Yield Management - Hotel Front Office Management

Yield Management in Hotel Front Office

Yield management is the technique of planning to achieve maximum room rates and most profitable guests. This practice encourages front office managers, general managers, and marketing and sales directors to target sales periods and to develop sales programs that will maximize profit for the hotel. Yield management is part of successful administration of a reservation system, because it forces the front office manager to make a realistic attempt to produce a favorable income statement.

Applying rate categories to specific time periods with minimum length of reservations and reviewing potential markets and their spending habits assist the front office manager not only in meeting the goal of 100 percent occupancy but also in achieving maximum profitability.

Processing Guest Reservations

Means of communication with the client; room inventory data banks; systems for reservation, confirmation, deposits, and cancellations; and blocking procedures, a process of reserving a room on a specific day, are the major components of a well - organized guest reservation processing system.

The guest who wants to secure overnight lodging accommodations must have an efficient means of communicating the room reservation to the hotel, such as a toll - freephone number, fax number, or personal computer. In turn, the hotel must have a way to check reservation requests against a data bank of available rooms.

To ensure the reliability of the room reservation, the hotel establishes a deposit or guarantee system that commits the guest to the purchase of the accommodation. A cancellation process allows the guest and the hotel the flexibility necessary to function in a complex society. A blocking procedure that balances future commitments with present room requirements also helps the front office manager in providing an effective room reservation processing system.

Computerized Reservations Systems

The lodging property associated with a system wide reservation service is connected to the system via a nation wide toll - free telephone number. The telephone number has been widely distributed by the marketing and sales departments of the corporation. The potential guest who dials this toll - free number will be greeted by an operator located at the central reservation headquarters.

This operator has access to the computerized data bank of available rooms at each participating lodging property, so that, for example, a request for a certain type of room for three consecutive nights (February 15, 16, and 17) at a property in Boston can be matched through the data bank. If the participating property has rooms available for those nights, the request can be processed. If it does not have space available, the operator can suggest properties in the reservation / referral system that do have rooms available.

After the operator has determined that the guest’s room request can be satisfied, he or she will ask when the arrival time will be. The many lodging properties in the industry have different policies on how long they will hold a reserved room; some will hold the room until 6:00 p.m., for example, while others will hold the reservation only until 4:00 p.m. In any case, the time of arrival is extremely important to the hotel’s income. Rooms that are held for guests who do not show, and that cannot be resold, adversely affect the front office manager’s ability to produce income. The maxim that “a room unsold is an opportunity lost forever” has profound implications for the profit - and - loss statement.

Because the hotel must have enough lead time to resell a no - show reservation and because guests want to ensure that their accommodations will not be resold before they arrive, a system must be in place to meet the needs of both the hotel and the guests. Both computerized and traditional reservations systems can offer various levels of reservation assurance to accomplish this goal via advanced, confirmed, and guaranteed reservations.

Outsourcing Reservations

In addition to central reservation systems (CRS) operated by hotels, there are outsourcingproviders of central reservation systems that are available for hotel managers.

This new breed of CRS and service provider processes voice, Internet and Global Distribution System – based reservations on behalf of hotels. This hybrid group provides reservation systems to clients that want to manage closely their reservation processing, while also offering all the services of a traditional representation company. In addition, these companies offer their services through Web - enabled application - service provider [ASP] models.

SynXis Agent, a suite of reservation - management and distribution products, consists of four main components - a CRS; GDS connectivity; alternate distribution - system connectivity; and Book - A - Rez, an Internet - booking tool.

Through its suite of Internet - based applications, SynXis enables hotel operators to consolidate and control hotel inventory from all booking sources. It also provides direct access to the four major GDSes and enables consumers to book hotel reservations online through the hotel’s Web site.

Sally Payze, vice president of operations at SynXis, indicates “It consolidates inventory across all booking channels into a single image of inventory. That allows all channels to have access to the last room available and there is no managing of allotments by channel. Its interface allows hotels to define and manage group profiles, administer room blocks and manage rooming lists. In addition, travel planners can enter their own rooming lists directly from the Web, which saves hotel labor, provides immediate confirmation numbers and reduces data - entry errors.”

Types of Reservations

Advanced Reservations

A guest usually chooses the advanced reservation option when he or she is in transit and is calling to determine if a property has rooms available for a particular time period.

The guest does not want any commitment from the hotel to secure the room reservation.The hotel will hold the reservation until a specified time. This type of reservation has been dropped by some lodging reservation systems in favor of confirmed reservations, which specify a certain arrival deadline with no commitment by the guest to pay if he or she does not show.

Confirmed Reservations

The confirmed reservation is comparable to a contract that becomes void at a certain hour of a certain day. The confirmed reservation allows the hotel to project the number of guests that will check in by the deadline hour. After that deadline, the hotel is free to sell that room to walk - in guests or to accept overflow guests from another property. The hotel usually keeps track of the number of no - shows and compares them to the total number of confirmed reservations that were made; these historical records help in predicting occupancy - and revenue - accurately.

