Hotel Front Office Management - Room Management - Assignment Example

Running head: Room Management Room Management Insert Insert Insert 19 October Room Management Question one Hoteliers have the mandate of putting into consideration a number of factors when setting hotel room prices. The factors include cost, amount of profit desired, market demand, industry standards, experience, skill level, business strategy, services offered and the kind of clients served. In allocating prices for rooms, hoteliers normally use various pricing models, but the two common models are Market Condition Model and Hubbart Model. This essay will discuss the various factors that hoteliers must take into account when setting room prices, as well as critically analyzing the two pricing models used in hotels. The first factor is the expected profit factor, which has a close relations with costs, as hoteliers must consider the amount expected above breaking even point. Market Demand consideration enable higher pricing during high demand and low pricing during low demand of the rooms. However, more the above factors, hotel room prices are also affected by internet affiliate sites that assist in advertising and bringing in more clients into the rooms. Affiliate organizations may charge higher prices for the rooms as compared to prices negotiated directly with hoteliers themselves. The affiliates also charge a fixed fee per booking and variable fees where prices are inclusive of taxes and fees (Hayes and Miller, 2010). The factor of industry Standards involves the rates charged by other hoteliers offering similar services, which enable setting of room rates that fit well in the general market. The level of skill among hoteliers is varying and it would therefore be an important factor that should be commensurate with room rates charged. Hoteliers experience in the industry will also determine the level of skill and type of services offered and thus consequently prices charged. More to the factors that must be considered when setting room prices is kind of Client served by hoteliers. These clients vary from tourists, luxurious guest to clients who are cost sensitive (Vanhove, 2010, p133). Moreover, hoteliers use price fixing models to come up with reasonable room rates that would lead to maximization of profits. The models include Market Condition Model and hubbart model. Hoteliers may use Market Condition Model where they make an analysis of other hoteliers in the same category as they are and then undertakes a comparison with prevailing room rates. Data analysis from the general hotel market will include negotiating with a particular number of suppliers who may be interested in selling to price line clients. Supplier flexibility will enable setting of room rates that are consistent with dynamic market conditions. Hoteliers are often in a dilemma of setting room prices higher to enable them make more revenue and potentially get low sales volume, or setting room prices lower so as increase sales volume and potentially make minimum profits. Market Condition Model provides an analysis with respect to market condition data, then consequently outlining how data may be used by hoteliers advantageously when setting room rates. A completely functional model that is implemented using excel comes up with a tool that enables copying of data from the market into the tool. In the past periods, hoteliers have been pushing dynamic pricing on their corporate accounts with high volume ends. However, standard enactment of the concept with which hotel room rates fluctuate based on market demand and season seems to have incorporated other diverse factors. The use of dynamic pricing has grown as a second-tier discount that is being greatly used by hoteliers as the best pricing model. However, dynamic pricing should not be accepted blindly without the use of a model that is data driven, as the strategy may get rid of rates that are negotiated yearly, thus leaving hoteliers unable to predict future costs. Before the introduction of data driven models, hoteliers had the capacity to influence dynamic pricing, unlike the current situation where they have to maintain themselves during unpredictable economic periods (Cronin, 2000). With respect to existing economic conditions, it is impossible for hoteliers to run hotels with room rates that are enough to cover costs of operations and to enable provision of adequate returns with regards to fair value of the hotel. Whereas it is known that hotel room rates result primarily due to the competitive conditions, hoteliers need to establish sound structures for hotel room rate setting. Hotel room rates computation using the hubbart formula has been used by most hotels as the best model of evaluating their room rates, and the rates are to be represented in consistence with conditions of operations. Hubbart Model is used by hoteliers as room rate computation formula that enables them to set appropriate room prices that are neither excessively low nor high. The hoteliers can set hotel room prices at rates that enable profit maximization while maintaining demand at adequate levels. Moreover, operations costs of the whole hotel and the guest room demand is examined rationally for appropriate