University of Cebu-Main Campus
College of Hospitality Management
HM BMEC1: Operations Management
NAME OF STUDENT: RICA JANE T. MAGALZO
YEAR: BSHM-3
ACTIVITY NO. 2: Operations Performance
INSTRUCTIONS:
Using the references available online (eBook, pdf, video materials), discuss/answer the
following questions based on the learnings acquired.
1. Cite the key performance indicators (KPI’s) of the following hospitality and tourism
businesses and discuss each:
a. Hotel or Resort
 Average Daily Rate (ADR)
Average daily rate is a simple metric used to calculate the average rate per occupied room. You
calculate average daily rate by dividing total room revenue by total rooms occupied. Although ADR
can assist in analyzing your hotel’s performance, it doesn’t take into account any unsold or empty
rooms. Therefore, it could be deceiving in terms of overall property performance. It works well in
isolation as an ongoing performance metric. ADR compares your performance against your
competitors and can also measure financial performance.
Average Daily Rate ADR = Room Revenue / Number of Rooms Sold

Revenue Per Available Room (RevPAR)
The most comprehensive and important metric hoteliers depend on is RevPAR. Revenue per
available room is similar to average daily rate, but you include your empty rooms into the
calculation. You calculate RevPAR by dividing total room revenue by total rooms available. You can
also calculate RevPAR by multiplying your ADR by the occupancy percentage. RevPAR can predict
how successfully your average rate is at filling available rooms and therefore provides a constructive
view on how well your hotel is operating.
Revenue Per Available Rooms RevPAR = Room Revenue / Number of Rooms Available or RevPAR =
Average Daily Rate * Occupancy Rate

Occupancy Rate
The occupancy rate is the most basic metric which you can run, and it can be applied to any specific
period of time you want to analyses; daily, weekly, monthly, or yearly. When you make a habit of
doing this type of data tracking over time, you can see how well you are performing over the course
of the season, track month-on-month performance, and see how your hotel marketing and
advertising campaigns are affecting your occupancy levels.
Applying length of stay (LOS) restrictions is the best way to increase your occupancy rate.
Occupancy Rate = Total Number of Occupied Rooms / Total Number Of Available Rooms

Online Rating (Customer Satisfaction Rating)
The previous metrics we explored were quantitative and revenue focused. Now we are going to
review how to measure something more subjective and personal, but just as important. Your
customer satisfaction rate speaks to how well customers are being served at all touch points. The
Customer Satisfaction Rating depends on your hotel’s ability to encourage your guests to complete
brief surveys or fill out feedback forms. The feedback that hotels receive, while not always positive,
is always valuable because it reveals gaps in customer service that management needs to address
through corrective action as well as strengths to build on.
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b. Restaurant
Sales are one of the most critical indicators of success for any business. In the restaurant
industry, sales impact many key metrics such as break-even point and gross profit.
Break-even Point measures the sales volume required to make back an investment. Breakeven point is a crucial metric when opening a new restaurant or considering any substantial
investment, such as buying new equipment or purchasing a building for a new location.
Gross Profit tells you how much money your restaurant is making after the cost of goods
sold. To calculate gross profit, subtract the cost of goods sold from your revenue.
Historical Sales data tracks how a restaurant is doing over time. It’s best to track this KPI by
day, week, month and year. Historical sales help identify trends, measure against past
performance and point out your busiest times of the year. Long-term sales data can also
produce more accurate forecasting, planning and reduces costs.
Labor Cost The cost of labor is a considerable expense for most restaurants. Labor cost
includes wages, as well as taxes, discounts and any employee benefits. According to Chron,
the typical labor cost is 30-35 percent of a restaurant’s total revenue. Measure your labor
costs carefully and be aware of the cost of labor in relation to prime cost (see below for a
definition).
Cost of Goods To increase your restaurant's bottom line, look for ways to decrease the cost
of goods sold without sacrificing quality. suggests strategies such as carrying a leaner
inventory, taking daily inventory on key items and having a plan to ensure maximum usage
of all purchased products.
Prime Cost is one of the most critical KPIs to study, because it makes up the majority of any
restaurant’s variable costs. Prime cost is found by adding total labor costs to the cost of
goods sold.
Food wasted per food purchased: Food waste is a huge concern for restaurateurs
worldwide. Monitoring food waste enables you to improve your demand forecasting, forces
you to reconsider how and where you procure your foods, and leads to better management
and storage your food stock. It can also help you determine if there are better methods to
prepare your food, and if you need to reconsider your portion sizes or serving methods.
Production time per dish: Knowing how long it takes to produce each dish is key, as it can
help you determine the value of each single dish based on turnaround time and
expectations. Track popular (or star) items as well dishes with low sales volume and consider
ways to shorten production time and offer faster service. If a popular dish takes too long to
prepare, it will negatively impact the customers experience as well as your kitchen’s efficacy.
And if items that are quick to produce are rarely ordered, consider swapping them out for
more popular items and giving the kitchen more time to prepare the items customers want,
faster.
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c. Travel Agencies
Revenue
Let’s talk about the bottom line. At the end of the day, you want your business to turn a profit. The
most basic and one of the most important KPIs is your overall revenue. There are plenty of great
programs out there to help you organize your finances like QuickBooks, but if you can, it’s worth
bringing in a professional bookkeeper to help advise on all financial decisions and manage them.

