Business Computing - Term Paper Example

? BUSINESS COMPUTING Table of Contents Table of Contents 2 Background 3 Findings and Analysis 4 Recommendations 7 Summary 8 9 References 10 Bibliography 11 Appendices 12 Appendix – 1 12 Background “Seaview Apartments” is a small apartment complex which is located at the Mornington Peninsula, Victoria, Australia. It is owned and managed by Shana Milestone. There are four types of apartments included in “Seaview Apartments” and are rented out to tourists visiting the area. The rent rates vary according to the type of apartment i.e. one bed room apartment, one bedroom deluxe apartment, two bed room apartment and the deluxe studio apartment. All these apartments are self-contained with all the necessary accommodation features required to stay there are available for the tourists. Discounts are also available for the customers who rents for seven or more days in any of the apartments mentioned above. The business is being successfully run by Shana but she is sceptical about the level of profits being earned from the business. She has raised concerns regarding the capacity utilisation of the apartments and the profitability associated with the business. The main purpose of this report is to analyse all the relevant facts related to the profitability and capacity utilisation of “Seaview Apartments”. Based on the findings and analysis of the information available regarding the apartments, some recommendations have also been suggested in this report which would help Shana to make effective utilization of the available capacity in her apartments and increase the profitability of the business. Previously all the information related to bookings of the apartments was recorded by Shana manually in the order they were received. The processing of data and analysis of the information contained in those manual records posed difficulty for Shana to take any kind of decisions to facilitate effective running of the business. In order to get rid of this problem, Shana has prepared a spreadsheet model for herself which contains all the valuable information that are required to facilitate comparison of popularity and profitability associated with each of the four apartments separately. This report is designed to analyse all the relevant information contained in the spreadsheet model prepared by Shana to get a better understanding about the profitability position of the business. In addition to this other concerned areas related to profitability like the capacity utilisation of the apartments and the marketing efforts to increase the demand of the services offered through the renting of the apartments would also be analysed in this report. This analysis along with other related secondary research would be used to help Shana in suggesting ways through which she can run the business in a more effective way and add to the profits of the business concern. Findings and Analysis “Seaview Apartments” is located at the peninsular region of Mornington, Australia and is at a walking distance from the nearby beach present there. Local tourists which include the residents of Melbourne are mainly found to visit the Mornington Peninsula. Various types of beaches and other different types of natural attractions are present in the area. Thus people visiting the place have a nice time visiting all the tourist places present there (Visitmorningtonpeninsula, 2012a). Hence “Seaview Apartments” is present in an advantageous location for the tourists visiting the area. Four types of apartments are offered on rent by “Seaview Apartments”, namely one bed room apartment, one bedroom deluxe apartment, two bed room apartment and the deluxe studio apartment. Thus it can accommodate customers of different types according to their varied requirements and preferences. Each of the apartment types is fully self-contained and hence all necessary facilities are available for the customers required to stay and spend their time at any of these apartment types. All these factors suggests that “Seaview Apartments” is well equipped with all relevant attributes to attract people to rent any of its apartments while they come to visit Mornington Peninsula. Next if we look at the information recorded in the spreadsheet model of “Seaview Apartments” it can be found that it managed to generate total revenue of $51,252.50 in the year 2011 and its total profit amounted to $25,252.50 in 2011. Hence the total profit margin of the business concern for the year 2011 was around 49.27% which is a significant amount of profit earned by Shana. Out of this total profit generated in 2011 by “Seaview Apartments” maximum contribution was from the One Bedroom Deluxe apartment and the least contribution came from the One Bedroom apartment. Almost half of the total profit generated by the business concern came from its One Bedroom Deluxe apartment and less than 10% of the total profit came from One Bedroom apartment. Compared to the revenue generated from each of the apartments the One Bedroom apartment had a profit margin of 20.99% and the One Bedroom Deluxe apartment had a profit margin of 61.66% (Appendix - 1). This suggests that the costs incurred in the One Bedroom apartment is quite high as compared to the revenues generated by it. Hence its profitability was significantly low as compared to the total profit generated by the business concern. Next if we look at the nightly accommodation rates charged by “Seaview Apartments” it can be found that the rates are in the range of $130 to $220 depending on the type of apartments. These rates are on the higher side as compared to the rates charged by other properties present in the area (Morningtonpeninsulaaccommodation, 2012). Hence, with the availability of other apartments in the Mornington Peninsula that is offering similar apartments like “Seaview Apartments” at cheaper rates, it is expected that customers would not prefer “Seaview Apartments”. Thus it can have a significant effect on reducing the profitability of the business concern. Next if we look at the popularity levels of each of the four types of apartments of “Seaview Apartments” it can be found that the Deluxe Studio apartment was booked for maximum number of times in 2011 and the Two Bedroom apartment was booked for least number of times in 2011. However if we look at the corresponding figures related to number of nights the apartments were rented in 2011, it can be observed that the One and Two Bedroom apartments were rented almost half the number of nights as compared to Deluxe apartments. This indicates that the deluxe apartments, especially Deluxe Studio apartment was the most popular of all types of apartments offered by “Seaview Apartments” in 2011. The possible reasons can be the higher prices of the One Bedroom and Two Bedroom apartments as compared to other similar