Chapter 1: Hotel Industry Overview & Professional Career Opportunities

Chapter 1: Hotel Industry Overview & Professional Career Opportunities

Lodging is Part of Tourism Industry: Tourism Industry
Figure 1.1: Segments in the Tourism Industry Tourism Industry Hospitality Retail (Shopping) Stores Transportation Services Destination (Activity) Sites Lodging Operation F&B Operations Tourism industry is all businesses that cater to the needs of the traveling public. Tourism industry is third largest retail industry following automotive & food stores nation’s largest service industry one of the nation’s largest employers Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Lodging is Part of Tourism Industry: Lodging (Hotel) Sector
Lodging properties are a segment within tourism industry Figure 1.2: Range of lodging property alternatives Destination resorts Full-service hotels Limited-service hotels Sleeping rooms Note that the range of lodging options presented in Figure 1.2 is not inclusive; For example, private clubs, casinos, cruise ships, time-share condominiums and campground lodges are also offering sleeping accommodations; also discuss suites, extended-stay hotels, and bed and breakfast hotels. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Lodging is Part of Tourism Industry: A Brief History of Hotels
Figure 1.3 : Highlights in the modern history of the US hotel industry 1900 Fewer than 10,000 hotels 750,000 to 850,000 rooms 1910 10,000 U.S. hotels One million rooms 300,000 employees Average size: rooms 1920 Occupancy: 85% Hotel construction reaches an all-time peak as thousands of rooms are added along the new state and federal highways Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Figure 1.3 : Highlights in the modern history of the US hotel industry
Lodging is Part of Tourism Industry: A Brief History of Hotels (continued….) Figure 1.3 : Highlights in the modern history of the US hotel industry 1930 Occupancy: 65% AHA’s Hotel Red Booklists 20,000 hotels 1940 Occupancy: 64% Average room rate: $3.21 1950 Occupancy: 80% Typical hotel: 17 rooms Average room rate: $5.91 1960 Occupancy: 67% $3 billion in sales Typical hotel rooms: 2,400,450 Typical hotel: 39 rooms, independent and locally owned Average room rate: $5.91 Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Lodging is Part of Tourism Industry: A Brief History of Hotels (continued….)
Figure 1.3 : Highlights in the modern history of the US hotel industry 1970 Occupancy: 65% $8 billion in sales Total hotel rooms: 1,627,473 Average room rate: $19.83 1980 Occupancy: 70% $25.9 billion in sales Total hotel rooms: 2,068,377 Average room rate: $45.44 Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Lodging is Part of Tourism Industry: A Brief History of Hotels (continued…)
Figure 1.3 : Highlights in the modern history of the US hotel industry 1990 Occupancy: 64% $60.7 billion in sales Total hotel rooms: 3,065,685 45,020 properties Average room rate: $58.70 2000 Occupancy: 63% $97 billion in sales Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations
Figure 1.4: 2000 Property / Room Breakdown By location Property Rooms Urban Suburban Highway Airport Resort 10.2% 33.6% 42.2% 7.7% 6.3% 16.0% 30.4% 31.0% 12.4% By rate Under $30 $30 - $44.99 $45 - $59.99 $60 - $85 Over $85 13.8% 26.9% 34.1% 16.2% 9.0% 3.3% 18.1% 27.3% 25.3% 26.0% By size Under 75 rooms 75 – 149 rooms 150 – 299 rooms 300 – 500 rooms Over 500 rooms 51.5% 33.5% 10.9% 2.8% 1.3% 22.5% 35.1% 21.3% 9.9% 11.2% Figure 1.4 classifies US lodging properties by location, by the room rate (the amount charged for a guest room), and by size (the number of rooms they contain). The vast majority of all lodging properties (approximately 76 % of properties representing about 61 % or rooms) are located in suburban and highway areas. The majority of guest rooms (approximately 77 % of the properties with 71 % of rooms) are sold at a per night rate ranging from $ 30 to $ 85 per room . In terms of size, 85 % of all properties (which contain approximately 58 % of all rooms) are relatively small (less than 150 rooms). Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations: Typical Lodging Guests
Figure 1.5: Typical lodging guests 28.8% are transient business travelers 25.3% are attending a conference/group meeting 24.6% are on vacation The text describes the characteristics of “typical” business guests and leisure guests. 21.8% are traveling for other reasons (for example, personal, family, or special event) Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations: Lodging Industry Characteristics
Emphasis on safety, cleanliness & service Guests also consider “intangible” aspects of the purchase decision Inseparability of manufacture & sales A room exists & is sold at the same site Perishability - If a room is not rented on a specific date, the revenue is lost forever Repetitiveness - Some operating procedures are routines * The text provides an example of each characteristic applied to lodging industry. Labor Intensive - Much of a hotel’s daily work involves employees providing services Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations: Lodging Industry Overview
Largest hotel affiliations Figure 1.6: Top 5 lodging brands Brands Rooms Properties 1. CENDANT CORPOPRATION 554,834 6,540 2. BASS HOTELS&RESORTS, INC. 481,482 3,030 3. MARRIOTT INTERNATIONAL 374,010 1,846 4. CHOICE HOTELS INTERNATIONAL 337,226 4,219 5.HILTON HOTELS CORPORATION 333,110 1,910 The students may not be familiar with names of Pendant Corporation, Bass Hotels & Resort, Inc. and/or Choice Hotels International. Figure 1.6 (Top 5 lodging brands) shows the exclusive lists of hotel names belonging to these parent companies. The ranking is based upon the total number of domestic & non-domestic (international) hotel rooms in each organization. Note that the average room size (115 rooms: 1,708,617 rooms / 14,884 properties) for these five largest companies is appreciably larger than the average domestic hotel ( 76 rooms: 4.1 million rooms / 53,500 properties). These five represent some 28 % (14,884 / 53,500 properties) of all domestic properties, & 42 % (1,708,617 / 4,100,000 rooms) of all rooms. The majority of these brands do not “own” their hotels, but hotel owners elect to affiliate with the brand, for a fee. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations: Lodging Industry Overview (continued….)
Hotel ownership / management Single-unit property not affiliated with any brand Single-unit properties affiliated with a brand Multi-unit properties affiliated with the same brand Multi-unit properties affiliated with the same brand Multi-unit properties affiliated with different brands Multi-unit properties operated by the brand or others Multi-unit properties owned by the brand Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Figure 1.7: Hotel Ownership / Management Alternatives Hotel property Franchise Non-Franchise Affiliation Franchise company (Franchisor) Independent Ownership Franchise company (Franchisor) Independent Operation Management company Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations: Hotel Organizational Structures
Small Hotel (75 rooms) Figure 1.8: Organizational Chart for Small (75 Rooms), limited-service hotel Manager Bookkeeper/Accountant Custodial personnel Housekeeping personnel Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations: Hotel Organizational Structures (continued….)
Large Hotel (350 rooms) Figure 1.9: Organizational Chart for Large (350 rooms), full-service hotel G.M. Administrative assistant Assistant G.M. Figure 1.9’s organizational chart for large hotel with 350 rooms only includes top-level officials (department heads). Controller F&B director H.R. Manager Director of sales & marketing Front office manager Executive housekeeper Chief engineer Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations: Hotel Departments
Line & staff departments Line department Those directly involved in the “chain of command”. Directly responsible for revenues - Front Office & Food / Beverage Also responsible for property operations - Housekeeping, Maintenance, & Engineering Staff department Providing technical, supportive assistance to support line decision-makers Making recommendations to (but not decisions for) line decision-makers - Purchasing, human relations, and accounting Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Close Look at Lodging Organizations: Hotel Departments (continued….)
Revenue and cost centers Revenue center A hotel department that generates revenue Front office & food / beverage departments Also revenues from telephone services, space rental and fees from parking garages, vending machines, and golf courses Cost center A hotel department which incurs costs in support of a revenue center Marketing, maintenance, accounting, human resources, & security departments Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Lodging is a Service Business
Successful hotels greatly emphasize serving their guests to the best possible extent. The brand name a hotel uses is not the most important factor in a hotel’s success. When hotels put guests’ needs first, those hotels will do well. * Delivering consistent guest service to all guests can be a challenging task, depending on differing situations. The second case study in “Managers at Work” provides a scenario of difficulty in delivering guest service in some problematic situations. Facility Engineering & Maintenance Consistent delivery of quality of products and services to guests must be addressed first, rather than considering tactics to maximize revenue; minimizing costs comes next! Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Lodging is a Service Business (continued….)
Questions that must be addressed to deliver quality service: How will we show our staff and tell them about the need for high quality guest service? How exactly will we evaluate the level of service quality being provided to our guests? What exactly are our service strategies and our service procedures? How will we train our staff about service concerns and the tactics to deliver service? How will we reinforce our service strategies? What can we do to emphasize service as a philosophy rather than as a program with a definite start & end time? What can we do to excel in the guests’ moments of truth? Question 2 in “ Issues at Work” (Chapter 1) reinforces the importance of delivering consistent guest service. Ask students what kind of guest relations training and tactics they would provide to their employees, were they G.M.s. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Current Issues confronting Hoteliers: Operating Issues
Labor shortages Managers should implement procedures to: a) reduce turnover levels, b) increase productivity levels, c) recruit from non-traditional employee labor markets. Cost containment Hoteliers should examine ways to reduce costs without impacting quality. An excessive emphasis on cutting service or product quality will ultimately result in reduced hotel revenue. Question 4 in “Issues at Work” (Chapter 1) asks students to plan / develop tactics to retain current employees as well as recruit new employees; also discuss the concept of “employer of choice.” Overbuilt is the condition that exists when there are too many hotel guest rooms available for the number of travelers wanting to rent them. Increased competition Overbuilt problem Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Current Issues confronting Hoteliers: Marketing Issues
Market segmentation is increasing Efforts to focus on a highly defined, smaller group of travelers. Brands overlap The more the number of brands increase, the harder consumers find it to differentiate between them. Increased sophistication of consumers Results in a more competitive selling environment for hoteliers (e.g., online room booking) Increased number of amenities Various amenities (e.g., business centers) increase costs for hotel owners yet sometimes appeal to only a small segment of the hotel’s market. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Current Issues confronting Hoteliers: Technological Issues
Recent technological innovations include: Interactive reservation system Allows potential guests to make reservations at preferred room rates in reduced time Guestroom innovations Two (or more) telephone lines enabling Internet access / interactive menu ordering for room service / electronic games and guestroom checkout Data mining technology Analyzing guest- (and other) related data to make better marketing decisions Yield management Matching guest demand with room rates Yield Management is demand forecasting systems designed to maximize revenue by holding rates high during times of high guestroom demand and by decreasing room rates during times of lower guestroom demand; Chapter 6: Front Office will discuss in detail the concept of Yield Management. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Current Issues confronting Hoteliers: Economic Issues
“As goes the economy, so goes the lodging industry” Impact of globalization on the lodging industry Lodging industry is an integral part of the tourism industry It is affected by the extent to which travelers, both within the country and worldwide travel * Facility Engineering & Maintenance Economies of the world, the country, the state and the community play on the financial success of a lodging organization & the individual properties which comprise it. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

G.M / Rooms division M. / Front office M. / Controller / Executive housekeeper / Catering M. / Executive steward / F & B M. / Banquet M. / Chef / Executive chef / Food production M. / Pastry Chef / Sous chef / Room service M. / F & B controller / Restaurant M. / Beverage M. / Purchasing Director / Human Resource M. / Credit M. / Executive assistant M. / Convention M. / Marketing & sales M. / Auditor / Director of security / Convention services director / Resident M / Chief engineer Typical Multi-Unit Positions: Area G.M. / Regional G.M. / Director of Training / Vice president, finance / Vice president, real estate / Director of franchising Being listed under multi-unit is when a hotel company owns or manage multiple (multi) properties. Question 3 in “Issues at Work” (Chapter 1) addresses advantages and disadvantages of management careers, depending on location / areas. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Professional Career Opportunities in Lodging: Get Started With Career Planning
How does one start to plan for a career in the lodging industry? Enrolling in and graduating from hospitality-related programs of study Working in a variety of lodging positions (including educational internships) Developing a career ladder for professional development within the lodging industry - Working with a mentor Obtaining suggestions by talking with G.M.s at hotels nearby industry leaders and educators A career ladder is a graphic “roadmap” which indicates possible career progression through a lodging organization. It is a plan that projects successively more responsible professional positions within an organization / industry. A career ladder also allows one to plan / schedule the developmental activities judged necessary to assume more responsible positions. Instructors may assign students to develop a career ladder for their professional development within the hospitality industry; discuss with students their designed career advancement strategies to reach professional career goals (refer to Question 5 in “Issues at Work”) Question 1 in “Issues at Work” (Chapter 1) asks students about the type of hotel they would like to work in as they begin their career and as they gain more experience within it; further discuss specific management concerns in a property with 50 rooms and one with 5,000 rooms. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Chapter 2: The Hotel General Manager

Responsibilities G.M.s Investor relations Community relations
G.M.s’ tasks Brand affiliation management Property management Executive Committee development General Manager (G.M.) is the title traditionally used to identify the individual at a hotel property who is responsible for final decision making regarding property-specific operating policies and procedures; also he or she is leader of the hotel’s management team. The text notes that the responsibilities involved in any G.M. position will vary based on factors including ownership structure, location and type of property. Question 1 in “Issues at Work” (Chapter 2) indicates that interests among guests, employees, owners and GMs may conflict with each other. Ask students whose interest they would consider to be the most important, under which condition? G.M.s The single most important human variable affecting a hotel’s short-term profitability “Wear many hats” (perform multiple tasks) Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Responsibilities: Investor Relations
G.M.s’ ability to effectively inform investors & owners about current performance & future needs of their hotel/s Property’s long-term success To successfully manage owner / investor relations: G.M.s’ talents Financial analysis ability Proficiency in written communication Effective public speaking / presentation skills Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Responsibilities: Brand Affiliation Management
Continually monitor operational standards set by the brand to ensure property performance Communicate effectively with franchise brand officials about marketing & sales programs Improve profitable operation of hotel by using activities & programs offered by the brand Managing brand at the property level To successfully manage owner / investor relations: G.M.s’ talents Well developed interpersonal skills Persuasive ability Listening skills Effective writing ability Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Responsibilities: Brand Affiliation Management (continued…)
Quality Inspection (or Assurance) scores Result of annual (or more frequent) inspections by franchise company Used as measure of effectiveness of G.M., of hotel’s management team, and of owner’s financial commitment to the property. Ensuring franchiser-mandated standards are met by franchisee Becoming an important example of how the G.M. interacts with franchisers and/or management companies Brand inspection scores are used in property ratings, marketing efforts and even by owners, to partially determine G.M. and other hotel managers’ compensation/bonuses. Show students the criteria used for property Quality Inspection (Assurance) scores using an example of Hotel(s). In the text, the website address of Best Inn and Suites ( is shown for the public reporting of Quality Inspection (Assurance) scores. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Responsibilities: Community Relations
Opportunities to assist the local community Attract new businesses Expand tourism opportunities Provide input regarding local business community needs Have charity events and fundraisers at the hotel To successfully perform community relations G.M.s’ talents Outgoing personality Well-developed social skills Effective public speaking & presentation skills Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Responsibilities: Executive Committee Facilitation
Functional area Responsible for Human Resource Manager Hotel staffing needs Controller Accounting for hotel assets and liabilities Front Office Manager Guest services and sales Executive Housekeeper Property cleanliness Food & Beverage Director Food & beverage production & service Security Director Guest, employee & property safety/security Sales & Marketing Director Revenue production & promotions Chief Engineer Upkeep of hotel’s physical facility Executive Operating Committee (EOC) comprise the hotel’s management team members (generally department heads) responsible for departmental leadership and over-all property administrations. An important skill needed by G.M.s is the ability to provide “direction” to his or her departmental managers. The slide shows what the G.M. is responsible for in each functional area. To provide effective direction and consultation with departmental managers, the G.M. does not have to be an expert in the specific day-to-day operation of each hotel department, but must be familiar with (or make efforts to stay abreast of) current trends, issues and technology in each department. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Responsibilities: Executive Committee Facilitation (continued…)
General Manager Human Resource Manager Security Director Controller Front Office Manager Executive Housekeeper Food & Beverage Director Sales & Marketing Director Chief Engineer Notice that the G.M. represents the highest management level on the property, and that he / she directs the work of middle-level managers. Typical mid-sized, full-service hotel department organizational chart Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Responsibilities: Executive Committee Facilitation (continued…)
That he/she must be an expert in specific day-to-day operations of each hotel’s department Wrong expectations regarding the G.M. Right expectations regarding the G.M. That he/she works with EOC to improve skills & efficiencies of the departments these individuals manage That he/she assists their professional development To successfully manage the EOC facilitation As a segment of the G.M.’s tasks, the text discusses the importance of successful executive committee facilitation. The text notes that “ most successful managers can point to one or more individuals in their lives who took the time to “show them the ropes”. Ask your students whether they have had such experiences in their previous or current working organizations; also use Question 3 in “Issues at Work” (Chapter 2) to facilitate this discussion. G.M.s’ talents Good listening skills Ability to evaluate / implement managerial training & development program Assisting in professional improvement & growth of EOC team Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Responsibilities: Property Management
G.M. should be able to direct overall property management. Process of planning, organizing, staffing, directing, controlling and evaluating human, financial and physical resources, to achieve organizational goals. To successfully handle property management: G.M.s’ jobs Organizational & coaching skills Analytical & financial analysis skills Ability to anticipate guest needs Competitive sprit & high attention to detail Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Responsibilities: Property Management (continued…)
Functional area Purpose Planning To establish goals and objectives Organizing To maximize deployment of resources Staffing / directing To provide leadership Controlling / evaluating To measure and evaluate results Management process Planning Controlling & evaluating Organizing Staffing & Directing Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Responsibilities: Property Management (continued…)
Planning What is the goal of providing in-room, high-speed Internet access to guests? Organizing How will the hotel allocate necessary dollars to achieve this goal? Staffing / Directing What needs to get done to keep staff “on task” with project completion timelines? Based on descriptions in the text, this slide shows an example of management process for in-room, high-speed Internet access to guests. More examples relating to this example are shown in the text. To enhance students’ understanding of management process, instructor may assign a homework assignment that envisions the management process (planning, organizing, staffing / directing, and controlling / evaluating) for the specific project the student is interested in, besides the example of in-room Internet access. Controlling / Evaluating How will the hotel measure sales volume or reputation value gained versus cost of providing in-room Internet service? Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Skills Development: Formal Education
Program titles Hotel admin. / hotel & restaurant mgt. / hospitality admin. / restaurant, hotel, & institutional mgt. / food service mgt. / hospitality business / tourism admin. / culinary arts Two-year degree For whom Designed for both traditional college students & non-traditional working students Wish to terminate their formal education after several years of study Have a B.A. degree in another subject & wish to gain knowledge of the hospitality industry Benefits Highly practical & current Practical professional instructors who may be well connected in the community (assisting job placement) Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Skills Development: Formal Education (continued…)
Four-year degree For whom Wish to complete a B.A. degree Seek to learn from a larger number of quality faculty Wish a “more advanced” degree than two-year Benefits Have diverse faculty & quality facilities Offer an excellent learning environment The text notes that formal education, regardless of degree, will not “make” one a qualified hotel G.M; however, formal education can provide tools with which to perform the job of G.M. when one attains this position. Question 4 in “Issues at Work” asks what advantages and potential advantages are gained by seeking career advancement by pursuing four-year degrees or higher qualifications; briefly discuss what career opportunities are available in hotel and motel management careers and how one can prepare one’s self for the field. Checklists Admission requirements Program designs Advanced degrees Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Skills Development: On-the-Job Training
OJT Learning activities designed to enhance skills of current employees Offered by management with intent to improve guest service & employee performance Generally no charge to employee for training OJT trends / focuses for hotel G.M.s Impact of advancing technology Impact of a changing workforce On-the-job training (OJT) comprises learning activities designed to enhance the skills of current employees. OJT programs typically are offered by management with the intent of improving guest service and employee performance at the hotel. Generally there is no charge to the employee for the training. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Skills Development: Professional Development
Business associations Membership benefits / activities of local business associations (e.g., local Chambers of Commerce) Business / skills enhancement programs Networking opportunities Timely publications & seminars including local economic data & best management practices In some cases, providing low- or no-cost training for entry-level workers Lobbying for business interests & facilitating public-private employment initiatives Updating on recent business thoughts & methods Explains the needs of managing one’s own professional development; the text references several Internet sites of professional associations that students might wish to join. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Skills Development: Professional Development (continued…)
Trade associations Serve certification, educational, social and legislative needs of their members Hold monthly and annual gatherings Offer educational seminars / workshops Have Trade Shows Efficient way to see new products & service offerings of a large number of vendors in a short time Example of the hotel industry Educational Institute of the American Hotel & Lodging Association Trade publications Current two major interests Technology applications / human resource management Help staying updated on current info Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Chapter 3: Management and Supervision Skills for the G.M.

