UNDERSTANDING HOTEL ORGANIZATIONS. Contents Organizational Chart Line and Staff Functions Business...
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Transcript of UNDERSTANDING HOTEL ORGANIZATIONS. Contents Organizational Chart Line and Staff Functions Business...
UNDERSTANDING HOTEL UNDERSTANDING HOTEL ORGANIZATIONSORGANIZATIONS
ContentsContents
Organizational ChartLine and Staff FunctionsBusiness FormsRevenue SourcesProfit and Costs
Like most service related organizations, hotels are divided between LINE functions and STAFF functions
Line FunctionsLine FunctionsLine functions are the tasks assigned to
employees that bring them in regular contact with guests.
Line operations in a hotel are the Rooms Division & Food and Beverage Division.
Line employees are hands-on participants in the assembly and delivery of the hotel’s services.
Line = Revenue
ROOMS DEPARTMENTROOMS DEPARTMENT
Performs the lodging function of a hotel.Includes Front Office, Reservations Uniformed Services and HousekeepingTasks performed:
◦Receive reservation◦Receive guests◦Assign rooms to guests◦Maintain status of room (available or vacant?)◦Receive mail / phone messages for guests◦Maintain security & cleanliness in rooms and public areas◦Answer guests’ questions◦Close coordination needed by all subunits
FOOD AND BEVERAGE DEPARTMENT
Provide food and beverage for guestsMay include coffee shop, restaurant, poolside snack bar,
room service, banquet, function rooms, lobby bar, nightclub / disco, room service
Provides banquet and catering services for events in the hotel
Food and Beverage Department cont.Consists of kitchen (food preparation) and F&B serviceContains individual F&B outlets – restaurants and coffee
shop etc (each managed by a manager)Full service hotels have convention and catering subunitStewarding subunit does the purchasing,cleaning and
washing, expediting and arranging facilities for food and beverage
OTHER LINE FUNCTIONS
Telecommunications
Concessions, rentals, and commissions
Fitness and recreation facilities
Staff functions are those behind the scenes activities that support the line functions and have little contact with guests.
Example: Engineering, security, human resources, marketing, accounting
Staff = Cost
Staff Functions
Sales and Marketing Department Individual sales manager in charge of corporate accounts, conventions,
tour and travel markets. Low intradepartmental interdependence.Human Resources Department Consists of employee recruitment, benefits administration, training subunitsAccounting Department Prepares payroll, manages accounts receivables, accounts payables,
handles purchases and cost controls, store room operations, night auditsEngineering and Security Repairs, maintenance, guest and property security
Hotel Functional Organizational Hotel Functional Organizational DesignDesign
Front Office
Reservations Room status
Housekeeping
Concierge / Bellhop
Clean room
Engineering
repair
Laundry
LODGING BUSINESS FORMSLODGING BUSINESS FORMS
Lodging Business FormsLodging Business Forms
The five basic lodging business forms:
Owner operatedOwner managedIndependentFranchisedManagement Contract
Owner OperatedOwner Operated
Understood to have been the first type of lodging management association
Hotel is run by an owner and the owner’s family
Currently popular Bed and Breakfast hotel is considered owner operated
Owner ManagedOwner Managed
The owner has hired additional (non-family) personnel to help with the running of the property
The overall management is in the hands of the owner, but day to day operations can be in the hands of others
IndependentIndependent
The owner has no role or management in day to day operations
An independent group of managers are responsible to the owner for the hotel’s performance
The hotel is not chain affiliated
FranchisedFranchised
Independently owned hotels that affiliate themselves with a chain
The chain provides standard operating procedures and guidelines to maintain a consistent level of quality and service
The chain has limited control
Franchise Costs/BenefitsFranchise Costs/Benefits
You can expect to pay in the range of $90,000 to $150,000 in initial fees for a first-class hotel franchise like Hilton‘s Homewood Suites.
Additional costs typically include royalty fees,
reservation fees, marketing fees, frequent traveler fees, and miscellaneous charges for items like training or commissions. These numbers are calculated assuming a 300-room hotel with 60% occupancy for the first year, so actual costs can vary. Total costs over ten years can run as high as $10 million or more.
Franchise Costs/BenefitsFranchise Costs/Benefits
Those with the best relationships with their franchisors reported gross operating profits per room (GOPAR) of $12,400, which translates to over $3.2 million per year in a 300 room hotel.
