Planning and Control at the Hilton London Metropole - Case Study Example

 Planning and Control at the Hilton London Metropole Introduction Hilton hotels and resorts is an internationally acclaimed chain of luxury hotels and resorts. The hotels and resorts offer a wide range of select service hotels. The chain was founded by Conrad Hilton and is now owned by Hilton Worldwide. It has over 530 brands of hotels that are operational in 78 countries in the world spread out in six continents. In 1943, the hotels made history by being the first coast to coast chain in the United States and have steadily grown since then. The chain does not necessarily own all the branded hotels. In some instances, the parent company franchises the brand or manages a hotel on behalf of the owners. The major focus of the chain is to cater for the leisure and business travelers by marketing the brands, which are scattered all over the world to them (Christiansen et al. 2011, p. 7). The hotels in the chain are located in areas where there is easy access to airports, inside a major city, next to convention centers and also in areas that would be attractive to the popular destinations for vacationing around the world. The chain of hotels is one of the most reputable in the world and this has led to numerous partnerships with other providers like airlines and car rental companies. The program of partnership is referred to as the Hilton HHonors. Many of the Hilton hotels have an executive level lounge where members who are Gold Card and Diamond Card holders frequent. These lounges are usually located at the top most floors of most of the hotels. Despite the exclusivity of these lounges, they can be accessible to all guests subject to an upgrade cost. As stated above, Hilton hotels are of worldwide repute and therefore are top of the class in terms of comfort. These hotels have been patronized by people of international acclaim in the modern society. It is for this reason and the fact that I have patronized the services of the hotel that I have chosen it to be the basis of my analysis. The Hilton hotels have survived many threats from within and without the industry, as was the case during the great depression when the other hotels tanked leaving a deal that ensured that Conrad Hilton could continue profiteering from the industry long after the depression had died down. The other reason that led me to choose the Hilton hotels as my basis of analysis is that the hotels have managed to grow their business portfolios which has increased their revenue base and earned exposure to the chain. Inputs and outputs The major source of business for most hotels is the sleeping accommodation (Lundberg 1974, p. 17). This is the case for Hilton hotels. Still the Hotel is transforming in a big way so as to provide other products and services which include conferencing facilities, food and beverage, outside catering and other events. All this products have to undergo a transformation process where raw materials are converted into the finished products that customers do enjoy. In this paper, we are going to consider the accommodation provided in the Hilton hotels. There are several inputs that go into the provision of accommodation. First, the hotels provide rooms which are equipped with the various basic amenities that are required for sleeping. The rooms are divided according to the number of amenities that they contain. In most hotels, there are usually suites which also vary according to the size and the number of additional facilities that are provided. The accommodation facilities are not complete on their own. More effort and raw materials have to be invested in them so that they meet the standards that guests expect them to be at. Therefore, housekeeping is considered a raw material in the accommodation sector (Machan 2002, pp. 5). This will include the human resources that are charged with the responsibility of ensuring that the rooms are always spick and span. They are also charged with ensuring that the ambience of the rooms is accommodating for the guests. This entails ensuring that all materials invested in the rooms are of the highest quality which exceeds guest expectations. The reception is also an important input for the accommodation department of the hotels. This is because it is important in the coordination of guest activity and the routine activities of the staff in the hotel. The department also ensures that the guests receive what they desire without much hustle. Therefore, this department can also be thought as encompassing the room service department which avails meals and drinks to the guests in the of their rooms (Stone 2004, pp.2). In provision of accommodation, a number of facilities have to be provided to increase the comfort of the guests patronizing them. These additional facilities will include air conditioning systems, televisions, heating equipments, phones, computers, internet, couches, refrigerators, room safes, hair driers and many others. These facilities must always be in the best condition so as to continue providing world class services to the guests. Therefore, there must be a maintenance department that works hand in hand with the housekeeping department to ensure that all the additions in the rooms are working to their expected best. Of equal importance is the cleaning department. This will include the turn down facilities and laundry. This department is responsible for ensuring that the linen from the rooms including draperies, bath robes and even guest clothing are clean. Cleanliness is an area where the hotels do not compromise on. They ensure that all areas are decent and attractive to look at. In the above discussion, the inputs that are invested in the accommodation include