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Rooms division management

Chapter 1
Paragraph 1.1
A process is a series of related tasks that yields a product or service to satisfy a guest.
A typical hotel has the following core processes:

Guests selection of a hotel

Guests arrival at the hotel
Guests stay at the hotel
Guests departure

The selection proceeds through the introduction of the hotel which can be done in 3 ways:

On Internet through a hotels website (one of the most important sources of reservations
for hotels)
An advertisement in a newspaper or magazine
Hotel guides

The 4 major GDSs (Global Distribution Systems) are:


Amadeus (airlines, hotel operators, travel agents and car rental companies)
Galileo (airlines, travel agencies, hotels, tour-operators, car rental companies and cruise
Sabre (has its own online travel service, an electronic network for travel buyers and
sellers and consulting services to airlines to optimize their operations and reduce costs.)
Worldspan (provides travel information for travel agencies, tour-operators, car rental
companies and corporations)

A travel agency is a company that arranges transportation, itinerary, and accommodation for
travellers. A tour operator is a company whose main business is the planning, packaging,
selling, marketing and promotion of multiple vacation components for a tour.
A hotel representative helps customers worldwide to find and book hotel accommodations.
Some of the main representatives are:

Utell: provides instant global connectivity by Pegasus voice reservation network, GDS
and the Internet.
Supranational: offers online availability, information about the member hotels and room
rates for the corporate and leisure travellers.

A reservation form should include the following information:


Full name
Room type
Date of arrival and departure
Room rate
Extra requests
Contact details

Procedures hotels have taken to avoid no-shows are mainly changes in the reservation
process. In the future a guest has:

To give his full name, private address and business address, telephone number, fax
number and email address.
To indicate date and estimated time of arrival and departure, and if applicable, flight
To indicate if he is a member of a group booking or an individual.
To indicate the accommodation required.
To indicate the room rate.
To indicate any special requests.

The payment agreements in case of an arrival later than 6 p.m. are the following:

A credit card (the name of the credit card company, the credit card number and period of
Company guarantee (must always be in writing and signed)
City ledger (guests to whom applicable only have to sign their bill and the rest gets taken
care of by a billing towards the company)

Upgrading means that the guest will get a bigger or more luxurious room for the same price as
the type of room he has reserved.

Paragraph 1.2
The doorman is the first person the guests get to see when they arrive and is one of the
associates of the Bellstand.

A doorman will welcome them with a warm smile and friendly greeting.
Is dressed immaculately in a conspicuous uniform.
Is always well groomed and has a charming face.
He must make eye contact with every guest entering the building and greet them,
preferably by name.
Keeps thieves and prostitutes out.
He is a source of information about places of interest.
He has to speak several languages and be very resourceful.
Will help the guests get out of the car or bus, will unload their luggage and escort them
to the reception.





The Continental Club Service/Tower Service offers an extra accommodation on a number of

floors is transformed into superior guest rooms and suites and special guest-relations staff is
trained to provide these very important persons (VIPs) with the personalized attention and
service they have come to expect.
If the guests name is not included on the list of arrivals, it may be for one of the following

The reservation is entered under the name of a company, a group or person who made
the reservation.
The reservation was made for a wrong date.
The reservation was not made at all.

If the reservation has not been made and the hotel has enough rooms available, the front office
clerk will simply allocate a room to the guest and proceed with the registration.
If there is no room available the front office clerk can:

Put the guest on a waiting list

Recommend a hotel of the same class, preferably nearby.

It is very important the guest signs the registration form since, this served as a contract and is
proof of his stay at the hotel.
At the check in you have to arrange a couple of things:

Make sure the registration form gets signed


Make sure the hotel agreement on the loss of personal valuables gets signed
Make sure they sign the agreement in which payment is ensured.

(Other ways to ensure payment:


Make an imprint of the guest credit card and verify the validity
A written and signed guarantee, in which a company gives permission for the invoice of
specified costs to be charged to the company.
A prepayment for the entire stay
A MCO (Miscellaneous Charges Order), a voucher provided by airlines for stranded
A voucher of a travel agency. )

European plan
Continental plan
Modified American plan/ Half board
American plan/ Full board

= Room only
= Room and Breakfast
= Room, breakfast and dinner
= Room, breakfast, lunch and dinner

In-house selling entails:

- A recommendation of the hotel outlets
- A reservation for the guest
Is only successful if the hotel revenue is increased and the individual guests wishes are
recognized and fulfilled.
To be a successful sales person you need to have a thorough knowledge of the following things:
- The products and services offered by the hotel.
- Get to know the guest
Information given on the keycard will be the following:
- The name of the guest
- Room number
- Room rate
- Date of arrival and departure
- Guests signature
- Clerks initial
The key cards can be used to charge costs made to the hotel room, to identify yourself as a
hotel guest, and in the advance of the hotel as a business card of the hotel.
In the case of a group check-in you need to avoid chaos. The separate room check in costs
time, so you need to find a way to keep the people occupied while you accompany the group to
a separate room or either store their luggage for a while.
The Tour Coordinator/Group Manager is responsible for the preparation and organization of
these group bookings. He will:
- Collect a rooming list and all data for a pre-registration of the group from the tour leader.
- Fill out a registration form for each member of the group before arrival

Fill in the key card and provide the electronic keys with a code
All together with a welcome letter are put in separate envelopes with the group name.
The envelopes are arranged alphabetically
A possibility is to let the group leader fill in the forms
Make sure that all activities are registered with the following information:
name of group
number of participants
time and date of arrival
time and date of departure
time/place of dinners
selected menu or buffet
special requests or diets
location, date, time of the activities
pre-paid costs and which costs are for their personal
way of payment: cash, credit card, charged to the room
group members can count on his assistance
take care of the internal communication regarding the groups

Paragraph 1.3
6 categories to classify institutes are:
- products and services
- size
- target group -> business or leisure or both
- independent hotels or hotel chains
- location
- quality -> budget to luxury or even super luxury
A motel = a roadside hotel for motorists.
A zotel = hotel located near a hospital where patients may recuperate
All suite hotel = luxury hotel with suites only
Hotel garni = a hotel that only offers lodging and breakfast
One can say that investing in a hotel accommodation is a more profitable business than
investing in a labour intensive because you only have to refurbish the rooms every 5-8 years
and clean-up after the guests, while a restaurant brings much higher expenses on labour and
stocking of food which can be spoiled when not eaten.
Las Vegas is the home of the largest hotels of the world, because it has the largest tourism flow
and need for accommodation.
Investors adapt the number of rooms to the market situation and their financial means. Before
making a commitment to invest they let specialist to do a market investigation for a chosen
location to research the need of a new hotel, the price ranges, what product and resources the
suitable target group would need and how much competition they have.
The main target groups in the hotel industry are business and leisure.
Hotels try to create unique experiences, the Desa Seni Resort located on Bali is an example of
such an hotel where houses in various Ethnic styles have been imported from different regions
of Indonesia and rebuilt in the bucolic tranquility of this island, amid rice fields.
When choosing a location for a hotel, a lot of considerations should be made. There are 5 main
points that count in this decision:
- Financial risks
- Political consequences
- Consequences for their reputation
- Holiday destination
- Or either an important business location.
Advantages and disadvantages of owning an own lodge:
+ Guests enjoy the character and special service found in a Bed & Breakfast or inns.


Proprietor gets a modest income from it

In economic crises, these hotels do better than the luxury hotels
Requires an large initial capital investment, as well as necessary improvements and
Business is often seasonal.