price computation. Nevertheless, accurate and specific assumptions are made with regards to guest demand and cost of operation of the hotel (Dopson and Hayes, 2008). In conclusion, the factor of Business Strategy will create a big difference to rates of prices, while services offered to clients may also vary with respect to quality and consequently the price tag. Services are directly tied to the level of communication between the hoteliers and the clients thus necessitating room rate prices to be adjusted in line with the service level. Word count: 892 Question Two: Yield Management System Hotel yield management system is a system that mainly focuses on influencing consumer behavior in relation to guest services, with the aim being improving productivity and profitability. Simply the system seeks to maximize hotel revenues by allocating different classes of rooms to guests at prices that the guests can afford. The following part of the paper will discuss the pertinent features of a yield management system in a hotel setting, as well as various inherent advantages and disadvantages to the organization, employees, and customers. Generally, Hayes and Miller (2010, p.236) define Yield Management System as “a dynamic pricing, booking and allocation of perishable assets across market segments in an effort to maximize short-term revenues for the firm.” The process of hoteliers implementing yield management systems involves analysis of room demands in the past, present and future. Although the system enables hoteliers to maximize revenue, it may have negative impacts on employees, customers and the organization itself. The use of yield management systems also involves review of transaction processes periodically with respect to rooms and services that have been offered in the past and those that are to be offered in the future. Hoteliers may also review hotel operations and competitive information concerning future events, seasonal variations, unexpected events, room prices, and other factors that affect sales. In addition, hotel room pricing models attempt to optimize firm outputs to maximize profits and forecast guest demand for all the rooms they offer (Jagels and Ralston, 2006). The process of implementing yield management system involves attempts to anticipating, understanding, and reacting to behavior of clients to enable hoteliers to maximize their profitability (Bardi, 2010). Hotel industry application of yield management system puts into consideration essential conditions, which include availability of a fixed amount of resources for meeting market demand for rooms; existence of time limits for selling rooms after which they become valueless; and that different clients pay different rates willfully for similar rooms. In case the available resources have no time limits or fixed amounts, then the issues are tied to management. In case all clients offer to pay same price for similar rooms, then the problem will be tied to how fast the hotel can sell the rooms. Yield management in hotels is highly relevant to situations where fixed costs are higher than variable costs. The lower the variable costs, the higher the revenue contribution to profit realization since focus is on marginal revenue maximization to given planning forecasts and operations. Utilization of resources is maximized by making sure that inventory is available to guests with the largest net revenue expected, and consequently, extracting maximum willingness to pay from all the clients (McMahon-Beattie, Ingold and Yeoman, 2000). Various advantages and disadvantages result from implementation of yield management systems. To begin with, standard costs and revenue applications are advantageous in yield management, since managers can attend to other vital issues when costs remain standard. In cases where the costs deviate from standard levels, managers should attend to the problems that cause these deviations. Standards set under reasonable levels by hotels can lead to economic growth and efficiency, as they provide performance benchmarks for hoteliers. In addition, yield management system enables bookkeeping simplification, since standard cost can be charged unlike the process of recording actual costs for every job. The advantage is that, standard costs can easily fit into a universal system of accounting responsibility, since the standards establish the kind of costs, individuals who need to be responsible for the costs, and the kind of actual costs under control. Standard reports, which are usually formulated periodical such as on a monthly basis, have the implication that the information is stale, considering that, they are released weeks after end of the period. The argument is that timely information is the key to management as compared to stale information released periodically. Hoteliers have moved from periodic reports to daily data due to this disadvantage. Yield management focuses on negative aspects of operations as well as other strategies that positively acknowledge and reinforce good performance. In case variances are applied collectively, subordinate employees may be influenced to cover up those variances that are not favorable instead of taking corrective measures. This is the case where low production