Feasibility of Clasidney Hotel - Case Study Example

REPORT ON FEASIBILITY STUDY OF CLASIDNEY HOTEL Student’s Name Institutional Affiliation Table of Contents Table of Contents 2 Introduction 4 Clasidney Hotel features 6 Description of the Industry (Drivers and Definition) 6 PESTEL analysis 6 Political Factors 7 Establishment of tourist hotel or another business in Sydney is a welcome move in terms of political situation in the area (Victoria Tourism Industry Council, 2011). There is no political tension as any given time. The elections campaigns are generally done in a peaceful manner without any threat to security or business destruction. The whole process is generally democratic and thus hotel business is not harmed in any way. The influx of tourists every time of the year is evident, whether there election or not. Despite the political fever some times of the year, there is no any threat posed by the sane (Singh, 2008). Al political issues are solved amicably despite disagreements.. 7 Economic factors 7 Since the times of recession, Australian dollar has greatly improved (Vanhove, 2011). This has drastically increased the number of visitors who come to Sydney every year. Therefore, the hotel industry is not at risk of losing its international market. Further, the number of local customers has increased tremendously as the inflation rates are kept at manageable levels of 5.4% (Vanhove, 2011). 7 Social Factors 7 Technological Factors 8 Environmental Factors 8 Legal Factors 9 SWOT Analysis (Hotel’s Capabilities) 9 Strengths 9 Weaknesses 10 Opportunities 11 Threats of New Entrants 11 A Brief Overview of the Financial Management in Hospitality Industry 11 Marketing Strategy for Clasidney Hotel 12 Financial and Financing Feasibility 14 The Total Project Costs 14 Sources of Financing 15 Clasidney Hotel Stakeholder Analysis 15 References 19 The Total Project Costs 20 Introduction The following study analyses the feasibility of the proposed Clasidney Hotel which is to be established in Sydney. The main aim of the Clasidney Hotel is to bring change to many visitors who flock the city, every time of the year. Therefore the hotel targets both the local customers and as well as the tourists. The hotel business in the tourism, industry was chosen after team members who noticed a gap in the industry that had not been properly filled did careful analysis of the industry. In this concern, the management of the Clasidney Hotel wishes to ensure that customers get value of their money by providing excellent services. this will be felt from the meals and drinks provided , accommodation services as well as other services that are available for customers to exploit. The objective of the study to ensure that the hotel is on the right track and it is able to meet its goals as planed ion the business strategy. In this study, the reason for the choice of the location f the business has been discussed including a general; overview of the hospitality industry in Australia. Further, the strengths, weaknesses, opportunities and threats to the business have been analyzed under the SWOT analysis. This unveils the areas that the hotel needs to improve on and those that it should maximize on Victoria Tourism Industry Council. (2011), Financial management of the hospitality industry has also been briefly provided. Finally, recommendations on steps to be taken in meeting the goals have been outlined before a brief summary to wind up the entire report.   PESTEL and SWOT Analysis Clasidney Hotel functions in an arguably congested industry which is mostly regulated by the guests and their preferential demands and needs. The strategic audit involved analyzing; the macro-environment through the use the PESTEL model, the competitiveness in the industry environment by the Porter’s Five Forces model, the expectations of the key stakeholders as well as both the internal weaknesses ,opportunities ,strengths and threats (Victoria Tourism Industry Council, 2011).This SWOT analysis includes the strengths (brand, products, people, certification /accreditation), the weaknesses (classic rooms, location, car parking, technology and performance management), the opportunities (the demographics of the market, pressure on corporate responsibility) and the threats (competitors, long-term contracts with both the suppliers /buyers, technology and economy) Clasidney Hotel will plan its strategy around differentiation through the provision of the highest quality services and products which will be unique from the rest in the hospitality industry. It is advisable to improve the hotel’s weaknesses as a realistic way to enhance the growth and profitability for the entire organization. However, Recommendations have been given on how the hotel can improve on its weaknesses. If one does not know where his business is going, then it means that any road can get him there. Business strategy is one of the driving forces in the success of any organizations. However, this depends on if the strategy for the business is analyzed in terms of the surrounding environments. Clasidney Hotel features Clasidney Hotel is one of the leading hotels in Sydney. The products and services offered include food and beverage, accommodation, spa, event venues, as well as health club facilities. The main goal is to expand its market share and profitability through offering 5 star level services. This aim has been reinforced by the Clasidney Hotel vision statement, which is “Good Services, Happy Customers” Description of the Industry (Drivers and Definition) Clasidney Hotel has been positioned in the high-end hotel industry within City of Sydney. It should be noted that hotel industry is an only a sub-section of the Tourism and Travel industry. This is one of the most expanding industries in the world. In addition, it is a fragmented industry because hotels are mostly driven by the services they do offer as well as the customers they can