housekeeping, reception, maintenance and cleaning. These are the major departments and they too use other raw materials that can be considered as being involved in accommodation. In finer details, one might consider detergents, water, machinery, computers, and people as being the inputs of accommodation. It can been seen here that the Hotel has undergone several transformations with the aim of providing good quality services for its clientele thus bringing a big change on how hotel business is done. Planning and control The initial consideration when one thinks about planning and control should be the establishment of goals and objectives that are to be achieved at the end of the whole process (Byars 1991, p. 6). The global structure of business is rapidly changing and those businesses that best adopt are the ones that are bound to perform better. Therefore, when a company embarks on a planning process, the motivator should be the movement of the company from the position it stands on currently to a better position. Only in this way can one guarantee progress. Control on the other hand is the process of measuring the actual progress against the planned progress gauging by the overall performance of the plan and taking corrective measures that are aimed at achieving the goals and objectives whenever a deviation is witnessed. The planning process in hotel accommodation is usually aimed at setting objectives that are focused on the occupancy levels and rates (Hilton Hotels Corporation 2010). This process of planning is done by management. As planning is a onetime activity, the control is the most important in ensuring that everything is going according to plan. The Hilton London Metropole hotel uses a number of instruments and dimensions in order to control the accommodation. The control dimensions include capacity control which is inclusive of overbooking, inventory and rate controls, control of durations and management of group requests. Controlled overbooking The control of capacity is aimed at the minimization of lost revenue that arises from the non-occupancy of rooms (Grover & Eric 2002, pp. 4). Therefore, management has a process of controlled overbooking so as to give cover whenever certain guests do not show up and shield the hotel against empty rooms on arrival dates. Most customers book rooms well in advance. If the hotel was to solely rely on the bookings, then, cancellation by some customers on the arrival day would mean that the hotel rooms will remain empty (Casper 2005, p. 17). Additionally, there are those customers who do not have the courtesy to cancel their bookings and on the arrival date will not show up. This means that the rooms will indicate that they are booked but no one has checked in. some customers also have reasons that make them check out well in advance of their expected check out times. In having controlled overbooking, the hotel ensures that the action of such customers does not lead to some rooms remaining vacant for any period of time as that ultimately translates to lost revenue. If a hotel that does not overbook experiences a 5% cancellation rate on booked rooms and a further 4% are no-shows, then, that hotel will have lost 9% of occupancy on the particular night. The total revenue that can be lost is measured by multiplying the number of rooms that are empty by the going rates for those rooms not mentioning the additions that customers usually have. Therefore, the Hilton does not close out reservation requests too early as it could mean losses for it. There is a statistically supported number of reservations that is supported by the Hilton in excess of the actual supply of rooms that the hotel has. The reason is simply to offset the negative effects that may arise from early checkouts, no-shows and cancellations. This statistics are carried out for every class of rooms that is available in the hotel and the number varies from class to class. The hotel further does forecasting for future dates of arrival, again for the different classes, by forecasting for walk-ins, early and late departures, cancellations and no-shows (Walkup 2005, p. 31). The forecasts are done depending on the market segment being targeted and bearing in mind the expected total demand as well as the recapture rate. The mode of capacity utilization that translates to occupancy and revenue are raised so that the hotel can cushion itself against customer behavior that might lead to the loss of revenues. All these factors must be considered while bearing in mind that the maximization of revenue, optimal overbooking level may lead to over sales in excess which leads to walking guests and in turn creating a negative effect. This means that caution must be exercised even while overbooking as dissatisfied guests who may have to be walked to other accommodation may never return to the hotel translating to lost future revenues (Brotherton 2009, p. 169). In determining cancellations and no-shows, the hotel considers the time that is left prior to the arrival date and the booked segment of the market as the segments act differently. The tradeoff between risks and costs arising from over sales and the revenue lost due to spoilage arising from rooms that go unoccupied can be managed by having controlled overbooking. The most common form of capacity management that is practiced by the Hilton and other hotels usually occurs on the arrival date. Here, the forecast for no-shows is offset by the booking of walk-ups. Cancellations are easier to plan and manage for as they are done in advance of the arrival date. However, some cancellations are done at the expected time of arrival meaning that the walk-ins play an important role in ensuring that the occupancy levels in the hotel are high. The management of capacity is done