Many countries have developed their own standards, while international guests demand the
same facilities and services they had at one of the other hotels from the same hotel chain. This
is why they have chosen to standardize their product.
There are a lot of rating systems, a couple of examples:
- English Tourism Councils star rating system (UK)
- Benelux Hotel Classification (Benelux)
- Michelin (France)
- International Hotel & Restaurant Association
The six main criteria to classify hotels in the Far East are:
- Location
- Architectural design
- Facilities and service conveniences
- Services and service qualities
- Staff
- Hygiene
5 of these requirements that deal with safety and security are:
- All areas must be well illuminated
- In case of an electricity breakdown, emergency lights must provide the necessary
- Electricity must be available at all times
- Sufficient water supplies for hotel services and to extinguish a fire at all times
- Must have a sprinkler system, fire extinguishers, fire alarms and emergency lights.
The staffing ratio in Asia is higher than in Europe because of the difference in labour expenses.

The 4 criteria a guest room gets rated on would be:

- Rating of the hotel
- Room rate
- Location
- Style of the hotel
Examples of 5 different room types may be:
- Single with single bed
- Double with double bed (king- or queensize)
- Twin with two single beds
- Triple with three single beds or one double and a single bed
- Suite a double bedroom with separate living room
The fixed expenses for a hotel are a refurbishment every 5-8 years, labour expenses, inflation of
the costs for building and furnishings.
In a multi-purpose building things included other than the hotel itself may be restaurants, bars,
casinos, parking fees, et cetera.
7 modern trends in hotel interior decoration are:
- Multifunctional furniture
- Use of natural materials and colors
- Flexible control of daylight of roller blinds or Venetian blinds, achieved by two
transparent materials joined together.
- Thermastop blinds keep heat inside during winter and when turned they keep heat
outside in summer.
- Roller blinds with a coating that cleans the air in the room from smoke and other
undesirable smells.
- Curtains with coatings that are dirt and moisture resistant
- Materials used in hotels should be flame retardant.
The essence of a lifestyle hotel is that the physical characteristics aside, what really
differentiates them is their ability to feel special and exclusive, and to give their guests a warm
sense of personal belonging.
5 advantages of owning a lifestyle hotel would be:
- Smaller properties
- More flexible buildings with possibility of changing the style
- Fewer leisure activities
- Smaller public space
- Lower staffing ratios.
One mayor disadvantage would be that most properties are too small to generate sufficient
profit to support these high fixed costs.

All colors have a main effect, as for the following this counts:
- Red:
Stimulating, friendly and lively color.
May be perceived as demanding an aggressive
- Blue:
Serene and mentally calming color, the favorite one of most people
May be perceived as cold and unfriendly
- Yellow:
Confidence and optimism
Too much can cause anxiety
- Green:
Harmony, rest and balance.
May cause boredom and blandness
- Violet:
Luxury, truth, contemplation and quality
When used in access may have a cheap and nasty effect
- Orange:
Warmth, security, sensuality and fun.
Too much has a frivolous effect on people
- Pink:
Feminine color with a soothing effect on people.
Too much can be emasculating and tiring.
- Grey:
Neutral color, which suppresses the effect of other colors.
Too much can cause a depressing effect on people.
- Black:
Glamorous, sophisticated which expresses efficiency and security
May have a cold and scaring effect on people.
- White:
Hygiene, clarity, purity and simplicity.
Sterility, coldness and unfriendliness.
- Brown:
Warmth, nature, earth, reliability.
Can cause heaviness and lack of sophistication.
Red, yellow and white are warm colors, so are likely to be used in hotel rooms.
3 ways to use mirrors to change the shape of a room:
- Place strips of vertical mirror from ceiling to floor on the walls next to a glass door.
Effect: extra light
- Fix a mirror from ceiling to the floor on the back wall.
Effect: extra length
- Install a sunken mirror in the ceiling
Effect: extra height
5 criteria for the selection of ceilings, walls, window coverings, furniture and fixtures:
- Easy to clean
- Flame-resistant
- Acoustics
- Durability
- Aesthetic
Amenities for the bathroom of a two-star hotel are likely to be shampoo, conditioner, shower
cap, soap and a toothbrush and shaving-kit on request.

To make sure the snacks and beverages taken from the mini-bar get paid, they get checked
every morning and charged to the guests account. Another way might be by the use of an
connected computerized accounting system that charges everything on the account as soon as
it gets removed from its place.
Top hotels offer a turn-down service so they can check on:
- The guests wellbeing
- The condition of the room
- To make the stay more pleasant.
Some personalized services implemented to make the guest feel special would be:
- Turn-down service
- Reservations
- A shuttle bus
- Do not disturb card
- City map provided
- Clearing frost of guests cars service
- Hot water bottle (keeping account with climate changes)
- Organization of trips, with amenities provide for the unpreparedness of guests


Paragraph 1.4
Hotels take measures to avoid skippers by demanding some kind of payment guarantee when
the guest checks in and make an imprint of their credit card. If a guest leaves the building
without paying, the bill gets send to the credit card company.
The segregation between operational and financial duties is to detect or prevent errors and theft
(fraudulent parties).
A cashier has a lot of different functions. An abbreviated job description would be:
Main tasks:
- Prints out invoices of guests departing the next day
- Checks the guests invoices
- If asked, gives explanation about items on invoice
- Makes sure that he receives the correct payment from the guest
- Changes foreign currency according to the hotel rules
- Handles questions and complaints in polite and courteous manner.
- Good head for numbers
- Meticulous, efficient and accurate worker
- Eye for detail
- Service-minded
- Honest and trustworthy
- Courteous
- Able to handle stress
- Knowledge of hotel accounting
- Knowledge of foreign currency exchange
- Knowledge of computerized accounting systems
- Well-spoken in local language
- Knowledge of foreign language(s) used by the majority of guests at the hotel
- Communication skills and able to handle guest complaints.
Reports to the Front Office Manager and for the financial part to the Financial Department.
To speed up the check-out procedure hotels can make use of pre-billing. The bill will be printed
out the day before departure and handed over to them in an envelope so they can get a first
impression of the costs and argue about issues at that time and not during rush hour.
Another possible way is by installing a in-house program so you can see every charges on the
television screen in your room.
A third possible way is by installing a self service express check-out machine where people can
handle things on their own.


You can check guest satisfaction in 3 different ways:

- By filling in a questionnaire
- By checking trip advisors
- Check Internet for columns.
How to handle in case of guest complaints:
- Listen actively to the complainer
- Show empathy
- Repeat the complaint to check whether you understood it correctly
- Make notes
- Do not ever blame another colleague or department
- Apologize even if you yourself are not the blame.
- Try to keep a noisy complainer away from the other guests
- Let the guest sit down, offer some refreshment and then sit down yourself
- Remove the barrier between you and the guest
- Do not start a discussion about who is right and wrong
- Use humor carefully
- Try to find out the reason why the guest is complaining
- Inform the relevant departments and colleagues
- Make a note of the complaint, so it can be discussed in the next department meeting.
- If you are unable to solve the problem yourself, call your supervisor
- Do not let a guest leave dissatisfied
- Be grateful towards the guest for bringing up the matter.
Upselling entails recommending and making a reservation for product/services of your own
department in your hotel.
Cross-selling is if a colleague in the restaurant recommends the hotel rooms to a restaurant
guest and confirms this reservation for him at the Reception Desk.
This can only be done if you make a perfect match between your products/services and the
guests needs.
Duties of a Night Auditor:
- Will verify all charges made during the last 24 hours and see whether the charges were
debited to the right account.
- Check the room status of every room
- Verify all no-shows (book bills on their credit cards) after checking the reasons ofcourse.


