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Staying Away from Home:

The Importance of Hotels
Travel & Hotels
Two Centuries of Hotel-keeping
Hotels in the Total Accommodation Market
Hotel Location
Types of Hotels
Hotel Products & Markets:
The Hotel as a Total Market Concept
Hotel Facilities & Services as Products
Hotel Accommodation Markets
Hotel Catering Markets
Hotel Demand Generating Sources
Hotel Market Areas
Hotel Market Segmentation
Buying & Paying for Hotel Services
Hotel Marketing Orientation
Hotel Policies, Philosophies & Strategies:
Objectives & Policies
General & Sectional Policies
Policy Formulation, Communication & Review
Hotel Philosophies
Hotel Plans & Strategies
The Framework of Hotel Management
Rooms & Beds:
Room Sales
Guest Accounts
Mail & Other Guest Services
Uniformed Services
Hotel Housekeeping
Organisation & Staffing
Accounting & Control
Food & Drink:
The Food Cycle
The Beverage Cycle
Hotel Restaurants
Hotel Bars
Room Service
Food & Beverage Support Services
Organisation & Staffing
Accounting & Control
Miscellaneous Guest Services:
Guest Telephones
Guest Laundry
Rentals & Concessions Other Income
Accounting & Control
Hotel Organisation:
Food & Beverages
Miscellaneous Guest Services
Hotel Support Services
The Management Structure
Organisational Structure of a Large Hotel
Accounting & Control
Hotel Staffing:
Determinants of Hotel Staffing
Numbers & Payroll
Hotel Products & Staffing
Organisation of the Personnel Function
Organisation of Training
Functions of the Training Division

Productivity in Hotels:
Measures of Labour Productivity
Physical Measures
Financial Measures Sales & Payroll
Physical/Financial Measures Sales Per Employee
Productivity Measures Value Added Approach
Some Ways to Higher Productivity
Productivity Standards
Computers in Hotels
From Product to Sales to Marketing
The Marketing Concept
Special Features of Hotel Marketing
The Marketing Cycle
Marketing Resources
Hotels in the Total Tourist Product
Property Ownership & Management:
Property Ownership
Property Operation & Maintenance Energy
Finance & Accounts:
The Hotel Balance Sheet
Balance Sheet Ratios & Analysis
The Hotel Profit & Loss Statement
Profit & Loss Ratios & Analysis
Hotel Operating Profit
Balance Sheet & Profit & Loss Relationships
Liquidity Ratios
The Small Hotel:
Products & Markets
Ownership & Finance
Organisation & Staffing
Accounting & Control
The Future of the Small Hotel
Hotel Groups:
Advantages of Groups
Problems of Groups
Scope for Centralisation
A Concentrated Hotel Group
A Dispersed Hotel Group
International Hotel Operations:
Cost & Profit Ratios
Ownership & Finance
Organisation & General Approach
Recommended Reading
Reading List
Main Text:
The Business of Hotels (Third Edition) S Medlik (Butterworth/Heineman


Throughout the year, many people increasingly stay away from home for different reasons such
as; business, holiday or other reasons. As a consequence many of them stay in hotels. The
primary function of an hotel is to accommodate those away from home and to supply them with
their basic needs.
Hotel- is an establishment providing for reward accommodation, food and drinks for travelers
and temporary residents, and usually also meals and refreshments and sometimes other facilities
for other users.
Importance of Hotels
Provision of facilities In most countries hotels provide facilities for the transaction of
business, for meetings and conferences, for recreation and entertainment. Through their
facilities hotels contribute to the total output of goods and services, which makes up the
material well-being of nations and communities.
Attractions for visitors In many areas hotels are important attractions for visitors who
bring to them spending power and who tend to spend at a higher rate than they do when
they are at home.
Foreign currency earners In areas receiving foreign visitors, hotels are often important
foreign currency earners and in this way may contribute significantly to their countries
balance of payments.
Employers of labour Hotels provides thousands of jobs either directly or indirectly.
Directly people are employed in hotels as chefs, receptionists, housekeepers, food and
beverage managers etc. Indirectly hotels provides opportunities for investments for
individuals as proprietors of small hotels, hospitality, university lectures etc.
Outlets for the products of other industries In the building and modernization of
hotels, business is provided for the construction industry and related trades. Equipment,
furniture and furnishing are supplied to hotels by a wide range of manufactures.
Source of amenities for local residents Their restaurants, bars and other facilities often
attracts much local custom and many hotel have become social centers of their
Staying away from home is a function of travel. Three main phases may be distinguished in the
development of travel in the northern hemisphere;
Until about the middle of the 19th C;
Most journeys were undertaken for business and vocational reasons, by road, by people
travelling mainly in their own countries.
Volume of travel was relatively small, confined to a small fraction of the population in
any country.
Most travel was by coach
Inns and similar hostelries along the highways and in the principal towns provided the
means of accommodation.
Between about 1850 and about 1950
Travel was mainly for other reasons, business, holidays came gradually to represent an
important reason for a journey.
The railway and the steamship dominated passenger transportation and the new means of
transport gave an impetus to travel between countries and between continents.
Hotels together with guest houses and boarding houses dominated the accommodation
By about the middle of the 20thC
Most traffic returned to the road, with the motor car increasingly providing the main
means of passenger transportation.
Aircraft took over from both the railways and shipping as the principal means long-haul
passenger transport.
a growing volume of travel away from home became international.
New forms of accommodation, holiday centers, holiday villages, motels and various self-
catering facilities emerged.
In England
The word hotel came into use in England with the introduction of London, after 1760 of
the kind of establishment then common in Paris, called hotel garni or a large house in
which apartments were left by the day, week or month.
Hotels with managers, receptionists and uniformed staff arrived only at the beginning of
the 19thC.
Other parts of Europe
Hotels made much of progress in other parts of Europe in the closing years of the 18thC and early
years of the 19thC. At that time originated the idea of a resort hotel.
In North America
Early accommodation originated in converted houses. By the turn of 18thC, several cities or the
Eastern Seaboard had purpose-build hotels. In the first-half of the 19th C, hotel building spread
across America to the pacific Coast.
The ratio of beds in hotels and similar establishments to beds in supplementary accommodation
gives an indication of the relative importance of the hotel sector in the total accommodation
According to the World Tourism Organisation, the global capacity of hotels and similar
establishments approached 12.7 million rooms in the mid 1990 s.
Well over one-half of the total European capacity is located in five countries - Italy,
Germany, France, Spain and the United Kingdom.
United States, Mexico and Canada combined account for more than three quarters of the
rooms in Americas.
China has more than quarter and together with Japan, Thailand and Australia, more than
two thirds of the capacity of East Africa and the Pacific.
The remaining global regions Africa, Middle East and South Asia combined have only
6% of the total world capacity.
Hotel services are supplied to their buyers direct in person, they are consumed at the point of sale
and are produced there. The main rules of success in the hotel business are;
Main factors influencing hotel location
Transport modes-in this early days all accommodation units followed transport modes.
Inns and other hostelries were situated along the roads and destinations, serving transit
and terminal traffic.
Holiday markets-in their areas of highest concentration, holiday visitors are
accommodated in hotels in localities where the resident population may represent only a
small proportion of those present at the time.
Economic activity industrial and commercial activities creates demand for transit and
terminal accommodation in industrial and commercial centers, in locations not frequented
by holiday visitors.
Some Criteria used to Classify Hotels into types
Location hotels may be classified as city hotels, town hotels, inland hotels, coast hotels,
country hotels
Actual position city center hotels, town center hotels, coastal resort hotels etc
Relationship with particular means of transport hotels may be classified into motels,
railway hotels, airport hotels
Purpose of visit this may give rise to business hotels, holiday hotels, convention hotels,
tourist hotels
Duration of guests stay for short stays, transit hotels; for long stays residential hotels
Range of Facilities and Services hotels may be open to residents and non-residents, or
restrict itself to providing overnight accommodation and at most offering breakfast to its
guests and be an hotel garni (apartment hotel)
License for the sale of alcoholic liquor hotels may either be licensed or non- licensed
Size Hotels may be small, medium sized, large or major
Grading hotels may be luxury, quality or economy. Also hotels may be one star, two
star, three star, four star or five star
Ownership and management hotels may be individually owned independent, chain or
group hotels. Accompany may operate its hotels under direct management or under a
franchised agreement.
NOTE: In its broadest sense, hotels may be classified as;
Terminus Hotel is a medium sized, economy, town center, unlicensed hotel,
owned and managed by a small company catering mainly for tourists visiting the
historic town and the surrounding country side.
Hotel Excelsior is a large, independent luxury hotel on the main promenade of
the coastal resort, with holiday visitors as its main market.
The Cross-roads Hotel is a small licensed quality transit motor hotel, operated
as a franchised, on the outskirts of the city which serve mainly travelling
businessmen and tourists.
From the point of view of its users, an hotel is an institution of commercial hospitality, which
offers its facilities and services for sale, individually or in various combinations.
The concept is made up of the following elements;
It places an hotel geographically in or near a particular city, within a given area. It denotes
accessibility and the convenience this represents, attractiveness of surroundings, freedom from
noise, etc
Include bedrooms, restaurants, bars, function rooms, meeting rooms and recreational facilities.
May be differentiated in type, size and in other ways
Comprises the availability and extent of particular hotel services provided through its facilities.
The style and quality described in such terms as formality and informality, degree of personal
attention, speed and efficiency
This is the way in which the hotel portrays itself to people and the way in which it is perceived as
portraying itself by them. It is enhanced by such factors as its name, appearance, atmosphere,
who eats and stays there.
It expresses the value given by the hotel through its location, facilities, services and image and
the satisfaction desired by its users from the elements.
NOTE: There are varying degrees of adaptability and flexibility in the total hotel concept,
ranging from the complete fixity of its location to the relative flexibility of price, with facilities,
services and image lending themselves to some adaptation in particular circumstances with time.


