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Hotel Operations Management, 1/e ©2004 Pearson EducationHayes/Ninemeier Pearson Prentice Hall

Upper Saddle River, NJ 07458

Hotel Management

Chapter 1:Hotel Industry

Overview & Professional Career Opportunities



third largest retail industry following automotive & food storesnation’s largest service industryone of the nation’s largest employers

Tourism Industry

Hospitality Retail (Shopping)Stores

TransportationServices

Destination(Activity) Sites

Lodging is Part of Tourism Industry:Tourism Industry

LodgingOperation

F&B Operations

Tourism industry is

Figure 1.1: Segments in the Tourism Industry



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

Destinationresorts

Full-servicehotels

Limited-service hotels

Sleepingrooms



1900

Lodging is Part of Tourism Industry:A Brief History of Hotels

Figure 1.3 : Highlights in the modern history of the US hotel industry

1910

Fewer than 10,000 hotels750,000 to 850,000 rooms

10,000 U.S. hotelsOne million rooms300,000 employeesAverage size: 60-75 rooms

1920

Occupancy: 85%Hotel construction reaches an all-time peak asthousands of rooms are added along the new stateand federal highways



1930Occupancy: 65%AHA’s Hotel Red Booklists 20,000 hotels

Lodging is Part of Tourism Industry:A Brief History of Hotels (continued….)

1940Occupancy: 64%Average room rate: $3.21

1950Occupancy: 80%Typical hotel: 17 roomsAverage room rate: $5.91

1960

Occupancy: 67%$3 billion in salesTypical hotel rooms: 2,400,450Typical hotel: 39 rooms, independent and locally ownedAverage room rate: $5.91




Lodging is Part of Tourism Industry:A Brief History of Hotels (continued….)

1970

Occupancy: 65%$8 billion in salesTotal hotel rooms: 1,627,473Average room rate: $19.83

1980

Occupancy: 70%$25.9 billion in salesTotal hotel rooms: 2,068,377Average room rate: $45.44




Lodging is Part of Tourism Industry:A Brief History of Hotels (continued…)

1990

2000Occupancy: 63%$97 billion in sales

Occupancy: 64%$60.7 billion in salesTotal hotel rooms: 3,065,68545,020 propertiesAverage room rate: $58.70




Close Look at Lodging OrganizationsFigure 1.4: 2000 Property / Room Breakdown

22.5%35.1%21.3%9.9%

11.2%

51.5%33.5%10.9%2.8%1.3%

Under 75 rooms75 –149 rooms150 –299 rooms300 –500 roomsOver 500 rooms

By size

3.3%18.1%27.3%25.3%26.0%

13.8%26.9%34.1%16.2%9.0%

Under $30$30 - $44.99$45 - $59.99$60 - $85Over $85

By rate

10.2%33.6%42.2%7.7%6.3%

Property16.0%30.4%31.0%10.2%12.4%

UrbanSuburbanHighwayAirportResort

RoomsBy location



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

21.8%are traveling for other reasons (for example,personal, family, or special event)



Emphasis on safety, cleanliness & service- Guests also consider “intangible”aspects of the purchase

decision

Close Look at Lodging Organizations:Lodging Industry Characteristics

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

Labor Intensive- Much of a hotel’s daily work involves employees

providing services



Close Look at Lodging Organizations:Lodging Industry Overview

Largest hotel affiliations

333,110

337,226

374,010

481,482

554,834

Rooms

1,9105.HILTON HOTELS CORPORATION

1,8463. MARRIOTT INTERNATIONAL

4,2194. CHOICE HOTELS INTERNATIONAL

3,0302. BASS HOTELS&RESORTS, INC.

6,5401. CENDANT CORPOPRATION

PropertiesBrands

These five represent some 28 % (14,884 / 53,500 properties) of alldomestic properties, & 42 % (1,708,617 / 4,100,000 rooms) of all rooms.The majority of these brands do not “own”their hotels, but hotel ownerselect to affiliate with the brand, for a fee.

Figure 1.6: Top 5 lodging brands



Single-unit property not affiliated with any brandSingle-unit properties affiliated with a brandMulti-unit properties affiliated with the same brandMulti-unit properties affiliated with the same brandMulti-unit properties affiliated with different brandsMulti-unit properties operated by the brand or othersMulti-unit properties owned by the brand

Hotel ownership / management

Close Look at Lodging Organizations:Lodging Industry Overview (continued….)




Figure 1.7: Hotel Ownership / Management Alternatives

Hotel property

Franchisecompany

(Franchisor)IndependentOwnership Independent

Franchisecompany

(Franchisor)IndependentOperation IndependentManagement

companyManagement

company

Franchise Non-FranchiseAffiliation



Close Look at Lodging Organizations:Hotel Organizational Structures

Figure 1.8: Organizational Chart for Small (75 Rooms),limited-service hotel

Small Hotel (75 rooms)

Manager

Custodialpersonnel

Housekeepingpersonnel

Bookkeeper/Accountant



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.Administrativeassistant

Assistant G.M.

Controller F&Bdirector

H.R.Manager

Directorof sales &marketing

Frontoffice

manager

Executivehousekeeper

Chiefengineer



Linedepartment

Those directly involved in the “chain of command”.Directly responsible for revenues- Front Office & Food / BeverageAlso responsible for property operations- Housekeeping, Maintenance, & Engineering

Staffdepartment

Providing technical, supportive assistance tosupport line decision-makersMaking recommendations to (but not decisions for)line decision-makers- Purchasing, human relations, and accounting

Close Look at Lodging Organizations:Hotel Departments

Line & staff departments



Revenuecenter

A hotel department that generates revenue- Front office & food / beverage departments- Also revenues from telephone services, spacerental and fees from parking garages, vendingmachines, and golf courses

Cost centerA hotel department which incurs costs in supportof a revenue center- Marketing, maintenance, accounting, human

resources, & security departments

Revenue and cost centers

Close Look at Lodging Organizations:Hotel Departments (continued….)



Successful hotels greatly emphasize serving their guests tothe best possible extent.

Lodging is a Service Business

The brand name a hotel uses is not the most importantfactor in a hotel’s success.

When hotels put guests’needs first, those hotels will dowell.

Facility Engineering & Maintenance

Consistent delivery of quality of products and services to guestsmust be addressed first, rather than considering tactics tomaximize revenue; minimizing costs comes next!



How will we show our staff and tell them about the need forhigh quality guest service?How exactly will we evaluate the level of service quality beingprovided to our guests?What exactly are our service strategies and our serviceprocedures?How will we train our staff about service concerns and thetactics to deliver service?How will we reinforce our service strategies?What can we do to emphasize service as a philosophy ratherthan as a program with a definite start & end time?What can we do to excel in the guests’moments of truth?

Questions that must be addressed to deliver quality service:

Lodging is a Service Business (continued….)



Overbuilt problem

Hoteliers should examine ways to reduce costs withoutimpacting quality.An excessive emphasis on cutting service or productquality will ultimately result in reduced hotel revenue.

Managers should implement procedures to: a) reduceturnover levels, b) increase productivity levels, c) recruitfrom non-traditional employee labor markets.

Labor shortages

Current Issues confronting Hoteliers:Operating Issues

Cost containment

Increased competition



Various amenities (e.g., business centers) increase costs forhotel owners yet sometimes appeal to only a small segmentof the hotel’s market.

Results in a more competitive selling environment forhoteliers (e.g., online room booking)

The more the number of brands increase, the harderconsumers find it to differentiate between them.

Efforts to focus on a highly defined, smaller group oftravelers.

Market segmentation is increasing

Current Issues confronting Hoteliers: MarketingIssues

Brands overlap

Increased sophistication of consumers

Increased number of amenities



Interactive reservation system- Allows potential guests to make reservations at preferred

room rates in reduced timeGuestroom innovations- Two (or more) telephone lines enabling Internet access /interactive menu ordering for room service / electronic gamesand guestroom checkout

Data mining technology- Analyzing guest- (and other) related data to make bettermarketing decisions

Yield management- Matching guest demand with room rates

Recent technological innovations include:

Current Issues confronting Hoteliers: TechnologicalIssues



“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 withinthe country and worldwide travel


Economies of the world, the country, the state and the communityplay on the financial success of a lodging organization & theindividual properties which comprise it.

Current Issues confronting Hoteliers:Economic Issues



G.M / Rooms division M. / Front office M. / Controller /Executive housekeeper / Catering M. / Executive steward / F &B M. / Banquet M. / Chef / Executive chef / Food productionM. / Pastry Chef / Sous chef / Room service M. / F & Bcontroller / Restaurant M. / Beverage M. / Purchasing Director /Human Resource M. / Credit M. / Executive assistant M. /Convention M. / Marketing & sales M. / Auditor / Director ofsecurity / Convention services director / Resident M / Chiefengineer

Typical Multi-Unit Positions: Area G.M. / Regional G.M. /Director of Training / Vice president, finance / Vice president,real estate / Director of franchising




Enrolling in and graduating from hospitality-related programsof studyWorking in a variety of lodging positions (includingeducational internships)Developing a career ladder for professional development withinthe lodging industry- Working with a mentorObtaining suggestions by talking with G.M.s at hotels nearbyindustry leaders and educators

How does one start to plan for a career in the lodging industry?

Professional Career Opportunities in Lodging:Get Started With Career Planning

Chapter 2:The Hotel General Manager



Responsibilities

G.M.s

G.M.s’tasks

Investor relations Community relations

Brand affiliationmanagement

Executive Committeedevelopment

Propertymanagement

The single most important human variableaffecting a hotel’s short-term profitability“Wear many hats”(perform multiple tasks)



G.M.s’ability to effectively inform investors & owners aboutcurrent performance & future needs of their hotel/s

Responsibilities: Investor Relations

Property’s long-term success

To successfully manage owner / investor relations:

G.M.s’talents

Financial analysis abilityProficiency in written communicationEffective public speaking / presentation skills



Continually monitor operational standards set by the brand toensure property performanceCommunicate effectively with franchise brand officials aboutmarketing & sales programsImprove profitable operation of hotel by using activities &programs offered by the brand

Managing brand at the property level

Responsibilities: Brand AffiliationManagement

To successfully manage owner / investor relations:

G.M.s’talents

Well developed interpersonal skillsPersuasive abilityListening skillsEffective writing ability



Result of annual (or more frequent) inspections by franchisecompanyUsed as measure of effectiveness of G.M., of hotel’s managementteam, and of owner’s financial commitment to the property.Ensuring franchiser-mandated standards are met by franchiseeBecoming an important example of how the G.M. interacts withfranchisers and/or management companies

Quality Inspection (or Assurance) scores

Responsibilities: Brand Affiliation Management(continued…)



Attract new businessesExpand tourism opportunitiesProvide input regarding local business community needsHave charity events and fundraisers at the hotel

Opportunities to assist the local community

Responsibilities: Community Relations

To successfully perform community relations

G.M.s’talents

Outgoing personalityWell-developed social skillsEffective public speaking & presentation skills



Responsibilities: Executive Committee Facilitation

Food & beverage production & serviceFood & Beverage Director

Guest, employee & property safety/securitySecurity Director

Revenue production & promotionsSales & Marketing Director

Guest services and salesFront Office Manager

Property cleanlinessExecutive Housekeeper

Upkeep of hotel’s physical facilityChief Engineer

Accounting for hotel assets and liabilitiesController

Hotel staffing needsHuman Resource Manager

Responsible forFunctional area



Responsibilities: Executive CommitteeFacilitation (continued…)

General Manager

HumanResourceManager

SecurityDirector

ControllerFrontOffice

Manager

ExecutiveHousekeeper

Food &BeverageDirector

Sales &MarketingDirector

ChiefEngineer

Typical mid-sized, full-service hotel department organizational chart



That he/she works with EOC to improve skills & efficiencies of thedepartments these individuals manage

That he/she assists their professional development

That he/she must be an expert in specific day-to-day operations of eachhotel’s department

Wrong expectations regarding the G.M.

