HOSP 4060 Spring 2015;Case Study – Hotel Analysis
You are working for a major global hotel company. The company has 10 separate brands and over 1,700 hotel units in operation, with more opening each day. The company owns none of these hotels, but manages about 20% of the hotels. Third party management companies manage the remainder on behalf of the franchise owners.
You have been promoted to a “task force” of managers to travel to a hotel unit that is struggling; to help the on site managers diagnose problems and implement corrective action. Your team serves as “internal consultants” to the managers of this troubled unit. You have one week to diagnose the problems and recommend solutions to the hotel unit managers. They then are responsible for implementing those solutions. The company has specified that all goals from task force recommendations must be equal to the upper quartile benchmark.
Each manager on your team will focus on an operational are of the hotel. You have been assigned to the rooms division. You will analyze the front office (front desk, bell service, guest transportation and valet parking service), housekeeping, and the laundry operations.
Prior to departing for the unit, the company provides you with access to the various financial statements, guest satisfaction scores and employee satisfaction scores, along with a brief overview of the hotel. You study this information carefully, and begin to formulate a plan based on what you see in these reports.
The company has developed a very specific sequence they use to diagnose problems. Using this sequence:
1. Review all of the information you have, and list all of the items you see which appear to be problems. Your list should be categorized in the same manner as the checklist.
2. From your list, determine which 5 problems should be addressed first, based on your estimate of their likely financial impact. For the 5 items you select, you will need to determine the financial impact (increased profitability) based on the hotel’s current performance and their distance from the company benchmark, using 2014 revenue and volume.
3. For each item on the list, recommend 4 specific action steps the management team must take to correct the problem and reach the benchmark.
4. Submit a written report “addressed to” the unit managers. In this report, for each of the 5 items identify, you need to:
a. Identify what information you used to draw your conclusion for that item. Which report(s) you used in your review.
b. Show the calculation you made to determine the financial impact.
c. List the 4 action steps you are recommending they take. These can be bullet points, but must be specific.
Hotel Unit Number 267
Brand: This hotel is in the “Dionysus” brand for the company. This brand is classified as an Upper Upscale, Full Service hotel brand. The brand is designed and marketed to appeal primarily to business segments, on both the transient and group levels, however there are often leisure transient guests on the weekends, and social events held at the hotels. The marketing tagline for the brand is “comfortable chic”.
Opening: June, 2008
Location: This hotel is located in a suburban multi-use development consisting of shopping, entertainment, apartments and condominiums, and office buildings.
The hotel is on the perimeter of this development, near a major intersection. There are 4 other full service hotels, and 3 limited service hotels in the general area.
– This unit has 285 rooms and 12 Suites, including a Presidential Suite.
– There is 25,000 square feet of flexible meeting space. There are two large ballrooms which may be divided into three separate sections each, smaller meeting spaces which may be divided into 12 separate meeting rooms, and 2 boardrooms. This area is served by a separate kitchen production facility.
– There are two restaurants. One is branded and operated by a third party. This restaurant has a self-contained kitchen, and entrances from the hotel lobby and directly from outdoors. It is opened for dinner only.
– The second restaurant is operated by the hotel, and is opened for breakfast and lunch only.
– The hotel operates a lobby bar during the afternoon and evening hours. During the morning hours, this lobby bar serves coffee and tea based beverages.
– The hotel offers in-room dining for breakfast, lunch, and dinner. Dinner is served from the third party restaurant.
– The hotel has a fitness facility and an indoor/outdoor pool and Jacuzzi.
– The hotel has an on-premise laundry, but processes only hotel terry and linen. All guest laundry and dry cleaning is outsourced to a local dry cleaner.
– The hotel has a parking garage and offers valet parking.
– The hotel provides on-demand shuttle service around the complex.
Market: The surrounding area continues to grow, with additional condominium and office buildings having been built from 2007 through the present. The area is very popular as an upscale entertainment destination. There are presently a number of restaurants and bars in the complex, and a 26-screen theatre.
Management: Due to the poor performance of this unit in the past year, the entire management team has been terminated. A new General Manager, Rooms Division Manager, Director of Food and Beverage, Director of Human Resources and Director of Marketing have been assigned from other units to this hotel. Most of them have been in position for less than 30 days.
Ownership: This hotel is owned buy a large national Real Estate Investment Trust. This REIT owns several hundred hotels, and uses all major brands and many different operating companies. They have expressed their displeasure at the rapid decline in performance of this unit, and have threatened to change the brand and management if performance does not improve.
The management contract of the hotel allows the ownership to terminate the management company (brand) without penalty if certain market share and financial performance levels are not met for a period of six consecutive months. Currently, this hotel is missing these termination “trigger” performance levels.
Reports: Your team will have access to standard unit Financial Statements, Guest and Associate Satisfaction information, and Market Share analysis. In addition, you will have access to company performance benchmark information for the top quartile system wide.
The final report you write and submit will be delivered to the unit management, your corporate offices, and the ownership group.