Introduction
The Pinafore Hotel proposal’s primary purpose is to increase the efficiency of the business operations, increase the online reservation and, at the same time, increase the annual earnings by 3%. Using technological devices in running financial records, entering records, and applying software by incorporating the internet to place reservations will help improve efficiency and hotel performance. This procedure will improve the hotel’s competitiveness in the industry and outdo other players.
RMS Cloud, an Australian-based management system, was used to prepare for this project. This program is designed to organize finances in any hospitality business. With the help of RMS Cloud, equipment and software costs, staff salaries, and the total potential profit from the hotel’s operation was calculated using a schedule review. The system also allows one to contact online agents to simplify the booking of suites, which is also reflected in work.
The technological changes will finally replace some hotel personnel, especially the 12 front office staff, and reduce them to three. The Pinafore Hotel will lease laptop computers and Point-of-Sale devices as hardware. Mass marketed SaaS (Software-as-a-Service) software will be used to organize all bookings and financial activities hermetically. The project is estimated to cost $625,800 but is assumed to have good returns on investment. The project will undertake a whole year to be fully operational with minimal risk. The financial statement and budget report will be used to provide a general assessment of the project’s success.
PESTEL Analysis
Political stability is an essential condition for the prosperity of the hotel business. Currently, the American government practically does not restrict entry into the country, allowing businesses to develop. The economic instability of the dollar and its weakening could potentially make the country more profitable for the entry of foreign tourists, thus positively affecting the hotel business. In economic recessions, residents of America and other countries will be forced to resort to booking in cheaper hotels and hostels.
A positive social factor for the hotel is the changing preference of consumers who want to stay in hotels for ever-longer periods. The increase in the number of world travelers in recent years also favors the hotel business. From the technical analysis, it appears that the hotel should invest more in advertising on social media and learn how to interact with the customer base online. The environmental factor requires the hotel to strictly regulate energy consumption and water supplies, probably also using new technologies that reduce energy waste. The legal aspect of the hotel’s operation is represented by the need to store the data of residents following US laws, as well as the obligation to comply with government regulations on health and safety in the workplace.
SWOT Analysis
A SWOT (Strength, Weaknesses, Opportunities, and Threat) analysis of the hotel may reveal several issues that the Pinafore needs to work on (Gurel & Tat, 2017). Some of the main strengths of the hotel included the following: a well-committed team of motivated staff, a sound capital base for the firm, over 100 rooms for booking, and hotel loyalty. Some weaknesses included no network connectivity, untrained teamwork on new technology, using the phone for the hotels booking, front office entering the records and finances manually, manual ticketing of guests, and manual tallying of mini-bar and dining room.
Some of the opportunities are the significant market share, favorable relations with the regulatory authority, and direct selling to its customers. Among the possible threats are the absences of specialized staff to handle operations like technology, entrants of new competitors, dynamic economic environment, network connectivity, and use of technological devices such as computers. If technological devices are not incorporated and services are not improved, the grand vision of the Pinafore Hotel will not be actualized even if the team is motivated.
Porter’s Five Forces Model
Knowledge of the five competitive forces could enable the firm to strategize itself better for a profitable venture. Michael Porter’s five forces model includes the competitive rivalry, threat of substitution, the threat of new entry, supplier and buyer bargaining power (Porter & Kramer, 2019). A particular threat is the customers’ bargaining power, which leads to requesting more superior services or products, and in a worse scenario, decreases the prices of products. Pinafore Hotel is greatly affected by the high bargaining power of the customers for such services as accommodations, refreshments, and tour operations. The threat of an increase in the bargaining power of the suppliers lowers the available opportunity for the firm to adjust in selecting and making strategic decisions. The suppliers who have a high say in the business endanger the firm’s productivity in many ways, including compromising the quality or raising the prices of their products. The hospitality industry should take advantage of the suppliers that provide cost-friendly products and services, quality, accessible, and unique products.
The problem of substitute products is another threat in Porter’s five forces model. The availability and provision of substitute products and services meet customer needs in several ways, including stagnation price of products, processing cost, and the customer behaviors of the exchanging products. In the hospitality industry, especially the hotel sphere, customers usually change their preferences for cheaper ones. These changes may have ripple effects on the Pinafore hotel and the loyalty of its customers. The threat of new entry is another force, as explained by Porter’s five forces model. It may affect other old industry players, thereby creating excess services, a decline in prices, and the ultimate reductions in the revenue of the established business.
Strategic Focus of the Pinafore Hotel
The Pinafore Hotel is committed to increasing direct booking by 3% annually and improving its internal efficiency by 3% annually. The management board will provide the firm with a strategic business plan that will act as a route map for the hotel to remain competitive. The hotels will use several approaches to achieve their core mandates like encouraging direct booking, proper revenue management strategies, rewarding the guest, having promotional services, destination marketing, increasing customer value, and using technology in every activity. The integration of the RMS Cloud with the existing infrastructure provides significant returns on investment. Revenue management will involve using application software to generate financial statements and budgets. This management will help the firm make informed decisions promptly.