Responsibilities: Executive Committee Facilitation(continued…)

Right expectations regarding the G.M.

To successfully manage the EOC facilitation

G.M.s’talents

Good listening skillsAbility to evaluate / implement managerial training &development programAssisting in professional improvement & growth of EOC team



Responsibilities: Property Management

To successfully handle property management:

G.M.s’jobs

G.M. should be able to direct overall property management.

Process of planning, organizing, staffing, directing,controlling and evaluating human, financial and physicalresources, to achieve organizational goals.

Organizational & coaching skillsAnalytical & financial analysis skillsAbility to anticipate guest needsCompetitive sprit & high attention to detail



Responsibilities: Property Management(continued…)

To provide leadershipStaffing / directing

To measure and evaluate resultsControlling / evaluating

To maximize deployment of resourcesOrganizing

To establish goals and objectivesPlanning

PurposeFunctional area

Management process

Controlling & evaluating

Planning

Organizing

Staffing & Directing



Responsibilities: Property Management(continued…)

What is the goal of providing in-room, high-speedInternet access to guests?Planning

What needs to get done to keep staff “on task”with project completion timelines?

How will the hotel measure sales volume or reputationvalue gained versus cost of providing in-room Internetservice?

Controlling /Evaluating

How will the hotel allocate necessary dollars toachieve this goal?

Organizing

Staffing /Directing



Hotel admin. / hotel & restaurant mgt. / hospitality admin. / restaurant, hotel, &institutional mgt. / food service mgt. / hospitality business / tourism admin. /culinary arts

Program titles

Skills Development: Formal Education

For whom

Designed for both traditional college students & non-traditionalworking studentsWish to terminate their formal education after several years ofstudyHave a B.A. degree in another subject & wish to gainknowledge of the hospitality industry

Two-year degree

Highly practical & currentPractical professional instructors who may be well connectedin the community (assisting job placement)

Benefits



ChecklistsAdmission requirementsProgram designs

Advanced degrees

Skills Development: Formal Education(continued…)

For whom

Four-year degree

Have diverse faculty & quality facilitiesOffer an excellent learning environment

Benefits

Wish to complete a B.A. degreeSeek to learn from a larger number of qualityfacultyWish a “more advanced”degree than two-year



Impact of advancing technologyImpact of a changing workforce

OJT trends / focuses for hotel G.M.s

Skills Development: On-the-Job Training

OJT

Learning activities designed to enhance skills ofcurrent employeesOffered by management with intent to improveguest service & employee performanceGenerally no charge to employee for training



Membership benefits / activities of local business associations(e.g., local Chambers of Commerce)

Business / skills enhancement programsNetworking opportunitiesTimely publications & seminars including local economic data & best

management practicesIn some cases, providing low- or no-cost training for entry-level

workersLobbying for business interests & facilitating public-private

employment initiativesUpdating on recent business thoughts & methods

Business associations

Skills Development: Professional Development



Current two major interestsTechnology applications / human resource management

Help staying updated on current info

Serve certification, educational, social and legislative needs of theirmembersHold monthly and annual gatheringsOffer educational seminars / workshopsHave Trade Shows

Efficient way to see new products & service offerings of a large numberof vendors in a short time

Example of the hotel industryEducational Institute of the American Hotel & Lodging Association

Trade associations

Skills Development: Professional Development(continued…)

Trade publications

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 impacthotel staff attitudes about those issues.

G.M.s personally direct only the work of department headsand, perhaps, relatively few other staff.

G.M.s’interaction with department heads directly impactshow they interact with their own staff.

Influence

Level of morale Desired product& service quality

Employeeturnover rates



G.M.s Must Manage: Organizational Levels

Of resources available, people (human resources) are themost complex and important for success!

Entry-Level Employees

Top-Level Management (G.M.)

Middle-Level Management(Department Heads)

Supervisory-Level Managers(Supervisors/Managers)



G.M.s Must Manage: G.M. Functions

Assess the extent to which long- and short-range plans wereattainedEvaluating

Take corrective action(s) when budgeted financial plans arenot attainedControlling

Supervise the work of department headsDirecting

Recruit, select, orient and train new department headsStaffing

Assign responsibilities for an upcoming banquet or conferenceeventOrganizing

Develop an operating budget or a marketing planPlanning

Examples of activity: Working withdepartment head (if applicable) to:

ManagementFunction



Ability to performmanagement-specificaspects of the jobForecasting guest demand forrooms and establishing roomrates, etc.

Ability to understand andinteract well with guests,employees, suppliers, etc.

Ability to organize anddirect required work efforts

Ability to develop policies andoperating procedures necessaryfor guest safety

Ability to collect, interpret,and use information logically

Learning about a new, competinghotel opening nearby and makingfuture marketing decisionsaccordingly

G.M.s Must Manage: G.M. Skills

Conceptual Interpersonal

Administrative TechnicalSkills



Joining professional business andcommunity service organizations

Meeting with communitygovernment representatives

Participating incommunity social events

Attending school & athleticevents with their children

Yesterday: dictatorialleadershipToday: facilitatorsTomorrow: empowerment

“Manage by walkingaround”

G.M.s Must Manage: G.M. Relationships

G.M.

Staff members Other hotel employees

External organization Others in community

How the hotel can meet andexceed guest expectations

Guests



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

React to global challenges

Improve quality while increasing productivity

Improve ethical / social behaviors

Adjust to workplace changes (e.g., re-engineering, downsizing)



Evolution of Traditional Hotel H.R. Practices

Participative decision styleAutocratic (dictatorial) decision style

Team behaviorIndividual behavior

Manager shares responsibility for resultsManager personally responsible for results

Manager listensManager tells and sells personal views

Pride, recognition, and growth are used tomotivate staffFear and pressure used to motivate staff

Team problem-solving is employedManager personally solves problems

Manager encourages changeManager seeks stability

Emphasis on employee facilitation skillsEmphasis on technical skills

Manager is supportiveManager is dominant

Team-focused work unitManager-focused work unit

ContemporaryTraditional



Evolution of Traditional Hotel H.R. Practices(continued…)

Long-term H.R. strategiesShort-term H.R. strategies

Multi-directional communicationTop down –one way communication

Flexible routinesBureaucratic “rituals”

ConsensusPower

EmpowermentHierarchy of control

Proactive management/supervision styleReactive management/supervision style

Consistent “moments of truth”Inconsistent “moments of truth”

What one says is consistent with what onedoes

What one says is inconsistent with whatone does

G.M. earns the team’s supportG.M. forces compliance

ContemporaryTraditional



Management Basics: Planning

Vision

Mission Statement

Long-Range Plan

Operating Budget

Short-Range (Business) Plan

Marketing Plan

What the hotel will strive to be

What the hotel must do to be successfuland how this will be accomplished

Hotel’s goal for long-range (e.g., fiveyear) time span

Hotel’s goal within a one-year time span

Anticipating revenues and expensesduring short-range plan implementation

What must be done to generate revenuesanticipated by the operating budget



Management Basics: Decision Making

Routine and repetitive decisionsmade after considering policies,procedures, or rules

Infrequent decisions requiringcreative decision making abilities

Programmed decision Non-programmed decision

Before making a decision

Who is the correct person to make decisions?Will a decision about a specific issue bring the hotel closer toattaining 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?



Management Basics: Decision Making Approach

Manager makesdecisionsunilaterally

Manager makesdecisions afterinput fromothers

Manager allowsteam to makedecisions

Traditional Recent Contemporary

Continuum of decision making



Management Basics: Decision Making(continued…)

Advantages Disadvantages

Groupdecisionmakingprocess

Considering broad rangeof informationGenerating more creativealternativesWhole team keenlyaware of issues andproblems

Achieving higher morale

Easier implementation

Possible conflictsMay be forced to “takesides”if alternativeopinions are expressedDomination by staffmembers with strongestpersonalities

Time-consuming

Not applicable when fastdecisions necessary



Limit to how many staffmembers one supervisor canmanage effectively

Each employee should reportor be accountable to onlyone boss for a specificactivity

Management Basics: Organizing Principles

Unity of command Span of control

Distribution of authority

Executive housekeeper establishes table linenlaundry schedule with F&B dept.

Line managers (betweendepartments)Functional

Hiring and firing employees within a specificdepartment

Line managers(within departments)Line

Develop orientation program for all hotelemployeesStaff managersAdvisory

ExampleUsed byTypes ofauthority



Work that others cando as well as the G.M.

Work that is lessimportant than otherwork

Work that should belearned by more thanone person

Management Basics: Delegation

What work might bedelegated by the G.M.?

Allows the G.M. to domost important thingsfirst

Effective process totrain employees

Allows more work tobe accomplished

Improves controls

Delegation benefits for theG.M.



Management Basics: Delegation (continued…)

Organizational climate necessary for delegation

Assign specific duties & responsibilities to employees

Grant sufficient authority for carrying out assignments

Supervisor & employees agree on expected results

Managers make feedback system to measure progress

Communicate responsibilities to minimize confusion

Steps in effective delegation



Management Basics: Flow of CommunicationMulti-directional communication

Formal channel (example): coachingInformal channel (example): grapevine / rumor mills

Managers/Supervisors

Department Heads(Executive committee)

G.M.

Employees

VerticalComm.

HorizontalComm.

Managers/Supervisors



Management Basics: Motivation

Poorly motivatedstaff

Inconsistent performance for required quality or quantity standards

Guest dissatisfaction

Increased operating costs

Hotel suffers

More motivated employees’leave



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

Manage a friendly hotel

Help your employees succeed



Management Basics: LeadershipEffective leaders will:

implement the property’s Mission Statement

have an objective & measurable “picture”of hotel’s desiredfuture

help others develop the knowledge and skills needed toattain hotel’s vision (e.g., orientation, training, andcoaching)

utilize the empowerment process

develop team of staff committed to hotel’s successachieve a reputation for quality service consistentlydelivered to guestscultivate a reputation for fairness and honesty



Management Basics: Discipline

Steps in a progressive discipline process

Discipline: activities reinforcing desired performanceor correcting undesired performance.

Oral warning (no entry in employee’s record)

Discharge

Oral warning (entry in employee’s record)

Written reprimand

Suspension for specific number of days



Have high standards andexpectations

Support individual membersand maintain trusting andrespectful relationships

Practice participativemanagement and solicit inputfrom members

Demonstrate that own personalgoals and individual teammember goals should not beplaced before team goals

Share credit for team successes

More control over workresponsibilities

Make work assignmentswithin the team

Schedule themselves

Evaluate each other’s work

Assign compensationincreases

Team Building Tactics

Self-directed team To be a good team leader,the G.M. must



Employee Selection, Orientation, and TrainingPersonnel 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

Supervisory / other training tactics

Training budget

Other training issues



G.M. Interactions

G.M.s never have a daily routine; every day is different

Daily involvement in guest relations are quite visible

Actual daily activities undertaken by a G.M. vary from day-to-day & month-to-month as well as from property-to-property

G.M. is on duty eight or more hours daily and is often on-call even when not on the property



G.M. Interactions: Employees

Observing employees at a company picnic enjoy themselves

Providing non-job related advice when requested

Observing staff who participate in community organizations/activities

Mentoring younger workers

Following employees’careers as they are promoted within the organization

Congratulating personnel about significant events in their families’lives

Welcoming new staff to the team

Learning employees’suggestions about possible operating improvements

Daily conversations with long-term staff

Possible interactions with employees: positive examples



G.M. Interactions: Employees

Observing an intoxicated employee attempting to come to work

Comforting an employee whose child has passed away

Explaining to staff why they did not get promotions they sought

Discovering employee “sabotage”

Supervising staff violating hotel policies, requirements, and rules.

