Innovations and Their General Impact on the Hotel - Case Study Example

Hospitality Report Name Institution Executive summary Annual performance report is an important tool for any hotel business and any other business. Despite the fact that there are general elements that enhance the success of a business, this is often not a guarantee that such elements shall lead the business to success. There are often features unique to the company or business entity that make it survive, succeed or fail. These features include the working environment, the employees the leadership and management of the entity and the critical decisions made by the company. These are features that form the brand of the company. As no business has room for mistakes in the current competitive world, these elements are harmonized and specific objectives set. Plans are then made to achieve the specific objectives using strategies unique business. Evaluation is then done to establish the extent to which objectives have been achieved. All this process, actions, decisions and activities including arising such as stuff turn over, are compiled in a report that informs on the business’ performance in that particular period. This document presents an annual report of a three star hotel drawn from a team based problem solving exercise on HOTS simulation. It describes the nature of the hotel, how it was inherited and how it has performed throughout the previous financial year. The report describes financial performance of the hotel in the fiscal year including the expenditures and the returns, the challenges faced and how the management team employed different strategies to overcome the challenges. It also outlines the different changes and decisions made in the fiscal and how the impacted on the general performance on the hotel. Innovations are quite important in any business as we different units reach for the standards of the postmodern world. This report also outlines the different decisions taken by the management tem regarding innovations and their general impact on the hotel. Arising matters like staff turnover and changes in the business environment such as the competitive market and how the hotel responded to them. The paper summarizes all this, evaluates the performance of the business over the year and projects plans for the next years. Table of Contents Table of Contents 4 1.Introduction 6 2.0 Performance and Financial analysis 6 2.1 Total hotel Revenue and total hotel net income 7 2.2 Rooms department revenue and rooms net income 10 2.3 Food & beverage department revenue and food and beverage net income 11 11 a.Return based on capital employed (ROCE) 12 2.5 ADR and REVPAR 14 2.6 Refurbishment costs 15 2.7Short term and Long term analytical stability ratios 16 2.8Staff turnover 17 2.9 Marketing spendings 19 2.10 EMS spent and activities 20 3.Business Plan 20 3.1 SWOT analysis 20 3.1.1 Strenghts 21 3.1.2 Weaknesses 22 3.1.3 Opportunities 22 3.1. 4Threats 23 3.2 Objectives 23 3.3 Strategies 24 3.3.1 Corporate Market 24 3.3.2 Leisure 25 3.3.3 Other market segments 25 3.3.4 Food and beverage 26 3.3.5 Staffing 26 3.3.6 Physical Property 27 3.3. 7 EMS 27 References 27 1. Introduction An annual reporting of a hotel is a significant parameter that evaluates the internal strength of the company and is considered a good tool on which decision making should be contacted and directed at fulfilling a company objective or aims (Clarke & Chen 2007). The hotel is a three star facility that has operated effectively and competitively since it was established. At the time of taking over the Hotel, it was considerably stable, with few issues staff turnover, but struggling to adjust or react to the competitions posed by other hotels of the same nature and others more advanced. The main challenge thereby was to ensure that the hotel competes favorably while at the same time trying to increase return on capita. This report analyzes the financial performance over the last three years, with reference to total revenue, net income, expenditures on marketing, returns on staffing, and EMS. Over the last three years, the hotel has performed excellently even though there were more challenges involved. 2.0 Performance and Financial analysis Financial analysis was conducted to determine their position in the market and whether the decision made were meeting targeted objectives or not. For some reasons, objectives were put as first priority and all efforts were applied to ensure that the mission statement of the hotel is real, and that all operations were revealing the internal definitions and expectations of the hotel. Revenue generation is subject to market volatilities, resource outsourcing, scheduling, quality improvement, and increase in offer of excellent services to the clients (Weygandt, 2009). The trends in performance of a hospitality based and any other business varies with stability of the market and the status of the global inflation levels (Verret, 2008). For effective financial analysis calculating revenue collected from capital employed, and the analysis was done in phases in order to determine the gaps. Production and matching the capital employed with objectives of the hotel was also a factor that gives insights into matters to be addressed in order to position the business in the market. ROCE, and other rations such as EBIDTA, Beta, liquidity rations, in combination with allocation of resources were recorded in order to enhance the financial status of an hotel. 