Chapter 2
Paragraph 2.2
Other names for a Housekeeping Manager would be an Executive Housekeeper or a
Accommodation Manager.
General goals set by management for housekeeping are:
- The hotel is at all times clean and fresh
- The housekeeping payroll is in line with the hotel occupancy
- And the operating expenses are in line with the hotel occupancy
The Housekeeping Manager has to prepare 3 budgets for management:
- Pre-opening budget
Lists all the fixed assets and operating assets that a housekeeping department will need
to operate the hotel once it is ready to receive the guests. Have a life-span of over a
Fixed assets are divided in furniture, fixtures and equipment needed for the guest
rooms/ textile needed for the guest rooms (excluding bed linen)/ housekeeping
Operating assets are used in daily operations of Housekeeping include: guest supplies,
cleaning supplies, bed and bathroom linen, uniforms.
- Operating budget (usually part of the rooms division budget)
A financial overview in which the management allocates funds to each department for
expenses for the duration of a year. The expenses for operating assets are deducted
from the total room sales mentioned in the rooms division operating budget, allocated a
percentage of the daily room revenue.
- Capital expenditure budget
List of fixed assets with prices that Housekeeping need or the coming year, which
includes machinery. (replacements in guest rooms)
- Pre-opening and post-opening budget for contractors
Solemnly prepared for contractors (outsourcing of linen, laundry, florist etc.)


The number of associates in Housekeeping depends on:

- The number of hotel rooms
- The size of public areas
- Additional responsibilities such as laundry, spa, swimming pool, fitness rooms,
florists, landscaping etc..
- Labour costs
- Rating of the hotel
- Quality standards
- Hotel occupancy
- Outsourcing of some or all cleaning activities, laundry, dry cleaning, florists,
Security problems that may occur in public areas might be:
A Room Status Report gives an overview of:
- Rooms occupied
- Number of occupants per room
- VIPs
- Expected check-outs
- Stay-overs
- Expected arrivals
- Special requests.
The duties of a Floor Manager are:
- Smooth organization of the work on guest floors
- Control and maintenance of the quality standards
- Print out the Room Status Report in the morning
- Handing out the keys of guest rooms to Housekeeping
- Check the rooms afterwards, change status and check defects etc.
- Check the number of guests in a room
Possible discrepancies between the Room Status Report and a physical check are:
- Walkouts or skippers
- Sleepers (mostly city-ledgers. Dont check out because of company payment)
- Sleep-outs
- Number of guests (actually staying in the room)


The number of rooms to be cleaned per Room Attendant depends on:

- Labour costs
- Qualifications of the room attendants
- Size of rooms, suites or apartments for long stay guests
- Furniture and fixtures
- Rating of the hotel
- Quality standards.
For security reasons, Room attendants must follow 5 security rules while cleaning a
guest room:
- Leave the door open
- Leave the trolley standing in front of the entrance.
- Ask for a guests name and key card when he enters.
- The room must never be left open when the Room Attendant is not present
- All windows and doors must be securely locked when the Room Attendant has
finished cleaning the room.
External cleaning contractors base their prices on the:
- Size of the area to be cleaned
- Easy to clean or elaborate and work-intensive fixtures and furniture
- Frequency of cleaning
- Time of cleaning (during weekends, night or day)
- Method(s) of cleaning
- Quality standards.
The advantages of outsourcing are:
- The contract cleaners provide trained cleaners
- The contract cleaners take care of recruitment, selection, training and payroll
- The contract cleaners provide the necessary equipment and supplies.
- Flexible use of manpower in accordance to the hotel occupancy
- No need to hire additional personnel for highly specialized cleaning work which
will only be executed occasionally.
The disadvantages are:
- Less control over quality standards.
- Security risks, as the hotel had not selected the personnel
- The associates may not feel and behave as representatives of the hotel.


To calculate the labour costs for cleaning the guest rooms on a particular day the
Housekeeping Manager will need to consult the forecasted occupancy for that date.
Total guest rooms x occupancy percentage = number of rooms to be cleaned
Number of rooms to be cleaned x standard cleaning time per room = number of
hours required.
Total number of hours
The number of room to be cleaned
By one housekeeping associate
during one shift.

the number of housekeeping associates

required (part-timers) includes

The abbreviation FTEE stands for Full Time Equivalent Employee.

Turnover percentage in personnel:
Number of associates that left the company during the year
Total number of associates during the same year


When making work schedules, the following should be taken in account:

- Maximum working hours and days per week dictated by local law and the
companys standard procedures regarding human resources.
- Religious and public holidays
- Arrangements and promises made in the employment contract.
- Hotel occupancy
- Schedules are made for a whole week and should include information about time
off and holidays.
- The schedules should be published at least seven days before the next schedule
- The unpopular tasks should be delegated evenly and fairly. The Housekeeping
Manager should not favor one associate above another.
The organization and execution of the skills trainings consists of six steps:
- Analyze the training needs
- Prepare for the training
- Present the correct procedure
- Present opportunity to practice
- Follow-up
- Evaluate the training


The advantages of cross training (training associates in different work to assure the
ability to keep working) are:
- associates feel proud of the new skills they have learned, which increases their
- Associates with more diverse skills are more valuable for the hotel and increase
their chance for a promotion to a higher position.
- Associates with a diversity in skills can be scheduled for different tasks, which
leads to more flexibility in scheduling.
- Cross training increases the understanding and co-operation between colleagues
in Housekeeping or related departments.
Empowerment refers to the process of giving associates the means and resources to be
more in control of their own work in order to better serve the interests of the guests, as
well as those of the hotel. Advantages and disadvantages are:
+ sign of trust by management makes them more motivated ro do a good job, increases
their feelings of self-confidence, pride and self-reliance and improves their ability to
solve problems on their own.
+ Might increase in salary in case of self-controlling Room Attendants.
+ Reduction in labour costs and the guests are better served if they can dispose of their
rooms sooner if the floor supervisor does not have to be called to check the room.
- The added responsibility might frighten off some associates.
Measures that can be taken to protect the health of guests and associates are:
- Develop quality standards regarding health and cleanliness
- Develop standard working procedures regarding health and cleanliness
- Check the quality standards regularly
- Train all personnel in cleanliness and (personal) hygiene on a regular basis
- Promote the importance of (personal) hygiene and cleanliness for guests and
- Motivate and coach associates to follow the hygiene rules
- Implement strict hygiene rules and regulations for the associates
- Regularly check if the rules are followed
- Discipline associates who do not follow the standard working procedures.
In a cleaning and maintenance plan a Executive Housekeeper had to define the:
- Areas that fall under the responsibility of Housekeeping
- Degree of cleanliness for each area
- Cleaning methods
- Cleaning accessories and equipment
- Cleaning frequency

Number of cleaning hours

Number of cleaners required
Time when the cleaning activities will take place.