Technological Needs
The Pinafore Hotel will lease 20 laptop computers with a high storage capacity of 1 terabyte, high-definition cameras, high-speed processors, 8 GB RAM, Bluetooth, graphic designs, a 21-inch touch screen, and wireless Internet connection. Each laptop will be subject to a monthly fee of $80. The hotel will also buy and install Point of Sale devices (POS) which are the electronic cash registers with a card to accept on-the-spot payment (Yu & Chen, 2020). The hotel will purchase 8 points of sale devices, each at $3,500, and they will be located at strategic positions within the premises.
In choosing between the in-house or off-the-shelf application software, preference will be given to off-the-shelf software due to its wide array of benefits. Off-the-shelf software like the SaaS (Sofware-as-a-Service) will help improve the firm’s efficiency. It is compatible with many computer devices and is easy to use. The other benefits the hotel will enjoy from using SaaS include cost reductions since a lot is saved on data backups, networks, and storage size, among others. SaaS enables the hotels to do multiple online bookings and reservations through one interface with easy accessibility and high disaster recovery.
The application software for online reservations is expected to increase the reservation by more than 3%. This process is unlike the previous bookings that mainly depended on phones. The presence of several front office staff to a tune of 12 will have to reduce to two or three utmost. The software will also help increase the operational efficiency at the hotel, like the automation of the records and finances.
The rooms will be fitted with an IT approach which will involve new room sensors and thermostats. The benefits of using this approach are many, including attracting more visitors, while its use of HVAC (Heating, Ventilation, and Air Conditioning) controls will help the hotel increase efficiency and decrease utility costs by reducing heating and cooling demands and turning off the lights in empty rooms. The changes to HVAC will yield an estimated $25,000 in annual savings for the hotel. SaaS use is expected to generate an estimated $300,000 per year in increased revenue and savings. The use of SaaS will increase conferencing services and improve procurement and monitoring flow of stock.
The RMS Cloud is SaaS-based software that offers top-notch cloud-based e-commerce solutions, providing the Pinafore hotel with constant connectivity, improving its efficiency and infrastructure. Therefore, RMS Cloud will enable the hotel to manage its online availability for the clients and enhance its ratings and reservations. The software will facilitate the hotel’s adaptation to the constantly evolving hotel business and customer needs, thereby extending its online distribution and facilitating a balanced distribution mix (Nunis, 2020). These improvements will influence Pinafore’s hotel relevance in the contemporary digital world and stimulate digitized hotel marketeering. Adopting the RMS Cloud software in the hotel will help it deliver a bespoke property management technique to meet the rapid growth and establishment of hotel services in the American markets. It will enable the hotel to integrate its clients in the American market as a boosted use of the RMS Cloud software will expose the clients to an enhanced and efficient experience.
Financial Rationale
The Pinafore has 100 rooms with a RevPAR (revenue per available room) of $115. RevPAR is the average daily room rate multiplied by the occupancy rate (Serra-Cantallops et al., 2018). Spending in the restaurant, room service, and incidentals adds another $25 per room per day. Based on these assumptions, the estimated annual revenue = $140 x 100 x 365, or just over $5 million. Industry experts argue that online reservation systems can significantly increase the visibility of hotels such as the Pinafore Hotel. The impact of increased visibility would be an increase in bookings in the 3% +- 5% range. Taking the low end, a 3% increase in bookings would represent a $150,000 increase in revenue.
Next, one needs to assume that an online reservation system would allow Pinafore to advertise with online travel aggregators such as Kayak.com, Expedia.com, Booking.com, etc. Although these sites charge a commission (10% +-) and rooms are often advertised at a slight discount relative to the rack rate, this new advertising capability would result in another 3% increase in bookings at a slightly lower RevPAR ($100 per night + $25 meals and incidentals). The current occupancy rate is 70% at our Pinafore hotel. Since the hotel has 100 rooms x 365 days per year x 70% occupancy, it currently sells 25,500 room nights per year. One must take a 3% increase in room nights and multiply the reduced RevPAR for rooms sold by online agents ($125 per night). This represents 766 additional nights sold at $125, or $95,750 in additional revenue. The changes to HVAC will yield $25,000 in annual savings.
SaaS use is estimated to generate $300,000 per year in increased revenue and savings. There will be the use of fiber and another coaxial cable (Spectrum and AT&T) so that in case a provider accidentally cuts a cable, the service will not be lost. A reasonable estimate for the right commercial service level is $1000 per month per provider. An estimated $300 per month (software included) for the lease of an excellent outward-facing security appliance. Inside the hotel, one needs a few Point-of-Sale systems like 8pcs with card readers to accept on-the-spot payments at $3500 each and 20 laptops leased each at $80 per machine. Then, setting up wireless for employees and guests will cost $15,000. The estimated annual total revenue is $5,682,750, while the estimated annual total expenditure is $625,800.
