Evaluating Front Office Operations
A successful front office manager shall continuously evaluate the results of department activities on a daily, monthly, quarterly, and yearly basis. While evaluating, the following items and tools shall be used:
- Daily operations report
- Occupancy ratios
- Rooms revenue analysis
- Hotel income statement
- Rooms division income statement or schedule
- Rooms division budgets report
- Operating ratios and ratio standards
- Daily operations report:
It is also known as the manager’s report, the daily report, and the daily revenue report. This very report contains a summary of the hotel’s financial activities during a 24-Hour period. Moreover, it serves as to reconcile cash, bank accounts, and revenue and accounts receivable, and as an important data that must be input to link front and back office computer functions.
- Occupancy ratios:
Occupancy ratios measure the success of the front office in selling the hotel’s primary product (i.e. guestrooms). Below are some common ratios used in the front office department:
- Occupancy percentage = (number of rooms occupied) / (total number of rooms available for sale)
- Multiple occupancy percentage = (number of rooms occupied by more than one guest) / (total number of rooms occupied)
- Average guests per rooms sold = (total number of guests) / (total number of rooms sold)
- Average daily rate = (total rooms revenue) / (total number of rooms sold)
- Average rate per guest = (total rooms revenue) / (total number of guests)
- Rooms revenue analysis:
One main report to enhance control over room revenue is the room rate variance report, which is the one that lists those rooms that have been sold at rates other than their rack rates. Another form is the yield statistic, which is the ratio of the actual revenue to the total possible potential revenue if all rooms are sold at rack rates.
Yield statistic = (actual room revenue) / (potential room revenue)
- Hotel income statement:
This very statement provides important financial information about the results of hotel operations for a given period of time
- Rooms division income statement:
The rooms division income statement (sometimes called a schedule) shall be referenced on the hotel’s income statement. Moreover, the rooms division schedule shall be prepared by hotel’s accounting division not the hotel’s front office accounting staff.
- Rooms division budget reports:
These reports are monthly budget forms that compare actual revenue and expense figures against budgeted amounts depicted both in dollar values and percentage variances
- Operating ratios:
Operating ratios (ex. occupancy ratios, yield statistic…) assist managers in evaluating the success of front office operations. Moreover, for ratios to be meaningful they should be compared against proper standards such as prior period’s, competitor’s, and/or budgeted ratios.