The G.M. Sets the Pace G.M.s feelings & actions about issues will likely impact hotel staff attitudes about those issues. G.M.s personally direct only the work of department heads and, perhaps, relatively few other staff. G.M.s’ interaction with department heads directly impacts how they interact with their own staff. Influence Stress the importance of human relations in the hospitality industry, and explain how G.M.s can influence human relations between members, as well as between staff and guests. Human relations are defined as skills needed to understand and effectively interact with other people. Level of morale Desired product & service quality Employee turnover rates Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

G.M.s Must Manage: Organizational Levels
Top-Level Management (G.M.) Middle-Level Management (Department Heads) Supervisory-Level Managers (Supervisors/Managers) Entry-Level Employees Notice that the G.M. represents the highest management level on the property, and that he / she directs the work of middle-level managers. Of resources available, people (human resources) are the most complex and important for success! Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

G.M.s Must Manage: G.M. Functions
Management Function Examples of activity: Working with department head (if applicable) to: Planning Develop an operating budget or a marketing plan Organizing Assign responsibilities for an upcoming banquet or conference event Staffing Recruit, select, orient and train new department heads Directing Supervise the work of department heads Controlling Take corrective action(s) when budgeted financial plans are not attained Evaluating Assess the extent to which long- and short-range plans were attained Explain five different management functions and relevant examples of activity. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

G.M.s Must Manage: G.M. Skills
Conceptual Ability to collect, interpret, and use information logically Learning about a new, competing hotel opening nearby and making future marketing decisions accordingly Ability to understand and interact well with guests, employees, suppliers, etc. Interpersonal Skills Administrative Ability to organize and direct required work efforts Ability to develop policies and operating procedures necessary for guest safety Ability to perform management-specific aspects of the job Forecasting guest demand for rooms and establishing room rates, etc. Technical Discuss the importance of four skills outlined for the G.M. Question 1 in “Issues at Work” (Chapter 3) asks students to give three additional examples of each of these: conceptual, interpersonal, administrative and technical. Ask your students how they can increase their skills in these areas. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

G.M.s Must Manage: G.M. Relationships
Staff members Other hotel employees Yesterday: dictatorial leadership Today: facilitators Tomorrow: empowerment “Manage by walking around” G.M. External organization Others in community Participating in community social events Attending school & athletic events with their children Joining professional business and community service organizations Meeting with community government representatives Empowerment is defined as the act of granting authority to employees to make key decisions within those employees’ areas of responsibility. Discuss your students’ experiences in which an organization has empowered them; ask how they felt when this occurred, and how this impacted guest satisfaction. Ask students about times they wished they had been given such empowered, but were not (what happened?) Guests How the hotel can meet and exceed guest expectations Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

G.M.s Must Manage: G.M. Manage in Times of Change
Relative to their counterparts “yesterday” G.M.s must Interact with a more diverse workforce Emphasize teams rather than individual performance Cope with fast-paced technology changes Adjust to workplace changes (e.g., re-engineering, downsizing) React to global challenges Re-engineering is re-organizing hotel departments or work sections within departments. Improve quality while increasing productivity Improve ethical / social behaviors Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Evolution of Traditional Hotel H.R. Practices
Contemporary Manager-focused work unit Team-focused work unit Manager is dominant Manager is supportive Emphasis on technical skills Emphasis on employee facilitation skills Manager seeks stability Manager encourages change Manager tells and sells personal views Manager listens Manager personally responsible for results Manager shares responsibility for results Manager personally solves problems Team problem-solving is employed Fear and pressure used to motivate staff Pride, recognition, and growth are used to motivate staff Autocratic (dictatorial) decision style Participative decision style Individual behavior Team behavior Question 2 in “Issues at Work” (Chapter 3) asks students whether the trend of the G.M. acting as facilitator and/or team leader rather than as “boss” will continue in hotel human resources practices in the future. Give examples of autocratic and participative decision styles. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Evolution of Traditional Hotel H.R. Practices (continued…)
Contemporary G.M. forces compliance G.M. earns the team’s support What one says is inconsistent with what one does What one says is consistent with what one does Inconsistent “moments of truth” Consistent “moments of truth” Reactive management/supervision style Proactive management/supervision style Bureaucratic “rituals” Flexible routines Top down – one way communication Multi-directional communication Hierarchy of control Empowerment Power Consensus Short-term H.R. strategies Long-term H.R. strategies Multi-directional communication will be explained later in detail in the section of “Management Basics: Flow of Communication.” Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Management Basics: Planning
Vision What the hotel will strive to be Mission Statement What the hotel must do to be successful and how this will be accomplished Long-Range Plan Hotel’s goal for long-range (e.g., five year) time span Short-Range (Business) Plan Hotel’s goal within a one-year time span Introduce Management Basics (planning, decision-making, organizing, delegation, communication flow, motivation) by explaining that they represent a range of strategies and tactics that G.M.s use to attain organizational goals. A strategy is a plan to achieve a long-range goal; a tactic is an action to attain a short-term objective. Share examples of vision and/or mission statements of prominent hospitality industry firms with your students. Ask your students if they are familiar with the mission statement of the company/ies where they have (do) work; if many students are not well aware of the vision and/or mission statement of their current firms, encourage them to find out what they are if they exist. Operating Budget Anticipating revenues and expenses during short-range plan implementation Marketing Plan What must be done to generate revenues anticipated by the operating budget Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Management Basics: Decision Making
Before making a decision Who is the correct person to make decisions? Will a decision about a specific issue bring the hotel closer to attaining objectives and goals? How will the decision affect guests? Is there only one acceptable alternative? How much time and effort can be spent on the decision? How does one’s experience help with decision making? Must the decision please everyone? What are the ethical aspects of the decisions? Give examples of programmed and non-programmed decisions. Stress that non-programmed decision methods present more challenges and opportunities for creativity than do non-programmed decision methods. Programmed decision Non-programmed decision Routine and repetitive decisions made after considering policies, procedures, or rules Infrequent decisions requiring creative decision making abilities Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Management Basics: Decision Making Approach
Continuum of decision making Manager makes decisions unilaterally Traditional Manager makes decisions after input from others Recent Manager allows team to make decisions Contemporary Discuss three possible decision-making approaches: traditional, recent, contemporary. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Management Basics: Decision Making (continued…)
Advantages Disadvantages Considering broad range of information Generating more creative alternatives Whole team keenly aware of issues and problems Achieving higher morale Easier implementation Possible conflicts May be forced to “take sides” if alternative opinions are expressed Domination by staff members with strongest personalities Time-consuming Not applicable when fast decisions necessary Group decisionmaking process Do your students agree with the advantages / disadvantages of the group decision-making process stated here? What are those? Discuss student group decision-making processes by considering their experiences at their school doing group projects; do your students feel that they become involved in the team decision-making process at their current employers? Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Management Basics: Organizing Principles
Unity of command Span of control Each employee should report or be accountable to only one boss for a specific activity Limit to how many staff members one supervisor can manage effectively Distribution of authority Types of authority Used by Example Advisory Staff managers Develop orientation program for all hotel employees Line Line managers (within departments) Hiring and firing employees within a specific department Functional Line managers (between departments) Executive housekeeper establishes table linen laundry schedule with F&B dept. Question 3 in “Issues at Work” (Chapter 3) addresses the need for clear distinctions among these three types of authority: advisory, line, functional, and asks for additional examples associated with them. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Management Basics: Delegation
Delegation benefits for the G.M. What work might be delegated by the G.M.? Allows the G.M. to do most important things first Effective process to train employees Allows more work to be accomplished Improves controls Work that others can do as well as the G.M. Work that is less important than other work Work that should be learned by more than one person Delegation is the process of assigning power to subordinates so they can do work which a manager at a higher organizational level would otherwise do. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Management Basics: Delegation (continued…)
Steps in effective delegation Organizational climate necessary for delegation Assign specific duties & responsibilities to employees Grant sufficient authority for carrying out assignments Supervisor & employees agree on expected results Question 4 in “Issues at Work” (Chapter 3) addresses the steps in effective delegation. Communicate responsibilities to minimize confusion Managers make feedback system to measure progress Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Management Basics: Flow of Communication
Multi-directional communication Managers/ Supervisors Department Heads (Executive committee) G.M. Employees Vertical Comm. Horizontal Comm. Distinguish between formal and informal communication channels. The grapevine is an example of an informal communication channel; note that often informal communication channels can be accurate and can be used to assess employee perceptions of the hotel’s “current events.” Vertical communication means communication between individuals which flows up and down throughout the organization, while horizontal communication relates to communication between individuals at the same organizational level. Formal channel (example): coaching Informal channel (example): grapevine / rumor mills Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Management Basics: Motivation
Poorly motivated staff Inconsistent performance for required quality or quantity standards Guest dissatisfaction Increased operating costs Create lists of motivators from your students that might make them work more efficiently in their current organization(s); then discuss Question 4 in “Issues at Work” (Chapter 3). More motivated employees’ leave Hotel suffers Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Management Basics: Motivation (continued…)
Strategies to motivate employees Follow sound management advice Effective orientation Train correctly Manage a professional hotel Supervise as you want to be supervised Encourage effective communication Figure 3.9 describes various tactics associated with these eight strategies to motivate employees. Manage a friendly hotel Help your employees succeed Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Management Basics: Leadership
Effective leaders will: implement the property’s Mission Statement have an objective & measurable “picture” of hotel’s desired future help others develop the knowledge and skills needed to attain hotel’s vision (e.g., orientation, training, and coaching) utilize the empowerment process Coaching has a goal of helping staff members and the hotel team to reach their highest possible performance levels. develop team of staff committed to hotel’s success achieve a reputation for quality service consistently delivered to guests cultivate a reputation for fairness and honesty Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Management Basics: Discipline
Discipline: activities reinforcing desired performance or correcting undesired performance. Steps in a progressive discipline process Oral warning (no entry in employee’s record) Oral warning (entry in employee’s record) Written reprimand Progressive discipline is a process of negative discipline in which repeated infractions result in increasingly severe penalties. Suspension for specific number of days Discharge Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

To be a good team leader, the G.M. must
Team Building Tactics Self-directed team To be a good team leader, the G.M. must More control over work responsibilities Make work assignments within the team Schedule themselves Evaluate each other’s work Assign compensation increases Have high standards and expectations Support individual members and maintain trusting and respectful relationships Practice participative management and solicit input from members Demonstrate that own personal goals and individual team member goals should not be placed before team goals Share credit for team successes Contemporary management focuses on team behavior rather than upon individual behavior. Determine what concerns (if any) students have regarding self-directed teams. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Employee Selection, Orientation, and Training
Personnel tactics checklist Recruitment / selection tactics General orientation tactics Correct training Departmental / orientation and workstation / induction tactics Train-the-trainer tactics On-the-job training (OJT) tactics Figure describes the personnel tactics checklist in detail. Supervisory / other training tactics Training budget Other training issues Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

G.M. Interactions G.M.s never have a daily routine; every day is different Actual daily activities undertaken by a G.M. vary from day-to-day & month-to-month as well as from property-to-property Daily involvement in guest relations are quite visible G.M. is on duty eight or more hours daily and is often on-call even when not on the property Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

G.M. Interactions: Employees
Possible interactions with employees: positive examples Daily conversations with long-term staff Learning employees’ suggestions about possible operating improvements Welcoming new staff to the team Congratulating personnel about significant events in their families’ lives Mentoring younger workers Following employees’ careers as they are promoted within the organization Providing non-job related advice when requested Observing employees at a company picnic enjoy themselves Observing staff who participate in community organizations/activities Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

G.M. Interactions: Employees
Possible interactions with employees: negative examples Disciplining or terminating staff Confronting staff known to be stealing Learning about illegal acts committed off-property by staff Assigning work responsibilities to cover “no show” employees Discovering employee “sabotage” Supervising staff violating hotel policies, requirements, and rules. Comforting an employee whose child has passed away Observing an intoxicated employee attempting to come to work Explaining to staff why they did not get promotions they sought Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

G.M. Interactions with Guests
Possible interactions with guests: positive examples Interacting with frequent guests Receiving spontaneous “Thank You Notes” from happy guests Observing hotel guests celebrate significant family / professional occasions Providing service / assistance to guests Receiving input from guests who genuinely want the hotel to be successful Interacting with guests as peers at community / professional meetings Providing accommodations to guests stranded by adverse travel conditions Receiving guest input about hospitable staff members Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

G.M. Interactions with Guests
Possible interactions with guests: negative examples Interacting with police called to hotel for disturbances or illegal guest activities Guest deaths in sleeping rooms or in the hotel’s public spaces Dealing with visibly intoxicated guests Preventing on-site prostitution Preventing guest theft of money, products and/or services from the hotel Preventing property vandalism Calming irate guests stranded by adverse travel conditions Discovering overt guest room damage Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Chapter 4: Human Resources

H.R. is both line & staff function
H.R. Department Roles Line managers H.R. specialists Making final employee selection decision Providing departmental-specific orientation Initiating ongoing training Supervision activities (e.g., performance appraisal) Helping line managers with H.R. related duties employee selection orientation training evaluation compensation H.R. is both line & staff function Ask how the G.M. can control the boundaries of authority among managers in an organization. Chapter 3 (“Management and Supervision Skills for the G.M”) discusses the distribution of authority. It focuses on types of authority (advisory, line, functional) used by either staff- or line- managers. Defining the boundaries of authority closely relates to a management basic (“delegation”) discussed in Chapter 3. G.M. must define authority boundaries between line- & staff managers. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

H.R. Department Roles (continued…)
How H.R. personnel assist in hotel’s overall operation Implementing policies to effectively recruit, select, motivate, and retain the most qualified management and non-management staff Developing and delivering orientation, safety, security, supervisory, and some department-specific training programs Developing and communicating H.R. policies that are equitable and fair to all employees while protecting the rights of the hotel When discussing examples of ways in which H.R. personnel assist in overall hotel operation, emphasize that the H.R. department works closely with ALL employees. It does not unilaterally develop policies and mandate “how things should be done” relative to employee management. Interpreting, implementing, and enforcing the ever-increasing body of laws and regulations Helping to maintain appropriate standards of work life quality and ethical business policies and practices Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Staffing the H.R. Department
Job descriptions Job specifications A list of tasks that an employee in a specific position must be able to perform effectively Statements about duties, responsibilities, working conditions & specific job activities Example: H.R. Director (recruitment, selection, evaluation, promotion) A list of personal qualities necessary for successful performance of the tasks required by the job description Statements about knowledge, skills, education, physical & personal characteristics Example: H.R. Director (considerable knowledge of principles & practices of H.R. management) Two staffing tools Clearly distinguish the definitions for a job description and job specification. Use a sample job description and job specification for a Human Resource Director (Figure 4.1). Discuss how the job description and job specification can be used as a tool for recruiting, selection, orientation, training, performance evaluation, etc. Question 3 in “Issues at Work” (Chapter 4) asks students to prepare the job description and job specification, following the pattern used in Chapter 4, for their first job. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Legal Aspects of H.R.: Employee Selection
Bonified Occupational Qualifications (BOQs): Qualifications to perform a job that are judged reasonably necessary to safely or adequately perform all tasks within that job Legitimate BOQs Education or certification requirements Language skills Previous experience Minimum age (for jobs such as waitress or bartender) Physical attributes (amounts able to be lifted, carried etc.) Licensing Stress that the job specification must address only legitimate BOQs. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Legal Aspects of H.R.: Employee Selection (continued…)
Tools to screen employee applicants Employment applications Only provide info directly relating to the job Demographic info, employment history, educational background, criminal history, employment status, references, drug testing Race, religion and physical traits should not be asked Age may be asked only for the purpose of legal requirements Interviews Question 4 in “Issues at Work” (Chapter 4) discusses the challenges of an H.R. director / G.M may confront when making decisions in support of a drug-free hotel. Use this question to facilitate discussion about drug-testing issues. Follow strict state guidelines and requirements for pre-employment drug testing Testing Other Obtain applicant’s permission in writing for background and reference checks Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Legal Aspects of H.R.: Employee Selection (continued…)
Equal Employment Opportunity Commission: Employers cannot discriminate against employees on the basis of race, color, religion, sex or national origin. Americans with Disabilities Act (1990) Prohibits discrimination against job candidates with disabilities Age Discrimination in Employment Act (1967) Protects individuals 40 yrs and older Immigration Reform & Control Act (1987) Prohibits hiring illegal immigrants Fair Labor Standards Act (1938) Protects young workers from employment interfering with education or that is detrimental to health Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Legal Aspects of H.R.: Employment Relationships
“At-will” employment Employment agreement Employees can elect to work for the employer or terminate the work relationship anytime Employers can hire or terminate any employees with or without cause at any time Document specifying the terms of the employer – employee work relationship Indicates rights and obligations of both parties Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Legal Aspects of H.R.: Workplace Laws
Sexual harassment One cannot ask favors of a subordinate in exchange for employment benefits; neither can one punish an employee if an offer is rejected. A G.M. should follow strict zero tolerance policy & procedures issuing of appropriate policies conducting applicable workshops developing procedures to obtain relief developing written protocols for reporting investigating & resolving incidents & grievances Define “zero tolerance” as total absence of behavior that is objectionable from discrimination or harassment perspectives. Family & Medical Leave (1993) Hotels (employing 50 or more staff) should provide up to 12 weeks of leave (unpaid) to an employee for a birth, adoption of a child or serious illness of immediate family members. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Legal Aspects of H.R.: Workplace Laws (continued…)
Compensation The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime work rates, and equal pay regardless of gender. Employee performance Employee evaluation (assuring work performance [nothing else] forms the basis for employee evaluations) Discipline (effectively communicating and consistently enforcing workplace rules and policies) Termination (preventing unacceptable termination of employee/s) Unemployment issues Note exceptions of a minimum wage to be paid to employees - such as youthful employees being paid a training wage for the first 90 days of employment & some tipped employees. The text discusses laws related to taxes including income tax, Federal Insurance Contribution Act, Federal Unemployment Tax Act, Earned Income Credit, and Work Opportunity Tax Credit. Some hotels use a progressive discipline system: a process in which repeated infractions result in increasingly severe penalties. If wished, an instructor may revisit the steps in a progressive discipline process as discussed in Chapter 3 (“Management and Supervision Skills for the G.M.). Provide examples of unacceptable reasons for termination. Unemployment insurance (allowing temporary financial benefits to employees who have lost jobs) Unemployment claim (asserting the worker is eligible for unemployment benefits) Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Legal Aspects of H.R.: Workplace Laws (continued…)
Employment records Selected employee records should be maintained. Examples of record keeping: Department of Labor records (e.g., employee’s name, address, gender, job title, work schedule, hourly rate, regular and overtime earnings, wage deductions and payday dates) any deductions from wages for meals, uniforms, or lodging amount of tips reported (for tipped employees) covered leave and amount of leave for eligible employees (Family & Medical Leave Act) employment eligibility verification (Immigration Reform & Control Act) personnel matters & benefit plans (Age Discrimination & Employment Act) Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