Rooms and Beds These relate to sleeping accommodation that is provided to hotel residents
Restaurants These are used to provide food to residents and non-residents alike
Bars These are used to provide drinks to both residents and non-residents alike
Functions Facilities Their products are bought by organized groups who may be residents in
the hotel eg participants in a residential conference, or be non-residents such as a local club or
society, or the group may combine the two
The buyers of overnight accommodation maybe classified into the main categories, namely:
Holiday users
Business users
Other users
Holiday users
Mainly travel for leisure reasons
Long stay guest at their destinations
Their demand for hotel accommodation tends to be resort- oriented.
They are seasonal.
They are sensitive to price because they often pay out of their own pocket.
Tend to book accommodation far much in advance.
Business Users
Are employees and others travelling in the course of their work
Are people visiting exhibitions, trade fairs or coming together as members of
professionals and commercial organizations for meetings and conferences.
Their demand for hotel accommodation tends to be town and city oriented.
They are non- seasonal
They are less price sensitive except for conferences delegates and their attending
Often book accommodation at short notice.
Other Hotel Users
Comprises visitors to a particular location for a variety of reasons other than holidays or
Include those attending such family occasions as weddings, parents visiting educational
institutions, visitors to a special events, relocating families.
Have more varied characteristics.
Tend to book accommodation in advance.
Hotel catering facilities are restaurants, bars and function rooms. The demand of hotel catering
facilities may be categorized into:
Hotel residents
Non- residents
Organized groups
Hotel Residents
They are those who have purchased hotel overnight accommodation.
Their use of hotel catering facilities is mainly influenced by the reason for their stay at
the hotel and term on which they stay.
Breakfast is their common hotel purchased.
Are more likely to be hotel restaurants or bar customers in the evenings.

Non- Residents
They may be staying at other hotels or accommodation establishments or with friends or
relatives or day visitors to the area or local residents using the hotel restaurants and bars.
They tend to represent important hotel users at mid- day as well as in the evening
particularly at weekends.

Organized Groups
They make advance arrangements for functions at the hotel.
They require separate facilities and organizational arrangements.
They include local clubs, societies, business and professional groups as well as
participants in meetings and conferences originating from outside the area.
To most people, demand for hotel accommodation is a derived demand- that is, few stay or eat in
an hotel for its own sake: their primary reasons for doing so lie in their reasons for visiting an
area or for spending their time there in particular ways.
For many others the use of hotel is a matter of choice; they do so in their pursuit of leisure and
recreation: for them hotel usage involves discretionary use of their time and money.
The main types of hotel generating sources are;
Institutional sources
Recreational sources
Transit sources

Institutional Sources
These include industrial and commercial enterprises, educational institutions, government
establishments and other organizations. They generate demand for hotels through their own
visitors and their requirements for hotels facilities and services.
Recreational sources
Include historical, scenic and other site attractions and event attractions. They generate demand
for hotels from tourists, local events and activities in the social and cultural life of the
community. They generate demand from clubs, societies and other organizations.
Transit sources
This stems from individuals and groups with no intrinsic reason for spending time in particular
locality, other than being on the way somewhere else and the need to break journey.
It is closely related to particular forms of transport, it expresses itself on highways, at ports and
at airports.
Main approaches of defining market areas
Reference to the people who buy hotel services
A network of dealings between the hotel and its users. From the above definition, hotel
users may come from within the area, from various parts of the country and from abroad.
This gives rise to local, domestic and foreign markets.
Physical area served by the hotel The area may extend from its immediate vicinity to a
radius of several miles or more for hotel accommodation.
For hotel catering services, the market area depends on market density the availability of
spending power within an area as well as on the accessibility of the hotel to the different sources
of demand and on the availability of other catering services in the area.
This refers to the subdivision of the market based on different criteria. It enables individual
hotels to identify their actual and potential users.
Some Criteria Used in Segmenting Hotel Markets
Products Bought Buyers of accommodation, food, drink and functions.
Accommodation Market holiday, business and other users
Hotel Catering Markets hotel residents, non-residents and functions
Origin of Demand may be classified into institutional, recreational and transit
Needs of hotel Users and the means they have to pay for their satisfaction
Socio-Economic Characteristics this groups people according to their occupation
and employment status, for example;
Social Grade Social Status Head of Household Occupation
A Upper middle class Higher managerial, administrative or
B Middle class Intermediate managerial,
administrative or professional
C1 Lower middle class Supervisory or clerical, and junior
managerial, administrative or
C2 Skilled working class Skilled manual workers
D Working class Semi-and unskilled manual workers
E Those at the lowest State pensioners or widows (no other
level of subsistence earner), casual or lowest grade


The main buying decisions are:
Deliberate buying decisions these are made with some advance planning and with advance
Impulsive decisions are instantaneous, for example, a tourist looking for somewhere to stay
when travelling by car, or on arrival at the railway station or airport.
It is important to know who the buying agent is and where the person is located.
According to the source of payment for hotel services, hotel users are of two kinds, namely;
Those who pay for themselves
Those whose bills are covered or reimbursed for them
The marketing concept is concerned with the consumer as a starting point in the conduct of a
The aim is to meet the needs of hotel users. Some of these needs are basic and physical, such as
sleeping in clean beds or eating wholesome meals, others are met by the image of the hotel. A
successful hotel must seek to meet both sets of needs
They indicate what the business is striving to achieve, for example, profitability, growth,
customer and employee satisfaction. These are the stated ends to be pursued.
Different parties in the hotel business have different objectives such as;
the community and customers, the purpose of an hotel is to provide certain facilities and
services to its users;
the employees, an hotel is a source of employment,
the owners, an hotel provides a return on their investment
These are a set of guidelines for management. The main categories are two namely; general
policies and sectional policies.
General policies these are formulated and promulgated by the top management, the
owner/manager in a small business, the board of directors in a company.
Sectional policies these are more detailed guidelines in particular aspects of the business and in
particular activities. They flow from the general policy and extend it from broad policy
indications into operational terms.
Categories of sectional policies
Customer Policy normally says what the hotel is aiming to do in terms of its markets
and quality standards of what it provides; includes its concept of good value and its
approach to price, discounts and credit; its state its attitude to complaints and refunds
Employment or personnel policy covers such matters as recruitment, selection and
training; remuneration, conditions of employment, welfare; promotion, retirement,
termination; consultation, negotiation and the handling of disputes.
Shareholder Policy defines what the owners are entitled to expect in terms of their
rewards, information and participation in the business, and what is expected from them.
Supplier policy it postulates what is expected from them regarding the quality of
supplies, delivery and terms, and how each can expect to be treated by the hotel
Policies should be committed to paper and be expressed to a greater or lesser extent in writing
and distribute them to those concerned. The need to communicate formally in writing is a
function of size.
Defining objectives is the responsibility of hotel management, which extends from the directors
through managers to heads of departments and supervisors.
At any time objectives and policies should express the best current view of the business and the
rules to be adhered to.
These are the rules, beliefs and conventions that are not formulated as policies, and yet influence
how people act, and are accepted by them as part of their everyday conduct of the hotel. They are
the common culture, doctrine or philosophy of the business.
A philosophy may express a more general attitude of management. It is the way we do things
around here.
Philosophies may be less formal and more specific while policies may be more formal and more
Plans are instruments which extend the attainable objectives of the hotel in concrete actionable
terms for a few months or a year ahead (short-term), for several years (medium-term), for
periods longer than a few years (long-term).
Plans are more numerate instruments and they do so as far as possible in measurable terms for
given periods of time. For example, return on invested capital, volume of sales and rates of
Planning is developing a constructive concern with tomorrow, deciding what can happen, what
should happen and how the desirable is to be accomplished.
They define how objectives shall be met. These are the links between objectives and plans and a
means to action-oriented planning in the hotel business.
Management Techniques
Budgetary Control This is the process used to keep the hotel on its course by translating into
budgets the objectives, plans and strategies.
Management by objectives these enable members of the management team to adjust their
performance because what is expected of them is based on what they can control and influence,
within the totality of the whole hotel.
There are the objectives what the hotel is in business to attain. Policies are the rules on which
management bases its decisions in the conduct of the business, and these are supported by the
philosophies of the hotel the less formal rules and conventions. Plans and strategies are the
instruments which direct management towards the attainment of the objectives, with the use of
such techniques as budgetary control and management by objectives.
Sleeping accommodation is the most distinctive hotel product. Room sales are invariably the
most profitable source of hotel revenue, which yield the highest profit margins and contribute the
main share of the hotel operating profit.
The main hotel activities earning the room revenue are:
Hotel reception
Uniformed services
They are the components of the hotel accommodation function.
Room Sales
Hotel guests may reserve their accommodation: in person, by telephone, facsimile or e-mail, by
letter, through travel agents and central reservation systems.
Hotel Reservation advance reservations are an important responsibility on the part of the hotel,
both in legal and in business sense, and calls for a system that enables room reservations to be
converted into room revenue.
Hotel Register used by guests to put down certain particulars about themselves.
Importance of guest registration
To satisfy the law
To provide an internal record of guests from which data are obtained for other hotel
Room Allocations may be made before the guests arrival and only guests registering without a
previous reservation are allocated rooms on arrival, but in some hotels all room allocations are
made only when guests arrive.
Main Records Used to Document Room Sale in the reception
Reservation Form/Card it standardizes the details of each booking, forms the top sheet of any
documents relating to it, and enables a speedy reference to any individual case
Reservation Diary or Daily Arrivals List records all bookings by date of arrival and shows all
arrivals for a particular day at a glance
Reservation chart provides a visual record of all reservations for a period and shows at a
glance rooms reserved and those remaining to be sold
Hotel register records all arrivals as they occur and gives details of all current and past guests
Reception or room status board shows all rooms by room number and floor and gives the
current and projected status of all rooms on a particular day, with details of occupation
Guest index it lists all current guests in alphabetical order with their room numbers and
provides an additional quick point of reference in larger hotels.
Mail and Other Guest services
A combined key and mail rack is a standard feature of most hotel reception offices and reflects
two typical responsibilities of the office room keys and guest mail.
Room keys are issued from the rack to arriving guests and to residents who call for them in the
course of a days business.
Guest Mail
May arrive before, during or after a guests stay at the hotel.
Before mails awaiting guests arrival should be handed to them when they are
During these should be delivered to guests promptly
After these should be forwarded to them
Basic Aids Related and Complimentary in the Provision of Key, Mail and Other guest
Guest index shows whether a particular person is resident and that persons room number
Reception or Room status board shows who is occupying a particular room
Key and Mail Rack indicates whether the guest is in the hotel and whether there is any mail for
that person.
Reception as a source of information to guests about;
Hotel facilities and services
The locality
Transport and other matters
They offer personal services to guests such as:
Servicing arrivals and departures they meet and greet arriving guests, help them with
their luggage and parking their cars. On departure, guests, luggage and transportation are
again their primary responsibilities.
Source of information about the hotel and locality, and the guests main source of such
arrangements as theatre tickets, tours, car hire and other services.
Other guest services may provide such items as newspapers as well as other small
articles. May also act as messengers, lift operators and mens cloakroom attendants.

