Q1) Explain rule of thumb approach for fixing the rates of rooms.

A hotel has different types of rooms on the basis of room size, location, view, décor,
furnishings, amenities, etc. Therefore the front office generally has more than one
room rate category depending on the types of rooms.

Rack rate is the standard rate fixed by the front office management for a particular
category of rooms. The rack rate is applicable for all guests except those who are
authorized for any discounts. Although rack rates are important, guests may ask for
and qualify for discount rates.

Some special room rate categories are:

1. Corporate or commercial rate: the rate offered to companies that provide

frequent business for the hotel or its chain.
2. Group rate: the rate offered to groups, meetings and conventions using the
hotel for their functions.
3. Promotional rate: the rate offered to guests during low occupancy periods to
promote occupancy.
4. Incentive rate: the rate offered to guests in affiliated organizations such as
travel agents and airlines because of potential referral business. This rate may
also be offered to group leaders, meeting planners, tour operators, and others
capable of providing the hotel with additional room sales to promote future
promote future business.
5. Family rate: a rate reserved for families with children.
6. Package plan rate: a rate that includes a guestroom in combination with other
events, activities, or services such as breakfast, golf, tennis, etc.
7. Internet rate: a special discounted rate that many hotels offer through their own
websites. It is available to guests making their online reservations through
hotel’s website.
8. Distressed-inventory rate: a rate offered when a hotel projects or experiences
low occupancy. This rate is implemented to help build occupancy.
 9. Complimentary rate: a room rate provided to special guests and/or important
industry officials. The guest is not charged for the room during the stay but will
have to pay for dining, telephone calls etc.

The management should consider various factors such as operating expenses, guest
demand, market conditions, and related business issues when determining rack rates
or discounted rates. Room rates are very important for a hotel’s success.

There are three methods of establishing room rates:

1. Market Condition Approach

In this method, the management looks at similar hotels in the area and sees what they
are charging for the same product. These properties are often called the competitive
set, which is made up of a number of properties in a market that are a property’s most
important competition. The competition can be based on location, type, brand or other
factors. According to this approach, the hotels will charge only what the market will
accept. This information is available through various public domain sources and
periodic blind calls to competing hotels. A blind call does not identify the hotel
making the call and simply asks for availability and rates on specific dates

2. The Rule-of-Thumb Approach

This method sets the rate of a room at Rs.1/- for each Rs.1000/- of construction and
furnishings cost per room assuming a 70 percent occupancy. For example, if the
average construction cost of a hotel room is Rs.80000/-, the average room rate will be
Rs.80/- according to this method. The emphasis on the hotel’s construction cost fails
to consider the effects of inflation. It also fails to consider the contribution of other
facilities and services towards the hotel’s desired profits.

The rule-of-thumb approach should also consider the hotel’s actual occupancy level
instead of a fixed 70 percent occupancy.
 3. Hubbart Formula Approach

It is a bottom-up approach to pricing rooms. This approach considers operating costs,

desired profits, and expected number of rooms sold to determine the average rate per
room. It is considered a bottom-up approach because its initial item – net income
(profit) – appears at the bottom of the income statement. The second item – income
taxes – is the second item from the bottom of the income statement, and so on. The
Hubbart Formula approach involves the following eight steps:

1. Calculate the hotel’s desired profit by multiplying the desired rate of return
(ROI) by the owner’s investment.
2. Calculate pretax profits by dividing desired profit (Step 1) by 1 minus the
hotel’s tax rate.

3.Calculate fixed charges and management fees. This calculation includes estimated
depreciation, interest expense, property taxes, insurance, building mortgage, land, rent
and management fees.

4.Calculate undistributed operating expenses. This calculation includes estimating

expenses for the following categories – administrative and general, information
technology, human resources, transportation, marketing, property operation and
maintenance, and energy costs.

5.Estimate non-room operated department income or loss, that is, food and beverage
department income or loss, telecommunications department income or loss and so on.

6.Calculate the required rooms department income. The sum of pretax profits (Step 2),
fixed charges and management fees (Step 3), undistributed operating expenses (Step
4), and other operated department income (Step 5) equals the required rooms
department income.
7.Determine the rooms department revenue. The required rooms department income
(Step 6), plus rooms department direct expenses of payroll and related expenses, plus
other direct operating expenses equals the required rooms department revenue.