H.R. Department at Work: Recruitment
Internal recruiting External recruiting Focusing on internal applicants for vacant positions “Promotion from within” Alerting friends and relatives of current employees Recruitment is not solely the job of H.R. department Current staff can impact hotel’s turnover rate Hiring from outside sources Newspaper and other media advertisements / job fairs / executive search firms / recruiting at schools / “help wanted” signs Attracting external candidates Recruitment methods Note that it becomes more difficult to attract job applicants as unemployment rates decrease. Review advantages / disadvantages of each recruiting tactic, and of internal and external recruiting methods. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

H.R. Department at Work: Selection
Evaluating job applicants to determine those more qualified (or potentially more qualified) for positions. Selection devices Employment interviews Employment tests Preliminary screening (reviewing application) Reference checks Drug tests Note that human resources personnel often refer applicants to line department personnel for a second selection interview. Then the appropriate line managers can make a selection decision (final selection decision is made by appropriate line managers, not solely by H.R. staff). Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

H.R. Department at Work: Orientation
Providing basic information about the hotel which must be known by all its employees. Goals Contents Reducing anxiety Improving morale Reducing turnover Providing consistency Developing realistic expectations Hotel overview (mission statement) Guest service / relations training Emphasis on teamwork Policies and procedures including handbook Compensation and benefits Guest safety & security Employee & union relations Property tour To facilitate an effective orientation program, many hotels utilize an employee handbook (employee manual) that includes written policies and procedures related to employment at the hotel. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

H.R. Department at Work: Training
Training is absolutely critical to the hotel’s success ! Improve knowledge or skills of staff New employees and experienced staff need training Ongoing professional development can motivate staff and help employees’ advancement opportunities Implement “train the trainer” program Group training Individualized training Chapter 3 (Figure 3.11) shows extensive lists for “train the trainer” tactics. Effective when several (or more) staff must learn the same thing Use of a role-play (e.g., upselling training for front desk agents) One-to-one training method Mainly responsible for individualized line departments Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

H.R. Department at Work: Performance Evaluation
Goals Determine where staff can improve performance Assess eligibility for pay raises and promotions Improve morale Assure legal compliance H.R. Dept. Roles Develop policies & procedures for property-wide system Communicate these policies & procedures to all staff Address and resolve employee concerns as they arise File performance evaluation results in employee records Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

H.R. Department at Work: Performance Evaluation (continued…)
Steps of performance appraisal system Performance standards are established for each position Policies (e.g., frequency of rating) are established Data is gathered about employee performance Raters must evaluate performance Discuss performance evaluation with employees Evaluation information is filed Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

The H.R. Department at Work: Compensation
All financial & non-financial rewards given to managers & non-management staff in return for their work. Salary / wages Direct financial compensation Benefits (health insurance, paid vacations, etc.) Indirect financial compensation Effective compensation programs should be: Legal / fair / balanced / cost effective / viewed as reasonable by staff Discuss the importance of employee compensation in effective recruitment and retention of employees. The text discusses various responsibilities that an effective H.R. staff and G.M., perform to manage a benefits program including 1) determining objectives for the benefit program, 2) facilitating discussion with employees about the desired benefits desired, 3) communicating the “benefit” of benefits, and 4) monitoring costs Question 5 in “Issues at Work” (Chapter 4) asks about appropriate benefits for salaried staff vs. hourly-paid staff. Establish pay for specific positions based on: What other employers attempting to attract the same applicants pay. What employees working on different jobs in the hotel are paid. What other employees working on same jobs within the hotel are paid. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

H.R. Department at Work: Employee Safety & Health
Work-related accidents & illnesses Work to be done e.g., cooks using knives Working conditions e.g., greasy floors in kitchen H.R. staff assistance for health related activities Developing and selecting programs to help employees cope with stress Developing procedures applicable to workplace violence Communicating updated info about HIV in the workplace Providing info about cumulative trauma disorders Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

H.R. Department at Work: Workforce & Work Quality Improvement
TECHNIQUES Improving work quality Professional development Cultural diversity Continuous Quality Improvement relates to ongoing efforts within the hotel to better meet (or exceed) guest expectations and to define ways to perform work with better, less costly and faster methods. Continuous quality improvement Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Chapter 5: The Controller

Facility Engineering & Maintenance
Accounting Facility Engineering & Maintenance Controller: individual responsible for recording, classifying, and summarizing the hotel’s business transaction. Purpose of bookkeeping Record and summarize financial data Purpose of accounting Development of systems to collect and report financial information Analyzing this same information Making finance-related recommendations to assist management decision making Main responsibility of the controller is to oversee the accounting and bookkeeping functions in the hotel. Differentiate the purposes of bookkeeping and accounting. Emphasize that the G.M. is ultimately responsible for the financial success of his or her property. A strong controller’s office is a critical component of any truly successful hotel. In Chapter 2 (General Manager), control was identified as one of the four major functions of management. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Accounting (continued…)
Centralized accounting systems Financial management system that collects accounting data from an individual hotel(s), then combines and analyzes the data at a central site Prevails in chain-operated or multiproperty hotel companies Company will likely employ C.P.A. for data analysis Decentralized accounting systems Financial management system that collects accounting data from an individual hotel site and combines and analyzes that data at the same site. G.M. and controller have larger role in preparing financial documents Chapter 5 illustrates a variety of booking and accounting functions in the controller’s office where a decentralized accounting system is in use. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Revenue Forecasting: Rooms Revenue
Rooms revenue forecast should include at minimum: Rooms available for forecasted period Estimated rooms for the period Estimated occupancy rate for period Total rooms sold / total rooms available = Occupancy percent (%) Estimated ADR (average daily rate) for period - Total room revenue / total number of rooms sold = ADR RevPar (revenue per available room) for forecasted period - Occupancy % X ADR = RevPar Projecting the future level of sales volume is a key to proper staffing! The role of the controller is to provide, or have available always, accurate forecasted data on these statistics (ADR, Occupancy percent, RevPar) for daily, weekly, monthly, quarterly and annually. Note that revenue forecasts within 5 – 10 % of actual realized revenue are realistically achievable. Question 1 in “Issues at Work” asks students to describe strength and weaknesses of ADR, Occupancy Rate, and RevPar in terms of tools to measure effectiveness of a hotel’s management team. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Revenue Forecasting: Food & Beverage Revenue
Number of guest rooms sold directly impacts amount of F&B sales volume Controller will forecast sales generated from: - Room service - Banquets - Meeting room F&B revenue - Audio visual equipment rental - Service charges * The text provides an example of each characteristic applied to the lodging industry. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Revenue Forecasting: Other Revenue
Typical examples of other revenue sources include: Pay-per-view movies Parking charges Internet access charges Gift shop sales of newspaper / cigarettes / candy / lotions / pop / etc Telephone (local / long distance calling) Guest laundry Coat check fees Golf fees Tennis fees Health club usage fees Pool fees The text examines five typical questions that might well be proposed to a G.M. by members of the EOC. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Budgeting Important function of budget
Allowing management to anticipate / operate for future business conditions Providing communication channel whereby hotel objectives are passed to various departments Encouraging department managers who have participated in budget preparation to establish own operating objectives / evaluation techniques / tools Providing G.M. with reasonable estimates of future expense levels and serving as tool for determining future room rates Helping controller & G.M. to periodically evaluate hotel and its progress toward financial objectives Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Budgeting (continued….)
Long-range budgets Encompass relatively lengthy period, generally 2-5 years or more Useful for long-term planning, considering wisdom of debt financing / refinancing and scheduling of capital expenditures Annual budgets Must be produced by individual hotels and submitted to central office for review in large, multiunit hotel companies Developed to coincide with calendar year Monthly budgets Helps determine whether maintaining progress toward goals developed in annual budget Great use for seasonal hotel Refer to Figure 5.1 (Waldo hotel property operations & maintenance department operating budget for January) Capital expenditure is the purchase of equipment, land, buildings, or other fixed assets necessary for the operation of the hotel. Seasonal hotel is a hotel whose revenue and expenditures vary greatly depending on the time (season) of the year the hotel is operating. Examples include hotels near ski resorts, beaches, theme parks, some tourist areas; sporting venues, and the like. Figure 5.1. Shows an example of the type of detail commonly found on the expense segment of a monthly operating budget. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Financial Statements: Income Statement
Key financial documents Income statement Balance sheet Cash flow statement Income statement Known as profit and loss statement Lists hotel’s revenues, expenses, GOP, & fixed charges for specific time (month, fiscal quarter, or year) In no case should this period exceed middle of next reporting period GOP is short for gross operating profit. It refers to hotel revenue less those expenses typically controlled at the property level. It is generally expressed on the income statement and in the industry as both a dollar figure and percent of total revenue. Question 2 in “Issues at Work” (Chapter 5) asks students to describe the purposes and limitations of the balance sheet, the income statement, and the statement of cash flow. Fixed charges are those expenses incurred in the purchase and occupation of the hotel itself. These include rent, property tax, insurance, interest, depreciation and amortization. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Figure 5.2: Income Statement Information This period’s actual Revenues Less Direct operating expense Equals Department operating income Overhead (undistributed) expense Net income (GOP) Fixed expense Income before taxes G.M. can answer: How did hotel perform during this period? Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Figure 5.3: Tricolumned Income Statement This period’s actual This period’s budgeted Last year same period actual Revenues Less Direct operating expense Equals Department operating income Overhead (undistributed) expense Net income (GOP) Fixed expense Income before taxes G.M. can answer: Hotel performance during this period? Hotel performance compared with performance estimate (budget)? Where did estimates vary significantly? How did hotel perform compared with same period last year? Where were significant changes from last year evident? Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Functions of balance sheet Provides a point-in-time statement of overall financial position of hotel “Snapshot” of financial health of hotel Capture the financial condition of hotel on day it is produced Not telling how profitable the hotel was in given accounting period Explain what sorts / types of information a balance sheet can offer, compared to an income statement; are there any limitations of balance sheet? Limitation of balance sheet Of all assets, none consider relative value / worth of staff, including the G.M, actually operating hotel Value of experienced, well-trained staff is not quantified. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Financial Statements: Balance Sheet
Figure 5.9: Accounts receivable aging report Assets Cash $75,000 Accounts receivable 50,000 Inventories on-hand 25,000 Prepaid expenses 10,000 Total assets $160,000 Property and equipment $7,000,000 (Less accumulated depreciation) 500,000 Net property and equipment 6,500,000 $6,660,000 Explain what sorts / types of information balance sheet can offer, compared to income statement; are there any limitations of balance sheet? Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Financial Statements: Balance Sheet
Figure 5.9: Accounts receivable aging report (continued….) Liabilities and Owners’ equity Current liabilities Accounts payable $75,000 Wages payable 25,000 Total current liabilities $100,000 Long-term liabilities Mortgage payable $6,300,000 Total liabilities $6,400,000 Owners’ equity 260,000 Total liabilities and owners’ equity $6,660,000 Explain what sorts / types of information balance sheet can offer, compared to income statement; are there any limitations of balance sheet? Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Financial Statements: Statement of Cash Flows
It is critical that the hotel not only is profitable, but also that it maintains solvency. It shows cash effects of hotel’s operating, investing, and financing activities. Statement of cash flows can answer to the following: How much cash was provided by hotel’s operation during accounting period? What was hotel’s level of capital expenditure for that period? How much long-term debt did hotel commit to during that period? Will cash be sufficient for next few weeks or will short-term financing be required? Solvency is the ability of a hotel to pay its debts as they come due. Discuss the importance of the statement of cash flow by using the example given in the text. it is important for a G.M. to know how much cash debt is outstanding, as well as the likelihood of collecting on that debt. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Daily Operating Statistics: Manager’s Daily Sales Report
Controller’s office should provide G.M. with a timely recap of prior day’s rooms, F&B & other revenues. Prepared from data supplied nightly by PMS. Daily includes the following: For room Number of rooms available for sale / number of rooms sold / occupancy rate / ADR / RevPar / Other room revenue info F & B Restaurant sales / bar & lounge sales / meeting room rentals / banquet sales / other F& B revenue For other income Telephone revenue / in-room movie revenue / no-show billings / other income PMS (Property Management System) refers to the computerized system used by the hotel to manage its rooms revenue, room rates, room assignments, and reservations, as well as other selected guest service functions; Chapter 6 (The Front Office) examines the PMS in detail. Many controllers increase the value of the Daily by including cumulative monthly data totals. A no-show is a guest who makes a confirmed room reservation, but fails to cancel the reservation and fails to arrive at the hotel on the date of the confirmed reservation. The more detail you desire, the longer the Daily ! Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Daily Operating Statistics: Detailed Room Revenue Statistics
Documentation & verification of night auditor’s report is an important function of controller’s office. Night auditor report provides wealth of info on room sales. Detailed room revenue report include: Rooms available Total rooms occupied Rooms occupied by guest type Occupancy percent Total ADR ADR by guest type Total RevPar Emphasize that it is important for the G.M. to know both how many rooms have been sold and to what client type those rooms have been sold it; Figure 5.6 ( Two Alternative Guest Profiles / Same RevPar) illustrates exactly why the G.M. also should know about the type of guests staying. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Daily Operating Statistics: Adjustments & allowances
Allowance & adjustments Reduction in sales revenue credited to guests because of errors in properly recording sales or to appease a guest for property shortcomings. Figure 5.7: Adjustment Voucher ADJUSTMENT NO (1) DATE (2) 200xx NAME (3) ROOM OR ACCT.NO. (4) EXPLANATION (5) SIGNATURE X (6) (7) As Figure 5.7 (Adjustment voucher) shows, the form has 1) a sequence number for control purposes, 2) a space for the date voucher is used, 3) a space for the name of the guest(s) for whom adjustment was made, 4) a space for the guest’s identifying room number or account, 5) a space for an explanation of the event or circumstances that justified the issuing of an adjustment, 6) a space for the initials or signature of the employee issuing the adjustment, 7) an identification number for reordering purposes Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Daily Operating Statistics: Adjustments & allowances (continued….)
Importance of completion of allowance & adjustment voucher Employee error in charge Employee training program, cash sales systems, or guest service techniques Hotel-related problems Equipment inspection programs, guest service training Guest-related problems Total monthly Allowance & Adjustments/ total room revenue = Room allowance & adjustment % This percentage varies based on hotel age, quality of staff & training programs, & type of guest typically served Discuss the importance of the use of adjustments and allowances for the G.M. to take corrective actions; if the G.M is unaware of problems on his or her property, curative action cannot be taken. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Internal Controls: Cash
Credit card-related techniques to defraud guests Changing guest’s credit cards for items not purchased, then keeping money from erroneous charge Changing totals on credit card changes after guest has left or imprinting additional credit card charges and pocketing cash difference Mis-adding legitimate charges to create higher-than-appropriate total, with intent to keep the overcharge. Charging higher-than-authorized prices for products/services, recording proper price, and keeping the overcharge Giving/selling/credit card numbers to unauthorized individuals outside hotel Address that the internal threat of employee theft/fraud is greater than the potential for robbery by nonemployee. Question 3 in “Issues at Work” (Chapter 5) deals with establishing credit policies to guests. This question asks students to list five factors they believe would be important to determine what credit terms to offer to new client in their hotels. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Internal Controls: Cash
Methods of evaluating cash control systems Cashier training programs Sales revenue recording systems Cash overage/shortage monitoring systems Enforcement of employee disciplinary procedures for noncompliance An effective G.M. should monitor the quality of the cashier-related security programs designed by the controller. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Internal Control: Accounts Receivable
Facility Engineering & Maintenance Accounts receivable (AR): money owed to hotel because of sales made on credit Facility Engineering & Maintenance Direct bill: an arrangement whereby a guest is allowed to purchase hotel services and products on credit Guest seeking credit would complete a “Direct Bill Application” (Refer to Figure 5. 8) Refer to the text (p.160) to understand the reason for a hotel electing to extend credit to a guest organization. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Internal Control: Accounts Receivable
Controllers’ jobs to establish: which guests are allowed to purchase goods/services on credit. how promptly those guests will receive bills. what is total amount owed to hotel and how long have those monies have been owed. The text notes that the creditworthiness of guests is a common debate issue between the marketing and sales area and the controller’s office. The controller’s office tends to have a conservative position while the marketing and sales office demands that the controller extends credit. Facility Engineering & Maintenance A controller together with a G.M. should establish credit policies that maximize number of guests doing business with hotel, yet minimize hotel’s risk of creating uncollectable accounts receivable. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Internal Control: Accounts Receivable (continued….)
Figure 5.9: Accounts receivable aging report Waldo Hotel: Accounts Receivable Aging Report For January,200X Total amount receivable $100,000.00 Number of days past due Less than 30 30-60 60-90 90+ $50,000 $30,000 $15,000 _____ $5,000 Total % of total 50% 30% 15% 5% Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Internal Control: Accounts Payable
Account payable (A.P.) Charge for goods / services used by hotel, invoiced by vendor, not yet paid Sum total of all invoices owed by hotel to its vendors for credit purchases made by hotel Four major concerns in A.P. systems Payment of proper amounts Payments made in a timely manner Payment records properly maintained Payment totals assigned to appropriate departments Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Internal Control: Accounts Payable (continued….)
Payment of proper amounts Ensure legitimate invoices are paid only for amount actually due. Invoices and payments for those invoices should be checked by at least two people Payments made in a timely manner Maintains good relations with vendors by prompt payment of invoices Take advantage of discounts offered by vendors for prompt payment Payment records properly maintained Create system whereby total payments to vendors match vendor billings exactly Coding is the process of assigning incurred costs to predetermined cost centers or categories. Payment totals assigned to appropriate departments Use a system of coding to assign actual costs to predetermined cost centers Implement functioning expenses coding system Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Internal Control: Purchasing & Receiving
Ensuring payment is made to vendors only for goods / services actually received Payment should be withheld if all services have not been performed. Before A.P. invoice is paid, check terms of sale, product prices quoted by vendor, & list of products against actual vendor’s invoices. Devising payment system ensuring members of property mgt. Team has: - Preauthorized work - Confirmed cost of work - Verified work is satisfactorily completed Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Internal Control: Inventories
Facility Engineering & Maintenance Secure accurate inventory from each department where monthly inventories are taken (refer to monthly income statement) Beginning period value of towel inventory + Towel Purchase = Cost of Towels Available - Ending period value of Towel Inventory Cost of Towels used in period Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Internal Control: Payroll
Proper payment of employees’ salaries and wages is an important function of the controller’s office Keep detailed, department-specific (individual) payroll info. - important due to fluid nature of labor usage in hotel Advice to G.M. about prevailing wage rates, worker productivity, variation from budget, and future labor needs Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Facility Engineering & Maintenance
Audits Facility Engineering & Maintenance Auditor: individual conducting independent verification of financial records. Internal audit Independent verification of financial records performed by organization operating hotel Cost-effective in multiunit hotels External audit An auditor does not examine every financial record produced by controller’s office since last audit. Instead, the auditor inspects a sample of records from a variety areas to determine whether consistent bookkeeping practices and standard accounting procedures are used. Question 5 in “Issues at Work” addresses that it is difficult for the G.M. to determine whether errors made in the financial records of a hotel represent intentional fraud or simply mistakes resulting from poor training or lack of knowledge. Ask students specific criteria used to evaluate controller’s office if an independent audit reveals multiple areas of consistent mistakes? Independent verification of financial records performed by accountants employed by organization operating hotel Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Chapter 6: The Front Office