Assigning work responsibilities to cover “no show”employees

Learning about illegal acts committed off-property by staff

Confronting staff known to be stealing

Disciplining or terminating staff

Possible interactions with employees: negative examples



Receiving guest input about hospitable staff members

Providing accommodations to guests stranded by adverse travelconditions

Interacting with frequent guests

Receiving input from guests who genuinely want the hotel to besuccessful

Interacting with guests as peers at community / professional meetings

Providing service / assistance to guests

Observing hotel guests celebrate significant family / professionaloccasions

Receiving spontaneous “Thank You Notes”from happy guests

Interacting with frequent guests

Possible interactions with guests: positive examples

G.M. Interactions with Guests



Discovering overt guest room damage

Calming irate guests stranded by adverse travel conditions

Interacting with police called to hotel for disturbances or illegal guestactivities

Preventing guest theft of money, products and/or services from the hotel

Preventing property vandalism

Preventing on-site prostitution

Dealing with visibly intoxicated guests

Guest deaths in sleeping rooms or in the hotel’s public spaces

Interacting with police called to hotel for disturbances or illegal guestactivities

Possible interactions with guests: negative examplesG.M. Interactions with Guests

Chapter 4:Human Resources



H.R. Department Roles

H.R. is bothline & staff

function

Helping line managerswith H.R. related duties- employee selection- orientation- training- evaluation- compensation

H.R. specialists

G.M. must define authority boundariesbetween line- & staff managers.

Making final employeeselection decision

Providing departmental-specific orientation

Initiating ongoing training

Supervision activities(e.g., performance appraisal)

Line managers



How H.R. personnel assist in hotel’s overall operation

H.R. Department Roles (continued…)

Implementing policies to effectively recruit, select, motivate, and retainthe most qualified management and non-management staff

Developing and delivering orientation, safety, security, supervisory, andsome department-specific training programs

Developing and communicating H.R. policies that are equitable and fairto all employees while protecting the rights of the hotel

Interpreting, implementing, and enforcing the ever-increasing body oflaws and regulations

Helping to maintain appropriate standards of work life quality andethical business policies and practices



Job descriptions Job specifications

Twostaffing

tools

Staffing the H.R. Department

A list of tasks that anemployee in a specificposition must be able toperform effectively

Statements about duties,responsibilities, workingconditions & specific jobactivities

Example: H.R. Director(recruitment, selection,evaluation, promotion)

A list of personal qualitiesnecessary for successfulperformance of the tasks requiredby the job description

Statements about knowledge,skills, education, physical &personal characteristics

Example: H.R. Director(considerable knowledge ofprinciples & practices ofH.R. management)



Legal Aspects of H.R.: Employee Selection

Bonified Occupational Qualifications (BOQs):Qualifications to perform a job that are judged reasonablynecessary to safely or adequately perform all tasks within that job

Education or certification requirementsLanguage skillsPrevious experienceMinimum age (for jobs such as waitress or bartender)

Physical attributes (amounts able to be lifted, carried etc.)

Licensing

Legitimate BOQs



Employmentapplications

Tools to screen employee applicants

Legal Aspects of H.R.: Employee Selection(continued…)

Interviews

Only provide info directly relating to the jobDemographic info, employment history, educationalbackground, criminal history, employment status, references,drug testing

Testing

Other

Race, religion and physical traits should not be askedAge may be asked only for the purpose of legal requirements

Follow strict state guidelines and requirements for pre-employment drug testing

Obtain applicant’s permission in writing for background andreference checks



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.

Protects young workers fromemployment interfering with educationor that is detrimental to health

Fair Labor Standards Act(1938)

Prohibits hiring illegal immigrantsImmigration Reform &Control Act (1987)

Protects individuals 40 yrs and olderAge Discrimination inEmployment Act (1967)

Prohibits discrimination against jobcandidates with disabilities

Americans withDisabilities Act (1990)



“At-will”employment Employment agreement

Legal Aspects of H.R.: Employment Relationships

Employees can elect towork for the employeror terminate the workrelationship anytime

Employers can hire orterminate any employeeswith or without cause atany time

Document specifyingthe terms of the employer–employee workrelationship

Indicates rights andobligations of bothparties



Legal Aspects of H.R.: Workplace Laws

One cannot ask favors of a subordinate in exchange for employmentbenefits; 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

Hotels (employing 50 or more staff) should provide up to 12 weeks ofleave (unpaid) to an employee for a birth, adoption of a child or seriousillness of immediate family members.

Sexual harassment

Family & Medical Leave (1993)



Unemployment insurance (allowing temporary financial benefits to employeeswho have lost jobs)

Unemployment claim (asserting the worker is eligible for unemploymentbenefits)

Employee evaluation (assuring work performance [nothing else] forms the basisfor employee evaluations)Discipline (effectively communicating and consistently enforcing workplace rulesand policies)Termination (preventing unacceptable termination of employee/s)

The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime workrates, and equal pay regardless of gender.

Compensation

Legal Aspects of H.R.:Workplace Laws (continued…)

Employee performance

Unemployment issues



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, wagedeductions 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)

Employment records

Legal Aspects of H.R.:Workplace Laws (continued…)



Internal recruiting External recruiting

H.R. Department at Work: Recruitment

Focusing on internalapplicants for vacantpositions

Focusing on internalapplicants for vacantpositions

“Promotion from within”Alerting friends andrelatives of currentemployees

Recruitment is not solelythe job of H.R. departmentCurrent staff can impacthotel’s turnover rate

Hiring from outsidesourcesNewspaper and other

media advertisements /job fairs / executivesearch firms / recruitingat schools / “helpwanted”signsAttracting externalcandidates

Recruitmentmethods



Selection:Evaluating job applicants to determine those more qualified(or potentially more qualified) for positions.

H.R. Department at Work: Selection

Selection devices

Employment interviewsEmployment tests

Preliminary screening (reviewing application)

Reference checksDrug tests



Orientation:Providing basic information about the hotel which must be known by all itsemployees.

H.R. Department at Work: Orientation

Goals

Reducing anxietyImproving moraleReducing turnoverProviding consistencyDeveloping realisticexpectations

Contents

Hotel overview(mission statement)Guest service / relations trainingEmphasis on teamworkPolicies and proceduresincluding handbookCompensation and benefitsGuest safety & securityEmployee & union relationsProperty tour



Training is absolutely critical to the hotel’s success !

H.R. Department at Work: Training

Group trainingEffective when several (or more)staff must learn the same thingUse of a role-play (e.g., upsellingtraining for front desk agents)

Individualized training

One-to-one training method

Mainly responsible forindividualized line departments

Improve knowledge or skills of staff

New employees and experienced staff need training

Ongoing professional development can motivate staff andhelp employees’advancement opportunities

Implement “train the trainer”program



H.R. Department at Work:Performance Evaluation

Goals

Determine where staff can improve performanceAssess eligibility for pay raises and promotionsImprove moraleAssure legal compliance

H.R.Dept.Roles

Develop policies & procedures for property-wide systemCommunicate these policies & procedures to all staffAddress and resolve employee concerns as they ariseFile performance evaluation results in employee records



Steps of performance appraisal system

H.R. Department at Work:Performance Evaluation (continued…)

Performance standards are established for each position

Evaluation information is filed

Policies (e.g., frequency of rating) are established

Data is gathered about employee performance

Raters must evaluate performance

Discuss performance evaluation with employees



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.

Legal / fair / balanced / cost effective / viewed as reasonable by staff

Compensation:All financial & non-financial rewards given to managers & non-management staff in return for their work.

The H.R. Department at Work: Compensation

Effective compensation programs should be:

Establish pay for specific positions based on:

Salary / wagesDirect financial compensation

Benefits (health insurance, paidvacations, etc.)

Indirect financial compensation



Work-related accidents & illnesses

H.R. Department at Work:Employee Safety & Health

Working conditionse.g., greasy floors in kitchen

Work to be donee.g., cooks using knives

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



H.R. Department at Work:Workforce & Work Quality Improvement

Professional development

Cultural diversity

Continuous qualityimprovement

Improving

work

quality

TECHNIQUES



Chapter 5:The Controller





Development of systems to collect and report financialinformationAnalyzing this same informationMaking finance-related recommendations to assistmanagement decision making

Record and summarize financial data

Purpose of bookkeeping

Accounting


Controller: individual responsible for recording, classifying, andsummarizing the hotel’s business transaction.

Purpose of accounting





Financial management system that collects accounting datafrom an individual hotel site and combines and analyzes thatdata at the same site.G.M. and controller have larger role in preparing financialdocuments

Financial management system that collects accounting datafrom an individual hotel(s), then combines and analyzes thedata at a central sitePrevails in chain-operated or multiproperty hotel companiesCompany will likely employ C.P.A. for data analysis

Centralized accounting systems

Decentralized accounting systems

Accounting (continued…)





Rooms available for forecasted periodEstimated rooms for the periodEstimated occupancy rate for periodTotal rooms sold / total rooms available = Occupancy percent (%)Estimated ADR (average daily rate) for period- Total room revenue / total number of rooms sold = ADRRevPar (revenue per available room) for forecasted period- Occupancy % X ADR = RevPar

Rooms revenue forecast should include at minimum:

Revenue Forecasting: Rooms Revenue





Number of guest rooms sold directly impacts amount ofF&B sales volume

Revenue Forecasting: Food & Beverage Revenue

Controller will forecast sales generated from:- Room service- Banquets- Meeting room F&B revenue- Audio visual equipment rental- Service charges





Pay-per-view moviesParking chargesInternet access chargesGift shop sales of newspaper / cigarettes / candy / lotions / pop / etcTelephone (local / long distance calling)Guest laundryCoat check feesGolf feesTennis feesHealth club usage feesPool fees

Typical examples of other revenue sources include:

Revenue Forecasting: Other Revenue





Allowing management to anticipate / operate for future businessconditionsProviding communication channel whereby hotel objectives arepassed to various departmentsEncouraging department managers who have participated inbudget preparation to establish own operating objectives /evaluation techniques / toolsProviding G.M. with reasonable estimates of future expenselevels and serving as tool for determining future room ratesHelping controller & G.M. to periodically evaluate hotel and itsprogress toward financial objectives

Important function of budget

Budgeting





Long-rangebudgets

Encompass relatively lengthy period,generally 2-5 years or moreUseful for long-term planning, consideringwisdom of debt financing / refinancing andscheduling of capital expenditures

Budgeting (continued….)

Annualbudgets

Must be produced by individual hotels andsubmitted to central office for review in large,multiunit hotel companiesDeveloped to coincide with calendar year

Monthlybudgets

Helps determine whether maintaining progresstoward goals developed in annual budgetGreat use for seasonal hotelRefer to Figure 5.1 (Waldo hotel propertyoperations & maintenance departmentoperating budget for January)





Known as profit and loss statementLists hotel’s revenues, expenses, GOP, & fixed charges forspecific time (month, fiscal quarter, or year)In no case should this period exceed middle of nextreporting period

Income statementBalance sheetCash flow statement

Key financial documents

Income statement

Financial Statements: Income Statement





Figure 5.2: Income Statement InformationThis period’s actual

RevenuesLess Direct operating expenseEquals Department operating incomeLess Overhead (undistributed) expenseEquals Net income (GOP)Less Fixed expenseEquals Income before taxes


G.M. can answer: How did hotel perform during this period?





Figure 5.3: Tricolumned Income StatementThis

period’sactual

Thisperiod’sbudgeted

Last yearsame period

actual

Revenues

Less Direct operating expense

Equals Department operating income

Less Overhead (undistributed) expense

Equals Net income (GOP)

Less Fixed expense

Equals 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?





Of all assets, none consider relative value / worth of staff,including the G.M, actually operating hotelValue of experienced, well-trained staff is not quantified.

Provides a point-in-time statement of overall financialposition of hotel“Snapshot”of financial health of hotelCapture the financial condition of hotel on day it is producedNot telling how profitable the hotel was in given accountingperiod

Functions of balance sheet


Limitation of balance sheet





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

Total assets $6,660,000





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





How much cash was provided by hotel’s operation duringaccounting period?What was hotel’s level of capital expenditure for that period?How much long-term debt did hotel commit to during thatperiod?Will cash be sufficient for next few weeks or will short-termfinancing be required?