8.Calculate the average room rate by dividing rooms department revenue by the
expected number of rooms to be sold.

Q2) Define front office. Discuss how to evaluate the front office operations.

Evaluating Front Office Operations

Evaluating the results of front office operations is an important management function.

Without thoroughly evaluating the results of operations, managers will not know
whether the front office is attaining planned goals. Successful front office managers
evaluate the results of department activities on a daily, monthly, quarterly and yearly
basis. Some important tools which front office managers can use for evaluating front
office operations and to evaluate the success of front office operations are:

1. The Daily Operations Report for Evaluating Front Office Operations– The
daily operations report also known as the manager’s report, the daily report
or the daily revenue report, summarizes the hotel’s financial activities during a
24-hour period. The daily operation report has a summary of cash, bank
accounts, revenue and accounts receivable. Copies of the report are generally
distributed to all department and division managers.

2. Occupancy Ratios – Occupancy ratios measure the success of the front office
in selling the hotel’s primary product – guestrooms. The following room
statistics must be gathered to calculate basic occupancy ratios:

 Number of rooms available for sale

 Number of rooms sold
  Number of guests
 Number of guests per room
 Net rooms revenue

Occupancy ratios that can be calculated from these data include occupancy
percentage, multiple or double occupancy ratio, average daily rate, revenue per
available room (REVPAR), revenue per available customer (REVPAC), and average
rate per guest. These ratios are calculated on a daily, weekly, monthly and yearly
basis.

 Occupancy percentage = Number of Rooms Occupied / Number of Rooms

Available

 Multiple Occupancy Ratio = Number of Rooms Occupied by More Than One

Guest / Number of Rooms Occupied

 Average Guests per Rooms Sold = Number of Guests /Number of Rooms Sold

 Average Daily Rate = Total Room Revenue /Number of Rooms Sold

 REVPAR = Total Room Revenue / Number of Available Rooms

 REVPAC = Total Revenue /Number of Guests

 Average Rate per Guest = Total Room Revenue / Number of Guests

3. Rooms Revenue Analysis – Front office staff members are expected to sell
rooms at the rack rate unless a guest qualifies for an authorized discounted
room rate. A room rate variance report lists those rooms that have been sold
at other than their rack rates. One way for front office managers to Evaluating
Front Office Operations and the sales effectiveness of the front office staff is
to generate yield statistic, which is actual rooms revenue as a percentage of
potential rooms revenue.
Yield Statistic = Actual Rooms Revenue / Potential Rooms Revenue

4. The Hotel Income Statement – The hotel’s income statement provides

important financial information about the results of hotel operations and
Evaluating Front Office Operations for a given period of time. The period may
be one month or longer but should not exceed more than one business year.
The hotel’s statement of income is also called a consolidated income
statement because it presents a complete picture of all the hotel’s financial
operations.

SAMPLE CONSOLIDATED STATEMENT OF INCOME

WESTVIEW HOTEL

Summary Statement of Income

For the Year ended 12/31/2012

PAYROLL
OPERATED NET COST OF & OTHER INCOME
SCHEDULE
DEPARTMENTS REVENUE SALES RELATED EXPENSES (LOSS)
EXPENSES

Rooms 1 6070356 1068383 473487 4528486

Food 2 2017928 733057 617705 168794 498372

Beverage 3 778971 162258 205897 78783 332033

Telecommunications 4 213744 167298 31421 17309 -2284

Rentals & Other

5 188092 188092
Income

Total Operated 9269091 1062613 1923406 738373 5544699

Departments

Undistributed
Operating Expenses

Administrative And
6 227635 331546 559181
General

Marketing 7 116001 422295 538296

Property Operation
8 204569 163880 368449
And Maintenance

Utility Costs 9 546331 546331

Total Undistributed
548205 1464052 2012257
Operating Expenses

Totals 9269091 1062613 2471611 2202425 3532442

Income After
Undistributed 3532442
Operating Expenses

Rent, Property Taxes

641029
And Insurance

Income Before
Interest,
Depreciation, 2891413
Amortization And
Income Taxes

Interest Expense 461347

Depreciation And
552401
Amortization

Income Taxes 469810

Gain On Sale Of
1574
Property (+)

Net Income 1409429

5. The Rooms Schedule – the hotel’s income statement shows only summary
information. The separate departmental income statements prepared by each
revenue center provide more detail and to help Evaluating Front Office
Operations. Departmental income statements are called “schedules” and are
referenced on the hotel’s statement of income.

