Developing Creative Solutions for Hotel Industry - Case Study Example

To develop creative solutions to a brief including analysis of effectiveness and Section # of Table of Contents 1. Brief Introduction to the Hotel Industry 3 2. Executive Summary 3 3. Factors of Downfall 5 4. Financial Drivers 9 5. Analysis and Recommendations 9 6. Conclusion 12 7. Bibliography 14 BRIEF INTRODUCTION TO HOTEL INDUSTRY A hotel is a place other than your house, where people find food and shelter. People are generally allocated a room that is their area for the time that they stay. The beauty of this industry is that along with tourism, it combines a number of professions in it (Walker, 2007), making it good for the economy and for employment. People stay in hotels because they are far away from their home, or they are living in a country, that is not their home country. When a person thinks about a hotel, it can conjure up exciting images. Hotels are often thought to be busy areas filled with people all around the world, especially business people and celebrities in order to pass their holidays or meetings (Bardi, 2003). The industry hires large number of skilled, unskilled and semi skilled workers to work, and because their work is to provide service, they need to teach some essential points to unskilled labors before hiring (Tanke, 2000). Adventurous people, when travelling, often need luxurious places to pass their traveling times. Because of the in comfort desired by people while traveling, hotel owners and designers tried to make places where people could come and rest without stress. As a consequence they made hotels for the betterment of people traveling from other countries for various purposes (Andrews, 2007). Hotels today are often called “home away from home” and people can stay in them for many different lengths of time, from a few days to many months. EXECUTIVE SUMMARY Hotel America is a mid-sized hotel chain which is one of the top ten hotel chains of America. During the last quarter of 2001, this hotel started to experience a decline in occupancy rate. There are certain factors attached with this decline. It is not just the case of this particular hotel chain. Rather, all the hotel industry is on a decline. The executive leadership hopes to improve the occupancy rate and this report was prepared to analyze the data available and devise the strategies to help the management. An analysis of the data found that there were certain internal factors as well as external factors that contributed to this downturn. External factors included the incident of 9/11 and the recession of America, both of which decreased patronage to hotels, and numbers of people travelling in general. Internal factors included a list of things like negligence of the management to maintain the bathroom or other facilities and to see whether the bed provided was comfortable. Another issue was the rude attitude of the staff which offended the customers. The staff coordination must be to a high standard, and there must be no conflict between the staff members because this will give a bad impression to the hotel customers (Sonnenstuhl, 1990). The location of many of the hotels and the unavailability of suitable transportation also had negative impact leaving many customers were unsatisfied. Special facilities and features were also looked upon. When people live in hotels in countries that they are foreign to, they often look at hotels for long term accommodation, however, the rent must be according to the facilities provided (Robinson, 2009). The most effective point towards a successful hotel is goal congruence (Goldsmith, 2002). Within the location category, the closeness to downtown and commercial areas was what the customer desired. Within the special features category, the presence of restaurants, business lounges and clubs gave a positive impact. Of the communication category the main desires were the provision of facilities like telephone and internet access. Based upon the analysis, this report gives recommendations such as: ensuring proper maintenance of the bathroom facility; assessing the customer service department to ensure it performs well, quality assurance to be in progress on regular basis; providing proper communication facilities such internet access and the telephone sets within rooms and adding special facilities like business lounge to attract more business customers. FACTORS OF DOWNFALL When talking about the downfall of Hotel America, the internal and external business environment should be kept in mind (PKF Consulting Report, 2003). The internal environment includes the management systems, employee morale, culture of the organization and financial management. Whereas, the external forces include situations and events that occur outside the hotel but have a significant effect on it. External driving forces include the competition, customer behavior, industry outlook, demographics, political and social environment as well as general environmental changes. Any organization should be ready for a change or else it collapses. Hotel business is a customer service business but interlinked with many other industries and they bring benefit to each other. The hotel industry depends on the travel industry to bring its guests. The downfall in the occupancy rate of the hotel is mostly caused by the decline of travel industry. When one part of the chain has problems, the others do feel the effects as they are inter-related. All American industries have been adversely affected by the terrorist attacks in New York City on September 11, 2001; the hotel industry has felt the longest effects which are still ongoing. Major airlines neared bankruptcy and airline employees were