Forecasting Room Availability:
Room
availability is the actual or projected number of rooms not yet occupied or
reserved on a given date. Because rooms continually turn over, is almost
impossible to compute the exact number that will be unoccupied. A room
availability report is an estimate base on information about past reservations
and occupancy.
The
following information is required to prepare an accurate room availability
report.
Room Inventory
Previously Night Occupancy
Departures
Reservations
Under Stay
Over Stay
Cancellation
No-Shows
Early arrivals
Room Inventory
The total number of rooms that could theoretically be sold
on a given date is called rooms that could theoretically be sold on a given
date is called room inventory. The inventory does not include rooms that are
out of order for maintenance or redecoration or rooms that are currently under
construction.
Previously Night Occupancy:
The total numbers of rooms were occupied by the guest on the
previous night.
Departures:
A departure is a guest who is scheduled to check out on the
current date.
Reservations:
The report must take into considerable that the total
numbers of rooms for which reservations have been received for the current
date.
Under Stay:
Guest who indicated their intention to remain inn the hotel
but checked out before their scheduled departure date is called under stay.
Over Stay:
Guest who remains in the hotel beyond the scheduled
departure date is called over stay.
Cancellation:
Reservation may be canceled for many different reasons. Bad
weather and labour strikes almost always create high cancellation percentage.
The average rate of a typical hotel is about 2% of reservation.
No-Shows:
Besides cancellation there is a small percentage of people
who make reservations and never check – in. The average number show rate is
about 5% of reservations.
Early arrivals:
There is also a possibility that a guest will check in prior
to the estimated arrival date.
FORECASTING DATA
The process of forecasting room
availability generally relies on historical occupies data as well as business
already committed. Historical data is used to take some of the guess work out
of forecasting. To facilitate
forecasting the following daily occupy data should be collected.
Number of expected room arrivals:
Based on existing reservations and historical trends for few
reservations and on cancellations prior to the arrival date.
Number of expected room walk-ins:
Based on historical records
Number of room stay over:
(rooms occupied on
previous night that will continue to be occupied for the night in
Question)
Based on existing reservation
Number of expected room no-shows:
Based on historical records
Number expected rooms under stays:
(checkouts occurring before expected departure date)
Based on
historical data
Number of expected room check out:
Based on existing reservation
Number of expected rooms over stays:
(Check out occurring after the originally reserved departure
date)
Based on
historical records.
Some
hotels with a very high double occupancy percentage may be as concerned with
guest counts. For example, an all
inclusive resort with a large amount of business from vacationing couples may
want to forecast guest as well as room count activity. Conventional hotels may often have the same
concerns.
Chances
are good that much of information is available in reports, documents and other
data sources at the property. The hotels
daily reports will likely be invaluable in this research these reports should
summarized and stored in a way (that is) easily accessible.
Over
all these data are important to room availability forecasting. Since they are used in calculating various
daily operating ratios that help determine the number of available rooms for
sale. Ratios are a mathematical
expression is a relationship between two numbers that is determined by dividing
one by the other. Most statistical
ratios that applied to front office are percentage of no-shows, walk-in, over
stays, under stays. Occupancy history
data from the fictitious property are used to illustrate the calculation of
each front office ratio. Manager should
look for consistency in ratios.
Consistency may roughly the same ratio every day or identifiable
patterns without consistency, forecasting ratios and projecting operating
performance very difficult.
Percentage of Walk – in:
PERCENTAGE
OF WALK-INS
|
Walk-ins
guest occupy available rooms that are held for guests with reservations often,
hotels can sell rooms to walk -ins guest at a higher rate, since these guests
may have less opportunity to considered to alternate property. Front desk agents are some times asked to
show a guest groom to a walk-in guest which tends to be much more effective
than trying to sell rooms over the telephone or through a website. Walk-in guest sales help to improve both
occupancy and room revenues. However,
from a planning perfective, it is generally considered better to have
reservations in advance than to count on walk-in traffic.
Note
that other ratios can dramatically affect the walk-in ratio. Example, if a hotel has 10 no-shows beyond
forecast it may accept more walk-ins than usual to make up for the last
business. When this information is
tracked for historical purposes, it is essential that the other ratios also be
tracked to show how they affect one another.
One effective way to predict walk-ins is to know what is going on in the
market place. Their will be a better
opportunity for walk-ins (and a higher rate).
If near by hotels are experiencing high demand.
