Hotel Ops Notes Chapter 11 and 12 PDF

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Week 11 and 12 Lecture notes...

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Chapter 11 Cash (1 of 7) ● Cash Paid Outs ○ When cash is taken out of the F.O. cash and “paid out” to someone (Employee,Guest, Vendor, Manager etc.,) ●

Tips to employees

Most common form of cash “paid out” at FO ● Guest adds the tip amount and signs the check. ● Tip is paid out on the same day to the employee ● Employee signs the “Cash Advance Voucher” for this Cost to the Hotel: Float ● Hotel gets money later, pays the employee up-front! Cost to the Hotel: Discount fees ● Hotel has to pay a fee to VISA or AMEX, but does not reduce tip! Cash (2 of 7) Cost to the Hotel: uncollectible accounts ● If the bill is not paid, hotel cannot recover tip already paid out! Another look at the employee tips ● All the above can end up costing the hotel a lot of money! Cash Loans ● A loan given to a guest from FO cash ● Common earlier for taxi fare, similar small amounts ○ Not a good idea for large amounts ○ Very rare these days with ATMs and Credit Cards ● Third party sources of cash ○ Encourage guests to use ATMs, get a loan on their credit card, or use wire services like Western Union Cash (3 of 7) Automatic Teller Machines(ATMS) ● Dispense cash world-wide in local currencies ● ATMS in Hotel Lobbies ○ Source of revenue for hotel as ATM company pays a fee ○ Encourages guests to spend more money in the hotel! Paid outs to concessionaries –Hotel pays the Dry-Cleaner or Hairdresser and charges it to guest account as a “Paid Out”

–Guest pays on departure –Refunds at Check-out ● If the guest paid a large advance up-front and has money left over, they are refunded as a “paid out” –Have a limit of $100 or so in cash to avoid fraud! Cash (4 of 7) House expenses •Cash Receipts –House Receipts •The Cashier’s Daily Report –The Bank A permanent supply of cash received by the FO cashier for daily use –Net Receipts The difference between money taken in and paid out –Total Receipts – Total Payments = Net Receipts Cash (5 of 7) –Over or Short Difference between “What should be” and “What is” –“What should be” = Cash according to accounts –“What is” = Actual cash in dollars and cents in the cash drawer –“Over” = More money in cash drawer than should be –“Short” = Less money in cash drawer than should be ● Differences due to errors, over/under payments, fraud –The Turn-In ● The cashier turns in the actual cash, along with the Cashiers ● Report, accounting for “over” and “short” The cashier turns in the actual cash and an auditor does the accounts Cash (6 of 7) Due Back -Refunding the Due Back -Refunding House Vouchers Other Related Issues –Tour Package Coupons Coupons used by members of tour groups to “pay” for meals, Etc. ● Must be accounted for like regular cash Cash (7 of 7) Foreign Currency

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Normally not accepted in US hotels –Canadian $ may be accepted close to Canadian border –Online reservation systems generally show the rates to the potential guests in the currency of their choices Some hotels provide money-changing facilities at FO –Rarer in US than in most other countries –In India, even small hotels change currency at FO –Currency exchange restricted to “major” currencies –Can be profitable for a hotel, but has its own risks! –USA hotels refer customers to specialized money changers Automated Currency Conversion Systems Example from the Land of Nod

Credit and The City Ledger (1 of 2) •Review of the City Ledger •Credit Cards History ● Started in the USA in 1915 ● Became big in 1950 with the founding of Diners Club ● American Express (AMEX) founded in 1958 ● BankAmericard in 1960, becoming VISA later ● MasterCard in 1970 ● Hotel chains started issuing their own credit cards, but dropped the idea later with increasing acceptance of general cards Credit and The City Ledger (2 of 2) Kinds of Credit cards –How the system works ● Customers get convenience, float, credit, security Debit cards and smart cards Debit cards –Transfer funds instantly from customers bank account •No float for customer, less fees for merchants Smart cards –Credit cards with memory chips that can store other information •ID, medical info, insurance info etc; becoming more popular Still other cards

Other City-Ledger Categories (1 of 4) •Master Accounts –Accumulate charges for groups

–Four common errors that irritate meeting planners ● Split billing ● Unauthorized signatures ● The sequence of posting ● Comp rooms •Groups, Packages, and Company Sponsored Functions Other City-Ledger Categories (2 of 4) –Individual “Direct Bill” City-Leger Receivables The Original City-Ledger Accounts Travel Agencies (TAs –A travel agency can become an account receivable in the city ledger when guest pays the first night’s room charge with the travel agency’s coupon Banquet Charges –An open account created by a catered party in the hotel, that a guest pays after-the-fact •Credit Cards are increasingly replacing this Late Charges –Charges that appear on the folio after the guest has checked out –May be “written off” as uncollectible if amount is too small to Pursue Other City-Ledger Categories (3 of 4) Delinquent Accounts –Accounts that have not been paid in a long time –May be transferred to “Bad Debts” account and “written off” if found to be uncollectible Executive Accounts –Personal account of Managers in the hotel •May receive discounts for hotel services •Need to distinguish “personal” and official entertainment Due bills or Trade Advertising Contracts or Trade-outs or Reciprocal Trade Agreements –Hotels trade their room nights for other services like newspaper or TV advertising –The voucher issued by the hotel is often traded like real money! –The guests presents the Due Bill on check-in for payment Other City-Ledger Categories (4 of 4) Frequent (Preferred) Guest Programs –Hotel company is billed for the room rate on the A folio –Guest is billed for other personal charges on B folio Managing Cash and Credit (1 of 2)

