1

Planning and Evaluating Operations

2

Occupancy Ratios

• Measures the success of the front office in selling rooms.– Common data includes:

• Number of Rooms Available for sale• Number of Rooms Sold• Number of Guests• Net Rooms Revenue

3

Occupancy Ratios: Occupancy Percent

• Proportion of rooms sold or occupied during a specific time period (Day, Month, Year)

• Rooms Occupied / Rooms Available• Example : Rooms Occupied = 750;

Rooms Available = 1000• 750 / 1000 = .75 or 75%

4

Occupancy Ratios: Average Daily Rate (ADR)

• The average of all the room rates on the property.

• Room Revenue / Rooms Sold• Example: Room Revenue = $125,000

and Rooms Sold = 700

– $125,000 / 700– ADR = $178.57

5

Occupancy Ratios: REVPAR

• Measures Financial Performance– Based on Total Available Rooms

• Room Revenue / Available Rooms• Example: Room Revenue = $125,000

and Available Rooms = 1000• $125,000 / 1000• Revpar = $125.00

6

Occupancy Ratios: Yield Statistic

• Ratio of actual room revenue to potential room revenue.

• Actual Rooms Revenue / Potential Room Revenue

• Example: Rack rate = 189.00; Number of Rooms sold = 700

• Potential Room Revenue = $189 X 700 = $132,300

• Actual Revenue was $105,623 • $105,623 / $132,300• = 79%

7

Occupancy Ratio Exercise

• Last night the Triple Diamond Resort reported the following:

• 1,250 rooms were available for sale; 1,132 rooms were sold; Room revenue was $201,858 and the rack rate for the evening was $209.00

• What was the Occupancy Percent? What was the ADR? What was the Revpar? What was the Yield Statistic?

8

Budgeting for Operations

• Most important long term planning function.

• Addresses– Revenues– Expenses

• Used to evaluate the actual results of the operation.

9

Forecasting Room Revenue

• Rooms Available X Occupancy Percentage X ADR

– Rooms Available = 43,800– Occupancy % = .76 (76%)– ADR = 132.66

• 43,800 X 76% X $132.66 = $4,415,986

10

Estimating Expenses

• Direct Expenses (Payroll, Guest Supplies, Laundry)– Vary in proportion to rooms revenue– Historical Data can be used based on a

percentage of room revenue.

11

Examples

• Room Revenue = $1,997,280– Payroll = 17.6%

• Estimated Payroll = $351,521• $1,997,280 X 17.6%

– Guest Supplies = 3.2%• Estimated Laundry = $63,912• $1,997,280 X 3.2%

12

• Sample Profit and Loss Statement