Housekeeping functions
Servicing of guest rooms
Cleaning bedroom floors, staircases, public cloakrooms and other public areas of the
Other Housekeeping services these may include;
Provision of first aid to guests and staff
Dealing with lost property
Dealing with floral arrangements
The dimensions and characteristics of each hotel are the main determinants of the organization
and staffing of the accommodation function.
The financial performance of the hotel accommodation function is reflected in the rooms
department operating statement, which shows the revenue and expenses of the department for a
given period resulting in the departmental profit. These figures may be compared by the budget
or with the same period of the previous year.
The provision of food and drink in hotels account for a larger proportion of employees than the
provision of sleeping accommodation and related services. This is because;
In contrast to hotel rooms, meals and refreshments in hotels may be supplied to non-residents as
well as to resident guests and include substantial functions sales
The provision of meals and refreshments is relatively labour intensive.
It represents a sequence through which food passes from the supplier to consumer in a hotel.
The cycle consist of several stages, namely; - purchasing, receiving, storing and issuing,
preparing and selling.
Purchasing normally one person has a designated responsibility for food purchases.
The purchasing function includes identifying best sources of supply, making
arrangements with suppliers and placing orders, close liaison with the kitchen and other
user departments regarding requirements, yield and quality, and with the accounts
department regarding payment.
Receiving this entails ensuring that the hotel is being supplied with food of the ordered
quantity and quality at the agreed price, and its transfer to stores or directly to the user
departments. It takes place by comparing delivery notes against orders and by a physical
inspection of the deliveries.
Storing and Issuing consists of maintaining an adequate stock of food for the day-to-
day requirements of the hotel, without loss through spoilage and pilferage and without
capital being tied up unnecessarily through overstocking, and of issues of food to user
Stocktaking takes place to ascertain the value of stocks held in order to determine the food costs
for a given period and stock values for accounts purposes.
Preparing/Food production it represents the conversion of the purchased foods by
chefs and cooks into dishes and meals.
Main Aspects of Food production
Volume forecasting it seeks to predict the number of meals and of particular items
of the menu to be served in each outlet of the hotel each day
Yields postulate the quantity obtained from items of food after their preparation and
Recipes give the formulae for producing particular dishes, including the quantities
and qualities of ingredients and the method of preparation used
Portions represent the size or weight of food served to customers
Selling it consists of the service of particular foods, dishes and meals by various
categories of food service staff to the customer in a restaurant or another hotel facility at
particular prices.
Main Aspects of Selling
Form of service
Physical environment and atmosphere
Menu - The main types are two, namely; table dhtel and a la carte
Table dhtel menu is a limited choice menu with a single price for any combination of items
chosen or with a price determined by the choice of the main dish
A la carte menu provides a choice of items, each of which is priced separately
Forms/levels of service
Self-service the customer orders and collects the food from a counter and takes it to a table
where he/she consumes it
Counter service the customer is presented with the food he/she has ordered and consumes it at
the counter
Table service the customer is served by a waiter or waitress who takes the order and serves the
meal at the table
Physical environment and atmosphere
This include; the shape and size of the room, the design and dcor, the type and layout of seating,
the lighting, temperature, noise level, cleanliness and comfort, the age, appearance and dress of
the staff and guests.
The food cycle
Storing & Issuing


Beverages normally include spirits, wines, beers and minerals but often exclude other soft drinks
which are treated in hotels as food.
N/B: Compared with the food cycle, beverage cycle is a simpler matter. This is because:
Purchasing many beverages are purchased in standard measures under brand
names from one or a few suppliers, many beverages are not perishable and can be
handled in the same form in which they have been purchased.
Receiving the form in which beverages are supplied make it easy to ensure that
what is delivered has been ordered.
Storage generally beverages have less specific storage requirements than food
Preparation and sales each beverage selling outlet in an hotel combines preparation
and sales and there is normally a standard unit of sale for each
For all the above reasons beverage control is a simpler matter than food control and takes one of
two basic forms:
Standard gross profit percentages are applied to minerals, beers, wines and spirits, which
are then controlled against these standards
Beverages are issued to selling outlets at selling prices, and controlled against sales
The number and type of restaurants is determined by the size and diversity of the markets served
by the hotel.
One multi-purpose restaurant has to satisfy the needs of smaller hotel operations with limited
non-resident markets for lunch and dinner service. When the market is large enough, the need
arises to differentiate between those seeking full meals who have enough time available to
consume them, and those requiring light meals and snacks who have limited time and perhaps
also limited means.
These are the main hotel outlets for the service of drinks. The size and diversity of the hotel
markets are reflected in the number and type of hotel bars.
In a small hotel one bar may serve residents and non-residents, in large hotels there may be a
residents bar perhaps combined with television lounge, a lounge or cocktail or a restaurant bar,
and one or more separate bars serving functions.
This refers to the provision meals and drinks to guests in their rooms.
It may take the following forms:
Meals and drinks supplied to rooms as part of the restaurant and bar service
Organized as a separate department particularly when it operates from separate floor
Provided by means of bar units in guest rooms, which are stocked with a selection of
alcoholic and non-alcoholic drinks for the use of guests who are charged for the drinks
Banquets, conferences and similar hotel services may be conveniently grouped together as
distinct and separate hotel products under the heading of functions.

Main characteristics
Customers are organized groups such as clubs
The organized groups make arrangements for dates and times, numbers attending, menus
and other requirements for each occasion, in advance
Each occasion can be treated as a separate operation planned and organized as such
Normally the same agreed menu is served to all participants
The operation usually takes place in separate rooms and is served by staff who are
distinct from those serving others in restaurants and bars, although they may be
interchangeable between these facilities
Main Records Used
A function agreement it summarizes the arrangements for each function
A function diary it lists details of all functions in date order
A function chart it provides a visual record of all functions arranged for a period ahead
N/B: The volume of identical meals prepared and served together enables higher profit margins
to be achieved from functions than from other food and beverage activities, and functions often
represent the second most profitable hotel product, after rooms.
The numbers and size of kitchens in an hotel depend on the scale and diversity of the food
operations as well as the operating preferences and philosophies of hotel management.
Kitchen services may be provided in any of the following ways;
One centralized kitchen supplying food to all restaurants
Individual kitchens serving particular outlets
Basic types of food and beverage stores
Food stores these are sub-divided into;
Dry stores
Perishable stores
Cold rooms
Beverage stores or cellar
Linen, china, glass and silver stores


