Learning Objectives

1. Explain why the food and beverage department, although not the principle source of profit, can be very important to a hotel's success.
2. List the principle sources of income and expense by department according to the uniform system of accounts for hotels.
3. Define the term yield management, and explain why it is used in hotel industry pricing.
4. Describe the integral role of housekeeping to a hotel and the responsibilities of housekeeping staff.
5. Provide examples of hotel security issues and technical and managerial responses to preventing and minimizing security hotel problems.
6. Explain how accounting statements can be used to measure the performance of departments and executives.
7. Define the terms occupancy percentage and average rate, and provide the formula used to compute each; identify two other key operating ratios used by the hotel industry.
8. Explain the relationship of the financial structure of a hotel to its cost of operations.

Chapter Overview

This chapter has two basic goals. First of all, it describes the way that a hotel is organized to serve the guest. The chapter provides an overview of the work of the major functional departments. It also describes the information flows that are essential to managing a hotel-and the systems that carry that information. The financial dimensions of a hotel are spelled out briefly, too, and some key terms are defined.

The second goal of this chapter is to give the student who hasn't worked in a hotel an idea of what it is like to work there. Here it is useful to provide the basic material that describes the functional departments.

Key Concepts

1. Explain how lodging organizations may differ based on their various sizes.
• Most properties basically perform the same functions, but the way in which they accomplish them varies with the property size.
• At a small property, there may be the general manager responsible for running the rooms departments and for supervising the assistant manager responsible for food and beverage.
• A large property requires a complex organization with several layers of authority.
2. Examine the rooms side of the house.
• Departmental income is the revenue remaining after the direct operating costs of the department are subtracted.
• The day-to-day operations of the typical rooms department yield a departmental income of 70 percent or more, compared to 15 to 20 percent for the food and beverage department.
3. Discuss front-office duties.
• Front-office duties include welcoming guests, answering their questions, and checking them in and out. Desk clerks are usually the first to hear any complaints.
• Since desk clerks represent the hotel to guests, courtesy and efficiency are vital.
• The night auditor is a desk clerk with special accounting responsibilities.
4. Focus on the automation of the front office.
• Property management systems (PMS) enhance the operational efficiency of the front office by eliminating repetitive tasks, and improve service by providing information faster and more accurately.
• An increasing number of hotels provide an automated check-out system and some hotel chains are testing automated check-in.
• When the front-desk computer is interfaced with other systems, front-office clerical routines can be simplified.
• Most chain or franchised properties interface their front-office systems with other departments, as well as their group's central reservation system.
5. Explore reservations and yield management.
• Two traditional measures of hotel success are occupancy and average rate per rented room (average daily rate, or ADR).
• Yield management involves varying room rates according to the demand for rooms during any given period of time.
• Careful employee training is essential to secure an effective yield management system.
6. Examine the housekeeping department.
• For both business and leisure travelers, clean rooms are essential.
• The housekeeping department is usually headed by an executive housekeeper.
• At larger properties, the executive housekeeper has at least one assistant and several supervisors who are usually called inspectors who supervise the room attendants in designated areas. Many hotels have substantially reduced the number and role of inspectors giving housekeepers the responsibility of inspecting their own rooms utilizing a checklist of cleanliness requirements.
• The housekeeping department also purchases guest room supplies.
• In most hotels, housekeepers clean the halls and public areas.
7. Discuss telephone service.
• For purposes of revenue, one often hears about the telephone department.
• Only in the largest hotels is there really a separate organizational unit.
• The increasing availability of voice mail and automated systems has expanded the service, reduced staffing requirements, and minimized translation needs.
• The prevalent use of cellular phones has reduced the telephone department's revenue, while in-room high-speed Internet access and in-room entertainment have supplemented its revenue.
8. Focus on uniformed services staff.
• Uniformed staff who perform personal services for guests include the bell staff, concierge, security workers, valet, and garage employees.
• The bell staff carries the guest's luggage and shows the guest to their room, demonstrates the room's operations and features, and may indicate when food service is offered, as well as provide other information.
• The valet will park the guest's car.
9. Review security concerns and issues.
• Security is a major concern for hotels. It is approached as both a technical and management problem.
• Technical measures include replacing room numbers on keys with coded identification, replacing metal keys with electronic or card-based locks, providing room safes, and installing improved keyholes for unit doors.
10. Discuss the food and beverage department.
• Some economy hotels offer only a complimentary breakfast, while all-suite properties also offer complimentary cocktails in the evening.
• Many full-service hotels have several different food outlets in order to extend guest services and keep the guest's food business in the hotel.
• Many hotels emphasize the food and beverage department's role as a profit center.
11. Review banquet service.
• Large properties may have a catering or banquet department headed by a catering manager who books and sells banquets. They usually have special full- and part-time banquet-service staffs.
• Small properties usually include banquet activities among the restaurant manager's duties. They use employees from their regular crew and often supplement them with part-time employees.
12. Examine food production.
• The person in charge of hotel food production is usually called the executive chef.
• Food-production manager is an increasingly common title in food service. These managers are usually accomplished cooks, emphasize kitchen management, and rely on strict adherence to written recipes to ensure quality.
• Hotels may have additional specialized culinary sections of the main kitchen.
13. Explain the importance of sanitation and the employees responsible for it.
• The importance of sanitation in food service cannot be overstated. Students can learn a lot about how a food service operation functions by becoming dishwashers, pot washers, and cleanup crew members.
14. Discuss leased restaurants.
• The practice of leasing restaurants has become increasingly common. Leasing allows hotel management to focus on the more profitable rooms.
15. Explore sales and marketing.
• Hotel marketing involves creating customers, encouraging guests to choose the property, and promoting it to target groups.
• Personal selling is a day-to-day activity. Larger properties divide the sales function into specific target markets to allow sales managers and associates a more defined focus. In smaller hotels, the general manager is responsible for managing sales.
16. Discuss accounting, human resources, and engineering.
• Also called the back office, the accounting staff is responsible for accounts receivable, accounts payable, payroll, and financial reporting and control.
• Since lodging is a labor-intensive industry, issues related to human resources are important.
• Engineering is responsible for operating the heating and air conditioning of a hotel; maintaining its refrigeration, lighting, and elevator systems, and overseeing all mechanical equipment.
17. Describe the uniform system of accounts.
• Hotel accounting is usually guided by the uniform system of accounts for hotels, which arranges the reporting of income and expense, so that the relative efficiency of each major department can be measured by the departmental income.
18. Review key operating ratios and terms.
• In addition to the key ratios used to measure food service operation results, hotels use other ratios to measure such operating results as occupancy, average rate, number of guests per occupied room, revenue per available room, and average rooms cleaned per maid day.
19. Examine capital structure.
• Capital costs are a significant part of a hotel's cost structure. They include rent, depreciation, interest, taxes and insurance.
• The hotel industry is capital-intensive. This means it uses a large part of its revenue to pay for capital costs, including real estate taxes.
20. Explore entry points and careers.
• There are several routes to advancement in the hotel industry. You are likely to begin your career in one of the following departments: front office, accounting, sales and marketing, or food and beverage.
21. Discuss front office positions.
• Many people begin their lodging careers in the front office.
• In limited-service properties, the front office is the most important area of technical knowledge.
22. Review accounting positions.
• Accounting is interesting and prestigious if you like to work with numbers.
• The hours are reasonably regular, and the pay is usually good.
23. Focus on sales and marketing positions.
• Many successful hotel operators have a sales background.
• Successful sales personnel are in demand and find their work interesting and financially rewarding.
24. Discuss food and beverage positions.
• The food and beverage area is one of the most demanding in hotel operations.
• Food and beverage managers need strong skills in product cost-control for both food and alcoholic beverages, employee scheduling, menu writing, and sanitation and housekeeping.
• Food and beverage management experience offers a sound basis for advancement to general management.
25. Explain how hotels can be purchased or managed with little or no investment.
• When banks must take over a hotel whose former owner has declared bankruptcy, they need people to handle operations.
• Some older hotels in smaller cities may need to be revitalized.

