Front Office Department And The Yield Management Tourism Essay Example
Front Office Department And The Yield Management Tourism Essay Example

Front Office Department And The Yield Management Tourism Essay Example

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  • Pages: 17 (4551 words)
  • Published: October 11, 2017
  • Type: Essay
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Chapter 1: Introduction

The aim of this chapter is to give a synopsis of the Front Office section and its output direction.

The term "Front Office" originated in the US but has now become a global concept. It encompasses various sub-departments, including response, concierge, patchboard, bellboys, reserves, and guest dealings. However, the presence of these sub-departments may vary depending on the size and type of hotel.

Regardless of the establishment's scale or category, the Front Office section plays a vital role in the hotel's operations. This is because room sales contribute more than 50% to both gross and net income. Therefore, it is crucial for the Front Office section to optimize its sales.

The Front Office plays a vital role in generating business for a hotel. It serves as the center for guest activity, whether it be through phone reservations, in-person check-ins, or inquiries. It is also responsible for guest registration


and providing information about hotel services. Additionally, the Front Office generates revenue indirectly for other departments, such as restaurant bookings and promoting the hotel as a whole. The team members often engage in up-selling to increase profits by offering additional services to guests.

When guests inquire about these services, it provides an opportunity for the staff to encourage them to purchase these facilities. It is important for the department to set goals and objectives in order to effectively manage and control output and maximize sales revenue. However, the Front Office should have its own mission statement to ensure successful management.


Planning and evaluating Front Office output management for improved revenue management and departmental success.


  • Proposing effective communication solutions and eliminating barriers.
  • Understanding the purpose of output management
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and how to plan, manage, and organize within the Front Office department.

  • Investigating the relationship between Front Office Operations and output management and their contribution to the department.
  • Implementing output management in the Front Office department.
  • Ensuring the Front Office section successfully controls and calculates revenue obtained from up-selling.
  • Problem Statement:

    There is an increase in communication barriers between departments regarding sales revenue.

    The lack of proper training facilities and procedures results in messages not being properly conveyed to the correct person, at the appropriate location, and in a timely manner. Consequently, employees are not motivated to engage in up-selling activities. As a result, expectations are not met and low revenue is generated. The presence of misunderstandings may lead to conflicts between staff and supervisors as they try to determine how to enhance sales.

    The lack of set objectives and guidelines for employees on the clip graduated table inhibits their ability to effectively plan, organize, and carry out tasks. This ultimately leads to a decrease in profits if there is a miscalculation or a decline in revenue and sales. Generally, team members neglect to prioritize project planning, resulting in ineffective, inefficient, and less productive work. Additionally, updated information is not regularly distributed.

    So, invitees are provided with outdated information about the monetary value of goods and services at the hotel. If there is any negligence, guests are compensated with a complimentary dinner on the beach. This ultimately reduces revenue and sales.

    Chapter 2: Front Office department

    Front Office department belongs to the suites division and serves as the central hub of the hotel. It is responsible for generating the highest amount of revenue.

    The front office is a highly visible department in a hotel that has

    the most guest interaction and is extremely focused on people. It serves as the initial permanent impression. The front office functions can be categorized into six main areas: 1. Reception 2.

    Guest Relations 3. Bell service 4. Mail and information / Reservation 5. Concierge 6. Tellers and dark auditors

    Front Office Structure

    A hotel's size and aims determine the organizational construction of the Front Office. (Abbott, P.

    According to Downs and Lewry (1993), the following tabular array displays various Front Office structures.

    Planning and measuring operations

    When planning and measuring operations, there are seven management functions that need to be taken into account. These functions include: 1.Planning 2.Organising 3.Coordinating 4.Staffing 5.Leading 6.Controlling 7.Evaluating


    Planning is crucial for the successful execution of office operations.

    Strategic planning is crucial for the Front Office operation as it involves setting goals, creating programs, and outlining tasks and schedules to achieve targeted objectives. The Front Office manager plays a key role in establishing the department's goals and objectives during the planning stage. These goals serve as a guide for developing more specific and measurable objectives.

    Finally, the front office director determines the schemes and processes to achieve these objectives. These purposes will be communicated to the Front Office staffs in order to plan and organize their work efficiently for the success of the department.


    After setting the aims, the Front Office director organizes the work by assigning tasks to the Front Office staffs. When organizing the tasks, the work is divided properly and must be completed within a specified timeframe.


    Coordination and teamwork are crucial.

    It involves unity and using the available resources to achieve planned goals.