On a Area cleaning inventory form the following information should be mentioned:

- Contact person, function of contact person
- Purpose of calculation
- Type of area
- Occupancy
- Working week
- Preferred cleaning time
- Type of activity in area
- Quality standards
- Floor plans
- Initial inspection
- Special requests.
Strong acidic and alkaline solutions should be used very sparingly because they may:
- Damage the surface to be cleaned
- Be hazardous for the cleaners health
- Be detrimental to the environment
- Be costly.
A cleaning schedule gives the following information:
- Area to be cleaned
- Frequency daily, weekly, periodically
- Product and accessories/machines to be used.
- instructions for usage of cleaning products.
A time norm indicates the work that an experienced associate can execute in one
minute, working at a normal pace and taking the usual time for rest and personal
There are two methods of calculating the number of cleaning hours:
- a detailed time calculation for each area, adding the standard times for cleaning
different objects, each with its own cleaning method and frequency. This method
is too time consuming to be used regularly.
- Calculation with standard cleaning norms is the most popular and practical
method of calculating the work hours.


The following things must be mentioned in a crisis plan:

- Standard operating procedures
- Allows for proactive planning and training, so that all associates involved know
and are able to execute the special duties allocated to them during a crisis.
- Instructions about how to recover and continue business after the crisis is
- Most practical and efficient rules and regulations (through evaluation and
Insurance companies require written evidence that hotels have taken all reasonable
measures to protect their guests and associates from criminal activities that are
foreseeable and to ensure a reasonably safe stay at the hotel in the form of:
- Safety manuals
- Safety rules and regulations
- Strict key control
- Fire regulations
- Regular maintenance for fire equipment
- Regular maintenance for elevator
- Regular maintenance for electrical and gas equipment
- Regular control of storerooms for dangerous chemicals
- Safety and fire trainings for all associates
- Regular hotel evacuations
- Security must make regular tours through the whole hotel with a checklist
- Documentation of all accidents, thefts and any incidents involving drugs,
weapons, excessive consumption of alcohol et cetera.
- Pictures of the accident scene
- Statements from witnesses with their signature on the accident report
- A plan of action for follow-up
- Serious offences have to be reported to the police
- Review all accidents and compensation claims and implement proactive
practices which will reduce potential accidents.
- Introduce an incentive program and reward good behavior and suggestions for
improving safety in the work environment.
- First aid boxes in all departments
- A hotel doctor should be on call day and night
- Involvement of ALL associates in improving and maintaining a safe work


Energy saving options a hotel can take:

- Revolving doors at the entrance
- Roof and wall insulation
- Roofs planted with grass and plants
- Water taps and shower heads that mix water with air bubbles and thus cut the
water flow in half.
- Occupancy sensors in room for switching on/off lights, airconditioning and
Energy saving options for the housekeeping:
- No television while cleaning
- Open drapes and shades to make advantage of the light and warmth from
- Use low-power bathroom and foyer night lights
- Clean debris from outside air vents
- Lamps should be dusted regularly. Dirty lamps and fixtures may reduce effective
light output by as much as 50 percent.


Paragraph 2.3
The front office is literally and emotionally the centre of the hotel because:
- Deals with incoming telephone calls
- reservations
- welcomes guests and
- handles room allocation
- billing and payments.
The disadvantages of a high front desk is that is presents a barrier between the
associates and the guests and makes a welcome more formal.
The reason why overbooking of long term reservations of 10% can change to a small
percentage of only 1-2% is because companies like to shop around for the best rates.
They make reservations at several hotels to later cancel them again.
Mr Lam selects his staff on the following criteria:
- Smart appearance and well groomed
- Outgoing personality
- Service orientated
- Positive attitude to their work
The difference in percentage of revenue generated by Food & Beverage Department
compared to Rooms Division between hotels in Shenzhen and Hong Kong differ a lot
because of their location. In Shenzhen there are not a lot of options so most hotel
guests choose to eat in the hotel, the room revenue is lower though because its a
smaller city. In Hong Kong the offer of restaurants in the city is so big, they lose a lot of
clients to it. The Room Revenue is higher though because of the size of the city itself.
Yield management: A technique used by hotels to increase their room revenue; to
optimize their room occupancy as well as their average room rate.
Upselling: To promote and sell the guest more expensive accommodation than the
guest had reserved or to make a new reservation when the guest checks out.
Cross-selling: To promote and sell the guest benefits from another outlet in the hotel, for
example food & beverage, hotel Spa, golf course, or sell benefits for an affiliated
Room sales generate more revenue than Food & Beverage and it is more profitable
because it is less complicated and expensive. The rooms are a one-time investment

while the restaurant needs to be updated and has higher expenses of labor, selling of
ingredients, storage and cleaning.
The four core processes in a hotel are:

Selection & reservation (front office, housekeeping, reservations department)

Arrival (front office, housekeeping)
Stay (F&B, housekeeping, front office)
Departure (front office)

Planboard: listed all the rooms of the hotel, the dates of the month and the names o the
Blocking system: divides rooms into a number of types, with each reservation the count
of the remaining free rooms of that types was showed.
Increasing competition, globalization, GDS, the use of websites and computer channels
have necessitated a closer co-operation between Reservations, Sales & Marketing and
the Revenue Department.
The CRS (Central Reservation System) leads reservation calls to a call center, where
calls from several hotels are entered. Here the associate enters the requested dates
and personal data of the caller into the system and the system indicates at what price
the room may be sold, if a particular length of stay is acquired or if there are other
restrictions. All exceptions are recorded and the number of permitted exceptions is
A hotel should provide the following features on its website:
- Branded URL and e-mail address, for example
- Site navigation tools
- Information on hotel facilities and room rates
- Multilingual
- Interactive
- Room availability check
- Reservations requests
- Modification and cancellation of reservation
- Download and/or print information
- Information about culture, sports and entertainment
- Use of credit cards
- Latest news and press releases
- Directions and a map or hyperlinks to external information
- Privacy statement or SSL (Secure Sockets Layer is used to secure transactions
on internet)

On-line guest book.

It is important to keep in contact with the guest after departure in order to provide
costumer-centered service and assure returning guests. (have to built a feeling of trust
and loyalty and try to get to know the preferences of the guest to be able to deliver a as
well as possible service.) Also it allows you to offer a loyalty program to returning
What are the criteria for success in keeping contact with guests through e-mail?:
- All e-mails have to be answered within 12 hours
- The response must be complete. Nothing frustrates a customer more than
receiving only an answer to part of his question.
- Some relevant up-selling and/or cross selling, for example special offers
- It must contain no spelling or grammar mistakes. (use of standard texts in
different languages, that can be adapted for each different situation to make it
- The message must be personalized by addressing the costumer by name.
- The costumer must be thanked for contacting the hotel. After all that is the whole
purpose of giving an e-mail address!
- The person answering the e-mail must mention his name and function
- Provide the full name and address of the hotel, as well as a digital brochure.
The 5 biggest internet based internet distribution companies are :Expedia ( accounts for
70% of online reservations not made directly at the hotel),, Hotwire,
Advantages and disadvantages of a merchant agreement for a hotel:
+ the costumer must always prepay his accommodation and no cancellation is allowed.
+ these sites reach many travel agencies, even the smallest, and consumers all over
the world, saving the hotel distribution costs.
- The number of rooms made available may not be changed, as these are
confirmed in a contract.
- If a hotel wants to have a prominent place on the list it must offer low room rates.
Examples of GDS (Global Distribution Systems) are: Sabre, Galileo, Amadeus and
Distribution Service Providers provide switches that link Central Reservation Systems of
hotels with Global Distribution Systems and on-line sites. They also provide services to
travel agencies and travel divisions of major companies.

