projecting room rate- hubbart formula
TRANSCRIPT
F/Offc Operation- Revenue Mgmt. [email protected]
F/Offc Operation- Revenue Mgmt. [email protected]
The BOTTOM-UP APPROACH
This approach was formerly known as the
“Hubbart Formula”
and was introduced in the United States in the 1950s. It is known as the bottom-up approach
because, contrary what we do in normal accounting
practice, we first decide how much profit is required
(return on investment) and then determine the
expenses for the following period (usually one year).
F/Offc Operation- Revenue Mgmt. [email protected]
Desired Total Revenue
Revenue From Other Department
Tot Rev-ODepRev=Room Revenue
Rm.Rev./Proj. Rms.=PRR
Projected RoomsProjected Room Rate(PRR)
F/Offc Operation- Revenue Mgmt. [email protected]
ILLUSTRATION
Hotel Project: Simla Savoy Suite
Total Guest Rooms: 200
F/B Facilities: Restaurant
F/Offc Operation- Revenue Mgmt. [email protected]
SIMLA SAVOY SUITE PROJECT COST FFE+Land+Buildg. 9,900,000 Working Capital 100,000
TOTAL 10,000,000
FFE-Fixture, Furniture, Equip.
FINANCIAL CAPITAL LOAN( HDFC Bank) 7,500,000 Owners (Cash Investmt.) 2,500,000
TOTAL 10,000,000
F/Offc Operation- Revenue Mgmt. [email protected]
Simla Savoy SuiteEstimation( Annual)
• Projected Occupancy 75% •Projected Rooms Occupancy @75% 54,750 Rms•Projected @ 75% Rooms Occupancy Sgl 60% of 54,750 32,850 Rms
Dbl 40% of 54,750 21,900 Rms
Total Rooms 200x1Yr(365 Days) 73,000 rms
F/Offc Operation- Revenue Mgmt. [email protected]
Simla Savoy SuiteEstimated Revenue
Rooms ?( 54750 Rooms @ ?)
Food & Beverage 150,000CR
Rental & Other Dept. 100,000CR Telecommunication
50,000DR TOTAL REVENUE ?
F/Offc Operation- Revenue Mgmt. [email protected]
Simla Savoy Suite Estimated Expenses Departmental Expenses 547,500
(Rooms)
Undistributed Operating Expenses 1,240,000
Fixed Expenses - I 600,000
Fixed Expenses – II 1,425,000
Total 3,265,500
F/Offc Operation- Revenue Mgmt. [email protected]
Simla Savoy Suite Estimated Departmental Expenses Rooms 547,500
(54,750Rms @ 10 per room)
F/Offc Operation- Revenue Mgmt. [email protected]
Simla Savoy Suite Estimated Undistributed Operating Expenses Admin & General 300,000 Marketing 200,000 Utility( Energy & Related) 300,000 Property Operations & Maine. 200,000 HR & Training 80,000 Telecommunication/ Data Processing 120,000 Transportation/ Logistic Related 40,000
TOTAL 1,240,000
F/Offc Operation- Revenue Mgmt. [email protected]
Simla Savoy Suite Estimated Fixed Expenses I
Property TAX 250,000 INSURANCE 50,000 DEPRECIATION 300,000
TOTAL 600,000
F/Offc Operation- Revenue Mgmt. [email protected]
Simla Savoy Suite Estimated Fixed Expenses II
ROI (Return on Owner’s Investment) 375,000Annually 15% of 2,500,000
Income Tax on ROI 150,000Calculated @ 40% of 375,000
Annual Interest on Bank Loan 900,000Calculated @ 12% of 7,500,000
Total 1,425,000
F/Offc Operation- Revenue Mgmt. [email protected]
Simla Savoy Suite Projecting Room Rate A. Estimated Room Revenue 3,265,000
to cover other expenses
B Reduce Other Revenues -(200,000)
(F&B, Rent & Other Dept., Telecomm.)
C (A+B) – C 3,065,000
D C ÷ Projected Rooms 56.00(3,065,000) ÷ (54,750)
Projected Room Rate @ 56.00(Rate Rounded off actual 55.98)
F/Offc Operation- Revenue Mgmt. [email protected]