SAMPLE ROOMS DIVISION INCOME STATEMENT

ROOMS – SCHEDULE # 1

WESTVIEW HOTEL

For the year ended 12/31/2012 Current Period

Revenue 6124991

Allowances 54635

Net Revenue 6070356

Expenses

Salaries and Wages 855919

Employee Benefits 212464

Total Payroll and Related Expenses 1068383

Other Expenses

Internet/Satellite Television 20100

Commissions 66775

Complimentary Guest Services 2420

Contract Services 30874

Guest Relocation 1241

Guest Transportation 48565

Laundry and Dry Cleaning 42495

Linen 12140

Operating Supplies 122600

Reservations 40908

Telecommunications 12442

Training 7122

Uniforms 60705

Other 5100

Total Other Expenses 473487

Total Expenses 1541870

Departmental Income 4528486

 6. Rooms Division Budget Reports – The hotel’s accounting division also
prepares monthly budget reports that compare actual revenue and expense
figures with budgeted amounts. These reports can provide timely information
for evaluating front office operations. Front office performances are often
judged according to how favorably the rooms division’s monthly income and
expense figures compare with budgeted amounts which is very important to
Evaluating Front Office Operations.

SAMPLE MONTHLY ROOMS DIVISION BUDGET REPORT

LANDMARK HOTEL

BUDGET REPORT – ROOMS DIVISION

FOR JANUARY 2013

Variances

Actual Budget Amount %

Revenue

Room Sales 156240 145080 11160 7.69

Allowances 437 300 137 (45.67)

Net Revenue 155803 144780 11023 7.61

Expenses

Salaries and Wages 20826 18821 (2005) (10.65)

Employee Benefits 4015 5791 1776 30.67

Total Payroll and Related

24841 24612 (229) (0.93)
Expenses
Other Expenses

Commissions 437 752 315 41.89

Contract Cleaning 921 873 (48) (5.50)

Guest Transportation 1750 1200 (550) (45.83)

Laundry and Dry Cleaning 1218 975 (243) (24.92)

Linen 1906 1875 (31) (1.65)

Operating Supplies 1937 1348 (589) (43.69)

Reservation Expenses 1734 2012 278 13.82

Uniforms 374 292 (82) (28.08)

Other Operating Expenses 515 672 157 23.36

Total Other Expenses 10792 9999 (793) (7.93)

Total Expenses 35633 34611 (1022) (2.95)

Departmental Income 120170 110169 10001 9.08%

Q3) Explain the methods for measuring the potentiality of operations of front
office.

Q4) Discuss the techniques of selection of employees.

Human resources selection techniques vary, based on a company's staff and

resources. The methods for selecting employees include preliminary
screening, phone interviews, face-to-face meetings, and HR functions to
determine whether a candidate is indeed suitable for the job. Small
businesses, even if staff resources are limited, should use these steps to
 choose the right candidate. The result is a wise hiring decision, and possibly
lower turnover and higher employee retention, all of which benefit small-
business employers.

Preliminary Screening

Once an employer has received what it considers sufficient interest in the position, the
recruiter starts screening the applications or resumes to determine which applicants to
contact for the preliminary screening interview. Employers determine sufficient
interest based on the number of applications or the amount of time the job is posted.
Many times, employers take down the job posting when they receive a manageable
number of applications, such as 100, to review for a handful of qualified candidates.
Small businesses that don't have a lot of time to devote to screening applicants should
screen based on discrete criteria, such as minimum number of years' experience or
verifiable credentials. Preliminary screening is an effective method for narrowing the
selection to candidates who meet the basic requirements for the job.

