥 100 = 𝟖𝟖𝟖𝟖. 𝟓𝟓%
200

b) Bed occupancy
𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁 𝑜𝑜𝑜𝑜 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠
𝐵𝐵𝐵𝐵𝐵𝐵 𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜 = 𝑥𝑥 100
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛 𝑜𝑜𝑜𝑜 𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏
245
= 𝑥𝑥 100 = 𝟕𝟕𝟕𝟕%
350

c) Double occupancy
𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑜𝑜𝑜𝑜 𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 𝑙𝑙𝑙𝑙𝑙𝑙 𝑡𝑡𝑡𝑡 2 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝
𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷 𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜 = 𝑥𝑥 100
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛𝑛 𝑜𝑜𝑜𝑜 𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑 𝑜𝑜𝑜𝑜 𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟
45 + 25 70
= 𝑥𝑥 100 = 𝑥𝑥 100 = 𝟒𝟒𝟒𝟒. 𝟔𝟔𝟔𝟔%
80 + 70 150

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In the example, less than half (46.67%) of the double occupancy rooms are being let accordingly; the
other half are wasting the potential sale of the other bed. If the hotel has a “per room tariff” rather
than “per person tariff,” one may not think that this situation matters too much as the hotel is not
losing out on a room charge for the second person.
Note that in calculating the total number of sleepers, hotels must not make temporary adjustments
for additional guests by “squeezing in” fold-out beds and the like, but stick to a standard figure of the
number of beds in a room.
Revenue statistics is used to add monetary values to the occupancy statistics. This determines how the hotel
is doing financially.
• Average daily rate (ADR)/Average room rate (ARR) – This shows how much a room is being sold for across
the hotel. This is the formula for calculating the ADR/ARR:
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑜𝑜𝑜𝑜 𝑎𝑎 𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔 𝑑𝑑𝑑𝑑𝑑𝑑 (𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒 𝑉𝑉𝑉𝑉𝑉𝑉 𝑎𝑎𝑎𝑎𝑎𝑎 𝑠𝑠𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑡𝑡𝑡𝑡𝑡𝑡)
𝐴𝐴𝐴𝐴𝐴𝐴/𝐴𝐴𝐴𝐴𝐴𝐴 = .
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠
Example: STI Hotel sold 175 rooms charging a per-person rate of ₱3,155.50. Its total room income on the
day in question would be ₱3,155.50 x 245 guests/sleepers = ₱773,097.50. For this day, the average daily
rate is
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑜𝑜𝑜𝑜 𝑎𝑎 𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔 𝑑𝑑𝑑𝑑𝑑𝑑 (𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒 𝑉𝑉𝑉𝑉𝑉𝑉 𝑎𝑎𝑎𝑎𝑎𝑎 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 𝑡𝑡𝑡𝑡𝑡𝑡)
𝐴𝐴𝐴𝐴𝐴𝐴/𝐴𝐴𝐴𝐴𝐴𝐴 =
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠
773,097.50
𝐴𝐴𝐴𝐴𝐴𝐴/𝐴𝐴𝐴𝐴𝐴𝐴 = = ₱ 𝟒𝟒, 𝟒𝟒𝟒𝟒𝟒𝟒. 𝟕𝟕𝟕𝟕.
175

• Yield percentage – Also called percentage revenue achieved or income occupancy percentage, this
expresses the room revenue actually earned by the hotel as a percentage of the maximum possible
revenue it could have earned (by 100% occupancy at full rack rates). This is the formula for calculating the
yield percentage:
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 (𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 𝑥𝑥 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑐𝑐ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎)
𝑌𝑌𝑌𝑌𝑌𝑌𝑌𝑌𝑌𝑌 % = 𝑥𝑥 100.
𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 (𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑥𝑥 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟)

Example: Calculate STI Hotel’s yield percentage using the following tariffs (excluding VAT):
Rooms Beds Occupancy
50 Single rooms = 50 45 Occupied
80 Twin rooms = 160 45 Occupied by two (2) persons + 30 occupied by one (1) person
70 Double rooms = 140 25 Occupied by two (2) persons + 30 occupied by one (1) person
200 350 175 rooms let (245 sleepers = 45 single; 45 x 2 twin + 30; 25 x 2
double + 30)
o Single room = ₱ 2,839.95
o Twin room = ₱ 3,786.60; single occupancy = ₱ 3,155.50
o Double room = ₱ 4,733.25; single occupancy = ₱ 3,786.60
Total room revenue = (45 x ₱ 2,839.95) + (45 x ₱ 3,786.60) + (30 x ₱ 3,155.50) + (25 x ₱ 4,733.25) + (30 x ₱ 3,786.60)
= ₱ 127,797.75 + ₱ 170,397 + ₱ 94, 665 + ₱ 118,331.25 + ₱ 113, 598 = ₱ 624, 789
Potential revenue = (50 x ₱ 2,839.95) + (80 x ₱ 3,786.60) + (70 x ₱ 4,733.25)
= ₱ 141, 997.50 + ₱ 302, 928 + ₱ 331,327.50 = ₱ 776, 253
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 (𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 𝑥𝑥 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑐𝑐ℎ𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎)
𝑌𝑌𝑌𝑌𝑌𝑌𝑌𝑌𝑌𝑌 % = 𝑥𝑥 100
𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃𝑃 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 (𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑥𝑥 𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟)
₱ 624, 789
𝒀𝒀𝒀𝒀𝒀𝒀𝒀𝒀𝒀𝒀 % = 𝑥𝑥 100 = 𝟖𝟖𝟖𝟖. 𝟒𝟒𝟒𝟒%
₱ 776, 253