It is critical that the hotel not only is profitable, but also that itmaintains solvency.

Statement of cash flows can answer to the following:

Financial Statements: Statement of Cash Flows

It shows cash effects of hotel’s operating, investing, andfinancing activities.





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

“Daily”

Controller’s office should provide G.M. with atimely recap of prior day’s rooms, F&B & otherrevenues.Prepared from data supplied nightly by PMS.

Daily Operating Statistics:Manager’s Daily Sales Report

Daily includes the following:

The more detail you desire, the longer the Daily !





Rooms availableTotal rooms occupiedRooms occupied by guest typeOccupancy percentTotal ADRADR by guest typeTotal RevPar

Documentation & verification of night auditor’s report is animportant function of controller’s office.

Detailed room revenue report include:

Night auditor report provides wealth of info on room sales.

Daily Operating Statistics:Detailed Room Revenue Statistics





Allowance &adjustments

Reduction in sales revenue credited to guestsbecause of errors in properly recording sales or toappease a guest for property shortcomings.

Daily Operating Statistics:Adjustments & allowances

Figure 5.7: Adjustment VoucherADJUSTMENT

NO 348685

(1)

DATE (2) 200xxNAME (3) ROOM OR

ACCT.NO. (4)

EXPLANATION (5)

SIGNATURE

X (6)

11-09-0199 (7)





Employee error in charge- Employee training program, cash sales systems, or guest service techniques

Importance of completion of allowance & adjustment voucher

Daily Operating Statistics:Adjustments & allowances (continued….)

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





Changing guest’s credit cards for items not purchased, thenkeeping money from erroneous chargeChanging totals on credit card changes after guest has left orimprinting additional credit card charges and pocketing cashdifferenceMis-adding legitimate charges to create higher-than-appropriatetotal, with intent to keep the overcharge.Charging higher-than-authorized prices for products/services,recording proper price, and keeping the overchargeGiving/selling/credit card numbers to unauthorized individualsoutside hotel

Credit card-related techniques to defraud guests

Internal Controls: Cash





Cashier training programsSales revenue recording systemsCash overage/shortage monitoring systemsEnforcement of employee disciplinary procedures fornoncompliance

Methods of evaluating cash control systems

Internal Controls: Cash





Facility Engineering & MaintenanceAccounts receivable (AR): money owed to hotel because of sales

made on credit

Internal Control: Accounts Receivable


Direct bill: an arrangement whereby a guest is allowed topurchase hotel services and products on credit

Guest seeking credit would complete a “Direct BillApplication”(Refer to Figure 5. 8)





which guests are allowed to purchase goods/services oncredit.how promptly those guests will receive bills.what is total amount owed to hotel and how long have thosemonies have been owed.

Controllers’jobs to establish:

Internal Control: Accounts Receivable


A controller together with a G.M. should establish credit policiesthat maximize number of guests doing business with hotel, yetminimize hotel’s risk of creating uncollectable accountsreceivable.





Figure 5.9: Accounts receivable aging reportWaldo 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 $50,000 $30,000 $15,000 $5,000

% of total 50% 30% 15% 5%

Internal Control: Accounts Receivable(continued….)





Payment of proper amountsPayments made in a timely mannerPayment records properly maintainedPayment totals assigned to appropriate departments

Charge for goods / services used by hotel, invoiced byvendor, not yet paidSum total of all invoices owed by hotel to its vendors forcredit purchases made by hotel

Account payable (A.P.)

Internal Control: Accounts Payable

Four major concerns in A.P. systems





Use a system of coding to assign actual costs to predetermined cost centersImplement functioning expenses coding system

Create system whereby total payments to vendors match vendor billings exactly

Maintains good relations with vendors by prompt payment of invoices

Take advantage of discounts offered by vendors for prompt payment

Ensure legitimate invoices are paid only for amount actually due.Invoices and payments for those invoices should be checked by at least twopeople

Payment of proper amounts

Internal Control: Accounts Payable(continued….)

Payments made in a timely manner

Payment records properly maintained

Payment totals assigned to appropriate departments





Ensuring payment is made to vendors only for goods /services actually received

Internal Control: Purchasing & Receiving

Payment should be withheld if all services have not beenperformed.

Before A.P. invoice is paid, check terms of sale, productprices quoted by vendor, & list of products against actualvendor’s invoices.

Devising payment system ensuring members of propertymgt. Team has:- Preauthorized work- Confirmed cost of work- Verified work is satisfactorily completed





Internal Control: Inventories


Secure accurate inventory from each department wheremonthly inventories are taken (refer to monthly incomestatement)

Beginning period value of towel inventory+ Towel Purchase

= Cost of Towels Available

- Ending period value of Towel Inventory

Cost of Towels used in period





Proper payment of employees’salaries and wages is animportant 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, workerproductivity, variation from budget, and future labor needs

Internal Control: Payroll





Internal auditIndependent verification of financial recordsperformed by organization operating hotelCost-effective in multiunit hotels

Audits


Auditor: individual conducting independent verificationof financial records.

External auditIndependent verification of financial recordsperformed by accountants employed byorganization operating hotel

Chapter 6:The Front Office



Front Office Function

Front Office Manager(FOM)

RevenueManagement

Reservations GuestServices

NightAudit

DeskStaff

Concierge BellStaff



Front Office Functions With Other Positions

Front OfficeManager

Revenue managerEstablishing room ratesReservation manager Managing the reservation processDesk staffGuest registration

Concierge Guest information

Bell staff Guest assistance

Night auditor Managing the Front Office related

accounting and data collection process



Responsibilities of Front Office

Functionalareas

PMS & itsmanagement

Revenue &reservation

management

Management ofguest Services

Accounting forguests

Datamanagement



Front Office: The PMS & Its Management

PMS:Computerized

system

Room rates,reservations, androom assignments

Guest histories

Reservations

Other selectedguest services

Managementinformationfunctions

Accountinginformation



To maximizehotel’s revenueper availableroom (RevPar)

Front Office :Revenue & Reservations Management

Occupancy % &Average Daily Rate

(ADR)Increase

Occupancy % x ADR = RevPar

To improve RevPar:

Estimate (forecast) guest demand for rooms

Practice yield management

Control occupancy



Revenue & Reservations Management:Forecasting Guest Demand For Rooms

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)

Knowing demand for rooms is key !

keep accurate historical records to understand past demand

know of special events or circumstances that impact futureroom demand

For forecasting demand, Front Office should:



Revenue & Reservations Management:Practicing Yield Management

Offer discounts up to 30%Less than 50% occupancyOffer discounts up to 20%50 - 70% occupancyOffer discounts up to 10%70-90% occupancyOffer no discounts90-100% occupancy

Rate strategyForecasted room demand

YieldManagement

A strategy using demand forecasts to maximizeRevPar.A strategy using demand forecasts to maximizeRevPar.Demand for rooms > supply, sell at “rack rate”Demand for rooms < supply, offer at discounts

Yield Management strategy based on room demand



Revenue & Reservations Management:Managing Occupancy

25Saturday

120Friday

250Rooms left to sellSunday

Example: Forecasted room demand (Hotel with 300 rooms)

“Closed to Arrival”(CTA) : Hotel declines reservation forguests attempting to arrive on this specific date.

“Minimum Length of Stay”(MLOS) : Hotel declinesreservations for guests seeking to stay for fewer days thanthe minimum established by the hotel.

Identifying Saturday as day that is CTA & MLOS of two daysto maximize total weekend occupancy

Room availability strategies



Managing Guest Reservations:By Types & Delivery Methods

Transient sales: rooms and services sold primarily via FrontOffice & its staffGroup sales: rooms and services sold primarily via Sales &Marketing department, and given to the Front Office for recordingand servicing.

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 roomreservations.

By reservation type

By delivery method



Managing Guest Reservations:Delivery Methods (Global Distribution System)

Travel agents,or Third-partysites

GDS Users GDSes Switches HotelsWorldspan,Amadeus,Sabre, orGalileo

Pegasus orWizCom

Hotel’sReserv.system

to to to

To Make Reservations:

Hotels

Hotel’sReserv.system

SwitchesPegasus orWizCom

GDSesWorldspan,Amadeus,Sabre, orGalileo

Travel agents,or Third-partysites

GDS Users

tototo

To Confirm Reservations:

Information Flow of the GDS



Managing Guest Services

Airport transportationParking carsHandling luggageProviding directions to local attractionsMaking restaurant reservationsTaking guest messagesRouting mailNewspaper deliveryManagement of safety deposit boxesSupplying directions for areas within the hotelSetting wake-up callsProviding guest security via careful dissemination of guest-related informationHandling guest concerns and disputes

Variety Of Guest Services



Assisting guests in getting baggage into hotel and their roomsExplaining hotel services and guest room features to guests

Printing “reg card”for guests scheduled to arrive next dayReg card: legal contract existing between hotel and guest(guest name / guest address / guest telephone number / arrival date / departuredate / # of adults in the room / rate to be paid / room type / form of payment)

Managing Guest Services: Front Desk - Arrival

Pre-arrival

Bell station

Bell staff should be friendly, well groomed, properly uniformed,and respectful of guest property

Valet



Managing Guest Services: Front Desk - Arrival(continued…)

Five-step registration process

Minimize wait / make guestsfeel welcome

Greeting guests

Reg card serves as the recordof guest’s stay

Authorize (validate) the cardat time of registration

Accommodate guest preference for roomtypes (location, view, bed type & amenities)

Issuance of keys Control issue of guestroom keys for guestsafety

Confirming theinfo on reg card

Securing a formof payment

Roomassignment



Without a guest’s permission, never reveal his or her room number toany third party.

Never perform registration tasks in ways allowing guest room info to beoverheard by others’.

Never write room numbers directly onto keys.

Never issue a duplicate room key to anyone except a registered guests.

Without a guest’s permission, never confirm or deny that he or she is infact 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 requestsregarding their stay.

Managing Guest Service:Front Desk- Guest Privacy

Guest information

Room information



Apologize to guest for any inconvenience.

Clearly explain hotel’s walk policy to guest.

Offer any reasonable assistance to minimize guest difficulties.

When guests’issues are handled professionally and theirlegitimate complaints are treated courteously, theirexperience is enhanced.

Managing Guest Service:Front Desk - Stay & Departure

Guest satisfaction issues

The walked guests



The detailed list of a guest’s room charges as well as othercharges authorized by the guest or legally imposed by the hotel.Appropriate guest charges incurred are posted to the appropriateguest’s folio.All independent supporting documentation should be thoroughlyreviewed prior to posting.

Accurately collect and post charges to the guest “folios”Maintain an accurate list, by room number, of guestroom occupantsVerify accuracy of the room rates charged to guestsConfirm the check-out dates

Accounting For Guests

Front office’s accounting related tasks

Billing to Folio



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.

Guests present themselves to begin registration process

Special check-in areas may be available, depending on level of service andpriority of guests.

Front Desk Agent confirms status of selected room prior to roomassignment

At front desk check-in

At shelf check-in, system should allow staff to:

Accounting For Guests:Room Management / Assignment



Industry term for location of actual registration cards signed byguests at check-in

Bucket

Guest’s actual room assignment / rate to be paid / departure date /form of payment /any other accounting-related information

Manual procedure for assuring accuracy of:

Accounting For Guests: Bucket Check

Physically verifies that info. on a guest’s registration card iscomplete and matches that in the PMS

Cross referencing method

Bucket check helps reduce errors related to billing guest’s folio.



