Rooms Division Basic Theories I
Transcript of Rooms Division Basic Theories I
Part IBy Eugene Win CRDE
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 Bottom-up approach.
Copyright. Eugene Win CRDE 2009
Hubbart formula (basic) 200 ROOMS HOTEL Desired net income yearly: $ 1,525,000.00 Plus depreciation, taxes +600,000.00 Plus operating expenses +1,240,000.00 Total required operated income = 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 Hotel’s 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 the Average Guest Per Room Sold Calculate the Average Daily Rate Calculate the Revenue per Available Customer(RevPAC) Calculate the 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.
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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