apartments available in the area. Thus the one and two bedroom apartments are not being utilised at its full capacity because out of 365 nights only 63 nights were occupied by these apartments in 2011. Another factor which can have an impact on the profitability of “Seaview Apartments” is its nightly rate of renting its apartments to its customers which is same throughout the year. According to the trends in the hospitality industry in Australia it can be found that the pricing strategies of hotels and apartments are aligned to the target market and the rent prices are found to be dynamic depending on the seasonal variations in a particular area (CBRE Hotels, 2010, p. 15). Hence, the prices of rented apartments found in Australia normally vary from lean season to peak season in a particular area depending on the demand and the target market. Thus, the pricing strategy adopted by “Seaview Apartments” can have an impact on its profitability. Another area of concern for “Seaview Apartments” is its 3 night minimum rule. It eliminates the possibility of the apartments being rented by the customers who wish to stay for less than 3 nights. Thus it reduces the capacity utilisation efficiency of “Seaview Apartments” and is losing out in revenue generation opportunities available to the business concern. The “Seaview Apartments” offer a 15% discount for its customers who rent for more than 6 days in any of its apartments. This can attract customers to book for longer periods in the apartments. However, it can have a significant impact in reducing the profitability of “Seaview Apartments”. 23 out of 49 bookings received discounts for staying more than 6 days in the apartments of “Seaview Apartments” during the year 2011. This amounted to $6562.50 offered as discounts to the customers in 2011 which is around 13% of the total revenues generated by “Seaview Apartments” in 2011. Next regarding the advertising strategies implemented by “Seaview Apartments”, advertisements in local newspapers are the only means of advertising implemented by Shana. It has the opportunity of advertising through different other media like online media, hoardings, etc. With the increasing use of social media by people, online advertising is one of the most attractive medium of advertisement for businesses like that of “Seaview Apartments”. Recommendations The analysis of the findings from the information presents in the spreadsheet model developed by Shana and different other sources suggest that “Seaview Apartments” have ample opportunities to increase its popularity and enhance its profitability by a significant amount. Some of the recommendations which can add to the profits generated by “Seaview Apartments” are as discussed below: From the analysis it is evident that the one bed room apartment was least popular and least profitable for “Seaview Apartments”. It is suggested that the One Bedroom apartment be renovated to One Bedroom Deluxe apartment. This would help Shana to generate a significant amount of profits from its business because One Bedroom Deluxe apartment was the most profitable of all the four types of apartments of “Seaview Apartments”. Shana needs to change its pricing strategy for its apartments as well. First of all the rates charged to the customers currently are at the higher sides as compared to other properties available in the Mornington Peninsula region (Visitmorningtonpeninsula, 2012b). Hence it needs to cut down its rates to attract more people and thereby increasing the capacity utilisation of the apartments. In order to compensate for the reduction in revenues as a result of cutting down its rates, Shana can change its discounting policy. However it is expected that with the reduction in rates the customer base of “Seaview Apartments” would increase, thereby increasing its revenue generation significantly. Apart from this “Seaview Apartments” should have dynamic pricing strategy and depending on the seasonal variances and demand in the market its prices should vary accordingly. It is also suggested that “Seaview Apartments” should remove its 3 night minimum rule to accommodate more people in its apartments because the people who wants to stay for less than 3 days would have the opportunity available at “Seaview Apartments”. This would increase the capability utilisation of the apartments offered for “Seaview Apartments” and hence enhance its profitability. With the increasing popularity of social media it is advisable for “Seaview Apartments” that it should advertise its business through online media. Moreover it should have a website which would facilitate online booking for the customers looking for apartments in the Mornington Peninsula area. Summary This study entails about the profitability analysis of “Seaview Apartments” located at the Mornington Peninsula region of Australia. It is a small business operated by Shana Milestone and has in offer four types of apartments to its customers. Shana is sceptical about the profitability position of its business and thinks that the apartments are not being utilised to its optimum capacity. She has prepared a spreadsheet model containing all the information regarding the booking of its apartments in 2011. An analysis of the data of the spreadsheet has been presented in this report. In addition to this information from other secondary sources has also been utilised to have a detailed understanding about the profitability position of “Seaview Apartments”. Based on the analysis of the findings some recommendations have been suggested for Shana in this report. Implementing those recommendations Shana could increase the profitability of its business significantly in the upcoming years. References CBRE Hotels, 2010. Australian Serviced Apartments: The Formation of an Industry. [pdf] Available at: [Accessed 13 September 2012]. Morningtonpeninsulaaccommodation, 2012. Bookings. [online] Available at: [Accessed 13 September 2012]. Visitmorningtonpeninsula, 2012a. Six Touring Themes to Start you on your Way. [online] Available at: [Accessed 12 September 2012]. Visitmorningtonpeninsula, 2012b. Accommodation. [online] Available at: [Accessed 12 September 2012]. Bibliography Chon, K. S., and Maier, T. A., 2009. Welcome to Hospitality: An Introduction. Connecticut: Cengage Learning. Drewniany, B. L., and Jewler, A. J., 2010. Creative Strategy in Advertising. 10th ed. Connecticut: Cengage Learning. Morris, M. H., and Morris, G., 1990. Market-Oriented Pricing: Strategies for Management. Connecticut: Quorum Books. O'Fallon, M. J., and Rutherford, D. G., 2010. Hotel Management and Operations. 5th ed. New Jersey: John Wiley & Sons. Appendices Appendix – 1 Profit margin calculations:       One Bedroom One Bedroom Deluxe Total Revenue 51252.5   8227 16952 Total Profit 25252.5   1727 10452 Profit Margin 49.27%   20.99% 61.66% Read More