Night audit function: eight keys item

Accounting For Guests: Night Audit

Posting appropriate room tax and tax rates to guest folioVerification of accurate room status (in PMS) of all roomsPosting any necessary adjustments or allowances to guest foliosVerification that all legitimate, non-room charges have beenposted, throughout the day, to proper guest folioMonitoring guest account balances (e.g., guest’s credit limit)Balancing and reconciling Front Desk’s cash bankUpdating and backing up electronic data maintained by FrontOfficeProducing, duplicating and distributing all managementmandated reports (e.g., ADR, occupancy %, business source,in-house guest lists)



Accounting For Guests: Check Out

Two essential tasks accomplished by desk agent

Confirmation of guest’s identityChecking for late faxes / messages not yet delivered to guestInquiring about and returning guest belongings in hotel’ssafety deposit boxesPosting any final chargesProducing copy of folio for guest’s inspectionProcessing guest’s paymentRevising room’s status in PMS to designate room as vacant

Settlement of guest’s bill

Re-booking of guest for a future stay (selling opportunity)



Confirmation that name on card matches that of individual presenting thecard for paymentExamination of card for any signs of alterationConfirmation that card has not expiredComparison of signature on card with signature by guest paying with thatcardDocumentation (usually initialing) by employee processing the chargeBalancing and reconciling credit card charges at conclusion of each FrontOffice shift

Credit card acceptance & processing guidelines

Data Management: Credit Cards

Accuracy

Commitment to securityProcessing guest credit cards



Recodablelockingsystem

Data Management: Locking / Security Systems

Increasingly utilized to ensure guest safetyInstalled cost is about $300 - $500 per guestroomIndependent & stand-alone (no wiring back toPMS is necessary)

Managing arecodable

lock system

Be trained to issue duplicate keys only toconfirmed registered guestsMaintain an accurate data system that actuallyidentifies registered guests and their assigned roomnumbers



Private Branch Exchange (PBX)

Hotel internal system to process incoming, internal, andoutgoing telephone calls

Data Management: Telephones

Call accounting systemRecords time, length, and number called, of eachtelephone call made within each guestroomPosts phone charges directly to guest’s folio wheninterfaced with PMS

Wake-up calls

Voicemail

Message on hold



Any sales recording system not located at Front Desk (alocation, excluding Front Desk, at which hotel goods &services are purchased)Mostly interfaced with the PMS

Data Management: Point of Sale (POS)

Point of Sale (POS)

restaurants / room service / lounges / laundry / valet / shops/ fitness centers / business centers

Multiple POS systems in large hotel operations

Ensure all legitimate purchases & charged purchases areposted to the correct guest or non-guest folio



In-roomservice

Movies

Pay-per-viewmovie system

In-room mini-barsInterfaced with thePMS(automaticallyposted to guest’s folio)

Data Management: In-Room Services

Games

“video”games ontelevision screen

in guest room

Safes

In-room safesfor guest use

Internetconnections

Pay-to-connectbasis in guest room



Data Management: Back Office SystemBack officeaccounting

system

System used by the controller to prepare hotel’sfinancial documents such as Balance Sheet, IncomeStatement, etc.

good underlying technologystrong company behind the product, including good leadershipcompatibility with popular hardware productssizable customer basegood customization capabilitiesexpandabilityease of use by non-technological staffexcellent support via telephoneexcellent online supportpotential for PMS interface

Back office accounting system should offer:

Chapter 7:Housekeeping



Decisions about required number of cleaning employeesFrequency of cleaning

Roles of Housekeeping Dept.: Guestrooms

Publicspaces

lobby areas / public restrooms / front desk areas /management offices / game rooms / exercise areas /pool & spa areas / employee break rooms & lockerrooms / selected meeting & food service areas

Major Executive Housekeeper responsibilities:



Guestroomareas

Properly cleaned by HousekeepingVerified as clean by second member of HousekeepingRoom’s status has been reported to Front Desk

Roles of Housekeeping Dept.: Guestrooms

Elevators/ corridors/ stairwells/ guestrooms

Room will be assigned, when:

Communication role to Front Desk staff (room status info) &Engineering / Maintenance Department ( room maintenanceissues)



Roles of Housekeeping Dept.: Guestrooms(continued…)

Room is occupied but not yet cleaned, due toguest request not to be disturbedDo not disturb

Room reported as occupied, but room was notused, and guest may have leftSleep-out

Guest will stay in room at least one more nightStay-over

Room vacant but not yet cleanedOn-Change

Room registered to a current guestOccupied

Room vacant, has been cleaned and can beassigned to guestClean & Vacant

Room status terminology



Roles of Housekeeping Dept.: Guestrooms(continued…)

Guest’s items still in room, but guest will be deniedaccess until management approval of re-entryLock-out

Guest has requested and has been allowed anextension of regular check out time

Late check-out

Room is not rentable, thus not assignableOut-of-order

Guest has departedCheck-out

Guest has indicated that is last day he/she will useroomDue-out

Room status terminology (continued…)



Laundryareas

laundry preparation areas/ laundry supply closets/guest linen, terry and supplies storage areas

Managing “On Premise Laundry (OPL)”and its effectiveoperation

Housekeeping Dept. & Executive Housekeeper’s role

Laundry often represents one of the hotel’s largest expenses.

Roles of Housekeeping Dept: Laundry



Assess quality of room cleanlinessPoint out deficiencies to room attendants, get those deficienciescorrected, & report revision of room status to ExecutiveHousekeeper or Front Desk

have management skills (planning, organizing, directing andcontrolling 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:

Staffing the Department



Treat them at all times with respectEnsure they are supervised by excellent supervisorsHave room cleaning assignment policies perceived by them as fairProvide excellent, ongoing trainingProvide a realistic career ladder for room attendantsEnforce Housekeeping Department policies consistently andwithout favoritismEnsure room attendant safety through training and appropriate hotelpoliciesProvide benefit packages that are competitive for the areaPay fair wages

Approaches to build highly motivated, dedicatedRoom Attendants:

Staffing the Department (Continued…)



Housekeeping employees areone of the hotel’s largest groups

Physical nature of jobs

Managing Housekeeping: Safety

this group’s accidentrates generally thehighest in the hotel.

thus

Equipment & supplies

RuleHousekeeping employees should handle only thosemachinery items and supplies they are properlytrained to handle.



Chemical handlingCleaning proceduresCorrect lifting techniquesProperly entering guestroomsContending with guestrooms containing:

firearms/ uncaged animals/ individuals perceived asthreatening/ ill or unconscious guests/ drugs and drugparaphernalia / blood and potential bloodborne pathogens

Guest serviceGuestroom securityLost & Found procedures

Areas of training concern

Managing Housekeeping: Safety



Inexperienced Executive Housekeeper relies exclusively onminutes per room

Total # of minutes worked by room attendants / total # of guestroomscleaned = Minutes per room

Experienced Executive Housekeeper relies on both minutes perroom and knowledge of guests and sales patterns

size of guestrooms / amenities in rooms / actual number of roomsto be cleaned / amount, if any, of deep cleaning

Scheduling the number of room attendants depends on:

How to establish room attendant schedules

Managing Housekeeping: Employee Scheduling



Check how much of each item is in use, in storage, on orderExecutive Housekeeper to compute monthly “product usage

reports”

sheets (all sizes)/ pillowcases/ bedspreads/ bath towels/ handtowels/ 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

Inventory items maintained by Executive Housekeeper:

Values of monthly inventories

Managing Housekeeping: Inventory Management



Managing Housekeeping: Inventory Management(continued…)

Waldo hotel product usage report

117Total Monthly usage

877 unitisCount on: __________________

850 unitsCount on: __________________

Plus

144 unitisPurchased in month

994 unitisTotal in service

Less

______________________________

Date: __________________________

Item:__________________________

For Period: ______________________

Prepared by: ____________________

Department:_____________________

January 1

February 1

Housekeeping King-sized Sheets



Hotel must safeguard mislaid property until rightful owner returnsHotel must hold lost property until rightful owner claims itHotel not required to find abandoned property’s ownerProperty left behind in room or found in lobby to be treated as mislaid or lostEstablish how long any mislaid/lost property to be held before disposing it

Three types of unclaimed property

Managing Housekeeping: Lost & Found

Law and/or policy requirements:

Owner intentionally has left item(s) behindAbandoned property

Owner unintentionally has left item(s)behind, then forgotten it/themLost property

Owner unintentionally has left item(s)behindMislaid property



Date item is returnedOwner’s name/ address/phoneHousekeeping Managerreturning itemMethod of returnDate property is declaredas abandonedName of hotel employeereceiving abandonedproperty

Date item is foundDescription of itemLocation where item isfound (room #, ifapplicable)Name of finderSupervisor who receivesitem

Managing Housekeeping: Lost & Found(continued…)

When item is found

Writtenreport

When returned to rightfulowner, or disposed of



Effective guestroom cleaning is heart of HousekeepingDepartmentDetermines long-term success or failure of property

Sleeping area: the first part seen by guest when enteringroomBathroom area: closely inspected by guests for cleanliness

Forms basis for a guest’s initial impression of property

Public space cleaning

Guestroom cleaning

Facility Care & Cleansing



G.M.s should know what to look for when inspecting the hotelG.M.s must inspect public space, guestroom and laundryoperation areas regularlyG.M.s should not evaluate effectiveness of theirhousekeeping departments based only on lower costs peroccupied room or fewer minutes per room cleaning(these factors are not always better!)

G.M.s’roles in facility care and cleaning

Facility Care & Cleansing (continued…)



Collecting

Operating an effective “on-premises laundry”is a multi-step process

Laundry

Delivering

Sorting

Watching

Drying

Finishing / Folding



Collecting

Laundry: Operating an Effective OPL(continued…)

Dirty linen and terry should never be used as guestroomcleaning rags.Bloodstained linen or terry must be placed separately in abiohazard 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.

WashingThis step is the most complex part.Monitor a: washing times, b: wash temperatures, c:chemicals, d: agitation length and strength



Drying

Laundry: Operating an Effective OPL(continued…)

Drying is simply a process of moving hot air (140-145degrees F.) through fabrics to vaporize & remove moisture.Fabrics that are dried must have cool-down period in thedryer before they are removed from it

Finishing/Folding

Space for finishing laundry must be adequate

StoringMany fabrics must “rest”after washing & drying24-hr rest time for cleaned laundryHousekeeping Dept. should maintain laundry par levels ofthree times normal usage

Delivering Storage areas containing these items should be locked

Chapter 8:Food and Beverage



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

Marketing concernsRepeat business important tofinancial success

Planning issues

Similarities: Hotel & Restaurant Foodservices

All foodservice operations mustassess financial status

- Operating budget- income statement / balance

sheet / cash flow statement

Necessity for standardoperating procedures

- Purchasing / receiving / storing/ issuing / pre-preparation /preparation / serving / service

Emphasis on consumers

Financial concerns

Cost control procedures



Standard Operating Procedures: Cycle of F&B ProductControl

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



Cycle of F&B Product Control (continued…)

Effective use of perpetual & physical inventory systemsControl of product qualitySecuring products from theftLocation of products within storage areas

Step 4:Issuing

Product rotation concernsMatching issues (issue & usage)Purchasing as inventory is depleted

Development of receiving proceduresCompletion of necessary receiving reports (e.g.,addressing financial and security concerns)

Develop purchase specificationSupplier selectionPurchasing correct quantitiesNo collusion between property and supplierEvaluation of purchasing process

Step 1:Purchasing

Step 2:Receiving

Step 3:Storing



Step 8:Service

Cycle of F&B Product Control (continued…)

Mise-en-placeMinimizing food waste / maximizing nutrient retention

Use of standardized recipesUse of portion controlRequirements for food and employee safety

Timing of incoming F&B ordersPortion controlRevenue management concerns

Revenue control concernsServing alcoholic beverage responsiblySanitation and cleanlinessF&B server productivity

Step 5:Pre-Preparation

Step 6:Preparation

Step 7:Serving



Transferring some decision-makingresponsibility and power to front-lineemployees

Enhancing service to guests andincreasing profits for the organization

Personnel Requirement Similarities:Hotel & Restaurant Foodservices

Practice of empowerment

Staff must be trained in standardized procedures.

Managers must provide clear direction to employees.

Managers must provide necessary resources.

