TABLE OF CONTENT
COVER
PREFACE .................................................................................. 1
TABLE OF CONTENT ............................................................ 2
I. Front Office Formula............................................................. 4
1. Occupancy .............................................................................. 4
1.1 Room Occupancy................................................................... 4
1.2 Sleeper Occupancy ................................................................ 4
1.3 Income Occupancy ................................................................ 5
1.4 Equivalent Occupancy ........................................................... 6
2. Average Rate .......................................................................... 8
3. Revenue Achieved .................................................................. 8
4. RevPar..................................................................................... 9
5. GopPar .................................................................................. 10
6. Average Guest Stay ............................................................. 11
7. Average Expenditure ........................................................... 12
8. Average Guests Per Room Sold.......................................... 12
9. Average Daily Rate .............................................................. 12
10. Average Room Revenue .................................................... 13
11. Average Revenue per Guests ............................................ 14
12. Potential Average Single Rate .......................................... 14
13. Potential Average Double Rate ........................................ 15
1
14. Yield Management ............................................................. 15
14.1 Potential Average Single Rate ........................................... 16
14.2 Potential Average Double Rate ......................................... 17
14.3. Multiple Occupancy Percentage ....................................... 18
14.4. Rate Spread ....................................................................... 18
14.5. Potential Average Rate ..................................................... 19
14.6. Room Rate Achievement Factor ...................................... 19
14.7. Yield Statistic.................................................................... 20
15. House Count ....................................................................... 20
16. Total Number of Guests in the Hotel ............................... 21
17. Overstay Percentage .......................................................... 21
18. Understay Percentage........................................................ 22
19. No-Show Percentage .......................................................... 22
20. Cancellation Percentage .................................................... 23
21. Foreign guest occupancy percentage ............................... 24
2
I. Front Office Formula
1. Occupancy
Occupancy is usually expressed as a percentage. By using the percentage
it is possible to make meaningful comparisons. Income alone, for
example, is unreliable, for while a hotel may be taking more than
previous year, there is no allowance for any increases in prices that may
have occured.
1.1 Room Occupancy
To calculate room occupancy, express the rooms sold as a percentage of
the room available:
Room Occupancy = (Total Rooms Sold / Total Rooms Available) x
100%
For Example, for the 31 days in July,
• Total Rooms Sold = 2480
• Total Rooms Available = 3100
Room Occupancy = (2480 / 3100) X 100% = 80%
1.2 Sleeper Occupancy
3
Sleeper occupancy is sometimes referred to a guest occupancy. This is a
useful statistic for calculating restaurant staffing levels and predicting
sales of food and drink.
Sleeper Occupancy = (Actual Sleepers / Potential Sleeper) x 100%
For example,
ABC Hotel has 50 double room and 50 twin room, of the 85 rooms sold,
60 have been sold at the double rate and only 50 were occupied by two
people. The other 10 were charged at the double rate but only occupied
by one person. So,
• Actual Sleepers:
No. of Rooms No of Guests
50 x2 = 100
10 x1 = 10
25 x1 = 25
85 135
The actual sleepers are 135.
• Potential Sleepers:
4
No. of Rooms No of Guests
50 double x2 = 100
50 twin x2 = 100
200
The potential maximum number of sleepers is 200.
Sleeper Occupancy = (135/200) x 100 % = 67.5% Sleeper Occupancy
1.3 Income Occupancy
Income Occupancy = Actual Income / Total Possible Income x 100%
For Example, for the 31 days in March,
• Actual Income = $400
• Total Possible Income = $750
Income Occupancy = ($400 / $750) x 100% = 53%
1.4 Equivalent Occupancy
Management can use the equivalent occupancy formula when it wants to
know what other combinations of room rate and occupancy percentage
provide equivalent net revenue.
The equivalent occupancy formula is very similar to the identical yield
occupancy formula, but takes marginal costs into account by
incorporating gross profit or contribution margin.
5
The cost per occupied room ( also called the marginal cost ) of providing
a room is the cost the hotel incurs by selling that room (for example,
housekeeping expenses such as cleaning supplies); this cost would not be
incurred if the room were not sold ( as opposed to fixed costs, which are
incurred whether the room is sold or not).