•Managing Cash –Counterfeit Currency ● It is a very real problem Hotels are targets as FO is busy and easy to cheat ● Important to train cashiers to detect fake currency ● Can buy devices that detect fake bills •Managing Check –Three Quickies –Simple Deterrents Managing Cash and Credit (2 of 2) –Traveler’s Checks ● Issued by AMEX and other issuers, As good as cash ● Cashed with a verifying signature ● Train employees in proper procedures, fraud detection ● Be careful about Canadian/Australian/ other dollars! ● Less popular now with increasing ATM, credit card use. A Cost/Benefit Decision (1 of 2) •If you do not extend credit you will certainly have no losses due to “bad debts”, skippers etc •However, you will also miss out on good business that was turned or scared away by your rigid credit policies •Collecting, Billing, and Dunning

A Cost/Benefit Decision (2 of 2) •Minimizing Chargebacks –Chargebacks ● When the credit card company refuses to pay the bill ● The guest refuses to pay (No-show fees etc.,) ● The hotel did not follow card company procedures –How to minimize them... ● Communicating charges/fees clearly to the guest ● Avoiding “late charges” by better training and good systems ● Training employees in following correct procedures

CHAPTER 12 The Auditor and the Audit (1 of 2) •The night audit closes the hotel’s business day. It

does so by reconciling the balances of the folios & the accounts receivable. •Despite the title, the night auditor is not usually trained as an accountant and is an auditor only in the broadest definition. The Auditor and the Audit (2 of 2) The Night Auditor –Work Shift ● Graveyard Shift: 11/12 midnight to 7/8 AM ● Required to remain, until job is completed ● Relieves the “Swing Shift” and is relieved by the “Day Shift” –General Duties ● Night Audit plus all Night Manager Duties in smaller hotels –Security, FO, HK, Maintenance etc., ● Restricted to auditing duties only in larger hotels –FO staff and others handle night operations

Overview of the Audit (1 of 3) •Reconciling Accounts Receivable –All businesses need to reconcile accounts periodically. - Hotels need to do it daily, as it may be too late otherwise! •The Closeout Hour –Hotels never close, so we have to pick a time to “close” –“Closing” means one days accounts are closed and the next days accounts begin –Most hotels chose midnight to “close” –Can be done later, if F & B outlets are open later –Later closing puts pressure on night auditors, but it accounts better for sales of outlets for the “day” Overview of the Audit (2 of 3) •Posting Room Charges –Posting Room Charges Electronically ● Room and tax for all rooms is posted at the press of one button instantaneously ● Totals are updated automatically, and a summary made ● No math or entry errors! –Room Charges Not Posted By the Auditor ● Day rate, use rate, part day rate guests ● Extra room charge for late check outs Overview of the Audit (3 of 3)

•Revenue Verification –Each folio (receivable) is updated nightly so an accurate bill can be presented on demand –Total income earned by any one department (say, room service) must equal the total of individual room-service charges posted to guest folios Reconciling Using a Property Management System (1 of 5) •Interfacing Different Systems –Turnkey Systems ● A standardized system installed by a vendor that the user simply “turns the key” to start ● (as opposed to designing a system from scratch!) •Verifying Basic Data –Closing Routine (Checklist on Page 411) ● The press of one button does all steps of the manual night audit! ● Need to tally department totals with FO totals only if POS systems are not interfaced with PMS system ● Reports and print-out of folios generated automatically

Reconciling Using a Property Management System (2 of 5) –Zip-Out Check-out or Express Check-out ● Printed folio is put under guest room door late at night and amount is charged to credit card, guest comes to FO for check-out only if there is a problem ● Similar procedure can be done with in-room TV ● If guest needs a copy of bill, it can be e-mailed to them –PMS Posting Errors (Exhibit 12-6) ● Errors still possible in PMS –Mostly entry errors of cashiers •System reduces errors by “rejecting” wrong entries –Can be systematic errors due to bugs in the system Reconciling Using a Property Management System (3 of 5) •Reports form the Night Audit –Exception Reports ● Highlights only exceptions from the norm – Lists only those over credit limit as opposed to credit status of each guest –Downtime Reports ● Printouts of core information in case of system breakdown –Credit Reports ● Credit status of “problem” guests, or to settle long term stays

–Reservation reports ● Report of rooms sold, un-sold, sold-by, demanded, refused, walked, projected occupancy etc.

Reconciling Using a Property ManagementSystem (4 of 5) –Rooms Management Reports ● List of guests, rates, convention member, VIP etc –Room Status Reports ● List of occupied, vacant, OOO, OOI rooms etc –Accounts Receivable Reports ● Lists details of City Ledger, Credit Card transactions,departmental totals etc.

Reconciling Using a Property Management System (5 of 5) •Report to the Manager –A report of the key issues of the previous day –Room Count, House Count, Room Income ● These are reported daily and accounted for –Room Statistics ● Rooms sold, ADR, Occupancy%, Comps, RevPar are reported daily –The Housekeeper’s Report ● Room statuses, OOO, DND (do not disturb)...