Front Office Function Front Office Manager (FOM) Revenue Management
Reservations Guest Services Night Audit This Front Office organizational chart (hotel department responsible for guest reservations, registration, service and payment) is in a 350 room full-service hotel. Desk Staff Concierge Bell Staff Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Front Office Functions With Other Positions
Revenue manager Establishing room rates Reservation manager Managing the reservation process Front Office Manager Desk staff Guest registration Concierge Guest information Night auditor Managing the Front Office related accounting and data collection process Bell staff Guest assistance Concierge/s is/are the individual/s within a full-service hotel responsible for providing guests with detailed information regarding local dining and attractions, as well as assisting with related guest needs. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Responsibilities of Front Office
PMS & its management Revenue & reservation management Functional areas Management of guest Services Accounting for guests Re-engineering is re-organizing hotel departments or work sections within departments. Data management Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Front Office: The PMS & Its Management
Guest histories Room rates, reservations, and room assignments Accounting information PMS: Computerized system Reservations Management information functions Figure 6.2 shows guest tracker PMS hotel management features. PMS requires its own care and maintenance; any installed back-up system (redundant hardware and/or software operated in parallel with the system it serves) hardware related to PMS should be inspected and tested on a regular basis. Other selected guest services Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Front Office : Revenue & Reservations Management
Increase To maximize hotel’s revenue per available room (RevPar) Occupancy % & Average Daily Rate (ADR) Occupancy % x ADR = RevPar To improve RevPar: Estimate (forecast) guest demand for rooms Practice yield management Control occupancy Do several math exercises so that students understand the formula of RevPar; another way to express RevPar is actual room revenue / number of available rooms. . Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Revenue & Reservations Management: Forecasting Guest Demand For Rooms
Knowing demand for rooms is key ! When demand for rooms is high, drive ADR (e.g., college football game: sell-out at a high ADR) When demand for rooms is low, drive occupancy (e.g., night before Thanksgiving: offer lower rate) For forecasting demand, Front Office should: keep accurate historical records to understand past demand know of special events or circumstances that impact future room demand Explain why forecasting demand is important to maximize RevPar with the examples of college football game, and night before Thanksgiving. Sell-out indicates 1) a situation in which all rooms are sold or over-sold. A hotel, area, or entire city may, if demand is strong enough, sell out, 2) a period of time in which management attempts to maximize ADR. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Forecasted room demand
Revenue & Reservations Management: Practicing Yield Management Yield Management A strategy using demand forecasts to maximize RevPar. Demand for rooms > supply, sell at “rack rate” Demand for rooms < supply, offer at discounts Yield Management strategy based on room demand Forecasted room demand Rate strategy 90-100% occupancy Offer no discounts 70-90% occupancy Offer discounts up to 10% % occupancy Offer discounts up to 20% Less than 50% occupancy Offer discounts up to 30% Yield Management is a strategy based on room supply and guest demand for rooms, that seeks to maximize RevPar by offering discounts on days when demand is weak, and eliminating discounts on days when demand is strong. Rack rate is the price at which a hotel sells its rooms when no discounts of any kind are offered to guests. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Revenue & Reservations Management: Managing Occupancy
Room availability strategies “Closed to Arrival” (CTA) : Hotel declines reservation for guests attempting to arrive on this specific date. “Minimum Length of Stay” (MLOS) : Hotel declines reservations for guests seeking to stay for fewer days than the minimum established by the hotel. Example: Forecasted room demand (Hotel with 300 rooms) While Yield Management is a method to control room rates, “Closed to Arrival” (CTA) and “Minimum Length of Stay” (MLOS) strategies are a method of managing occupancy, depending on room occupancy. For all these methods, forecasting room demand is an important job of the Sales and Marketing manager. Use Figure 6.4 (Forecast Room Demand) to describe the concepts of “Closed to Arrival” (CTA) and “Minimum Length of Stay” (MLOS). To enhance students’ understanding of these two strategies, Question 3 in “Issues at Work” in Chapter 6 ask students: in which specific circumstances would it be best to employ CTA versus MLOS to maximize occupancy? The text also discusses the practice of “over-booking” (a situation in which the hotel has more guest reservations for rooms than it has rooms available to lodge those guests) as one method to manage occupancy; use second case study to facilitate discussion with students about ethical issues involved in over-booking, from the hotel’s and the guests’ perspectives. Friday Saturday Sunday Rooms left to sell 120 25 250 Identifying Saturday as day that is CTA & MLOS of two days to maximize total weekend occupancy Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Managing Guest Reservations: By Types & Delivery Methods
By reservation type Transient sales: rooms and services sold primarily via Front Office & its staff Group sales: rooms and services sold primarily via Sales & Marketing department, and given to the Front Office for recording and servicing. By delivery method Global distribution system: great use by travel agents worldwide. Hotel direct: effectiveness of the telephone sales effort is important. Walk in: “curb appeal” is important. Internet: accuracy of current info on web-site is important. Franchise 800 numbers: significant source of transient room reservations. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Managing Guest Reservations: Delivery Methods (Global Distribution System)
To Make Reservations: Travel agents, or Third-party sites GDS Users GDSes Switches Hotels Worldspan, Amadeus, Sabre, or Galileo Pegasus or WizCom Hotel’s Reserv.system to To Confirm Reservations: Hotels Hotel’s Reserv.system Switches Pegasus or WizCom GDSes Worldspan, Amadeus, Sabre, or Galileo Travel agents, or Third-party sites GDS Users to Information Flow of the GDS Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Managing Guest Services
Variety Of Guest Services Airport transportation Parking cars Handling luggage Providing directions to local attractions Making restaurant reservations Taking guest messages Routing mail Newspaper delivery Management of safety deposit boxes Supplying directions for areas within the hotel Setting wake-up calls Providing guest security via careful dissemination of guest-related information Handling guest concerns and disputes Depending on the location, type, size and characteristics of hotel, levels of guest services vary greatly. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Managing Guest Services: Front Desk - Arrival
Pre-arrival Printing “ reg card” for guests scheduled to arrive next day Reg card: legal contract existing between hotel and guest (guest name / guest address / guest telephone number / arrival date / departure date / # of adults in the room / rate to be paid / room type / form of payment) Bell station Assisting guests in getting baggage into hotel and their rooms Explaining hotel services and guest room features to guests Registration (reg) card is a document that provides details such as guest’s name, arrival date, rate to be paid, departure and other information related to the guest’s stay. Valet is originally a term used to identify an individual who cared for the clothes of wealthy travelers; its most common usage now is in reference to those individuals responsible for parking guest vehicles. Valet Bell staff should be friendly, well groomed, properly uniformed, and respectful of guest property Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Managing Guest Services: Front Desk - Arrival (continued…)
Five-step registration process Greeting guests Minimize wait / make guests feel welcome Confirming the info on reg card Reg card serves as the record of guest’s stay Securing a form of payment Authorize (validate) the card at time of registration Validation means 1) the card is being used legally, 2) the card has sufficient credit remaining to pay for the guest’s estimated charges 3) a “hold” for a dollar amount determined by Front Office policy has been placed on the card to ensure the hotel’s payment. Room assignment Accommodate guest preference for room types (location, view, bed type & amenities) Issuance of keys Control issue of guestroom keys for guest safety Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Managing Guest Service: Front Desk- Guest Privacy
Guest information Without a guest’s permission, never confirm or deny that he or she is in fact registered. Without a guest’s permission, never release info related to his or her stay. Always be vigilant in informing guests of any third-party info requests regarding their stay. Room information Without a guest’s permission, never reveal his or her room number to any third party. Never perform registration tasks in ways allowing guest room info to be overheard by others’. Never write room numbers directly onto keys. Never issue a duplicate room key to anyone except a registered guests. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Managing Guest Service: Front Desk - Stay & Departure
Guest satisfaction issues When guests’ issues are handled professionally and their legitimate complaints are treated courteously, their experience is enhanced. The walked guests Apologize to guest for any inconvenience. Clearly explain hotel’s walk policy to guest. Offer any reasonable assistance to minimize guest difficulties. “Walked” indicates a situation in which a guest with a reservation is re-located from the reserved hotel to another hotel because no room was available at the reserved hotel. Ask students whether they have experienced dealing with walked guests; determine the training aspects relating to this situation, the policy regarding walked guests at the organization(s) they worked at, and how they managed such a difficult situation without diminishing the reputation of the hotel. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Accounting For Guests Front office’s accounting related tasks
Accurately collect and post charges to the guest “folios” Maintain an accurate list, by room number, of guestroom occupants Verify accuracy of the room rates charged to guests Confirm the check-out dates Billing to Folio The detailed list of a guest’s room charges as well as other charges authorized by the guest or legally imposed by the hotel. Appropriate guest charges incurred are posted to the appropriate guest’s folio. All independent supporting documentation should be thoroughly reviewed prior to posting. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Accounting For Guests: Room Management / Assignment
At front desk check-in Guests present themselves to begin registration process Special check-in areas may be available, depending on level of service and priority of guests. Front Desk Agent confirms status of selected room prior to room assignment At shelf check-in, system should allow staff to: verify and document identification of guest to whom room is rented. assign guests, whenever possible, to requested room type. assure that assigned room status is “clean & vacant”. confirm rate guest pays, prior to issuing room keys. confirm guest’s departure date, prior to issuing room keys. secure acceptable form of payment from guest. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Accounting For Guests: Bucket Check
Industry term for location of actual registration cards signed by guests at check-in Cross referencing method Physically verifies that info. on a guest’s registration card is complete and matches that in the PMS Manual procedure for assuring accuracy of: Guest’s actual room assignment / rate to be paid / departure date / form of payment /any other accounting-related information Bucket check is a procedure used to verify, for each guest, the accuracy of that guest’s registration information. Bucket check helps reduce errors related to billing guest’s folio. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Accounting For Guests: Night Audit
Night audit function: eight keys item Posting appropriate room tax and tax rates to guest folio Verification of accurate room status (in PMS) of all rooms Posting any necessary adjustments or allowances to guest folios Verification that all legitimate, non-room charges have been posted, throughout the day, to proper guest folio Monitoring guest account balances (e.g., guest’s credit limit) Balancing and reconciling Front Desk’s cash bank Updating and backing up electronic data maintained by Front Office Producing, duplicating and distributing all management mandated reports (e.g., ADR, occupancy %, business source, in-house guest lists) Night author is the individual who performs daily review of guest transactions recorded by the Front Office; night audit is the process of reviewing for accuracy and completeness the accounting transactions from one day to conclude or “close” that day’s sales information in preparation for posting the transactions for the next day. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Accounting For Guests: Check Out
Two essential tasks accomplished by desk agent Confirmation of guest’s identity Checking for late faxes / messages not yet delivered to guest Inquiring about and returning guest belongings in hotel’s safety deposit boxes Posting any final charges Producing copy of folio for guest’s inspection Processing guest’s payment Revising room’s status in PMS to designate room as vacant Settlement of guest’s bill Hotels increasingly implement express or self-check in / out systems to meet guests’ needs and wants; Question 4 in “Issues at Work” in Chapter 6 asks who (business travelers versus leisure travelers) demand or prefer the speed of self-check in / out to human interaction of a front desk agent, and how this relates to consumer loyalty. Re-booking of guest for a future stay (selling opportunity) Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Data Management: Credit Cards
Accuracy Processing guest credit cards Commitment to security Credit card acceptance & processing guidelines Confirmation that name on card matches that of individual presenting the card for payment Examination of card for any signs of alteration Confirmation that card has not expired Comparison of signature on card with signature by guest paying with that card Documentation (usually initialing) by employee processing the charge Balancing and reconciling credit card charges at conclusion of each Front Office shift Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Data Management: Locking / Security Systems
Recodable locking system Increasingly utilized to ensure guest safety Installed cost is about $300 - $500 per guest room Independent & stand-alone (no wiring back to PMS is necessary) Managing a recodable lock system Be trained to issue duplicate keys only to confirmed registered guests Maintain an accurate data system that actually identifies registered guests and their assigned room numbers Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Data Management: Telephones
Private Branch Exchange (PBX) Hotel internal system to process incoming, internal, and outgoing telephone calls Call accounting system Records time, length, and number called, of each telephone call made within each guestroom Posts phone charges directly to guest’s folio when interfaced with PMS Wake-up calls Call accounting is the hotel internal system to document and charge guests for their telephone use. Question 5 in “Issues at Work” (Chapter 6) addresses the issue of decreased revenue from telephone services in the hotel; ask students to list three specific methods they would employ to encourage in-room telephone use in a hotel. Voic Message on hold Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Data Management: Point of Sale (POS)
Any sales recording system not located at Front Desk (a location, excluding Front Desk, at which hotel goods & services are purchased) Mostly interfaced with the PMS Multiple POS systems in large hotel operations restaurants / room service / lounges / laundry / valet / shops / fitness centers / business centers Ensure all legitimate purchases & charged purchases are posted to the correct guest or non-guest folio Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Data Management: In-Room Services
Movies Pay-per-view movie system Games “video”games on television screen in guest room In-room service In-room mini-bars Interfaced with the PMS(automatically posted to guest’s folio) Safes In-room safes for guest use Re-engineering is re-organizing hotel departments or work sections within departments. Internet connections Pay-to-connect basis in guest room Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Data Management: Back Office System
Back office accounting system System used by the controller to prepare hotel’s financial documents such as Balance Sheet, Income Statement, etc. Back office accounting system should offer: good underlying technology strong company behind the product, including good leadership compatibility with popular hardware products sizable customer base good customization capabilities expandability ease of use by non-technological staff excellent support via telephone excellent online support potential for PMS interface Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Chapter 7: Housekeeping