2.1 Total hotel Revenue and total hotel net income During the first of being in business, the team initiated efforts that helped in identifying the best way to survive in the market (Verret, 2008). Since it was the first time in business, a significant time was required before returns on capital employed could be realized. At the end of the first year, total revenue of about $ 520815 was realized, and which also resulted into a net income of $132376. However, the net income from the revenues collected was not sustainable in the first phase because it was significantly below the targeted amount. The answer to this was that, the business had just started and it took lot of time for clients to get to know the services and products that were being offered and also for the new management to orientate with the business environment around the hotel (Weygandt, 2009). As such, the revenue collected was relatively low, which eventually generated a reduced income. However, different decisions were taken to respond to this marketing strategies were laid down, and the best of them were chosen to ensure that the presence of the hotel was evident (Verret, 2008). These approaches were conducted through promotions, and through televisions advertisements (Burkard, 2011). The results form these approaches steered the operations of the hotel, and during the second year, the revenue shifted to $695385 while the associated net income increased to $ 266534. Comparing the first revenue and net income reveals that the inputs and marketing strategies that were employed were sustainable and they helped in shaping the business in the right direction, to achieve better services (Burkard, 2011). The net profit outlined existed slightly above the targeted line, and at the end of the second year, the business had been positioned strategically to compete with other market participants. However through the whole of second year, monthly revenue were fluctuating rapidly such that there was no consistency though the revenue collected were sustainable (Weygandt, 2009). These figures reveal that hospitality industry is volatile in nature, and it exists with no equilibrium levels. For the third year, revenues increased to $785953with a corresponding net income of $ 331724. The strategies made in year 2 were good and it is the reason why the revenues increased to position the hotel operations and practices at a highlighted level (Verret, 2008). Despite the challenges, the revenue increased because there was a rise in income because the income generated in year one was reinvested in year three. The market volatilities and competitive strategies were suitably aligned with the objectives of the hotel, and which then became favorable for the company (Verret, 2008). The team initiated a reinvestment plan in year 2, and the results from them saw the generation of a significant rise in revenues and it was then hoped that risks will be reduced by increasing the services offered by the hotel (Weygandt, 2009). Accommodation, foods, and restaurant and quality addition on the services were improved. The team was also able to relate and exercise a holistic approach towards elaborating the market strength of the hotel, with a forecast on how the market volatilities fluctuated (Verret, 2008). At the end of three years, the hotel had achieved great things, and it was deemed that the trend could even rocket in the fourth year, and fifth year, but only if the market remained stable (Burkard, 2011). 2.2 Rooms department revenue and rooms net income Analysis of the rooms department shows a positive trend and the trend has been rocketing to higher levels. At the start of the first year, and in the first month, revenues reaching $ 149036 was realized and at the end of the year, the revenue had increased to $ 217516 with a corresponding increase in net income from $ 102556 in first month of first year to $ 141448 in the twelfth month. The average revenue almost doubled in first year between the first year and the twelfth month. The indepth analysis suggested the commitment among members of the simulation team, and the motivation among individual members to keep the business going (Verret, 2008). The rooms were excellently vanished and prepared to match different categories of demand among clients who had different cultural backgrounds. For example, the rooms were installed with digital televisions, linen towels that could be exchanged quite often as requested by the client. The rooms had also telephones through which a client could communicate with their family members or other friends in a free style (Burkard, 2011). During the second year, the revenues reached $ 324186 wit a corresponding net income of about $ 218644 before the revenue rocketed to $ 390021 and net income to $ 274306 at the end of year three (Burkard, 2011). Transition and recording of revenues between months was also significant and consistent as evidenced on the graph, but there were slight adjustments and slow down at the end of the first year and the introduction of the second year (Verret, 2008). The net income matched with an increase in revenue collection from different rooms, and as more clients continued to flow in, the revenues reflected with a positive trend or correlation. 