To meet unanticipated guest needs effectively



Profitability = Revenue - Expenses

Profitability Differences:Hotel & Restaurant Foodservices

Hotel’s “bottom line”profit from F & B sales is likely to belower than a restaurant’s.

Profit amounts generated by restaurant F & B is relativelyeasy to calculate.

The process of allocating revenues and expensesapplicable to F & B services in a hotel is more difficult.

Costs of F & B sales is generally higher in a restaurantthan in hotel.

Payroll costs (or fixed labor costs) are higher than in arestaurant.



Marketing-related Differences:Hotel & Restaurant Foodservices

Restaurants: locations easily accessibleto potential guestsHotels: locations most accessible to guestsdesiring lodging accommodations

Restaurants: locations easily accessibleto potential guestsHotels: locations most accessible to guestsdesiring lodging accommodations

For hotels, F& B service is viewed as anamenity or secondary(sale of guestrooms is primary objective)

Location withinthe community

Location withina hotel

Menu



Room Service Operations:Profitability Concerns

Why losemoney?

Relatively few properties generate profits from room serviceVery high labor costsHigh expenses incurred for capital costs- delivery carts / warming devices

Whyoffered?

How tooffset losses?

High expenses incurred for capital costs- Delivery carts / warming devicesOffer hospitality suite business

Provide hosted events

Service to guests

Impacts hotel rating- some guests select hotels based on room service availability



Room Service Operations:Menu Planning Factors

QualityConcerns

Cross-Selling

MenuLanguage

Advertising availability of other hotel services- dinner menu providing info about Sunday brunch

Less likely to oversee room service food qualityMust offer products maintaining quality duringholding and transportation to guest room(example: problems with omelet & French fries)

Language barriers for international guests- uses of pictures and multi-lingual menu descriptions

Clearly state ordering-requirements- minimum order charges / mandatory tipping policies



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 theentire lodging experience.

Communication

Guest placing order / order taker / room service production-service staff / room service staffAbbreviations should be clearly understood by order takerand food production staff

TechnologyImproving the accuracy of room service orders- electronic cash register (ECR) / point-of-sale terminal /

remote printer

UpsellingTechnique

Opportunities for upselling are overlookedUpselling increases guest check average



Training issues for room service attendants

Room Service Operations: Within-Room Service

Presenting guest check and securing payment

Opening wine bottles (where applicable)

Providing an attitude of genuine hospitality

Explaining procedures to retrieve room service items

Asking guests where room service meal should be set up



Well-planned banquets can be profitable!

Banquet Operations: Profit Opportunities

Banquet menu has higher contribution margin.- banquets frequently celebrate special events

Forecasting & planning production, service and labor arerelatively 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

Increasing market share of thecommunity’s banquet business

Increasing property’sprofitability



Factors / concerns for planning banquet menusBanquet Operations: Menu Planning

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

Sanitation issues

Peak volume production / operating concerns

Ability to generate required profit levels



Butler service Appetizers and pre-poured champagnes can be served byservice staff at a reception while guests stand.

Banquet Operations: Service Styles

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 andbrought to guests’tables

French service Meals are prepared or finished at tableside by service staff:(e.g., tossing Caesar salad / flambéing entrée)

Platter service Production staff plate food in the kitchen; service staff bring itto the table to place individual portions on guests’plates

Plated service(American service)

Production staff pre-portion food on plates in kitchen; servicestaff serve to guests



Individualdrink price

Collecting cash or a ticket when each drink is sold

Banquet Operations: Beverage Functions

Bottle charge Charging on a by-bottle basis for each bottle consumed /opened

Per-personcharge

Charging a specific price for beverages based on attendanceat the event

Charging the host a specific price for each hour of beverageservice

Using hours of beverage service;charging number of drinks / hour X number of guests

Various ways to charge for beverage

Hourly charge

Specific per-event charge



Size Timing

Twocritical

concerns

Banquet Operations: Banquet Room Set-Up

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, dancefloors, band stands, otherentertainment, head tables, etc.

reception / buffet tables

Becomes critical when:

the same room to be usedsame day for differentfunctions

when large evening eventprecedes following day’slarge breakfast event insame room



Last date that banquet space will be held without signed contract

Banquet Operations:Banquet Contracts & Billing Policies

Topics in banquet contract

Time by when a guarantee of attendance must be received

Cancellation policies

Guarantee reduction policy

Billing: amount & schedule for guest payment

Information about service of alcoholic beverages

Other information applicable to specific event



Responsible service & consumption of alcoholic beverage is anintegral part of the responsibility of all F & B managers in alltypes of operations.

Alcoholic Beverage Service in Hotels

Train for all staff in the hotel (i.e. including non-F&B positions,e.g. front desk, housekeeping, maintenance and/or securitystaff ) to recognize and respond to visible signs of guests’(non-guests’) intoxication.

Develop and implement ongoing training for responsible serviceof alcoholic beverages.

Good training protects guests, public and hotelfrom tragedies and lawsuits

Chapter 9:Safety and Property Security



Hotels are not required to ensure guest safety.

However, must exercise reasonable care for guest andemployee safety.

Hotel may be held wholly or partially liable for resultingloss or injury if it is found that a hotel has exhibited anabsence of reasonable care for guest safety.

Personal Safety:Legal Liability & Guest Safety

Protection of an individual’s physical well-being and healthSafety

Protection of an individual or of business’property or assetsSecurity

Hotels are not required to ensure guest safety.



Facility Engineering & MaintenanceLocal law enforcement officials can provide no-cost safetyand security training for employees.

Training employees to 1) ensure guest safety, 2) worksafely, and 3) assist hotel’s security efforts.Employee safety training is an ongoing process

Reinforcesthat:

Guest safety and hotel security is the responsibility of everymanager, supervisor, & employee of the hotel.

Personal Safety: Staffing for SecurityOperation of Safety & Security Committee

Employee safety training

Local law enforcement



Reduce chance for guests to be victimized in their roomsby someone who had rented the same room on a prior nightHelp reduce the incident of employee theft from rooms

Personal Safety: Safety ResourcesRecodable locks

Surveillance systems

Use of VCR- Recording activity at front desk, in parking areas, and near cashiers

Use of CCTV (Closed-Circuit Television)-In a multiple-entry property where management desires to monitoractivity outside each entrance



Internalalarms

Alarm systems

Notify (contact) an external entity such as fireor police departments if alarm is activated

Contactalarms

Personal Safety: Safety Resources

Serve to deter criminal or mischief activityNotify an area within the hotel if alarm is activatedProtect storage areas, hotel facilities (pools, spa, andexercise areas), and hotel and perimeter

Both federal law and local building codes mandate hotel fire alarms



Fire / power outages / severely inclement weather / robbery/ death or injury to a guest or employee / bomb threat /intense negative publicity by the media

Personal Safety: Safety ResourcesEmergency Plans: the identification of a threat to the safety andsecurity of the hotel & hotel’s planned response to the threat

Response to events in most hotels’emergency plans

An emergency plan must be a written document, including:Type of crisisWho should be told when the crisis occursWhat should be done and who should do it in the crisisWho should be informed of the results or impact of the crisiswhen it is over

Where practical, hotels should practice implementation of their plan !



Figure 9.3 lists ten key practices for parking lot safety

Figure 9.2 lists ten key practices for spa safety

Figure 9.1 lists ten key practices for swimming pool safety

Swimming pools

Personal Safety: Special Safety Issues

Spas

Parking lots

Always remember how to improve guest safety and minimize thelegal liability of the hotel!



All hotels should document their safety and security relatedefforts!

Personal Safety: Documenting Safety Efforts

Prepare & complete MOD checklists for each critical areaof hotel- Appropriate frequency, content and number of checklistshould be determined

Incident reports listing the “who, what, where, and how”should be filed and maintained

Document minutes from safety and security committeemeetings, general staff meeting’s notes relevant to safetyissues, records of employee training related to safety andsecurity, and safety seminars attended by employees



Provide a safe workplace for employees by complying withOSHA safety and health standards

Personal Safety:Occupational Safety & Health Administration

OSHA regulations ensure businesses:

Provide workers with only tools and equipment that meet OSHAspecifications for health and safety

Establish training programs for employees who operatedangerous equipmentReport to OSHA within 48 hrs of any worksite accident thatresults in fatality or requires hospitalization of five or moreemployees

Maintain the “OSHA Log 200”(an on-site record of work-related injuries or illness) and submit it to OSHA once per year



Display OSHA notices regarding employee rights and safety inprominent places within the hotel

OSHA regulations ensure businesses (continued…)

Provide all employees access to the Material Safety Data Sheetsthat provide information about the dangerous chemicals they maybe handling during work

Personal Safety:The Occupational Safety & Health Administration

Offer no-cost hepatitis B vaccinations for employees who mayhave come into contact with blood or body fluids

Compliance with OSHA standards

Results in

Fewer accidents lower insurance costs healthier workforce



Hotels bond those employees in a position to embezzle funds

Property Security: Threats to Asset Security- Internal Threats

Methods of fraud related to cashiering

Charging guests for items not purchased, then keeping theovercharge

Changing totals on credit card charges after the guest has left orimprinting additional credit card charges and pocketing the cashdifference

Misadding legitimate charges to create a higher-than-appropriatetotal with the intent of keeping the overchargeVoiding legitimate sales as “mistakes”and keeping the cashamount of the legitimate sale

Facility Engineering & Maintenance 9

Charging higher-than-appropriate prices for hotel goods orservices, recording the proper price, then keeping the overcharge



Property Security: Threats to Asset Security- Internal Threats (continued….)

Time Should have strong controls in place regarding timecards.

Three noncash assets most subject to employee theft:

Companyproperty

Carefully screen employees prior to hiringReduce theft opportunities by using effective securityTreat all proven cases of similar theft in a similarmanner

ServicesMonitor long-distance telephone bills generated byeach administrative telephone extension number



Property Security: Threats to Asset Security- External Threats

Cash

Robbery is not the occasion to attempt the protection ofcash assets.Robbery is the time to protect staff !During a robbery, complying with robber’s demands andobserving the robber should be the employee’s soleconcern.If no contact alarm is installed in the cashier’s cash drawer,an employee who is robbed should, at the earliest safeopportunity, contact local law enforcement officials as wellas others indicated in the robbery section of the hotel’semergency plan.



Other assets: security-conscious manager:

Property Security: Threats to Asset SecurityExternal Threats (continued….)

Hang all artwork in lobbies & guest rooms with lock-downstyle hangersAvoid placing valuable decorations & décor pieces in areaswhere they can be easily taken by guestsTrain room attendants to alert management if excessiveamounts of in-room items go missing from stay-over roomsBolt televisions securely to guestroom furnitureTrain all employees to be alert regarding loss of hotelproperty & to report any suspicious activity



Guest-theft of housekeeping suppliesTheft from guest rooms by room attendants or otheremployees- best policy is to report the incident to local law enforcement

Largest area of security concern is fraudulent selling ofroomsUse housekeeping discrepancy report to detect room revenuefraud

Front Office

Property Security: Threats to Asset SecurityDepartment-Specific Threats to Asset Security

Housekeeping



Employee theft of hand tools and suppliesImplementing a sign-in/sign-out program for tools

Misstating mileage traveled, clients entertained, or sales tripstaken

Hotel suppliers such as silverware and glassware taken by guestsEmployees accepting kickbacks from vendors or by purchasing,then stealing, food and beverage items intended for the hotel

Food & Beverage

Property Security: Threats to Asset SecurityDepartment-Specific Threats to Asset Security

Sales & Marketing

Maintenance & Engineering



Chapter 10:Sales & Marketing





The Front Office

Identify and cultivate clients

Manage hotel’s marketing efforts

Set rates to maximize RevParNegotiate sales contracts on behalf of hotelServe as a leader to hotel’s sales & marketing team

Roles of Sales & Marketing

Sales Activities related directly to servicing consumerdemand & booking clients

Roles of Director of Sales & Marketing

MarketingActivities designed to increase consumer awareness& demand by promoting & advertising hotel





Planning hotel’s sales and marketing strategyPreparing and issuing sales contracts in timely mannerMaintaining accurate sales records, forecast and historiesCoordinating and communicating special client requestswith affected hotel departments

Hosting clients during their stayConducting site tours

Front office

Sales & Marketing

Roles of Sales & Marketing: In the HotelTransient roomsInfluence

Group saleInfluence

Tasks of Sales & Marketing staff with their group sales focus





Roles of Sales & Marketing: In the Community

Two sales opportunities

Promotionopportunities

When DOSM and Sales team are active membersof the business community (e.g., local Chamber ofCommerce), disseminating info about hotel’sproducts and services is allowed.

