It is the basic function of management. It deals with chalking out a future course of action & deciding in advance the most appropriate course of actions for achievement of pre-determined goals. A plan is a future course of actions. Planning is determination of courses of action to achieve desired goals. Thus, planning is a systematic thinking about ways & means for accomplishment of pre-determined goals. Planning is necessary to ensure proper utilization of human & non-human resources. It is all pervasive, it is an intellectual activity and it also helps in avoiding confusion, uncertainties, risks, wastages etc. A front office manager’s first step in planning should be to establish department goals, both near-term and long-term.
Using planned goals as a guide, front office managers can organize the department by dividing the work among front office staff. Managers should distribute work so that everyone participates and the work can be completed in a timely manner. Organizing includes determining the order in which tasks should be performed and establishing completion deadlines for each group and subgroup of tasks. Organizing as a process involves:
- Identification of activities.
- Classification of grouping of activities.
- Assignment of duties.
- Delegation of authority and creation of responsibility.
- Coordinating authority and responsibility relationships.
It is the function of manning the organization structure and keeping it manned. Staffing has assumed greater importance in the recent years due to advancement of technology, increase in size of business, complexity of human behavior etc. The main purpose of staffing is to put right man on right job. Staffing involves:
- Manpower Planning (estimating man power in terms of searching, choose the person and giving the right place).
- Recruitment, Selection & Placement.
- Training & Development.
- Performance Appraisal.
- Promotions & Transfer.
Direction is that inert-personnel aspect of management which deals directly with influencing, guiding, supervising, motivating sub-ordinate for the achievement of organizational goals. Direction has following elements:
- Supervision- implies overseeing the work of subordinates by their superiors. It is the act of watching & directing work & workers.
- Motivation- means inspiring, stimulating or encouraging the sub-ordinates with zeal to work. Positive, negative, monetary, non-monetary incentives may be used for this purpose.
- Leadership- may be defined as a process by which manager guides and influences the work of subordinates in desired direction.
- Communications- is the process of passing information, experience, opinion etc from one person to another. It is a bridge of understanding.
It implies measurement of accomplishment against the standards and correction of deviation if any to ensure achievement of organizational goals. The purpose of controlling is to ensure that everything occurs in conformities with the standards. An efficient system of control helps to predict deviations before they actually occur. The control process ensures that the actual results of business operations closely match planned results. Controlling has following steps:
- Establishment of standard performance.
- Measurement of actual performance.
- Comparison of actual performance with the standards and finding out deviation if any.
- Corrective action.
Establishing Room Rates
- A front office revenue management system will almost always have more than one room rate category for each guestroom.
- Room rate categories generally correspond to types of rooms (suites, two beds, one bed, etc.).
- Differences in a hotel’s room rates are based on criteria such as room size, location within the hotel, view, furnishings, and amenities.
- The “rack rate” is the standard price for an overnight accommodation, as determined by management, for a particular room or room type. Unless a guest qualifies for an authorized room rate discount, the rack rate will apply.
- Front office employees are expected to sell rooms at the rack rate unless a guest qualifies for a discounted room rate.
Forecasting Room Availability
The most important short-term planning that front office managers engage in is forecasting the number of rooms available for future reservations.
- Room availability forecasts are used to help manage the reservations process.
- The number of rooms available on any given night, forecasting the number of rooms available for sale and the number of rooms expected to be occupied can be useful in computing an expected occupancy percentage.
- Occupancy forecasts may be an important consideration for making room rate pricing decisions.
- Without an accurate forecast, rooms may go unsold or be sold at less-than-optimal rates.
- Room occupancy forecasts can be useful when scheduling employees.
- Forecasting skill is acquired through experience, effective recordkeeping, and accurate counting methods.
- Expected arrivals
- Expected walk-ins
- Expected stayovers
- Expected no-shows
- Expected understays
- Expected check-outs
- Expected overstays
Percentage of No-Shows: Helps front office managers decide when (and if) to sell already-committed rooms to walk-in guests. The percentage of no-show indicates the proportion of reserved rooms that the expected guest did not arrive to occupy on the expected arrival date.
Number of No-Show Rooms
Percentage of No Show = ——————————————- X 100
Number of Room Reservations
Percentage of Walk-Ins: Helps front office managers know how many walk-ins to expect, especially when the hotel is near full occupancy.
Number of rooms occupied by walk-ins for a period
Percentage of Walk-In = ——————————————————————– X 100
Total number of room arrivals for the same period
Percentage of Overstays: Alerts front office managers to potential problems when the hotel is near full occupancy and rooms have been reserved for arriving guests. Overstay represent rooms occupied by guests who stay beyond originally scheduled departure dates. The percentage of overstays is calculated by dividing the number of overstay rooms for a period by the total number of expected room check-outs for the same period.
Number of expected check-outs = Number of actual check-outs – Under stays + Overstays
Number of Overstay Rooms
Percentage of Overstays = ——————————————– X 100
Number of Expected Check-Outs
Percentage of Understays: Alerts front office manager to probable additional room availability when the hotel is near full occupancy. Under stay represents rooms occupied by guests who check-out before their scheduled departure dates. The percentage of understays is calculated by dividing the number of understay rooms for a period by the total number of expected room check-outs for the same period.
