Diamond Hotel Business Analysis - Case Study Example

HOTS REPORT Name Professor Course Date 1.0 Executive summary This is the third operational year of Diamond Hotel. It is wise to understand that, following the whole strategies and decisions that the previous team layout, it can be noted that a great change has perfectly been implemented in this hotel. From the staffing to the environmental conservation, it is worth noting that a positive change has so far been witnessed. This report is primarily limited in areas that the Diamond hotel got a full control over the quality of information and data collection. It is of important to note that the financial report of this business is because of auditing the annual accounts in all departments. The purpose of the report is, therefore, intended to provide us with an insight of the past performance in the hotel. The past performance has been analyzed and the results presented in graphs, understanding the graphs which portray the results is important because we can be able to interpret and make our judgments. The analysis displays the results of hotel net income and the revenue, this is important because the hotel will be able to determine its position in terms of revenue and income. The performance on room departments has also been analyzed and it displays the revenue and net income from the sale of the rooms to the customers. Food and beverage department has also been analyzed such that the revenue and net income are recorded and the results compared to every year to determine the amount being accumulated during the peak and the off peak seasons. An analysis of the return on capital employed is also another trend that has been observed by the hotel, and the results are used to determine the rate of return on capital employed. The hotel has also analyzed the occupancy and the daily rate of the customer turn up which is used to calculate and predict the amount of revenue. The analysis on refurbishment and extra facilities has also been used by the hotel to determine the trend of the past three year performance. The hotel has also analyzed the short term and the long term stability ratios in order to determine the position on the hotel stability. The performance of staff turnover is also important for the hotel to develop strategies of ensuring a constant rate of staff turnover. After performing the analysis, the hotel will use the past performance in developing strategies that will aim at improving the performance of the fourth year. These strategies will be guided by the objectives that will be developed. SWOT analysis will also be conducted to determine the capability of the hotel to withstand the internal and external pressure. Table of Contents 1.0 Executive summary 2 2.0. Introduction 6 3.0. Financial analysis and performance 7 3.1.1. Total hotel revenue and total hotel net income 7 3.1.2. Rooms department revenue and rooms net income 8 3.1.3. Food & beverage departments revenue and food & beverage net income 9 3.1.4. Return on capital employed (ROCE) 10 3.1.5. Occupancy, average daily rate (ADR), and REVPAR 11 3.1.6. Refurbishment spending and extra facilities built 12 3.1.7. Short term and long term stability ratios 12 3.1.8. Staff turnover 14 3.1.9. Marketing spend and activities 14 3.1.10. EMS spends and activities 15 4.0. Part B Strategies 15 4.1 SWOT analysis (based on the year ending 2013) 15 4.1.1 Strength 15 4.1.2 Weakness 16 4.1.3 Opportunities 16 4.1.4 Threat 17 5.0 Objectives 17 6.0 Strategies 18 6.1.1 Security 18 6.1.2 Market conference 18 6.1.3 Corporate leisure 19 6.1.4 External Ideas 20 6.1.5 Other market segments 21 6.1.6 Food and beverage 21 6.1.7 Service and staffing quality 22 6.1.8 Physical property condition 22 6.1.9. EMS 22 References 23 5. Appendices 25 5.1 Current sheet 25 5.2 Statement of income for the third year 26 5.3 monthly indicator report 26 2.0. Introduction The report is intended to provide performance results of the past three years of the Diamond hotel. The results have been analyzed and the performances of each department have been recorded. The purpose of analyzing the performance is to enable the hotel to determine its areas of weakness and strengths, the results also provide an insight on how the operations of the hotel are carried out, this will help the management in making decisions concerning the correction of deviations that will be detected through observing the trends of the performance. Developing the fourth year strategies will highly depend on the results from the past performance, which will therefore influence the objectives of the Diamond hotel. Overall, I feel the Hotel has gained favor and stability in the market. A brief account of this can be seen from the rating of the Hotel itself and from the service, it gives as per the executive summary. The client service is perfect, employees and general information flow in the Hotel’s system of governance. With this, there is no doubt that the Hotel has proved to be the best among the many available Hotels, despite the competition it has been facing. All this is assumed to be caused by the strategy that the initial managers and stakeholders laid before the company got its roots. 