HFT100 Exam 3 Study Guide Chapters 13 14 17 and 18 Chapter 13 Managing Revenue and Expenses Income Sources in the Hospitality Industry Making a profit about Increasing revenue and lowering costs those are the two main ingredients in making a profit Occupancy percentage Double occupancy Average daily rate ADR Yield management Occupancy Occupancy Percentage Ratio relating the number of rooms sold to the number of rooms available 1000 rooms available for sale x 365 days per year 365 000 rooms 67 5 occupancy rate Number of rooms sold 675 Number available 1000 675 1000 Always round off to the 100th place to ensure accuracy Too much rounding off will affect the accuracy of your answer For example 1000 rooms at 68 occupancy rounded off 680 rooms Occupancy Determining an accept rate National averages Use of daily audit report from past records Goals of management Comparison of competitor s rates Double Occupancy Price by number of guests in a hotel room Additional costs include Extra bed used linen laundry costs Extra time for housekeeping Additional continental breakfast consumed Additional happy hour consumption Number of guests Number of rooms sold Number of rooms occupied Example 1000 number of guests 750 number of rooms sold 750 number of rooms occupied 1000 750 750 33 33 Wha this means is that 33 33 or 1 3 of the rooms occupied had double occupancy and 66 66 or 2 3 of the rooms had single occupancy 500 rooms Average Daily Rate ADR The ADR is computed by dividing room revenue by the number of rooms occupied This is how managers measure how well they are maximizing revenue income through double occupancy and through the selling of more expensive rooms The 100 rate is simply the average price of rooms sold that night You want to maximize revenue by selling as many rooms as possible at as high a room rate as the market will allow 100 000 Room Revenue 1000 rooms occupied 100 ADR 74 140 room revenue 674 rooms occupied 110 ADR The average price of room sold that night In almost all cases the Average Daily Rate cannot be less than the minimum published room rate nor greater than the maximum published room rate Rule of Thumb for ADR Yield Management Occupancy percentage and average daily rate combined are a utilization of yield management attempts to control occupancy as a means of maximizing revenue potential Occupancy percent and ADR combined Attempts to restrict occupancy Holding out for a higher room rate Adjusting rates according to changing conditions Goal attain maximum revenue for the hotel Revenue in the Restaurant Industry Revenue concerns are crucial due to high failure rate restaurant business failure rate is much higher than the hotel industry Failure rate of independent restaurants 50 within the first year of operation 90 within the first 3 years of operation Prime costs are a major concern It s a term restaurants use for food and beverage expenses and payroll It is referred to as prime costs because these are your two largest expenses in the restaurant industry Food and beverage Payroll Most restaurants fail financially because they could not control their prime costs Labor costs payroll costs also referred to as payroll costs consists of salaries wages and employee benefits Food and Beverage Costs Food costs include the The cost of food sold Given away intentionally or accidentally Wasted Stolen Effectiveness of restaurant management can be measured by the food cost percentage Food Cost Percentage Cost of food sold Food sales Food cost Example 30 000 cost of food sold 100 000 food sales 30 food cost Maximizing Revenue Through Selling Discounting It s a method of reducing an item from the regular price Managers must concern themselves with the perishability factor Perishability refers to the shelf life or how much time you have to sell a product until it cannot be sold anymore Up selling it s often not about selling more items it is about selling higher priced items of a particular item or logical additions to an item that the customer has already expressed an interest in purchasing Goal is to get the consumer to purchase the more expensive item among those that he she is already interested in Reminder questions Up grades A guest is not going to pay more for something if they do not perceive any benefit in paying more Top Down Approach A method of attempting to sell the most expensive item first and then offering a less expensive item next and so on Similar to up selling and would consist of the restaurant server recommending more expensive menu items Example My personal favorite is Controlling Costs in the Hotel Industry Energy Management is about controlling Heat Air conditioning Water usage Gas usage Electric usage Controlling labor costs IMPORTANT Labor Costs in the hotel industry are different than controlling labor sots in the restaurant industry Know difference for test just in case Influenced by seasonality If a hotel is operating at 90 occupancy during the summer and 50 occupancy during the winter staffing should be adjusted accordingly Adjustments in staffing should be made to reflect the of hotel occupancy Food Cost control One means of controlling food costs is through volume purchasing Volume purchasing is effective but must consider perishability and Portion control and forecasting tools are critical as well as purchasing storage factors properly concerning AP weights meaning as purchased and EP weights to factor in normal waste of shrinkage that occurs during cooking edible portion Key Management Positions The majority of management and supervisory positions in the hotel and restaurant industry involve revenue and cost control Summary No segment of hospitality is immune from cost control and revenue Those wishing to have a career in this function should have strong analytical maximization strategies and math skills Chapter 14 Human Resource Management HR Overview Human resource management is the process of how organizations treat their people in order to accomplish the goals and objectives of the organization Most important asset to any corporation it s human resources The people who work for the company You must treat them well and train them well Guide the organization regarding Selection select the right people with the right attitude Having the right skills talent experience etc Termination fire someone who shows up or late or who isn t doing their job Legal mandates Compensation benefits Training and development Responsible for formulating policy and
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