The Concept of Hospitality Operations and Revenue Management in Small Businesses - Example

Table of Contents Table of Contents 1 Executive Summary 2 1.0 Literature Review 3 2.0 Discussion 5 2.1 Marketing 5 2.2 Management 9 2.3 Entrepreneurship 11 2.4 Small and medium enterprises 12 2.5 Family business management 12 3.0 Implications 13 4.0 Recommendation 13 5.0 Conclusion 14 References 15 Executive Summary The report presents findings of a study that involved investigating the concept of hospitality operations and revenue management in small businesses. El sweetie resultant is a family owned small business that has been running since 2009.The restaurant provides an explicit example concerning hospitality operations and revenue management in small businesses. Foremost the report reviews a variety of literature that discuss varies key issues that surrounded revenue management within the hospitality industry. From the analysis of the literature the paper identified key elements in effective revenue management which include provision of services that are customer centered, the role of the human resource, entrepreneurship and consistency in the quality of services offered. El sweetie as small business has adopted various approaches in its operations that indicated how the business was managing its revenue and operations. One of the crucial area was marketing which involved market segmentation as core strategy in initiating the process of revenue management. Management is another significant area that has facilitated an increasing level of revenues for the business. From the general observation good management existed in El Sweetie. Entrepreneurship, small business management and family business management are also other key areas that were effectively implemented by the El Sweetie. One of the key implication of the study is that hospitality operations and revenue management should not only be perceived as an initiative of maximizing the wealth of the business but rather it should aim at creating customer satisfaction which will further result to increasing the revenue of the business. 1.0 Literature Review Lorette, (2012) defines revenue management as a business process that involves evaluating and understanding the actions taken by customers in order to raise the revenue of a business. According to Hayes and Miller (2010) one of the crucial elements of a successful revenue management philosophy is one that is customer centric. Hayes and Miller (2010) further highlights that a successful business within the hospitality industry aims at increasing the wealth of its customers not itself. Increasing the wealth of the customers entails offering superior customer service. Lorette, (2012) highlights that if the management effectively understands the needs and wants of the customers they are bound to provide effective services to the customers. Kimes, (1999) further argues that when the operations of a business are customer centered, the business is bound to attain high levels of operating profits and an attractive return on its investments (ROI). Boella and Goss-turner, (2012) argue that employees are a significant resource in the hospitality industry. This is based on the fact that the kind of services provided by the human resource influences the operations of the business in terms of services offered to the customers, which may further impacts on the revenue of the business. Tanke (2001) asserts that the management should ensure that the culture of the organization is such that employee are well taken care of through motivation, adequate training and compensation. Consequently if the employees are well taken care of, they will able to take care of the customers effectively. The basic theme in the management of human resource is that the management should take care of the employees while the employees take care of the guests and everything else will take care of itself. Service consistency is another essential aspect of enhancing operations and revenue management. Buttle, (1996) highlights that a common source of conflict that occurs between customers and hotel operators involves the inability of the business to offer a consistent level of quality service .This occurs mostly in scenarios where the system of operations are more frequently implemented for the convince of the business as opposed to the customers. Kandampully, et al (2001) therefore proposes that the management is supposed to ensure that the services offered are of quality at all times. This will enable the customers to increase product consumption which may further increase the revenue of business. Darren and lashley (2012) highlight that; entrepreneurship is a vital element in the management of business in the hospitality industry essentially small businesses. Darren and lashley (2012) further highlights that entrepreneurs of small business should adopt strategies such creativity and innovation in order to enable the growth of their business. According to Darren and lashley (2012) entrepreneurship should assist a business to replace the ineffective and inefficient approaches with better and improved services which can further attract more customers to the business and enhance growth. Getz and Petersenb (2005) in a study to evaluate entrepreneurship among family business owners revealed that the goals and the attitudes of entrepreneurs greatly influenced the profits and the growth of small business in the hotel industry. As a result if the business owners have an objective of being innovative and creative, the business is bound to experience good profits in the long run. 2.0 Discussion 2.1 Marketing Marketing is a general function of management that influences the type and the number of customers that visit a restaurant (Buttle, 1996). Marketing is basically one of the key approaches in which the el sweetie restaurant used in order to attract customers into the business. The el sweetie restaurant adopted market segmentation as the core strategy in initiating the process of revenue management. The segmentation approach used by El sweetie largely depends on psychographic segmentation whereby the dividing of the customers was grounded on aspects such as their lifestyles, their values, their social class and even their personalities. In order to undertake psychographic segmentation el sweetie offers services that can met the