3. Functions of a Manager
1. Planning
2. Organizing
3. Staffing
4. Leading/
Directing
5. Evaluating
& Controlling
4. Functions of a Manager
Planning Deciding on the goals of the organization, the best way to
achieve those goals and the necessary resources needed.
Organizing Organizing is about creating a human resource structure
(hierarchy), that will be able to achieve the planned goals.
Staffing After setting up a workable organization, staffing function
deals with filling the different positions with the right
people.
Leading/
Directing
Leading function is to guide, train, motivate and supervise
the efforts of the people working in the organization, so as
to achieve the goals.
Evaluating &
Controlling
Evaluating is to examine the performance of the individuals,
departments and whole organization. Then, compare with
the planned goals. Controlling is to make corrections for
failure.
5. Establishing Rates: Pricing Strategy
• Every business has to decide on the price it
will charge from it’s customers, for the goods
& services it sells.
• For a customer, price may be one of the most
important basis for selecting/rejecting a
product or service.
• The “Law of Demand” & “Law of Supply”
affect the final price in the market. When
demand is more than supply, price increases
and vice-versa.
6. Methods of Pricing
• In the chapter on “Room Tariff”, we have
discussed two main methods of calculating the
best price for any business;
• Market- based pricing (competition based)
• Cost-plus pricing method- The business has to
first calculate the cost of supplying one unit of
the product or service, and then add a mark-up %
of profit to find the final price. (Rule-of-Thumb &
Hubbart’s Formula)
• Best price is that price-point, where both, the
buyer and seller, are satisfied (value).
7. Tariff Design
• A business always has many types of buyers.
They differ on the basis of disposable income,
age, gender, education, place of residence,
religion, habits, needs, occupations etc.
• They all are willing to pay different prices for
same product/ service, because for each one
of them, the value of the product/ service is
different. E.g. booking a room for an urgent
meeting and booking a room for a family
vacation are not of equal importance.
8. Pricing is Planning
• Calculating tariff and creating a wide range of
discounts, come under the planning stage.
• Now we shall move to the topic of “Forecasting”
which deals with the concept of dynamic/changing
pricing (tariff).
• Forecasting is estimating the level of demand for the
product/ services of the hotel, with the help of
Statistics, Mathematics and experience.
• Dynamic pricing is adjusting prices with expected
changes in demand for the product/ services. More
demand, higher price, less demand, lower price!
9. Forecasting
• Forecasting is estimating the demand for the
products/ services of a hotel/ business, in
future. It is based on the past data and
present trends .
• It is a planning tool to minimize the
uncertainty in business.
10. Forecasting techniques
• Quantitative technique: This technique is used
when past/historical data of the business is
available. The data is analysed to understand a
pattern or trend that may repeat in future.
• Qualitative technique: This technique is used
by new businesses that do not have any past
data to analyse.
11. Forecasting techniques
• Quantitative technique:
a. Last period demand.
b. Simple and weighted n-
period moving averages.
c. Simple exponential
smoothing.
d. Poisson process model
based forecasting.
e. Multiplicative seasonal
indexes.
• Qualitative technique:
a. Executive Opinions
b. Delphi Method
c. Sales Force Polling
d. Consumer Surveys
12. Forecasting Room Availability
Forecasting helps a hotel manager in following
ways;
• Proper staff scheduling and duty roster.
• Right level of stock (inventory) to be maintained.
• Allocating rooms to different market segments at
most profitable rates. Rooms are a highly
perishable product/service!
• Estimate the cost of repair & maintenance
• Arranging for special requests
13. Forecasting & Revenue management
• Revenue management is using a number of
tools to maximize revenue (income from sales)
of the business.
• It is understanding, anticipating and influencing
the customer’s behaviour in a profitable way.
• That understanding of customer’s behaviour
comes from analysis of past business data and
anticipation is forecasting of future customer
behaviour. It is a very complex science, based on
analytics, computers and human judgement.
14. In order to forecast room availability on any date,
the following past data on the same date are
needed:
a. Number of expected arrivals
b. Number of expected walk-ins
c. Number of expected stay-over
d. Number of expected no-shows
e. Number of expected cancellation
f. Number of expected under-stays
g. Number of expected check-outs
h. Number of expected overstays
Forecasting Room Availability
15. Total Number of Guest Rooms
- Number of Out of Order Rooms
- Number of Stayover Rooms
- Number of Reserved Rooms
+ Number of No-show Rooms
+ Number of Cancellation Rooms
+ Number of Check-Out Rooms
+ Number of Under stay Rooms
– Number of Overstay Rooms
= Number of Rooms Available for Sale
Forecast Formula
16. Forecasting Room Availability
• When it is acceptable and safe to do
overbooking? History of cancellation...
• When is the right time to open and close
discounts? How much discount for which
segment? Watch the demand at that price
point...
• When is it okay to demand that guest must buy at
least these many rooms or be refused?
Demand is expected to exceed supply of rooms...
17. Types of Forecast in Hotel Business
• Long-term: forecasting the demand for a time
after 30 days to 1 year.
• Short-term: forecasting demand in the
immediate future, from 10 days to 3 days in
advance.