To make sure regular guests do net enter the special rates intended for travelling
agencies and corporate guests on their website, they secured it with a login and
password that is only granted to the organizations with which the hotel has contracts.
The main benefits of a CRS for the hotel are:
- Reduced administrative work in confirming, cancelling and modifying
- Minimization of distribution costs
- Maximization of room occupancy
- Direct contact with costumers worldwide
- Easy to apply the hotels strategic market and revenue plan
- Easy to monitor the productivity of travel agencies and corporate clients.
- Easy to modify and control rates, conditions and restrictions
- Easy management of allotments
- Less chance of human errors in rates
- A selection of reliable payment possibilities for international customers
- All reservations are guaranteed or pre-paid
- Easy group check-in because names and types of accommodation are indicated
on the reservation list in the system.
- Reduction of distribution costs
- Access to more markets worldwide
- Time and cost saving
The main benefits of CRS for costumers are:
- Possibility to make reservations, modifications and cancellations online without
time restrictions
- Instant confirmation
- Reliable updates of rates and availability
- Time and cost saving
- Reduction of administrative work
- Efficient and quick group check-in procedure
- Additional information about the property may be included
- Map and directions to the hotels are included in the e-mail confirmation.


The administrative guest cycle:

- Reservation
- Registration
- Guest accounting
- Check-out
- Night audit
- Guest history
Once a Property Management System (PMS) has been selected, the following factors
have to be considered:
- The computer data bases must be shared by different departments.
- Access to some sections must be limited to a selected number of persons.
- A good maintenance contract with the supplier is essential, as a break-down of
the system will inconvenience guests and will lead to loss of revenue.
- In case of a power cut battery-powered temporary energy units must keep the
system going
- The installation of the system with the necessary electronic cables will disrupt
- Inform hotel staff when the hotel will be on-line and connected to the GDS
wholesaler and hotel (chain) website.
- To function properly computer equipment needs air-conditioned rooms
- Ergonomic factors need to be taken in account.
- All associates who will work with the system need to be trained.
Managers can ensure rate parity between a multitude of reservation channels, which
include GDS (Global Distribution System), website of the hotel and of the hotel group,
call center, tour operators, airlines, travel agencies and other intermediaries.
A commercially sound match between service supply and service demand can be found
- Effective scheduling
- Intensive training of Front Office Associates, so that they can execute the checkin procedure quickly, efficiently and in a friendly, hospitable manner.
- Crosstraining associates.
- Employing part-time employees for the peak hours.
- Keep waiting guests at resort hotels busy by playing a video on a large screen of
tourist attractions in the neighbourhood etc..
- Arrange for a number of convention halls for checking in and checking out guests
at peak hours, especially for groups.
- Installing electronic check-in kiosks.

Personal data of the guests are requested on the registration form for the following reasons:
- It is required by law in most countries which want to keep track of the where-abouts of
inhabitants and especially foreigners.
- Hotels like to keep into contact with guests in order to try and convince them to return for
another visit.
- Hotels like to register guests preferences, so that they can make their next visit even
more enjoyable.
- Hotels want to trace guests who did not pay their bill or who caused damage to the hotel
- Before admitting guests to their room, hotels want to check the personal data to make
sure that the guests are not on the black list.
- During check-in the Front Desk Associate can verify the date of departure, which is
essential when the hotel is (nearly) fully booked.
- A check-in form is similar to a contract as it contains important statements by the hotel.
(Electronic) key cards have the advantage that they can be used several times, but also that
they dont have the room number on it. When a guest loses his key card it would be no problem
since a possible thief doesnt know the room number. By asking for a new one the old key card
gets blocked and no longer provides access.
Managers should stage the guest experience by:
- Deciding which play will be stayed (mission statement, strategy)
- Attracting the audience (sales & marketing, PR)
- Providing the theatre, costumes and props (hotel building, products, services, uniforms)
- Finding the right actors to play the parts (selection procedures)
- Writing the good scripts (policies and standard procedures)
- Staging the guest experience (organizing culinary, cultural and sports events, social
- Inviting the guests to participate in the play (associates and guests intermingle)
- Rehearsing the play (training and development)
- Directing the play (team building and managing the service process)
- Keeping the memory alive (send brochures, and keep guests up to date with memorable
events at the hotel, personal greetings and messages sent after the guests departure).
According to Doug Kennedy a good Front Office manager should be able to:
- Compete with the needs of stakeholders ranging from the executive-level managers
through frontline employees.
- Being called upon to handle the most difficult guests.
- Close the gap between hotel standards and procedures that exist in memos and training
manuals versus what transpires daily on the frontlines.
- Mentor new associates
- Inspire the next level of hospitality recruits onward and upward.


The night auditor is responsible for:

- Prints out and checks the financial transactions that took place during the preceding day
- Compare occupancy rates with room rates of competing hotels in the neighbourhood.
- Checks accounts for in-house guests, city ledger accounts, split bills and expense
account for management. Also does the debet and credit bookings and the automatic
postings of room rate and tax.
- Must be able to check-in and check-out late or early guests.
- Plays security guard for the hotel.
- Prepares the report for management in the morning with any notes on peculiarities.


Chapter 3
Paragraph 3.1
Strategy is a pattern or plan that encapsulates the main goals and policies of an organization
while also establishing a coherent sequence of actions to be put into practice.
3 strategy opinions would be:
- Reducing their costs as much as possible.
- Offering the guest a unique product and/or service, creating guest loyalty
- Focusing on a specialized market (business hotels, long stay accommodations, limited
service hotels, accommodation for a special age group)
For a hotel company there are 3 main possible ways to achieve a rapid growth:
- A merger with another company
A joining of two companies of similar size, which merge into one new company
- An acquisition of another company
When a company buys another company or shares in it, taking full control over the purchased
- A joint venture
An agreement between two or more companies that set up a firm with its own juridical status.
They provide assets to the new company and share the profit that the newly formed company
Both mergers as well as acquisitions are carried out by companies for reasons of obtaining:
- Financial synergies:
The company will have access to more capital and can borrow at lower costs
- Operational synergies:
Combination of marketing, reservation and other services improve the operations and save
- Managerial synergies:
Managers of the acquired company join the new company, bringing with them their particular
talents and skills.

Real Estate Investment Trusts (REITs) another source of funding hotels which may enable
them to spend more cash on updating or renewing hotel buildings. Sales activity is being driven
- The large amount of capital seeking real estate investments
- Inexpensive debt
- The emergence of private equity firms both selling and buying properties
- Less attractive returns on other types of real estate


The lease back construction Hotels are selling and leasing back the properties they sell from
the institutional investors. They release equity from the hotel but continue to manage it therefore
collecting a management fee. This reduces the debt level, improves the overall return on
Franchise contracts developers (franchisees) finance the construction of a hotel, but leave
the management of the hotel to a hotel company (franchisor). Need substantial amounts of
capital to achieve market penetration. Sometimes this happens through mergers from hotel
companies with non-hotel companies (like Sheraton with ITT).
Product franchise agreement The hotel owner pays fees for the right to use the hotel
companys name. Disadvantage for the franchisor is that he has little or no control over the way
the hotel is managed and that is the reason why he has lost his popularity.
Business-format franchise in case the franchisee agrees to follow the hotel companys
business directions and maintain its operating standards.
The advantages for the business-format franchisee are:
- the use of the brand name, profiting from the franchisors good reputation\
- assistance with architectural matters and interior design
- training of staff before the hotel opening
- sales, marketing and public relations assistance
- worldwide, computerized reservation system linked to global distribution system (GDS)
- toll free reservation telephone lines
- purchasing assistance
- the good reputation helps in convincing financial institutes to provide loans
- quality control
- use of a fully developed business concept that has been tried and tested
The advantages for the franchisor are:
- inexpensive way to grow
- rapid market penetration
- franchised hotels serve as booking agents for each other and thus increase the number
of reservations for the whole chain.
Conversion franchising used by existing independent hotels. For a fee they can make use of
the worldwide reservation system and marketing programs of a hotel chain.