Roles of Housekeeping Dept.: Guestrooms
Public spaces lobby areas / public restrooms / front desk areas / management offices / game rooms / exercise areas / pool & spa areas / employee break rooms & locker rooms / selected meeting & food service areas Major Executive Housekeeper responsibilities: Decisions about required number of cleaning employees Frequency of cleaning The text addresses management judgments regarding areas of cleaning responsibility specific to each department, and notes that many hotels have implemented color-coded maps of their properties to facilitate this; the first case study provides the scenario of possible conflicts - in responsibilities for cleaning areas - between Housekeeping Department and other departments (e.g. Food & Beverage / Maintenance Department). Decisions about the required number of room attendants is a major responsibility of the Executive Housekeeper. In the section “Employee Scheduling” later, the text discusses differences in how the inexperienced and the experienced Executive Housekeepers establish Room Attendants’ schedules in terms of numbers. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Roles of Housekeeping Dept.: Guestrooms
Guestroom areas Elevators/ corridors/ stairwells/ guestrooms Communication role to Front Desk staff (room status info) & Engineering / Maintenance Department ( room maintenance issues) Room will be assigned, when: Properly cleaned by Housekeeping Verified as clean by second member of Housekeeping Room’s status has been reported to Front Desk Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Roles of Housekeeping Dept.: Guestrooms (continued…)
Room status terminology Clean & Vacant Room vacant, has been cleaned and can be assigned to guest Occupied Room registered to a current guest On-Change Room vacant but not yet cleaned Do not disturb Room is occupied but not yet cleaned, due to guest request not to be disturbed Sleep-out Room reported as occupied, but room was not used, and guest may have left Stay-over Guest will stay in room at least one more night Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Roles of Housekeeping Dept.: Guestrooms (continued…)
Room status terminology (continued…) Due-out Guest has indicated that is last day he/she will use room Check-out Guest has departed Out-of-order Room is not rentable, thus not assignable Lock-out Guest’s items still in room, but guest will be denied access until management approval of re-entry Late check-out Guest has requested and has been allowed an extension of regular check out time Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Roles of Housekeeping Dept: Laundry
Laundry areas laundry preparation areas/ laundry supply closets/ guest linen, terry and supplies storage areas Laundry often represents one of the hotel’s largest expenses. Housekeeping Dept. & Executive Housekeeper’s role Managing “On Premise Laundry (OPL)” and its effective operation Linen is a generic term for guestroom sheets, pillowcases, tablecloths and napkins washed and dried in the laundry area. Terry is a generic term for bath towels, hand towels and wash cloths washed and dried in the laundry area. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Staffing the Department
have management skills (planning, organizing, directing and controlling departmental activities). have commitment to cleanliness and impeccable cleaning standard. create an appropriate inspection checklist and revise it as necessary. know about personal administration, budgeting, laundry sanitation, fabrics & uniforms, room cleaning chemicals and routines. be guest oriented. Executive Housekeeper should: Room Inspector’s major responsibilities: Assess quality of room cleanliness Point out deficiencies to room attendants, get those deficiencies corrected, & report revision of room status to Executive Housekeeper or Front Desk Note that principle of management is also applied to run an effective Housekeeping Department. Thus, the Executive Housekeeper needs to understand management process such as planning, organizing, directing & controlling) specific to the Housekeeping Department. Revisit Chapter 2 (The Hotel General Manager) and Chapter 3 (Management Skills for the G.M.) to review how each management process step works and what specific things should be done, in detail. Inspector (inspectress) is the individual responsible for physically checking guestroom status, as well as other tasks assigned by the Executive Housekeeper. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Staffing the Department (Continued…)
Approaches to build highly motivated, dedicated Room Attendants: Treat them at all times with respect Ensure they are supervised by excellent supervisors Have room cleaning assignment policies perceived by them as fair Provide excellent, ongoing training Provide a realistic career ladder for room attendants Enforce Housekeeping Department policies consistently and without favoritism Ensure room attendant safety through training and appropriate hotel policies Provide benefit packages that are competitive for the area Pay fair wages The text discusses that recruiting and retaining quality room attendants is a challenge, and that the G.M. in conjunction with the Executive Housekeeper needs to develop / design strategies to attract and retain the best room attendants; what specific activities / strategies can be applied so that room attendants regard the G.M., and the property, as the employer of choice. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Managing Housekeeping: Safety
this group’s accident rates generally the highest in the hotel. thus Housekeeping employees are one of the hotel’s largest groups Physical nature of jobs Equipment & supplies Rule Housekeeping employees should handle only those machinery items and supplies they are properly trained to handle. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Managing Housekeeping: Safety
Areas of training concern Chemical handling Cleaning procedures Correct lifting techniques Properly entering guestrooms Contending with guestrooms containing: firearms/ uncaged animals/ individuals perceived as threatening/ ill or unconscious guests/ drugs and drug paraphernalia / blood and potential bloodborne pathogens Guest service Guestroom security Lost & Found procedures Bloodborne pathogen is any microorganism or virus, carried by blood, which can cause a disease. The text emphasizes that the G.M. particularly needs to pay attention to the matter of blood pathogens. Similarly, attention is necessary to lost and found training; in the section “Lost and Found” later, three types of unclaimed property are discussed in detail, in terms of law and policy requirements. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Managing Housekeeping: Employee Scheduling
size of guestrooms / amenities in rooms / actual number of rooms to be cleaned / amount, if any, of deep cleaning Scheduling the number of room attendants depends on: How to establish room attendant schedules Inexperienced Executive Housekeeper relies exclusively on minutes per room Total # of minutes worked by room attendants / total # of guestrooms cleaned = Minutes per room Experienced Executive Housekeeper relies on both minutes per room and knowledge of guests and sales patterns Actual number of rooms to be cleaned is the most critical variable (factor) to effective scheduling. Deep cleaning means the intensive cleaning of a guestroom, typically including the thorough cleaning of items such as drapes, lamp shades, carpets, furniture, walls and the like. “Minutes per room” is the average number of minutes required to clean a guestroom. Explain different factors used between experienced and inexperienced housekeepers to establish room attendant schedules. Question 2 in Issues at Work in Chapter 7 asks students to design a scheduling system that fairly assigns holidays to the employees. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Managing Housekeeping: Inventory Management
Inventory items maintained by Executive Housekeeper: sheets (all sizes)/ pillowcases/ bedspreads/ bath towels/ hand towels/ washcloths/ soaps/ shampoos/ conditioners/ sewing kits/ glass cleansers/ furniture polish/ acid-based cleansers/ glassware/ cups/ coffee & filters/ in-room literature/ telephone books/ pens/ paper pads Values of monthly inventories “Product usage report” is a report detailing the amount of an inventoried item used by a hotel in a specified time period (i.e. week, month, quarter, year) Check how much of each item is in use, in storage, on order Executive Housekeeper to compute monthly “product usage reports” Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Managing Housekeeping: Inventory Management (continued…)
Waldo hotel product usage report 117 Total Monthly usage 877 unitis Count on: __________________ 850 units Plus 144 unitis Purchased in month 994 unitis Total in service Less ______________________________ Date: __________________________ Item:__________________________ For Period: ______________________ Prepared by: ____________________ Department:_____________________ January 1 February 1 Housekeeping King-sized Sheets The Executive Housekeeper, assisted by the housekeeping staff, should compute monthly usage rates on all significant housekeeping items. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Managing Housekeeping: Lost & Found
Three types of unclaimed property Mislaid property Owner unintentionally has left item(s) behind Lost property Owner unintentionally has left item(s) behind, then forgotten it/them Abandoned property Owner intentionally has left item(s) behind Law and/or policy requirements: Hotel must safeguard mislaid property until rightful owner returns Hotel must hold lost property until rightful owner claims it Hotel not required to find abandoned property’s owner Property left behind in room or found in lobby to be treated as mislaid or lost Establish how long any mislaid/lost property to be held before disposing it Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Managing Housekeeping: Lost & Found (continued…)
When item is found When returned to rightful owner, or disposed of Date item is found Description of item Location where item is found (room #, if applicable) Name of finder Supervisor who receives item Date item is returned Owner’s name/ address/ phone Housekeeping Manager returning item Method of return Date property is declared as abandoned Name of hotel employee receiving abandoned property Written report The text emphasizes that Housekeeping Department must have specific, written “Lost and Found” procedures in place; it is one of the Executive Housekeeper’s important jobs to have pre-printed forms, namely, written lost and found procedures, in place to protect guest property until it is declared abandoned. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Facility Care & Cleansing
Public space cleaning Forms basis for a guest’s initial impression of property Guestroom cleaning Effective guestroom cleaning is heart of Housekeeping Department Determines long-term success or failure of property Sleeping area: the first part seen by guest when entering room Bathroom area: closely inspected by guests for cleanliness Review Figure 7.3 (Sample Public Space Inspection Sheet), 7.4 (Sample Guestroom Sleeping Area Inspection Sheet), and 7.5 (Sample Guestroom Bath Area Inspection Sheet) in the text. The text discusses the usefulness of inspection sheets to identify areas to be evaluated during routine inspections of public spaces, guest bathroom and sleeping room areas, and laundry. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Facility Care & Cleansing (continued…)
G.M.s’ roles in facility care and cleaning G.M.s should know what to look for when inspecting the hotel G.M.s must inspect public space, guestroom and laundry operation areas regularly G.M.s should not evaluate effectiveness of their housekeeping departments based only on lower costs per occupied room or fewer minutes per room cleaning (these factors are not always better!) “cost per occupied room” is total cost incurred for items or area, divided by the number of rooms occupied in the hotel for the time period examined. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Laundry Operating an effective “on-premises laundry” is a multi-step process Collecting Sorting Watching Drying Finishing / Folding Delivering Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Laundry: Operating an Effective OPL (continued…)
Collecting Dirty linen and terry should never be used as guestroom cleaning rags. Bloodstained linen or terry must be placed separately in a biohazard waste bag (pre-sort in guestroom). Biohazard waste bag should be on every housekeeping cart. Sorting Once in OPL, laundry is sorted both in terms of fabric type & degree of staining. Emphasize that use of the biohazard waste bag is necessary to avoid needless exposure to bloodborne pathogens, when room attendant notices linen or terry is bloodstained. Agitation is movement of the washing machine resulting in friction as fabrics rub against each other. Executive Housekeeper must teach laundry workers to monitor washing times, washing temperatures, chemicals and agitation during the washing process. Washing This step is the most complex part. Monitor a: washing times, b: wash temperatures, c: chemicals, d: agitation length and strength Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Laundry: Operating an Effective OPL (continued…)
Drying Drying is simply a process of moving hot air ( degrees F.) through fabrics to vaporize & remove moisture. Fabrics that are dried must have cool-down period in the dryer before they are removed from it Finishing/ Folding Space for finishing laundry must be adequate Storing Many fabrics must “rest” after washing & drying 24-hr rest time for cleaned laundry Housekeeping Dept. should maintain laundry par levels of three times normal usage Laundry par level is the amount of laundry in use, in process and in storage. Delivering Storage areas containing these items should be locked Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Chapter 8: Food and Beverage

Similarities: Hotel & Restaurant Foodservices
Planning issues Plan by focus on menu Menu impacts operational factors Menu focus on guests’ wants, needs & preferences layout / equipment labor for production, service & clean-up F&B products for purchase Financial concerns All foodservice operations must assess financial status Operating budget income statement / balance sheet / cash flow statement Necessity for standard operating procedures Purchasing / receiving / storing / issuing / pre-preparation / preparation / serving / service Marketing concerns Repeat business important to financial success Emphasis on consumers Cost control procedures Stress that basic principles for planning, for managing financial resources, for implementing marketing efforts, and for controlling costs are similar in all hospitality segments. Review terms, “commercial foodservice operations” and “institutional foodservice operations” and their target audiences, when discussing “emphasis on consumers.” Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Standard Operating Procedures: Cycle of F&B Product Control
Step 1: Purchasing Step 2: Receiving Step 3: Storing Step 4: Issuing Step 5: Pre-Preparation Step 6: Preparation Step 7: Serving Step 8: Service Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Cycle of F&B Product Control (continued…)
Develop purchase specification Supplier selection Purchasing correct quantities No collusion between property and supplier Evaluation of purchasing process Step 1: Purchasing Development of receiving procedures Completion of necessary receiving reports (e.g., addressing financial and security concerns) Step 2: Receiving Effective use of perpetual & physical inventory systems Control of product quality Securing products from theft Location of products within storage areas Step 3: Storing Purchasing: describe the purposes of documenting purchase specifications: they provide detailed descriptions of desirable quality, size and weight for a particular item. In addition, the standardized purchase specification format includes usage of product, product test procedures and special instructions and requirements. Receiving: Provide examples of financial and security concerns in receiving Storing: For a perpetual inventory system, keep a running balance of the quantity of stored products by recording all newly purchased items as they enter storage areas and all quantities issued from storage to production areas; in a physical inventory system, physically count stored products periodically. Product rotation concerns Matching issues (issue & usage) Purchasing as inventory is depleted Step 4: Issuing Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Cycle of F&B Product Control (continued…)
Step 5: Pre-Preparation Mise-en-place Minimizing food waste / maximizing nutrient retention Use of standardized recipes Use of portion control Requirements for food and employee safety Step 6: Preparation Timing of incoming F&B orders Portion control Revenue management concerns Step 7: Serving Pre-Preparation: Mise-en-place means “everything in its place” and “getting ready for service.” Define serving and service (serving is the process moving products from products personnel to service personnel; service is the process moving products from service personnel to the guests). Revenue control concerns Serving alcoholic beverage responsibly Sanitation and cleanliness F&B server productivity Step 8: Service Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Personnel Requirement Similarities: Hotel & Restaurant Foodservices
Practice of empowerment Transferring some decision-making responsibility and power to front-line employees Enhancing service to guests and increasing profits for the organization To meet unanticipated guest needs effectively Staff must be trained in standardized procedures. Managers must provide clear direction to employees. Managers must provide necessary resources. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Profitability Differences: Hotel & Restaurant Foodservices
Profitability = Revenue - Expenses Profit amounts generated by restaurant F & B is relatively easy to calculate. The process of allocating revenues and expenses applicable to F & B services in a hotel is more difficult. Costs of F & B sales is generally higher in a restaurant than in hotel. Define allocation as the process of spreading costs between two or more profit centers to more accurately identify each department’s profitability. Discuss Question 2 in “Issues at Work” (Chapter 8) to explain the process of allocating revenues / expenses between departments in hotels. The text (Figure 8.2) discusses why costs for products and labor differ between restaurant and hotel F & B. Hotel’s “bottom line” profit from F & B sales is likely to be lower than a restaurant’s. Payroll costs (or fixed labor costs) are higher than in a restaurant. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Marketing-related Differences: Hotel & Restaurant Foodservices
Location within the community Restaurants: locations easily accessible to potential guests Hotels: locations most accessible to guests desiring lodging accommodations Location within a hotel Restaurants: locations easily accessible to potential guests Hotels: locations most accessible to guests desiring lodging accommodations Menu For hotels, F& B service is viewed as an amenity or secondary (sale of guestrooms is primary objective) Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Room Service Operations: Profitability Concerns
Why lose money? Relatively few properties generate profits from room service Very high labor costs High expenses incurred for capital costs - delivery carts / warming devices Why offered? Service to guests Impacts hotel rating - some guests select hotels based on room service availability Hospitality suite business involves providing food and beverage service during conventions / conferences; hosted events are functions served by a hotel which are complementary for invited guests. High expenses incurred for capital costs - Delivery carts / warming devices Offer hospitality suite business Provide hosted events How to offset losses? Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Room Service Operations: Menu Planning Factors
Quality Concerns Less likely to oversee room service food quality Must offer products maintaining quality during holding and transportation to guest room (example: problems with omelet & French fries) Cross-Selling Advertising availability of other hotel services - dinner menu providing info about Sunday brunch Discuss issue of the prompt removal of soiled room service items, and how to design procedures for this operating challenge; use the first case study to facilitate discussion with students. Menu Language Language barriers for international guests - uses of pictures and multi-lingual menu descriptions Clearly state ordering-requirements - minimum order charges / mandatory tipping policies Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Room Service Operations: Operating Issues
An inaccurate room service order cannot be corrected quickly. A minor problem in room service may impact guest’s perceptions about the entire lodging experience. Communication Guest placing order / order taker / room service production-service staff / room service staff Abbreviations should be clearly understood by order taker and food production staff Technology Improving the accuracy of room service orders electronic cash register (ECR) / point-of-sale terminal / remote printer Ask students about “upselling techniques” they have used in any segments of food and beverage service; then discuss how those techniques can be applied in room service. Upselling Technique Opportunities for upselling are overlooked Upselling increases guest check average Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Room Service Operations: Within-Room Service
Training issues for room service attendants Explaining procedures to retrieve room service items Asking guests where room service meal should be set up Presenting guest check and securing payment Opening wine bottles (where applicable) Question 4 in “Issues at Work” (Chapter 8) addresses special training that a room service attendant needs to become an efficient dining room server. Providing an attitude of genuine hospitality Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Banquet Operations: Profit Opportunities
Well-planned banquets can be profitable! Banquet menu has higher contribution margin. - banquets frequently celebrate special events Forecasting & planning production, service and labor are relatively easy. - formal guarantee is made - less likelihood of overproduction of food with subsequent waste Beverage sales from hosted or cash bars increase profit. - capable of increasing alcoholic beverage sales Question 5 in “Issue at Work” (Chapter 8) addresses communication problems applicable to planning and delivery of banquets. Stress that coordination between banquet chef and banquet manager, between production staff and service staff, between sales / marketing department and the banquet department is critical to success. Distinguish between hosted bars and cash bars. Market share is the percentage of the entire volume of business of a specific type which the hotel enjoys. Increasing market share of the community’s banquet business Increasing property’s profitability Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Banquet Operations: Menu Planning
Factors / concerns for planning banquet menus Guest preferences Ability to deliver desired quality products Availability of ingredients required to produce the menu Production / service staff with appropriate skills Equipment / layout / facility design issues Nutrition issues Discuss the use of a banquet event order, and how this helps the banquet planning process; show an example of a banquet event order either from text (Figure 8.6) or from other resources. Sanitation issues Peak volume production / operating concerns Ability to generate required profit levels Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Banquet Operations: Service Styles
Butler service Appetizers and pre-poured champagnes can be served by service staff at a reception while guests stand. Buffet service Quantities of food are pre-arranged on a self-service line; guests pass along the line and help themselves Family style (English style) Platters and bowls of food are filled in the kitchen and brought to guests’ tables French service Meals are prepared or finished at tableside by service staff: (e.g., tossing Caesar salad / flambéing entrée) Each service style varies uniquely in terms of required staff skills, costs, elegance, needed equipment, etc. Discuss advantages / disadvantages associated with each service style. (For example, for English service, the portion control procedures can be challenging. Although Russian and French service styles offer elegance, well-trained service employees and specialized equipment are needed, which increases costs. On the other hand, American service style involves low equipment- and labor- costs.) Platter service Production staff plate food in the kitchen; service staff bring it to the table to place individual portions on guests’ plates Plated service (American service) Production staff pre-portion food on plates in kitchen; service staff serve to guests Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Banquet Operations: Beverage Functions
Various ways to charge for beverage Individual drink price Collecting cash or a ticket when each drink is sold Bottle charge Charging on a by-bottle basis for each bottle consumed / opened Per-person charge Charging a specific price for beverages based on attendance at the event Hourly charge Define the terms “Call brand beverages,” “Premium brand beverage”, and “House brand beverage.” Charging the host a specific price for each hour of beverage service Specific per event charge Using hours of beverage service; charging number of drinks / hour X number of guests Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Banquet Operations: Banquet Room Set-Up
Size Timing Determined by : number of expected guests local fire safety codes / ordinances types and sizes of tables, chairs, other equipment number of seats per table required space for aisles, dance floors, band stands, other entertainment, head tables, etc. reception / buffet tables Becomes critical when: the same room to be used same day for different functions when large evening event precedes following day’s large breakfast event in same room Two critical concerns Many factors should be considered in banquet room set-up. A key aspect of the space issue is that banquet managers / planners should consider easy accessibility for both guests and service personnel. Stress the importance of considering the size of the banquet space and implementation of service styles when booking events. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Banquet Operations: Banquet Contracts & Billing Policies
Topics in banquet contract Last date that banquet space will be held without signed contract Time by when a guarantee of attendance must be received Cancellation policies Guarantee reduction policy Show students a sample copy of a banquet contract while discussing topics commonly listed in the banquet contract. Explain how fees are assessed when the banquet contract is canceled and how the guarantee reduction policy works. Billing: amount & schedule for guest payment Information about service of alcoholic beverages Other information applicable to specific event Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Alcoholic Beverage Service in Hotels
Good training protects guests, public and hotel from tragedies and lawsuits Responsible service & consumption of alcoholic beverage is an integral part of the responsibility of all F & B managers in all types of operations. Train for all staff in the hotel (i.e. including non-F&B positions, e.g. front desk, housekeeping, maintenance and/or security staff ) to recognize and respond to visible signs of guests’ (non-guests’) intoxication. Question 6 in “Issues at Work” (Issues at Work) asks students whether they agree or disagree with the statement that “all personnel in the hotel require training in responsible service of alcoholic beverages.” Develop and implement ongoing training for responsible service of alcoholic beverages. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Chapter 9: Safety and Property Security