3.0. Financial analysis and performance Here, the report is intended to give a review of the financial and market performance of the Diamond Hotel for the past three years. Based on the data available in the company, fundamental analysis was done to find out the current and the future bottom of the Hotel. A brief History asserts that Diamond Hotel is one of the leading three star hotels .With the introduction of international standard, the Hotel has not only gained fame but has also gained the market favor. This will be evident prior to the analysis of the financial finding below. The estimated growth over the past three years is twenty-three percent in sales revenue, and if that is not enough the Hotel enjoys a sixteen point five earnings before tax. In terms of assets, the company has grown to 258% that is after three years. The hotel has witnessed an equity multiplier that indicates that the Hotel owns. 3.1.1. Total hotel revenue and total hotel net income During the first year, the hotel net income was way below the expected value because it was recorded at $ (-200000).the total revenue for the hotel was also not impressive, but it was way beyond (-). For the second year, we notice that there was a drastic change in both the revenue and the net income, such that an increase in the total revenue resulted to an increase in the net income and the same case applies to the third year. The total revenue and net income for the hotel indicate that the hotel was registering growth for the first year of operations. The total revenue for the first year was $4,323,590, the first years twelve months of operations indicate that the hotel made revenue on an increasing basis. It was able to register increasing revenue every month for the twelve months. This is very positive for hotel as it indicates that it was acquire customers and retaining them. The revenue increased from $284,211 in January in year 1 to $520,815 in December the same year. The hotel made a total net loss on the first year of operations; the total loss was ($30,424). On monthly basis, the hotel made losses five times and income seven times. 3.1.2. Rooms department revenue and rooms net income In the first year, the revenue and the net income of the room were seen to be very low and there was a slow increase. in the second year, there were some changes and we, therefore, conclude that there is a positive correlation in the room department revenue and the room net income from the records we can conclude that the room departments experiences higher rates of return on the month of February and march every year. There is also a positive correlation between the two variables such that an increase in one variable will cause the same change in the other variable. 3.1.3. Food & beverage departments revenue and food & beverage net income In the first year, there was a slow and gradual increase in food and beverage department, such that an increase in revenue results, in the same increase net income. From the analysis, it is notable that, in the month of February every year, the food and beverage department experience higher rates. The results, therefore, enables the hotel to always expect higher rates in the month of February and, therefore, develop strategies that will reduce wastage of resources during low seasons. The hotel will, therefore, ensure they make higher profits during peak seasons and thus specialize more in the satisfactory service provision. 3.1.4. Return on capital employed (ROCE) In the first year, the return on capital employed was very low and it was recorded at -12.5% this was the lowest record for the hotel. During the second year, the hotel experienced a higher rate on return on capital employed and it was recorded at 10.7%.the change was gradual it was the same case for the third year where the hotel experienced a slight increase from the previous year and made a record of 18.5%. 3.1.5. Occupancy, average daily rate (ADR), and REVPAR The ADR records a mixture of increase and decrease across the three years of operations, the results are average. The REVPAR indicates an average performance as well for all the three years. The occupancy, ADR and REVPAR indicate a difficult year 1 of operations, but an increasing performance in year 2 and year 3. There is a positive correlation the results of occupancy and REVPAR and it has been experienced through the past three years. 3.1.6. Refurbishment spending and extra facilities built The highest record of refurbishment was in the first year whereby the cost was at $ 300000 in the month of February. The trend has been seen to have fluctuated since then the increase from year 2 is because of the refurbishment of facilities and equipments such as the catering equipment and facilities which are exposed to constant heat throughout the day for a whole year. 3.1.7. Short term and long term stability ratios Short term In the first year, the short term stability ratio was very low at 1.3, and this was during the mid year. In the second year, the ratio was high and it recorded a stability ratio of 3.4, this was a very impressive performance for the hotel because it was able to maintain a high ratio on its short term ability. The third year experienced a slight increase in the stability ratio and it recorded a ratio of 3.9 which was high above the second year. Long term stability ratio The long term ratio in the first year was seen to be high and it recorded a percentage of 17.7%, but the results on the ratio analysis were not impressed in the second year where the performance was very low at 15.7%.the third year however experienced a great improvement from the previous year where it recorded a high rate of 17% 3.1.8. Staff turnover The rate of staff turnover has been analyzed and the results show that there is fluctuation on the trend of staff turnover. In the first year, the hotel recorded the highest rate of staff turnover and it was at 150%.the rate of staff turnover is seen to be high during some specific months of the year which are March and July every year. The second and third year also experienced the same fluctuation. The issue should, therefore, be addressed in the human resource department concerning the maintaining the rate of the turnover. 