The hotel services other than accommodation food and drinks may be provided to the guest by
the hotel or by the operators on the hotel premises. The revenue earning activities provided
directly by a hotel may be variously described as ancillary or subsidiary revenue-earning
department or minor operated department. These services may include, telephone, laundry etc.
This facilitates communication between the guest and the outside world. May include telephone
services such as telegrams and facsimile.
The Main Operative Methods
All calls to be made through the hotel operator who can ascertain the cost of all outgoing
calls with the aid of a meter connected to the main switchboard
The guests may dial calls directly from their rooms
Some guests particularly those staying in hotels more than a few days often require laundry and
valet services in hotels.
Main Ways of Organising Guest Laundry
As an in-house facility
By arrangement with an outside laundry and dry cleaning firm
Guest laundry and valeting are regarded by some hotels as a service to their guests, which is
required no more than to cover its direct costs.
Hotels may raise income from activities operated on the hotel premises by others as;
This type of income arises most commonly from;
flats and apartments let to tenants for residential purposes
The offices may be let to businesses and other organisations for their purposes; shops let
to retailers;
club rooms let for purposes of a members or a proprietary club
display rooms and show cases let to others for the display of their wares
The concessionaires are given the right to operate on hotel premises with a view to undertaking
services to guests, which would be otherwise operated by the hotel. These include;
News agents
Hair dressers
Souvenir shops
NOTE: Rentals denote greater independence for the tenants than concessionaires
Commissions may accrue to the hotel from the providers of car hire and taxi services,
theatre and travel agencies, and other suppliers of services to guests, in return for the
business generated for them by the hotel
Foreign currency and travelers cheques exchange hotels usually exchange these for
guests at rates more favourable to the hotel by those offered by banks
Salvage it represents revenue derived from the sale by the hotel to dealers of such items
as used cooking oil, waste paper and other waste or obsolete materials
Interest this is earned by hotels on bank deposits and other investment of spare funds
Cash Discounts these are earned by the payment of creditors accounts within the
discount period, as deduction from the cost of goods and services bought.
Hotel organization is the framework in which various activities operate. It is concerned with such
matters as:
The division of tasks
Positions of responsibility and authority
Relationship between the positions
Some Concepts in the Organisation Framework
Span of control refers to the number of subordinates supervised directly by an
Levels of management the number of tiers through which management operates
Delegation this is the allocation of responsibility and authority to designated
individuals in the line of command
Organization is a function of purpose and the complexity of hotel business arises because it is
concerned with several distinct products, services and facilities which are offered in various
Classification of Activities of the Hotel Business
Operated Departments (Revenue Earning)
Major (Primary) Departments
These are;
Minor (Ancillary) Operated Departments
These include;
Guest telephone
Guest laundry and valeting
Other guest services
Support Service Departments (Undistributed Overheads)
These include;
Administration and general
Property operation, maintenance and energy

The accommodation function of the hotel is described in terms of reception, uniformed services
and housekeeping
Typical Organisational Approaches
All the three activities operate as separate departments with their own heads of
Reception and uniformed services are grouped together as the front hall or front house of
the hotel under an assistant manager for whom this is the sole or main responsibility
Reception or uniformed services are grouped together as front hall or front house
department with its own head of department
All the three activities are grouped together as the rooms department under an assistant
manager for whom this is the soul or main responsibility
All three activities are grouped together as rooms department with its own head of
Some Activities Connected with Rooms
In most hotels advance reservations form an integral part of hotel reception and the same
employees deal with them and with other reception tasks.
In smaller hotels guest accounts are normally handled by bookkeeper/receptionists
however, this is an extension of the accounting function.
In some hotels room service is provided by housekeeping staff, though this function is
clearly part of the food and beverage function of the hotel.
Food and beverage function of the hotel is described in terms of the food and beverage cycle, the
main sales outlets, and the related support services.
Typical Organisational Approaches
Each sales outlet and supporting service operates as a separate department with its own
head of department
Several departments are grouped together under an assistant manager for whom they
represent the sole or main responsibility eg purchasing and storage bar etc
Several of these departments are grouped together as one department under its own head
of department
All food and beverage activities are grouped together under an assistant manager from
whom they represent the sole or main responsibility
All food and beverage activities are grouped together as a food and beverage department
with its own head of department
Aspects of Food and Beverage Function
Most hotels have facilities serving both food and beverages although in some of them
food or beverages may predominate.
Food and beverage control based on the food and beverage cycles may be appropriately
seen as part of the total accounting function of the hotel
Where there is a separate sales department, food and beverage sales are usually closely
monitored by that department.


These may be presented in such terms as telephone and laundry
Typical Organisational Approaches
The services are operated under direct management of the hotel as minor operated
The services are operated under rental and concession arrangements with hotel by another
The Following Services may be provided under this arrangement;
Beauty shop and hair dressing
Laundry and dry cleaning
Newspapers and magazines
Secretarial services
Squash courts and tennis courts
Gifts and souvenirs
Swimming pool tobacconist
Factors Influencing the Type of Approach Adopted
Size of the operation
Availability of suitable operators of particular services
Operational philosophy of the hotel or hotel groups
Quality of the services
Financial return to the hotel
In practice the non-revenue service activities are organized in one of the three main ways.
Retained among the hotel managers own responsibilities
Assigned to an assistant manager as one of his or her responsibility
Assigned to separate department with its own head of department
Specialist activities which may be organized in the hotel

Specialist Activity Source

Accounting and Hotel accountants and consultants, public accountants and auditors,
Finance professional stock-takers
Personnel Services Personnel recruitment and selection specialist; work study, human
resource and industrial relations advisers; training boards and other
Purchasing Hotel accountants and consultants; furniture and equipment
specialists; various suppliers
Sales and marketing Market research agencies; advertising agencies; public relations
Property operation, Architects, builders, designers; consulting engineers; utility
maintenance, energy undertakings


According to the size of the hotel and the particular arrangement in operation, the hotel chief
executive may be variously designated as managing director, general manager or simply hotel
The complexity and continuity of the hotel activities normally give rise to the need for one or
more deputy or assistant managers.
Those in positions of heads of departments fall into two distinct categories;
Line managers Heads of operated departments with direct lines of responsibility and authority
to their superiors and to their subordinates. Eg, head receptionists, head housekeepers, head chefs
and restaurant managers.
Heads of service departments these are specialists who provide advice and service to line
management. They have no direct authority over employees other than those of their own
departments. Eg, accountants, buyers, personnel and purchasing officers.


chart, page 159)


Main Areas of Application of Information Technology in Hotels
Administration word processing, spreadsheets, data storage and manipulation
Communications fax, e-mail, telephone, messaging, pagers
Control reservations, billing, telephone charging, in-room entertainment
Finance budgeting, accounting and taxation
Internal Systems property and energy management, security and fire control
Management management information and decision making, project management
Marketing internet selling, customer profiling
Advantages of Technology
Speed the new technology is fast and speed is important in hotels, for example, in
responding to a guest, travel agent etc
Accuracy the new technology is accurate and accuracy is important in hotels.
Cheap the new technology is becoming cheap to use, cheaper than ordinary office
machinery, and with rising costs of clerical labour in hotels, the scope for saving may be
Main Aspects of Human Resource Function
Job analysis, manpower planning and scheduling of work
Recruitment, selection and training of employees
Job evaluation, conditions of employment and welfare of employees
Promotion, retirement and termination of employment
Employees consultation, negotiation and the handling of disputes
Size of hotel large hotels tend to have a lower staff/guest ratio than medium sized hotels
and the ratio is also low in smaller owner/managed hotels where the owner and his family
generally work longer hours and employ fewer staff.
Ownership group owned hotels tends to be larger and more standardized than the
independent hotels, which tend to be more individualized
Age and layout of the building modern purpose built hotels with a view to ease
economy of operation can operate with fewer staff than older hotels, which are more
difficult and expensive to operate
Range/type of facilities and services the greater the variety of food and beverage
facilities of other guest services in the hotel, the greater the staffing requirements
Methods by which hotel services are provided hotel services may be provided
personally by staff or through self-service and other non-personal methods with wide
variations in required staffing
Quality of staff this has a bearing on the output and, therefore on the number of staff
required to provide a particular volume and standard of hotel facilities and services
Organization this influences the staffing of hotels through the division of tasks and
responsibilities, the extent of use of labour saving equipment, techniques, procedures and
the extent to which specialists, contractors and suppliers are used for particular hotel
Incidence of demand may give rise to annual, daily, and weekly fluctuations in staffing
requirements, which can be met to a varying extent by the employment of temporary,
casual and part-time staff
The number of employees in different departments depend on;
Relative importance of each activity in the total hotel operation
The criteria used in allocating employees between departments
Distinctive Features of Employment in Hotels
The operating conditions of various hotels
The range of skills and occupations
The groupings in departments and the conditions of work
In small the human resource function may be the direct responsibility of the hotel manager, in a
large hotel or in a hotel group, the human resource function is normally the responsibility of
separate departments which form one of the main service departments of the hotel.
Organization of the human function of a group of hotels
General Manager

HR Manager (a)

HR Development assistant (b)

Welfare assistant (e)

Training manager (d)
Recruitment assistant (c)

Each hotel
Head office

Assistant manager (HR) (g)

HR Manager (head office) (f)

Schedule of the human resource responsibilities

Position Responsible to Responsible for
Human resource General manager All aspects of the human resource
manager function
Human resource The human Job analysis and evaluation, research,
development assistant resource manager records and statistics
Recruitment assistant Human resource Recruitment and preliminary selection
Training manager Human resource All aspects of training
Welfare assistant Human resource Health, welfare, safety including staff
manager accommodation
Human resource Human resource All aspects of the human resource
manager (head office manager functions in respect of the head office
personnel and hotel management
Hotel assistant Hotel manager All aspects of the human resource
manager (human function in respect of staff in the hotel

