Introduction
Hotel business is a service industry where we don’t sell any products. We get paid for our services. There are so many things that count and affect the performance of a hotel. For example the look of the hotel, the interior, the staff, the room settings, cleanliness, room tariffs, the food, facilities, etc. Apart from these, advertisement is also a must. The staff is the backbone of hotel industry. Kim Hoque (2002a) is of the opinion, “ The only unique asset of a commercial hospitality operation is the staff at the end of the delivery syatem.” (Hoque, 29)
Analysis of the present situation
For any service industry, guest satisfaction is of utmost significance. Our valued guests have been impressed with the tariff of our rooms. We gave our best services with the added advantage of low prices and this helped us in getting more customers.
Price: According to a survey in which five hotels were considered, our hotel had the most economic rates. In fact our rates have been same the whole year round. Not only this, our room tariff is the same for the whole week even. Other hotels increase their tariff during the weekends. This gesture of our hotel has helped us in generating more customers. Our occupancy rate in the last month was 68.2% for weekdays and 68.23% on weekends. For the same month, the second highest occupancy rate amongst the five hotels was 56.42% for weekdays and 55.47% on weekends. Our market share was 26.41% for weekdays and 26.95% for weekends, by the end of first year.
Product: Hospitality is the only product of any hotel. Hospitality includes service, cleanliness, the quality of food and beverages, and comfort. We have never compromised on the cleanliness and the quality of our food and beverages. Manpreet Singh expressed his views, “The fine accommodation and service are provided to the guest so they are pleased with the hotel. The guest satisfaction is its primary object and the hygiene factor must always be present in the hotel.” (Singh). But due to remarkable decrease in our hotel’s profits, the management hasn’t been able to invest in the refurbishment of the hotel. But we have always strived hard to sustain this slump in the business. We give more attention to the cleanliness and maintenance so that things don’t look weary.
Promotion: Until June, we had no sort of advertisement. Even then the occupancy rate of our hotel was the highest. This was possible because of the “word of mouth” publicity. But in spite of this, our hotel was making only marginal profits. So we started some advertisement campaigns and the results started showing by October.
Quantity: Due to the advertising, our occupancy rate shot up from 78.04% in June to 83.18% in October, on weekdays. The guests were also happy because they could find us easily.
Human Resources: Staffing numbers: The forecasted overall staff was supposed to be 98 whereas the actual number of elected staff was 151 i.e. an excess of 54.08%. A close scrutiny shows that the areas where excess staff was employed are front office, room attendants, and service attendants. Actually speaking, this increased number helped us in serving our guests in a better way. But this increased the costs also.
Staff quality: Most of the staff was given ample training in order to improve the service. The competence of such staff has been 100%. It was felt that certain departments didn’t need training. Unfortunately, the competence of such departments has been very poor. Owing to these non performing departments, the average competence level of the staff dropped to 70.33%. Kim Hoque (2002b) showed his concern, “How effective the hotel is in achieving its quality enhancer goals is open to question. Of the 5 percent of guest questionnaire replies expressing dissatisfaction, many complaints concerned staff-related issues rather than technical issues.” (Hoque, 104)
Staff costs: This year $44,700.00 were spent on the training of staff.
Facilities: Offer and condition: Due to the recent refurbishments, the annual guest satisfaction has been 35%.
Stockholders: ROI and security:The return on investment of the owner’s equity is -9.06 %. This is not a good sign. The market index reports are also not encouraging. As per the index the ADR index raised from 55.73 in April to 75.28 in December i.e. an increase of 35.08%. Occupancy rate for our hotel dropped from 139.14 in January to 121.50 in December i.e. a decrease of 12.68%. The RevPar index dropped from 108.60 in January to 92.81 in December i.e. decrease of 14.54%. Mark Woodworth, president of Colliers PKF Hospitality Research put his views in words, “when RevPAR is driven by rate growth, the value is 1.5% higher than when it driven by occupancy.” (Woodworth)
Objectives to be reached at the end of next year
Price: I am of the opinion that the prices should be increased marginally for direct bookings. This will increase our overall revenue.
Product: The management should decide on allotting some funds for refurbishing. This will change the appearance of our interiors and will increase guest traffic.