Percentage of Over Stay:
The over stays
represent rooms occupied by guests who stays beyond their originally schedule
departure dates. Over stay guests may
have arrived with guaranteed reservations or as walk-ins. Over stays should not over confuse with over
stays. Stay over rooms are room occupied
by guests who arrived to occupy a room before the day in question and whose
scheduled departure date isn’t until after the day in question.
The
percentage of over stays is calculated by dividing the number of expected room
check outs for the same period. The
number of expected room check out equals the number of actual check outs on the
books minus under stays plus over stays stated another way, the numbers of
expected room check outs is the number of
rooms shown by the front office system or the manual count of occupied
room as due for departure.
Number of
over stays rooms
% of over stays
=______________________________________________ x 100 Room check outs – under stay rooms +
over stays room
= 47 / 346 – 33
+ 47 x 100
= 47 / 313 + 47
x 100
= 47 / 354 x 100
= 13.06 %
To help
regulate room over stays, front office agents are trained to verify an arriving
guest’s departure date at check-in. Such
verification can be critical, especially when the hotel is at or near full
occupancy and there are no provisions for over stay guests. Over stay may also prove problematic when
specific rooms have been blocked for arriving guest. This is especially important for suit or
rooms that may have special importance to an incoming guests.
Percentage of Under Stay:
Under stay represents rooms occupied by guest who checks out
before their originally scheduled departure dates. Under stays guests may have arrived at the
hotel with guaranteed or non-guaranteed reservation or as walk-ins.
The
percentage of under stay is calculated by dividing the number of under stay
rooms for a period by the total number of expected room check outs for the same
period.
Numbers of under stay rooms
% of Under stay
=
______________________________________________ x 100
Room check outs – under stays rooms + over
stay rooms
= 33 / 346 – 33 + 47 x 100
= 33 / 346 + 47 x 100
= 33 / 360 x 100
= 9.17 %
Guest
leaving before their stated departure date create empty rooms that typically
are difficult to fill. Thus, under stay
rooms may represent permanently lost rooms revenue. Over stay, on the other hand, are guest
staying beyond their started departure date and may best room revenues. When the hotel is not operating at full
capacity, over stays result in additional, unexpected room revenues. In an attempt to regulate under stay and over
stay rooms, front office staff should.
Confirm or reconfirm each guest’s departure date at
registration. Some guests may already
know of a change in plans, or a mistake may have been made in the original
processing of the reservation. The
sooner data are corrected the grater the chance for improved planning.
Present an alternate guest room reservation form to a
registered guest, explaining that an arriving guest holds a reservation for
his/her assigned room. A note card may
be placed in the guest room a day before or the morning of the scheduled day of
the registered guest departure.
Review group history, many groups, especially associations,
hold large closing events, for the entire group on the last day of the
meeting. Guest may make reservation to
improve attending the final event.
However changes in plans or other priorities may required guest’s to
leave early. While it is difficult for
the hotel to hold guest to the number nights they reserved. Managers may be better able to plan for early
departure, based on the groups departure history. Some hotels that have a lot of association
business or a history of transient guests departing before their schedule day
may apply the reservation deposit to the last of the night of the stay not the
first night.
Contact potential over stay guests about their scheduled
departure date to continue their intension to check out. Room occupancy data should be examined each
day, rooms with guest expected to check out should be flagged. Guest who have not left by check out time
should be contacted and asked about their departure and intensions. This procedure permits airlines an early
revised count of over stay and allow sufficient time to modify previous front
office planning if necessary.
FORECAST FORMULA
Once
relevant occupancy statistics has been gathered, the number of rooms available
for sale on given date can be determine by the following formula.
Total Number of guest room
(-) Number of out order rooms
(-) Number of rooms reservation
(+) Number of rooms
reservations (x) % of no show
(-)Number of rooms over stays
(=) Number of rooms available for sale
Note that this formula does not include walk-ins. They are not included because the number of
walk-ins a hotel can accept id determined by the number of rooms that remain
available for sale. If a hotel is full
due to existing reservations, stay over and other factors. It can’t accept walk ins.
As an example, consider the hotel is a 120
room property where on April 1st there are 3 out of order rooms and 55 stay
over. On that day, there are 42 guests
with reservations scheduled to arrive since the percentage of no-show has been
recently calculated at 18.06 % the front office manager calculates that as many
as 8 guests with reservation may not arrive (42 x .1806=7.59, rounded to 8
). Based on historical data, 6 under
stays and 15 over stays are also expected.
The number of rooms projected to be available for sale on April 1st can
be determined as follows.