The main aims of training are to;
To Improve employees knowledge, skills and attitude to work
Improve output and sales
Improve recruitment
Increase employees loyalty
Improve the image of the company in the outside world
Reduce breakages, waste of materials and misuse of equipment
Reduce accidents
Reduce absenteeism
Reduce labour turnover
Reduce stress on management
Main Functions of the Training Division
Formulate a training policy for the approval of the general manager and the board to keep
them regularly informed of its implementation
To prepare an annual budget for the approval of the general manager and the board to
report regularly to them on income and expenditure
To identify quantitatively and qualitatively the training requirements for all grades and
categories of employees and keep them under review
To maintain close liaison with educational institutions and training centres, asses the
appropriateness of their facilities and services for the training requirements of the
company and to arrange for new courses
To establish and operate induction, orientation, refresher and other appropriate courses
for different grades and categories of company employees as necessary and to make
arrangements for their attendance
To co-operate with appropriate staff of the human resource management and supervisory
staff and those suitable for developing into such positions for systematic development of
existing new managers and supervisors
To establish and administer training schemes for all grades and categories of employment
To maintain adequate premises for purposes of training administration and instruction
To maintain all necessary procedures for training within the company
To represent the company in all natters concerned with training both within and outside
the company and advice the general manager and the board on all such matters

Organization of the training function in a group of hotels

HR Manager

Training Manager (d)

Trainer, aids & Equipment (l)

Training instructor (k)
Management trainer (j)
Supervisory trainer (i)
Operative Trainer (h)
Schedule of training responsibilities in a group of hotels
Position Role
Training manager Directs and coordinates all training and maintains close
liaison with recruitment and welfare assistants, human
resource manager (head office) and hotel assistant
Operative trainer Is responsible for supervision and co-ordination of all
training below the level of assistant head of department
Supervisory trainer Is responsible for supervision and co-ordination of all
management training above operative and below assistant
manager level, ie head and assistant head of department
Management trainer Responsible for supervision and co-ordination of all
management training above head of management level
Training instructors Are specialists trainers in food production, food and drink
service, housekeeping, training and administration ,
providing instructions at all levels under the supervision
and co-operation of training officers
Trainer aids and Is responsible for production, maintenance and storage of
equipment all training aids and equipment including operational and
training manuals

Performance of hotels reflects their success in a range of areas. Success in performance is
necessary for any hotel to survive and prosper, often in an increasingly competitive environment.
Success enable the hotel to earn the revenue required to pay its debts, reward its staff and make a
profit to give a suitable rate of return for its owners or investors.
Some Criteria of Measuring Performance
The hotel can be regarded as a systems model which takes in inputs that lead to desirable
Job satisfaction
Fed & rested customers
Return on investment
Wages & salaries
Tired & Hungry Customers
Time & effort

The effort, time and capital that is put into a business can lead to outputs of job satisfaction,
wages and salaries for staff and return on investment for owners.
The hotel system can input tired and hungry customers and output those whose needs are
satisfied by the services provided by the hotel.
Performance is the relationship between the inputs and output of an hotel, Including tangible
goods and intangible services. Tangible goods include food and drink to be consumed by the
customer, while the services produced by a hotel are less tangible and are often judged
subjectively by the customer.
Integrating the Tangible and Intangible Measures
Since the running of an hotel nowadays is such a complex activity, managers need to be able to
monitor the business from a number of perspectives such as;
Financial perspective
Internal business perspective
Innovation and learning perspective
Customer perspective

Financial perspective

Internal Business perspective

Customer perspective

Innovation & learning Perspective

It deals with how the hotel looks to shareholders.
In order to succeed hotels must generate outputs that can be measured in terms of profitability,
growth and shareholder value.
Because the fixed costs of hotels are usually high, it is important that sales and revenue (outputs)
are maximizes and costs (inputs) are minimized.
Measures of labour productivity
These relate output to labour input. The main types are;
Physical measures these relate physical units of output to numbers employed or hours
Financial measures relate output measured in financial terms to pay roll
Physical/financial measures relate output measured in financial terms to numbers
employed or hours worked.
Also productivity may be measured by considering the number of employees per bedroom
These include activities and processes in which the hotel must excel in order to be successful,
such as:
Management of the property, people and planning for the future. Hotel management is
an important activity and a determinant of the success of the hotel.
Operations the day-to-day running of the business that is central to the way that hotels
run. The operational day often runs from check-in time to check-out time on the
following morning.
Systems these the internal processes that ensure that, for example, information is sent to
the right department.
Information all hotels need to keep records about, for example, customers and finance.
Communication managers and staff need to work together to satisfy customers, so
there is a constant need to communicate effectively.


Relates to ways in which the hotel can improve and create value. Because of the dynamisms in
the market environment, there is an increasing need for hotels to consider how they operate in
the future. This takes into account product development, marketing and technology. It is the role
of management to constantly re-evaluate the facilities and services of the hotel to ensure that
they will meet the needs of the market in the future.
The hotels must manage their workforce effectively because their employees are their greatest
It involves looking at the hotel from the viewpoint of customers.
As the hotel world-wide has become so competitive, there is a greater need more on the customer
and continuously adapt to their needs. Hotels must review their service and facilities against
what is offered by competitors, so that the product is periodically developed.
Hotels need to gauge customer feedback regularly so that regular complaints of service or
facilities can be addressed. This may be done by asking hotel users to complete questionnaires or
comment cards about their perceptions.
Productivity measures provide a means of monitoring productivity levels and trends, and of
comparing them between hotels and departments, with a view to identifying reasons for
differences, and taking steps to improvement.
These ways may include;
Substituting capital for labour by machines replacing men
Examination of the extent to which highly labour intensive guest services continue to
meet an economic demand, and in the elimination of those which do not, or their
provision by non-personal methods.
Improving the utilization employees time through the definition of jobs, work scheduling
and multifunction staffing, when the same employee performs more than one role or task
in a working day.
Improving the quality of staff through improved recruitment, selection and training and
through financial and other incentives to better performance.

Consumer markets have evolved through several phases, namely;
First Phase (Production Phase)
Main Characteristics
Shortage of available goods and services when demand exceeds supply
There is no sales problem
What is produced can be sold
The major problem is to increase output
It leads to a sellers market and a production orientation on the part of the seller
Second Phase (Sales Phase)
Main Characteristics
There are higher real incomes
Increase in purchasing power
Greater supply that exceeds demand leading to a buyers market and a sales orientation
on the part of the seller
Third Phase (Marketing Phase)
Main Characteristics
There is growth in capacity and output accompanied by a further growth in incomes
leading to the affluent society.
It leads to a realization of the need for goods and services to be produced to match
consumers needs
It gives rise to a buyers market and a marketing orientation
MARKETING - According to the British Chartered Institute of Marketing, it refers;
The management function which organizes and directs all those business activities involved in
assessing and converting customer purchasing power into effective demand for a specific product
or service and in moving the product or service to the final customer or user so as to achieve the
profit target or other objectives set by the company.
Marketing is based on the belief that sustainable profitability can only be achieved by
identifying, anticipating and satisfying customer needs and desires.
Differences between Marketing and Selling
Selling focuses on the needs of the sellers while marketing on the needs of the buyers
Selling is pre-occupied with the sellers need to convert his products into cash while
marketing with the idea of satisfying the needs of the customers by means of the product
The demand of hotel products is a derived demand the reason for a guest stay at the
hotel may be a business visit or holiday but rarely the room itself
The hotel room is fixed in time and place in the short run the number of rooms or
beds on offer cannot be significantly changed and location is part of the highly
perishable product
Hotel investment is primarily an investment in land and buildings and interior assets.
The critical factors to a successful hotel operation are:
The right location
Correct capacity
High level of utilization
In the reception of an hotel, marketing can contribute first through a market feasibility
study to assess the demand a study may identify the best market opportunity for an
hotel , a gap in the market, a location or choice between alternative location for a
particular hotel concept; or given a particular location a study can determine the most
appropriate hotel concept
In planning a new hotel, there is full scope for adherence to the marketing concept
from the outset
In the short run, the existing facilities and services are given within narrow limits
Hotel services are less tangible and therefore they cannot be tried out before purchase.
They are often bought individually or as part of a package, and they may be bought
directly by the user or through an intermediary such as a travel
The Marketing Cycle

Market Research

Monitoring & Review Product Formulation & Development

Selling Promotion

Market Research
This is concerned with providing the management with information about market and product in
such a way as to contribute to systematic decision making.

