Hotel and Hospitality industry: The Angelus Hotel - Case Study Example

Case study (The Angelus Hotel) Before analyzing the key questions, let us try to do a SWOT analysis of Angelus hotel; Strengths of Angelus include: i. The backing of a strong group of hotels SEHG. ii. Spacious hotel of 450 rooms having all modern facilities for the comfort of individual as well as corporate clients. iii. Conference and banquet facilities. iv. Strong posse of 380 committed workforce. v. Chief Engineer Dick Evans has been with the hotel for the last 20 years, a dependable technical hand in realizing the required backbone of networking for tasks like yield management. vi. Spacious NCP parking space adjacent to the hotel. Weaknesses: i. The management team at Angelus hotel is relatively new and inexperienced except the Chief Engineer Dick Evans. ii. This makes the task of Jenny Naasri, the personnel manager, really very challenging in motivating the workforce. iii. Dick Evans too is slated to retire at the end of the year, when the company will be in the most crucial phase of experimenting. iv. The last three year's performance report shows that the hotel has not been able to break the jinx of low occupancy and being low revenue grosser during the January-May period. v. The pyramidal structure in the hierarchy makes it more burdensome for Deputy Manager Nisha Patel to monitor all the operations simultaneously. Opportunities: i. The relatively new appointments on many key posts mean more youthful dynamism and energetic personnel on these posts. This could be an opportunity for training them in modern techniques of management as they'll be free of the traditional bias and hence can easily adopt the newer methods. ii. The young breed will be more educated and in touch with more modern techniques. Moreover similar age group people can display better coordination in carrying out the tasks. iii. The hotel group is to come up with 15 more hotels in near future, which leaves lot of room for planning and execution. iv. With customers becoming more and more quality conscious, Angelus can be an attractive destination as it values quality. v. Developing relations with the tourism industry, particularly the proposal from Lawson tours. Threats: i. Decreasing margins in the fiercely competitive market the world-over, in the hotel and hospitality industry. ii. The looming threat of terrorism creates security concerns in the minds of the prospective visitor. So, he tries to avoid the visit at times owing to the level of threat perception and travel advisory from respective governments. 1. Angelus Hotel started its operations since September 1999. It is part of an International hotel group called Saint Emilton Hotel Group (SEHG). Since the hotel is having 40 hotels in its portfolio in Europe and Far East, therefore it can be safely assumed that the group is experienced enough in the business. It is being felt that hotel facilities are not being used to its fullest potential, therefore the General Manager, Robert Herr as asked Kati Mertens, the Front Office Manager to examine and prioritise the pricing strategy. Some of the key issues that Kati needs to look into, are; a. What type of visitor is coming to Angelus Hotel Is he a tourist or a business visitor b. Tourist visitors too fall in two categories. One from an affluent class, for whom price is no consideration, and he is on the lookout for comfort and pleasure. On the other hand less affluent and middle income group customers always desire reasonable pricing for a decent comfort. This sort of data can be gathered from feedback forms (for return customers) and by judging them through correspondence or at the front office. Accordingly differential pricing strategy can be prepared depending upon their economic background. The visitor who's here on a tourism spree has the requirements for sight-seeing etc. Therefore, it is equally important the Hotel has a tie up with some tour operators for such sight-seeing tours etc. must be c. The business visitor on the hand requires a host of facilities like, meeting rooms, conference facilities, Fax, Wi-Fi, Internet, PC, printer, projectors, flip charts etc. Therefore rooms adjacent to conference rooms/ meeting rooms etc. can be priced accordingly. Moreover, the business visitors might be coming in groups for seminars or conferences and such groups expect group discounts. d. During the lean period like January and February, the prices of hotels may be attractively discounted to accommodate as many visitors as possible. Initially it may not look like that profitable but gradually as the customer base is widened, more and more customers start experiencing the world class facilities, the prices can be accordingly revised. The gains in customer loyalty will be an immense gain for the hotel. To maintain certain standards and quality, the discounts be structured accordingly. e. In line with the international systems prevalent in the hotel industry, the Angelus hotel should also devise the prices accommodative of breakfasts as well. f. For frequent customers like Airline crew, event organizers, the hotel can offer special rates and facilities as well. During peak season these discounts can be reduced as well. This marginal hike will be well understood by such customers as they too are professionals in the field. g. Existing figures show that the 'Corporate' market segment is the one giving maximum business to the hotel. But this segment happens to be very vulnerable and requires lot of pampering. The moment they get a better rate and deal in some other hotel, they'll all go in hordes to that rival hotel. Therefore it is equally important that the managers remain in touch with the market scenario as well, to get a feel of any such competition building up, and adequate plans of action must be readied as soon as possible to take care of such 'threat' 2. Yield Management: Also known as 'Revenue Management' or 'Real-time pricing' is a scientific technique which involves managing the economics