1. Bali Hospitality Professional
Service
Drs. Agustinus Agus Purwanto, MM
Senior Consultant
Jl. Tukad Batanghari VIII/7A
Denpasar – Bali – Indonesia
E-mail:
agustinus.aguspurwanto@ehotelier.com
Web:
www.linkedin.com/in/aguspurwanto

2. Chapter 8Chapter 8
The Functions ofThe Functions of
ManagementManagement

3. POSDCORBPOSDCORB
P Planning
O Organizing
S Staffing
D Directing
CO Coordinating
R Reporting
B Budgeting

4. Front Office BudgetingFront Office Budgeting
The most important long-term planning
function
FOM is responsible for:
1. Forecasting Rooms Revenue
 Use historical trend data
2. Estimating Expenses
 Vary directly with rooms revenue

5. Forecasting RoomsForecasting Rooms
RevenueRevenue
Forecasted Annual Rooms Revenue =
Rooms Occupancy Average
Available Percentage Daily Rate
Rooms Available = Total Rooms X 365 Days

6. Forecasting Rooms RevenueForecasting Rooms Revenue
ExampleExample
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

7. Room ForecastingRoom 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

8. Forecasting RoomForecasting Room
AvailabilityAvailability
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.

9. Forecasting DataForecasting Data
No-shows
 Expected guests who did not arrive.
Walk-ins
 Guests without reservations.
Overstays
 Guests who stay beyond their departure
date.
Understays

10. Percentage Of No-Percentage Of No-
showsshows
Number of Room No-Shows
Number of Room Reservations
Purpose:
 Helps front office managers
decide when (and if) to sell rooms
to walk-in.

11. Percentage Of Walk-Percentage Of Walk-
insins
Number of Room Walk-Ins
Total Number of Room Arrivals
Purpose:
 Helps front office managers
know how many walk-ins to
expect.

12. Percentage OfPercentage Of
OverstaysOverstays
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.

13. Percentage OfPercentage Of
UnderstaysUnderstays
Number of Understay Rooms
Number of Expected Check-Outs
Purpose:
 Alerts front office manager to
additional room availability.
 20% of hotels charge understay

14. Rooms Availability FormulaRooms 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

15. Rooms AvailabilityRooms Availability
Formula ExampleFormula Example
150 Guestrooms
- 5 Out of Order
- 45 Stayovers
- 50 Reservations
+ 10% No-show
+ 5 Understays
- 20 Overstays
40 Rooms Available for
Sale

16. Establishing RoomEstablishing Room
RatesRates
Marketing Positioning Statement
 Room rates reflect service expectations to
the hotel’s target markets.
1. Market Condition Approach
2. Rule-of-thumb Approach
3. Hubbart Formula Approach

17. 1. Market Condition1. Market Condition
ApproachApproach
 Common sense approach.
 Often used, but has many problems.
 Base room rates on your competitions’
rates.
 Doesn’t take into account new properties
and construction costs.
 Allows the local market to determine the

18. 2. Rule-of-thumb Approach2. 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
 Doesn’t take inflation into account

19. 2. Rule-of-thumb Approach2. Rule-of-thumb Approach
Average per-room cost for hotel development:
Segment Per-room cost
 Budget/Economy $52,800
 Midscale w/o $85,600
 Midscale with F&B $103,100
 Full Service $165,900
 Luxury/Resorts $516,300

20. 3. Hubbart Formula3. Hubbart Formula
ApproachApproach
“Bottom-up”approach
 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

21. 3. Hubbart Formula3. Hubbart Formula
ApproachApproach
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

22. EvaluatingEvaluating
Front Office OperationsFront 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

23. Occupancy PercentageOccupancy 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%

24. Occupancy PercentageOccupancy Percentage
ExampleExample
Number of Rooms Occupied
Number of Rooms Available
 Sold 95 rooms with 5 comps
 150 room hotel with 25 out of order
95 + 5 = 100 =
150 - 25 = 125
80%

25. Daily Occupancy RatesDaily Occupancy Rates
47.8
62.4
67.7 68.3 65.3 66.5 70.1
0
10
20
30
40
50
60
70
Sun Mon Tues Weds Thurs Fri Sat

26. Average Daily Rate (ADR)Average Daily Rate (ADR)
Rooms Revenue
Number of Rooms Sold
 Number of Rooms Sold includes
comps

27. Average Daily Rate ExampleAverage Daily Rate Example
Rooms Revenue
Number of Rooms Sold
 $10,000 Rooms Revenue
 Sold 95 rooms with 5 comps
$10,000 $10,000 =
95 + 5 = 100
$100

28. Revenue per Available RoomRevenue per Available Room
(RevPAR)(RevPAR)
Actual Rooms Revenue
Number of Available Rooms
or:
Occupancy Percentage x ADR
2001 = $49.36

29. RevPar ExampleRevPar Example
Actual Rooms Revenue
Number of Available Rooms
 $10,000 Rooms Revenue
 150 room hotel with 25 out of order
$10,000 $10,000 =
150 - 25 125
$80

30. Revenue per Available RoomRevenue per Available Room
ExampleExample
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?

31. RevPAR IndexRevPAR Index
Hotel RevPAR
Competitive Set RevPAR
 You decide what hotel’s make up your
competitive set of hotels that you compare
yourself too.
 Get your Comp Set RevPAR figures from the

32. RevPAR Index - ExampleRevPAR Index - Example
Hotel RevPAR
Competitive Set RevPAR
 Your Hotel’s 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

33. RevPAR IndexRevPAR Index
Missed Revenue ExampleMissed Revenue Example
 If your Hotel’s RevPAR is $58 and your Comp
Set’s 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.

34. RevPAR IndexRevPAR Index
 You need to select a realistic Comp Set of
hotels
 Comparing a luxury hotel to economy hotels
inflates your RevPAR Index but doesn’t help
your revenues
 A consistent increase in RevPAR Index is your
goal