Part I

By Eugene Win CRDE

For Kabul Serena Hotel 2009

Copyright. Eugene Win CRDE

2009

At the end of this session, trainee will

know :
- basic knowledge on establishing room
rates
- how to calculate Daily Operational Ratios.
- how to Forecast Room availability and
basic formulas

Copyright. Eugene Win CRDE

2009

There are various approaches to pricing

rooms. We will examine three popular
approaches.
The Market Condition Approach
The Rule-of-thumb approach
The Hubert Formula

Copyright. Eugene Win CRDE

2009

This approach is the commonsense

approach. Management looks at
comparable hotels in the geographical
market and sees what they are charging for
the same product.
How do our rates compare to those of our
competition?
Are our rates much lower or higher than
those of the competition?

Copyright. Eugene Win CRDE

2009

How are our rates affecting our revenue and

our share of the business?
What is our occupancy percentage? What is
the occ % of the competitive set? Will our
total revenue improve if we increase
(decrease) our rates?
Have any trends emerged during the past
six months?

Copyright. Eugene Win CRDE

2009

The Rule-of-Thumb approach sets the rate of

a room at $1 for each $1,000 of
construction and furnishings cost per room,
assuming a 70% occupancy.
Eg. Assume that average construction cost
of a room is $80,000.00. Using this
approach comes average selling price of
$80.00 per room. Set up different rates for
different room types, but ARR would be
$80.00

Copyright. Eugene Win CRDE

2009

Hubbart Formula approach considers

operating costs, desired profits and
expected number of rooms sold. In other
words, this approach starts with desired
profit, adds income taxes, then adds fixed
charges and management fee, followed by
operating overhead expenses and direct
operating expenses. It is consider a Bottomup approach.

Copyright. Eugene Win CRDE

2009

Hubbart formula (basic) 200 ROOMS HOTEL

Desired net income yearly:

Plus depreciation, taxes
Plus operating expenses
Total required operated income

$ 1,525,000.00
+600,000.00
+1,240,000.00
= 3,365,000.00

Less other department incomes:

- 200,000.00
Total Rooms Division income:
= 3,165,000.00
Rooms direct expenses
+547,500.00 (base on estimated
Total
= 3,7 12,500.00 75% occ of 200 rms
Number of rooms sold in a year
54,750
1 year: 54,750)
Required average room rate:
$ 67.81

Copyright. Eugene Win CRDE

2009

Available Rooms = Total rooms out of order

rooms.
Occupancy % = (number of occupied rooms) /
(number of rooms available for sale) * 100
depends on management decisions , most of the
hotels maintain fixed number of available rooms
without deducting out of order rooms.

Copyright. Eugene Win CRDE

2009

Palace Hotel has 204 rooms: 45 are triple, 60

are double and the remaining is single. On
the night of May 9th, 09 the night auditor
counted 195 rooms occupied, 43 are triple,
58 are double, and the remaining are single.
Moreover, the housekeeping department
communicated only 4 rooms (all single) out
of order for the night of May 09th, 09
What is palace Hotel's Occupancy Rate for
the night of May 09th, 09?
Copyright. Eugene Win CRDE
2009

Occupancy Percentage = (Number of Rooms Occupied) / (Total

Number of Rooms Available For Sale) * 100

Multiple Occupancy Percentage = (Number of Rooms Occupied by

More Than One Guest) / (Total Number of Rooms Occupied) * 100

Single Occupancy Percentage = (Number of Single Rooms Occupied) /

(Total Number of Single Rooms Available For Sale) * 100

Double Occupancy Percentage = (Number of Double Rooms Occupied)