2.3 Food & beverage department revenue and food and beverage net income Revenue collection from the food and beverage department doubled in the first twelve months of the first year from $ 130728 to $ 284004 while the net income increased from $ 31572 to $144 951. This means that, many clients who came to the hotel were more of taking food, and some drinks or beverages, but very few could book for rooms. However, compared to other departments, the food and beverage industry was recording higher revenue, and was therefore also matching the revenues with the net incomes (Verret, 2008). It was also evaluated that for the second year, the number of clients or customers increased due to the effective marketing strategies that the team adopted to steer implementation of the documented or targeted projects. For comparison purposes, the second year performance lagged behind the performance of the first year because for the first year, the business had just started and therefore, an increasing trend was expected until when the first customer’s visits to the hotel had reached a constant level (Verret, 2008). The second year revenue started at $ 310758 with a net profit of $ 156251 to $ 355744 with a corresponding net income of $ 200391. The first customers were continuously visiting the hotel and the increase was accompanied with a little increase from new customers who also got a snapshot of the hotel and information from advertisements and from friend’s comments (Burkard, 2011). For the third year, the revenues increased from $ 375636 with a net income of $214308 in twelve months to $ 377903 with an associated net income of $ 217701. The third year was also sustainable and effective in nature but the implications were such that, the frequent customer s had increased and one time visitors and the increase noted was due to randomized visits that were recorded from new customers. However a general description outlines that the three years were successful and that the increase in both revenues and net income were due to the increased marketing and additional value that was fostered by the team at different levels of business operation (Verret, 2008). a. Return based on capital employed (ROCE) From the total revenue collected and net income, the ROCE for the years was related and correlated with income and revenue to assess whether the income and revenue matched with the targeted levels. By applying the ROCE element, it was established that ROCE for the first year was significantly estimated at -12.5, and during the year two, it was estimated at 10.7, and during the third year, it was approximated at 18.5. This indicates that there was a tremendous increase in number of returns from the capital employed, and that, the hotel had started to make achievements, and probably gaining an increasing markets share (Verret, 2008). 2.5 ADR and REVPAR The ADR has been existing slightly above the normal line and slightly above the REVPAR values. This means that the business is worlking towards maintaining a constant income from its invested resources, and the trend has been postive. For the first one year, ADR was as high as 83.78 while the REVPAR stood at 21.29 with regard to the start of the year. However, towards the end of the year, the ADR had reduced to 59.84 while the REVPAR had increased to 29.97. The exchange in values means that the business was performing better from the start, and the future was promising as more resources were being pumped in. For the second year, the ADR value stood at 55.75 while the NEVPAR was estimated at 38.12. At the end of the first year, the ADR has rocketed to 72.03. with a corresponding value of 44.34. For the third year, the ADR increased again from 68.48 to 74.95 at the end of the year with corresponding value of 44.34 for REVPAR to 53.25 at the end of year three (Burkard, 2011). This indcates that the ADV has been changing randomly with REVPAR such that there were flcutuations with regard to market changes in prices, and challenges from the marketing strategies (Verret, 2008). 2. 6 Refurbishment costs At the start of the first year, there were no refurbishment costs because the services were new and the assets were still operational (Burkard, 2011). During the second month, of the first year, the refurbishment costs rocketed because there were need to address the demand of the clients and to compare the rates at different available hotels and room service providers. During the second month, a total of $ 271490 was spend, but the values then started to reduce significantly such that during the twelve month period of the first year business operation, only $ 29075 was spent on refurbishment. At the start of the second year, $ 38520 was spend and but reduced significantly as the time went by. The refurbishment costs were continuously recorded for the first two months, then they were applied in the fourth, seventh, and eleventh months. However for the unmentioned months of the second year, no refurbishment costs were spent. For the third year, $39120 were spent in the first month, $ 90190 in the third month, $52320 in the fifth month and lastly $75496 was spent in the seventh month whereas nothing was spent in the unmentioned months. A summary of the analysis on refurbishments indicates that refurbishments were highly recorded in the first years and the same rate reduced in the last two years. The strategies applied enabled the hotel to manage the costs effectively such that in the later years, some of the months recorded no expenditure, a strategy that has enabled the hotel to save dearly (Burkard, 2011). 2. 