Networkingopportunities

Development of personal relationships forbusiness-related purposes will result in increasednumbers of sales calls.- Convention and Visitors Bureau





Segmentation of the Sales & Marketing Dept.

product designations becomingsales specialty areas

Segmentation based on:

By product(s)sold

By market(market segment)

By distributionnetwork

type of guests (clients) who buythe product

“how”the hotel’s sales (products)are made (distributed)





Byproduct sold


Group guestrooms Conferences

Catered event

MeetingsConventions

Weddings andspecial events





Guaranteed occupancy,ease of cleaning theirrooms, relativelyuncomplicated billingRooms often sold at verylow daily rates

Vacations, weddings, visitsby friends and family, ornon-work related reasonsHeavy reliance on travelagents’advice

Social, military,educational, religious, orfraternal organizations

Business travelers (whopay highest room rates)

Corporate

SMERF & Others

By market(market

segmentation)Long-term stay

Leisure






Potential guest who arrives at hotelwithout an appointment

Fastest growing distributionchannelCreating homepages andlinking them to other sites

Largest customers of manyhotelsNegotiated rate / blackoutdates / pick-up

Retailers, wholesalers or bothUsing Global Distribution

SystemReceiving commission

(5 –20 %) from hotel

Representative of corporations,groups and organizationsUsing comparison-shopping

techniquesInfluence on hotel’s

reputation

Meeting planners

Internet

BydistributionnetworkingConsortia

Travel agents


Drop-ins





Maintain record (e.g.,demographic data) ofhotel’s past, current andprospective clients

Help department maintainits sales records, meetdeadlines, and plan futureactivities

Harmonizes efforts acrossdepartment lines

Engages in long-termplanning

Ensures cooperation of allin sales and marketingprocess

Sales & Marketing Activities: Sales Efforts

Sales & marketingcommittee

Tracesystems





The sales cycle

Pre-sale phase


Invite client to a site tourSubmit a bid

Post sale phase

Complete “Request for Proposal”and submit on timeEstablish room ratesPrepare group contract (attrition and cancellation policy)Forward Direct Bill application to GroupEstablish group blockDetail client’s contracted requirementsMonitor client’s blockAttend pre-event sales meeting of hotel staff

Write thank you note to each groupReview the final billInclude that group in the hotel’s preferred client databaseFile all written reports

Sales phase





Make a sales visit / presentation to potential client withouthaving previously set an appointment to do soVisit / call quality prospective clients for hotel’s rooms / services

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 & Marketing Activities: Sales EffortsSales lead –effective DOSM should discuss the followings:

Reserve adequate time for cold calling!





Gala client appreciationevent

Golfing, sporting events,concerts, theater tickets

Gift giving

Solidify business relationshipwith current clients (allowhotel to express gratitude toclients for current business)

Communicate to potentialclients the seriousness withwhich the hotel views thehotel / client relationship


Goals Examples

Client appreciation activities





A review of market competitionOccupancy trends /ADR trends / performance of own hotel

Marketing plan development: format of marketing planSales & Marketing Activities: Sales Efforts

Competitive analysis of your competitorStrengths / weaknesses / price structure

Competitive analysis of your own hotelStrengths / weaknesses / price structure

Forecast of future market conditionsEstimated market growth or contraction / performance goals and objectives for

own hotel / timeline for achieving these goals and objectives

Determination of specific marketing strategies & activitiesAdvertising / public relations / promotions

Preparation of a marketing budget

Development of measurement & evaluation tools





Eye or ear catchingMemorableSell the hotel’s featuresCost effectiveDoes not become quickly outdatedReflect positively on hotel’s imageCan be easily directed to the hotel’score client groups

Exterior signageIn-hotel and in-room signage andmaterialsRadio or television commercialsDirect mailingInternet bannersE-mail messageYellow pagesFranchiser-supplied advertisingvehicles (directories, co-ops, etc.)BillboardsPersonal contact


Types of advertising Effective advertising

Advertising





Promotion


“Special”packaging of products or servicesPromoted and disseminated by advertising andpublicity

Publicity

Information about hotel, media-distributed free ofchargeCosts the hotel nothingMay be either good or bad

PublicRelations

(PR)

Activities ensuring hotel has a positive public image(good citizen of the community)Hosting charity events, contributing cash or in-kindservices, donation of hotel staff time for worthy cause





Teaming of GDS with Internet

Internet Sales & Marketing

Online reservation system

Impact

Travel agents: check availability, compare prices andbook hotel on-line

Online booking sites are fastest growing source ofreservations in hotel industry





Effective hotel websites should:

Sales & Marketing Activities: Websites

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 acustomer 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.





The Front Office

Inexpensive to send to many current and potential clients.Has attachment feature function to move documents quickly.Automatically updates user databaseCan disseminate special rate, promotion, new hotel feature toits client list

Internet Sales & Marketing : E-mail Systems

Traditionalcommunication methods

Direct mailing, telephone, fax

Emergingcommunication methods

E-mail system

Advantages of e-mail systems





Pace report

Evaluating Sales & Marketing Department:Pace Report

Is a document summarizing confirmed (group) sales made bySales and Marketing dept.Can be prepared based on number of rooms sold, value (indollars) of sales made, or bothCan also include any period of time in the futureTells hotel’s owner and management the potential sales volumegenerated by Sales and Marketing departmentHowever, does not indicate what actual sales volume should be(STAR report does!)





Evaluating Sales & Marketing Department:Sample Pace Report

Sold this month Total sold YTD Sold same monthlast year

Total sold lastYTD

Jan 25 150Feb 450 750 250 550Mar 550 1,550 330 1,250Apr 650 1,550 550 1,350May 875 1,175 650 1,050June 1,100 1,400 800 1,700July 1,350 2,250 1,100 2,150Aug 1,700 2,900 1,500 1,900Sept 500 700 750 1,750Oct 300 800 550 1,050Nov 850 1,150 300 600Dec 200 550 125 225

Total 8,550 14,775 7,055 13,575

Waldo Hotel Group Rooms Pace Report for January, 200x





Hotel voluntarily submits financial data to SmithSmith maintains confidentiality of all individual hotel dataCombine operating data submitted by selected competitorsAn individual hotel’s operating performance is compared to thatof its competitive set (understanding the competitive set is keycomponent of understanding STAR!)

STAR working process and preparation

Evaluating Sales & Marketing Department:The Smith Travel Accommodations Report (STAR)

Hotel owners, management companies, property management,franchisers, appraisers, financial community

Who are the STAR interest groups?





Operatingcomparison criteria

Evaluating Sales & Marketing Department:The Smith Travel Accommodations Report (STAR)

Goals

Occupancy, ADR, RevPar, market share,historical trends, to-date performance, stateor region

Assess performance of Sales &Marketing department as well as theentire propertyKnow the strength of hotel and Sales andMarketing staff’s sales results, incomparison with selected competitors.

Chapter 11Facility Engineering & Maintenance



Protecting and enhancing financial value of building and grounds forhotel’s ownersSupporting efforts of all other hotel departments through timelyattention to their E&M needsControlling maintenance and repair costsControlling energy usageIncreasing pride & morale of hotel staffEnsuring safety of those working and visiting the hotel

Goals of E&M department

Role of E&M Department



Underpowered (or overpowered) equipmentIncreased building deteriorationExcessive energy usageHigher-than-necessary operating costs

Engineering: Designing and operating the building to ensuresafe and comfortable atmosphere

Role of E&M Department: Engineering

Goals of E&M department



Maintenance: activities required to keep a building(physical property) & its contents in good repair.

Effective hotel maintenance must be:

Role of E&M Department: Maintenance

Planned

Implemented

Recorded



Building’soriginal design,

size and facilities

Role of E&M Department:Design & Renovation

Quality ofconstruction used

in building

Finishes andequipment specified

for installation

Affect

Property Operation & Maintenance (POM) related costs



Major renovation as well as refurbishment required15-22 years

Restoration required; high-maintenance costs incurred22+ years

Refurbishment required; average maintenance costs incurred6-8 years

Minor renovation and refurbishment required8-15 years

Maintenance costs increase3-6 years

Low maintenance costs incurred1-3 years

Building characteristics and requirementsBuilding age

Role of E&M Department:Design & Renovation (continued….)


Renovation and refurbishment normally one via establishment ofan FF&E reserve



Refurbishment and minor renovation is ongoing process inmost hotelsMajor renovation should occur every six to ten yearsRestoration every 25 to 50 years, typicallyIf restoration is not undertaken when needed, the hotel’srevenue-producing potential will likely decline

Restoration: returning a hotel to its original (or better than original) condition

Facts:

Role of E&M Department:Design & Renovation (continued….)



Individuals with varying degrees of skills in:engineering / mechanics / plumbing / electricity / carpentry/ water treatment / landscaping / grounds maintenance

Head of E&MIn smaller hotels, hands-on role in the maintenance effortIn larger hotels, more administrative role

Chief engineer

Staffing the Department

Maintenance Assistants



Exterior

Lawn care, landscaping, leaf and snow removal,window cleaning, and paintingMaintaining hotel’s exterior impacts curb appeal,operating costs, & ultimately the building’s value

Day-to-day upkeep of both exterior and interior of buildings

Indoor plants, interior window washing, floorand carpet cleaningGuestroom and public space related items

Interior

Managing Maintenance:Routine Maintenance



“Replace asneeded”

Replacement plan that delays until the original partfails or is near failuree.g., maintenance of refrigeration compressors

Two ways for implementation

Replacement is based on a predeterminedschedulee.g., maintenance of light bulbs in high-riseexterior highway signs

Systematictotal

replacement

Managing Maintenance:Routine Maintenance (continued….)



any staff seeing an area of concern can initiate a work orderchief engineer keeps a room-by-room record of replacementsor repairs made

Managing Maintenance:Routine Maintenance (continued….)

In a well-managed hotel,

Date Corrected: ___________________ Time Spent: ___________________E&M Employee Comments: _______________________________________Chief Engineer Comments: ________________________________________

Received On: ____________________ Assigned To: ___________________

Problem Observed: ______________________________________________

Date: ______________Time: ____________ Room or Location: __________

Work Order Number: ____(Preassigned)___ Initiated By: _______________

Waldo Hotel Work Order

Work order



Long-term repair costs by prolonging equipment lifeReplacement parts costs because purchases of these can beplannedLabor costs by allowing PM to be performed in otherwise slowperiodsDollar amount of refunds and charge-backs due to guestdissatisfactionCosts of emergency repairs by minimizing their occurrence

Effective preventative maintenance can reduce:

Managing Maintenance:Preventative Maintenance

PM is not a repair program!



Managing Maintenance:Preventative Maintenance (continued….)

Sample PM task list for laundry area dryer

Daily

Monthly

DailyCheck pulley alignmentAdjust rotating basket if neededLubricate motor bearingsLubricate drum bearings if needed

Clean lint trapWipe down inside chamber with mild detergentClean and wipe dry the outside dryer shell

Vacuum the inside of dryer (upper and lower chambers)Tighten, if needed, the bolts holding dryer to floorCheck all electrical connectionsCheck fan belt for wear, replace if neededLubricate moving parts



Most important and most extensive areas for PMCritical to sales effort, to retain guests, and to maintain theasset’s monetary value

Windows, HVAC units, furniture, lights, elevators, carpetsCarpet care is one of the most challenging PM areas

Public space

Guest room




Washers, dryers, folding equipment, water supply lines, drains, lightingfixtures, temperature control unitsChemical dispenser maintenance should be an important part of thelaundry PM program.