Guaeanteed Reservations

Guaranteed reservations enable lodging establishments to predict revenue even more accurately. They commit the guest to pay for a room night and the hotel to provide accommodations, regardless of arrival time. If the guest does not show up (without prior cancellation), the hotel may process a credit - card voucher for payment.

Likewise, no matter when the guest arrives on the reserved night, the hotel must have the reserved accommodation available. The guaranteed reservation requires the hotel to determine the method of guest payment. The guest may secure the method of payment with a valid credit card, an advance payment, or a pre - authorized line of credit.

Reservation Codes

Reservation codesare a sequential series of alpha numeric combinations that provide the guest with a reference for a confirmed or guaranteed reservation. (Reservation codes are also referred to as confirmation numbers.) This code indicates that accommodations have been secured for a specific date with a commitment to pay for at least the first room night.

The code, which usually consists of several letters and digits that do not necessarily have any meaning to the guest, may identify the hotel in the chain / referral group, the person who processed the reservation, the date of arrival, the date of departure, the type of credit card, the credit - card number, the room rate, the type of room, and / or the sequential number of the reservation. The organization that develops the code will include information in the code that is appropriate for the efficient management of a particular reservation system. A guaranteed reservation code may look like this:

122 -JB - 0309 - 0311 - MC - 75 - K - 98765R

  • 122: the identification number of the property in the chain
  • JB: the initials of the reservationist or desk clerk who accepted the reservation
  • 0309: the date of arrival
  • 0311: the date of departure
  • MC: the type of credit card (Master Card)
  • 75: the nightly room rate of $75
  • K: indication that the reserved room has a king - size bed
  • 98765R: the sequential reservation number

A few things should be kept in mind when establishing a reservation code system. The amount of memory available to store the code information in a computer data bank maybe limited. Therefore, a shorter code that provides less information may be necessary. The reservation code should be designed to give adequate information to the hotel property that must provide accommodations for the guest. The purpose of the code is to communicate the details of a guaranteed accommodation to the host property. The guest data have already been entered into the central computer and usually can be easily retrieved.

However, there are times when these data may not be available or may be misplaced. When this happens, a reservation code allows the host property to provide appropriate accommodations.

The method of paying for a guaranteed reservation is established when the reservation is made. Credit cards or previously approved direct billing are the most common methods.

Sometimes the guest will send a bank check or deliver cash to secure a reservation. A bank check is acceptable, as long as adequate time is available to process the check. The cash advance payment and bank check, however, should alert the front office manager that this guest has not established a line of credit with a credit - card organization or with the hotel. Determining how the guest will pay the total final bill is essential. The folios of guests who pay cash in advance must be monitored.

Cancellations

Cancellations due to the guest’s change in plans are easily handled by a computerized reservations system. The guest calls the central reservation system or the hotel where the reservation has been made. Some lodging organizations stipulate a time period for canceling reservations. Twenty - four, 48, or 72 hours’ notice may be required for the guest to be exempt from paying the first night’s room rate. Policies vary among reservation systems, based on the historical frequency of cancellations (and the subsequent effect on the profit - and - loss statement) and the public relations policy (the potential of lost repeat business) of the organization.

Cancellation Codes

A cancellation codeis a sequential series of alphanumeric combinations that provides the guest with a reference for a cancellation of a guaranteed reservation. (Cancellation codes are also referred to as cancellation numbers.) This code verifies that the cancellation has been communicated to the hotel property and assures the guest that he or she is not liable for the canceled reservation. For example, if the front office staff mistakenly processes a charge for a guaranteed reservation that had been canceled, the guest could refute the credit - card billing with the cancellation code.

A cancellation code is composed like a reservation code and consists of letters and digits that may identify the hotel property, the person who processed the cancellation, the date of arrival, the date of departure, and / or the sequential number of the cancellation.

This and other information is included to ensure efficient management of room cancellations. If the guest had applied a cash deposit to the room, a credit balance on the guest folio would have to be processed. A cancellation code may look like this:

122 - RB - 0309 - 1001X

  • 122: the identification number of the property in the chain
  • RB: the initials of the reservationist or desk clerk who accepted the cancellation
  • 0309: the date of arrival
  • 1001X: the sequential number of the cancellation

Blocking Procedure

After a reservation has been received, the reserved room is blocked in the room inventory. In a computerized reservation system, the room is automatically removed from the available - room data bank for the dates involved. For example, if each of the participating 75 hotels in the reservation / referral system has 200 rooms available, the room bank would have 15,000 rooms available to be sold on any one night. As a reservation request is processed, the room or rooms involved are blocked out of the available - room inventory.

Reservation requests for 4,000 rooms on a particular night at the various participating properties require the computer to block (or reserve) those rooms at the appropriate hotels. If additional reservation requests are received for that night at a particular property and that hotel is already filled to capacity, the computer will not process the requests.

It may, however, tell the computer terminal operator that a hotel in the same geographic area does have vacancies. This is undoubtedly one of the major advantages of participating in a reservation / referral system. This type of blocking is usually referred to as blocking on the horizon - that is, in the distant future.


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