is covered up by employees through fast productions rates that may compromise quality. Positive management needs to avoid cover up measures and undertake corrective measures such as sales activities in the hotel industry to improve demand of rooms, considering the fact that Sales persons are in high demand in the hotel industry (Barrows and Powers, 2008). In conclusion, hoteliers focus on essential aspects such as quality maintenance and improvement, timely delivery and tailor-made services for specific needs of clients. Meeting standards only is not enough for hotel management, but also continuous improvement to keep up with the dynamics of the competitive hotel industry environment. Hoteliers apply the use of yield management system to improve their performance in the industry through revenue growth and development of the organization. Word count: 834 Question Three: Stages of the Guest Cycle in Managing Large Groups Large groups need careful planning through each stage of the guest cycle. According to Andrews (2007), guest cycle involves the pre-arrival stage, arrival, occupancy, and departure of guests in a hotel according Andrews. This essay will discuss considerations to be made by hoteliers for the pre-arrival, arrival, occupation and departure stages for a large group. The hotel industry is competitive and has strong management systems for recording and processing all the paperwork that is needed for efficient and quick handling of guests. For large groups, the use of management systems are put into consideration for keeping in touch with previously handled guests and to contact and welcome them back again. The first stage is pre-arrival, where the hotel creates reservation records for all potential clients. This process initiates the guest cycle and enables personalization of guest services alongside scheduling staff members appropriately. The department of reservation prepares guest folios and completes pre-registration activities. Reservation activities enable room sale maximization through revenue forecasting and monitoring of room availability prior to guest arrival (Wood and Brotherton, 2008). Guest arrival stage involves booking in of guests and registration, after which the hoteliers are able to establish positive relationships with their clients for future welcoming. Clerks who monitor guests check-in need to determine the status of guests’ reservation, and there after, prepare a record of registration in the automated system. Records of registration are included in financial and personal information, which are collected from the custody of a group leader. Personal information includes guest names, billing address, contacts, passport number, and guest’s special requests. Financial information includes date of arrival, expected date of departure, room number assigned, room rates, and intended payment method of the guests. Records of registration are generally used for the purpose of guest satisfaction, room occupancy forecast, guest account settlement, and guest history establishment. During guest occupancy stage, guests’ services are coordinated and billed by the group leader with respect to common policies. Group leaders delegate the task of encouraging guests by solving guest complaints to the front office staff. This is done using suggestion and complaint cards, which are analyzed and positive feedbacks sent to the guests. Effective procedures are also designed to protect VIP guests and funds through surveillance, guest key control, emergency exits and panels, and the use of safe deposit boxes. At departure stage, guests are walked out of the hotel vicinity, after which, group records concerning guest history is created. Cashiers also settle outstanding balances in guest account. Proper guest checkout occurs when the guests return keys to the rooms, vacate the rooms, settle their account balances, and leave the hotel vicinity. During departure, checkout staff must encourage the clients to consider coming back to the hotel in the future. In case guest accounts are not settled at departure, then clerks have to accumulate the charges (Pizam, 2010). Word count: 473 Reference List Bardi, J. A., 2010. Hotel Front Office Management. NJ: John Wiley and Sons. Barrows, C. W. and Powers, T., 2008. Tom Powers, Introduction to Management in the hospitality Industry. NJ: John Wiley and Sons. Cronin, M. J., 2000. Unchained Value: The new Logic of Digital Business. Harvard Business Press. Dopson, L. and Hayes, D., 2008. Managerial Accounting for the Hospitality Industry. NJ: John Wiley and Sons. Hayes, D. and Miller, A., 2010. Revenue management for the hospitality Industry. NJ: John Wiley and Sons. Jagels, G. and Ralston, C. E., 2006. Hospitality Management Accounting. NJ: John Wiley and Sons. McMahon-Beattie, U., Ingold, A. and Yeoman, I., 2000. Yield Management: OH: Cengage Learning EMEA. Pizam, A., 2010. International Encyclopedia of Hospitality Management. MA: Butterworth-Heinemann. Vanhove, N., 2010. The Economics of Tourism Destination. NY: Routledge. Wood, R. C. and Brotherton, B., 2008. The Sage Handbook of Hospitality Management, NY: SAGE Publications Ltd. Andrews. 2007. Text Book of Front Office Management & Operations. Tata McGraw-Hill Education. Read More