Number of Under Stay Rooms
Percentage of Under Stays = ———————————————-X 100
Number of Expected Check-Outs
Once relevant occupancy statistics have been gathered, the number of rooms available for sale on any given date can be determined by the following formula:
Number of rooms available for sale = Total no of guest rooms
– Number of out-of order rooms
– Number of room stayovers
– Number of room reservations
+ Number of room reservations x Percentage of no-shows
+ Number of room under stays
– Number of room overstays
Number of walk-ins is not included because the number of walk-ins a hotel can accept is determined by the number of rooms available for sale. Front office planning decisions must remain flexible; they are subject to change as the front office learns of reservation cancellations and modification. It should also be noted that room availability forecasts are based on assumptions whose validity may vary on any given day.
A ten-day forecast usually consists of: daily forecasted occupancy figures, the number of group commitments (with details about the groups), and a comparison of the previous period’s forecasted and actual room counts and occupancy percentages. A special ten-day forecast may also be prepared for food and beverage, banquet, and catering operations. To help departmental managers plan their staffing and payroll levels for the upcoming period, the ten-day forecast should be completed and distributed in advance of the coming period. Most automated systems have programs to help managers accurately forecast business.
A three-day forecast is an updated report that reflects a more current estimate of room availability. A three-day forecast details significant changes or events not highlighted on the ten-day forecast. Three-day forecasts are intended to guide management in fine-tuning labor schedules and adjusting room availability information. In some hotels, a daily revenue meeting is held to focus on occupancy and rate changes for the next several days; the results of this meeting are often reflected in the three-day forecast.
Evaluating Front Office Operations
Evaluating the results of front office operations is an important management function; without evaluation, managers will not know whether the front office is attaining planned goals. Front office managers should evaluate the results of department activities on a daily, monthly, quarterly, and yearly basis. Important tools that front office managers can use to evaluate the success of their operations include the following: daily report of operations, occupancy ratios, rooms revenue analysis, income statement, rooms schedule, rooms division budget reports, operating ratios, and ratio standards.
The daily report of operations is also known as the manager’s report, the daily report, and the daily revenue report. The daily report of operations summarizes the hotel’s financial activities during a twenty-four-hour period. The daily report of operations provides a means of reconciling cash, bank accounts, revenue, and accounts receivable.
Occupancy ratios measure the effectiveness of the front office and reservations, sales staffs in selling guestrooms. The following rooms statistics must be gathered to calculate basic occupancy ratios: number of rooms available for sale, number of rooms sold, number of guests, number of guests per room, and net rooms revenue. This information is usually available in the daily report of operations. Common occupancy ratios include occupancy percentage, multiple occupancy, average daily rate, revenue per available room, revenue per available customer, and average rate per guest. The front office system typically generates occupied rooms data and calculates occupancy ratios for the front office manager to review.
The most commonly used operating ratio in the front office is occupancy percentage. Occupancy percentage relates the number of rooms either sold or occupied to the number of rooms available during a specific period of time. Some hotels use the number of rooms sold to calculate occupancy percentage, while others use the number of rooms occupied. Out-of-order rooms may or may not be included in the number of rooms available, depending on the hotel.
The calculation of occupancy ratio requires the following data
- Occupancy Percentage = (Number of Rooms Sold / Total Number of Rooms Available for Sale) x 100
House count is the total number of resident guest present in the hotel
Most front office managers calculate an average daily rate even though room rates within a property can vary significantly depending on the type of room, type of guest, day of the week, and season. Some hotels include complimentary rooms when calculating average daily rate, to show their effect on the rate.
ADR is the average rental income per occupied room for a given time period
- Average Daily Rate = Total Room Revenue/ Total Number of Rooms Sold
Average Rate per Guest (ARG):
- ARG = Total Room Revenue/ Total Number of Guests
Revenue per Available Room( Rev Par): Rev Par is used to measure and compare the performance of two or more hotels. Revenue per Available Room (Rev PAR) is one of the most important hotel statistics, because it provides a statistical benchmark for comparison with similar hotels.
- Rev PAR = ADR x Occupancy percentage
Yield management or revenue management is the process of understanding, anticipating, and influencing consumer behavior in order to maximize revenue or profits from a fixed, perishable resource such as airline seats or hotel rooms. The challenge is to sell the right resources to the right customer at the right time for the right price. This process can result in price discrimination, where a firm charges different prices from customers consuming otherwise identical goods or services.
Yield management can defined as ‘a technique based on the principle of demand and supply, used to maximize the revenue generation of any hotel by lowering prices to increase sales during off season (low demand period) and raising the prices during peak season (high demand periods)’
A guest room is one of the highly perishable products of the hospitality sector, if a room is not sold on a particular day; the entire potential revenue that could be generated from it is lost for ever.
Benefits of Yield Management
There are a lot of benefits associated with the use of yield management in the hospitality sector, especially in hotels. These benefits include the following:
- Improved forecasting
- Improved seasonal pricing and inventory decisions
- Identification of new market segments
- Identification of market segment demands
- Enhanced coordination between the front office and sales divisions
- Determination of discounting activity
- Improved development of short-term and long-term business plans
- Increased business and profits
- Savings in labour costs and other operating expenses
- Initiation of consistent guest-contact scripting