    The proper individuals and experienced ones are recruited. It is important to provide training to the

    employees for a better success of the department.


    Leading involves overseeing, motivating, training, coaching and setting an example for the Front Office section. Leading is important to maintain the effectiveness of the tasks.


    Controlling ensures that the actual outcomes of operations closely align with the anticipated program outcomes. Supervisors primarily lead and direct the execution of tasks.


    Evaluation determines the degree to which planned objectives and goals are actually achieved. Additionally, it entails measuring and, if necessary, revising or assisting in revising Front Office goals. Furthermore, all tasks are planned in advance to maintain the success of the department.

    The accommodation arrangements for the guests' arrival are well organized. Prior to their arrival, the registration card, which is a legal document, is prepared on the evening before along with the hotel information sheets. Additionally, cold towels and cocktail juice are prepared in the evening for the guests' arrival the next day. The departure and arrival checklists are prepared a day in advance. In the case of group arrivals, a plan is made for facilitating the check-in process.

    A day-to-day event record is prepared each evening by the Guest Relation Officers, displaying detailed information about guest arrivals and departures, including the total number of guests currently staying. An event report is provided as an extension. If there are any early arrivals, the housekeeping department must be notified to prepare the room beforehand.

    Establishing room rates

    The Front Office manager assigns a rack rate to each room category. The Front Liners are expected to sell rooms at this rate unless a guest qualifies for a different rate, such as an airline rate, corporate rate,

    group rate, daily rate, package program rate, complimentary rate, cooperative rate, promotional rate, incentive rate, or family rate. When determining room rates, management must consider operating costs, inflationary factors, and competition.

    In general, there are three well-known attacks to pricing a room. These approaches include the market status approach, the rule-of-thumb approach, and the Hubbart expression approach.

    Market status approach

    The market status approach determines prices by comparing rates charged by similar hotels in the same geographic market. The goal is to charge what the market will accept. However, this approach does not consider the value of the property or the impact of strong sales efforts on profitability.

    Rule-of-thumb approach

    The rule-of-thumb approach sets room rates at $1 for every $1000 spent on construction and furnishing per room, assuming a 70% occupancy rate. However, this method ignores factors like inflation, contributions from other hotel amenities and services, and desired hotel profitability.

    The Front Office director is responsible for maintaining communication with the General Manager and accountant to ensure the effectiveness of room rates. This approach, called the Hubbart expression approach, considers operational costs, desired profits, and projected demand (number of rooms sold). The approach primarily focuses on operating expenses, desired Return on Investment (ROI), and revenue from different hotel departments to establish room rates.

    The hotel's method of generating revenue to cover expenses and ROI relies on the Front Office. According to Hubbart's formula, the process for calculating a room rate involves several steps. First, calculate the hotel's projected net income by multiplying the desired ROI by the owner's investment. Then compute pre-tax profits by dividing the projected net income by 1 minus the tax rate. Next, determine fixed expenses and

    management fees, including depreciation, interest expenses, property taxes, insurance, amortization, building mortgage, land rent, and management fees. Evaluate undistributed operating expenses such as administrative and general expenses and energy costs. Assess non-room operating division income or loss from divisions like Food and Beverages or telephone services. Measure the required room division income by summing pre-tax profits with operating division losses and other division incomes.

    Determine the room division revenue which includes direct payroll and related expenses in addition to required room division income.
    Calculate average room rate by dividing section revenue of rooms by expected number of rooms sold.
    These methods should only be used as guidelines as it is necessary to monitor room rates based on market conditions of supply and demand.Further information can be obtained from the following expressions:
    - The daily sales of doubles can be calculated by multiplying the dual tenancy rate with the total number of suites, then multiplying it by the tenancy percentage.
    - The daily sales of singles are determined by subtracting the daily sales of doubles from the total number of suites sold in a day.
    - The equation (Singles sold daily x X) + (Doubles sold daily x (X + Y)) = (mean room rate) x (total number of suites sold daily) represents the relationship between singles, doubles, and the overall room rate. In this equation, Ten represents the price of singles, Y represents the differential value between singles and doubles, and X+Y represents the price of doubles.
    Forecasting room availability involves predicting how many suites will be available for sale on a future date.

    The mentioned prediction type is beneficial for various purposes such as managing reservations, guiding Front Liners

    in efficient room management, and forecasting occupancy. Additionally, it aids in determining the appropriate staff count for a department of a planned size.The information required to predict room availability includes the number of expected room arrivals/check-ins, no-shows, walk-ins, stayovers, overstays, check-outs, and understays. This information is essential for Front Liners to conduct daily operational calculations.