The contribution margin is that portion of the room rate that is left over
after the marginal cost of providing the room has been subtract out.
To find the equivalent occupancy, use either of the following formula
(which are equivalent versions of the same equation).
• Equivalent Occupancy =
Rack rate - Marginal cost
Current occupancy % X
Rack rate X (1-discount %) – Marginal Cost
• Equivalent Occupancy =
Current Contribution Margin
Current Occupancy % X
New contribution Margin
6
Example :
Casa Vana Inn is currently operating at 70 percent occupancy with an
average rate of $80, and considering strategies designed to raise its
average rate to $100.
Further assume that the marginal cost of providing a room is $12. What
occupancy percentage must the Casa Vana Inn achieve to match the net
room revenue it currently receives?
Equivalent Occupancy = 70% x $80 - $12
$100 - $12
= 54.1 %
Recall from the discussion of identical yields that the Casa Vana Inn
needs a 56 percent occupancy to produce an identical yield statistic – that
is, equivalent gross revenue. However, the Casa Vana Inn does not need
to match its gross revenue to achieve the same net revenue, since by
selling fewer rooms ( at the higher price), it incurs fewer associated
operating costs.
Example :
What is the equivalent occupancy to 70 percent with an $80 average room
rate if the average room rate is discounted by 20 percent (to $64)?
7
Answer :
Equivalent Occupancy = 70% x $80 - $12
$64 - $12
= 91.5 %
2. Average Rate
The average rate shows how much a room is being sold for across the
hotel.
Average Rate = (Room Revenue / Rooms Sold)
To calculate the average rate when, for example, room income is $3400
and total rooms sold is 85 rooms:
Average Rate = (3400/85) = $40.00
Figures are normally expressed excluding VAT or local sales tax
3. Revenue Achieved
Average rate alone does not give a measure of performance against the
potential of the hotel. To do that, many hotels look at the revenue as a
percentage of the possible maximum.
%Revenue Achieved = (Actual Revenue / Potential Revenue) x 100%
In the example hotel, the tariff (excluding VAT and sales tax) is as
follows:
8
Room type 1 Guest 2 Guests
Double $60.00 $75.00 + VAT
Twin $55.00 $80.00 + VAT
The actual revenue was $3400
The potential maximum revenue is
50 Double x $75.00 = $3750
50 Twin x $80.00 = $4000
$7750
Revenue Achieved = (3400/7750) x 100% = 43.87%
4. RevPar
Even average rate and percentage revenue achieved do not provide a
measure against competitor hotels. For this reason, many hotels now use
a combination of average rate and occupancy.
This is referred to as ‘Revenue Per Available Room’ or RevPar. Another
term for this is ‘rooms yield’
RevPar = Average Rate x Occupancy%
For the sample hotel,
Average Rate = $40.00
9
Occupancy = 85%
RevPar = 40.00 x 85 = $34.00
This allows comparison to be made with competitor hotels with different
tariffs and number of rooms. RevPar for a typical month for a competitor
hotels in a European city could be as follow:
Hotel No. of rooms RevPar($)
A 200 43.70
B 130 29.92
C 140 25.39
D 105 25.82
E 165 37.14
5. GopPar
Revenue is only one part of the story. Costs are equally important, and to
be profitable the hotelier needs to ensure that there is a gap between the
two.
All international chain hotels, and many larger privately owned hotels,
prepare their accounts in the same manner. GopPar refers to ‘Gross
Operating Profit Per Available Room’. GopPar is defined as the profit of
the hotel before allocating central charges such as bank interest,
depreciation and property taxes to the total number of rooms available
during the period.
10
GopPar = Gross Operating Profit / Rooms Available
For example,
GOP Rooms Available
Hotel A 45.000 3100
Hotel B 82.000 5600
GopPar A = 45.000 / 3100 = 14.51
GopPar B = 82.000 / 5600 = 14.64
This shows a clear comparison between the hotels even though they are
different sizes, and have different accounting periods in the same month.
6. Average Guest Stay
The average guest stay will affect a number of decisions in the hotel.
These concern mainly staffing levels, facilities offered, and even the
number of towels placed in the guest rooms.