/ (Total Number of Double Rooms Available for Sale) * 100

Triple Occupancy Percentage = (Number of Triple Rooms Occupied) /

(Total Number of Triple Rooms Available For Sale) * 100

Copyright. Eugene Win CRDE

2009

Palace Hotel has 204 rooms: 45 are triple, 60

are double and the remaining is single. On
the night of May 9th, 09 the night auditor
counted 195 rooms occupied, 43 are triple,
58 are double, and the remaining are single.
Moreover, the housekeeping department
communicated only 4 rooms (all single) out
of order for the night of May 09th, 09
What is Palace Hotel's Single, Double, and
Triple Occupancy rates for the night of May
09th, 09?
Copyright. Eugene Win CRDE
2009

Average Guests Per Rooms Sold = (Total Number of Guests) /

(Total Number of Rooms Sold)

Average Daily Rate = (Actual Room Revenue) / (Total Number

of Rooms Sold)

Revenue Per Available Room (RevPAR) = (Actual Room

Revenue) / (Number of Available Rooms)

Revenue Per Available Customer (RevPAC) = (Actual Hotel

Revenue) / (Number of Guests)

Average Rate per Guest (ARG) = (Total Room Revenue)/

(Number of Guests)
Copyright. Eugene Win CRDE
2009

Serena Hotel has 120 rooms: 53 of them are single and

67 are double. On the night of 09/10/09, Serena Hotels
Night Auditor counted a total of 85 rooms occupied, 42 of
which were occupied by more than one guest. Moreover,
on the same night 127 guests were registered. In
addition, 2 rooms were on a complimentary basis. From
the Housekeeping Room Status Report (for the night of
09/10/09), there were a total of 4 rooms Out of Order, 3 of
which were Single. Lastly, the Actual Room Revenue for
the same night was at the order of $ 6,960 and Actual
Hotel Revenue was 10,000
Calculate
Calculate
Calculate
Calculate

the
the
the
the

Average Guest Per Room Sold

Average Daily Rate
Revenue per Available Customer(RevPAC)
RevPAR
Copyright. Eugene Win CRDE
2009

No-shows % = (number of no-show rooms) /

(number of rooms reserved) * 100
Cancellation % = (number of cancellation
rooms) / (number of rooms reserved) * 100
Walk-ins % = (number of walk-in rooms) / (total
number of rooms arrivals) * 100
Overstays % = (number of overstay rooms) /
(number of expected check-outs) * 100
Understays % = (number of understay rooms) /
(number of expected check-outs) * 100

Copyright. Eugene Win CRDE

2009

Given the following data, calculate the

percentage of overstays:

Number of room no-shows

30
Number of room walk-ins
60
Number of overstay rooms
40
Number of understay rooms
20
Number of room reservations
300
Number of room arrivals
340
Number of expected check-outs
380

Copyright. Eugene Win CRDE

2009

Forecasting room availability is forecasting

the number of rooms available for sale on
any future date. This type of forecasting
helps manage the reservation process,
guides the front office staff for an effective
rooms management, and can be used as an
occupancy forecast, which is, further, useful
in attempting to schedule the necessary
number of employees for an expected
volume of business.
Copyright. Eugene Win CRDE
2009

In order to forecast room availability, the

following data are needed:
Number of expected room arrivals
Number of expected room walk-ins
Number of expected room stayovers
Number of expected room no-shows
Number of expected room cancellation
Number of expected room understays
Number of expected room check-outs
Number of expected room overstays

Copyright. Eugene Win CRDE

2009

Total Number of Guest Rooms

- Number of Out of Order Rooms
- Number of Stayovers Rooms
- Number of Reserved Rooms
+ Number of No-show Rooms
+ Number of Cancellation Rooms
+ Number of Check-Out Rooms
+ Number of Understay Rooms
Number of Overstay Rooms
= Number of Rooms Available for Sale

Copyright. Eugene Win CRDE

2009

Given the following data, calculate the rooms

available for sales:

Number of room no-shows

30
Number of room walk-ins
60
Number of overstay rooms
40
Number of understay rooms
20
Number of stay over room
300
Number of room arrivals
40
Number of expected check-outs
80

Copyright. Eugene Win CRDE

2009

THANK YOU!

Copyright. Eugene Win CRDE

2009