Management Service and Operation Tourism Industry at Pattaya, Thailand - Case Study Example

Management Service Operation Table of Contents Introduction Every business is influenced by a number of paradigm changes that affect itfrom all perspectives. Dr Paul Frost and others (2006) mention the diversity of factors that influence the business environment. Though at the outset, it might appear as if the entire business depends on the customer perspective of the product and the services, it soon becomes apparent; to what extent even the supply chain and their perspective could affect the entire business environment. The geographical location of a business has a dominating impact on the performance of the business; as much as the operational and capability planning including quality management. Human resources play an important role in the services management particularly in a service industry. Monitoring of the services rendered and correcting it is an important feedback management technique that needs to be adopted and implemented. The Service Industry that has been taken for analysis purposes is the tourism industry at Pattaya, Thailand. All the aspects of the business management laid out earlier, pertaining to the geographical advantage, facilities and operational management and Human Resources Management are studied during my visit to the location. This is analysed to see whether the theoretical aspects are met by the practical situations in the hospitality and the tourism industry. The extent to which the factors affect the performance of the industry has been studied and presented below. Four major areas of operation have been considered during this study. 1. Location and the geographical advantage of the place 2. Finance management is a major requirement for any business and this paper studies the methods adopted by the finance management team at the hospitality centre to take care of the issues that might prop up from time to time. 3. Operational Management was studied under the capacity management principles that were employed to take care of the capacities of the location, quality of service and the overall operational management. 4. Human Resources Management and Training of the staff to ensure that the services provided by the people are in line with the customer expectations and matches the commitments made by the company in this regard. The details of these are presented below. Location and Facility Management The company we are interested in is a resort at the Beaches of Pattaya, Thailand. The resort spans about 4 acres of land facing the ocean front beach called the Dongtan beach. The location is tropical. The hospitality divides the season into three groups rather than two. They call it low, high and peak. The low season is between May 1 and Oct 31. The High is between Feb 15 and April 30 while the peak season is between Dec 20 and Feb 14. There is a gap of about one and a half months, which is used by the management to do maintenance or any other activity that might be needed to make the resort a better one for the customers to walk in. It is designed as a Thai village Resort with only 45 suites that takes care of every need of the customer. The village resort has three types of cottages or suites. These include forest lane houses, pool cottages with garden showers and suites with Thai showers. All the three of them offer similar basic facilities to the customers. 1. Every suite can be occupied by 2 to 4 people, with 60 to 80 square meters of space for the occupant. 2. Some suites come with full kitchen, refrigerators, ovens, burners, etc., 3. But every one of the rooms inherits the architectural splendours of the past and replicates the Thai heritage themes. The silk, the cotton, the furniture are all hand made from the Thai villages. Many of the original artwork of Thai artisans adorns the rooms (Rabbit Resorts 2007). 4. In some of the cottages, private balconies and gardens are also maintained. Even a garden Thai Shower for a bath in the gardens is possible. 5. The resort also provides a room service like any other would, in addition to the restaurant and coffee shop that is open 24 hours of the day (night). They call it the Ocean Front Dining. It has a Beach Grill that could serve some of the best meat products and the fish out of the ocean. The Deb's coffee is the one that is open 24 hours for providing the much needed excitement to the visiting guests. With two pools and poolside gardens, there is enough framed photos possible at the resort. It also has a function hall that can accommodate 30 guests for any wedding. It can also be organized at the beach and at the gardens. There is a speciality catering group that could serve continental, Asian, Chinese or any other cuisine of the guest's choice. Thailand is known as the land of cuisines where cuisine from across the world merge and the visitor gets everyone of them or even any combination of them. Effervescent and indulging, Pattaya beach resort is the tropical beach resort of choice for most of the people (Dr Ian Corness 2004). Financial Management The management of the resort has invested in the land long time ago. It is the current owner's ancestors who have bought the four acre plot opposite the beach and have started building a resort for the guests. The investment has been in making the resort an attractive and a hospitable place for living. The accounts of the company are managed in the following ways: 1. The income to the company is in the form of shareholder's investments and in the form of revenue flow to the company. 2. The loans to the company from creditors and debtors are also included in the capital that is available in the company. 3. Expenditure in the company is in the form of revenue expenses and for capital expenses. The revenue expenses in any service industry will include, the salaries, the maintenance of various articles in the resort including china, cutlery, etc. and stock of other materials including food and beverages. 