in a systematic manner and is usually dependent on the class of rooms. It makes more business sense to overbook more in the lower classes than in the higher ones. This is because, if a guest is overbooked in the lower class, upgrading him to a higher class would not be as much a problem as downgrading a guest who has been booked in the higher class to the lower class (Slattery 1999, p. 68). The demand for rooms in the higher classes is therefore a determinant in the level of overbooked to be allowed. The Hilton London Metropole hotel does not worry much about the problem of overbooking as ultimately, those that are overbooked can get accommodation in other Hilton hotels in London. This is part of the reason why the Hilton London Metropole hotel performs better than other hotels owned by individuals and do not belong to chains (Slattery & Roper 1986). Controlling inventory The optimal inventory allocation that is done to rate classes is another control tool that is exercised by the Hilton hotel. Here, the reservations are usually over a range of rates which are dependent on the booking conditions as well as on the different types of customers in different segments. The objective of this control dimension is to increase the revenues collected by protecting some inventory for sale at higher rates. This is aimed at the satisfaction of the demand that has been projected between the time of booking and the date of arrival. The process which is done for every class and starts at the rack rate down requires a good capability for demand forecasting, an inventory structure that is nested as well as a stochastic optimization technique that is good in order to predict how much inventory to protect and at what rate and class to protect it in. the secondary objective of the allocation of inventory is to limit the number of discounts awarded in favor of “bus-ups” (Rice 2002, pp, 9). Another consideration is the price elasticity of demand and also the chances of up-selling. This means that there is a risk involved and hence the requirement of control to protect the hotel from any negative, unwanted and avoidable consequences. The technique of shoring up inventory is based on the number of rooms available vis-à-vis the total number of rooms in the hotel, the value of both the high and low yield categories of rates, the price elasticity of demand, the rates that are being offered by the competitors and the deviation from the forecasted demand (Lashley & Morrison 2000, p. 75). Controlling durations Control of accommodation to ensure that the goals and objectives identified while planning are met can also be done by controlling the duration that the customers spend in the hotel. The duration is dependent on the rates, the availability of the rooms, the forecasted demand for a certain market segment and the potential for displacement of revenue. The solution to this problem can be mathematically done despite its complexity. However, in simpler terms, the hotel cannot accept a reservation for a room at a given rate for a limited period of time if another opportunity for reservation arises where the same rate is offered but the stay is relatively longer. Guests who are willing to stay for a single night will always be the least favored in a hotel for guests with intentions to stay longer. The opposite occurs whenever there is high demand. The longer stays at reduced rates will be the least favored compared to shorter stays at the rack rates (Lashley 2000, p. 9). The mathematics that follows is easy. Shorter stays at rack rates will attract more revenues than longer stays at reduced rates. Catering for groups The reliance on sales on rack rates and corporate businesses is sometimes not enough to offset the costs of running business making it hard to break even. The recent economic crisis put a strain on spending in some market segments (Allin 1999, p. 320). This meant that the forecasted demand was affected. The hotel thus realized the importance of groups, airlines, short break segments and conventions to break even during the seasons of low demand. The process of catering for groups works in much the same way as the control of inventory allocations that is done for different rate classes. The revenue that can be accessed from groups is determined by the rates being charged, the size, the length of stay, the attrition rate, expected profits from sale of food and beverages and other peripherals and the probability of cancellation. Conclusion The Hilton chain of hotels is large and has built a reputation for the best in product and service delivery in the world of hospitality. The brand is distributed all over the world with its presence in the New York Stock Exchange (NYSE) and the Fortune500 magazine a testament of the success that it has achieved. The Hilton London Metropole hotel is a member of this chain that is located in the heart of London. In order to stay competitive in the fast changing global environment, the hotel has identified a number of ways in which to maximize on its most valuable resource; accommodation (Porter 1985, p. 5). In order to achieve maximum occupancy levels all year round, the hotel has identified a number of control measures that it takes in order to achieve this goal. The control of capacities to ensure that over sales do not result from overbooking and in turn prevent the loss of customers is the most important point to consider when overbooking, which is an inevitable process in ensuring that there are no empty rooms in the hotels arising from cancellations, no-shows and early check outs. Other control measures discussed include the control of inventory and rates, the control of durations of stay and the management of groups. 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