Personal Safety: Legal Liability & Guest Safety
Protection of an individual’s physical well-being and health Security Protection of an individual or of business’ property or assets Hotels are not required to ensure guest safety. However, must exercise reasonable care for guest and employee safety. Hotel may be held wholly or partially liable for resulting loss or injury if it is found that a hotel has exhibited an absence of reasonable care for guest safety. Differentiate the meaning between safety and security. Emphasize that laws do not hold hotels responsible for everything that happens to guests during their stay as long as the hotel has exhibited a legal standard of “reasonable care” for guest safety. Explain the meaning of “reasonable care” (a legal concept identifying the amount of care a reasonably prudent person would exercise in a specific situation) and liability (being legally bound to compensate for loss or injury) Hotels are not required to ensure guest safety. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Personal Safety: Staffing for Security
Operation of Safety & Security Committee Reinforces that: Guest safety and hotel security is the responsibility of every manager, supervisor, & employee of the hotel. Employee safety training Training employees to 1) ensure guest safety, 2) work safely, and 3) assist hotel’s security efforts. Employee safety training is an ongoing process Safety and Security Committee is an interdepartmental task force comprising hotel managers, supervisors, and hourly employees charged with monitoring and refining a hotel’s safety and security efforts. Question 2 in “Issues at Work” (Chapter 9) reinforces that all of the hotel’s employees should share concern for guest safety. This question further asks who should be responsible to ensure whether activities for guest safety are implemented successfully or not, depending on the size of hotel. Local law enforcement Facility Engineering & Maintenance Local law enforcement officials can provide no-cost safety and security training for employees. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Personal Safety: Safety Resources
Recodable locks Reduce chance for guests to be victimized in their rooms by someone who had rented the same room on a prior night Help reduce the incident of employee theft from rooms Surveillance systems Use of VCR - Recording activity at front desk, in parking areas, and near cashiers * Quality recodable locks consist of electronic door locks that “stand-alone”, meaning that there is no need to wire the locks back to a central computer. Use of CCTV (Closed-Circuit Television) In a multiple-entry property where management desires to monitor activity outside each entrance Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Alarm systems Internal alarms Serve to deter criminal or mischief activity Notify an area within the hotel if alarm is activated Protect storage areas, hotel facilities (pools, spa, and exercise areas), and hotel and perimeter Contact alarms Notify (contact) an external entity such as fire or police departments if alarm is activated When the E&M department implements a “replace as needed” program, it means a parts or equipment replacement plan that delays installing a new, substitute part until the original part fails or is in near failure; on the other hand, a “total replacement” program involves a parts or equipment replacement plan that involves installing new or substitute parts based on a predetermined schedule. Question 1 in “Issues at Work” (Chapter 11) asks students to discuss factors influencing the decision between “replace as need” approach and systematic “total replacement”. Both federal law and local building codes mandate hotel fire alarms Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Emergency Plans: the identification of a threat to the safety and security of the hotel & hotel’s planned response to the threat Response to events in most hotels’ emergency plans Fire / power outages / severely inclement weather / robbery / death or injury to a guest or employee / bomb threat / intense negative publicity by the media An emergency plan must be a written document, including: Type of crisis Who should be told when the crisis occurs What should be done and who should do it in the crisis Who should be informed of the results or impact of the crisis when it is over When safety and security emergencies occur in the hotel, hotel management and employees must deal with those emergent situations quickly and appropriately. To do so, the G.M. together with appropriate managers need to plan ahead for foreseeable crises such as severe weather storms. The emergency plan can be used to prepare the hotel for a crisis. Emergency plan is a document describing a hotel’s predetermined, intended response to a safety/security threat. Question 3 in “Issues at Work” (Chapter 9) asks a student’ opinion on whether he or she would include “fire drill” that involve clearing the hotel of all guests as a way of practicing the final plan’s implementation, if he or she were a G.M.? Where practical, hotels should practice implementation of their plan ! Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Personal Safety: Special Safety Issues
Swimming pools Figure 9.1 lists ten key practices for swimming pool safety Spas Figure 9.2 lists ten key practices for spa safety Parking lots Figure 9.3 lists ten key practices for parking lot safety * Discuss the first case study at “Managers at Work” relating to the safety issues in swimming pools. Always remember how to improve guest safety and minimize the legal liability of the hotel! Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Personal Safety: Documenting Safety Efforts
All hotels should document their safety and security related efforts! Prepare & complete MOD checklists for each critical area of hotel Appropriate frequency, content and number of checklist should be determined Incident reports listing the “who, what, where, and how” should be filed and maintained MOD (Manager on Duty) is the individual on the hotel property responsible for making any management decisions required during the period he or she is MOD. Refer to Figure 9.4 to view the sample of the MOD checklist for parking areas. If wished, extend the discussion by creating one more MOD checklist example in the area of swimming pools and/or spas. Incident report documents details of an accident, injury, or disturbance, and the hotel’s response to it. Emphasize that the hotel’s documenting efforts relating to the safety and security of guests can be useful to prove that hotel has exercised reasonable care toward protecting guest safety/security. Document minutes from safety and security committee meetings, general staff meeting’s notes relevant to safety issues, records of employee training related to safety and security, and safety seminars attended by employees Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Personal Safety: Occupational Safety & Health Administration
OSHA regulations ensure businesses: Provide a safe workplace for employees by complying with OSHA safety and health standards Provide workers with only tools and equipment that meet OSHA specifications for health and safety Establish training programs for employees who operate dangerous equipment Report to OSHA within 48 hrs of any worksite accident that results in fatality or requires hospitalization of five or more employees Material Safety Data Sheet (MSDS) is a written statement describing the potential hazards of, and best ways to handle, a chemical or toxic substance. An MSDS is provided by the manufacturer of the chemical or toxic substance to the buyer of the product and must be posted and made available where it is easily accessible to those who will actually use the product. Maintain the “OSHA Log 200” (an on-site record of work- related injuries or illness) and submit it to OSHA once per year Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Personal Safety: The Occupational Safety & Health Administration
OSHA regulations ensure businesses (continued…) Display OSHA notices regarding employee rights and safety in prominent places within the hotel Provide all employees access to the Material Safety Data Sheets that provide information about the dangerous chemicals they may be handling during work Offer no-cost hepatitis B vaccinations for employees who may have come into contact with blood or body fluids Compliance with OSHA standards Results in Fewer accidents lower insurance costs healthier workforce Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Property Security: Threats to Asset Security - Internal Threats
Hotels bond those employees in a position to embezzle funds Methods of fraud related to cashiering Charging guests for items not purchased, then keeping the overcharge Changing totals on credit card charges after the guest has left or imprinting additional credit card charges and pocketing the cash difference Misadding legitimate charges to create a higher-than-appropriate total with the intent of keeping the overcharge Revisit the terms of safety and security here again. Safety-related hotel programs are designed to keep people safe from harm, whereas security-related efforts are directed toward protecting property from theft or damage. Embezzlement is the theft of a company’s financial assets by an employee. Bond(ing) means purchasing an insurance policy against the possibility that an employee will steal. Voiding legitimate sales as “mistakes” and keeping the cash amount of the legitimate sale Facility Engineering & Maintenance 9 Charging higher-than-appropriate prices for hotel goods or services, recording the proper price, then keeping the overcharge Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Property Security: Threats to Asset Security - Internal Threats (continued….)
Three noncash assets most subject to employee theft: Time Should have strong controls in place regarding time cards. Company property Carefully screen employees prior to hiring Reduce theft opportunities by using effective security Treat all proven cases of similar theft in a similar manner Current technology is available to assist a chief engineer determine what must be maintained and how frequently to schedule preventative maintenance program Services Monitor long-distance telephone bills generated by each administrative telephone extension number Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Property Security: Threats to Asset Security - External Threats
Cash Robbery is not the occasion to attempt the protection of cash assets. Robbery is the time to protect staff ! During a robbery, complying with robber’s demands and observing the robber should be the employee’s sole concern. If no contact alarm is installed in the cashier’s cash drawer, an employee who is robbed should, at the earliest safe opportunity, contact local law enforcement officials as well as others indicated in the robbery section of the hotel’s emergency plan. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Other assets: security-conscious manager:
Property Security: Threats to Asset Security External Threats (continued….) Other assets: security-conscious manager: Hang all artwork in lobbies & guest rooms with lock-down style hangers Avoid placing valuable decorations & décor pieces in areas where they can be easily taken by guests Train room attendants to alert management if excessive amounts of in-room items go missing from stay-over rooms Bolt televisions securely to guestroom furniture Train all employees to be alert regarding loss of hotel property & to report any suspicious activity Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Property Security: Threats to Asset Security Department-Specific Threats to Asset Security
Front Office Largest area of security concern is fraudulent selling of rooms Use housekeeping discrepancy report to detect room revenue fraud Housekeeping Guest-theft of housekeeping supplies Theft from guest rooms by room attendants or other employees - best policy is to report the incident to local law enforcement * Discrepancy report is a daily comparison between the status of rooms as listed by the PMS at the front office, and the status of rooms as listed by the housekeeping department. The second case study at “Managers at work” provides a scenario of a guest complaint about theft of her necklace from her room while she was away, and she claims her loss against the hotel. The text presents four possibilities: 1) the guest is mistaken, and the necklace reported stolen has been misplaced, 2) the guest is attempting to defraud the hotel, 3) the theft was committed but by another guest, 4) a hotel employee, in fact, committed the theft. What sort of tools can help to determine such a scenario? Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Maintenance & Engineering
Property Security: Threats to Asset Security Department-Specific Threats to Asset Security Food & Beverage Hotel suppliers such as silverware and glassware taken by guests Employees accepting kickbacks from vendors or by purchasing, then stealing, food and beverage items intended for the hotel Sales & Marketing Misstating mileage traveled, clients entertained, or sales trips taken Maintenance & Engineering Employee theft of hand tools and supplies Implementing a sign-in/sign-out program for tools Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Chapter 10: Sales & Marketing

Roles of Sales & Marketing
Activities related directly to servicing consumer demand & booking clients Marketing Activities designed to increase consumer awareness & demand by promoting & advertising hotel Roles of Director of Sales & Marketing The Front Office Identify and cultivate clients Manage hotel’s marketing efforts Set rates to maximize RevPar Negotiate sales contracts on behalf of hotel Serve as a leader to hotel’s sales & marketing team Question 1 in “Issues at Work” (Chapter 10) asks students to compare definitions of “sales” and “marketing” by referring to three other books devoted to the sales and marketing area. The text notes that sales is the process of servicing business currently identified while marketing seeks to generate new business. Ask your students to define both sales and marketing in their own words; are your students able to distinguish sales from marketing? Chapter 6 (The Front Office) discussed ways to maximize (improve) RevPar (revenue per available room) from the Front Office perspectives: 1) Estimate (forecast) guest demand for rooms, 2) Practice yield management, 3) control occupancy. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Roles of Sales & Marketing: In the Hotel
Transient rooms Influence Front office Group sale Influence Sales & Marketing Tasks of Sales & Marketing staff with their group sales focus Planning hotel’s sales and marketing strategy Preparing and issuing sales contracts in timely manner Maintaining accurate sales records, forecast and histories Coordinating and communicating special client requests with affected hotel departments Hosting clients during their stay Conducting site tours Note that Sales and Marketing department plays a major role in selling group sales, while transient rooms are sold through Front Office efforts. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Roles of Sales & Marketing: In the Community
Two sales opportunities Promotion opportunities When DOSM and Sales team are active members of the business community (e.g., local Chamber of Commerce), disseminating info about hotel’s products and services is allowed. Networking opportunities Development of personal relationships for business-related purposes will result in increased numbers of sales calls. - Convention and Visitors Bureau Involvement in the local business community (e.g. Chamber of Commerce) is presented as a sales opportunity (particularly promotion opportunity) for the hotel; Chamber of Commerce is an organization whose goal is the advancement of business interests within a community or larger business region. Convention and Visitors Bureau (CVB) is an organization, generally funded by taxes levied on hotels, that seeks to increase the number of visitors to the area it represents. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Segmentation of the Sales & Marketing Dept.
Segmentation based on: By product(s) sold product designations becoming sales specialty areas By market (market segment) type of guests (clients) who buy the product By distribution network “how” the hotel’s sales (products) are made (distributed) Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Catered event Group guest rooms Conferences By product sold Meetings Conventions Weddings and special events Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Business travelers (who pay highest room rates) Corporate Vacations, weddings, visits by friends and family, or non-work related reasons Heavy reliance on travel agents’ advice Leisure By market (market segmentation) Long-term stay Guaranteed occupancy, ease of cleaning their rooms, relatively uncomplicated billing Rooms often sold at very low daily rates Social, military, educational, religious, or fraternal organizations SMERF & Others Sales and Marketing departments can be segmented based on type of guests who buy the product. Text shows six characteristics AAA (American Automobile Association) evaluators rate: 1) exterior, grounds and public areas, 2) guestrooms and bathrooms, 3) housekeeping and maintenance, 4) room décor, ambiance and amenities, 5) management, 6) guest services ; based on these six characteristics, the book also presents what the AAA Diamond ratings represent from one diamond to five diamonds. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Representative of corporations, groups and organizations Using comparison-shopping techniques Influence on hotel’s reputation Meeting planners Retailers, wholesalers or both Using Global Distribution System Receiving commission (5 – 20 %) from hotel Travel agents By distribution networking Consortia Largest customers of many hotels Negotiated rate / blackout dates / pick-up Fastest growing distribution channel Creating homepages and linking them to other sites Internet Directors of Sales and Marketing structure their departments based on “ how” the hotel’s sales are made, namely the specific distribution channels used; distribution channel is a distinct and definable source of hotel rooms or services sales. Consortia are groups of hotel service buyers organized for the purpose of reducing their client’s travel-related costs; a single such group is a consortium. Negotiated rate is a special room rate, offered for a fixed period of time, to a specific client of the hotel. Black-out dates are days on which the hotel will not honor a negotiated rate. Black-out dates should be identified at the same time the hotel and the client agree on a negotiated rate (e.g. New Year’s Eve). Pick-up is the actual number of rooms used by a client in a defined time period. Potential guest who arrives at hotel without an appointment Drop-ins Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Sales & Marketing Activities: Sales Efforts
Sales & marketing committee Trace systems Harmonizes efforts across department lines Engages in long-term planning Ensures cooperation of all in sales and marketing process Maintain record (e.g., demographic data) of hotel’s past, current and prospective clients Help department maintain its sales records, meet deadlines, and plan future activities A G.M. normally acts as the Chair of Sales and Marketing Committee. Sales and Marketing Committees are groups of individuals responsible for coordinating hotels’ sales and marketing efforts. “Trace system” is a methodical process to record what was done in the past and what must be done in the future to maximize sales effectiveness; an effective trace system has the records of each individual client. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

The sales cycle Pre-sale phase Invite client to a site tour Submit a bid Complete “Request for Proposal” and submit on time Establish room rates Prepare group contract (attrition and cancellation policy) Forward Direct Bill application to Group Establish group block Detail client’s contracted requirements Monitor client’s block Attend pre-event sales meeting of hotel staff Sales phase Inform students about what specific sales and marketing activities take place at the sales cycle; the lists of events associated with each cycle of sales (pre-sale phase, sales phase, post-sale phase) are not exclusive, but still give ideas of sales team activities (or of the Director of Sales and Marketing), based on the scenario in the text. Write thank you note to each group Review the final bill Include that group in the hotel’s preferred client database File all written reports Post sale phase Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

New leads uncovered since last meeting Realistic sales potential of these leads Who in the department is following up on leads How leads will be pursued What, if anything, G.M. can do to help cultivate prospect Any sales resulting from leads discussed previously Sales lead – effective DOSM should discuss the followings: Good networking can create leads. Also, text emphasizes that a G.M. should be able to identify prospective clients for solicitation. Question 2 in “Issues at Works” in Chapter 10 asks how networking skills affect cold calling ability. Reserve adequate time for cold calling! Make a sales visit / presentation to potential client without having previously set an appointment to do so Visit / call quality prospective clients for hotel’s rooms / services Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Client appreciation activities Goals Examples Solidify business relationship with current clients (allow hotel to express gratitude to clients for current business) Communicate to potential clients the seriousness with which the hotel views the hotel / client relationship Gala client appreciation event Golfing, sporting events, concerts, theater tickets Gift giving Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Marketing plan development: format of marketing plan A review of market competition Occupancy trends /ADR trends / performance of own hotel Competitive analysis of your competitor Strengths / weaknesses / price structure Competitive analysis of your own hotel Strengths / weaknesses / price structure Forecast of future market conditions Estimated market growth or contraction / performance goals and objectives for own hotel / timeline for achieving these goals and objectives Explain the benefits of a marketing plan to the Sales and Marketing department and to entire hotel property. Marketing plan is a calendar of specific activities designed to meet the hotel’s sales goals; activities included in a marketing plan involve analysis of own competition, analysis of own hotel, establishing prices, and publicizing hotel’s offerings through advertising, promotions and public relations activities. Determination of specific marketing strategies & activities Advertising / public relations / promotions Preparation of a marketing budget Development of measurement & evaluation tools Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Advertising Types of advertising Effective advertising Exterior signage In-hotel and in-room signage and materials Radio or television commercials Direct mailing Internet banners message Yellow pages Franchiser-supplied advertising vehicles (directories, co-ops, etc.) Billboards Personal contact Eye or ear catching Memorable Sell the hotel’s features Cost effective Does not become quickly outdated Reflect positively on hotel’s image Can be easily directed to the hotel’s core client groups Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Promotion “Special” packaging of products or services Promoted and disseminated by advertising and publicity Publicity Information about hotel, media-distributed free of charge Costs the hotel nothing May be either good or bad Public Relations (PR) Activities ensuring hotel has a positive public image (good citizen of the community) Hosting charity events, contributing cash or in-kind services, donation of hotel staff time for worthy cause Provide examples of promotion, such as a “Summer Getaway” promotion, to be marketed in winter. Emphasize that the publicity costs the hotel nothing, and the publicity may be either good or bad; cultivating good relationships with the media is an important task of the G.M. Text describes different scenarios to distinguish the terms of “marketing”, “advertising”, “promotion”, “publicity”, “public relations” and “sales” Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Internet Sales & Marketing
Online reservation system Teaming of GDS with Internet Impact Travel agents: check availability, compare prices and book hotel on-line Note that online booking sites are the fastest growing source of reservations in the hotel industry; this method is becoming popular because online is an inexpensive way to reach consumers directly Online booking sites are fastest growing source of reservations in hotel industry Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Sales & Marketing Activities: Websites
Effective hotel websites should: be easy to navigate. have some level of interactivity. be linked to appropriate companion sites (demand generator). allow for online booking. balance guest privacy needs with hotel’s desire to build a customer base. update and revise room rates easily on the website. include a virtual tour of the property. complement other marketing efforts. be in language(s) of potential clients. have website address easy to remember. Effective use of websites allow hotel to take advantage of an inexpensive direct line to consumers. Emphasize that measures of website effectiveness should be sales production (sales made), rather than sales calls (hits). “Demand generator” means an organization, entity or location that creates a significant need for hotel services; Examples in a community include large businesses, tourist sites, sports teams, educational facilities and manufacturing plants. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Internet Sales & Marketing : E-mail Systems
Traditional communication methods Direct mailing, telephone, fax Emerging communication methods system Advantages of systems The Front Office Inexpensive to send to many current and potential clients. Has attachment feature function to move documents quickly. Automatically updates user database Can disseminate special rate, promotion, new hotel feature to its client list Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Evaluating Sales & Marketing Department: Pace Report
Is a document summarizing confirmed (group) sales made by Sales and Marketing dept. Can be prepared based on number of rooms sold, value (in dollars) of sales made, or both Can also include any period of time in the future Tells hotel’s owner and management the potential sales volume generated by Sales and Marketing department However, does not indicate what actual sales volume should be (STAR report does!) A strong pace report shows that sales made by Sales & Marketing department are increasing on a monthly and / or annual basis while a weaker report shows they are declining or staying the same. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Sold same month last year
Evaluating Sales & Marketing Department: Sample Pace Report Waldo Hotel Group Rooms Pace Report for January, 200x Sold this month Total sold YTD Sold same month last year Total sold last YTD Jan 25 150 Feb 450 750 250 550 Mar 1,550 330 1,250 Apr 650 1,350 May 875 1,175 1,050 June 1,100 1,400 800 1,700 July 2,250 2,150 Aug 2,900 1,500 1,900 Sept 500 700 1,750 Oct 300 Nov 850 1,150 600 Dec 200 125 225 Total 8,550 14,775 7,055 13,575 Show students how to evaluate bottom-line effectiveness of Sales & Marketing department by comparing Pace Report in any given month with the Pace Report of matching month in prior year. Figure 10.2 in the text describes how to understand Pace Report, 200X; according to the example, the selling pace of the hotel for January, (8550 rooms) is up a total of 21 % ( 8,550 – 7,055 / 7,055 = 21.1 %) over last year (7055 rooms) and YTD (year to date) sales productivity of Sales & Marketing staff increases 8.1 % (14,775 – 13,575 / 13,575 = 8.1 %). Address that the Pace Report tells management where future occupancy problems may exist. For example, Figure 10.2 in the text indicates that a potential problem exists in September (700 rooms this YTD vs YTD at same time last year), thus corrective management actions to increase sales in September should be taken. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Evaluating Sales & Marketing Department: The Smith Travel Accommodations Report (STAR)
STAR working process and preparation Hotel voluntarily submits financial data to Smith Smith maintains confidentiality of all individual hotel data Combine operating data submitted by selected competitors An individual hotel’s operating performance is compared to that of its competitive set (understanding the competitive set is key component of understanding STAR!) When an instructor explains how STAR is prepared, stress again that Smith only reports the aggregate results of the competitive set, not releasing information on an individual property or brand. Competitive set is the group of competing hotels to which an individual hotel’s operating performance is compared. Who are the STAR interest groups? Hotel owners, management companies, property management, franchisers, appraisers, financial community Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Evaluating Sales & Marketing Department: The Smith Travel Accommodations Report (STAR)
Operating comparison criteria Occupancy, ADR, RevPar, market share, historical trends, to-date performance, state or region Goals Assess performance of Sales & Marketing department as well as the entire property Know the strength of hotel and Sales and Marketing staff’s sales results, in comparison with selected competitors. Question 5 in “Issues at Work” (Chapter 10) asks students to discuss three positive and three negative factors involved in an analysis of a hotel’s monthly STAR; in addition, the question further asks what other performance indicators can one use to evaluate the hotel. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Chapter 11 Facility Engineering & Maintenance