    To calculate the percentages of no-shows, walk-ins, overstays, and understays, the following expressions are used:

    1. No-shows percentage = (Number of no-show suites) divided by (Number of suites reserved)
    2. Walk-ins percentage = (Number of walk-in suites) divided by (Sum of the figure of suites arrivals)
    3. Overstays percentage = (Number of overstay suites) divided by (Number of expected check-outs)
    4. Understays percentage = (Number of understay suites) divided by (Number of expected check-outs)

    To determine the forecasted number of suites available for sale for the upcoming day, use the following expression:
    Forecasted number of suites available for sale = Total number of guest suites - Number of out-of-order suites - Number
    of stayover suites - Number
    of reserved rooms + Number
    of no-show rooms + Number
    of understay rooms - Number
    of overstay rooms

    Under non-automated and semi-automated systems,
    forecasts for the total number
    of available rooms are based on varying demands ranging from three-day to ten-day forecasts.Fully automated systems in the Opera system enable instant room forecasts for the immediate future. These forecasts are already registered and considered, eliminating repetitive manual work and reducing human error.

    Budgeting for Operations

    Hotels must create annual budgets that encompass all income and expense categories for the upcoming year. These budgets serve as a benchmark against which managers can assess the actual performance of the hotel. The process of preparing the annual operating budget requires close coordination among

    all management teams. Typically, the annual hotel budget is broken down into monthly plans, which are further divided into weekly and daily plans to ensure effective control over ongoing operations. Additionally, when preparing the annual budget for the Front Office department, the Front Office manager must collaborate with the finance department to estimate revenue and direct expenses solely for the rooms. As a result, both the hotel accountant and the General Manager must review and revise this budget.

    Forecasting room revenue

    The Front Office director uses historical financial data, such as past room revenue, number of suites sold, average daily rate, and occupancy rates, to predict future room revenue. This involves analyzing and comparing past data to make better decisions.

    Forecasting direct expenses

    The Front Office director only focuses on the variable costs of their section, which are the direct expenses. They consult past financial data to determine the ratio of variable costs to room revenue in order to estimate section expenses.

    Polishing budget plans

    If significant external factors unpredictably change, the actual budgeted figures need to be revised.

    Measuring Front Office Operations

    A successful Front Office director continuously evaluates the outcomes of their section's activities on a daily, monthly, quarterly, and annual basis.

    The following points and tools must be considered when measuring:

    • Daily operations study, for example Room move report
    • Occupancy ratios
    • Rooms gross analysis
    • Hotel income statement, for example Early breakfast sale
    • Rooms division income statement or agenda, for example up-selling of rooms
    • Rooms division budgets report
    • Operating

    ratios and ratios standards

    Daily operations report

    This study is also known as the director's study, the daily study, and the daily gross study. It includes a summary of the hotel's financial activities during a 24-hour period. Additionally, it helps to reconcile cash, bank accounts, and gross and accounts receivable.

    Occupancy ratios

    Occupancy ratios measure the enhancement of the Front Office in selling the hotel's guestrooms.Below are some commonly used ratios in the Front Office section:

    - Occupancy percentage: (Number of occupied rooms) divided by (Total number of rooms available for sale)
    - Multiple occupancy percentage: (Number of rooms occupied by more than one guest) divided by (Total number of occupied rooms)
    - Average guests per room sold: (Total number of guests) divided by (Total number of rooms sold)
    - Average daily rate: (Total room revenue) divided by (Total number of rooms sold)
    - Average rate per guest: (Total room revenue) divided by (Total number of guests)

    In addition, a key method to manage room revenue is the room rate discrepancy study. This study focuses on analyzing rooms that have been sold at rates different from their rack rates, such as airline rates, corporate rates, and other negotiated rates.

    Another indicator is the output statistics, which is the ratio of the current gross to the amount of the potential gross if all suites are sold at rack rates. The formula for calculating the Yield statistic is as follows: Yield statistic = (Actual room gross) / (Potential room gross).

    Hotel income statement

    This statement provides important financial information about the results of hotel operations for a specific period of time.

    Room division income


    The room division income statement, also referred to as a schedule, must be included in the hotel's income statement. Additionally, the room division schedule should be prepared by the hotel's financial division rather than the Front Office accounting agent, specifically the Night Auditors.

    Room division budget reports

    These reports are monthly budget forms that compare current gross and expense figures to budgeted amounts, presented in both Euro values and percentage variances.