7Short term and Long term analytical stability ratios For the first year, the short term stability and long term stability ratios were high because the strategies were highly effective. The reason for this is that, assets were still new and the liabilities were still new (Burkard, 2011). However as time went by, the amount of long term debt reduced from $ 973858 in the first year to 834 775 in the second year. In addition, the current assets increased from 1,041, 642 in the first year to 2,937,225 in the second year. However, for comparison purposes, the changes in short term ration had changed from 1.3 to 3.3 while the long term had changed from 17.7% in the first year to 15.7% in the second year. However, after stabilization of the market and after gaining a market share, the short term increased to 3.8 in third year and long term increased to 17.1%. 2.8 Staff turnover The staff turnover is used to determine the efforts of workers towards meeting the company’s financial prospects within a targete time frame (Burkard, 2011). Time is an asset that must be utilized by supplying the necessary resources to workers and streamlining a company’s compesantion plans for workers (3215HSL, N.d). For year one and during the first month, the staff turnover was estimated at $41.94 and it increased till march when it reached $121.88. However, $ 150 was spent in July, $33.55, and another $ 39.4 dollars was spent with another $59.43 being spent during the month of November (3215HSL, N.d). However, nothing was spent in unmentioned months and therefore, a reliable and systematic avenues was created to retain employees who had achieved a good and sustainable perfromance index (Burkard, 2011). For various reasons, the employees who had performed well were retained to work for the second year. Durin the second year, some amount was spent in almost all months with expemption of Septmember. Consistency was also noted in the third year whereby in Januray, a staff turnover of $ 29.55 were spent, with a significant amount of about $ 57.78. However, the trend on turnovers has been reducing signicantly but within the manageable levels. Consistency has been noted, and there are various strategies such as optimization and typical resource allocations in order to limit the fluctuations and keep the number within manageable levels. Staff turnover should be kep at minimum and consistency to ensure that little amount is overspent or utilized to change the face of staffs (3215HSL, N.d). Staff members are the key to production within manageable elvels, and therefore various stakeholders in the business world should be controlled and maintained so that sustainability is attained (3215HSL, N.d). Staff turnovers are also subject to the rate at which resources are allocatd, and the amount that are spent to establish long term relationships between the management and the staffs (Burkard, 2011). Economic principles outline that there are various changes that are involved when staff members are not motivated or retained within the operational frameworks, and every aspect should be steered towards meeting the conceptual frameworks (3215HSL, N.d). There are definitions that have been adopted to explain the nature of keeping the staff members and resources towards keeping the workforce for the benefit of the hotel managementt and stakeholders welfare. 2.9 Marketing spendings For the first year, the available funds were not enough and therefore, only $6822 was invested to improve the marketing strategy of the hotel (Reid & Bojanic, 2009). However, in the second month the amount was almost doubled to $ 12566, and the same doubling was strategically adopted during the second month however, for the first year, a maximum amount of $40140, was spent in May to improve the strategy and meet the increasing need for the hotel to have a wider coverage and platform in the market (Burkard, 2011). For the second year, the maximum amount on marketing was spent and the value of the expenditure was estimated at $ 56218 while the least amount spent was estimated at $32773. In comparison, large amounts of funds were spent in the second year because the resources allocation had reached the peak, and the need to market more products was therefore eveident, and te markets share was to be expanded to gain a greater indepth of the market, and a significant gain in profits (Reid & Bojanic, 2009). 2.10 EMS spent and activities It was accounted that for the three years, little was spent on meeting the environmental protection because the hotel management and operations is considered to be a business sector that demand less legalization with regard to environmental protection and management. The only demanding aspect for the sector is that, it requires a licence from the public health sector in order to ensure that the sanitation and hygiene practices meet the international and local public health demands. A zero expenditure on EMS signifies that no coin was spent on installations, conformance, and maintainance or acquistion of any effective resources (Burkard, 2011). Matching resources and EMS strategies ensures that there is a constant but sustainable flow of ideas and knowledge between the implementers and regulators. However, for this case, nothing was spent, and neither any amountis expected to be spent it the future operation of the business. 