Product formulation and development

With adequate information about the market it is possible to identify accurately the particular
segments of the market serve or to be served by the hotel. The formulation and development of
the products to match the identified market segments includes both the range and type of hotel
facilities and service and pricing.
This may be done through;
Advertising this covers the use of the press, radio and television, films, posters and other paid
space or paid media
Public relations Includes all those efforts other advertising, such as editorial publicity,
intended to create and maintain a favorable image of the hotel and its products.
Merchandising This is the point-of-sale promotion of particular significance importance in
hotel restaurants and bars through packaging, display and presentation.
This may be performed by sales staff whose sole concern is selling. In most successful hotels the
receptionists, waiters and other staff in direct contact with the customer are also sales men.
Monitoring of performance and review
It is concerned with comparisons of actual results with plans and budgets and with evaluating the
effectiveness of the marketing effort, with view to providing an informed basis for changes and
adjustments in market and product policies and strategies of the hotel.
Marketing costs include payroll, and other expenses of the relevant activities.
Yield Management
Refers to the concepts and techniques concerned with the maximization of profit and revenue. It
can help in two main ways:
Rooms inventory management this is concerned with matching different room types to the
available demand
Differential pricing structure it is concerned with obtaining the best price at any particular

Quality Management
This is a systematic process that consists of several stages, namely;
Determining the guests requirements
Designing hotel facilities and services to meet the guests requirements
Operating the hotel in conformity with the established standards
Monitoring the guest satisfaction
More often than not hotel accommodation and other hotel products are parts of the total tourist
products, which covers, from the point of view of the tourist, the whole experience from the time
s/he leaves home to the time they return.
In inclusive tours the tour operator or another organizer brings together all the elements of a
holiday which the operator promotes and offers for sale as a single product at one inclusive price.
This has important implications for hotel marketing, increasingly, hotel beds and other facilities
and services cannot be successful if marked in isolation.
Main Types of Co-ordination required for effective marketing in travelling and tourism
At the destination It is the role of the official tourist organization to formulate and
develop tourist products based on the destination and to promote them in appropriate
At the generating end It is the role of tour operators to assemble component services
into packages and to promote them and sell them as a single product
It is the role of individual operators to formulate, develop and supply their products as
parts of a total tourist products


An investment in hotels is an investment in land and buildings, which represent the dominant
asset in hotels.
Other fixed assets in hotels
Plant and equipment eg, major items such as air conditioning, boilers, lifts and heavy
kitchen equipment
Furniture, furnishings and small equipment
China, glass, linen and cutlery
Some ways of owning and managing hotels
The building shell may be owned by a developer sometimes as part of some large project
and leased to an hotel operator on a rental basis
Hotel companies make use of sale-and-lease-back arrangements as a means of financing
the investment, which reduces the capital requirements for the hotel operator
Interior assets may be leased by the hotel rather than bought
The property support services are usually under the technical services, building and services,
works director, etc
Technical consideration involved in property operation and maintenance are specialist activities
normally entrusted to specialist staff and sometimes contracted out
Property Operation and Maintenance Costs
These include Operating costs of;
repair and maintenance of buildings
plant and equipment
furniture and furnishings
maintenance of grounds
related wages and salaries
Main Factors Influencing Property Operation and Maintenance Costs
Age of the hotel older hotels tend to spend more of the revenue on property operation
and maintenance than new ones
Size of the hotel In comparison with others smaller hotels tend to spend more of their
revenue on property operation and maintenance

Most hotels concentrate on what they do best and outsource other non-core activities to it. This is
done to achieve cost effectiveness in operations
Some non-core activities include; cleaning, laundry, waste collection, ground maintenance, re-
decoration, minor repairs, heating and electrical matters, swimming pool maintenance etc
Energy costs include;
Cost of electricity
Cost of gas
Cost of oil
Cost of steam
Cost of water
Cost of other fuels
NOTE: Energy costs may be affected by climate in the following ways;
In warmer climates energy costs account for the higher proportion of the hotel
revenue to air condition the rooms in first class hotels
In cold climates heating represents the major parts of energy consumption
The major environmental problems in this century are;
Global warming
Ozone layer depletion
Acid rain
Land pollution
Pollution of water and other natural resources
Hotels should therefore use energy and other resources responsibly and control consumption as a
social responsibility as well as good business
In hospitality and tourism this can be best achieved by acknowledging the importance of
sustainable development and eco-tourism.
The major accounting statements include;
The balance sheet it shows the financial position of a business at a particular time eg, at the
end of the year
The profit and loss accounts (Income Statements) It shows the revenue and the costs and
expenses incurred in earning that revenue for a given period such as a week, a month or a year
Main Users of Accounting Information
Owners and long-term lenders
Short-term lenders and trade creditors
Owners and Long-term lenders they are interested in the sustained profitability of
the hotel. Their focus is on the return on investment, which indicates the use the
business makes of its assets, and at the relationship between owners capital and
Short-term and Long-term lenders They take a more limited view and wish to be
particularly satisfied that the hotel can meet its current obligation
Management has responsibilities to investors and to both long-term and short-term
creditors. Are also concerned with planning and day-to-day control of the business.
This may either be presented horizontally or vertically.
Major sections of the balance sheet
Capital (equity)

Assets these may either be fixed or current

The grouping of assets into fixed and current reflects the investment intensity, which is normally
very high in hotels, because the bulk of hotel investment is in land and buildings and other fixed
assets. Current assets comprise cash and other items convertible into cash in the normal course of
business such as stocks.
Liabilities these may either be short or long term.
Long-term liabilities are a form of total financing of the hotel wile short-term liabilities are the
amounts owed to suppliers and they include such short-term borrowing as bank overdrafts.
Capital (Equity, Net worth of the business)
This represents the owners capital. According to the form of ownership it may be represented by
shareholders capital in a company, capital accounts in partnerships and individual
Some Balance Sheet Ratios and Analysis
Capital gearing it shows the relationship between equity and liabilities. It is
calculated by dividing the net worth by total liabilities or, where current liabilities
fluctuate, the net worth is divided by the long-term debt only.
It indicates the strength of capitalization
Current ratio It is calculated by dividing current liabilities into current assets and
represents the measure of liquidity of a business.
The main profit and loss concepts are;
Revenues these are classified by products/department showing the income mix
Costs and expenses these are classified by type of cost and expense into cost of
sales, payroll, other direct expenses, undistributed operating expenses, and fixed
Costs and expenses
These are classified into;
Cost of departmental Sales they relate to each category of sales eg, food, beverage
and minor operated departments.
Cost of Sales = opening stock + purchases closing stock
Departmental Payroll this is related to each category of sales eg, (food and
beverages, rooms, minor operated departments)
Other direct departmental expenses incurred in the operation of a department are allocated to that
Operating expenses relating to the whole hotel, which are not distributed to departments, are
distinguished from fixed charges related to assets and capital
Departmental gross profit may be calculated for food, beverages and minor operated
departments (revenue less cost of sales)
Departmental net margin may be for rooms, food and beverages and minor operated
departments (revenue less prime costs)
Departmental operating profit may be calculated for rooms, food and beverages and
minor operated departments (revenue less direct expenses)
Hotel operating income this is the sum of departmental profits plus rentals and other
Hotel operating profit it is given by operating income less undistributed operating
Hotel net profit it is given by operating profit less fixed charges
A number of ratios may be calculated from the income statement, these include;
For each operated department each element of cost may be expressed as a percentage of
departmental sales
For each operated department each profit margin may be expressed as a percentage of
departmental sales
For the whole hotel rentals and other income, undistributed operating expenses, and fixed
charges may be expressed as a percentage of total hotel revenue
For the whole hotel operating income, operating profit, and net profit may be expressed
as a percentage of total hotel revenue
Some Particular ratios of importance
These enable each element of cost and expense to be controlled for each operated department in
relation to the sales of that department.
When the departmentalization of the operating statement follows the responsibilities of the hotel
organization structure, it is possible to equate the various profit levels with individual
responsibilities, for example;
Departmental gross profit this is the responsibility of the chef, head bar person,
telephone supervisor etc
Departmental operating profit this is the responsibility of the front hall manager and
the food and beverage manager
Hotel operating profits this is the responsibility of the hotel manager
NOTE: Control is facilitated by;
The structure of financial statements
The amount of detail and analysis contained in the statements
The frequency with which they are produced
The following are produced together with related ratio and with supporting schedule
Daily statement of revenue
Weekly statement of costs of sales and payroll
Monthly operating statement of revenue, costs and expenses
Quarterly balance sheet