Telephone Interviewing

Used as a first-round interview, telephone interviews give recruiters an opportunity to

find out whether an applicant is still interested in the job. It also saves small
businesses the money and time of conducting face-to-face interviews immediately
after the preliminary screening step. A telephone interview also confirms whether the
applicant has the requisite qualifications. Following the telephone interview, the
recruiter typically selects the candidates who were able to articulate their skills and
qualifications in a manner that meets the company's staffing needs

In-Person Interviews

Face-to-face interviews take time, which is one of the reasons the applicant pool
should be narrowed by conducting preliminary screening and telephone interviewing.
The recruiter is a conduit for providing the hiring manager with the best-suited
candidates, a process that streamlines the selection process. For example, out of 10
applicants interviewed by phone, the recruiter should select three to four candidates.
The hiring manager further narrows the selection to two finalists. In a small business,
although the hiring manager may be doing the work of a recruiter, best practices for
HR selection methods dictate that at least one face-to-face interview be conducted
before making a decision.

Cultural Fit Selection

In the third-round interview, often the decision round, the hiring manager asks
questions that will help him determine which candidate fits the organizational culture.
Qualifications aside, an important factor in the hiring decision is cultural fit. Cultural
fit means the candidate's values align with the organization's values. It's a subjective
analysis, and one that hiring managers can only attribute to being a gut feeling, not
objective criteria.

Vetting Candidates

Once the hiring manager tells the recruiter who has been selected as the most suitable
candidate, the recruiter dispatches a conditional job offer. As part of the selection
techniques, a conditional offer goes out to the No. 1 candidate, while keeping the
runner-up in mind should the first candidate not pass the final stage. The final stage in
what's now become the vetting process consists of pre-employment matters, such as
background checks and drug testing. Even small businesses should invest in the time
and expense of background checks -- doing so can reduce the likelihood of hiring
mistakes. Background checks verify information provided by the candidate and are an
exercise in due diligence, according to management consultants Kim Kerr and Barry
Nixon, in their May 2008 article on HR.BLR.com titled "Benefits and Components of
a Background Screening Policy." Once the candidate passes the background check
and the drug test, the company extends a final offer. The company then sends a
rejection letter to the No. 2 candidate now that it knows the No. 1 candidate can move
forward with the on-boarding process.
1. Ability tests:

This assessment method helps in knowing more about the employee in a direct way.
It showcases an individual’s ability in knowing how well would he turn up for the
position he has been rendered to and the duties he has to cater to.

It helps in the measurement of mental abilities of an employee such as his/ her verbal,
reasoning , mathematical ability and the reading ability.

These tests include multiple choice questions and help in increasing the knowledge
about a particular employee’s capability for a particular position. This test however is
an very effective one in determining a person’s ability.

2. Integrity tests:

Now this test is the hardest of all. It allows the employee to show off his/her ability in
a positive way so that the company chooses to select him/her.

It helps in measuring the attitude and experiences of a particular employee. It helps in

relating the individual with his honesty, the art of dependability and the nature of
trustworthiness.

If these factors are combined together in a positive way, then it is a sure shot green
signal for the employee to be selected for a respected position in the firm.
3. Personality describing tests:

These tests are

of utmost importance everywhere, be it a small start up consultancy or an already
established firm.

These personality tests help in the assessment of certain traits that help in the
development of an employee and help pave way to the road of success.

Every company needs a known and to the best mannered employee to help the
company reach higher goals of success. It has its own traditional way of conducting
the test with a paper and a pencil.

4. Data revealing bio data tests:

Every company has to choose such an employee who is and will be loyal to the
company for a prolonged period of time. This can be attained only by knowing the
employee’s history, his background, his work preference and many more.

Hence, a data that reveals his/her biography is conducted from the side of the
employee. This test allows the employee to write about his personal characteristics,
his interests, likes and dislikes and so on.
It focuses how effectively the employee has performed in the past and will perform in
the near future.

5. Knowledge about the job tests:

These tests are the same like those of cognitive ability, but show a deeper meaning
whilst its application.

It describes the ability of an employee in knowing about the job which he is interested
to work upon. Such tests include the traditional pencil and stencil test.

Also, sometimes an essay regarding the company is asked to be written before giving
a final call for a particular employee.

These tests cannot be used in a situation where in an employee has to be trained after
being selected. It works only on persons who have got to be selected and trained upon
in one go.
6. Structured Interview tests:

These tests are the most common and most used ones whilst conducting a test to
determine an employee’s ability.

Also, it is the best used device in most of the organizations and instructions.
Structured interviews consist of few specific generic questions catering to the firm.

These questions are to be answered by the employee in a structured way and that
would ultimately determine his/her capability in working for that particular firm or
institution.

Also, this test provides a standardized result as compared to various other tests. It
helps in evaluating potential job candidates.