3.1.9. Marketing spend and activities In the first year, the hotel experienced a gradual increase in the market spending for the first five months. Thereafter, there was a decrease in the cost until the month of May the second year where the cost increased the same case applied to the third year. The highest record on marketing spend was $ 65000 and the lowest spend was zero. The hotel, therefore, has discovered the months on which they will spend more on marketing and, therefore, they will use the resulting performance to plan and budget for the fourth year spending. 3.1.10. EMS spends and activities The hotel did not analyze the performance of EMS spend and other activities 4.0. Part B Strategies 4.1 SWOT analysis (based on the year ending 2013) Considerably, in as much as the three past years were greater one, since the company saw a great achievement after the rescheduling of its operational strategy, it should be noted that the company still faced a great instability. The following detailed SWOT analysis of the Hotel can perfectly outline where the Hotel faced it rough, and where it gained the best. 4.1.1 Strength Its strength as per the three years is as follows: first, it has a 24-hour service centre. This made it have a 24-hour selling period per day. There is also a brand new, convention center attached to it. It is located in the Nation’s one of the largest cities and, therefore, attracting more and more clients. Next, it portrays an international standard of operation, hence attracting even those people who have international standards. On the contrary, it also offers cheap foods for those natives who do not live on a higher standard of life to achieve. This ensures all-round service, to all clients, hence maximizing sales. It has an indoor heated water pool, for recreation. Here, the company has ensured that even those who are disabled can comfortably enjoy the company’s facilities, hence making available the disability accessible facilities. 4.1.2 Weakness It is worth understanding that the company bears the following weakness as witnessed in the past three years. First, the company was discovered to be business oriented and not family oriented as expected. It also has no special transportation; therefore, at most the clients are expected to hire taxis for them to be relocated, when the need arises. In as much as foods are cheaper, it is noted that its biggest weakness lies on the boardroom. Since it has very expensive rates per night, and, therefore, the only people who can manage such rates are allowed to spend. Hence, it has a limiting service scope for those who want to sleep. 4.1.3 Opportunities It has been linked to the brand new convention center; therefore, it receives many visitors. Further, the company is located in one of the largest cities in the country; therefore, it has the highest opportunity of getting what they want. The government knows it and, therefore, the government usually makes it number one when it comes to meeting the point. It gets the first priority with the government; hence heightened their relationship, hence has gained an advantage to the government. 4.1.4 Threat Since the company is located in one of the largest cities in the country, with a convention next to it, it experiences late night noises. These noises at times, usually make the visitors uncomfortable; hence, it faces the threat of being avoided when it comes to night visits. Terrorists, due to its bright5enign future, can as well target it. At times, it is noted that the parking at times can be an issue due to the busyness of the city. This is a threat since, a person may fight it hard to park and have a rest at the Hotel, during the times when the street is busy. The above are some of the noted SWOT analysis of the Hotel. However, it can be noted that its strength is more as compared to the weakness, then followed by opportunities. These are the main factors that have so far raised the standards of the Hotel. In other words, the strength and opportunities are the main factors that made the Hotel shoot up in the world of business. Here, it is considered that the two are the positive side of the firm. 5.0 Objectives The objectives for the fourth year are as follows; To operate furnished, and hotel opportunities as well as equipping the hotel to the top of the European market To build more relationship with the shareholders, as well as securing hotel management contracts and not forgetting successfully managing hotel investments To achieve levels of profit enough to give out reinvestment. To manage the hotel, but the principle of human resource, that encourages both the reward and the unification of efforts and achievement. In addition, the company is focused on providing training as well as interpersonal development within its area of reach. 6.0 Strategies One of the strategies that made this Hotel shoot up as the highest when it comes to Hospitality; is that it focuses on borrowing concepts from other international hotels. Among them is the famous Starwood Hotel and Resorts worldwide inc. after borrowing the basic operational concepts of the Hotel. The strategies are meant to give the Hotel a clear vision and target in the fourth year. The above is done in the efforts of meeting the worldwide standard of operation. 