Hotel Front Office Management, 3rd Edition

COMPONENTS OF THE REGISTRATION PROCESS 195Figure 7-3. Room sales projections are based on room rates and market sensitivity to these rates.SPRING TIME HOTEL PROJECT—ROOMS SALES PROJECTIONJ F M A M J J A S O N DRooms avail. 200 200 200 200 200 200 200 200 200 200 200 200% occ. 40 40 60 70 70 80 90 100 70 70 50 40Rooms sold/day80 80 120 140 140 160 180 200 140 140 100 80Days/mo. 31 28 31 30 31 30 31 31 30 31 30 31Proj. rooms 2,480 2,240 3,720 4,200 4,340 4,800 5,580 6,200 4,200 4,340 3,100 2,480soldtotal rooms per year 47,68047,680 $70 rate$3,337,60047,680 $85 rate$4,052,80010%(loss in sales becauseof higher rate)47,680 $90 rate$4,291,20015%(loss in sales becauseof higher rate)ESTABLISHING ROOM RATESThe rental charge for a room provides income to pay for hotel expenses generated inother areas, such as administrative costs, overhead, and utilities. Often students try tocompare the efficiencies (control of food cost and labor costs, marketing techniques, etc.)of a freestanding restaurant with the sometimes seeming inefficiencies of a hotel restaurant.In a hotel, the general manager may plan for some of the profit from room rentalto be applied to food and beverage operations. In a freestanding restaurant, the managerdoes not have that luxury.When hotel real estate developers perform feasibility studies, they base the profitabilityof the enterprise on sales projections and other related factors, such as investment opportunities,investment portfolio balance, and current income tax laws. A consulting firmwill survey market demand for room sales and room rates, which will form a basis for aroom sales projection. Of course, adjustment of market demand because of the entranceof this new hotel into the market is calculated. An example of a room sales projection isshown in Figure 7-3.The three room sales projections at various average room rates shown in Figure 7-3give the real estate developers some idea of room income, provided management andTLFeBOOK