laid off. This affected the hotel industry resulting in hotel occupancy declining. The number of foreign visitors rose in 2004 but still was far below the 51million in 2000. This incident acted as a major factor to the downfall of the Hotel America. Another factor that contributed to the downturn was the downturn in the U.S. economy that began in 2000. It was in 1990s that the largest economic expansion took place but the beginning of twenty-first century brought a recession period. Jobs became scarce and new business investment was almost completely stopped. Reasons for the downfall of the Hotel America include certain factors which are related to the absence of maintenance. The first thing that the customer complaints about was the bathroom. It gave had more negative reviews than positive ones. It was not properly cleaned and maintained in many hotels within the chain. The bathroom was small and the customers found it cramped. The negative reviews rated to almost 11% when evaluated for the bathroom. The second major cause of the downfall of the hotel was the staff or in other words the customer service representatives. Dissatisfaction with customer service reached more than ten percent of guests reporting as totally unsatisfied. There was also a large proportion of customers that gave positive reviews, but left negative comments. The negative feedback also destroys the goodwill towards a business as the opinion travels from mouth to mouth and people share their views. The wide opinion was that across the different hotels in the chain most staff were stubborn and not helpful. Travelers seek easy access to food that is unique to the region as well as food that is familiar to them. As a consequence, they desire different restaurants inside the hotels they visit. For this reason, there is a drive to increase restaurants within the Hotel America chain. In Asian countries, providing excellent food is closely tied into comfort and hospitality. For the people traveling from different areas, the food and taste must be kept according to the taste of most visitors in that hotel, the general solution to this is to offer a wide range of different food types (Wood, 1992). Location was another issue, but not a major one, with five percent of respondents giving a negative review of location. Conversely, positive reviews or comments associated with location were around ten percent. Transportation and parking facility had a bigger negative impact, with around seven and a half percent reporting dissatisfaction with the available parking and transportation. This is a major cause of the downfall of business because customers prefer hotels where they are provided with the parking facility and the transportation facility. Hotel offered valet parking for a fee which was in addition to the overpriced room rate. Customer satisfaction is the biggest non-financial factor that affects the running of hotel and long term profitability. Due to some of the drawbacks of financial performance indicators, non-financial performance indicators are used to assess the performance of the business (Gowthorpe, 2005). For Hotel America, another factor that caused unrest among the customers was the bed facility. There were around seven and a half percent negative reviews concerning the beds. The communication facility had more negative reviews than positive ones; however the level of negative reviews was far below the percentage for location and transportation. Although the communication facility had more negative percentage than the positive one but still it was way below the level of bed and transportation. Nevertheless, nowadays no hotel can attract customers without proper phone facilities and internet access. Hotel America charges the customers extra for phone calls and this has a negative impact on customer satisfaction. In addition, the phone system in some of the hotels in the chain did not work properly. Within the special facilities that the hotel provided, one major impact was that of the poorly maintained sports facility. The presence of these facilities was a good sign but there was no maintenance which resulted in a negative impact on customer opinion rather than a positive one. These are a selection of the internal and external factors which caused the collapse of the hotel chain. These affected the business as a while, and with the economic downturn, the circulation of money was reduced and businesses declined. Jobs were cut and as a consequence the fear of losing their job caused staff to be rude sometimes and tense, resulting in further negative opinions. The careless attitude of the management towards the staff and the maintenance of the hotel made customer satisfaction decline day by day. In addition, the efficiency decreased resulting in the cost of running the hotels increasing significantly day by day. The recession and lack of travel resulted in fierce competition within the hotel industry, as there was an oversupply of hotel rooms. As a consequence, the facilities and services were decreased, in turn causing a further decrease in customer satisfaction and a decline in hotel revenue. The hotel industry provides service to the customer, so customer satisfaction is the point of hotel management that should be emphasized. It is directly related to the quality revolution in any part of the world especially United States (Allen & Rao, 2000). FINANCIAL DRIVERS The main financial driver at the time of the downturn of Hotel America was recession. Profits, business, investment spending, household incomes, and inflation all decreased during the recession, while bankruptcies and the rate of unemployment increased. The major recession followed the incident of 9/11, the