Understanding hotel organizations
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UNDERSTANDING HOTEL ORGANIZATIONS. Organizational Chart Line and Staff Functions Business Forms Revenue Sources Profit and Costs. Contents. Like most service related organizations, hotels are divided between LINE functions and STAFF functions.

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Contents

Contents



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 hotel’s services.

Line Functions


Rooms department

  • Performs the lodging function of a hotel. bring them in regular contact with guests.

  • Includes Front Office 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

ROOMS DEPARTMENT


FOOD AND BEVERAGE DEPARTMENT bring them in regular contact with guests.

  • 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


Food and Beverage Department cont. bring them in regular contact with guests.

  • 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


Staff functions

Staff Functions


Sales and Marketing Department support the line functions and have little contact with guests.

  • 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 security


Hotel functional organizational design

Engineering support the line functions and have little contact with guests.

Reservations

Room status

repair

Housekeeping

Front Office

Clean room

Concierge / Bellhop

Laundry

Hotel Functional Organizational Design


Lodging business forms
LODGING BUSINESS FORMS support the line functions and have little contact with guests.


Lodging business forms1

The five basic lodging business forms: support the line functions and have little contact with guests.

  • Owner operated

  • Owner managed

  • Independent

  • Franchised

  • Management Contract

Lodging Business Forms


Owner operated

Owner Operated


Owner managed

Owner Managed


Independent

Independent


Franchised

Franchised


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 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/Benefits


Franchise costs benefits1

Franchise Costs/Benefits


Management contract

Management Contract



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

Revenue Sources


Sleeping rooms

  • The sleeping room is the most profitable of all of the hotel’s 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

Sleeping Rooms


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

Meeting/Function Space


Outlets ancillary revenue sources

  • An rooms salesoutlet 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.

Outlets/Ancillary Revenue Sources


Profit margin

Profit Margin


Room cost

Room Cost


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:

    Roomcost = Actual CostRoom Rate

    = $ 31.00

    $150.00

    = 21.0%

    Room Rate – Room Cost = Profit

Room Cost Example


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

Food Cost


Food cost example

  • The equation for determining the cost is: consider food sales as profitable as room sales. This is not the case

    Food cost = Purchase Price / Menu Price

    For example:

    Item Purchase Price Menu Price Food Cost

    Steak $5.95/ea. $22.00 27.0%

    Chicken $3.95/ea. $17.95 22.0%

    Caesar Salad $1.99/ea. $ 9.95 20.0%

Food Cost Example


Opportunity cost

Opportunity Cost


Opportunity cost example

  • ABC Hotel has 400 sleeping rooms opportunity to ever sell it again

    Consider 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: $336,000

    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.

Opportunity Cost Example


Captive audience quotient

  • A opportunity to ever sell it againcaptive 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

Captive Audience Quotient


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