Mean Average Guest Stay = No. of Sleeper Nights Sold / No. of
Guests
The period used for calculating this is generally one month. Normally the
figure will not be an exact number of nights, so many hotels will talk of
their average guest stay being 2.65 nights, which although useful, is not
clear.
11
An alternative to this is to produce a statistic which shows the most
common length of stay. Obviously, no guest stay for 2.65 nights
The table below shows the number of nights spent in a hotel by 200
guests.
Length of Stay No. of Guests Guest Nights (1x2)
1 night 40 40
2 nights 80 160
3 nights 30 90
4 nights 20 80
5 nights 20 100
6 nights 10 60
200 530
Mean Average Guest Stay = 530 / 200 = 2.65
By dividing 200 into 530, the average stay of 2.65 nights is found. So,
although the mean average is 2.65 nights, over a half the guests stay for
two nights or less.
7. Average Expenditure
The amount spent by guests is often calculated. This can only be done
effectively where expenditure is posted onto a guest’s account. Any
puchases in cash will be recorded under chance business of the
departement concerned.
12
Average Expenditure = Total Posted to Guest’s Account / No. of
Guests
For Example, total posted to Mr. Andy’s account is $110.00 and the guest
is staying with his wife.
Average Spenditure = 110 / 2 = $55.00
8. Average Guests Per Room Sold
Average Guests Per Room Sold = Total Number of Guests
Total Number of Rooms Sold
For example,
Type of Room Room Sold No of Guests
Single (x1) 70 70
Double (x2) 80 160
150 230
Average Guest Per Room Sold = 230 / 150 = 1.53
9. Average Daily Rate
Average daily rate use to calculate the average price or rate for each hotel
room sold for a specific day.It is one of the most common financial
indicators to measure how successful the performance of the hotel is
against other hotels that have similar characteristics such as size, clientele
and location and/or its own previous figures.
13
ADR = Room Revenue
Rooms Sold
Example :
A boutique hotel’s revenue today is $20.000, of which the rooms sold for
today is 100 rooms. Using the data provided, a hotel wants to know its
Average Daily Rate so it can accurately assess its performance.
Answer :
ADR = 20.000 = $200
100
10. Average room revenue
ARR can also be used to measure the average rate for a longer period of
time (weekly, monthly).
ARR = Total Room Revenue
Total Rooms Occupied
Example :
In 1 month, a boutique hotel has previous revenue $10.000.000, and total
rooms occupied in that month is 100.000 rooms. Using the data provided,
a hotel wants to know its Average Room Revenue so it can accurately
assess its performance.
Answer :
ARR = 10.000.000 = $100
14
100.00
Average revenue per guest / average spent (ARG)
It is the ratio of room income to the total number of guests staying in the
hotel.
ARG = Room Income
Total number of guests staying in the hotel
Example :
Suppose a hotel has 260 rooms, and suppose on a particular night all
rooms are sold and 436 guest are in the hotel, and suppose the total
revenue received is $874.380
Answer :
ARG = 874380
436
= $ 2005,45
Potential Average Single Rate
The hotel has varied its single rate by room type, so we need to calculate
the potential average single rate.
Potential Average Single Rate = Single Room Revenues at Rack Rate
Number of Rooms Sold as Singles
15
For example,
Room Type Number of Rooms Single Rack Rate Revenue(100% OCC)
Standard 200 $40 $8000
Deluxe 100 $70 $7000
300 $15000
Potential Average Single Rate = 15000 / 300 = $500
13. Potential Average Double Rate
Since we also have varied rates by room type the potential average double
rate must be calculated.
Potential Average Double Rate = Double Room Revenues at Rack
Rate
Number of Rooms Sold as Doubles
For example,
Room Type Number of Rooms Double Rack Rate Revenue(100% OCC)
Standard 200 $50 $10000
Deluxe 100 $80 $8000
300 $18000
16
Potential Average Single Rate = 18000 / 30 = $600
14. Yield Management
Yield Management is a Technique used to Maximize Room Revenues.
Yield Management (Revenue Management) presents a more Basic
Measure of Performance because it combines Occupancy Percentage with
Average Daily Rate (ADR) into a Single Statistic called the Yield
Statistic
Yield Management is an evaluative Tool that allows the Front Office
Manager to use Potential Revenue as the Standard against which Actual
Revenue can be Compared.