Franchising fees are based on room revenue:

- An initial fee is charged per room to cover the costs of inspection before the hotel is
accepted. An average fee of $300-$400 is usual, with a minimum of $40,000-$50,000.
- A yearly fee of 4-6% of the gross revenue per room. This entitles the franchise to use the
name and logo of the brand.
- A marketing fee of 1-3,5% of the gross revenue per room for participating in marketing
and promotion programs.
- A reservation fee of $1,25-1,75 for each booking made for the franchisee. Helps to cover
the costs of use of GDS and the commission paid to travel agencies, hotel
representatives etc.
- Further fees are charged for training, participation in quality control programs and other
specialized assistance from head-office experts.
Disadvantage of franchising hotel operators have their doubts about whether local owners
who purchase franchising will comply with the strict quality standards of the brand itself.
Management contracts A management contract is an agreement between a hotel
management company and the owner(s) of a hotel whereby the management company
manages the hotel in exchange for a fee. The investors will supply the building and capital.
A couple of advantages for independently managed hotels are:
- assistance of highly specialized experts for a reasonable fee
- access to capital which might be more difficult to obtain for an independent hotel
- worldwide computerized reservation system
- jointly arranged promotion
- bulk buying
Advantages for remaining and independent companies are:
- no high costs for a head office
- operational flexibility.
The advantages for a hotel company to work with management contracts instead of owning its
properties are:
- possibility of rapid growth
- brand recognition
- each managed hotel serves as a reservation centre, resulting in referrals
- no capital investment for land, construction costs and mortgage interest
- no loss of capital in case of a war or revolution
Shareholders may require the following capital investments from the management company:
- pre-opening costs
- initial working capital
- a loan from the management company (usually 10-20% of the total investment)
- shares in the investors company
- cash investments
- Furnishing, fixtures and equipment
- Lease of an empty building or a so called turn-key project, a completely furnished hotel

During a lease contract a management company does not owe any responsibility to the
Some of the essential subjects that have to be included in a management contract are:
- Financial participation of the management company
- Financial control procedures by the shareholders
- Length of the contract
- Terms of cancellation
- Possible penalties for breach of contract
- Fees for services supplied by the management company
- Fees for consultancy by hotel management head office
- Possible bonus for extra profit
- Right to put in a first bid for the property if the shareholders want to sell the hotel
- Competition clause (describes under which conditions the management company may
buy or manage another hotel in the same area, rules out unfair competition for
shareholders in case of 2 hotels managed by the same management company)
- Responsibility for the labor contracts and remuneration. (Contracts signed with the
management company, in case of a take-over or bankruptcy, the management company
has to find new jobs for their personnel.)
- The lease contracts for the shops and offices in the hotel
- Insurance. (Shareholders are responsible for insuring the building. The management
company will take care of indemnity insurance and legal liability insurance)
There are three types of management fees:
- Basic fee:
May be as high as 5% of the gross revenue. It encourages a management company to
increase its sales, but is no incentive to control the costs.
- Basic fee plus incentive fee:
The following variations are possible:
- A basic fee of less than 5% of hotel revenue plus an incentive fee of about 10% of the
gross operating profit.
- A basic fee which is based on percentage of room revenue and a separate basic fee
based on food & beverage income plus incentive fee consisting of a percentage of the
gross operating profit.
- A basic fee based on a fixed sum per available room plus incentive fee consisting of a
percentage of the gross operating profit.
- A basic fee plus an incentive fee based on the hotels cash flow.
- Basic fee or incentive fee, whichever is the highest.
The time-share business is a co-operation between a number of shareholders, investors and
hotel management company in which shareholders will offer hotel apartments for sale for
separate periods of time even before construction starts. The time-share owners can make use
of all hotel facilities, but will find that the maintenance costs are quite high and will increase over
the years.

The advantages for hotel owners are:

- Little capital investment, as apartments are often sold before construction starts
- Growth of the time-share market (can offer time-sharers to switch to another location)
- Multiple visits by the time-share guests each year
- Substantial spending power of time-share guests, which benefits all outlets of the hotel
- Guest loyalty
- Less costs for advertising, reservations, marketing and labor.
A brand is a combination of a name, symbol, and design that a hotel company uses to identify
the type of accommodation and services that distinguish its hotels from those of the competition.
Hotels offer a lot of different brands, the Marriott International is an example of this:
Fairfield Inn
Spring Hill Suites

Residence Inn

Top price
New World
RJW Marriott

Super de luxe

There are two different ways to calculate the average room rate, the rule-of-thumb calculation
and the Hubbart Formula.
The rule-of-thumb calculation sets the room rate at $1 for every $1000 of costs for construction
and furnishing, assuming that the hotel has a 70% occupancy.
The Hubbart Formula approach starts with the profit the shareholders and management desire
and then calculates it back to the room rate.
It is necessary to check these room rates regularly to check whether the average rate is still
satisfactory. This is done by using the following formula:
Total net room value
Total number of occupied rooms

= Average room rate

The rate might not be satisfactory any more as result of one of the following reasons:
- Sales & Marketing and the Reservation Department may not promote the more
expensive accommodation enough.
- Maybe the difference between the more expensive rooms and the average rooms is too
small that the guests are not tempted to choose the expensive rooms.
- Maybe the hotel is not offering the right accommodation for their target group.
- The associates from the Reservation Department are not selling enough rooms with
double occupancy. Double occupancy not only means a higher room rate, but also a
higher income for the Food & Beverage and other departments.


Paragraph 3.2
A hotel has many room rates for different target groups, some of these rates are:
- Rack rate
The official maximum price of a room that a hotel publishes in its brochures, on its
website, at the reception desk and in the hotel room itself. They can reduce this price,
but may never increase it.
- Best Available Rate (BAR)
Making sure all channels present the same rates. BAR rates are established by the
Revenue Manager for the duration of a year, but can be changed any time. Booking
directly with the hotel itself offers the chance of special offers or loyalty programs.
- Commercial, corporate or executive rate
Mainly for business guests, they are offered a membership card for that specific hotel
company (chain). The corporate rates are established for a while season and may give a
8-15% reduction on accommodation for its management and associates. Depends on
the number of rooms booked, applies:
- Always for very big accounts.
- For standard rooms and if no standard rooms are available, best available rate for luxury
- Only if the hotel occupancy remains below a certain level.
- Group rate
A hotel will accord special rates for groups. Reduction on room rates given by hotels
depends on the number of room nights and the season.
- Packages
Include travel, accommodation, meals, car rental and possibly excursions. The discounts
differ for business hotels and resorts because they have different occupancy patterns.
- Day use rate
A charge of 50% of the room rate to make use of a late check-out. Usually when the
hotel has enough space for arriving guests, this is not charged.
- Confidential rate
A guest books through a travel agency or on a on-line intermediary and pays an all-in
price for travel and accommodation with or without meals and/or excursions. The guest
is not able to have an insight in the room rate.
In case of a merchant agreement sites such as Expedia buy rooms at a reduced rate and sell
them at a small mark-up. Both room rate and mark-up are confirmed in a contract, so that the
hotel can ensure a rate parity. A disadvantage for the hotel is that the number of rooms made
available cannot be changed.
In case of a commissionable agreement the intermediary does not ask for a pre-payment. The
costs for accommodation are paid at the front desk of the hotel which pays a commission to the
intermediary. Is expensive due to labor and administration costs. The hotel can close the
availability of accommodation at any time though.