    Operating ratios

    Operating ratios such as occupancy ratios and yield statistics help managers assess the success of Front Office operations.

    In addition, meaningful ratios should be compared against proper criteria such as previous periods, competitors, or budgeted ratios.

    Front Office Operations

    There is a need for communication in order to communicate with other managers and staff working different shifts. The reservation area is the sales department of the Front Office, making it a revenue center for the department as reservations depend on occupancy levels. The Front desk staff must alert guests when their credit limit is exceeded. Lastly, the Front Office staff should take advantage of the check-out process to offer additional services to the guest, such as suggesting future room bookings in the hotel.

    (Vallen, J.J. 1985) Night audit, response, and Guest Relation are vital aspects of the Front Office department, considered to be a highly productive section. The role of Guest Relation Officers is to persuade guests to accept promotions. (Jones, C and Paul, V.)

    In 1993, a control procedure system was implemented to supervise the targeted performance aims of the Front Office. Additionally, the Front Office is responsible for controlling its cash and


    Interdepartmental Communication

    The Front Office staff collaborates with all hotel departments, such as marketing and sales, housekeeping, food and beverage, events, accounting, maintenance, security, and human resources. Each department has a unique method of communication with the Front Office staff.

    These sections recognize the Front Office as a vital connection for guest services. The Front Office serves as a hub for communication activities.

    Sales and Revenue department

    The Sales and Revenue department relies on the Front Office to access guest information and past visits. The guest history is a valuable tool for sales and revenue, allowing them to target marketing campaigns, create promotions, generate mailing labels, and select appropriate advertising media.

    Housekeeping department

    Effective communication between the Front Office and the Housekeeping department is crucial, particularly regarding room status. The Housekeeping team provides the Front Office with regular room status reports, facilitating efficient follow-up actions.

    Food and Beverage department

    To communicate charges to a guest's account, handovers are utilized.

    It is crucial for the Food and Beverage department to coordinate with the Front Office department in order to be aware of the guests' meal plans. This is to make sure that the guests are charged accordingly before they have their planned meals. Through interdepartmental communication, information is shared among all the departments to effectively communicate and improve the hotel's situation and increase revenue. It is also important for better work planning.

    Intradepartmental communication

    Internal communication within the department is necessary for better work planning. After setting the goals and objectives for successful Front Office operations, it is essential for all Front Liners to work together and communicate effectively to accomplish the assigned tasks properly.

    Effective communication is vital for the Front Liners to achieve their goals

    and increase revenue in their operations. The team's spirit and understanding are crucial for improving the Front Office department. It is necessary to have interaction among the Front Office manager, supervisors, and Front Liners in order to identify the root cause of the problem and find solutions to rectify the situation. Interdepartmental exchange of information is important for achieving goals and objectives.

    Barriers leading to a decrease in sales revenue

    A decline in sales revenue results in unsuccessful hotel operations. Lack of cooperation among departments leads to communication barriers. A decrease in tourist arrivals has a negative impact on revenue.

    The low demand results in reduced grosses across various areas including room revenues, sales of merchandise and services. The main source of this problem is the reservation department. Other departments like Finance, Food and Beverage, and Housekeeping may also face challenges related to sales. For instance, when a guest has a Half Board voucher but the opera system shows it as All-Inclusive, it causes confusion for the relevant departments.

    The overall cellaret and the Half Board option are completely distinct. If the Housekeeping, Food and Beverage, and Financial departments are not informed about or modify the guest's meal plan in the system by the Front Liners, it may result in a loss of revenue. Insufficient training procedures regarding upselling will not boost sales revenue. The employees' lack of skills does not motivate them to engage in upselling.

    There may also be conflicts in different duties charged to guests, for example; a Front Liner may charge a guest Rs 200 instead of aˆ200 resulting in a huge decrease in sales revenue.

    Ways to rectify the barriers relating to a decrease in sales


    Through effective communication, there may be an increase in sales revenue and a successful department. It is important to maximize rates when demand is high but if demand is low, special promotional package has to offer to guests to increase the demand. The Front Office manager has to well-trained the Front Liners to understand the significance of yield management and how to increase sales or ensure sales revenue.

    The Front Office direction aims to increase gross revenues and therefore communicates with various sections of the hotel. This cooperation among sections is crucial for generating successful gross revenues. Front Liners must effectively and efficiently communicate with sections such as Food and Beverage, Financial, and Housekeeping regarding guests' meal plans. Training enables team members to excel in sales techniques. It is essential for each section to provide training facilities and procedures to employees in order to learn how to increase gross revenues.

