Management of Front Office Operations - Essay Example

Introduction Managing front office operations is toughest task in the hospitality industry. The front office role determines the success of the unit.The front office staff reflects the quality of service that the guests can expect. The responsibility of the Front Office Manager includes co-coordinating reservations and room assignments, training and directing the hotels front office staff, ensure courteous treatment to the guests, resolve complaints and problems, carry out special requests. They also have the authority to adjust charges on the guest bill. There has to be a full understanding of the flow of business from the front office. It begins with the reservation process and is until the client checks out and the bills are settled. The responsibilities include night audit and statistical analysis of rates and revenue management. The quality of service of the front office staff is of utmost importance and inadequate staffing may jeopardizes the quality of service. The staffing levels would depend upon six important factors according to Abbot & Lewry (pp 245 cited by Olivemagro, 2001). These factors include room occupancy, average length of stay, pattern of activity in relation to arrival and departure of guests, amount of personal contact required, character of the hotel and the technology used. Manual and computer systems: Information Technology today plays a very important role in operations. It has undergone dynamic and rapid changes in the last decade. With the help of computers while initially only reservations were handled, today embedded knowledge helps to forecast demand, to accept or decline reservations instantly (Sigala et al., 2001). Competitive knowledge lies not merely on the location as was considered in the past but on the creation of knowledge. Nevertheless, the traditional form of booking over telephones continues to be the most popular form of booking (Lee et al., 2003). The front office staff should be so equipped that in case of system failure the work does not come to a halt. The hotel industry cannot afford to be paralyzed. The front desk has to be upto-date with the rates and packages sold online. They have to keep a manual record of all quotations gives, how many have been turned away for whatever reason. Discrepancies occur in fully computerized systems when all fields are not entered by the front office staff, either because they are too busy or due to non-cooperation by the guests. Technology should be used as a support to labor and not replace manual labor. Benefits of technology: IT helps to distribute information across various departments and across different levels of employees. This facilitates faster and more accurate decision making within the organization. Property Management System (PMS) is used by the front office for decision making. The central reservation system (CRS) helps attain valuable information about the clients specially for chain hotels. Marriott Corporation has 12 million customer base and sells 350,000 rooms globally on an annual basis (Lee et al.,). With the help of CRS, it collects information about the characteristics, habits, and preferences of people who travel. It can cross-reference the personal profiles of customers with product preferences. The Maestro Front Office and Yield Management System incorporate a centralized database to consolidate chain information. This is one of the largest front office implementations. Chain hotels benefit from this instant guest recognition system worldwide. Suburban Franchise Systems, Inc. (SFS) has 65 properties throughout America and uses this software to ease its operations. This software package can be used by hotels with rooms ranging from 1700 to 25 rooms. This PMS is easy to use and learn. It has single screen graphics that incorporate group, package, accounts receivable, guest history. Maestro CRM added to this helps in the booking procedure. Campbell Resort, Washington uses this software because it helps them to unite operating data and guest information on a single system and database (Markham 2006). It improves guest service and enhances professional operations. Holiday Inn, Sydney uses this software because it includes a robust yield management module and powerful CRM (Markham, 2004). Hilton Garden Inn, California employs sophisticated technology for guest check-in procedures. The front office uses Xybernaut with Cameo 3 PEP printers with Bluetooth connections. It was primarily used to line bust – when long lines were expected at guests check-in. When a large crowd is expected, the customer-service executives meet and greet the guests in a separate check-in area. They carry a wearable computer that includes a touch screen and the Cameo 3 PEP mobile printer. They use the printers to encode room keys, swipe credit cards and print necessary documentation to expedite check-in (Harler, 2003). This is connected to the main reservation system. This eases the pressure at the reception where individual guests are checked-in. Security is definitely enhanced with the advanced technology. CCTV systems help in monitoring activities around the hotel. The front desk needs to be monitored as a lot of document crimes occur in this area like fraudulent transactions, or attempts to distract guests to steal wallets and cameras. A single camera in such an area cannot produce clear identifiable images. A dedicated camera with wide-angle lens helps to view the activities of the front desk staff alone (Hudak, 2002). Developing trends: Technology has allowed the industry to become more customer-oriented. Small enhancements in service become competition differentiator. The collection, analysis, and storage of readily accessible information has become a powerful tool that presents junior members of staff in a hotel with an opportunity to assume responsibility for making on-the-spot decisions without the need to consult senior management (Lee et al.,). Technology has helped better guest service in various ways. Multiple telephone lines, electronic meal ordering, self-check out and self wake-up systems, in-room business services, electronic and video entertainment services have all been added with advancement in technology. Customers demand higher level of service, which has become possible