Tour operators are travel wholesalers who design and operate tours around the world and
market them through retail travel agencies or airlines. Tour operators make the packages which
they sell to the travel agencies.
Allotment contracts, where a number of rooms are left at the disposal of the agency, specify
the following relevant items, such as:
- Reservation periods for the allotment
- Number and type of rooms allotted within each period of the contract
- Rates, discounts and commissions
- Special conditions (free service, et cetera)
- Form and final date of payment, currency, possible guarantee deposit
- Regular information on the development of sales during the whole period of the contract
- Time limit for rooming lists
- Release date (The date the travel agencies return the unsold accommodation to the
- Tour operators like to make back-to-back bookings for their packages. (a new group
arrives when the other one just left that morning)
A guaranteed contract is a contract in which a tour operator or other intermediary agrees to
pay for the fixed number of guest rooms and/or restaurant seats throughout the season,
irrespective of how many are sold. There are 5 different kinds of guaranteed contracts:
- Full guarantee
The agency pays everything, regardless of the occupancy. Hotels dont like this because
empty rooms do not generate revenue in the bars, restaurants and shops.
- Minimum room occupancy agreement
The agency guarantees a minimum room revenue throughout the allotment season
- Minimum room revenue guarantee
The agency guarantees a minimum room revenue throughout the allotment season
- Minimum bed occupancy agreement
Covers room revenue only while a high bed occupancy per room increases the number
of guests staying at the hotel.
- In a long term contract a tour operator guarantees a percentage of the hotel room
occupancy or even all accommodation for a number of years.
A free sale agreement allows a tour operator or other intermediary to sell a certain number of
hotel rooms per night without prior consultation, as long as the fixed number of rooms per day is
not exceeded. Only used during low season. The hotel needs to keep the tour operator up-todate on the occupancy rates and closed dates, while the tour operator needs to send every
reservation through to the hotel administration.
Yield management is a technique used by hotels to increase their room revenue: the aim is to
optimize their room occupancy as well as their average room rate. Another definition would be:
Yield management is the process of allocating the right type of capacity, to the right kind of
costumer, at the right price, at the right time.

Yield management is also referred to as Perishable Asset Revenue Management. Perishable,

because a room that is not sold for a particular night means loss of room revenue, which can
never be recovered.
Airlines use yield manager in their last minute offers.
Revenue realized
Revenue potential

= 100% yield

The hospitality industry and airlines have a lot in common, here are six similarities:
- Relatively fixed capacity
Seats in a plane, as well as rooms in a hotel come in fixed numbers and cannot be
- Perishable inventory
Lost income, seats or rooms not sold for a certain date, cannot be recuperated.
- Inventory can be sold in advance
The possibility to book a room or seat in advance. Rates might change when you do this
at the last moment. In case of an airline, you get the best rates while in case of a hotel
you would get the highest rates.
- Different market segments
Business guests travel for business, not pleasure. Therefore they will often book a short
time in advance, taking no consideration of the rates on that specific date, since they
need to be somewhere and the company will be paying the bill while leisure guests do.
In exchange for lower rates they are willing to accept restrictions:
- They might decide to go on holiday before or after the high season
- Accept the uncertainty of a last minute flight
- Stay over an extra night in the weekend
- Relinquish the right to cancel or amend flights.
- Demand fluctuates substantially
The rates are following the changes in demand from the guests (think of holidays and
business facilities in the weekends)
- Marginal sales costs are low and marginal production costs are high
The costs to sell one extra room/seat are just as high when you are trying to sell 100
rooms/seats. On the other hand, it requires a substantial capital investment if a hotel has
to increase the number of their guest rooms.
Major differences between airlines and hotels:
- Airline passengers arrive and depart on specific times while hotel guests come and go at
all times of the day
- Airlines prices strategy is based on place of departure and destination. Hotels base their
prices on duration of guests stay.


Sequence of steps to be taken to prepare hotel associates for yield management:

- Once management has made the decision to use yield management, the associates
must be informed.
- Then management must find out which associates have previous knowledge and
experience in yield management and/or recruit personnel with a yield management
Accurate forecasts are very useful tools for the operational departments, enabling them to:
- Maximize the occupancy and the average room rate
- Calculate the number of personnel required
- Make work schedules
- To purchase the correct quantities of food, drinks, linen, amenities etc..
Information required for long term forecasting:
- Comparison of occupancy and average room rates between the hotel and the
competition in the area.
- Historical data regarding occupancy and rates
- Historical data regarding lead times (how far in advance reservations were made)
- Historical data regarding cancellations, refusals and no-shows
- Information of coming special events in the area
- Number of non-guaranteed and guaranteed reservations
- Cut-off date for room blocks held for groups
- Number of rooms out of order, due for renovation or refurbishment.
- Renovation plans in hotels in the same area. This will increase the demand for rooms in
the other hotels.
Walk-ins = people who arrive without reservation
No-show = a guest who has made a reservation, but who does not register or cancel his
Stayovers = guests who stayed at the hotel last night and will be staying the next night(s) as
Overstays = guests who should have checked out today, but decide to prolong their stay.
Understays = guests who check out earlier than expected.
A revenue manager in addition to the yield of the hotel accommodation, also checks the
revenue from the food & beverage, meeting rooms, telephone, parking, internet etc.. Is
responsible for the revenue of the whole hotel.
Lieberman describes revenue management as: using information, historical and current, in
combination with policy supports, procedural supports and statistical models, to enhance a
hotels ability to carry out a number of business practices and thereby increase both its
revenues and its customer-service capabilities.


Revenue management encompasses the maximization of the total revenue of a hotel. Yield
management concentrates on the revenue maximization of accommodation, such as guest
rooms, meeting and convention rooms or restaurant space.
The latest trends in revenue management:
- Upgrading in low demand days
- Negotiation power of the guest has been reduced by the BAR rates and rate parity.
- Length-of-stay controls
- Registering all no-shows and denial reservations will increase the accuracy in future
- Total commitment of the management and staff is essential.
- Encouraged to invent creative new ideas for revenue improvement.