4. The capital expenses in the resorts will include the cost of buying new furniture, cutlery, etc., Purchase of anything new is brought under capital expenses. The total expense is taken from both capital and from the revenue expense. While the capital expense is amortised as assets, the revenue expense is a part of the expenses incurred and is brought forward from the profit and loss statement of the company. The financial planning in the company follows the flow chart shown below: Figure: Finance Management The above figure indicates the financial management strategy adopted by the resorts. The company draws out an expense budget that takes care of revenue budgeting as well as the capital expenses budgeting. This will be done at the beginning of every year. Further detailed budgeting is done for every quarter at the beginning of the respective quarter. This helps in controlling the expenses done at the resort. Every expense needs to get passed through the respective budget failing which it will not be expended. Similar to the budgeting mission, the company also plans an annual marketing target. This decides on the income that the company is going to achieve for that year. This will also decide on the nature of spending of the advertising budget and normally lays claim on the advertising expenses for the year. Based on this requirement, the advertising budget for the year is planned. Similarly, if the marketing department feels that there could be a larger intake of guests during a specific year and that specific transport or such other services would be required by them, then the operational budget will be accordingly increased to take care of the marketing department's requirement. Based on the marketing department's projection of the business, the income for that period is drawn. This will also help in understanding the number of additional staff required during the peak and the high seasons and the number of people the resort might need during the lean season. Accordingly, the excess staff could move out of Pattayah and back to Bangkok if required on other jobs within the company or could even take their annual off during this period (Pete Odgers 2006). This would decide on the size of the income and the budgeted expense for the year. However, it is very important that the control on these activities is duly laid down so that there is no violation of the laid down budgets and the targets are duly met. The company produces the expenses analysis sheet on a monthly and whenever the management feels it is needed to monitor whether the expenses are within the budgets laid down by the company at the beginning of the year. The same is the case with the income generated out of the marketing exercise. The targets reached every month is cross checked and verified by the management. This in itself would also ensure that adequate steps are taken by the management and the staff to ensure that the company meets its set targets. While setting these targets and budgets, standard industry benchmarks are considered by the company and an equivalent figure is set for the company / resort. This would help the resort achieve global standards in services while at the same time taking care of the environment. The net profits are checked every month to see the contribution from the business to the group. However, the return on capital invested is calculated on an annual basis though the capital on the land was invested nearly three decades ago and the major chunk of the investment was done at least ten to twenty years back. The worth of the investment at the current prices are calculated and used for the calculation of the return on investment. In order to improve the performance of the company, it is a standard practice to reduce the cost of production in the service industry. In line with this, the unit cost per bed per night is calculated. This, at the current occupancy rate would ensure that the company earns reasonably good profits. Cost of operation is derived based on the fixed costs faced by the company in maintaining its services and the variable cost that adds up to the total cost of the resorts. There are few costs which are direct and controllable. These costs are limited to the extent possible when the percentage occupancy goes down in order to reduce the overall cost of the resort maintenance. This would ensure that the company is able to ensure smoother and appropriate operation and produce a profitable outcome. In the case of this resort, the costs involved are given below: Month August September No. of bed nights 1395 (45x31) 1395 (45x31) Average occupancy 60% 65% Total sales 25,110 27,200 Fixed costs 5,000 19.9% 5,000 18.3% Variable costs 10,000 39.8% 10,833 39.8% Mixed costs 6,000 23.9% 6,300 23.1% Total costs 21,000 83.6% 22,133 81.4% Net profit 4,110 16.4% 5,067 18.6% The contribution is calculated on a monthly basis and this is then compared along with the budgeted and the projected targets at the beginning of the year. Any corrective action in the method of operation if required is suggested and taken by the management so that the annual target is met. The pricing in the company has been fixed based on the occupancy percentage which hovers about 60 to 70% on an average in a month all through the year. Based on the occupancy and on the costs involved, a nominal profit of 15 to 20% is anticipated and the rate of per bed per night is calculated. This helps the company to realise a reasonable profit at the same time, help in maximising occupancy rate in the resorts. The market in the beach resorts of Pattaya is around the charges levied by this resort for a two star category hotel. Though the resort itself can be looked at as having four star facilities, it still charges at the rate of a two star hotel so that the occupancy is maximised. This rate is fixed for all the packages, special offers, off season offers and other such discounted rates. The rates are increased during the season when a full occupancy is expected and bookings are done at least two months in advance. Since this is realisable the company tries to have a peak season rate that is 50% more than the low season price and the high season price is 25% over the low season price. The rates are as indicated below: rooms | category | season (rates per room, unless specified) High Season Jan 01, 2007 - Apr 30, 2007 Peak Season Dec 20, 2006 - Feb 14, 2007 Low Season May 01, 2007 - Oct 31, 2007 Forest Room, Forest / Up or Downstairs THB 3700 THB 4600 THB 3050 Forest Room, Poolside / Up or Downstairs THB 4150 THB 5150 THB 3600 Antique Room, Forest / Garden THB 4000 THB 5000 THB 3400 Antique Room, Poolside THB 4550 THB 5500 THB 4000 Antique Room, Extra Bedroom THB 4800 THB 5800 THB 4200 Cottage 1-storey Poolside / Forest THB 5000 THB 6000 THB 4400 Family