Goals of E&M department
Role of E&M Department Goals of E&M department Protecting and enhancing financial value of building and grounds for hotel’s owners Supporting efforts of all other hotel departments through timely attention to their E&M needs Controlling maintenance and repair costs Controlling energy usage Increasing pride & morale of hotel staff Ensuring safety of those working and visiting the hotel Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Role of E&M Department: Engineering
Engineering: Designing and operating the building to ensure safe and comfortable atmosphere Goals of E&M department Underpowered (or overpowered) equipment Increased building deterioration Excessive energy usage Higher-than-necessary operating costs Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Role of E&M Department: Maintenance
Maintenance: activities required to keep a building (physical property) & its contents in good repair. Effective hotel maintenance must be: Planned Implemented Most franchisers offer many excellent checklists and suggested activities developed for the E&M department, free of charge to its franchisees. The Chief Engineer may use those checklists and suggested activities for planning the hotel maintenance activities and schedules. Recorded Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Role of E&M Department: Design & Renovation
Building’s original design, size and facilities Quality of construction used in building Finishes and equipment specified for installation Affect Note that durable finishes and high-quality, long-life equipment may have higher purchase prices, but will generally reduce POM related expenditures over the long term Property Operation & Maintenance (POM) related costs Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Role of E&M Department: Design & Renovation (continued….)
Building age Building characteristics and requirements 1-3 years Low maintenance costs incurred 3-6 years Maintenance costs increase 6-8 years Refurbishment required; average maintenance costs incurred 8-15 years Minor renovation and refurbishment required 15-22 years Major renovation as well as refurbishment required 22+ years Restoration required; high-maintenance costs incurred As a building ages, its maintenance challenges increase. FF&E Reserve is funds set aside by management today for future furniture, fixture, and equipment replacement needs of a hotel. Typically, FF&E reserves should average % of a hotel’s gross sales revenue. Facility Engineering & Maintenance Renovation and refurbishment normally one via establishment of an FF&E reserve Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Role of E&M Department: Design & Renovation (continued….)
Restoration: returning a hotel to its original (or better than original) condition Facts: Refurbishment and minor renovation is ongoing process in most hotels Major renovation should occur every six to ten years Restoration every 25 to 50 years, typically If restoration is not undertaken when needed, the hotel’s revenue-producing potential will likely decline Refer to Figure (Selected Hotel Renovation and Replacement Considerations) to review the lists of specific items to be considered when planning a hotel’s short-and long-term renovation program. The first “managers at work” case study addresses the challenge that a hotel faces in deciding between repair and replacement. Ask students what factors would influence a chief engineer and/or G.M’s decision in this issue. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Staffing the Department
Chief engineer Head of E&M In smaller hotels, hands-on role in the maintenance effort In larger hotels, more administrative role Maintenance Assistants Individuals with varying degrees of skills in: engineering / mechanics / plumbing / electricity / carpentry / water treatment / landscaping / grounds maintenance An effective chief engineer should have the ability to determine which tasks are best performed by in-house E&M staff rather than being contracted to outside vendors. Question 2 in “Issues at Work” (Chapter 11) presents an example of the possibility that lawn care can be done in-house or contracted to an outside vendor. This question further has a list of questions that a hotel should ask of a potential provider of lawn and landscape services before contracting with an outside vendor. Ask your students what factors would influence most their decision to select an outside vendor for the lawn and landscape work, from the lists of questions. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Managing Maintenance: Routine Maintenance
Day-to-day upkeep of both exterior and interior of buildings Exterior Lawn care, landscaping, leaf and snow removal, window cleaning, and painting Maintaining hotel’s exterior impacts curb appeal, operating costs, & ultimately the building’s value Interior Indoor plants, interior window washing, floor and carpet cleaning Guestroom and public space related items Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Managing Maintenance: Routine Maintenance (continued….)
Two ways for implementation “Replace as needed” Replacement plan that delays until the original part fails or is near failure e.g., maintenance of refrigeration compressors Systematic total replacement Replacement is based on a predetermined schedule e.g., maintenance of light bulbs in high-rise exterior highway signs When the E&M department implements a “replace as needed” program, it means a parts or equipment replacement plan that delays installing a new, substitute part until the original part fails or is in near failure; on the other hand, a “total replacement” program involves a parts or equipment replacement plan that involves installing new or substitute parts based on a predetermined schedule. Question 1 in “Issues at Work” (Chapter 11) asks students to discuss factors influencing the decision between “replace as need” approach and systematic “total replacement”. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Managing Maintenance: Routine Maintenance (continued….)
Work order Waldo Hotel Work Order Work Order Number: ____(Preassigned)___ Initiated By: _______________ Date: ______________Time: ____________ Room or Location: __________ Problem Observed: ______________________________________________ Received On: ____________________ Assigned To: ___________________ Date Corrected: ___________________ Time Spent: ___________________ E&M Employee Comments: _______________________________________ Chief Engineer Comments: ________________________________________ In a well-managed hotel, any staff seeing an area of concern can initiate a work order chief engineer keeps a room-by-room record of replacements or repairs made Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Managing Maintenance: Preventative Maintenance
Effective preventative maintenance can reduce: Long-term repair costs by prolonging equipment life Replacement parts costs because purchases of these can be planned Labor costs by allowing PM to be performed in otherwise slow periods Dollar amount of refunds and charge-backs due to guest dissatisfaction Costs of emergency repairs by minimizing their occurrence Emphasize that preventative maintenance should not be viewed as a repair program; repairs should be done as they are needed, while PM activities should be preformed as scheduled. PM is not a repair program! Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Managing Maintenance: Preventative Maintenance (continued….)
Sample PM task list for laundry area dryer Daily Clean lint trap Wipe down inside chamber with mild detergent Clean and wipe dry the outside dryer shell Monthly Vacuum the inside of dryer (upper and lower chambers) Tighten, if needed, the bolts holding dryer to floor Check all electrical connections Check fan belt for wear, replace if needed Lubricate moving parts The PM program should identify what is to be done, when it is to be done, how it is to be done. Daily Check pulley alignment Adjust rotating basket if needed Lubricate motor bearings Lubricate drum bearings if needed Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Public space Windows, HVAC units, furniture, lights, elevators, carpets Carpet care is one of the most challenging PM areas Guest room Most important and most extensive areas for PM Critical to sales effort, to retain guests, and to maintain the asset’s monetary value Refer to Figure 11.5 for a sample PM checklist used for guest rooms; The text notes that PM checklist must be tailored for each property and thus the G.M. and the chief engineer are responsible to develop a custom PM checklist and inspection schedule for guest rooms. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Food Service Back-of-house equipment - ovens, ranges, griddles, fryers, other production equipment Dining space used by guests - chairs and booths, self-serve salad or buffet areas, lighting fixtures, guest check processing equipment Meeting and conference rooms and equipment Landry Washers, dryers, folding equipment, water supply lines, drains, lighting fixtures, temperature control units Chemical dispenser maintenance should be an important part of the laundry PM program. Current technology is available to assist a chief engineer determine what must be maintained and how frequently to schedule preventative maintenance program Other equipment Pools and spas, front desk equipment, electronic locks, exterior door locks, motor vehicles, and in-hotel transportation equipment Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Managing Maintenance: Emergency Maintenance
is unexpected threaten to negatively impact hotel revenue require immediate attention to minimize damage require labor and parts that may need to be purchased at a premium The stronger the routine and PM programs, the fewer dollars spent on emergency repairs! Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Managing Utilities 80% of total utility costs for hotel are actually fixed Energy costs present % of total operational costs, depending on hotel’s location E&M department should be concerned with conserving energy and controlling utility costs Energy management: specific policies and engineering, maintenance, and facility design activities intended to control and reduce energy usage. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Managing Utilities: Electricity
Electricity is most common and usually most expensive form of energy used in hotels. Lighting Light levels measured in foot-candle -The more foot-candles, the greater the illumination In candescent lights Inefficient, short-life, but easy to replace Electric discharge lights Longer lives, higher efficiency and low operating costs Refer to Figure 11.5 for a sample PM checklist used for guest rooms; The text notes that PM checklist must be tailored for each property and thus the G.M. and the chief engineer are responsible to develop a custom PM checklist and inspection schedule for guest rooms. Lighting maintenance (lamp repair, bulb change, and fixture cleansing) must be an integral part in PM program. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Managing Utilities: Electricity (continued….)
Heating, ventilation, & air conditioning (HVAC) Heating components Electricity is not cost-effective in cold climates Use natural gas, LPG, steam, or fuel oil Cooling components Effectiveness of cooling system dependent on Original air temperature & humidity of room to be cooled Temperature & humidity of chilled air entering room from HVAC Quantity of chilled air entering room Operational efficiency of air-conditioning equipment Refer to Figure 11.5 for a sample PM checklist used for guest rooms; The text notes that PM checklist must be tailored for each property and thus the G.M. and the chief engineer are responsible to develop a custom PM checklist and inspection schedule for guest rooms. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Managing Utilities:Natural Gas
Usages of natural gas Heating water for guest rooms Powering laundry area clothes dryers Powering plants to provide heat to guest rooms and public space Cooking (rapid heat production and great degree of temperature control) Refer to Figure 11.5 for a sample PM checklist used for guest rooms; The text notes that PM checklist must be tailored for each property and thus the G.M. and the chief engineer are responsible to develop a custom PM checklist and inspection schedule for guest rooms. Managed properly, natural gas is an extremely safe source of energy! Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Managing Utilities: Water / Waste
Conserving water: Reduces the number of gallon of water purchased Reduces the amount the hotel will pay for sewage In the case of hot water, reduces water-heating costs because less hot water must be produced Waste Hotels encourage manufacturers to practice source reduction & to implement creative programs to reduce solid waste Reduce waste disposal costs by: recycling minimizing waste generation & wise purchasing Refer to Figure 11.5 for a sample PM checklist used for guest rooms; The text notes that PM checklist must be tailored for each property and thus the G.M. and the chief engineer are responsible to develop a custom PM checklist and inspection schedule for guest rooms. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Chapter 12 Franchise Agreements and Management Contracts

The Hotel Franchise Relationship
What is franchising? A business strategy allowing one party (the brand) to use the logo, trademarks and operating systems of another business entity in exchange for a fee A network of interdependent business relationships allowing a number of people 1) to share brand identification, 2) to develop a successful method of doing business, and 3) to establish a strong marketing and distribution system. Franchise benefits For the franchisee, franchising helps reduce risk Proven operational methods are used Franchisees and their financial capital expand the brand faster than franchiser could do solo Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Hotel Franchising: Origin & Structure
History of hotel franchising is relatively short First significant hotel franchising arrangement began in 1950s with Kemmons Wilson and his Holiday Inn chain Today hotel owners increasingly affiliate their hotels with other hotels under a common brand name. Company administering and directing the brand itself is not an owner of hotels, but rather a franchise company. Majority of franchise companies do not actually own the hotels operating under their brand names. Those companies have right to sell brand name & determine brand standards Conflict can arise between hotel owners and brand managers - G.M. should balance legitimate interests of hotel and brand Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Hotel Franchising: Origin & Structure (continued….)
Figure 12.1: Ten Largest Brands Brand Properties Rooms 1. Best Western International 4,008 304,664 2. Holiday Inn 1,576 295,252 3. Days Inn Worldwide 1,947 164,023 4. Marriott Hotels, Resorts & Suites 433 160,540 5. Comfort Inns and Comfort Suites 2,065 159,619 6. Sheraton Hotels & Resorts 399 133,200 7. Super 8 Motels 2,092 127,533 8. Ramada Franchise Systems 971 118,114 9. Hampton Inn / Hampton Inn and Suites 1,175 120,589 10.Holiday Inn Express 1,351 109,186 Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Hotel Franchising: Governmental Regulations Related to Franchises
Federal Trade Commission (1979): Franchise Rule requires that franchisers: Supply potential franchisees with disclosure document at either the first face-to-face meeting or ten business days before any money is paid by franchisee to franchiser Provide evidence, in writing, of any earning claims or profit forecasts made by franchiser Disclose number and % of franchisees achieving earnings rates advertised in any promotional ads that include earnings claims Provide potential franchisees with copies of basic franchise agreement used by franchiser Federal Trade Commission (FTC) enforces federal antitrust and consumer protection laws. It also seeks to ensure that the nation’s business markets function competitively and are free of undue restrictions caused by acts or practices that are unfair or deceptive. Refund promptly any deposit monies legally due to potential franchisees who elected not to sign a franchise agreement with franchiser Do not make claims orally or in writing that conflict with written disclosure documents provided to franchisee Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Hotel Franchising: Governmental Regulations Related to Franchises
Franchise Offering Circular (FOC) include Name of franchiser and type of franchise it offers for sale Business experience of franchise company’s officers Fees & royalties that must be paid Initial investment requirements Rights & obligations of franchiser & franchisee Territorial protection offered by franchiser Required operating policies Renewal, transfer, and termination procedures Earnings claims A sample franchise agreement Specific info required by each state in which FOC is to be filed Name and address of legal representative of franchiser Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

The Franchise Agreement
A hotel franchise relationship exists with a franchise agreement. Franchise agreement: legal contract between hotel owners (franchisee) and brand managers (franchiser), which describes duties & responsibilities of each in the franchise relationship Question 3 in “Issues at Work” (Chapter 12) addresses a product segmentation issue that fewer and fewer franchise companies own increasingly larger numbers of brands. How would this issue affect guest satisfaction? Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

The Franchise Agreement: Major Elements
Franchise agreement includes: Names of parties signing agreement Name of legal entity representing the brand as well as corporation, partnership, or sole proprietor owning hotel Detailed definitions Any definitions subject to misinterpretation by parties to the agreement are defined. License grant Description of how the owner is allowed to use the brand’s logo, signage, and name in operating the hotel. In the section of detailed information, the text emphasizes that any definitions that could be subject to misinterpretation by the parties to the agreement should be defined in the franchise agreement. The text offers an example of defining “gross rooms revenue” in the franchise agreement. The clear definition of such term is important because many franchise agreements base the fees, to be paid by owners, on the gross room revenue achieved by the hotel. “Window” is a clause in a franchise agreement that grants both franchiser and franchisee the right, with proper notification, to terminate the agreement. “Early out” is a clause in a franchise agreement that grants both the franchiser and the franchisee the right, with proper notification, to terminate the agreement after it has been in effect for a relatively short period of time. When this clause exists, a window may be granted after only one, two, or three years. Term (length of agreement) The most common franchise agreements are written for 20 years. Also include windows at fifth, tenth, & fifteenth years with early outs. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Franchise agreement includes: (continued….) Fees Affiliation fees / royalty fees / marketing fees / reservation fees Reports - Room revenue generated, occupancy levels, & occupancy taxes & ADR Responsibilities of franchiser - Inspection schedules, marketing efforts, & brand standards enforcement Responsibilities of the franchisee Signage requirements, operational standards & payment schedules *Affiliation fees are flat fees, paid up front (upon signing the agreement), to affiliate with the brand while royalty fees and marketing fees are generally determined by the hotel’s revenue level. Assignment of agreement Ownership transfer & its affect upon the agreement Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Franchise agreement includes: (continued….) Termination or default - Events that permit a termination, or define a default, by either party Insurance requirements Owner should provide types & amounts of required insurance Proof of general indemnification policies, automobile insurance, & mandatory workers’ compensation insurance Requirements for alteration - Rights of the franchiser to change the agreement Arbitration and legal fees - Responsibilities of each party related to legal disputes Signature pages -Authorized representative of the brand & owners of the hotel will sign the franchise agreement Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

The Franchise Agreement: Advantages to the Franchisee / Franchiser
Advantages to franchisee Allowing hotel owners to acquire a brand name with regional or national recognition Connecting the hotel to the GDS Increasing hotel’s sales, thus its profitability Affecting ability of hotel’s owner to secure financing Assistance with on-site training, advice on purchasing furnishings & fixtures, reduced operating costs, & free interior design assistance Question 2 in “Issues at Work” (Chapter 12) asks about the major obstacles faced by independent hotels, and how an effective management team can overcome those obstacles; Question 2 further asks about the future trend towards hotels affiliated with brands. Advantages to franchiser Increasing fee payments to the brand Growing the business (brand spread) Helping pay for fixed overhead of operating that brand Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

The Franchise Agreement: Selecting a franchiser
Basic considerations for a selecting a franchise brand: Quality and experience of the brand managers Hotel owners, not brand managers, bear financial risk of poor brand management Perceived quality / service level of the brand Travelers associate some brands with higher quality, service levels, and costs, than other brands. Franchisers offer brands at a range of quality and guest services The amount of fees paid to franchiser - Fees paid to a franchiser are a negotiable part of franchise agreement The text emphasizes it is crucial that brand manages be experienced and talented because, in case of losses incurred by the hotel, the brand and its managers are not financially responsible; brand today bases the fees it collects on achieved profits, rather than on achieved revenue. Direction of the brand Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