Customer Acquisition Costs (CAC)
In a perfect world, you’d set up shop on a Monday and by Friday, you’d be booked with customers
for the next three months. Unfortunately, it doesn’t work that way. As the saying goes, sometimes it
takes money to make money. You have to market your business and do something to bring
customers in the door. But at what cost? The CAC is essentially your marketing expense. It’s the
money you have to attract and obtain new customers.
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Customer Retention
Once you have a customer, how long do they stick around? Do they come back? Do they bring their
friends with them this time? Do they tell their loved ones and social media followers to check out
your tour? As a business owner, you should be retaining your customers and making them happy,
not just searching for new ones. A great way to measure this is to offer customer rewards (such as
vouchers or discount codes) for those who come back. Or, if your business relies on seasonal
tourists, you could create a referral program where you offer a discount or prizes to customers who
spread the word. Get creative with it, but just make sure you have something in place that’s easily
measured.
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Referral Rate
Speaking of referrals, you need to track how many customers you gain from other customers. The
referral rate helps you keep your CAC lower and statistically, has shown success in making your ROI
higher. Referral programs work, so if you don’t have one already, it’s time to put one together for
your company.
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Cost of goods sold (COGS)
Now that we’ve talked about the importance of customers, it’s also important to look at the value of
your offer. The cost of goods sold (COGS) are any expenses directly related to providing a service.
For a tour operator, this includes the cost of staff salary, insurances and equipment for starters.
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Customer satisfaction
A common mistake that businesses make is thinking that having more customers will solve all their
business woes. But if your offer isn’t very good or the cost outweighs the value, your customers
aren’t going to be very happy. Having a lot of customers won’t mean much if few of them are
satisfied by the services you’re providing. In fact, it can work against you, as those customers are
likely to share their experiences with friends, family members, or even strangers through reviews on
TripAdvisor.
2. How does “Benchmarking” relate to hotel operations performance? What is its key
purpose?
Benchmarking is the process of identifying "best practice" in relation to both products and the
processes by which those products are created and delivered. ◦ The search for "best practice"  can
take place both inside a particular industry, and also in other industries (for example - are there
lessons to be learned from other industries?). ◦ The objective of benchmarking is  to understand
and evaluate the current position of a business or organization in relation to "best practice" and to
identify areas and means of performance improvement. ‘the continuous process of measuring
products, services and practices against the toughest competitors or those companies recognized as
industry leaders’ (Camp 1989).
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Internal
A comparison of internal operations processes
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Competitive
Specific competitor to competitor comparison for a product or function
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Functional
Comparisons of similar functions within the same broad industry, or to industry leaders.
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Generic
Comparison of business processes or functions that is very similar, irrelevant of the industry.
3. Cite the key performance indicators (KPI’s) being applied in the Front Office Operations? How
do these key performance indicators being measured?
 Average Room Rate (ARR/ADR):
Although room rates may vary depending on the market segment, many lodging property managers
calculate an average room rate (“ARR”). The average room rate reveals the average rate charged per
paid room occupied and is calculated by dividing rooms revenue by the number of paid rooms
occupied, as follows.
Average Room Rate (ARR or ADR) = Total Rooms Revenue / Number of rooms sold
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Average Rate Per Guest (AGR):
Provides the average revenue contribution by each guest occupied in the hotel, This rate is normally
based on every guest in the hotel including children. Some hotels take their AGR without considering
children.
Average Rate Per Guest= Total Room Revenue / Total Number of guests
Average Rate Per Guest W/O Child = Total Room Revenue / Total Number of Adults
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Bedroom Occupancy Rate:
This operating ratio compares the number of rooms sold to the number of rooms available.
Managers rely on this ratio in determining whether, or not, the premises are being utilized efficiently
and whether expansion is possible. The bedroom occupancy rate is calculated by dividing the
number of rooms sold by the number of rooms available, as follows.
Bedroom occupancy rate = % of Number of rooms sold / Number of rooms available x 100

