Hospitality Exam 2 Study Guide Chapter 11 Income Sources for Hotel Industry 1 Occupancy Percentage a The ratio of number of rooms sold to the number of rooms available b When comparing occupancy ratios do not compare a certain day from the previous year to the same day of the current year c of rooms sold of rooms available 2 Double Occupancy a of guests of rooms sold of rooms sold b Price is effected by number of guests in a room 3 Average Daily Rate ADR 4 Yield Management a Room Revenue of rooms occupied b This is how managers measure how well they are maximizing revenue through double occupancy and through the selling of more expensive rooms In most cases the ADR can t be less than the minimum published room rate or greater than the maximum published room rate Involves occupancy percentage and average daily rate a b This measurement of hotel measurement is important because of the fluctuation of rates during seasonal holidays The greater demand the higher the rates c Hotels that don t change rates throughout the year will not maximize their profits Revenue in Restaurant Industry Failure A LOT more common in restaurant industry than hotel industry 50 of independent restaurants fail within the first year of operation 90 of independent restaurants fail within the first 3 years of operation Prime Costs Food beverage and payroll expenses a Called prime costs because they are the majority of a restaurants expenses 1 Payroll expenses consist of salaries wages and employee benefits Effectiveness of a restaurant is determined by the food cost percentage a Cost of food sold food sales food cost Restaurant managers can adjust food costs by creative menu items Example A leftover chicken dinner can be turned into a chicken salad lunch special for the next day Restaurant managers can also determine the popularity of menu items from Point of Sales equipment Determines the percentage of sales for each menu item Maximizing Revenue through Selling Discounting Reduces the original price of an item a Managers must be concerned about the perishability of a product b A discounted item is more attractive to customers c Doesn t always have to be a reduction in the price could be a free item offered on top of a product Example if you buy a Big Mac you get a free ice cream cone d Used most often at lower priced restaurants and less often at fine dining restaurants Up Selling Selling higher priced items of a particular item or logical additions to an items that the customer has already expressed an interest in purchasing Example For 20 more you can upgrade to a poolside room If used correctly it should help to increase a hotel s Average Daily Rate Must convince the customer that a more expensive item is in their best Top Down Approach A method that attempts to see the most expensive item first and then offering a less expensive next In the restaurant industry this method is very similar to the up selling approach o Recommend selling more expensive items Ex My personal favorite interest is Controlling Costs in the Hotel Industry Cost Control Consists of energy management and labor costs Energy Management Concerned about heat air conditioning water usage electrical usage gas usage and sewer usage Labor Costs Fluctuates with the different seasons Ex If a hotel is operating at 90 occupancy during the summer and 50 occupancy during the winter staffing should be adjusted accordingly Controlling Costs in the Restaurant Industry Volume Purchasing Restaurants save money by purchasing items in bulk but must be aware that certain items will spoil over time Should purchase slightly more food than you need Portion Control If restaurants don t use portion control they won t know the profit they are making on each item Without portion control a menu item make look and taste differently time to time for customers AP As Purchased Often used with meat AP is what a particular item weighs when purchased including all the bones and fat before it is taken out EP Edible Portion is the condition of the item once the waste is removed and cooked If a recipe calls for 1 pound of meat EP you would have to buy more than 1 pound Key tools for measuring revenue Occupancy Percentage Average Daily Rate and Yield Management Occupancy rate Compares the number of rooms sold to the number of rooms available Number of restaurants that fail within 3 years 90 What is ADR Average Daily Rate Room Revenue of rooms occupied What are the largest expenses in the restaurant industry Prime costs which consist of Food Beverage and Payroll Expenses How do you control labor costs Must adjust staffing depending on the seasonal changes How do we derive food cost percentage Cost of food sold food sales How do we manage food wisely Purchase nonperishable items in bulk and maintain portion control Chapter 12 Human Resource Department HR Handles all paperwork regarding selection termination legal mandates benefits training and compensation HR managers are responsible for formulating policy and assisting with strategic planning related to department functions Very concerned with the people who work for the company Human resource management is the process of how organizations treat their people to accomplish the goals and objectives of the firm Human Resource Department Functions 1 Planning Assesses what skills are needed for the job Must predict future employment needs in terms of turnover or growth Must look at future trends to asses additional skills needed Must develop the plan to conduct needed training Must be competitive with wages to attract the best employees Initial HR planning functions What work needs to be accomplished How the work should be accomplished The skills necessary to complete the job Job Analysis What work needs to be done Job Description Identifies the tasks responsibilities and duties under which jobs are performed Job Specification the knowledge skills and abilities necessary to perform the position Job Design Job Simplification determining the smallest components of the job and assessing how they fit into the whole job Job Enlargement broadening the job by adding tasks Job Enrichment adding responsibilities to the job Job Rotation allowing employee to work at different jobs Team Building views employees as members of work groups rather than individuals 2 Staffing The key is to find the right employee for the job HR must first train managers how to interview properly No illegal questions Behavioral and situational questions are
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