The front office budgeting document outlines key processes for forecasting rooms revenue and expenses in the long term. This includes forecasting rooms revenue using historical occupancy rates, average daily rates and rooms available. It also discusses estimating variable expenses. The document also summarizes important short-term forecasting factors like reservation trends, group profiles and scheduled events to forecast near-term room availability. Key performance metrics for evaluating front office operations such as occupancy percentage, average daily rate and revenue per available room are also introduced.
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The front office budgeting document outlines key processes for forecasting rooms revenue and expenses in the long term. This includes forecasting rooms revenue using historical occupancy rates, average daily rates and rooms available. It also discusses estimating variable expenses. The document also summarizes important short-term forecasting factors like reservation trends, group profiles and scheduled events to forecast near-term room availability. Key performance metrics for evaluating front office operations such as occupancy percentage, average daily rate and revenue per available room are also introduced.
The front office budgeting document outlines key processes for forecasting rooms revenue and expenses in the long term. This includes forecasting rooms revenue using historical occupancy rates, average daily rates and rooms available. It also discusses estimating variable expenses. The document also summarizes important short-term forecasting factors like reservation trends, group profiles and scheduled events to forecast near-term room availability. Key performance metrics for evaluating front office operations such as occupancy percentage, average daily rate and revenue per available room are also introduced.
Copyright:
Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPT, PDF, TXT or read online from Scribd
The front office budgeting document outlines key processes for forecasting rooms revenue and expenses in the long term. This includes forecasting rooms revenue using historical occupancy rates, average daily rates and rooms available. It also discusses estimating variable expenses. The document also summarizes important short-term forecasting factors like reservation trends, group profiles and scheduled events to forecast near-term room availability. Key performance metrics for evaluating front office operations such as occupancy percentage, average daily rate and revenue per available room are also introduced.
Copyright:
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Front Office Budgeting
The most important long-term planning function FOM is responsible for: 1. Forecasting Rooms Revenue
Forecasted Annual Rooms Revenue = Rooms Available Occupancy Percentage Average Daily Rate
Rooms Available = Total Rooms X 365 Days
Forecasting Rooms Revenue Example
100 Room Hotel 100 x 365 days = 36,500 Rooms Available 75% Occupancy Percentage .75 $50 Average Daily Rate
36,500 x .75 x $50 = $1,368,750
Room Forecasting Ten-Day Forecast Done by FOM and Reservations Manager
House Count Expected number of guests in the hotel Divided into group and non-group
Three-Day Forecast Updated with current information Identifies changes in staffing needs
Forecasting Room Availability
The most important short-term planning function Hotel Occupancy History The past few months and last year at this time Reservation Trends How far in advance are reservations being made?
Scheduled Events City-wide conventions; sporting events, etc.
Group Profiles Pickup history
Forecasting Data No-shows Expected guests who did not arrive.
Walk-ins
Guests without reservations.
Overstays
Guests who stay beyond their departure date.
Understays
Guests who check out before departure date.
Percentage Of No-shows Number of Room No-Shows Number of Room Reservations
Purpose: Helps front office managers decide when (and if) to sell rooms to walk-in.
Percentage Of Walk-ins Number of Room Walk-Ins Total Number of Room Arrivals
Purpose: Helps front office managers know how many walk-ins to expect.
Percentage Of Overstays Number of Overstay Rooms Number of Expected Check-Outs Purpose: Alerts front office managers to potential problems when rooms have been reserved for arriving guests.
Percentage Of Understays Number of Understay Rooms Number of Expected Check-Outs Purpose: Alerts front office manager to additional room availability.
20% of hotels charge understay guests
Rooms Availability Formula
+ + Total number of guestrooms Out of order rooms Stayovers Reservations Reservations x no-show percentage Understays Overstays Number of Rooms Available for Sale
Rooms Availability Formula Example
150 Guestrooms - 5 Out of Order - 45 Stayovers - 50 Reservations + 10% No-show + 5 Understays - 20 Overstays 40 Rooms Available for Sale
Establishing Room Rates
Marketing Positioning Statement
Room rates reflect service expectations to the hotels target markets.
1.
Market Condition Approach
2. 3.
