Staff to Room Ratio – indicator at best

Staff to Room Ratio – indicator at best
Staff to Room Ratio is one of the critical factors that determines an optimum level of balance between permanent staff and hotel room capacity. This influences the labor cost which happens to be the single biggest expense line item in a hotel Profit and Loss Statement.

If you arrived at this post directly, you may want to visit Repeat Guest Ratio, Average Length of Stay – 2 Paths to Revenue Growth Nirvana, Table Turnover, Meal Period Analysis – 2 Paths to Restaurant Revenue Growth Nirvana, Market Segmentation Reports – Road Map to Revenue Results and 5 Myths about Financial Analysis, to catch the thread of related posts.


 


How to calculate Staff to Room Ratio

Staff to Room Ratio in a hotel is computed using the following formula:


Full-Time Employees / Total Number of Available Rooms


 


What does Staff to Room Ratio do?

The function of the Staff to Room Ratio is to provide an indication of the balance between the number of full time (permanent) employees and the rooms available in a hotel.


You might well ask: What is the connection between full time employees and rooms available in a hotel? Well, the answer to that is: There is no direct correlation between the two which actually depends upon many factors like:


Is it for a city hotel or a resort?


This question basically addresses the fact that a city hotel is often a vertically oriented building structure with multiple floors. This means that the structure has various levels to it but area wise is not spread out. Contrast this to a resort which is spread out mostly and thus covers a wider area.


When the resort is spread out (and even in the case of a city hotel which is horizontally spread out), the logistics of staff movement becomes critical. Whereas, in a vertically oriented city hotel structure, movement of staff from one level to another may not take as much "time" as in the case of a resort. This has a direct bearing on the number of staff required to service a particular operation area for the simple reason that it takes more time to get from one point to another.  In effect, it may dictate the hotel's manning requirements particularly the housekeeping function and more specifically the public area attendants.


How many restaurants does the hotel or resort have?


This is another important factor determining the Staff to Room Ratio in a hotel or resort. The more the number of restaurant outlets that the hotel or resort has, the more the staff complement needed.  This will further be influenced by factors like how many of the restaurants are food restaurants (this brings the element of kitchens into the equation) and whether each of those have a dedicated kitchen etc.,


Whether the hotel is located in a developed country or a developing country?


This factor literally determines the labour cost factor of the hotel vis-a-vis rooms available. For example, a hotel or resort located in an emerging market like Brazil or Russia or a developing country like China or India will have a higher Staff to Room Ratio than in developed countries like US, Canada, Australia. This is mostly driven by the fact that basic salaries and wages are very high in developed countries. Additional factors could be better educated, trained staff etc.,


What is the degree of Multi-tasking?


Even in developing countries, salaries and wages are on the rise constantly which have a significant bearing on the bottom line performance of the hotel or resort. Since bottom line is driven by the top line, generating revenues faster than the increase in labour costs becomes paramount. When revenue increases cannot keep pace with labour cost increases, manning cuts are inevitable.


However, considering that the hotel industry is a service industry, keeping service levels high according to customer expectations may well determine sustained revenue growth and in this scenario multi-tasking has become a powerful tool to tackle perennially rising labour costs. By training staff to do more than one task (often at the same time), the Staff to Room Ratio can be kept in check.  Multi tasking can also mean combining functions currently performed by different individuals so that these can be done by one person.


 


Staff to Room Ratio Examples


Staff to Room Ratio can range all the way from 2.5:1 (2.5 full time staff for every room available) in underdeveloped countries like Brazil, Russia through a ratio of 2:1 in developing countries like China, India (in fact, it is around 1.75:1 in India) to less than 1:1 in developed countries like US, Canada, Australia, UK.


Combined with a low staff to room ratio in developed countries, the labour cost % to gross operating revenue is very high, in the region of 40% to 50%.  This compares with less than 30% in developing countries and less than 20% in emerging markets.


 


Staff to Room Ratio – an indicator at best


It is thus paramount to understand that the Staff to Room Ratio is at best an indicator.  It is to be used more to verify if the ratio is significantly above or below the norm according to some of the factors stated earlier (city hotel or resort, how many restaurant outlets, whether in a developing or developed country) rather than apply as a rule of thumb.


What the ratio certainly provides however is a quick indication of the balance between the complement of full time employees and the rooms available. This is very useful in the case of a new hotel project where the owners or investors would like a quick and dirty way of knowing what this balance is like. And as stated earlier, it has a major influence on the ultimate labour cost.


 


Operating Hotel Staff to Room Ratio


In the case of an operating hotel, the staff to room ratio can change over a period of years as the hotel or resort matures and the staff becomes more and more trained (of course assuming that they stay with the hotel over these years).  This can result in significant improvement in the staff to room ratio.


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Staff to Room Ratio is like all other operational analysis tools which complement the tools of financial analysis in providing a comprehensive picture about a hotel's business performance and results.


 


 


 


 

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Published on July 22, 2011 05:01
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message 1: by Shoukry (new)

Shoukry Shoukry Dear Gents,
How to use this ratio?
what is the maximum no. of rooms that housekeeping manager can handle per property(vertical and horizontal.
Please reply
shoukry_s@yahoo.com
thanks
Shoukry


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