Total number of guest rooms 120
( - ) Number of out of order rooms 3
( - ) Number of stay over
55
( - ) Number of room reservation 42
( + ) Number of room reservation X Percentage of
No-show
8
( + ) Number of rooms under stay 6
( - ) Number of rooms over stays 15
= Number of rooms available for sale 19 rooms
BUDGETING FOR OPERATIONS
The
most important long terms planning function that front office perform is
budgeting front office operations. The
hotels annual operations budget is a profit plan that addresses all revenue sources
and expenses items. Annual budgets are
commonly divided into monthly plans that, is terms are divided into weekly (
some times daily ) plans. These budget
plans becomes standards against when management can evaluate the actual results
of operations.
In most
hotel, room revenues are greater than food, beverage, banquet or any other
revenues. In addition, rooms division
profits are usually greater than those of any other division. There fore, an accurate rooms division budget
is vital to creating the over all budget of the hotel.
The
budget planning process requires the closely coordinated efforts of all
management personnel. While the front
office manager is responsible for room revenue forecast. The accounting division staff will be counted
on to supply department managers with statistical information process. The accounting division staff is also
responsible for co-ordinating the budget plans of individual department wide
operations budget for top management’s review.
The General Manager and controller typically a budget report for
approval by the hotels owners. If the
budget is not satisfactory, elements requiring charges may be written to the
appropriate division managers for review and revision.
The
front office manager’s primary responsibility in budget planning are
forecasting rooms revenue and estimating related expenses. Rooms revenue is forecasted with input from
the reservations manager’s, while expenses are estimated with input from all
department manager’s in the rooms divisions.
FORECASTING ROOM REVENUE
Historical
financial information often serves as the foundation on which front office
managers build rooms revenue forecasts.
One method of rooms revenue forecasting involves an analysis of rooms
revenue from past periods. Dollar and
percentage differences are noted and the amount of rooms revenue for the budget
years is predicted.
For
example, the table shows yearly
increases in net rooms revenue for the Emily Hotel. For the years 2001 to 2004, the amount of
rooms revenue increased from $1,000,000 to $1,331,000, reflecting a 10 percent
yearly increase. If future conditions
appear to be similar to those the past, the rooms revenue for 2005 would be
budgeted at $1,464,100 a 10 percent increase over the 2004 amount.
Rooms Revenue Summary for the Emily Hotel
|
YEAR
|
ROOMS REVENUE
|
INCREASE OVER
DOLLAR
|
PRIOR YEAR %
|
|
2001
|
$1,000,000
|
-
|
-
|
|
2002
|
$1,100,000
|
$1,00,000
|
10%
|
|
2003
|
$1,210,000
|
$1,10,000
|
10%
|
|
2004
|
$1,331,000
|
$1,21,000
|
10%
|
Another
approach to forecasting rooms revenue bases the revenue projection on past room
sales and average daily room rates. The
table presents rooms revenue statistics for the 120 room Bradley hotel
from
2001 to 2004. An
analysis of these statistics shows that occupancy percentage increased three
percentage points from 2001 to 2002, one percentage point from 2002 to 2003,
and one percentage point from 2003 to 2004.
Average daily room rates increased by $2, $2, and $3 respectively over
the same periods. If future conditions
are assumed to be similar to those of the past, a rooms revenue forecast for
2005 may be based on a one percentage increase in occupancy percentage (to 76
percentage) and a $3 increase in the average daily room rate (to $60). Given these projections, the following
formula can be used to forecast rooms revenue for the year 2005 for the Bradley
Hotel.
Rooms Revenue Statistics for the Bradley Hotel
|
YEAR
|
ROOMS SOLD
|
AVERAGE DAILY RATE
|
NET ROOMS REVENUE
|
OCCUPANCY
%
|
|
2001
|
30,660
|
$50
|
$1,533,000
|
70%
|
|
2002
|
31.974
|
$52
|
$1,662,648
|
73%
|
|
2003
|
32,412
|
$54
|
$1,750,248
|
74%
|
|
2004
|
32,850
|
$57
|
$1,872,450
|
75%
|
Forecast rooms revenue = rooms available X occupancy
percentage X Average daily rate
=
43,800 X .76% X $60
= $1,997,280
The
number of rooms available is calculated by multiplying the 120 rooms of the
Bradley Hotel by the 365 days of the year.
This calculation assumes that all rooms will be available for sale each
day of the year. This will probably not
be the case, but it is a reasonable starting point for projection. Note also that at some point occupancy will
not be able to grow any further, and may actually decline. For example, new competitors may enter the
market, taking occupancy away from the hotel.