The Franchise Agreement: Selecting a franchiser (continued….)
Clues to future success of the brand Number of hotels currently operating under the brand name Percent of hotels, on an annual basis, that elected to leave the brand in the past five years Number of new properties currently being built under the brand’s name The number of existing hotels converting to the brand (if conversions are allowed) ADR trend for the last five years in comparison to ADR trend for the industry segment in which the brand competes Occupancy rate trend for the last five years in comparison to the occupancy rate trend for the industry segment in which the brand competes Percent of total hotel room revenue contributed by the brand’s reservation system and percent of hotels within the brand that achieve that average rate of contribution Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Selecting a Franchiser: Franchiser Questionnaire
Figure 12.2: Franchiser Survey Contents in franchiser questionnaire Application fees Area of protection Recurring fees Standards Mandatory service programs Operating performance FOC Fair franchising Financing assistance Termination Refer to figure 12.1 (franchiser survey) to see examples of questionnaires in a survey that could be used to search for a franchiser; the slide above only shows the titles of questionnaire contents. Area of Protection (AOP) is the geographic area, designated by a franchiser and granted to a franchisee, in which no directly competing franchisees will be sold. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Selecting a Franchiser: The Product Improvement Plan (PIP)
A brand conversion = reflagging Process of changing a hotel’s flag from one franchiser to another Conversion will always require some facility modification. When a potential franchiser inspects a hotel property whose owners are interested in a conversion, a PIP (product improvement plan) will be prepared. Estimating expenses to implement PIP is the hotel owners’ job. Discuss what causes hotels to reflag. As a rule, the hotel franchisers will not estimate the expenses required for implementing the PIPs they prepare, but the hotel’s owners must do so to obtain a total cost of the improvements necessary for converting to the new brand (flag). PIP: document detailing property upgrades and replacements required if a hotel is to be accepted as one of a specific brand’s franchised properties. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Selecting a Franchiser: Negotiating the Franchise Agreement
Franchise agreement is negotiable. Franchise agreement tends to be written in franchiser's favor. Owners should evaluate all components of proposed franchise agreements. Hotel owners have demanded that impact studies, prepared by an independent party, be undertaken and paid for, when appropriate, by franchiser. G.M.s must become adept at operating hotels in best interests of their owners, as well as in compliance with their owners’ franchise agreement. Impact study is an in-depth evaluation of the effect on occupancy percent and ADR that a new hotel in a given market will have on existing hotel(s) in the same market. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Hotel Management Company Relationship: Management Companies
Management contract: agreement between hotel owners and hotel management company under which, for a fee, the management company operates the hotel. Management companies will: Secure, and if it has closed, reopen the hotel Implement sales and marketing plans to maximize hotel’s short- & long-term profitability Generate reliable financial statements Establish suitable staffing to maximize customer and employee satisfaction Show hotel to prospective buyers Report regularly to owners about hotel’s condition Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Get annual revenues (in millions of $)
Hotel Management Company Relationship: Management Companies (continued….) Figure 12.3: Ten largest management companies Brand Properties Get annual revenues (in millions of $) 1. Interstate Hotels and Resorts (with 2002 MeriStar merger) 357 2,800.0 2. Destination Hotels & Resorts 29 545.0 3. Tishman Hotel Corp. 17 521.8 4. Prime Hospitality Corp. 198 485.0 5. Lodgian 106 448.0 6. John Q. Hammonds 56 436.7 7. Kimpton Hotels & Restaurant Group 34 400.0 8. Outrigger Enterprise 39 9. Ocean Hospitalities 93 339.0 10.Sunstone Hotel Investors 52 293.0 Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Management Companies: Origin & Purpose
Management companies will : Reflag hotel from lower quality brand to higher one Reflag hotel from higher quality brand to lower one Manage / directing major renovation of hotel Operate hotel in a severely depressed market Handle bankruptcy / repossession of hotel Manage hotel that is slated for permanent closing Manage hotel when G.M. unexpectedly resigns Manage hotel extendedly time for owners who elect not to become directly involved in day-to-day operations The fees charged by management companies to operate a hotel, in general range between 1 and 5% of the hotel’s monthly revenue. While most management companies charge a revenue-based fee to operate a hotel, owners can negotiate additional payment incentives tied to performance Question 4 in “Issues at Work” (Chapter 12) asks students whether they would propose to manage hotels for a percentage of the gross rooms revenue for a fee determined by the STAR report results, or for a fee determined by the hotel’s profitability, if they the students were to form a management company. The text discusses that hotel owners negotiate contracts that tie management company compensation to the hotel’s actual operating performance, especially with hotels that are proven profitable. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Management Companies: Hotel Management Company Structures
How to examine the management company Are they first tier or second tier By number of hotels they operate Participation in actual risk and ownership of the hotels they manage The management company is neither a partner in nor owner of hotels it manages The management company is a partner (with others) in the ownership of hotels it manages The management company only manages hotels it owns The management company owns, by itself, some of hotels it manages, and owns a part, or none, of others it manages First tier is management companies that operate hotels for owners using the management company’s trade name as the hotel brand. Hyatt, Hilton, Sheraton are examples. Second tier is management companies that operate hotels for owners who have entered into an agreement to use one of a franchiser's flags as the hotel brand. Emphasize that tiering does NOT refer to the quality of the management operating, or G.M.s working for, the management company. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Management Operating Agreement
Major elements of management agreement include: Length of the agreement Procedures for early termination by either party Procedures for extending contract Contract terms in the event of hotel’s sale Base fee to be charged Incentives fees earned or penalties assessed related to operating performance Management company investment required or ownership attained Exclusivity (Is the management contract company allowed to operate competing hotels?) Reporting relationships and requirements Insurance requirements of the management company Status of employees Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Management Operating Agreement: Advantages / Disadvantages to Hotel Owners
Management quality can be improved Targeted expertise can be obtained Documented managerial effectiveness is available Payment for services can be tied to performance Partnership opportunities are enhanced Disadvantages The owner cannot control selection of the on-site G.M. & other high-level managers Talented managers leave frequently The interests of hotel owners and the management companies they employee sometimes conflict The costs of management company errors are borne by the owner Transfer of ownership may be complicated - High cost of buyout limits the number of potential buyers Buyout is an arrangement in which both parties to a contract agree to end the contract early as a result of one party paying the other an agreed-upon financial compensation. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Issues Affecting G.M.s: Managing the Franchise Relationship
Franchise agreement will affect G.M.’s relationship with: Hotel owner Hotel’s franchise service director (FSD) - Responsible for day-to-day relationship between franchiser & franchisee Assisting hotel’s sales effort Monitoring and advising about hotel’s use of reservation system - Advising franchise on availability and use of franchiser resources Brand (managers) The G.M.s during their careers managing hotels are likely to find themselves in one of the following situations related to franchisers and management companies: 1) the hotel is operating as a franchise, 2) the hotel is operating under a management contract, 3) the hotel is a franchise operating under a management contract. The management contract and franchise agreement affects the day-to-day responsibilities of the G.M. The text discusses the examples of possible disagreements / conflicts the G.M. can have with hotel owners, hotel franchise service director, brand managers, staff and guests, influenced by such arrangements (franchise agreement, management contract). Franchise Services Director is the representative of a franchise hotel brand who interacts directly with the franchised hotel’s G.M.s. Staff Brand standards will affect every department in hotel. Guests Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Issues Affecting G.M.s: Managing for a Management Company
G.M.s’ challenges Career management challenges Long-term career advancement with management company conflicts with desires of the hotel owners Dual loyalty issues (owners vs. management company) Hotel owner’s best course of action works against the best interests of own company. Strained EOC relationships Affected and concerned employees A new management company implements its benefit, pay, seniority, and related employment policies in place of those of a previous management company When the management company does not own the hotel it operates, the G.M. does not work directly for the hotel’s owners. The lists of challenges above discusses the challenges the G.M.s face in such situations. Question 5 in “Issues at Work” (Chapter 12) mentions that the G.M.’s loyalty can be tested because of the conflicting interests of staff, guests, the brand, the management company, and the hotel’s owners. In case the financial interests of two of these groups directly conflicts, this question asks students what would be in the best interests of each party in the example. Conflicts with brand managers Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Chapter 13: Purchasing a Hotel

Buying an existing property Buying a property to build
Selecting a Property Buying a hotel? Buying an existing property Buying a property to build Buying performance Buying potential performance Question 1 in “Issue at Work” (Chapter 13) inquires what five factors would lead students to want to own their own hotel(s), and further asks what factors would cause students to seek an alternative investment for their time and money. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Selecting a property: Buying an Existing Property
Hotel broker brings buyers and sellers together Owner (seller) authorizes broker to solicit offers for the property Broker sends potential buyers owner-supplied info (number of rooms, summary of most recent financial performance, current STAR Reports, etc.) Potential buyers visit property Potential buyers examine whether hotel is operating at reasonable levels of performance Sales price will differ, based on performance levels Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Selecting a property: Buying an Existing Property (continued….)
Buying a strongly performing hotel: Receiving not only the real estate involved, but also an exceptionally solid operating business Is likely to continue to perform at high level with continued, proper management Paying more on a per room basis Often a safer investment than buying one not performing as well Buying potential performance Considering purchase for its “upside potential” Cost of acquiring hotel is low Risk greater than that of buying established, more profitable property Likelihood of making significant profits in future operation or sale of the hotel may exist Upside potential is the possibility that, with proper investment and management, a hotel will yield significant increases in real estate value and/or operational profitability. Question 2 in “Issues at Work” asks students which property they might buy between strong upside potential (a distressed property) and a hotel with known levels of profitability. Discuss with them how their decisions will affect securing hotel finance. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Selecting a property: Buying a Property to be Built
Step 1: Secure site Step 2: Select franchiser Step 3: Design building Step 4: Coordinate building process Step 5: Build hotel * Grand opening is an event held at a hotel that marks its official opening. Step 6: Furnish hotel Step 7: Perform preparering & grand opening activities Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Securing Hotel Financing
Per key Term used to describe cost of hotel acquisition based on number of rooms (keys) purchased Allowing comparison between hotels of unequal size. Total Host Cost / Number of units (rooms) in hotel = Cost per Key * Market value is hotel’s estimated worth. Individual investor / owners should understand basics of hotel’s market value, potential funding sources and supporting documentation these funding sources. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Securing Hotel Financing: Establishing Property Market Values
Factors of establishing value of the hotel Current profitability Annual revenues Physical condition Brand Quality & experience of the hotel’s staff Hotel’s STAR Report results The determination of the appropriate price to pay is always a challenge. Question 3 in “Issues at Work” (Chapter 13) seeks students’ understanding of various methods to establish a hotel’s market values. Note that some approaches put greater emphasis on the hotel’s real estate value, while some place greater emphasis on the hotel’s ability to generate operating profits. Its competition Number of new hotels to be built in that area growth (or lack of growth) in market within which hotel is located. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Methods of establishing value of the hotel Replacement approach Assuming a buyer is unwilling to pay more for a hotel than the amount required to build (replace) a similar hotel in a similar location Less useful when no replacement hotel has recently been or could be built in the area Revenue stream approach Viewing primarily as producer of revenue Value is established as multiple of its room’s revenue Hotel brokers often use this approach for advertising sale Sales comparison approach Assuming similar type of hotels in a given area sell for similar per key prices Approach is common in residential real estate market and is popular in commercial hotel real estate market Less reliable in a market where no hotels have been sold recently Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Methods of establishing value of the hotel (continued….) Income capitalization approach Often used for income producing properties such as apartment complexes and hotels Developing a mathematical relationship (capitalization rate) between hotel’s projected income, expenses, and market value Method estimates 1) hotel’s potential gross revenue, 2) hotel’s operating expenses, 3) hotel’s net income, and 4) performs a value analysis of hotel based upon real costs of acquiring the property Return on investment approach Value is based on the owner’s anticipated return on investment Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Securing Hotel Financing: Applying for the loan
Fewer hotel buyers pay 100% of the purchase price at time of closing. Most buyers make a down payment on the property, and seek a mortgage for balance of purchase. Use of borrowed money helps buyers leverage their own funds. Liability for repayment If loan is not repaid, lender has recourse to secure loan - Full recourse / limited recourse / nonrecourse Lenders prefer to make full and limited recourse loans. In a foreclosure, lenders sell property to recover loan amount. Borrowers prefer to seek and secure nonrecourse funding future operation or sale of the hotel may exist. Closing is the legal process of transferring property ownership from a seller to a buyer Mortgage is a legal document that specifies an amount of money a lender will lend for the purchase of a real estate asset (hotel), as well as terms for the loan’s repayment. Leverage is the use of borrowed funds to increase purchasing power. Recourse is the right to demand assets as payment for a loan. Loans can be full recourse (the right of the lender to take any assets of the borrower if repayment is not made), limited recourse (allows lender to take assets specifically named in the loan agreement), nonrecourse (limits lender’s rights to the specific asset being financed). Foreclose is the process in which the lender terminates the borrower’s interest in a property after a loan is defaulted. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Securing Hotel Financing: Funding Sources
Figure 13.1: Funding Sources for Hotels Hotel type Funding source Loan amounts Luxury hotels Life insurance companies Pension funds $15,000,000 or more First-class hotels Credit companies International banks National banks $3,000,000- $30,000,000 Midmarket hotels Regional banks Community banks $1,000,000 - $15,000,000 Economy/Budget hotels SBA loan providers ($5,000,000 or less) Notice that different lenders have different goals for the loans they make. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Securing Hotel Financing: Funding Sources (continued….)
To successfully secure a loan, borrowers must demonstrate: A strong market - Hotels located in undeveloped / underdeveloped areas difficult to finance Appropriate equity Amount of loan requested / property value = Loan to value ratio Strong franchise affiliation Few lenders will lend money to non-branded property Question 4 in “Issues at Work” (Chapter 13) deals with securing hotel financing, particularly the G.M.’s experiences as a factor the borrower must demonstrate to successfully secure a loan. Students have learned about becoming an effective and professional G.M. throughout the text. Ask how they would determine the quality of the G.M.. Proven operational and/or development experience Defensible appraisal, business plan, and revenue forecasts Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Appraisal is a required part of the loan application process! Potential lenders want to know from appraisal: Legal description of property and land Physical condition of property Assessment of market conditions affecting hotel Current valuation of property for tax purposes Valuation methods to estimate property’s market value Qualifications of those conducting the appraisal Assumptions in developing the appraisal Date appraisal was conducted Estimated market value of property It is important to note that an appraisal is performed to benefit both the individual seeking to purchase a hotel and the lender who is asked to help fund the purchase. The feasibility study (a determination that a proposed hotel development will or will not meet the expectations of its investors) serves as a substitute for the appraisal when the hotel does not exist. It is imperative that three essential components of a hotel purchase (land, building, and furnishings) be in balance if the hotel is to be financially successful. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Well-written business plan plays important role in securing financing ! Figure 13.2: Sample business plan outline Cover letter to lender Table of contents page Plan summary / overview Physical description of hotel Marketing plan (description of hotel’s primary market) Financial plan(Statement of equity available/funding requested) Operating management plan (Description of current mgt. team) Supporting documentation (appraisal / copy of proposed purchase agreement / franchise agreement / management contract / other supporting documentation) Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Hotel revenue forecast Sales forecast should be as accurate as possible. Realistic assumptions about 1) hotel’s opening date, 2) achievable occupancy rates, 3) achievable ADR, 4) required operating expenses Best sales forecasts include estimates of hotel revenues and expenses. Revenue and expense forecast projects 1) revenues (sales) for a 4-yr period, 2) expenses for same period, 3) increasing occupancy percentage, 4) increasing ADR Refer to Figure 13.3 (example of revenue and expense forecast) that might be required by a lending institution. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Hotel Start-up Three scenarios involved in starting up new hotel:
New hotel is built Existing hotel is purchased and operated under the same flag Existing hotel is purchased and reflagged Reflag: to change a hotel from one franchise brand to another Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Hotel Start-up: Selected Preopening Responsibilities of G.M / Owners
Six months prior to opening G.M. arrives on-site (on-site trailer if new construction) Office supplies, stationery links ordered Office installed Begin search for EOC members Secure all franchiser operating manuals Hotel tele-system ordered Install “Coming Soon” sign with hotel name on site Join Chamber of Commerce subscribe to local and state business magazines Establish hotel account with local bank Establish petty cash account Order hotel courtesy van Order property walkie-talkies system Lists in “Selected Preopening Responsibilities of G.M. / Owners” and “Selected Postopening Responsibilities of G.M. / Owners” above do not include tasks that are unique to a hotel reflag (conversion) project. Lists above for selected preopening responsibilities of G.M. / owners are exclusively related to work activities. Question 5 in “Issues at Work” addresses the importance of keeping balance in one’s life while managing the preopening of one’s own hotel. Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Hotel Start-up: Selected Preopening Responsibilities of G
Hotel Start-up: Selected Preopening Responsibilities of G.M / Owners (continued….) Six months prior to opening (continued….) Assure interface capability of PMS Contract with landscaper Order all exterior signs Plan direct mail campaign, implement of sales plan Order laundry and maintenance equipment Set up accounts payable system Open needed vendor accounts File for all licenses (liquor) and operating permits Order vending machines Place Yellow Pages ad Create area information guide (restaurants, attractions) Obtain federal tax I.D. number Prepare job descriptions Order cable channels/movie services Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Three months prior to opening DOSM selected begins work Chief engineer selected begins work F&B suppliers selected Determine prevailing local wages Contact newspaper employee advertising process Begin FOM and executive housekeeper search Determine policies for reservations Purchase exterior trash receptacles Executive housekeeper arrives FOM arrives Secure credit card accounts and authorization Select pest control vendor Order audiovisual equipment/meeting room furniture Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Three months prior to opening (continued….) Order insurance liability cards for guest rooms Order roll-away beds, cribs, high chairs Order ADA compliance items Install emergency master key box for fire department Conclude supervisory hiring Plan grand opening party Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

One month prior to opening Review all policies with insurer Install safety deposit boxes Install decals (logos) on courtesy van Select fire extinguisher company Begin hiring hourly employees Establish partnerships with local restaurants Mail grand opening invitations Order employee uniforms Designate smoking/nonsmoking zones Contact health department for F&B inspections Purchase first aid/biohazard kits Install cellular telephone/CB in van Begin training of hourly employees Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

One month prior to opening (continued….) Purchase laundry chemicals, dispensing equipment Prepare MSDS binders Test fire alarm Plan preventative maintenance program Purchase maintenance supplies Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

One week prior to opening Test all systems Electronic locks Credit card processing Safety systems Televisions/remotes Water HVAC Cable/in-room movies Room telephones/voice mail Send grand opening press release to media Conduct practice room service, breakfast, lunch, dinner areas Host grand opening party “Keep smiling” Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Hotel Start-up: Selected Postopening Responsibilities of G.M / Owners
Postgrand opening activities Mail thank-you cards to grand opening attendees Follow-up on all leads made during the grand opening party Thank the media for attending Thank all hotel employees for their assistance during the opening Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Hotel Start-up: Selected Postopening Responsibilities of G.M / Owners
Ongoing activities Train staff, train staff, train staff Improve constantly through continued study of the - Hospitality field - Spend time daily with: - Each department head - Your hourly staff - Your guests - Your family Assist the hotel sales effort whenever possible Manage your hotel Hotel Operations Management, 1/e ©2004 Pearson Education Hayes/Ninemeier Pearson Prentice Hall Upper Saddle River, NJ 07458

Chapter 1: Hotel Industry Overview & Professional Career Opportunities

Similar presentations

Presentation on theme: "Chapter 1: Hotel Industry Overview & Professional Career Opportunities"— Presentation transcript:

Similar presentations

About project

Feedback

Log in

Auth with social network:

Chapter 1: Hotel Industry Overview & Professional Career Opportunities

Similar presentations

Presentation on theme: "Chapter 1: Hotel Industry Overview & Professional Career Opportunities"— Presentation transcript:

Similar presentations

About project

Feedback