Pools and spas, front desk equipment, electronic locks, exterior doorlocks, motor vehicles, and in-hotel transportation equipment

Back-of-house equipment- ovens, ranges, griddles, fryers, other production equipmentDining space used by guests- chairs and booths, self-serve salad or buffet areas, lighting fixtures,guest check processing equipmentMeeting and conference rooms and equipment

Food Service

Landry


Other equipment



is unexpectedthreaten to negatively impact hotel revenuerequire immediate attention to minimize damagerequire labor and parts that may need to bepurchased at a premium

The stronger the routine and PM programs, the fewerdollars spent on emergency repairs!

Emergency maintenance

Managing Maintenance:Emergency Maintenance



Energy management: specific policies and engineering,maintenance, and facility design activities intended tocontrol and reduce energy usage.

Managing Utilities

80% of total utility costs for hotel are actually fixed

Energy costs present 3 - 10% of total operational costs,depending on hotel’s location

E&M department should be concerned with conservingenergy and controlling utility costs



Electricity is most common and usually most expensiveform of energy used in hotels.

Lighting

Light levels measured in foot-candle-The more foot-candles, the greater the illumination

Managing Utilities: Electricity

In candescent lights-Inefficient, short-life, but easy to replace

Electric discharge lights-Longer lives, higher efficiency and low operating costs

Lighting maintenance (lamp repair, bulb change, andfixture cleansing) must be an integral part in PM program.



Heating, ventilation, & air conditioning (HVAC)

Heating components-Electricity is not cost-effective in cold climates-Use natural gas, LPG, steam, or fuel oil

Managing Utilities: Electricity (continued….)

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



Usages of natural gas

Managing Utilities:Natural Gas

Heating water for guest roomsPowering laundry area clothes dryersPowering plants to provide heat to guest rooms and publicspaceCooking (rapid heat production and great degree oftemperature control)

Managed properly, natural gas is an extremely safe source ofenergy!



Hotels encourage manufacturers to practice source reduction& to implement creative programs to reduce solid wasteReduce waste disposal costs by: recycling minimizing wastegeneration & wise purchasing

Reduces the number of gallon of water purchasedReduces the amount the hotel will pay for sewageIn the case of hot water, reduces water-heating costsbecause less hot water must be produced

Conserving water:

Waste

Managing Utilities: Water / Waste

Chapter 12Franchise Agreements and

Management Contracts



A business strategy allowing one party (the brand) to usethe logo, trademarks and operating systems of anotherbusiness entity in exchange for a fee

The Hotel Franchise Relationship

A network of interdependent business relationshipsallowing a number of people 1) to share brandidentification, 2) to develop a successful method of doingbusiness, and 3) to establish a strong marketing anddistribution system.

For the franchisee, franchising helps reduce risk-Proven operational methods are usedFranchisees and their financial capital expand the brandfaster than franchiser could do solo

Franchise benefits

What is franchising?



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 withother hotels under a common brand name.

Hotel Franchising: Origin & Structure

Company administering and directing the brand itself isnot an owner of hotels, but rather a franchise company.

Majority of franchise companies do not actually own thehotels operating under their brand names.-Those companies have right to sell brand name & determine brand

standards

Conflict can arise between hotel owners and brandmanagers- G.M. should balance legitimate interests of hotel and brand



120,5891,1759. Hampton Inn / Hampton Inn and Suites

159,6192,0655. Comfort Inns and Comfort Suites

133,2003996. Sheraton Hotels & Resorts

127,5332,0927. Super 8 Motels

118,1149718. Ramada Franchise Systems

1,351

433

1,947

1,576

4,008

Properties

109,18610.Holiday Inn Express

164,0233. Days Inn Worldwide

160,5404. Marriott Hotels, Resorts & Suites

295,2522. Holiday Inn

304,6641. Best Western International

RoomsBrand

Figure 12.1: Ten Largest Brands

Hotel Franchising:Origin & Structure (continued….)



Supply potential franchisees with disclosure document at either thefirst face-to-face meeting or ten business days before any money ispaid by franchisee to franchiser

Federal Trade Commission (1979):Franchise Rule requires that franchisers:

Hotel Franchising:Governmental Regulations Related to Franchises

Provide evidence, in writing, of any earning claims or profit forecastsmade by franchiser

Disclose number and % of franchisees achieving earnings rates advertisedin any promotional ads that include earnings claims

Provide potential franchisees with copies of basic franchise agreementused by franchiserRefund promptly any deposit monies legally due to potential franchiseeswho elected not to sign a franchise agreement with franchiser

Do not make claims orally or in writing that conflict with writtendisclosure documents provided to franchisee



Name of franchiser and type of franchise it offers for saleBusiness experience of franchise company’s officersFees & royalties that must be paidInitial investment requirementsRights & obligations of franchiser & franchiseeTerritorial protection offered by franchiserRequired operating policiesRenewal, transfer, and termination proceduresEarnings claimsA sample franchise agreementSpecific info required by each state in which FOC is to be filedName and address of legal representative of franchiser

Franchise Offering Circular (FOC) include

Hotel Franchising:Governmental Regulations Related to Franchises



Franchise agreement: legal contract between hotel owners(franchisee) and brand managers (franchiser), whichdescribes duties & responsibilities of each in the franchiserelationship

The Franchise Agreement

A hotel franchise relationship exists with a franchise agreement.



Names of parties signing agreement-Name of legal entity representing the brand as well as corporation,partnership, or sole proprietor owning hotel

Franchise agreement includes:

The Franchise Agreement: Major Elements

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.

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.



Fees- Affiliation fees / royalty fees / marketing fees / reservation fees

Franchise agreement includes: (continued….)


Reports- Room revenue generated, occupancy levels, & occupancy taxes & ADRResponsibilities of franchiser- Inspection schedules, marketing efforts, & brand standards enforcement

Responsibilities of the franchisee- Signage requirements, operational standards & payment schedules

Assignment of agreement- Ownership transfer & its affect upon the agreement



Termination or default- Events that permit a termination, or define a default, by either party

Franchise agreement includes: (continued….)


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



Advantagesto franchisee

The Franchise Agreement:Advantages to the Franchisee / Franchiser

Allowing hotel owners to acquire a brand name withregional or national recognitionConnecting the hotel to the GDSIncreasing hotel’s sales, thus its profitabilityAffecting ability of hotel’s owner to secure financingAssistance with on-site training, advice onpurchasing furnishings & fixtures, reduced operatingcosts, & free interior design assistance

Advantagesto franchiser

Increasing fee payments to the brandGrowing the business (brand spread)Helping pay for fixed overhead of operating thatbrand



Quality and experience of the brand managers- Hotel owners, not brand managers, bear financial risk of poor brand

management

Basic considerations for a selecting a franchise brand:

The Franchise Agreement:Selecting a franchiser

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

Direction of the brand



Number of hotels currently operating under the brand namePercent of hotels, on an annual basis, that elected to leave the brandin the past five yearsNumber of new properties currently being built under the brand’snameThe number of existing hotels converting to the brand (ifconversions are allowed)ADR trend for the last five years in comparison to ADR trend for theindustry segment in which the brand competesOccupancy rate trend for the last five years in comparison to theoccupancy rate trend for the industry segment in which the brandcompetesPercent of total hotel room revenue contributed by the brand’sreservation system and percent of hotels within the brand that achievethat average rate of contribution

Clues to future success of the brand

The Franchise Agreement:Selecting a franchiser (continued….)



1. Application fees2. Area of protection3. Recurring fees4. Standards5. Mandatory service programs6. Operating performance7. FOC8. Fair franchising9. Financing assistance10. Termination

Contents in franchiser questionnaire

Selecting a Franchiser: Franchiser QuestionnaireFigure 12.2: Franchiser Survey



Conversion will always require some facility modification.When a potential franchiser inspects a hotel property whoseowners are interested in a conversion, a PIP (productimprovement plan) will be prepared.Estimating expenses to implement PIP is the hotel owners’job.

A brand conversion = reflagging

Process of changing a hotel’s flag from one franchiser to another

Selecting a Franchiser:The Product Improvement Plan (PIP)

PIP: document detailing property upgrades and replacementsrequired if a hotel is to be accepted as one of a specificbrand’s franchised properties.



Franchise agreement is negotiable.Franchise agreement tends to be written in franchiser's favor.Owners should evaluate all components of proposed franchiseagreements.Hotel owners have demanded that impact studies, prepared byan independent party, be undertaken and paid for, whenappropriate, by franchiser.G.M.s must become adept at operating hotels in best interests oftheir owners, as well as in compliance with their owners’franchise agreement.

Selecting a Franchiser:Negotiating the Franchise Agreement



Management contract: agreement between hotel owners and hotelmanagement company under which, for a fee, the managementcompany operates the hotel.

Management companies will:

Hotel Management Company Relationship:Management Companies

Secure, and if it has closed, reopen the hotelImplement sales and marketing plans to maximize hotel’sshort- & long-term profitabilityGenerate reliable financial statementsEstablish suitable staffing to maximize customer andemployee satisfactionShow hotel to prospective buyersReport regularly to owners about hotel’s condition



Hotel Management Company Relationship:Management Companies (continued….)

Figure 12.3: Ten largest management companies

339.0939. Ocean Hospitalities

448.01065. Lodgian

436.7566. John Q. Hammonds

400.0347. Kimpton Hotels & Restaurant Group

400.0398. Outrigger Enterprise

52

198

17

29

357

Properties

293.010.Sunstone Hotel Investors

521.83. Tishman Hotel Corp.

485.04. Prime Hospitality Corp.

545.02. Destination Hotels & Resorts

2,800.01. Interstate Hotels and Resorts(with 2002 MeriStar merger)

Get annual revenues (inmillions of $)Brand



Reflag hotel from lower quality brand to higher oneReflag hotel from higher quality brand to lower oneManage / directing major renovation of hotelOperate hotel in a severely depressed marketHandle bankruptcy / repossession of hotelManage hotel that is slated for permanent closingManage hotel when G.M. unexpectedly resignsManage hotel extendedly time for owners who elect not tobecome directly involved in day-to-day operations

Management companies will :

Management Companies: Origin & Purpose



Are they first tier or second tier

How to examine the management company

Participation in actual risk and ownership of the hotelsthey 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

Management Companies:Hotel Management Company Structures

By number of hotels they operate



Length of the agreementProcedures for early termination by either partyProcedures for extending contractContract terms in the event of hotel’s saleBase fee to be chargedIncentives fees earned or penalties assessed related to operatingperformanceManagement company investment required or ownershipattainedExclusivity (Is the management contract company allowed tooperate competing hotels?)Reporting relationships and requirementsInsurance requirements of the management companyStatus of employees

Major elements of management agreement include:Management Operating Agreement



Advantages

Management quality can be improvedTargeted expertise can be obtainedDocumented managerial effectiveness is availablePayment for services can be tied to performancePartnership opportunities are enhanced

Disadvantages

Management Operating Agreement:Advantages / Disadvantages to Hotel Owners

The owner cannot control selection of the on-siteG.M. & other high-level managers

Talented managers leave frequentlyThe interests of hotel owners and the managementcompanies they employee sometimes conflict

The costs of management company errors are borneby the owner

Transfer of ownership may be complicated- High cost of buyout limits the number of potential buyers



Hotel ownerFranchise agreement will affect G.M.’s relationship with:

Issues Affecting G.M.s:Managing the Franchise Relationship

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)

Staff- Brand standards will affect every department in hotel.

Guests



G.M.s’challengesCareer management challenges- Long-term career advancement with management company conflicts

with desires of the hotel owners

Issues Affecting G.M.s:Managing for a Management Company

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 previousmanagement company

Conflicts with brand managers

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