due to advanced technology. Multiple telephone lines allow the guests to do various work-related tasks and have effective communication with their customers and the head office. The managerial staff too benefit with technology. Sheraton Hotels, New York uses the property management system that directly links its three units in the immediate area. It can integrate management and operational functions and maintain one accounting system. The CRS facilitates the reservation procedures. Yield management: Yield management also known as revenue management is a systematic approach to maximize the revenue via manipulating the rates offered to the customers, taking into account the demand and supply pattern in the industry. The front office staff have to be well equipped with the quantitative and knowledge-based techniques. The three pillars of yield management are market segmentation, timing (demand and supply management) and pricing (Sanchez & Satir, 2005). Executing a good yield management requires demand forecasting, supply analysis in terms of room availability, market segmentation, statistics of no-shows and cancellations. These data help the front office to analyze and give the right advice. The average daily rate (ADR) and occupancy are mere indicators but to maximize revenue these have to be incorporated with other facts. First and foremost is capacity management. At times the front office may have to do overbooking of rooms so that rooms do not go unoccupied in case of last minute cancellations but discretion has to be used here based on past records. Capacity management should include how many walk-ins to accept on the day of check out being conscious of early departures and no-shows. This responsibility calls for using differential rates to maximize occupancy. Most often it is not possible to sell at rack rates in which case discounts have to be offered. The Hubbart formula (Olivemagro, 2002) has to be applied where the average room rate has to be calculated based on the capital employed and the required income based on the expenses. The differential room rate can then be calculated based on the number of rooms, the occupancy level. At the same time, the discounting strategy should allow the hotel to protect enough rooms to sell at the best possible rates while at the same time selling rooms that would otherwise remain unsold. Limiting discounts encourages upselling. The front office has to use discretion in refusing one night stay even though room may be available on that day but it may affect bookings on adjacent days. This is known as duration control. When the hotel has only one type of room, then the average room rate suffices. Differential tariff becomes necessary when there are several categories of rooms in a hotel. Appropriate weightings for different rooms have to be calculated, again dividing it between season and off-season. Short-term forecasts have to be prepared on a daily basis by the front office staff. This indicates the expected arrival and departures. With reference to the previous data, it is also possible to forecast unplanned arrivals, departures, and even no-shows. Yield management can be calculated using software but it does not take into account the operating costs. Sale techniques: The tariff structure varies depending upon the time of the year. It also depends on the size of the group, the length of the stay, whether it is a direct booking or through an agent. If it is a group booking normally net rates are given to agents who add their markup. There is a constant conflict between the hotelier and the tour operators. The hotel seeks support from tour operators during off season while the operators look for best rates during high season. The hotel can sell rooms anyway during the season. Conference rates are generally negotiated a year in advance although of late the trend is changing. Rates so negotiated become binding on both the operator and the hotel. These have to be considered keeping in mind the political scenario to which this industry is very sensitive. Competition has also to be taken into account while offering or disclosing tariff. Market based pricing is necessary as the hotel has to consider what comparable hotels in the same geographical region are charging. The hotel can only charge prices, which the market will accept hence, prices are dictated by competition. Rate cutting may not be an effective sales tool as competition may also cut prices to match and ultimately all are losers. On the other hand, keeping the price high gives the hotel a prestigious image. This defies the laws of economics and can work only when the market is not price conscious. Hotels normally take up overbooking based on their experience of last-minute cancellations and no-shows. Cancellation procedures should not be very strict. Very strict cancellation rules result in no advance bookings until the last minute. No-shows are usually charged by hotels in high season when the demand is high. It would depend on the character of the hotel, though. In case of corporate travelers, normally no-shows are not debited, as most often these companies have annual negotiated tariffs against assured number of room nights. The front office can generate sales as it is always in direct contact with people. All enquiries should be attended to as a lead. Generally, staff feel it is the end of their responsibility by giving information over the phone or posting brochures. Seldom is follow up call given to convert such leads into sales. Customer database generated helps to send direct mail. It can also be effectively used to conduct email or telephonic surveys. Customer retention is important hence customer loyalty programs should be devised. Repeat customers should be granted redeemable points, which can be converted in upselling or value added benefits. Forecasting and statistical data: Hotels receive majority of the bookings outside of their own reservation offices and hence they are unable to measure the lost demand accurately. This makes it difficult to set prices. To optimize pricing it is essential to have a realistic idea of the future demand (Higbie, 2006). Optimum pricing is necessary so that it does not discourage conventioneers and travelers. Occupancy ratios are used to determine departmental performance. Operating ratios