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In the example, all guests are assumed to have paid the full rack rate. Obviously, the yield will be lowered
if some guests pay discounted rates. Yield is thus affected both by rate discounting and by occupancy
rates.
• Revenue per available room (RevPAR) – Also known as rooms yield, this provides a standard measure that
helps in determining the contribution each hotel room has made to the hotel’s financial performance. This
can be used to compare one’s financial position to other hotels from one season to another or from this
year’s performance with last year’s performance. In a hotel charging a per-room rate, this could be
calculated as
𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑖𝑖𝑖𝑖 𝑎𝑎 𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝
𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 = .
𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁 𝑜𝑜𝑜𝑜 𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟

The position is a bit more complicated if the hotel will charge with a per-person rate instead of a per-room
rate. Hence, the following alternative calculation can be used based on the previous examples in Pages 9-
10:
𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 = 𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑥𝑥 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜 % 𝑖𝑖𝑖𝑖 𝑎𝑎 𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔𝑔 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝
𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 = ₱ 4,417.70 𝑥𝑥 87.5% (0.875) = ₱ 𝟑𝟑, 𝟖𝟖𝟖𝟖𝟖𝟖. 𝟒𝟒𝟒𝟒.
• Gross operating profit per available room (GOPPAR) – This is used to compute how much revenue a hotel
earns above its operational costs. Profit is the difference between costs and revenue, that is, the surplus
left over the business after covering the costs. Gross operating profit (GOP) is the profit of the business
before the deduction of charges, such as interest and taxes. It is the difference between revenue and
operating costs.
This is the formula for calculating the gross operating profit per available room:
𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺 𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 (𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 − 𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡𝑡 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐)
𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺 =
𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟 𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑥𝑥 𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝𝑝 𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐𝑐 (𝑛𝑛𝑜𝑜. 𝑜𝑜𝑜𝑜 𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑)
Example: These two (2) competing hotels are situated in the province of Cebu. STI Hotel Mandaue has 200
rooms and makes a GOP of ₱ 4,417,700.00 in its October accounting period (31 days). Gold Hotel Talisay,
on the other hand, has 145 rooms and reports a GOP of ₱ 2,524,400.00 in its October accounting period
(31 days). Determine which hotel is more profitable.
₱ 4,417,700.00
𝑆𝑆𝑆𝑆𝑆𝑆 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻 𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀𝑀′𝑠𝑠 𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺 = = ₱ 𝟕𝟕𝟕𝟕𝟕𝟕. 𝟓𝟓𝟓𝟓
(200 𝑥𝑥 31 = 6,200)
₱ 2,524,400.00
𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺 𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻𝐻 𝑇𝑇𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎′𝑠𝑠 𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺 = = ₱ 𝟓𝟓𝟓𝟓𝟓𝟓. 𝟔𝟔𝟔𝟔
(145 𝑥𝑥 31 = 4,495)
Despite having the same accounting periods and provincial location, it is still seen at a glance that STI Hotel
Mandaue is a more profitable operation upon calculating the hotels’ respective GOPPAR. This example
shows that by having more available rooms, a hotel can potentially generate higher gross operating profit.

References:
Bhakta, A. (2012). Professional hotel front office management. Manila, PH: Tata McGraw-Hill Education (Asia).
Carev, D. (2015). Hotel sales and front office operations. Zagreb, HR: VPŠ Libertas.
Confederation of Tourism and Hospitality (2009). Front office operations. London, UK: BPP Learning Media Ltd.
Ismail, A. (2010). Front office operations and management. Albany, NY: Delmar/Thomson Learning, Inc.
Travel Pulse (2019). American express travel. Retrieved from https://www.travelpulse.com/suppliers/host-agency-and-consortia/american-express-
travel.html on 29 August 2019
Tutorials Point (2016). Front office management [PDF file]. Retrieved from
https://www.tutorialspoint.com/front_office_management/front_office_management_tutorial.pdf on 17 January 2019
Vallen, G. K. (2014). Check-in checkout: Managing hotel operations. Essex, UK: Pearson Education Limited.

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