Rule-of-thumb Approach Hubbart Formula Approach
1. Market Condition Approach
Common sense approach.
Often used, but has many problems. Base room rates on your competitions rates. Doesnt take into account new properties and construction costs. Allows the local market to determine the rate
2. Rule-of-thumb Approach Sets the minimum average room rate at $1 for each $1,000 of construction & furnishing costs per room. Assumes 70 % occupancy $125,000 in construction and furnishings - $125 room rate Doesnt take inflation into account
Doesnt include other hotel services
2. Rule-of-thumb Approach Average per-room cost for hotel development: Segment
Budget/Economy Midscale w/o Midscale with F&B Full Service Luxury/Resorts
3. Hubbart Formula Approach
Bottom-upapproach
Begin with desired profit based upon expected Return on Investment (ROI) Calculate pretax profits, fixed charge, management fees, & operating expenses Estimate other departmental income Determine the required rooms department income Add expenses to get rooms department revenue
3. Hubbart Formula Approach
Average Room Rate = Rooms Department Revenue Expected Number of Rooms Sold Sets a Target Average Price Lets you determine if your target is too high
You may have to finance the difference
Evaluating Front Office Operations
Occupancy Percentage The most commonly used operating ratio
Average Daily Rate (ADR)
Average of all room types and rates
Revenue per Available Room (RevPAR)
Measures revenue capabilities of hotel
Occupancy Percentage Number of Rooms Occupied Number of Rooms Available
What does rooms occupied include?
Rooms sold + comp rooms
What does rooms available include?
Use the rooms availability formula
2001= 59.20%
Occupancy Percentage Example
Number of Rooms Occupied Number of Rooms Available
Sold 95 rooms with 5 comps 150 room hotel with 25 out of order 100 125 =
95 + 5 = 150 - 25 =
80%
Daily Occupancy Rates
67.7 70 60 50 40 30 20 10 0 Sun Mon Tues Weds Thurs Fri Sat
68.3
62.4 47.8
65.3
66.5
70.1
Average Daily Rate (ADR)
Rooms Revenue Number of Rooms Sold Number of Rooms Sold includes comps
2001 = $83.48
Average Daily Rate Example
Rooms Revenue Number of Rooms Sold
$10,000 Rooms Revenue Sold 95 rooms with 5 comps
$10,000 100 =
$10,000 95 + 5 =
$100
Revenue per Available Room (RevPAR)
Actual Rooms Revenue Number of Available Rooms
or: Occupancy Percentage x ADR
2001 = $49.36
RevPar Example Actual Rooms Revenue Number of Available Rooms
$10,000 Rooms Revenue 150 room hotel with 25 out of order $10,000 125 =
$10,000 150 - 25
$80
Revenue per Available Room Example
Occupancy Percentage x ADR 80% x $100 = $80 RevPAR Limitations:
* Does not include Revenue & Costs from F&B and other outlets
Is RevPAR higher or lower than ADR ? When will they be equal?
RevPAR Index Hotel RevPAR Competitive Set RevPAR
You decide what hotels make up your competitive
set of hotels that you compare yourself too.
Get your Comp Set RevPAR figures from the STAR Report or the HRM (HotelRevMax) Report
RevPAR Index - Example
Hotel RevPAR Competitive Set RevPAR
Your Hotels RevPAR is $58; Comp Set is $60 $58/$60 = .966 x 100% = 96.6%
Below 100% = Under Performing Hotel
100% = Fair Share Above 100% = Over Performing Hotel
RevPAR Index Missed Revenue Example
If your Hotels RevPAR is $58 and your Comp Sets is
$60, you are losing $2 per room in potential revenue
Calculate your potential lost revenue per month
RevPAR Difference x Number of Rooms x Days in Month
Ex. Missed Revenue for 150 room hotel in December $2 x 150 x 31 = $9,300
RevPAR Index
You need to select a realistic Comp Set of hotels
Comparing a luxury hotel to economy hotels inflates
your RevPAR Index but doesnt help your revenues
A consistent increase in RevPAR Index is your goal Ideally, you want a RevPAR Index above 100% and a positive percentage change from month to month