combined effect of these two factors resulted in a long downfall to business. Much job unemployment took place; the investors were not willing to invest and the government was shocked. The team of the hotel reacted the same way as other employees: they were in a fear of losing their jobs and this affected their efficiency to work. This inefficiency to work bought negative impact on the business and the customers were offended. The economic problem also made the spending difficult and so the people did not opt for staying in hotels unless it was necessary. The key financial drivers for the hotel are margin, overheads, cost of goods and inventory days. During the period of downturn, the financial position of the hotel was stressed and it had no money to bring the position back. When the business is declining, the team loses hope and this loss of hope resulted in further inefficiency and cost increase. This adversely affected the business and the hotel could not sustain its position as one of the top ten hotels in America any more. The small mistakes like the negligence of maintenance became a major issue as they were addressed in good time. As the income of household decreased, hotels use decreased and spending while at a hotel decreased, and so the impact on the hotel was great. OTHER DRIVERS While financial drivers were prominent in the decline of the Hotel America chain, they were not the only drivers. Another important driver was tourism. Following the events of 9/11, tourism to America as a whole decreased. There were two reasons for this. Firstly, there was increased security to prevent further security threats, which reduced the number of tourists that entered America, as there were many complaints about discrimination and unreasonable security procedures around that time. In addition, America was seen as an unsafe place, and fears of further attacks resulted in travelers that would have ended up going to America instead choosing different destinations. Another driver of decline for this business is frames. The theory of framing suggests that individual people organize their thoughts, feelings and experiences in frames based both on prior experience and knowledge. In the case of business, this can mean that once an individual has had a bad experience at a hotel this is their lasting impression of it, and the opinion that they pass onto others. Consequently, as the reputation of Hotel America decreased, those that were dissatisfied with their stay will continue to have a negative opinion and they will share this with people they know. ANALYSIS AND RECOMMENDATIONS: Summarizing the data analysis of customer opinions, certain aspects come to the surface: First of all, the bathroom is associated with a low customer rating score. Location of the hotel has a significant positive effect with the customer rating. The customers favor hotels which are located near airports, downtown areas, shopping malls or a tourist attraction. Presence of subway, bus stations and train stations nearby also brings a positive impact as it allows customers to use public transportation. Presence of kitchenette with the suite is appreciated by the customers, bringing many positive comments. In addition quality service has a positive impact on customer satisfaction. Eleven percent of reviews contained keywords within the staff category, indicating that it is a category that needs to be handled carefully. The presence of special facilities within the hotel, also affect positively the customer’s opinion. Rather than giving and positive or negative comments, the customer merely describes the facilities present which indicates that the more the facilities available, the better it is for the hotel and the customer. Taking in consideration the communication facilities, it is better to provide a telephone in good condition rather than the provision of newspaper or internet. This may be because newspapers and the internet are seen as more of a luxury item, while a telephone is a necessity. Additional charges for phone calls result in negative reviews from customers. Recommendations for Hotel America to remain in business and attract more customers are: Make sure that the customer has no complaints regarding the bathroom facilities. They should be kept neat and clean and in proper working condition. Maintenance should be taken care of on daily basis and the customer opinion should be asked before they check out of the hotel. The area for the bathroom should be adequate and not cramped. Even before looking at the management and staff, the location of the hotel should be re-assessed. Make sure that the hotel is situated in the heart of the city where it is easy to access the shopping malls, business centers, airport, and public transport. Customers do not like to spend a lot of money on travelling to reach their destinations. If this is not possible, the hotel could look at providing cheap transport to the most popular attractions. After location, the most attractive feature of any hotel is the service they provide. Therefore, a proper review of the current customer service should be done and the quality assurance department should be created. This department should not be a one-time job, rather its role should be on-going and ensure proper monitoring of services and the performance of the staff. The type of facilities provided within the hotel need to be assessed. The more the facilities within the hotel, the less the customers would have to leave the hotel and more they would feel comfortable and like the hotel. However, reviews show that it is better to have a few high quality facilities than many low quality ones. There are certain strategies that the hotel should adopt