Top Franchises: Marriott (Ritz Carlton), Hilton, Four Seasons, Park Plaza, Holiday Inn
Management ContractManagement Contract
Independently owned hotels that affiliate themselves with a chain
The chain maintains a high level of control as the chain operates the hotel on the owner’s behalf
Many hotel companies offer both franchises and management contracts.
Management fees are paid as a % of revenues
Revenues, Profits and CostsRevenues, Profits and Costs
Revenue SourcesRevenue Sources
A revenue source is the result of a product or service a hotel makes available to guests for a price.
Sleeping Rooms
Meeting / Function Space
Outlets / Ancillary Revenue Sources
Sleeping RoomsSleeping Rooms
The sleeping room is the most profitable of all of the hotel’s products
A sleeping room is an accommodation unitThe price of each of these units is called the
room rateOccupancy is the measurement of how many
rooms are sold each night verses how many rooms the hotel has to sell.e.g. 75 rooms sold of 100 rooms available
= 75% occupancy rate
Meeting/Function SpaceMeeting/Function Space
Many hotels incorporate the revenue source of non-sleeping rooms sales
Meeting rooms, or function rooms are used for any type of group meeting
The revenue sources from meeting/function space comes from:1. Selling space for a specified period2. Providing food and beverage service in theserooms
Outlets/Ancillary Revenue SourcesOutlets/Ancillary Revenue Sources
An outlet is a food and beverage point of sale
Ancillary revenue sources are revenue sources outside of sleeping rooms or food and beverage such as gift shops or spa services.
Profit MarginProfit Margin
The hotel sleeping room is the most profitable portion of all hotel products because of profit margin.
Profit margin is determined by comparing sales revenue verses the costs incurred in providing a product or service.
Room CostRoom Cost
Room cost analysis looks at what it costs the hotel to keep a room running in relation to what it is sold for to the guest.
H/L/P Labour OverheadHeat
Light
Power
HousekeepingEngineering (Internal structure maintenance)Grounds Maintenance (Grounds surrounding building)
Debt service of owners marketing (Local effort)Management Costs (Inc. franchise or management contract fees)TaxesCorporate Obligations
Room Cost ExampleRoom Cost Example
ABC Hotel sells a room for an average of $150 per night. The cost incurred in preparing each room for sale are:
Heat $3.00 Light $2.00Power $2.00Housekeeping $9.00Engineering/Grounds $5.00Debt service of owners $0.50Marketing $2.25Management costs $2.75Corporate obligations $2.00Taxes, etc $2.50Total: $31.00
Compare this to the actual cost to the price sold (room rate) and the room cost can be determined:
Room cost = Actual CostRoom
Rate
= $ 31.00 $150.00
= 21.0%
Room Rate – Room Cost = Profit
Food CostFood Cost
A common misconception in the hospitality industry is to consider food sales as profitable as room sales. This is not the case
Food cost is the cost of a particular food item in relation to the price for which it is sold
Put simply, the food cost percentage is the percentage of the profit taken up but the actual cost of the item
Food Cost ExampleFood Cost Example
The equation for determining the cost is:Food cost = Purchase Price / Menu Price
For example:
Item Purchase Price Menu Price Food CostSteak $5.95/ea. $22.00 27.0%Chicken $3.95/ea. $17.95 22.0%Caesar Salad $1.99/ea. $ 9.95 20.0%
Opportunity CostOpportunity Cost
Each night when a room goes unsold the hotel loses that opportunity to ever sell it again
This is called opportunity cost
The “Empty Room Theory” states that once a room goes unoccupied, it is gone forever
Opportunity Cost ExampleOpportunity Cost Example
ABC Hotel has 400 sleeping roomsConsider the following example:
Room Cost Room Rate Profit Margin
Sleeping Room $30.00 $150.00 $120.00_____________________________________________________________
The daily maximum room profit potential is: $48,000 ($120x400)Weekly: $336,000Monthly: $1,400,000Yearly: $17,520,000
$17,520,000 is the maximum potential room profit that ABC Hotel could make in a year. Each unoccupied room subtracts from that number. It is easy to understand why hotel operators focus so much attention on occupancy.
Captive Audience QuotientCaptive Audience Quotient
A captive audience are guests who are staying at the hotel who will utilise the outlet in the hotel.
Captive audience quotients apply to both outlet/ancillary sales and catering sales
Group catering contribution is the catering business acquired by a hotel that has all, or a large percentage of, the attendees staying at the hotel itself
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Managing Quality Control Managing Quality Control Set standards
Select employees
Train employees
Involve employees
Evaluate
Reward achievement