attract. Some of the factors which influence the consumer selection include the location of the hotel, the available facilities, the price per single night and the size of the facility (Vanhove, 2011). All hotels in Sydney classified under “High-end hotels” compete for corporate and independent travelers, in both international and local customers. PESTEL analysis Political Factors Establishment of tourist hotel or another business in Sydney is a welcome move in terms of political situation in the area (Victoria Tourism Industry Council, 2011). There is no political tension as any given time. The elections campaigns are generally done in a peaceful manner without any threat to security or business destruction. The whole process is generally democratic and thus hotel business is not harmed in any way. The influx of tourists every time of the year is evident, whether there election or not. Despite the political fever some times of the year, there is no any threat posed by the sane (Singh, 2008). Al political issues are solved amicably despite disagreements.. Economic factors Since the times of recession, Australian dollar has greatly improved (Vanhove, 2011). This has drastically increased the number of visitors who come to Sydney every year. Therefore, the hotel industry is not at risk of losing its international market. Further, the number of local customers has increased tremendously as the inflation rates are kept at manageable levels of 5.4% (Vanhove, 2011). Social Factors It is evident that opinions of customers regarding services and products of a company can quickly diminish or build a brand and its reputation within no time (Singh, 2008). In recent times, there is increased usage of social media to gain access to information. This can be either healthy or unhealthy to the growth of companies, especially those who do not maintain and monitor brand standards (Vanhove, 2011) These impacts of economic factors can be observed in the demographics of the Sydney market (Singh, 2008) This brings benefits to the strong short-haul markets since easily buffer the hotel and hospitality industry when there is significant reduction in the long-haul markets. Technological Factors Over the past few decades, there have been great technological advances and innovations. These developments have not only affected the hotel industry but al other industries as well (Victoria Tourism Industry Council, 2011). However, Innovation potentials are held back when companies try to balance the needs of the customers and what they are prepared to pay for. Further, technology does not in any way replace personal touches, but ensures that information storage based on the guests’ preferences. At the same time, some Sydney hotels should make sure they upgrade their services when compared to the international standards so that the can maintain their consumer expectations. Environmental Factors The issue of global warming has increased pressure to all industries to be environmentally responsible. Hotel industry has not been left behind (Singh, 2008). This has lead top any environmental organizations that provide certifications and accreditation to businesses in regard to compliance with environmental maters. These institutions also give grading system to organizations on the same subject. The aim is to ensure that there is minimal pollution of environment as much as possible. This accreditation ensures that hotels are an engage with more customers in their operations (Singh, 2008). Legal Factors On the legal front, there are several unions that will determine the expected legal requirements of the hotels regarding their employee. However, the impacts of this process are usually determined after the negotiations have taken place. Further, business are given grace period to comply with the employment law especially in ensuring that a company employs workers who are best suited for their respective positions. This means that the best employees in their best positions definitely increases productivity, efficiency, satisfaction, as well as the general wellbeing of staff therefore reducing costs to the organization. SWOT Analysis (Hotel’s Capabilities) Strengths The products and services of Clasidney Hotel will hold their value between the prices paid as well as the received quality. The products; 406 rooms, five outlets of beverage and food, facilities of spa and thirteen event venues. All these product and services are set for 5 star standards and continue to be upgraded as ideas are developed every day Victoria Tourism Industry Council. (2011), Further the marketing strategy of the brand of Clasidney Hotel is excellent .it has been marked as elegant and luxury hotel by new group of visitors. This concept is done through media, such as the social media which is monitored heavily to ensure there is increased positive awareness of the brand. In addition, the ethnic diversity comprising of 350 employees, means that the communication with the guests is less problematic. Clasidney Hotel has incorporated the Vision, mission and Values (VmV) in creating a positive culture of employees. Weaknesses Clasidney Hotel is situated in the upper CBD, therefore one will cover is a distance from city activities. Despite the fact that the hotel offers a shuttle around Sydney, there is no the views or flexibility as a prime location in the city. In addition, the classic rooms have not been updated. Most of these rooms are similar as the executive rooms as far as size is concerned. However, the decorations are dated and dopes not match other products provided by meeting the same 5 star standard. In addition, Clasidney Hotel does not offer parking lot car parks for both guests and employees except for the valet parking. The location of the city makes it quite expensive to park in the nearby buildings Victoria Tourism Industry Council. (2011), At the same time, public transport is usually limited. Further, the