Villa 2-stories - living room THB 8700 THB 10250 THB 7550 Family Villa 2-stories - extra king bed THB 8700 THB 10250 THB 7550 Seashell Suite THB 4000 THB 5000 THB 3400 Rates are incl. 10% service charge, incl. 7% VAT, incl. breakfast extra bed surcharge. (see rate table) * All rooms are non-smoking, ashtrays are provided on the terrace or balcony * Small dogs are accepted at Baht 700 per night per dog Surcharge Baht 500/night is applicable for belowing period - Chinese New Year Feb.15-19,2007 - Songkran Festival Apr.12-15,2007 These rates are accordingly presented so that there is an overall contribution of over 20% every period. Based on both the budgetary and the actual expenses incurred as well as on the planned or targeted income and the actual income, a variance analysis is done and the same is then used to help planning and budgeting in the following year. This control is very closely maintained in the company to ensure optimal planning and execution. Service Failures and Recovery 'Reliability is regarded as the core of the service quality' (Berry & Parasuraman, 1992). Poor service might turn out to be a major problem particularly in the service industry. But appropriate customer support and providing failure redressal would turn a frustrated customer into a loyal one. In line with this principle, it has been the stress of a number of service industries to stress on customer support as much as providing customer service itself. The resort like most of the other ones, have a clear redressal mechanism for customers in case of any complaints. Customers do accept the fact that there are services that could go wrong under many circumstances. However, on more than one occasion, it has been found that the customers expect the company to respond appropriately to failure situations rather than expect everything right the very first time. The company handles all the four varieties of failures that are normally occurring. Failures at the Systems side, the employee failure, opportunity failure and there could also be failures due to customers themselves. There is a redressal mechanism for any of the failures that has occurred during the stay of any guest in the resort. The resort has a complaint management which starts at two levels. One at the reception, which is the most frequented part of the resort and the other is at the resort manager. In case, any complaint is not attended to or resolved within a reasonable time frame from the time of the complaint or within the said time limit, then the customer can lodge a complaint with the manager of the resort. The resort ensures that the mechanism of lodging the complaint is foolproof by ensuring a neutral party like the lounge manager to have the complaints book. This complaints book is filled in by the customer in case something goes wrong. Normal and ordinary complaints pertaining to the facilities issues, are passed to the maintenance department immediately who attend to the problem with in the next 4 hours maximum. Apart from these technical complaints, there could also be personal complaints of misbehaviour or impolite behaviour from among the staff. Though this is rare, it does occur rarely. When it does occur, the complaint is then transferred to the Human resources department, which in turn talks to the staff concerned. If the failure on the part of the staff is not too big, then the staff is retained in the service. If he were to have violated any of the company rules in attending to the customers, then the staff is removed from the service forthwith. At the same time, this feedback is also given to the training department that ensures the incident is brought up during the discussion sessions of the training. The staff are educated on how such situations will have to be handled without antagonising or personally irritating the customer. However, in case the problem is about any other operational inconvenience or problem then it is escalated to the manager of the resort who addresses the problem either by meeting the customer and resolving the issue in such a way that he remains happy. The net result is that: 1. Every complaint has a clear process that is followed by the resort to resolve the complaint. If any specific complaint were to be different and is not in line with any of the procedures already laid down then the procedure is to escalate the problem and get a procedure before it is too late. 2. One of the steps in the procedure is to inform the complainant about the outcome of the complaint he or she made. 3. There is a single point of contact for most of the complaints. In this case, it is the lobby manager. Above all the company promises a service guarantee when the customer logs on to the resort and becomes a customer. They promise to provide the basis services listed. Conclusion The resort studied has the financial management system in place which is in line with the theoretical concepts in vogue. Similarly, the methods that are adopted by the company to redress the customer dissatisfactions are also in line with the theoretical aspects of the service industry studies. However, the company does not have a clear and explicit guarantee of service which highlights the features of their resort though there are a number of implicit guarantees that they do make to the customer and they strive to maintain that as well. Other service failures, such as remote booking of the room which at times could fail due to a delay in payment realisation causes lots of dissatisfaction to customers. Since they are employing a technology that is not still stabilised in Thailand, such issues are taken in the right stride and are resolved favouring the customer as much as possible. Similarly, the resort does not still employ detailed revenue management methodology to enhance tighter finance control. The company once they grow in size further, might require such control and management of revenue flow. References 1. Dr Paul Frost, Chris Dutton and Harvey Ells, 2006, Excellence in Managing the business-to-business customer relationship, University of Brighton. 2. Pete Odgers, 2006, Managing Finance in Service Operations, School of Service Management, University of Brighton. 3. Rabbit Resorts, 2007, Available at: http://www.rabbitresort.com/index.html 4. Dr Iain Corness, 2004, Local Personalities: Paisan Bundityanond, available at: http://www.pattayamail.com/578/who.shtml Read More