3. Business Plan 3.1 SWOT analysis SWOT analysis is done to help the current management systems and operation, and it paves way to understand the future position of the business in the current markets and noting the challenges that may render a business unable to meet people’s demand (Dyson, 2004). It helps businesses, managers and stakeholders to develop a sustainable strategy, by looking forward to minimize effects of business weaknesses, and building on strenghts and opportunities. Threats the business should also be defined and minimized considerably in order to enable achieve sustainable business cash flows (Reid & Bojanic, 2009). Different markets pose different threats and weaknesses on businesses and therefore, there are various strategies that can be used to eliminate them by applying cheap methodologies (Dyson, 2004). An effective business plan should include different analysis of threats and weakness that can sabotage efforts of the workforce of the company towards increasinf revenues and gaining a sustainable market share in a competitive market environment. The report has considered that strenghts and weaknesses of a company results form failure to match intenal based resources, efforts and skills. They include patents, location and reputations. These weaknesses and strenghts can be reduced any time but some work is required to ensure that they don’t affect the normal operation of the business or undertaking of business practices within the hospitality industry. however, opportunities and threats are external and they are defined by noting reliability of the suppliers of various materials, or services to the hotel. It also include threats and opportunities from competitors, and effects becomes more fatal when a hotel lacks strategic measures to improve prices and promotional strategies (Dyson, 2004). 3.1.1 Strenghts The hotel is recognized and is current well established firm or business industry, and is currently leading in the hospitality and the associated gaming industry (Dyson, 2004). It also has a wider coverage with several hotels in the hospital industry, and it has wider mixed pricing strategy. In addition the hotel has a wider coverage and partnerships with several companies that manufactures its own furniture, and it currently owns a robust and flexible travel and online services (Dyson, 2004). 3.1.2 Weaknesses The hotel is affected by global economy because it has a narrowly based strategy, and therefore, it is more vulnerable to downturn when occurences such as terrorist attacks and bird flu become an international menace or objectives for health organizations. In addition, the hotel is vulnerable to worker’s strikes especially when the minimu wage regulation changes or when fluctuations change because it operates under different state government which have different legalizations and cintrol rules with regard to minimu wages (Dyson, 2004). 3.1.3 Opportunities The number of high ended and tourist customers has been increasing, and there have been an increased array of specialized, and distinctive services and quality management of high roller customers. The number of increased customers looking for wedding, hosting, and planning is also rocketing and therefore the hotel can expand its services to cover a wider range of activities towards meeting the rising demand among internationa and local customers. The hotel consists of a network of personal trainers who offer refresher courses to the employees, and there is space to expand the business to cover a wider field, a move which can help the hotel to gain a bigger market share (Dyson, 2004). Gaming services are also sustainable, because they require a limited regulation, and rules when implementing its activities, and operations. In addition, emerging markets are expanding to cover all sorts of mid-priced products and services (Reid & Bojanic, 2009). 3.1. 4Threats The hotel should be keen not to extend the over expenditure on entertainment, and gaming because they are so volatile, and there are other providers who can serve as substitutes to the customers seeking for such services and related products. Extension of credit based frameworks and offers or agreements can affect sustainable gain of profits. Terrorism attacks at various hotel locations can affect operations and positioning of the business, and the sales can drastically slow down when such threat of attack occurs (Reid & Bojanic, 2009). 3.2 Objectives From the year three performances, it is clear that some adjustments are required in the fourth year (Reid & Bojanic, 2009). 1. The hotel management should be able to increase the revenue in the fourth year and be able to obtain a significant rise in net income (Reid & Bojanic, 2009). 2. The hotel management should be able to improve turnover from staff because the current turnover is not sustainable when new markets are opened (Reid & Bojanic, 2009). 3. The marketing strategies should be increased to cover a wider variety of services and if possible with the same rate of investment but with a wider coverage of other market descriptions (Reid & Bojanic, 2009). 4. Return based on the capital employed should be increased considerably for the fourth year so that the company can use the profits to expand into other new emerging markets. 5. More expansions are to be made in order to diversify the service provision and be able to target new rollers. 