processes which have been put in place for performance management are as well limited. There are recognition programs for the management team which is a short term strategy but the link is missing to annual promotions and reviews while the future objectives have not been are quantified. Clasidney Hotel limits its market since it has not installed wireless internet all over the hotel. This has been provided in some areas with extra charges. It is evident that this is important since Technology is an area that would improve satisfaction of guests and enhance productivity. Opportunities There is great opportunity of the hotel business in this location to expand. This is based on the fact that in every year there are many visitors flocking the city. It is also coupled by the presence of many colleges who are not satisfied by the current hotels in the area. Threats of New Entrants The coming up of new hotels in town has posed an obvious threats to the Clasidney Hotel. The existing hotels will be giving Clasidney Hotel a ruin for its money. However, the hotel has introduced a program which is expected to be its competitive advantage. It involves giving discounted prices to customers who bring there friends every at any given time. A reduction of five percent of every purchase they make, inform of products offered or services in the hotel. The program includes being given levels, as a customer; depending on how many times one brings new customers with him. The reduction of prices of purchases made is consistent to any loyal customer who is interested in the program. A Brief Overview of the Financial Management in Hospitality Industry Hospitality Financial Management ensures that hospitality manager is able to have practical and a straightforward approach toward helping in effectively analyzing reports and financial statements in management hospitality industry (Victoria Tourism Industry Council, 2011). Managers of hotels and other hospitality facilities should be in a position to prepare accurate their business forecasts, use of strategic pricing models, and effectively applying cost control systems. Managing working capital is essential in this industry as well as developing and financing growth strategies for the future (Business Monitor International Ltd., 2009). Investment analysis should also be Performed ion ascertaining the business worth including preparing investment packages, negotiating and structuring business deals. Marketing Strategy for Clasidney Hotel The market strengths of the Clasidney Hotel, as indicated earlier will be based on differentiations, which will ensure that clients get unique services and products. This will bring more clients at Clasidney Hotel. Product Clasidney Hotel products are defined in terms of the location, the designing of the hotel, the condition of the available facilities, the quality of foods and services, prices, and a general customer experience. The management promises to work on the quality of the facilities, foods and services so that they can be even more competitive in the market. It will also ensure that customer’s credibility is well maintained. Pricing In order to ensure that the clients billing is simplified, Clasidney Hotel will be working on a fixed pricing structure in all foods that are sold. This will be based on those types of foods that will sell and then multiplied by the number of days that would take the hotel’s most experienced consultant in finishing the entire project. It means that if less experienced consultants were to participate on this project, then it may take more time than could be expected. Clasidney Hotel may consider utilization of cash-and-equity arrangement or the application of potentially all equity for some specific projects. There is need for more experienced team in both accounting and finance in order to effectively integrate this pricing strategy. This will also help in determining proper stakes of equity that the company should be request, and so on (Business Monitor International Ltd., 2009). Place and Destination The location of The Clasidney Hotel is both accessible and ideal. The area, recommended for the business location is densely populated (Weaver et al, 2010). This means that although competition is there, there I sis enough market to be shared. Furthermore, the presence of a lot of touristy attraction sites makes it great for visitors who would love to use hotel facilities (Weaver et al, 2010). At the same time, the consumers of the products and services will comprise of the students and staff of the nearby Sydney University who are forced to cover some distance to get the same services. Promotion and Advertisement The marketing team of Clasidney Hotel will integrate several promotional and advertisement strategies to attract customers. These include the distribution of leaflets and flyers detailing more about the discounts, promos as well as new released products. They will also include the benefits that customers will in the establishment of the Clasidney Hotel. Advertisement will also involve use of media such as TV, radio, newspaper, magazines among others. The use of internet platforms such as twitter, facebook as well as banners and streamers, will also be implemented. Employees will also be involved by ensuring that they try to spread the same information to their friends and relatives. Financial and Financing Feasibility In this study, the total costs of the proposed project such as construction and operating costs including the potential revenues that the Clasidney Hotel can get in five year period is analyzed. The main aim is to ensure that profitability of the company is determined; the future financial strategy is feasible for a given period of time, determining if Clasidney Hotel will generate expected income in terms of profit, analyzing losses to the hotel and determining the source of income for the business. The Total Project Costs