The most significant profit level for management purposes is the hotel operating profit, ie, the
level of profit after all operating costs and expenses have been deducted from the hotel revenue
and before fixed charges
When assets are used up they become expenses eg, fixed assets are depreciated and the
depreciation becomes an expense
Revenue creates assets eg, sales generate cash or debtors
Earnings and assets this is a measure of the effectiveness of management in employing
assets to generate profits.
Rate of stock turn-over This is calculated by dividing the costs of food, beverages and
other sales by the average stock. It represents the number of times a particular stock turns
over in a year and is useful indicator for avoiding overstocking
Rate of debt turn-over This is measured by dividing credit sales by average debtors.
The criteria used to measure the size of an hotel are;
Scale of investment
Turn over
The number of bed and guest rooms
Numbers employed
Other criteria
Importance of small hotels
Hotel ownership offers considerable attraction to people willing to invest money, time
and effort in building up a business
It is concerned with providing personal service.
The size of a small hotel is limited by the size of the market and the extent of
Most hotels provide more than one product line rooms, meals and refreshments and
sometimes also other services and they do so in various combinations
A small hotel often has more than minimal capital invested in it, employs non-family
labour and is perceived as a business by its owners.
Independent owner-managed hotels have commonly up to twenty or thirty rooms and less than
twice that number of beds, a restaurant or a dining room, and a bar and sometimes also offer a
few other guest facilities and services.
Rooms may, but need not necessarily represent the large single source of hotel revenue.
Telephones, newspapers and guest laundry are the main and often the only services provided by
small hotels, in addition to sleeping accommodation, food and drink.
Products in small hotels relate to its markets, which are likely to be more specialized in a large
city with a variety of hotels than in a small town where the hotel may be one of only a few small
hotels or the only hotel serving the town.
The small hotel users include;
Family rather than groups
Coach tours etc
Small hotels tend to approach their markets less formally and more intuitively from their detailed
knowledge of their guests and rely on selling their products more on personal recommendation
than on repeat visits than on systematic promotion
Traditionally, the small hotel has been owned by an individual or a family; the common legal
form of ownership has been an unincorporated firm, a sole trader or sometimes partnership
Hotels require short-term, medium term and long term finance for particular purposes. It is
common for small hotels to provide most of the finance of all three types from retained profits
and from personal savings, sometimes drawn from the realization of other assets, and the main
external source are bank overdrafts.
The Main Ways that Income Accrues to the Owner of small hotels are;
The appreciation of land and buildings
Income in-kind
In a small hotel the owner/manager is an entrepreneur who normally combines ownership and
management as well as the function of top and operational management in one person.
The owner/manager may turn outside for advice and help for such services as accounts, and
finance architecture and design, business promotion, law, maintenance of equipment and
services, etc
Main Implications of the Scale of Operations
Limited departmentalization and the likelihood that it can be supervised without or with
no more than one intervening level.
In a small hotel, a few people may assist the owner in the office and others have specific
but quite wide departmental responsibilities
From a management point of view, a small hotel operation calls for a breadth of
knowledge and skills, which are rarely combined to a high degree in the same person.
Most hotels, however small, keep some accounts, in order to have a record of their transactions
with their guests and suppliers, and in order to satisfy certain legal requirements.
Main basic accounting records appropriate for small hotels
A receipt and payments book it records all cash transactions
A visitors tabular ledger with individual accounts for all resident guests may be
extended to include separate accounts for functions, as well as for total cash and credit
sales in the restaurant and bar to customers using these facilities without taking up
sleeping accommodation.
A wages book it includes all employee and related payments, provides a comprehensive
record of all payroll transactions.
Some Reasons for Analysing the Performance of Small Hotels
Indicate the relative profitability of different parts
Establish a basis for monitoring and comparison
Enable an assessment to be made of the effect of any changes introduced in operation
Realities of small hotels
It is normally adequate to analyse and certain expenses under no more than four
headings; room, food, liquor and miscellaneous
An extended visitors ledger can provide analysed details of all revenue
Cost of sales data for food and beverages can be derived from an analysed receipts and
payments book and adjusted for changes in stock levels, to give the gross profit
Each employee is allocated to the department in which s/he is primarily employed, or an
employees pay roll cost may be divided between the departments to which they
The future of the small hotel lies in concentrating on what it can do best and what it alone
can do, on the high quality, individual and personal approach to hotel keeping.
Some other approaches
The formation of hotel consortia or cooperatives of independent hotels
Creation of advisory services by national hotel associations and by tourist boards
Inter-hotel comparison surveys which enable them to compare or benchmark their own
performance with other hotels with similar characteristics, and to identify particular
operating weaknesses.
These provide the small hotel with greater visibility and the ability to market its products
offering to the wider consumer base.

The independent owned hotel may be the dominant firm in the industry, but the growth of the
industry has been increasingly associated with hotel groups. The increase in the size of hotel
firms has come about by firms building or acquiring hotels in different locations and placing
them under central management.
The Main ways of Operating Hotels as groups are:
A group operating hotels owned by them or leased by them from their owners to whom
they pay a rental
Groups may manage hotels as agents for the owners under management contracts
Group may operate under franchise agreements
The advantages that may accrue to hotel groups are resulting advantages of size, ie, economies of
scale. These include;
Financial Economies this is the ability of the group to marshal capital resources from its own
cash flow and from external sources. A group may be able to borrow from lending institutions
and to do so on favourable terms because it is big and because its hotels provide a good security
to its lenders.
Marketing Economies because of its size a group can enjoy marketing economies. It can
create a group image in the market, which may extend to a common name, facilities and
standards throughout the group, and it can engage in promoting its hotels together.
Economies of Buying an hotel group has open to it economies of buying because it can buy in
bulk and negotiate advantageous prices and terms with its suppliers of a wide of goods and
services on behalf of the whole group.
Managerial Economies - a group can attract high-quality staff through the prospects it can offer
within the group and the availability of training schemes, and benefit from an interchange of staff
between its hotels. It can also provide centralized services to its hotels and in these it can employ
specialists with the time and skill to exploit the advantages of group operation in such areas as
finance, personnel, purchasing and marketing.
Technical Economies - when the hotels are concentrated geographically within a limited area,
the volume of business may then make it possible to concentrate such operating facilities as
central food production, maintenance and laundry, when reduction in unit costs may be achieved
as compared with providing the facilities in individual hotels.
Economies of risk spreading these enable groups to reduce risk by product and geographical
diversification. A decline in demand for a particular hotel may be offset by a high volume of
business in another hotel, and thus even out the fluctuations for the group as a whole.
Some Sources of economies of Scale
The weight the group has in the markets
From providing certain services to its hotels
From operating them as a group
The major problems are those of;
Communication in order for a group to operate well, the centre has to communicate policies,
procedures and other matters to individual hotels which in turn have to communicate
information, requests and other matters to the centre.
Control whatever the degree of central direction and monitoring of individual units, there is a
need for some control to be exercised over the conduct of the hotels, to ensure group decisions
being carried out and the accountability of individual hotels for their performance.
Costs a group operation gives rise to its own costs, through the need for communication and
control, and through the provision of central services to hotels.
Factors affecting the extent of the above problems
The number of hotels in the group
Geographical dispersal of the hotel
The extent to which the various aspects of the group operation are centralized
A group management may adopt a mainly passive ownership role. In order to obtain the
advantages of group operation, a more positive group management approach is necessary. The
group management has to formulate the objectives, policy and operational guidelines, evolve
strategies and plan on behalf of the group.
The major issue for an hotel group is how much to centralize
The Principal Functions that offer scope for Centralization
Accounting and finance
Human resource services
Sales and marketing
Technical services
Accounting and Finance such aspects such as preparation of final accounts for the group,
capital accounts, cash management and detailed analysis of the financial performance of each
Human resource service this is concerned with staffing levels, salary and wage structure,
employee records. It normally deals with recruitment, selection and placement, sometimes for all
employees, sometimes only with particular grades and categories, and others are recruited and
engaged locally.
Purchasing substantial economies may be achieved by centralized purchasing. This may be
done in the following ways:
When the hotels are located in a limited area, supplies are bought for central stores from which
they are distributed to a hotel
Orders may be placed centrally against requisitions by hotels and delivered directly to hotels.
Orders may be placed by individual hotels against centrally negotiated contracts, with nominated
suppliers to deliver directly to the hotels.
Sales and Marketing all or some publicity, advertising and direct sales promotion may be
centralized, to project the desired image of the group and to generate sales, particularly from
large hotel users.
Other Operations these may be services carried out individual hotels, or obtained from
specialist suppliers, or provided to hotels in a group as a central facility, if their volume is large
enough and if the hotels are close enough to be served centrally.



These are hotel groups that operate in more than one country.
The major types of international companies are:
National companies with a head office in a particular country
Multinational companies, established by airline and other interests, which operate hotels
in different countries.
National companies operating internationally
International operation offers a scope for expansion outside their initial sphere of operation often
in more favourable terms than their own countries.
Also it offers them a chance to exploit further the economy of scales for example in finance,
marketing and risk spreading through geographical diversification.
Multinational Companies
When airlines participate in international hotel operations, they bring together the main
components of the travel products ie, transportation and accommodation thereby diversifying
the products as well as often seeking to safeguard their main business, to which they take their
Main Reasons for International Hotel Operations
To less developed countries international hotel operations bring management skills and
expertise not available locally and helping opening up international markets.
For developed countries international hotel operations offer opportunities for the export
of skills and expertise, as well as various goods and services.
Main Problems/Challenges of International Hotel Operations
Rooms represent the single most important hotel products in all regions and countries except in
Ireland. In most of them rooms, food and beverages account for around 90% or more of the total
There are major variations in the extent to which hotels in different regions rely on business,
holiday and other markets.
The great majority of hotel users reserve their accommodation in advance. The operation of
international groups account for a high proportion of reservations made through own reservation
systems and through travel agents and tour operators, both of particular importance in the
marketing of international hotels.
The major forms of ownership available are;
Joint Venture this occurs when the operator is a full partner in the joint ownership of the hotel
with a joint participation in the financial outcome
Lease occurs when the operator take temporary possession of the hotel for a specified period of
time for rent payments
Management Contract it occurs when the operator who may or may not be also an investor
manages the hotel for an agreed remuneration.
Franchise this occurs when the operator takes a franchise from a franchisor
The Main Forms of National Financing of International Hotel Operations
Operating companies with a head office in a particular country enter into arrangements in
other countries which may include capital investment
Private institutions such as commercial banks in Europe, North America and the Far East
investing in hotels abroad
Suppliers of goods and services, particularly construction companies, may participate in,
or arrange, equity or loan finance for projects abroad in order to secure a substantial
Public and semi-public institutions are entrusted by governments to make grants and
extend credit, usually to developing countries, where the beneficiaries are normally
governments but may also be private firms.
Main Forms of International Financing of Hotel Operations
Multinational companies, which tend to set up separate companies in different countries
and acquire a part interest in them
Inter-governmental organizations, such as the World Bank group and regional
development banks, which lend to developing countries.
The problems of international hotel groups operations are potentially and in practice generated
by the following sets of factors;
Group operations
Differences between countries
The need to cope with the differences in the interests of the group as a whole
Each hotel in a particular country operates in its own environment with its own markets and
market conditions, operating conditions, customs and practices.
Also there are differences in the various in the countries economic, political, and social systems.