6. For the fourth year, the room department should be able to come up with other rooms so that the demand is met. 3.3 Strategies 3.3.1 Corporate Market Is a description of a scenario whereby role of equity markets play a critical aspect of promoting activity of corporate takeovers. Stock performance is significantly achieved when there is efficient management. To achieve this, pricing, promotion, distribution, and sales should be more relevant and steered towards management of corporate frameworks (O'Fallon & Rutherford, 2011). Quality of products at the hotel will be improved to fit preferences of different cultures among customers. Product and quality improvements should be obtained by training the management, stakeholders, suppliers, and middle men on what quality of products entails. For take aways, the packaging will be water proof, and enclosed in recyclable packagings. For gaming, proper procedures and facilities will be availed to customers, in combination with refreshments (O'Fallon & Rutherford, 2011). Promotion will be done in away that the employees will be trained to understand the need of handling customers with high levels of courtesy. Promotion will also be achieved by providing various products by the management such as thank and welcome again cards. Different employees will also take some photos with clients or customers afterwhich their photos will be made available on the website portal of the hotel. Generation of sales, will target bi-annual assessments such that the best of the sales will be linked to different team works and employees will be initiated to targeted certain results within specific time frames. The management will also provide strategic information on viable and sustainable distribution networks, and will direct efforts of the employees to maintain specific number of distributions including food distribution points, and temporary food, room equipments or gaming facility stores (O'Fallon & Rutherford, 2011). 3.3.2 Leisure For this category, prices will be made available on the websites and at the various departments so that customers can have easily evaluate and determine future plans to visit the places. Services such as an extra time, and provision of soft drinks and private changing rooms will be provided to serve as a promotional tool (O'Fallon & Rutherford, 2011). Products such as rackets, chess manuals, and excellent playing procedures or manuals for starters will also be provided to enable them to have a soft but excellent orientation to the hotel leisure services. Distribution of leisure services will target all ages, and all genders, and the associated tools and facilitities will be found at strategic places where privacy will be a priority. Each leisure departmets will record its own sales and forward the information to the representing financial officer in charge of recreational services 3.3.3 Other market segments New centres or points will be establsihed and named after the hotel name. The products available at the hotel will also be made available at the segmented points so that customers can effectively have an access to the game facilities (O'Fallon & Rutherford, 2011). Promotion will be offered inform of giving transport means to customers at reduced rates, and the prices at the segmented centres will be two dollars less compared to the prices at the main hotel place. Distribution of services will be availed on nornal places and the segmented areas or locations and branches will consist of all products available at the main hotel. The sales recording systems at the segmnents will be connected to the main systems so that revenue generation at each segmented is monitored and evaluated by the management at the headquarters. 3.3.4 Food and beverage Missing beverage brands and new types of food from different cultural backgrounds will be applied to ensure that preferences among different customers is fulfilled at the hotel without having to look for substitutes everywhere. The rationale for this choice is that, globalizations has brought more people from different nations, and they have varied experiences to food types. However, the introduction of the foods will depend on the number of requests and previously noted demands. 3.3.5 Staffing In order to have a work force, different seminars and conferences will be conducted to equip employees with excellent hospitaly skills including improving quality during preparation and offer of services (O'Fallon & Rutherford, 2011). The minimum wage will also be adjusted to reflect the government requirements, but overtime compensation plan will consider a significant increase by about 2 dollars per hour. 3.3.6 Physical Property The current condition of the building and infrastructure is good and the renovations will be done on need basis, but lack of need will mean that the renovations will be done after six months but the procedure will be implemented by considering follow up of departments, and under a close supervision of maintenance and renovation engineer (O'Fallon & Rutherford, 2011). 3.3. 7 EMS No plans are there for EMS because the current operational sector does not require input of resources or skills from the hotel. References 3215HSL (N.d). Hotel service Operations Management (Lecture 3): HR management & Operations. Bardi, J. A. 2006. Hotel Front Office Management. Hoboken: John Wiley & Sons. http://public.eblib.com/EBLPublic/PublicView.do?ptiID=258852userid=^u . Burkard, N. (2011). Market Segmentation and Branding in the hotel industry with special references to Hilton Cooperation. München: GRIN Verlag GmbH. Clarke, A., & Chen, W. (2007). International hospitality management: Concepts and cases. Amsterdam: Elsevier/Butterworth-Heineman Dyson, R.G. (2004). Strategic development and SWOT analysis at the University of Warwick. European Journal of Operational Research, 152: 631-640. O'Fallon, M. J., & Rutherford, D. G. (2011). Hotel management and operations. Hoboken, N.J: Wiley. Reid, R. D., & Bojanic, D. C. (2009). Hospitality marketing management. Hoboken, N.J: John Wiley & Sons. Verret, C. (2008). Hotel sales and revenue management book 2.0. New York: iUniverse. Weygandt, J. J. (2009). Hospitality financial accounting. Hoboken, N.J: John Wiley & Sons. Read More