DESCRIPTION ESTIMATED COST(US Dollars) Cost of Building construction 1,600,000 Water, internet, Lighting and telephone costs 24,000 Fixtures and Furniture 251,000 Equipment and Machinery 499,000 Uniforms 16,000 Advertisement(Marketing) 14,000 Total 2,404,000 Sources of Financing An estimation of about 80% of the total cost of the entire business will be financed through bank loan from Backlays Bank via Jim enterprises which is one of the shareholders of this project. The rest of the capital will be coming from savings and contributions of the shareholders. Further, the initial capital will be directed into the establishing and operating of the hotel. Clasidney Hotel Stakeholder Analysis The Clasidney Hotel’s strategy was developed by the director and is associated with value for quality services to customers. The director has shown enormous dedication to the organization by ensuring that he retains the control over the entire strategy and the growth of business. The clients and guests of Clasidney Hotel will see the business as important to them in their short term relationship Weaver, D. B., & Lawton, L. (2010), customers who hold this relationship for longer time will definitely enjoy more of excellent services and products provided. Employees’ Attitudes are aimed at offering quality services. This ensures that the workforce remains intact and committed in providing good services to the clients. Clasidney Hotel understands the role that the media plays in providing opportunities for marketing, but the media, on the other hand do not have the same need. They provide a platform through which the business can reach out to its existing and potential customers Clasidney Hotel is also does not have large importance for the local government as, whereas the hotel offers income to the government through local taxes as well as jobs Weaver, D. B., & Lawton, L. (2010), On the other hand, it should be noted that the business also benefits from the services provided by the same government in terms of security, water, health and other basic amenities. Recommendations The following recommendations are focused on improving the Clasidney Hotel weaknesses. There is need to introduce management schemes based on the Performance of employees. This is necessary to ensure that the business maintains its 5 star standards in terms of services and products that the hotel offers to its guests as well as in employee interactions. Further, the Clasidney Hotel goals should be set in order to manage employees’ performance. This needs to be done jointly by involving mismanagement and organization the employees. The involvement of employees in decision making process will assist in empowering them to meet the already set goals. Special reviews on wages and salaries should be conducted as well as integrating an incentive scheme which will be based on the achieving key performance indicators by each employee or the entire business. In addition, there is need for the classic room product to be redecorated in order to ensure that product consistency is maintained and therefore satisfying the requirements of customer (Weaver, D. B., & Lawton, 2010)Further, in terms of the Technology, the hotel’s wide Wi-Fi system should be installed in order to keep up with the international 5 star standards.The management should address the issue of car parking through negotiating with Kimson Parking so that it can take back the car park management or else rent additional car parks for its employees and more so the guests. The extra car parks should first take consideration of the needs and satisfaction of the guests. Conclusion The main objectives of the Clasidney Hotel are to seek high levels of productivity, profitability and growth. Further, while the brand, product and people are the hotel’s strengths, there is a great need of ensuring that services are kept consistent with good performance management. The trial period given by law for business to adjust should be utilized properly to ensure that employees adapt to the organizational culture and maximization of profit is enshrined ion the daily operations. The hotel’s goals and vision should be clear in the mind of every employee. This ensures that all workers go a long together in the same direction. The current products offered by the hotel are great, the management will be forced to work extra hard top ensure international standers are maintained. The 5 star products quality and services ensure value for customers. The weaknesses observed with the decorations of the classic rooms, including lack of car parking lot as well as and limited usage of the technology, mean that the management has to improve a lot to attract more visitors. Therefore, Clasidney Hotel should ensure it remains on top of the new innovations so that the products and services are consistently upgraded. The hotel will ensure it taps on this international market while at the same time maintaining its domestic customers. References Business Monitor International Ltd. (2009). Australia tourism report: Including 5-year industry forecasts to. London: Business Monitor International. Singh, L. K. (2008). Marketing in service industry: Airline, travel, tours and hotel. Delhi: Isha Books. Victoria Tourism Industry Council. (2011). Tourism excellence. East Melbourne, Vic: Victorian Employers' Chamber of Commerce & Industry on behalf of the Victoria Tourism Industry Council. Vanhove, N. (2011). The economics of tourism destinations. Place of publication not identified: Elsevier. Weaver, D. B., & Lawton, L. (2010). Tourism management. Milton, Qld: John Wiley & Sons Australia. Appendices Appendix 1 The Total Project Costs DESCRIPTION ESTIMATED COST(US Dollars) Cost of Building construction 1,600,000 Water, internet, Lighting and telephone costs 24,000 Fixtures and Furniture 251,000 Equipment and Machinery 499,000 Uniforms 16,000 Advertisement(Marketing) 14,000 Total 2,404,000 Read More