needs various families from diverse cultures who live in the country. In addition the restaurant provides opportunity for people such business men to hold their business meetings in the restaurant. Such kind of segmentation provides an indication that the management of the company conceders marketing as a key strategy of revenue management. This is based on the fact that the menus offered to fit the needs of families from different lifestyles and cultures existed and were well prepared. Some of the dishes included; gourmet sandwiches, Lebanese sweets, Italian dishes and French pastries. Table 1.1 below provides a data that demonstrates the weekly attendance of families and business people who came to the restaurant and the likely menus that they eat. From the table above, the attendance of customers as a result of psychographic segmentation gives an insight that when the revenue attained from the segmented market is calculated, the earnings received were profitable enough. This can be attained by calculating Revenue per seat per Hour. For instance; When measuring the Revenue per seat per Hour (RASH) of the restaurant on Sunday and Monday. The approach of calculating revenue is by dividing the revenue received for a particular period of time, by the amount of seat hours that existed during that particular period of time. On Sunday Revenue per seat per Hour (RASH) = Revenue Earned Number of seats $ 3,300/ 60 = $ 55 Monday Revenue per seat per Hour (RASH) = Revenue Earned Number of seats $ 2,500/30=$ 83.3 Calculating the revenue per seat per hour is important in giving the precise revenue based on the fact that it is possible that a restaurant may be 80% full however it may turn out to not be profitable in that particular day. Apart from market segmentation the El Sweetie also adopted other marketing strategies such as promotion of other social functions in the restaurant which would attract more customers. For instance; the restaurant provides Lebanese entertainment which is usually offered on Saturday nights. Other promotions offered include proving free meals for people with health issues such as diabetes whereby they are provided with free menus. 2.2 Management Management refers to coordination and organization of business activities so as to attain defined objectives. It consists of interlocking functions of developing corporate policy and planning, organizing and controlling organization’s resources. In hotel industry, management is essential in determining the revenues and operations levels. It is believed that effective management often makes organizations experience higher revenues. Effective management also ensures that business operations are of high standard (O'Fallon and Rutherford, 2010). In El Sweetie for instance, effective management has contributed to the high revenues experienced by the organization. Effective management has also contributed to the high standard of operations experienced in El Sweetie. For the past years, El Sweetie has been recording an increasing level of revenues. This is highly associated with good management within the organization. The management of El Sweetie normally ensures that employees are well motivated. Employees in El Sweetie are usually handled well and their huge salaries and bonuses released on timely basis. This normally motivates them at work, thus providing high quality services to customers. Many customers are usually pleased with the services offered, which makes them frequent the hotel. The high number of customers frequenting the hotel normally makes El Sweetie experience high revenues. Good management in El Sweetie also ensures that the operations within the organization are excellent. Operations in the kitchen are usually well supervised, thus ensuring that the products offered to customers are admirable and of high quality. The table below shows the number of customers visiting the hotel on daily basis. Day Number of customers Day 1 100 Day 2 80 Day 3 70 Day 4 90 Day 5 75 Day 6 66 Day 7 85 2.3 Entrepreneurship Entrepreneurship refers to ability and willingness to create, plan and manage business venture together with its risks so as to make profit. It can also be looked at as a practice of commencing new business or reviving an existing business so as to capitalize on available opportunities. Entrepreneurship is normally linked with uncertainty, especially when it entails introducing something new in which there market is not readily available. A major aspect of entrepreneurship is that it embraces opportunities. Entrepreneurship entails identifying business opportunities and utilizing them with an aim of maximizing profits. It also entails conducting a business in a very unique way (Shukla, 2009). Morrison, et al (2012) argues that entrepreneurship contributes a lot to the success of any industry or economy. It has greatly contributed to the growth and development of hotel industry. Entrepreneurship has enabled new businesses emerge within the hotel industry. The emerged businesses have not only come up with new products but also with new way of providing services (Lee-Ross, & Lashley, 2012). El Sweetie for instance has for along time embrace entrepreneurship in its operations. It also embraced entrepreneurship during its establishment. Currently, El Sweetie employs entrepreneurship skills in its services and products. El Sweetie normally takes a risk in producing products that are very unique from the products offered by other competitors. The cakes manufactured by El Sweetie are believed to be very unique from those manufactured by other organizations. In addition the consideration of other cultures within he menus offered has provided the company an opportunity to be very unique. Some of the menus offered include; Menu Price Traditional Italian Source $15.50 Turkish Bread $ 5 Buttered bread and Spanish Onions $10 Lebanese Sweets & French Pastries $18 2.4 Small and medium enterprises Small and medium enterprises are businesses with fewer employees. These kinds of enterprises do always play an important role in a county’s economy. Small and medium enterprises contribute to over 50% of the new jobs created in every year. It is believed that establishing and operating a small and medium enterprise incorporates possibility of either success or failure. Small and medium enterprises are normally associated with simple