7. Situational tests:

Such tests determine how an individual will react in a given situation undergoing in a
company.
These are the situational judgment tests that should be recommended to every single
institution for application of a potential employee. It will determine in knowing how
an individual will handle the situation.

Generally, crisis management is the most given situation in these tests as it

showcases how well an individual handles it and leads the company in worst times
too.

These tests are usually videotaped for recording an employee’s behavior during such
crisis times.

8. Assessment centers:

These tests last up to a one day or even more days. These tests are the same like the
work samples.

However, it focuses more on the ability of an individual employee. An employee is

been called at an assessment centre, given a list of to do work to be done in a
stipulated time.

And then he/she gets selected on how they have worked in this given time limit.
Whether they managed to get through this deadline thereby leaving a negative
impression in the minds of the employer.

9. Samples related to work:

These tests are of utmost importance in knowing how well an individual deals in a
particular situation.

Work sample tests allow the individual to showcase his/ her abilities in working as a
potential candidate. These tests can be called as a mirror in determining how well an
employee performs in a given situation.
A certain work task is given and the individual is asked to work upon it. Later on, the
task gets proofread and approved by the recruiters and this is how the employee paves
way through this process directly to the institution.

10. Physical ability tests:

These tests allow the

individual to showcase his/her ability in the test. These tests are less common and are
not much in usage.

However, it allows the candidate to show his potentiality in terms of weight and
physical ability. Hence, to pass out in this test, stability of mind and a healthy soul a
fit toned body is necessary enough.

Also, this test has a specified time frame which allows the candidate to showcase his
talent in a particular set of time period.

11. Realistic job previews:

These tests help in giving out a considerable amount of potential candidates from
among a hundred ones.

A realistic crisis called situation is given and then the employee is asked to solve it on
own. Now the employer has to decide how he will judge this particular candidate.
The crisis can be of the same which your company might have gone through quite a
long time ago.

Now if the employee has researched well about the company then he might strike the
right chord and get dealt with it in a quick and positive way.

12. Forms of the applicants:

This is the easiest and less time consuming way in picking out the best employees.
Resumes are sent by all and the recruiter has to do just one job.

Look at all the resumes and cut short the best ones. Now this has to be considered in
one way. It has to be divided into different sections so the best ones are picked up
from among a thousand applicants.

The following criteria should be kept in mind while choosing the best resume,
experience, knowledge, skills, talents, acknowledgements, references, physical
ability and attitude.

13. Preliminary screenings:

Such screenings are conducted to choose the best of the employees from a plethora of
the existing ones.

It is obvious that a recruiter might have short listed 50-60 applicants. Now to cut short
them more and to conclude with the best applications for a particular job, the recruiter
must be smart enough to chose the perfect one.

Also, this method has to be considered by keeping in mind the following possibilities;
number of year’s experience and credentials.

This method is the most effective method in choosing among a hundred good
applicants and pick up the best ones for this job.
14. Face to face interviews:

This is the toughest among all and for both the parties. Most people dislike this
process as it consumes a lot of time and makes the interviewee nervous enough to
blabber in front of everyone.

Also, it hits on a lot of misconceptions as the interviewer might be prejudiced and

partial enough not to choose the deserving candidate because of personal issues.

He might let go off the short ones as they might be considered too pushy. The ones
with beard might feel rejected because people feel that they have something in
common to hide their feelings.

However, this method, if approached in the right way, opens gate for a lot of
knowledgeable information to be exchanged.

15. References:

These tests are of a little importance as it does not give us the freedom to know more
about the employee.
It shows how well the employee has performed in his/ her previous work places and
asks the employer to determine the employee’s ability in this way.

You can ring up the contact number mentioned in the reference section and know the
details about your employee. This would work either ways even. Hence, this method
is least used in the selection assessment methods.

16. Group selection methods:

These methods are very common and are also very much in usage in the corporate
world.

Nowadays, open ground debates and elocutions have allowed people to show off their
talent in a positive way. Hence, people are now not afraid to open up in the group
interviews.

It allows exchanging knowledge and valuable information that most of the people
might be alienated to.

That particular group which has to be interviewed can be asked to do a presentation or

an activity together, thereby leading to unity goals in the company.

Q4) Explain various methods of performance appraisal.