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UNDERSTANDING HOTEL ORGANIZATIONS. Contents Organizational Chart Line and Staff Functions Business Forms Revenue Sources Profit and Costs.

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Presentation on theme: "UNDERSTANDING HOTEL ORGANIZATIONS. Contents Organizational Chart Line and Staff Functions Business Forms Revenue Sources Profit and Costs."— Presentation transcript:


2 Contents Organizational Chart Line and Staff Functions Business Forms Revenue Sources Profit and Costs

3 General manager Front Office Front Desk Bell service Valet Concierge Night Audit MaintenanceAdministrationHOUSEKEEPING Floor Attendants Laundry Food Beverage Restaurant/Bar Banquets Catering Room Service Human Resources Convention Sales RoomSales

4 Like most service related organizations, hotels are divided between LINE functions and STAFF functions

5 Line Functions Line 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 hotels services. Line = Revenue

6 ROOMS DEPARTMENT Performs the lodging function of a hotel. Includes Front Office, Reservations Uniformed Services and Housekeeping Tasks 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

7 FOOD AND BEVERAGE DEPARTMENT Provide food and beverage for guests May 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

8 Food and Beverage Department cont. Consists of kitchen (food preparation) and F&B service Contains individual F&B outlets – restaurants and coffee shop etc (each managed by a manager) Full service hotels have convention and catering subunit Stewarding subunit does the purchasing,cleaning and washing, expediting and arranging facilities for food and beverage

9 OTHER LINE FUNCTIONS Telecommunications Concessions, rentals, and commissions Fitness and recreation facilities

10 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

11 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 subunits Accounting Department Prepares payroll, manages accounts receivables, accounts payables, handles purchases and cost controls, store room operations, night audits Engineering and Security Repairs, maintenance, guest and property security

12 Hotel Functional Organizational Design Front Office Reservations Room status Housekeeping Concierge / Bellhop Clean room Engineering repair Laundry


14 Lodging Business Forms The five basic lodging business forms: Owner operated Owner managed Independent Franchised Management Contract

15 Owner Operated Understood to have been the first type of lodging management association Hotel is run by an owner and the owners family Currently popular Bed and Breakfast hotel is considered owner operated

16 Owner 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

17 Independent The owner has no role or management in day to day operations An independent group of managers are responsible to the owner for the hotels performance The hotel is not chain affiliated

18 Franchised 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

19 Franchise 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 Hiltons 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.

20 Franchise 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

21 Management 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 owners behalf Many hotel companies offer both franchises and management contracts. Management fees are paid as a % of revenues

22 Revenues, Profits and Costs

23 Revenue 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

24 Sleeping Rooms The sleeping room is the most profitable of all of the hotels products A sleeping room is an accommodation unit The price of each of these units is called the room rate Occupancy 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

25 Meeting/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 period 2. Providing food and beverage service in these rooms

26 Outlets/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.

27 Profit 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.

28 Room 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/PLabourOverhead Heat Light Power Housekeeping Engineering (Internal structure maintenance) Grounds Maintenance (Grounds surrounding building) Debt service of owners marketing (Local effort) Management Costs (Inc. franchise or management contract fees) Taxes Corporate Obligations

29 Room 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$2.00 Power$2.00 Housekeeping$9.00 Engineering/Grounds$5.00 Debt service of owners$0.50 Marketing$2.25 Management costs$2.75 Corporate obligations$2.00 Taxes, etc$2.50 Total: $31.00 Compare this to the actual cost to the price sold (room rate) and the room cost can be determined: Room cost =Actual Cost Room Rate =$ 31.00 $150.00 =21.0% Room Rate – Room Cost = Profit

30 Food 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

31 Food Cost Example The equation for determining the cost is: Food cost = Purchase Price / Menu Price For example: ItemPurchase PriceMenu PriceFood Cost Steak$5.95/ea.$22.0027.0% Chicken$3.95/ea.$17.9522.0% Caesar Salad $1.99/ea. $ 9.95 20.0%

32 Opportunity 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

33 Opportunity Cost Example ABC Hotel has 400 sleeping rooms Consider the following example: Room CostRoom RateProfit Margin Sleeping Room$30.00$150.00$120.00 _____________________________________________________________ The daily maximum room profit potential is:$48,000 ($120x400) Weekly: $336,000 Monthly: $1,400,000 Yearly: $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.

34 Captive 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

35 35 Managing Quality Control Set standards Select employees Train employees Involve employees Evaluate Reward achievement

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