The market is a dominant influence on the location of an hotel.

a) Discuss to what extent EACH of the following may influence an hotels location:
i Transport
ii Holiday markets
iii Economic activity [10]
b) Describe the criteria that will place an hotel into EACH of the following categories:
i Luxury hotel
ii Resort hotel
iii Commercial hotel
iv Residential hotel
v Transit hotel [10]
An hotel will often have characteristics that are specialist to meet demands of their
particular clientele.
a) Explain how a transit hotel differs from other types of hotel. [5]
b) Describe how an hotel may provide amenities for local residents. [5]
c) Discuss influences that contribute to determining the location of an hotel. [10]

During a worldwide credit crunch, the hotel and catering industry will continue to make a
significant contribution to the economic and financial stability of a country.
a) Explain how hotels are influential in EACH of the following aspects:
i employers of labour
ii outlets of products of industries not related to food and beverage production [8]
b) Describe how the characteristics of a resort hotel may differ from a city hotel in EACH of
the following features:
i location
ii purpose of visit
iii length of stay
iv range of facilities and services [12]

A number of countries has suffered from a lack of tourism during recent economic
restraint. Examine the role to the economy that the hotel and catering industry plays in
EACH of the following areas:
a) provision of outlets for the products of other industries
b) attracting visitors to the area
c) provision of facilities
d) employers of labour
e) provision of amenities for local residents [20]
Whenever visitors stay in an hotel, they will use the services of the restaurants and bars
depending upon their perceived needs.
a) Describe the needs that EACH of the following categories of customers may have on the services pro
i organised groups [4]
ii non-residents [3]
iii residents [3]
b) Compare and contrast characteristics that will distinguish between the following
types of hotel guest:
i holiday user [3]
ii business user [3]
iii other user [4]

The main purpose of the visit to a particular hotel will determine the extent to which a
guest will use hotel accommodation and services.
a) Examine the distinguishing characteristics of the main types of client that will make up
an hotels accommodation market. [10]
b) The use of hotels frequently represents derived demand, as guests rarely stay or eat in an hotel for its own

Persons who are influential in the functioning of an hotel will have a different priority
towards the operation of the establishment, depending upon their individual involvement.
a) Discuss the interests of EACH of the following categories of person:
i owner
ii employee
iii customer [15]
b) Sectional policies will provide guidance for management decisions and actions.
Explain aspects that a shareholder policy should be expected to define. [5]
The operational success of an hotel will be influenced by a policy that is based on
management objectives specified within sectional policies. Discuss objectives you would
expect to find in the following sectional policies:
a) Customer
b) Supplier
c) Shareholder
d) Employer [20]

Commencing from the time that an enquiry is received through to departure, the progress
of an hotel guest will be recorded whenever an activity takes place.
a) Examine FIVE records that an hotel front office will maintain during a guests stay,
identifying information that is held on each record [10]
b) Throughout a guests stay, the hotel front office will usually be the prime source of
information. Discuss what information the guest can expect staff to provide. [5]
c) Hotel guests may spend up to one-third of their stay in their room. Describe
characteristics of an hotel bedroom that will influence customer satisfaction. [5]

In addition to providing a wide range of services, hotels operate to provide overnight

accommodation for travellers.
a) Discuss FIVE ways in which a traveller may reserve accommodation in an hotel, and
identify ONE advantage for EACH method. [10]
b) Describe how a room reservation chart may differ from a room status board. [5]
c) Identify duties that may be carried out by front hall uniformed staff. [5]

Although the sale of rooms is usually the biggest income provider in an hotel, a range of
services and facilities is usually offered to maximise sales.
a) Differentiate between TWO activities that will increase earnings through the sales of
rooms in an hotel. [10]
b) Explain how the atmosphere in an hotel dining room may be changed. [10]

Front office staff will be aware that a room reservation is a legal contract between a hotel
guest and the hotel, and it is important that details of the transaction are recorded.
a) Explain what information is recorded on EACH of the following front office
i guest list
ii room status board
iii hotel
iv daily arrival list
v reservation chart
vi reservation form [18]
b) Determine which of the records listed above is complementary to the distribution of
guests incoming mail. [2]

The food and drink service is the second major activity of most hotels.
a) Explain how an la carte menu will differ from a table dhte menu. [6]
b) Identify THREE different levels of food service, and describe the unique characteristics
of EACH type of service. [9]
c) Discuss why the control of food costs is more complex than the control of beverage costs.

The food and beverage operation in an hotel follows a sequence of progressive stages.
Examine activities that take place in relation to food and beverage operations at EACH of
the following stages:
a) purchasing
b) receiving
c) storing and issuing
d) preparing [20]

Budget hotels may offer accommodation only, but the supply of food and drink is a
significant activity in most hotels and will frequently attract visitors, some of whom will
reserve accommodation as well.
a) Discuss how banqueting will differ from other aspects of a food and beverage
operation. [10]
b) Outline the advantages and disadvantages of having one central kitchen in an hotel. [10]

Hotels that encourage group bookings will obtain a significant source of their revenue
from organised activities.
a) Indicate how banqueting and conferences are frequently a separate and distinct sector of the food and
b) Describe how the use of a function diary will differ from that of a functions chart. [5]
c) Specify reasons why the profit gained from a function is usually higher than that
gained from other food and beverage activities. [5]

In addition to accommodation, food and drink, overnight guests will make demands on
hotel services according to their needs.
a) Discuss extra services that may be provided for a guest that will generate additional
income for an hotel. [10]
b) Identify support service departments in an hotel, and explain the specialist activities that
may be provided by EACH of them. [10]
The efficient operation of an hotel is influenced by the successful manner in which
management is able to organise the various departments.
a) Compile an organisation chart for a large hotel, identifying departments and levels of
management, and indicating the span of control in EACH department. [15]
b) State ONE advantage and ONE disadvantage in the use of an organisation chart. [5]

Managers who analyse weekly sales will identify the sources of hotel income and take
suitable action to maximise expenditure across all departments.
a) Examine activities that may be classified within EACH of the following operations:
i primary revenue-earning departments
ii ancillary revenue-earning departments
iii support service departments [15]
b) Specify the type of services that may be operated under rental and concession
arrangements within an hotel [5]

Hotel companies with a successful human resource department are organisations that
have a tendency to accomplish more than their rivals.
a) Describe activities that may be carried out by the human resources, or personnel,
department in an hotel [10]
b) Explain how the size, age and layout of an hotel will be influential on the numbers of
staff employed there. [10]
Training of staff is usually a dedicated section of the human resource department of an
a) Identify principal activities of a training manager in an hotel. [10]
b) Discuss the benefits to an hotel of implementing training. [10]
During economic constraint, an hotel will depend on effective marketing to fill rooms.
Examine activities that will be carried out at EACH of the following stages of the
marketing cycle:
a) Market research
b) Product formulation and development
c) Promotion
d) Selling
e) Monitoring and review [20]

The ability to reduce costs without a compromise of standards will enable hotel and
catering managers to improve profit margins. Examine how variable costs may be
decreased. [20]
High-performance hotels have regular training sessions to improve the efficiency and
raise the standards of their staff.
a) Examine the ways in which training will be of benefit to an hotels operation. [15]
b) Discuss how an hotel manager may develop the quality of existing staff, and thereby
increase sales revenue. [5]

The type of holiday package chosen by a traveller will have been selected from a range of
information received.
a) Explain how the role of the official tourist organisation will differ from that of the tour
operator. [10]
b) Hotel products are brought to the attention of the tourist through marketing promotions.
Discuss various methods that may be used to develop the promotional mix. [10]

The role of a facilities manager embraces the care and maintenance of an hotel.
a) Specify the categories of costs that may be included under Property Operation and
Maintenance costs [10]
b) Discuss, with reasons, main factors that will affect these costs. [6]
c) Explain how energy costs will be influenced by climate. [4]

The role of a manager in the hotel and catering industry will benefit from a greater
understanding of the financial situation of the establishment.
a) Define the following financial terms:
i current assets
ii current liabilities
iii equity
iv fixed assets
v gross profit [15]
b) Describe how an hotel manager may calculate whether a particular food item is being
overstocked. [5]

Financial performance may be used to measure the success of an hotel manager.

a) Specify information that may be found in an operating statement. [5]
b) Discuss the main operating ratios that are monitored during the day-to-day control of
a business. [10]
c) Differentiate between departmental net profit and departmental gross profit. [5]

The financial performance of an hotel is reflected in just two key statements the balance
sheet and the profit and loss statement.
a) Examine information that a profit and loss statement may contain. [10]
b) Discuss who will benefit from receiving a copy of the latest profit and loss statement. [5]
c) Compare the frequencies with which a profit and loss statement may be prepared to
the frequency with which a balance sheet may be prepared. [5]

Companies owning hotels regularly review their portfolios and ownership of hotels
changes whenever a smaller company is incorporated into a larger group. Examine issues
that an hotel group will need to consider in order to remain successful in a competitive
market. [20]

The number of hotels owned by national companies is steadily increasing whilst the
number of privately owned hotels is diminishing.
a) Explain how the administration of an hotel managed under a management contract differs
from an hotel operated under a franchise agreement. [5]
b) Examine advantages that an hotel group can expect as a result of its larger size. [15]

In times of economic constraint, the challenge for any hotel group is to remain
competitive. Examine issues that an hotel group will need to consider in order to remain
successful in a competitive market. [20]