Revenue per available room (RevPAR)
This operating ratio compares rooms revenue to the number of rooms available. Revenue per
available room (“REVPAR”) is calculated as follows:
Revenue per available room = Total Room Revenue / Total Number of Available Rooms for sale
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Cost Per Occupied Room
This operating ratio compares the cost of the rooms department to the number of rooms sold.
Managers rely on this ratio to determine whether, or not, room costs are reasonable. Occupied
room cost is calculated by dividing the cost of the rooms department by the number of rooms sold,
as follows:
Cost per occupied room = Total rooms department cost / Number of rooms sold
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Potential Average Rate Single and Double Rate:
One of the main computations involved in the front office or revenue management is to calculate
the hotel's yield statistics. Potential Average Rate provides the amount of revenue that would have
been generated if all the rooms were sold at their published or rack rate.
Potential Average Single Rate = Single Room Revenue at Published Tariff or Rack Rate / Number of
Rooms sold as singles
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Room Achievement factor
The Room Achievement Factor is also known as Rate Potential Percentage of a hotel, is defined as
the percentage of the Rack Rate that the hotel actually receives by selling their rooms. Room
Achievement factor is calculated by dividing the Actual Average Rate (ARR or ADR) by the Potential
Average Room Rate. Additionally, depending upon the hotel's management policy the Actual
Average Rate is either divided by the total Rooms Sold or Occupied Rooms. Room Sold = (Occupied
Rooms - Complimentary and House use)
Room Achievement Factor = Actual Average Rate / Potential Average Rate
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Rooms Labor cost
The rooms labor cost percentage is calculated by dividing room payroll and related expenses by total
room revenue, as follows:
Rooms labor cost = % Rooms Payroll & Related expenses x 100 / Room Revenue
4. Performance Standards are required quality levels of performance. Performance standards
state not only what must be done, they also describe in detail how the job must be done.
Productivity Standards determine the acceptable quantity of work to be done by department
employees. If you are the Executive Housekeeper, how will you determine the productivity
standards, when it comes to the number of guestrooms to clean per shift, of your
Housekeepers if the performance standards to clean per room is 25 minutes? Show your
formula.
Productivity Standard can be defined as the ration between input or output or more explicitly ration
below the amount produced and the amount of any resources used in the course of production.
Management has to be concerned with productivity in operations where labor cost constitute a
huge proportion of the budget, which are labor intensive where over increasing financial constraints
are imposed or where competition from outside agencies is a threat such as possibility of
introducing contract labor to replace directly employed labor where management are concerned
with productivity, emphasis must be place on seeking ways to improve output either by increasing
the amount of work performed for the reduced cost.
As an executive housekeeper I will:
For 8 hours shift:
Total Shift Time = 8 hrs. X 60 mins = 480 mins.
Beginning of Morning Shift = 20 mins
Water Break = 15 mins
Lunch Break = 60 mins. or 1 hr.
Evening Water Break = 15 mins
End of Morning Shift = 20 mins (handover)
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480mins. – 130 mins. = 350 mins.
Therefore, the room attendant is there for 350 mins in guest rooms (480-130) and each room
takes 25 mins to clean. Therefore, the attendant can clean 14 rooms in 350 mins.
References:
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Top Hospitality Key Performance Indicators. (n.d). Retrieved from
https://www.hotelminder.com/top-hospitality-key-performance-indicators
Biel, J. (2020). Top 7 Benchmark KPIs Every Restaurant Owner Should Measure. Retrieved
from https://www.netsuite.com/portal/business-benchmarkbrainyard/industries/articles/retail/top-7-benchmark-kpis-every-restaurant-owner-shouldmeasure.shtml
Burkhard, S. (February 20,2018). 6 Key Performance Indicators (KPI’s) for tour and activity
providers. Retrieved from https://www.trekksoft.com/en/blog/6-key-performanceindicators-for-tour-and-activity-providers
Sutton, J. (September 25,2014). Hotel Benchmarking. Retrieved from
https://www.slideshare.net/jonsut/hotel-benchmarking
List of KPI (Key Performance Indicators) Used in Hotel Front office. (2012). Retrieved from
https://setupmyhotel.com/train-my-hotel-staff/front-office-training/710-kpi-hotel-frontoffice.html
Rajak, H. (January 05,2020). Performance and Productivity standards. Retrieved from
https://hmhub.me/performance-and-productivity-standards