    The employees should be aware of the merchandise, in order to increase profits, and the staff should be careful when accepting payment from guests. Questions about adjustments and meal plans should be asked politely when a guest reserves a room. It is important to keep a record of financial transactions so that the Financial department can identify ways to resolve barriers related to declining sales revenue. "It's not always easy and often requires a lot of determination. But making an effort to remove the obstacles - both tangible and intangible - that hinder us, can be the key to building relationships that truly work" - by Eric Garner.

    Output Management

    Output Management is a demand prediction technique borrowed from airlines that the hotel industry uses to maximize room revenue.

    It is based on the economics of supply and demand, meaning that prices increase with strong demand and decrease with weak demand. Therefore, the purpose of output management is to increase profitability.

    The yield direction strategy is utilized to allocate the appropriate skillset to the right customer at the optimal price in order to maximize revenue or output for each available room (Kimes, S.E, 1989). The output management approach involves monitoring reservations and utilizing historical patterns. The number and type of rooms to be sold, as well as the optimal price for each room, are determined based on existing demand in order to achieve maximum revenue. The output management plan monitors both demand and supply, suggesting the ideal number and type of rooms to sell on a given day, along with their respective prices.

    Planning sales revenue

    The Front Office plays a crucial role in promoting sales, and it is the responsibility of the Front Office Manager to develop and implement a comprehensive plan to maximize sales opportunities for the Front Office agents. This plan focuses on areas such as promotions, goal setting and procedures, incentive programs, staff training programs, budgets, employee feedback systems, and profitability analysis. Additionally, planning output management involves setting objectives, considering options, creating budgets, and developing an evaluation tool for feedback.

    The program must be discussed with the General Manager, section directors, and Front Liners from different sections to achieve goals and objectives. The team members must ensure that the profitable program is effectively developed. According to Narula (Feb 1987), some goals were given to the Front Office employees to increase sales. These goals include selling rooms to guests who have not made prior reservations,

    upgrading guests to incentivize them to purchase higher-priced products or services, maintaining room records, providing information about available product facilities such as food and beverage, and ensuring that all hotel facilities and benefits are sold. Additionally, the goal is to maximize revenue from room sales by balancing overbooking and a full house. Guest feedback is also a priority. Planning can only be initiated if there is improved communication between Front Liners and the Marketing and Sales department. An effective marketing strategy must be developed when market conditions change.The ultimate goal of a sales-driven Front Office is to boost revenue from rooms, food and beverage, and various departments.

    The hotel's Front Office and other departments need to collaborate in order to determine how much to increase revenue in order to achieve their goals. Before making any decisions, they must ask several questions to better plan their revenue management. They should continuously set new goals for future months to generate revenue. When creating and executing a plan to increase gross revenues, the Front Office manager, along with other department managers and employees, must identify products and services to promote.

    The annex provides a list of services and merchandises that will be promoted.

    Measuring gross revenues - Output direction in Front Office Operations

    The Front Office team needs to determine which concepts to generate in order to increase gross revenues. To develop and implement the plan, the Front Liners must refer to the goals and objectives. The overall purpose of the program is to maximize gross revenues from the Front Office, Food and Beverage department, stores, and health facility products

    and services. The Front Office agents must decide which areas are more profitable for the hotel.

    There is a need for backup incentives during brainstorming to create a successful sales program. Feedback on the evaluation of the success of the Front Office agents in promoting other areas of the hotel is crucial in preparing a sales plan. Planning allows for effective evaluation of tasks to enhance the department. It is important to motivate employees to sell the products and services offered at the hotel. Additionally, guest trials are advantageous for the Front Office manager to assess the sales performance of the Front Liners.

    Another way to evaluate the program is by calculating the actual financial outcomes. To effectively track the amount of revenue given to the Front Liners as incentives for boosting sales in specific countries, a comprehensive recordkeeping system must be established. Okin proposes a strategy for developing plans to manage output, meaning that during periods of high demand, it is essential to maximize rates, while during low demand, the focus should be on maximizing room sales. Instead of relying on a seasonal decision-making approach, Okin suggests adopting a daily decision-making mindset when developing and implementing a specific strategy. Each aspect of revenue management contributes to a system that supports the ultimate goal of maximizing the hotel's profitability.

    When there is low demand for room gross revenues, reserve agents should be given special promotional rates to offer guests who book at standard rates. However, it is not guaranteed that a high occupancy rate will lead to increased output management. For example, if the occupancy rate is low but there is an increase in sales of products and

    services, this results in a boost in gross revenue.

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