Chapter 10
Chapter focus points:
- Importance of the night audit in a hotel
- Night audit process
- The daily flash report
- Reading the night audit.
The night audit is the control process whereby the financial activity of the guests accounts is
maintained and balanced. This process tracks charges and payments (debits and credits) and
the departmental receipts and charges on a daily basis. The front office manager monitors the
credit activity of the guests, projects daily cash flow from room sales, and monitors projected
and actual sales for the various departments.
It gives the necessary objective overview to evaluate the hotels financial activity. Based on that
review, the general manager must determine how the night audit should be adapted o meet the
expenses and profit foals for the accounting period. It also allows the general manager to see if
marketing plans and operational activities have accomplished their stated profit goals.
It provides an insight into how each department must be monitored to produce an acceptable
income statement. Ultimately, the night audit allows general managers to make good financial
decisions based on current and cumulative data.
The night auditor must check in and check out guests who arrive or depart after 11.00 p.m.,
process reservations, perform the duties of security guard, monitor fire safety systems, act as a
cashier for banquet functions, and perform the work of manager on duty. Works between 11:00
P.M. and 7:00 A.M. shift.
The night audit process is used by management to verify the integrity of the guest accounts
and to review operational effectiveness, which is the ability of a manager to control costs and
meet profit goals. The six basic steps involved in preparing a night audit are:
- Posting room and tax charges
- Assembling guest charges and payments
- Reconciling departmental financial activities
- Reconciling the accounts receivable
- Running the trial balance
- Preparing the night audit report.
Posting room and tax charges: After the night auditor reviews messages from other front
office staff, reviews guests who checked out of the hotel, extends any guest stays, reviews all
room rates, and prints a variance report, his first tasks is to post room and tax charges to all
account. This is mostly done automatically by the PMS.
Assembling guest charges and payments: The modules in a PMS (food and beverage, call
accounting, gift shop, etc.) allow for ease in assembling guest charges and payments. Note how
the restaurant, room service, and lounge paperwork is further classified by meal or function, to

facilitate recordkeeping and so that managers can review the income-generation activity of each
of the departments.
Reconciling departmental financial activities: The department totals option of the night
audit module in the PMS report total sales by department are compared to posting information
received from the point-of-sale system. Another department total that must be verified is the
cash tendered by guests at the front office. The cash payment can be arranged only at the front
office or on other locations as well. The cashier option of the night audit module in the PMS
reports the amount of cash, credit cards, and coupons received and discounts processed during
the shift. The total amount of cash received by each cashier issued a cash drawer must be
verified against the total money deposited for that shift.
Reconciling accounts receivable: The city ledger, a collection of guest accounts of persons
who are not registered with the hotel, is an account receivable. They have either received
approval for direct billing privileges or paid a deposit on a future banquet, meeting, or reception.
The hotel may hold a credit balance, amounts of money it owes guests in future services.
Another account receivable is the master credit card account, which depends on the number
of guests paying with this card, the size of the hotel and the speed of reimbursement from the
credit card agency.
Running the trial balance: A trial balance is a first run on a set of debits to determine their
accuracy compared to a corresponding set of credits. The report lists the debits and credit
activity of the front desk, receivables, and payables. It is important that the night auditor
compares the departmental totals against transfers and paid-out slips for each department
processed by desk clerks and cashiers.
Goal of preparing the night audit report: The night audit report is key in maximizing the
efficiency of a hotel. The daily figures regarding room occupancy, yield percentage, average
daily rate, and room revenue per available room (RevPAR) suggest opportunities to improve a
slow sales period.
Preparing the night audit report: Different people have different demands for a night audit
report, do notice the columns headed budget and goal. The budget figure is the target
amount of sales planned for that day. The goal figure shows what percentage of the budgeted
figure was actually achieved.
Department totals: Daily sales reports are to be reported to the front office, so the general
managers can determine the profitability of income-generating departments and the success of
marketing programs.
Bank deposit: Includes both cash and credit card deposits. Cash, business checks and checks
from credit card companies are received at several moments of the day.


Accounts receivable: An ongoing listing of outstanding amounts owed to the hotel. Essential to
a positive cash flow. Primary responsibility of the controller and general manager.
Cashiers report: Lists cashier activity including cash and credit cards an PMS totals.
Managers report: a listing of occupancy statistics from the previous day , such as occupancy
percentage, yield percentage, average daily rate, RevPAR, and number of guests. Reviewed
daily by the general manager, controller, front office manager, and director of marketing and
Formulas for balancing the night audit report:
Formula to balance guest ledger:
Total revenue
-paid-outs and noncollect sales
=daily revenue
-total cash income
-todays outstanding A/R income

Formula to balance city ledger:

yesterdays outstanding A/R
+ todays outstanding A/R income
= total outstanding A/R
- credit card received and applied to A/R
- cash received and applied to A/R
= balance of A/R

Formula to balance bank deposit:

Total bank deposit
-total cash sales
-credit card received A/R
-cash received A/R
Room and tax: The room sales figure represents the total of posted daily guest room charges.
These totals are obtained by activating the (tax) cumulative total feature in the PMS system,
which ads all previous posted amounts into one grand total.
Total restaurant sales and sales tax: The total restaurant sales figure comprises all sales
incurred as restaurant or food outlets in the hotel. These figures are verified against the daily
sales report, a financial activity report produced by a department in a hotel that reflects daily
sales activities with accompanying cash register tapes or point-of-sale audit tapes from each of
the restaurants or food outlets.
Tips for restaurant, room service, banquet and lounge employees: Represent an important
control feature, must be paid out from the desk clerks cash drawer or the restaurant cash
Room service: If a hotel as organized a special marketing and merchandising campaign to
increase room service sales or feels careful monitoring of this potentially service is profitable.


Banquet sales: Are checked next to the daily function sheet to check whether all activities have
been billed. Also provides information for the cash flow of the hotel.
Banquet bar and total lounge sales: Originate from the point-of-sale cash registers.
Room rental: Also think of the rental of meeting rooms etc. that get checked next to the daily
function sheet.
Valet: Dry cleaning and laundry services. Transfer slips are prepared to indicate the charges for
valet service which will be booked on the guest folio.
Telephone charges: surcharge rates, or rates for adding service charges for out-of-state longdistance telephone service.
Gift shop sales and tax: Necessary for the accounting procedure and the insight in cash flow
and profitability of the shop itself.
Vending: the money count of the vending machines, placed in the hotel.
Spa: charged to the guest folio.
Parking: cash and charge activities from each shift with supporting documentation, including
parking tickets, cash register tapes, transfer slips, and monthly parking permit renewals.
Total revenue and total write-offs: Represent all the cash and charge transactions for the day,
reflecting all the previously reported figures. The general manager maintains strict control over
these figures.
Cash sales and accounts receivable balance: Total cash sales today represents the totals
reported and received from the departmental daily reports and is required to justify the daily
bank deposit. Todays outstanding A/R is added to Yesterdays outstanding A/R to obtain a
cumulative balance of outstanding accounts receivable (total outstd A/R).
Credit cards and cash applied to accounts receivable: By the checks and cash payments of
the accounts receivable, they get updated.
Analysis of accounts receivable: To make sure payments are made and to operate an
overdue payment collection program.
Bank deposit and amount transferred to accounts receivable: The cash and credit cards
totals deposited must match the total cash sales plus the cash received and applied to
outstanding accounts receivable minus total paid-outs.


Cashiers report: The cash and credit card vouchers are added to the individual cashiers shift
report, which also includes amounts of cash and credit card transactions received for application
to accounts receivable. These figures must be verified in the daily bank deposit. Also notes
variances between actual totals and PMS totals. Substantial overages and shortages must be
investigated as to regularity and source.
Operating statistics: This summary reviews the days activities and the hotels success in
meeting financial budget targets. The rooms sold, rooms vacant and rooms out of order are
determined by assessing the housekeeping module and the housekeepers report.
Formulas for determining operating statistics:
Occupancy percentage
Number of rooms sold
Number of rooms available
Double occupancy percentage

Number of guest number of rooms sold

Number of rooms sold



Number of rooms sold x average daily rate

Number of rooms available x rack rate


Average daily rate

Room income
Number of rooms sold


Room revenue
Number of available rooms
Hotel occupancy percentage x average daily rate

Daily flash report: a PMS listing of departmental totals by day, period to date, and year to date,
is useful to general managers and to department managers and supervisors.
Total paid-out and noncollect sales: a total of total paid-outs, total discounts, and total writeoffs