management mistake that can easily results to their closure. The major contributors of their failure are improper financing, poor planning and management. Lack of credit is also another factor that hinders the development of small and medium enterprises (Mac an Bhaird, 2010). Small and medium enterprises are usually characterized by the few numbers of employees. Employees are usually very few such that employers can easily know them and monitor all the assigned work (Dyson, 2012). Most businesses in hotel industry can be considered as small and medium enterprises. El Sweetie is a good example of a small and medium enterprise. It has approximately fifty employees and the employer normally involves in monitoring the tasks assigned to every employee. The profits and revenues experienced by the organization are normally lesser than those experienced by larger enterprises. The operations in El Sweetie are also lesser than those undertaken by large enterprises. The products and services offered by El Sweetie is normally enough to serve its few customers. El Sweetie is a family owned enterprise with a small capital base, thus making it fall under a small and medium enterprise. 2.5 Family business management Family-owned businesses are among the various types of organizations that lately exist. They are quite common in today’s business settings. Their management is simple and calls for participation of every member of the family. When managing a family business, it is essential to set rules and responsibilities. It is believed that family business management consists of chain of authority, well-defined responsibilities and roles. El Sweetie is a good example of family owned business. Its management is majorly done by family members. Family members are responsible for authorizing administrative functions, sales and marketing strategies and how business products and services are delivered. 3.0 Implications The study implies that small business enterprises are very critical in the hospitality industry. Even though small business enterprises need a lot of concentration when starting, managing and marketing them, their establishment assists servicing the existing market base. The study also implies that managing a small enterprise is quite challenging. It needs a lot of keenness when establishing the business, when managing and when marketing the products and services that the business offers. In addition revenue management should not only be perceived as an initiative of maximizing the wealth of the business but rather it should aim at creating customer satisfaction which will further result to increasing the revenue of the business. 4.0 Recommendation It is highly recommended to take proper research on the available business opportunities before establishing any small and medium enterprise. Establishing a small business such as a hotel is not a one day thing. An entrepreneur needs to take several days studying the market and identifying the shortfalls of other businesses in the industry. Management and formulation of marketing strategies are essential aspects of business growth and development. Managers, particularly in a hotel business, should foster effective interpersonal communication. This will improve the quality of customer care in the business. Improved customer care services will attract more customers, thus making the business earn more revenues. 5.0 Conclusion From the discussion, it is clear that for an organization to maximize its revenues and improves its operations, it has to ensure its management, marketing and entrepreneurship skills are excellent. Effective management, marketing and entrepreneurship are quite essential in business prosperity. Management refers to coordination and organization of business activities so as to attain defined objectives. Entrepreneurship is the ability and willingness to create, plan and manage business venture together with its risks so as to make profit. Marketing is a general function of management that influences the type and the number of customers that visit a restaurant. All these aspects are well catered for in El Sweetie. It is believed that El Sweetie experiences high revenues due to its effective management, good entrepreneurial skills and effective marketing strategies employed by the organization. El Sweetie is a good example of a small and medium enterprise. It has approximately fifty employees. The profits and revenues experienced by the organization are lesser than those experienced by larger enterprises. The operations in El Sweetie are also lesser than those undertaken by large enterprises. References Boella, M and Goss-turner, 2012, Human resource management in the hospitality industry, routledge. Buttle, F, 1996, Relationship marketing: theory and practice Marketing series, Sage . Dyson, K, 2012, Small and medium sized enterprises. Routledge. Darren, L and lashley, C, 2012, Entrepreneurship and small business management in the hospitality industry, Routledge. Getza, D and Petersenb , T, 2005, Growth and profit-oriented entrepreneurship among family business owners in the tourism and hospitality industry, International journal of hospitality management, 24(2),p219–242. Hayes, K and Miller, A, 2010, Revenue Management for the Hospitality Industry. Kimes, S, 1999, Implementing restaurant revenue management A five-step approach, 40(3) , p16-21. Cornell Hospitality Quarterly Lorette, K , 2012, pros of revenue management, demand media,   Wiley and Sons. Lee-ross, d. & lashley, c. (2012). Entrepreneurship and small business management in the hospitality industry. Routledge Kandampully, J, Mok, C and Beverley A, 2001, Service Quality Management in Hospitality, Tourism, and Leisure ,Routledge. Morrison, et al , 2012, Entrepreneurship in the hospitality, tourism and leisure industries. < http://www.elsevier.com/books/entrepreneurship-in-the-hospitality-tourism-and-leisure-industries/morrison/978-0-7506-4097-8#> Mac an bhaird, C, 2010, Resourcing small and medium sized enterprises: a financial growth life cycle approach. Springer. O'fallon, M & Rutherford, D , 2010, Hotel management and operations. John wiley & sons. Shukla, A,2012, What is entrepreneurship?http://www.paggu.com/entrepreneurship/what-is-entrepreneurship/ Tanke , M,2001, Human resources management for hospitality Food and hospitality series, Cengage learning. Read More