Chapter 8: Check-out & Settlement

1. Chapter 8: Check-out & Settlement 8.5: Evaluating Operations

2. Tools Used to Evaluate Success of Front Office Operations • Daily operations report • Occupancy ratios • Revenue management • Rooms division budget reports • Operating ratios and ratio standards

3. Activity: Tossing Problems Around

4. Daily Operations Report • Also known as manager’s report, the daily report, daily revenue report • Summarizes financial activities during a 24-hour period • Includes room statistics, occupancy ratios, and comments & observations from the accounting staff • The daily operations report explained! • Sample daily operations report

5. Calculate Occupancy Ratios Statistics to gather: • # of rooms available for sale • # of rooms sold • # of guests • # of guests per room • Net rooms revenue

6. Calculate Occupancy Ratios • Occupancy % most commonly used ratio • # of rooms divided by # of rooms available • Multiple occupancy ratio=double occupancy ratio • Forecast f&b revenue, clean linen requirements, analyze average daily room rates • # of rooms occupied by more than 1 guest / # of rooms occupied • Average daily rate=total rooms revenue / # rooms sold • RevPar (Revenue per Available Room): one of most important stats • =actual room rev (including f&b & other sales) / # of rooms available • Average rate per guest = rooms rev / # of guests

7. Analyze Room Revenue • Room rate variance report • Lists all rooms that have been sold at a rate other than the rack rate • Mgrs use to review special rates & whether they are being used effectively • Yield Statistics: help evaluate effectiveness in selling rooms • = actual revenue / potential revenue (Actual revenue is the revenue generated by the number of rooms sold. Potential revenue is the amount of money that would be received if all rooms were sold at their rack rates. )

8. Interpret Rooms Division Budget Report • Monthly report: compares actual rev & expense w/ budgeted amts • Includes both monthly variances & year-to-date variances • $ variances • indicate difference between actual results & budgeted amts • Favourable if actual rev exceeds budgeted rev or if budgeted expenses exceed actual expenses • Unfavourable if budgeted rev exceeds actual rev or if actual expenses exceed budgeted expenses

9. Interpret Rooms Division Budget Report • Expenses increase when rev increase • Not all unfavourable variances are negative • Variance favourable? – verify by • Actual cost / Actual rooms occupied • Budgeted cost / Actual rooms occupied • If actual cost is at or below the budgeted cost per room – variance is positive • % variances = dollar variance / budgeted amt • Mgrs should only analyze and act on significant variances

10. Operating Ratios • a group of ratios that assist in the analysis of hospitality operations • Help evaluate success of front office operations • Should be compared to useful criteria such as: • Planned ratio goals • Corresponding historical ratios • Industry averages • Indicate problems, they do not solve them or reveal the source

11. Assignments for 8.5 • Apply Your Learning 8.5 • Workbook 8.5 assignments • Prepare for 8.5 quiz for next class