Yield Management and Performance Ratios

2. Average Daily Rate (ADR)

3. Revenue per Available Room (RevPar)

4. Yield management

Study Questions

1. What is required of a night auditor?
2. What is the engineering department in a large hotel responsible for?
3. What percent of total sales should the rooms department contribute in a hotel?
4. What does leverage mean and why is it important in the hotel industry?
5. What is a property management system?
6. What is considered a capital cost?
7. What is yield management?
8. Why are hotel restaurants often costlier to operate than free-standing restaurants?
9. What percentage of sales should be contributed by a typical food and beverage department?
10. Who provides guest information in upscale full-service hotels?
11. Know how to calculate: guests per occupied room, occupancy percentage, average daily rate, RevPar, average rooms cleaned per housekeeper, total revenue for a given night.
12. What is the most time consuming duty of the morning front desk shift?
13. In upper upscale hotels, who is the person who provide guest information especially on restaurants, theaters, and other entertainment in the city?
14. The process of balancing the day's charges and cash receipts agains the guests' accounts is referred to as _____?
15. What are the major security problems in hotels?
16. What department is found in a full-service hotel but not in a limited-service hotel?
17. What is a biometric safe?
18. In lodging operations, marketing is part of which functional area?
19. For operations that cannot afford a magstrip key card system, how can they improve the security of room keys?
20. What are bonuses for executive-level property managers based on?
21. What are capital costs?
22. What is the broad category of costs that pertain to all departments and cannot be perfectly assigned to any one department called?