18. Hotel IHM Hajipur
Ten Day Occupancy Forecast
Week ending _________________
Date Prepared____________________________ Prepared By______________________________
To be submitted to all Department Heads at least one week before the first day listed on forecast
1. Date & Day
Fri Sat Sun Mon Tue Wed Thu Fri Sat Sun
2. Estimated Departure
3. Reservation Arrivals – Groups
4. Reservation Arrivals –
Individuals
5. Future Reservations (after the
forecast is complete)
6. Expected Walk-ins (based on
past 2 weeks)
7. Total Arrivals
8. Stayovers
9. Total Forecasted Rooms
19. 10. Occupancy Multiplier (based
on no of guests per occupied
room for average of the same
day for last 3 weeks)
11. Forecasted no of guests
12. Actual Rooms Occupied
13. Forecasted Variance
(difference between actual &
forecasted occupancy)
14. Explanation ( to be completed by FO Manager & submitted to GM)
APPROVED ________________________
General Manager’s Signature
Date:______________________________
21. Hotel Performance Evaluation
Measuring the performance of a hotel is
important for it’s investors, owners, and
managers.
Investors want to know if they will earn some profit
by investing, owners are keen to find out if the
business will generate enough revenue to cover all
expenses and managers want to prove that they
have successfully achieved their planned goals.
22. Key Performance Indicators
• All departments of an organization, that deal
with finance (income or expenditure) are
always evaluated by some common “key
performance indicators”.
• Example of such departments are; Marketing
& Sales, Finance, Project & operations.
• Hotel business also uses some KPI.
23. Methods of measuring hotel performance
Methods Of Measuring Hotel
Performance
Market Share
Index
Revenue Per
Available Room
(RevPAR)
Occupancy Ratio
Average
Room Rate
Per Guest
(ARPG)
Average Daily
Rate (ADR)
24. Occupancy Ratio
It is one of the oldest method of evaluating a hotel’s
performance.
Occupancy % = Number of rooms occupied X 100
Total number of rooms in hotel
High occupancy would indicate some degree of
success.
25. Average Daily Rate
Average daily rate (ADR) is the average rental
income per occupied room for a given time period.
ADR = Total Revenue generated in 1 day
Total rooms sold in 1 day
The time period can range from 1 day to 1 year,
including week, fortnight, month, quarter and six
months.
High ADR indicates that people are willing to spend on
and; in this hotel
26. Average Room Rate Per Guest
• It is calculated by dividing the total room revenue
by the total number of guest in the hotel, including
children above 5 years.
ARG = Total revenue generated (in a specified time)
Total guests staying in the hotel
High ARG indicates that we succeeded in attracting
high spending clientele to our business.
27. Revenue Per Available Room (RevPAR)
Rev-par is the revenue per available room. It is
calculated by multiplying the average daily rate with
the occupancy percentage. It helps in comparing
the performances of two hotels of different type,
size and operations.
RevPAR = Total Revenue (in a specified time period)
Total rooms available for sale
This reveals the true success of a hotel. High
occupancy as well as higher levels of revenue.
28. Market Share Index
it is defined as a hotel’s occupancy performance in
relation to other hotels within a pre-determined
competitive set.
Competitive set is a group of hotels in that area
who have equal star rating and same target market
For example, all business class, 5 star deluxe hotels in
Chennai.
30. Hotel Name No. of
rooms
Market
Potential
per week
Actual no.
of rooms
sold in 1 week
A 20 20 x 7 = 140 130
B 30 30 x 7 = 210 150
C 40 40 x 7 = 280 210
D 50 50 x 7 = 350 260
E 60 60 x 7 = 420 300
Total 1400 1050
Average occupancy % of Competitive set = 1050÷1400 x 100 =
75%
31. Actual Market Share of each hotel
A (130/1050) x 100 = 12.38 %
B (150 / 1050) x 100 = 14.28 %
C (210 / 1050) x 100 = 20 %
D (260 / 1050) x 100 = 24.77 %
E (300 / 1050) x 100 = 28.75 %
32. Comparison of each hotel’s actual share with fair market
share
Hotel Actual
market Share
%
Fair market
Share %
Difference
A 12.38 % 10 % + 2.38 %
B 14.28 % 15 % - 0.72 %
C 20 % 20 % 0 %
D 24.77 % 25 % - 0.23 %
E 28.57 % 30 % - 1.42 %
33. Fair Market Share
• Every hotel first tries to achieve it’s fair market
share.
• Once it is successful, next goal is to increase
the market share.
• There is a general rule-of-thumb that, in any
market, only top 3 companies survive in the
long run.
34. Evaluation By Guests
• We have looked at some methods by which hotels
evaluate their performance. It is even more
important to learn how guests rate a hotel.
• Guest base their evaluation of hotel on various
criteria like location, hotel staff, service level,
cleanliness, etc.
• 80 % of guests now search online for making
reservations.
• 50 % of these guests will not select a hotel if they
read any negative review or comment about it.
35. Evaluation By Guests
• This is the reason why a “Guest Cycle” in a
hotel should run smoothly & perfectly.
• A negative review has the power to spread
through “word-of-mouth” publicity and
decrease hotel sales.
36. TripAdvisor
• A travel portal that provides travel information,
booking and a the largest online travel
community.
• It allows map search of destinations. As the
search becomes narrow, it shows a local map of
attractions and offers from dealers in that
location.
• TripAdvisor is wiki-enabled. It is open like
Wikipedia.
• It provides direct access to OTA like Expedia,
Orbitz, Travelocity, hotel.com, Priceline,
Booking.com, Airbnb etc.
37. What makes a hotel great?
Location 30%
Comfortable beds 29%
Good Staff & Service 24%
What makes a hotel bad?
Unclean rooms 54%
Noisy hotel guest 14%
Poor hotel staff & services 11%
What was the worst experience in a hotel?
Dirty carpet 68%
Equipment not working 64%
Room not ready at check-in 59%
38. What is the dirtiest part of a hotel room?
Carpet 38%
Bed Spread 37%
TV Remote 11%
Bathroom 11%
What makes a bed comfortable?
Mattress 64%
Linen 11%
Pillow 11%
Cleanliness is the top priority of most customers in a hotel.