in order to gain competitive advantage over its rivals. Firstly, a structured internet marketing plan should be devised which contains the overall objectives and all the tools to ensure that those outlined objectives are being met. Certain online tools like email marketing and online PR can be used to promote the hotel online. Today is the time of speed and people do not waste time on going and booking personally. Rather, everything is done online (2003). So, in order to compete and remain in business, the hotel should go online. Quantitative customer surveys must be taken to evaluate the performance of employee service given to customer, as well as, overall facilities of the hotel (Coachran, 2003). Hotels need to provide special features to make the work for customers easier when they are away from home. Free newspapers, complimentary breakfast, Wi-Fi internet access and sports facilities should be provided where possible. Employees with sales and marketing experience should be hired and all the employees should be taught customer satisfaction techniques. Special attention should be given to the way the staff talk to and deal with a customer. Computerized systems should be used for the purpose of data collection and check-in and check-out information. To attract more customers, the hotel should arrange for a business lounge where staff meetings could be conducted. CONCLUSION If any hotel undergoes this situation, and has encountered a significant decrease in its business, seeking advice from a professional body is a good starting point. This type of hotel can also follow some of the solutions and recommendations in this report because it will help the organization, to grow and prosper. However, it is highly recommended that non-financial indicators are taken care of in any service industry first; as they affect customer satisfaction, and as such have a high impact upon the profitability of service industries (Alexander, Britton & Jorissen, 2007). In the case of Hotel America, these solutions and recommendations were considered and the hotel that was built in 1970 was completely renewed in 2005. All the problems mentioned earlier caused a downfall to the hotel by 2001 but within next four years, they were covered and the hotel stands grand and tall once again into the present day. The chain has expanded beyond America, and has hotels in locations such as Spain and France. Hotels are present in many major cities, and many of these are easily accessible by walking or public transportation, as well as being close to many popular attractions. The facilities that are provided vary from hotel to hotel throughout the chain, however many include: outdoor swimming pool, free Wi-Fi, courtesy car, meeting rooms, gym and sauna. With all these features, this hotel chain is a great success now, but there are certain areas where it still lacks as customers complain. One of that area is the unfriendly behavior of staff at a number of locations, which is very important to resolve quickly as customer satisfaction depends on how the staff behaves. Another area which the customer complains about was the air conditioning system which is not being maintained in the warmer climate locations. Without proper maintenance, the hotel would lose its customers. In general though the hotel chain is widely popular, and small flaws are easily overlooked by most customers. However, it would be beneficial for the hotel management to handle these minor issues to reduce any chance of a major issue in the future. BIBLIOGRAPHY Alexander, David , Anne Britton, and Ann Jorrisen. 2007. Reprint. (p.869). "Disclosure of non financial data." International financial reporting and analysis. London: Patrick Bond, 2007. Allen, D., & Rao, T. (2000). The Historical roots of customer satisfaction research. Analysis of customer satisfaction data (p. 1). Quality press publications. Milwaukee. Bardi, James A. (2003). Reprint 2007,(pg 3). "Introduction to Hotel Management." Hotel Front Office Management. New Jersey: John Wikey & Sons Inc. Performance Management (p. 284). Goldsmith, A. (2002). (Original work published 1997). Human resource management for hospitality services. Thomas Learning. Bedford. Tanke, M. (2000). (p. 176). Human resources training, development and education. Human resources management for the hospitality industry  Library of Congress Cataloging. Colombia. Walker, J. (2009). (Original work published 2007).Welcome to the hospitality industry. Introduction to hospitality management (p. 48). Dorling kindersely. Delhi. Wood, R. (1992). Accommodating decline. Working in hotels and catering (p. 157). Routledge. New York. PKF Consulting Report. (2003), 2003 First Half Hotel Profits Plunge - Average U.S. Hotel Suffered 11.9% Decline in IBFC During the First Six months of 2003. Oct. 15, 2003. Retrieved from http://www.hospitalitynet.org/news/Market_Reports/PKF_Consulting_(USA)/4017369.html on 10/17/03 News Release. (2003), Cornell experts propose strategies for hotels challenged by growing Internet room bookings by customers. Cornell School of Hotel Administration. Retrieved from http://www.hotelschool.cornell.edu/publications/news/news.html?id=233 on 10/17/03. Tripadvisor.co.uk. (2011), viewed 02 August 2011, http://www.tripadvisor.co.uk/Hotel_Review-g580292-d283106-Reviews-Hotel_America-Calas_de_Majorca_Majorca_Balearic_Islands.html MAJORCA HOTELS GUIDE. (2011), viewed 02 August 2011,( for picture) http://www.majorcahotelsguide.com/calas-de-mallorca/hotel-america.html Hotel America. (2007), viewed 02 August 2011, (web address) http://www.hotelamericabarcelona.com/eng/superior.php http://www.hotelesglobales.com/en/hotel-america-calas-de-mallorca-majorca.html ( for picture) Read More