Training & Assessment
Training of the staff will be given preference to help improve the efficiency and effectiveness of the firm. Due to the introduction of the new software, point of sale, and reintroduction of computers all the staffs will have been trained on how to handle these devices and applications. The training will be conducted by a team of competent staff with knowledge and experience in using computers, Point-of-Sale devices, and the SaaS software. The front office staff will train how to use the online reservation and handle customers’ feedback; the cash handlers will be trained to generate financial statements and budgets. The managers at all levels will also be trained on the decision support system, making strategic plans, and monitoring and evaluating the activities. The whole training is estimated to take a whole month at an estimated cost of $500. The increase in the general hotel efficiency and revenue will be a sure measure of training benefits.
Funding Method
The best method of funding the Pinafore Hotel project is the chargeback funding model. Through this model, every department in the hotel will be responsible for settling the costs of the IT services used, thus providing an efficient method of funding the project through the years. According to Heslin (2015), the chargeback model allocates the cost of IT services consumed to the micro-units in the enterprise instead of bundling the costs to the hotel’s less established IT department. Therefore, the IT operational costs at the hotel will be “zeroed out” as I will not consider the IT as overhead but rather an integral part of the hotel department’s operating and business expenses. By adopting the chargeback funding model, the hotel will witness significant enhancement in departmental culture, accountability, and awareness, such as high transparency as the usage and expenditure of IT services are accurately allocated (Heslin, 2015). Additionally, financial management in the hotel will increase as the departments will be aware and sensitive to their IT expenditure, and they will maximize their outcomes from the services, leading to improved online services management. The IT department will be wholly integrated into the hotel’s commercial strategies, planning and operations.
The chargeback funding model will benefit the enterprise as it promotes and simplifies resource consumption, enhances decision making, improves interdepartmental relationships, and recognizes IT significance in hotel management. Heslin (2015) argues that facilitating the accountability of every department prompts them to modify their operations and enhance their efficiency. Therefore, improved efficiency facilitated by the chargeback funding model will ensure the hotel has sufficient revenue to cater to the software and programs established to run the hotel activities (Heslin, 2015).
On the other hand, the chargeback funding model facilitates cost control. The Pinafore hotel will experience improved utilization and optimization of the software to enhance its efficiency. Consequently, the departments in the hotel will be prompted to analyze their expenditure and make well-informed spending decisions, thereby cutting the operational costs in the hotel. The cut-down of running costs will save the hotel a significant amount of resources that can be used to fund other projects in the hotel. The financial accountability caused by the chargeback funding model will extend the durability of the hotel infrastructure and resources, including the software, besides deferring the upgrading of resources by facilitating the identification and deployment of underutilized ones (Heslin, 2015).
Roles, Stakeholders, and Implementation
The board of management and the stakeholders will play an essential role in ensuring that all the strategic plans are well implemented. The hotel manager will have to ensure that the entire catering department is doing an excellent job and giving the management feedback on a daily business. The family members of Joe Pinafore, who are the primary beneficiary of the hotel, will be making the major decision concerning the hotel, including strategic plans. Valets should ensure that the customers’ individual needs are met, while the cleaning team should ensure a high level of hygiene at the hotel. The maintenance team must ensure all repairs are attended to, while the concierges should ensure that all guests and facilities are well taken care of.
Summary
The use of information technology is inevitable for any industry that wants to remain competitive. Technological advancement will help the hotel, especially the Pinafore, increase online reservations hence earning more returns on investment. The advancement will also help the hotel improve its efficiency and processing of financial reports. Improving the rooms and the customer services will significantly help to out-compete other players in the hotel industry.
References
Gurel, E., & Tat, M. (2017). SWOT analysis: A theoretical review. The Journal of International Social Research 10, 994-1006.
Heslin, K. (2015). IT chargeback drives efficiency. Uptime Institute Blog. Web.
Nunis, M. (2020). New partnership between d-edge & RMS Cloud. Hotel Tech Report. Web.
Porter, M. E., & Kramer, M. R. (2019). Creating shared value. In Managing sustainable business (pp. 323-346). Springer, Dordrecht.
Serra-Cantallops, A., Peña-Miranda, D. D., Ramón-Cardona, J., & Martorell-Cunill, O. (2018). Progress in research on CSR and the hotel industry (2006-2015). Cornell Hospitality Quarterly, 59(1), 15-38.
Yu, M. M., & Chen, L. H. (2020). Evaluation of efficiency and technological bias of tourist hotels by a meta-frontier DEA model. Journal of the Operational Research Society, 71(5), 718-732.
Appendices
Project Timeline
Project Risk Schedule
Return on Investment (ROI)