THE CONCEPT OF YIELD MANAGEMENT:
Yield Management is based on Demand and Supply. The Hotel
Industry’s Focus is shifting from High Volume Booking to High Profit
Booking.
The Commodity that the Hotel sells is Time in a Given Space, and if it is
Unsold, Revenue is lost forever. Yield Management is composed of a set
of Demand Forecasting Techniques used to determine whether Room
17
Rates should be raised or lowered, and whether a Reservation should be
accepted or rejected in order to maximize Revenue.
In order to maximize Revenue, the Front Office Manager needs to
forecast Information concerning Capacity Management, Discount
Allocation, and Duration Control.
Measuring Yield:
The Yield Statistic is the Ratio of the Actual Revenue (Generated by the
Number of Rooms Sold) to Potential Revenue (The amount of money that
would be received from the Sales of Rooms in the Hotel at a Rack Rate)
14.1 Potential Average Single Rate:
Potential Average Single Rate = (Single Room Revenues at Rack Rate) /
(Number of Rooms Sold as Single)
• Example 1 - Potential Avg. Single Rate (Where the single rate
is same for all room types):
Total Number of Rooms sold in Single = 25
Rack Rate / Published Tariff for Single = 125.00
Single Room Revenue at Published Tariff = 25 * 125.00
= 3125.00
Potential Avg. Single Rate : 3125.00 / 25 = 125.00
• Example 2 - Potential Avg. Single Rate (Where the single rate
varies as per room types):
18
Deluxe Room - Rack Rate / Published Tariff for Single = 125.00
Deluxe Room Number of Rooms Available in the hotel = 100
= 125.00 * 100
= 12500.00
Suite Room - Rack Rate / Published Tariff for Single = 168.00
Suite Room Number of Rooms Available in the hotel = 30
= 168.00 * 30
= 5040.00
Single Room Revenue at Published Tariff = (12500.00 + 5040.00)
= 17540.00
Potential Avg. Single Rate: 17540.00 / 130 = 134.92
14.2 Potential Average Double Rate:
Potential Average Double Rate = (Double Room Revenue at Rack Rate) /
(Number of Rooms Sold as Double)
• Example 1 - Potential Avg. Double Rate (Where the Double
rate is same for all room types):
Total Number of Rooms sold in Double = 55
Rack Rate / Published Tariff for Double = 175.00
Double Room Revenue at Published Tariff : 55 * 175.00 =
9625.00
Potential Avg. Double Rate: 9625.00 / 55 = 175.00
• Example 2 - Potential Avg. Double Rate (Where the Double
rate varies as per room types):
Deluxe Room - Rack Rate / Published Tariff for Double = 185.00
Deluxe Room Number of Rooms Available in the hotel = 100
= 185.00 * 100
= 18500.00
19
Suite Room - Rack Rate / Published Tariff for Double = 215.00
Suite Room Number of Rooms Available in the hotel = 30
= 215.00 * 30
= 6450.00
Double Room Revenue at Published Tariff: (18500.00 + 6450.00)
= 24950.00
Potential Avg. Double Rate: 17540.00 / 130 = 134.92
14.3 Multiple Occupancy Percentage:
Multiple Occupancy Percentage = (Number of Rooms Occupied by more
than 1 Person) / (Total Number of Rooms Sold) * 100
• Example Multiple Occupancy Percentage Calculation (Based
on Rooms Occupied)
Total Number of Rooms with More than One Adult on 10th
September 2017 = 115
Total Number of Rooms Occupied on 10th September 2017
= 207
Hotel's Occupancy Percentage = 115 / 207 *100
= 55.55 %
14.4 Rate Spread:
Rate Spread = (Potential Average Double Rate) – (Potential Average
Single Rate)
• Example Rate Spread
Potential Average Double Rate : 175
Potential Average Single Rate: 135
20
Rate Spread: (Potential Average Double Rate – Potential Average
Single Rate) = 175 – 135 = 40
14.5 Potential Average Rate:
Potential Average Rate = (Multiple Occupancy Percentage * Rate
Spread) + (Potential Average Single Rate)
• Example Potential Average Rate
Multiple Occupancy Percentage: 55%
Rate Spread: 40
Potential Average Single Rate: 135
Potential Average Rate : (55% * 40) + 135 = 157
14.6 Room Rate Achievement Factor:
Room Rate Achievement Factor = (Actual Average Rate) / (Potential
Average Rate) * 100
• Example Room Rate Achievement Factor
Actual Average Rate: 200
Potential Average Rate: 300
Room Rate Achievement Factor: 200 / 300 * 100
= 66.66%
21
‘
14.7 Yield Statistic:
An important element in revenue management is the yield statistic. The
yield statistic calculation incorporates several of the previous formulas
into a critical index. There are various ways to express and calculate the
yield statistic, all of which are equivalent.