Promotion: Last year we started little advertisement when we were half way through. Next year we should give the required leverage to advertisement and promotion. Simple word of mouth is not enough.
Quantity: We hope to increase the occupancy rate of our hotel by various means such as getting the refurbishment done, better service, providing lift, better trained staff, etc.
Human Resources: Staffing numbers: The number of staff that was in the last year was not required actually. So this year we should decrease the staff.
Staff quality: We should provide ample training to all the staff from all departments and not like last year. Those untrained workers had decreased the competence rate.
Staff costs: We should not cut on the staff cost (for training). Reduction in staff is different but reduction in the training can harm the hotel in the long run.
Facilities: Offer and condition: We should do some refurbishing and install a lift. These two are the most important things to be done at the moment. Apart from these, we can renovate our swimming pool, have a proper gymnasium, have a small kid section, etc.
Stockholders: ROI and security: Stockholders of any company first of all look at the Income statement. If the figures are good, they will continue with the company else they might withdraw their share. This may prove fatal for the company. Last year’s market index was not encouraging. In the next year we should take care and help in improving our hotel’s Income statement figures so that ROI seems to be good.
Operational plan
Sales prices and product definition: As mentioned earlier, hospitality is the only product (service) of our hotel. All services come under it. We have noticed that our rates are the lowest amongst the five hotels that were part of the survey. Now since we plan to do the refurbishing and interior decoration, I propose an increase in the room tariff by at least 10%. The rate for travel agents should be the same. This will give them the reason to send customers to our hotel. Further, we should improve the quality of our food also. I am not saying that at present it’s not good but there is always a scope for improvement. Once the quality is improved, the rates of food items can also be increased. According to Juliette M. Boone “Overall, the executives agreed that in the past five to ten years, consumers from nearly all market segments have become more demanding when it comes to food and beverage quality and the dining experience.” (Boone, 2008). Other services that we may improve are the swimming pool, a gymnasium, a children’s play room, etc.
Staff: Last year we had excess staff that resulted in excess expenditure. But since this year we are expecting a growth in the number of customers, we will require more staff but not to the last year’s extent. So I propose a cut in the staff to the tune of 15%. The overall wages will come down. Training should be provided to all the staff members, irrespective of the departments. This will increase the competence and our customers will be served better.
Advertisement action plan: Advertisement and promotional campaigns should be launched immediately. We should advertise in the media such as newspapers (classified section), television (local channel), hoardings in and around the city (especially at tourist spots, train and bus stations). Distributing pamphlets would be a good idea as well. Another way of promotion could be keeping hotel brochures at the lounge so that any one sitting there can have a look. The budget that I propose for advertisement and promotion is $100,000.00. This amount may seem to be exorbitant but the results will garner more profit. We should keep in mind that our hotel guests are mostly from other cities and the main rush is during the vacations of school going children. So we should concentrate to advertise during these months only.
Refurbishment decisions: It would be significant to redo the complete interior of all the rooms. This includes the furniture as well. The lounge should be beautified because first impression is the last impression. As soon as any customer enters our hotel, he or she should feel the warmth and comfort of our hospitality.
Investment decisions: For all the improvements mentioned above, a lot of funds will be required. So I don’t think the management should decide on investing anywhere at the moment. In fact the management should try and disinvest a major part of the hotel’s investments that have been done elsewhere. This will ease the urgency of funds.
Loan requests and reimbursements: In lieu of availability of funds, we can apply for loan from banks. In case the management is not able to disinvest, we will require at least $1,000,000.00. The repayment should be such that it doesn’t bother us. It should be a long term loan. I don’t think it would be a problem for us to pay $25,000.00 per month. So within a period of three and a half years, we shall be able to repay the loan.
Reference List
Boone, MB 2008, Increasing Importance of Hotel Food and Beverage is Reflected in Food & Beverage Staffing Trends, Web.
Hoque, K 2002a, Human Resource Management in the Hotel Industry, London: Routledge.
Hoque, K 2002b, Human Resource Management in the Hotel Industry, London: Routledge.
Singh, M n.d., Careers in Hospitality, 2011. Web.
Woodworth, M n.d., Hotel Industry Quotes from ALIS 2011, Web.