are also necessary to evaluate the financial position of the front office, to determine expenses incurred by the front office operation. The payroll and related expenses of the rooms divided by the department’s net revenue yields the labor cost. Various statistical formulae are used to determine the pricing policy and forecast demand. Average room rate is calculated by dividing the monthly revenue by the number of rooms sold in the month. The differential room rate is then calculated based on the revenue expected. The total room revenue divided by the total sleepers gives the average sleeper rate. The occupancy rate is determined by dividing the rooms sold in the month by rooms available in the month. The daily occupancy report should indicate the hotel’s performance in terms of rooms, sleepers, and room revenue. It should also compare with the forecast or budgeted figures. Complementary rooms, rooms used for internal use, under repairs or refurbishing, occupied by groups and conferences should be charted separately to get an accurate idea. Occupancy forecast should also be prepared daily. This indicates the expected arrivals and departures. Based on past data it may also be possible to forecast unplanned departures, likely no-show and likely chance arrivals. The daily occupancy report should typically include the various categories of rooms sold, the rate at which they were sold, the source of business, the difference from the forecast, the room revenue generated, the income occupancy, the guest occupancy and the average room rate. Night audit The night auditor is not merely a night receptionist but has a significant role to play. This too falls under the purview of the front office. Night audit varies from one hotel to another. It depends on the size of the hotel, the technology used and its accounting practices. Even if a hotel uses sophisticated technology night audit becomes necessary to have strict control over accounting, procedural control, and guest credit control. Since this has so much to do with accounts, the night auditor in many hotels is a part of the finance and accounting department. The end of the day in hotel industry refers to the end of the accounting day. In case of hotels, which offer 24 hours catering service, the end of the day would be the last check-in and the last food ordered. The night audit begins when the typical day ends. Once the night audit begins, any transactions after that are charged on the following day. The night audit procedures may be performed manually, semi-automatic or electronically. When then hotel uses Management Information Systems, the night audit is done electronically. The word audit itself suggest thorough checking of the procedures and accounting during the business day. Typically, the night audit process focuses on two areas – discovery and correction of front office accounting errors and creation of accounting and management reports. This helps to ensure integrity of the front office staff through cross referencing. Discrepancies are tracked and corrections made. Important operating information is necessary to prepare a report for the management to evaluate and take further decisions. These include average room rate, level of occupancy, usage of package plans, group occupancy, and complementary rooms. As the staffs on a hotel have shift duties, everyone is expected to be familiar with all procedures including night audit. Computerized systems allow disseminating information at the touch of the button, then why is night audit necessary? Online reporting can be done any time of the day but to get a complete picture of the day night audit becomes important. Night audit ensures there have been no errors in postings because posting errors result in faulty reporting. It further helps to reconcile room status discrepancies. The responsibilities of the night auditor include checking individual accounts and balancing all departments, verify actual no-shows. At times no-show may arise due to duplicate booking or check in has not been completed. The reports prepared by the night auditor give insight into the revenues, receivables, operating statistics and cash transactions. Due to the technology and its pitfalls, it is important that the night auditor takes back up of all data. The Front Office System is programmed to produce all reports, which include guest list, room status report, guest ledger reports, arrival and departure reports. The night auditor then has to distribute the reports to the appropriate authorities. Management is a continuous cycle of planning, organizing, motivating, and reviewing. Evaluating the front office performance is necessary. Evaluating means reviewing and if necessary revising the goals that have been set. Sales strategies need to be changed from time to time depending upon market conditions and acceptability. While front office does have a major responsibility, it cannot function independently. Automation has reduced the workload, improved overall performance, more work in less time and efficiently done but an integrated management approach is the success of any business in the hospitality sector. References: Harler C (2003), Hospitality Technology, 30 March 2006 Higbie Jon (2006), TravelMole, New system unveiled to accurately forecast hotel demand, 31 March 2006 Hudak R G (2002), The Eyes Have It, American Society for Industrial Security, Security Management. Volume 46 Issue 8 August 2002 pp. 59 Lee et al., (2003), Technology, service quality, and customer loyalty in hotels: Australian managerial perspectives, Managing Service Quality Volume 13 Number 5 2003 pp. 423-432 Markham ON (2004), Holiday Inn Sydney at Rooty Hill Selects Maestro Enterprise Suite to Automate Front Office, 31 March 2006 Markham ON (2006), Campbell’s Resort Installs Maestro Enterprise Front Office, 31 March 2006 Oilivemagro (2002), Front Office Management, 30 March 2006 Sanchez J & Satir A (2005), Hotel yield management using different reservation modes, International Journal of Contemporary Hospitality Management Volume 17 Number 2 2005 pp. 136-146 Sigala et al., (2001), Strategic implementation and IT: gaining competitive advantage from the hotel reservations process, International Journal of Contemporary Hospitality Management Volume 13 Number 7 2001 pp. 364-371 Read More