Professional Documents
Culture Documents
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:
-
The selection proceeds through the introduction of the hotel which can be done in 3 ways:
-
On Internet through a hotels website (one of the most important sources of reservations
for hotels)
An advertisement in a newspaper or magazine
Hotel guides
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.
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.
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/Concierge
Doorman
Bellman/Bagagist
Piccolo/Chasseur
Liftboy
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:
-
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 hotel agreement on the loss of personal valuables gets signed
Make sure they sign the agreement in which payment is ensured.
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
Continental plan
Modified American plan/ Half board
American plan/ Full board
= Room only
= Room and Breakfast
= Room, breakfast and dinner
= Room, breakfast, lunch and dinner
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
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
- 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.
6
+
+
-
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 Councils 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.
The staffing ratio in Asia is higher than in Europe because of the difference in labour expenses.
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
- 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 guests 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 guests 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 guests 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 guests 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.
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.
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12
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.)
13
14
15
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 room to be cleaned
By one housekeeping associate
during one shift.
x100%
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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.
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
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19
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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 its 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.
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
21
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:
-
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
- 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)
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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.
+ 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.
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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 hotels 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:
- 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.
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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 dont have the room number on it. When a guest loses his key card it would be no problem
since a possible thief doesnt 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)
- 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.
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27
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
- Less attractive returns on other types of real estate
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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
companys 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 companys
business directions and maintain its operating standards.
The advantages for the business-format franchisee are:
- the use of the brand name, profiting from the franchisors 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.
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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:
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 hotels 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.
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Mid-price
Courtyard
Residence Inn
Ramada
Top price
Marriott
New World
Renaissance
RJW Marriott
Super de luxe
Ritz-Carlton
There are two different ways to calculate the average room rate, the rule-of-thumb calculation
and the Hubbart Formula.
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
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.
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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 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.
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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 dont 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.
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-todate 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.
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= 100% yield
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)
- 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.
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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.
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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 hotels 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, 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
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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.
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.
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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.
Cashiers report: Lists cashier activity including cash and credit cards an PMS totals.
Managers 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:
Total revenue
-paid-outs and noncollect sales
=daily revenue
-total cash income
-todays outstanding A/R income
=0
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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 longdistance 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 justify the daily
bank deposit. Todays outstanding A/R is added to Yesterdays 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.
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Cashiers report: The cash and credit card vouchers are added to the individual cashiers 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 days activities and the hotels 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 housekeepers report.
Formulas for determining operating statistics:
Occupancy percentage
Number of rooms sold
x100
Number of rooms available
Double occupancy percentage
x100
Yield
x100
Room income
Number of rooms sold
RevPAR
Room revenue
Number of available rooms
Or
Hotel occupancy percentage x average daily rate
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 writeoffs
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