by calculating the best pricing and profits optimizing strategies. This technique was popularized by the US airlines industry in particular in the early 1980s, when they started comparing the supply and demand scenarios and accordingly offered differential pricing. This all started with the introduction of low cost airlines like 'People's Express and the liberalization programmes. For a hotel business, yield management system allows real-time tracking of the hotel bookings, enquiries and occupancy. Correlating all these discounted rates can be offered to some customers as that will result in accommodating more people with the same set of facilities and costs, thus optimizing the revenues and operating profits under the present set of circumstances. To keep an accurate track for yield management, software solutions are available off the self. The hotel can also get itself a customized software package as well. In addition, to start with, good use can be made of a team of trained managers in reporting capabilities of their reservations and front desk systems to direct pricing and inventory issues. This will require monitoring and adjustments periodically. Generally, yield management is an ongoing, day-in and day-out, week-in and week-out process. On a daily basis team members evaluate each and every piece of potential business to see how and if it fits into the acceptable business guidelines of the hotel. Yield management also calls for lesser flexibility with cutoff dates for meeting planners and the ability to control their inventory after cutoff for the hotels, in order to maximize the return on their remaining rooms. There could be some days of the week (like the weekends in case of Angelus Hotel) when the occupancy is less, suitable discounts can be extended on these days as well. In today's market driven economy we'll have to remember that; There's immense competition in the marketplace. Demand drives hotel pricing. Hotels must not expect consistent margins. They are in the business of perishable goods and services, whose shelf life is one day. If the product is utilized there'll be some return, if not, the product goes waste. Pricing decisions are controlled by many variables like season, security environment, PR exercise, market standing, global economic scenario (whether it's gloomy or booming), country's relations with the outside world etc. The management will have to be flexible and knowledgeable about all these aspects. With the general economic conditions looking up the world-over, rate and occupancy is bound to increase in the coming years. With the distribution of wealth in good measures all around the globe like in Asia and the far-east, the hotel needs to look up towards the customers from these areas as well. At present the customer base from these areas is a miniscule of about 10%. Potential of this segment needs to be explored further. The hotel can tie-up with some of the hotels or tour-travel agencies in these areas on mutually agreeable terms. Yield management is a scientific tool and needs to be used with actual facts and figures, duly assisted with judgmental decisions of the management, wherever necessary. 3. Tie-up with Lawson Tours: Angelus Hotel has been approached by Lawson Tours to run a series of tour groups on a weekly basis from March to October, requiring 40 rooms for four nights starting Wednesday. Before finalizing any tie-up and deciding the pricing issues we need to take into account; a. For a hotel industry the weekends are generally accepted as slow days with less business during Friday-Sunday, while the period of Monday-Thursday is peak demand period. Therefore the hotel is on the lookout for customers on the weekends. b. With plans of 15 more hotels in the offing the SEHG group will do a favor to itself if it tries to establish itself in the market place amongst retail as well as corporate customers. This effectively means being well-known for its friendly tariffs and features amongst wider group of people and amongst more tour operators. c. Such an exercise will help the hotel group in collecting data from a wider variety of customers, their preferences and suggestions for improvements in services etc. Accordingly the hotel group can take all such suggestions into account while planning and executing the facilities for the upcoming hotels in USA over the next two years. d. As of now, the hotel has been able to do good business during the period of June to October only. In fact, it is quite peculiar that after attaining peak in revenue earnings in the month of June every year, the hotel chain fails to keep this momentum and the revenues earnings gradually come down in the following months except some spurt in activities in the month of October. e. Therefore, it is apparent that the hotel is short of customers in the months of March, April, May, July, August and September all these years. f. Therefore analyzing the above mentioned factors, it will be a good opportunity for Angelus hotel if it profitably ties up with Lawson tours. g. Such a tie-up will help in realizing and truthfully assessing the potential of the hotel chain. It is widely acknowledged that visitor attractions play an important role in the tourism industry the world over, and the hotel and hospitality industry is pivotal in giving boost to this trend. References: 1. David Peckinpaugh, Hotel Negotiations: Understanding Yield Management, available online at http://www.pcma.org/templates/Conferon/charts/Ch3_2.htm 2. Definition and history of Yield Management, available online at http://www.optims.com/UK/hight_profits.html 3. Garrod, Brian, (2003), 'Managing the Visitor Impacts' In Managing Visitor Attractions; New Directions , Fyall, Garrod & Leask , pp.124-128. 4. SWOT analysis, available online at; http://www.valuebasedmanagement.net/methods_swot_analysis.html 5. Research areas: How to do yield management, available online at http://www.technology.gov/digeconomy/powerpoint/varian/tsld004.htm 6. The case study paper itself. Read More