Management needs to anticipate this shift and adjust its forecast to
take into account the increased
competition. The same logic applies to
projecting rate growth. Hotel management
may decide to hold or even reduce rates to maintain or improve occupancy when
new competitors enter the market.
This
simplified approach to forecast to forecasting rooms revenue is intended to
illustrate the use of trend data in forecasting. A more detailed approach would consider the
variety of different rates corresponding to room types, guest profiles, days of
the week, and seasonality of business.
These are just a few of the factors that may affect room revenue
forecasting.
ESTIMATING EXPENSES
Most
expenses for front office operations are direct expenses in that they vary in
direct proportion to rooms revenue.
Historical data can be used to calculate an approximate percentage of
rooms revenue that each expense item may represent. These percentage figures can then be applied
to the total amount of forecasted rooms revenue, resulting in dollar estimates
for each expenses category for the budget year.
Typical rooms division expenses are patrol and
related expenses, guestroom laundry (terry and linen), guest supplies (bath
amenities, toilet tissue), hotel merchandising (in-room guest directory and
promotional brochures), travel agent commission and direct reservation
expenses, and other expenses. When these
costs are totaled and divided by the number of occupied rooms, the cost per
occupied room is determined. The cost
per occupied room is often expressed in dollars and as a percentage. The table presents expense category
statistics of the Bradley Hotel from 2001 to 2004, expressed as percentage of
each year’s room’s revenue. Based on this
historical information and management’s current objectives for the budget year
2005, the percentage of rooms revenue for each expense category may be
projected as follows, payroll and related expenses 17.6%, laundry, linen and
terry, and guest supplies, 3.2%, commissions and reservation expenses, 2.8%,
and other expenses, 4.7%.
Expenses category as percentage of Rooms Revenue for the
Bradley Hotel
|
YEAR
|
PAY ROOL &
RELATED
EXPENSES
|
LAUNDRY
LINEN & GUEST SUPPLIES
|
COMMISSIONS & RESERVATION
EXPENSES
|
OTHER
EXPENSES
|
|
2001
|
16.5%
|
2.6%
|
2.3%
|
4.2%
|
|
2002
|
16.9%
|
2.8%
|
2.6%
|
4.5%
|
|
2003
|
17.2%
|
3.0%
|
2.6%
|
4.5%
|
|
2004
|
17.4%
|
3.1%
|
2.7%
|
4.6%
|
Using
these percentage figures and the expected rooms revenue calculated previously,
the Bradley Hotel’s room division expenses for the budgeted year are estimated
as follows.
Payroll and related expenses
$1,997,280 X .176 = $351,521.28
Laundry, linen, terry, and guest supplies
$1,997,280 X .028 = $63,912.96
Commissions and reservation expenses
$1,997,280 X .028 =$55,923.84
Other expenses
$1,997,280 X .047 =$93,872.16
In this
example, management should question why costs continue to rise as a percentage
of revenue. If costs continue to rise (
as a percentage, not in real dollars), profitability likely will be affected. Therefore, one of the outcomes of the budget
process will be to identify where costs are increasing as a percentage of
revenue. Then, management can analyze
why these costs are increasing disproportionately with revenue and develop a
plan to address the issue.
Since
most front office expenses vary proportionately with rooms revenue ( and
therefore occupancy), another method of estimating these expenses is to
estimate variable costs per room sold and then multiply these costs by the
number of rooms expected to be sold.
REFINING BUDGET PLANS
Departmental
budget plans are commonly supported by detailed information gathered in the
budget preparation process and recorded on worksheets and summary files. These documents should be saved to provide an
explanation of the reasoning behind the decisions made while preparing
departmental budget plans. Such records
may help resolve issue that arise during the budget review. These support documents may also provide
valuable assistance in the preparation of future budget plans.
If no historical
data are available for budget planning, other sources of information can be
used to develop a budget. For example,
corporate headquarters can often supply comparable budget information to its
chain-affiliated properties. Also,
national accounting and consulting firms can usually provide supplemental data
for the budget development process.
Many
hotels refine expected results of operations and revise operations budgets as
they progress through the budget year.
Reforecast is normally suggested when actual operating results start to
vary significantly from the operations budget.
Such variance may indicated that conditions have changed since the
budget was first prepared. While
operating budgets are seldom changed once they are approved by a hotel’s
management and owners, reforecast provides a more realistic picture of current
operating conditions.
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