Yield Statistic = ((Rooms Nights Sold) / (Rooms Nights Available)) *
((Actual Average Room Rate) / (Potential Average Rate))
• Example Yield Statistic
Occupancy percentage * Achievement factor
Occupancy percentage = Rooms night sold / rooms night
available
= 70 / 100 = 0,7
Achievement Factor = Actual Average Room Rate / Potential
Average Rate * 100
= 200 / 300 * 100 = 66,66%
Yield Statistic = Occ. Percentage * Achievement Factor
= 0,7 * 66,66 % = 0,46662 = 46,662%
15. House count (H.C)
22
(the number of guests staying on a particular night)
H.C = previous H.C + Arrivals – departures
Example :
A boutique hotel has previous house count 72 guests, of which the guests
arrived today is 80 guests and departure guests is 54 guest. Using the data
provided, a hotel wants to know its House Count so it can accurately
assess its performance.
Answer :
House Count = 72 + 80 – 54
= 98 guests
16. Total number of guests in the hotel
Total guests = single rooms + 2 x (double rooms) + extra beds
Example:
A boutique hotel has 40 guests stay in single rooms, 35 guests stay in
double rooms and 4 of them requests extra beds.The hotel wants to know
its Total Guests today so it can accurately assess its performance.
Answer :
Total guests = 40 + (2 x 35) + 4
= 114 guests
23
17. Overstay Percentage
This is the percentage of scheduled departures who remain on in the
hotel, even after their scheduled date of departure.
Overstay Percentage = Number of overstays
X 100 %
Total number of scheduled departures
Example :
A boutique hotel has previous 15 guests want to longer their stay in the
hotel, of which the scheduled guests departure today is 80 guests. Using
the data provided, a hotel wants to know its Overstay Percentage so it can
accurately assess its performance.
Answer :
Overstay Percentage = 15
X 100 %
80
= 18,75
18. Understay percentage
This is the percentage of those guests who leave before their expected
date of departure or don’t stay until the announced date of their departure.
Understay Percentage = Understay
X 100 %
24
Stayovers
Example :
A city hotel has previous 5 guests leave before their date of departure, of
which the guests stay over is 50 guests. Using the data provided, a hotel
wants to know its Understay Percentage so it can accurately assess its
performance.
Answer :
Understay Percentage = 5
X 100 %
50
= 10%
19. No – show percentage
This is the percentage of those guest who don’t come in their expected
date of arrival or they don’t come until the announced date of their
arrival.
No-show percentage = Number of did-not arrive guests (DNA)
X 100 %
Number of confirmed reservation guests
Example :
25
A city hotel has previous 5 guests didn’t come in their arrival date, of
which the confirmed reservation guests is 50 guests. Using the data
provided, a hotel wants to know its Understay Percentage so it can
accurately assess its performance.
Answer :
No-show percentage = 5
X 100 %
50
= 10 %
20. Cancellation percentage
It is the percentage of total number of cancellations as against total
number of reservations.
Cancellation Percentage = Total number of cancellations
X 100 %
Total number of confirmed reservations
Example :
A city hotel has previous 3 guests cancelled their reservation, of which
the total confirmed reservation guests is 50 guests. Using the data
provided, a hotel wants to know its Understay Percentage so it can
accurately assess its performance.
Answer :
Cancellation Percentage = 3
X 100 %
50
26
=6%
21. Foreign guest occupancy percentage
Total guest H.C – no. of locals = number of foreign guests
Their percentage is calculated by
Number of foreign guests in hotel
X 100
Total number of guests in hotel (H.C)
27