6.1.1 Security Strategies for the fourth year are as follows: first strategy will involve training the employees to be well versed with technology. This is because, the company will move from a manual system to a digital one. This is due to the insecurity reasons outlined in weakness step of SWOT analysis. Doors, gates and all exit and entering point, should be guarded with electric alarms and codes. This will involve a proper scan and code use for the employees of the company plus clients. 6.1.2 Market conference The main struggle for the company is to meet the highest standards. This can as well be achieved by the introduction of the conference market. Here, the market expected will be operated in a conference manner. Where, the company will be able to meet the clients from all occupations, nearly the same time, to discuss issues related to marketing. This suggestion was conceptualized with the mangers and it is thought to perfectly fit in the system. 6.1.3 Corporate leisure Right now, the company has a hot watered swimming pool; however, this is not enough facility for leisure activity. Therefore, in the coming four years, the company has decided to make more leisure facilities, for instance table tennis, lawn tennis, and badminton grounds. This will ensure a good environment for the visitors who come in for more than two days. The above are mainly internal ideas; however, the company also has external ideas as below. Products will as well be introduced by the company in the leisure market, so that the clients can have a chance to enjoy their products while on leisure activities. In this way, the company will be maximizing the use of both leisure activities and food. Competitive sets Which hotels directly compete with my property? Participation – submit monthly, daily, and segmentation data Proximity - usually close to the subject hotel Pricing – usually similar in scale, class or price level Product – comparable features, number of rooms, meeting space Hotels can have more than one comp set… A hotel may have a local comp set and a 2nd that uses a broader geographic area with more similar features, or one for WD and another for WE, or Group/Transient, or chain versus management company, or old versus new 6.1.4 External Ideas According to research (Sheela, 2002), it is noted that at most Hotels should embrace technology in their every activity. In the same way, apart from the alarm control doors and gates, the company will introduce a wire payment method. Where, it will not be necessary for a client to come on the premises so that he or she can book a room or any service. They can as well do that in the comfort of their homes, or while still travelling so that they can be assured of their accommodation or the service expected. Therefore, the company will give the clients the option of depositing money into the company’s account, and then they will, only have a code number to prove their deposition on arrival to the premises. 6.1.5 Other market segments Product promotion The company will as well enter into market product promotion in style. Here, the product promotion will be staged in media platform. Where, all the products and services that the company is offering will be aired officially on both the website of the company and the magazines as well as newspapers. The advertisement itself will comprise of the pricing and distribution. Since the company is looking forward to changing product pricing, it will be better if the above is made familiar to the clients through advertisements. Therefore, with the above in place, it should be noted that the company will get not only potential buyers, but will also control incidents of misunderstandings. A client who comes in the service of the company should have already been told about the pricing. 6.1.6 Food and beverage The company intends to improve its food and beverage production. At most, the three years ago have made the mangers understand all kinds of food, which certain people prefer due to their cultural influence. Since the Hotel so far acknowledged cultural diversity, also food and beverages will be supported by the culture. This will be successful with the employment of cooks, who understand most of the cultural foods and beverages of the clients. In this way, almost all clients who come in will get what he prefers, both in terms of culture and in terms of just peer influence. 6.1.7 Service and staffing quality The company operates with a staff that is more responsible and professional in their undertakings. With the increasing number of the company’s client, the managers have thought to also increase the number of employees plus their wages. Minimal payout will be 87 dollars and the maximum payout will be 256 dollars per week. Service quality should be improved as follows; I. The employees will be upgraded on housekeeping and reception II. With the help of a computerized system, clients will be assisted immediately they arrive III. Dancing troops will be made available, to entertain the guest that continuously entering the company The three steps above will be used to improve the kind of service the company has been offering to its client. 6.1.8 Physical property condition Most of the properties are still in the best condition. A bit of renovation will be required, although that will not involve many expenses. The pertinent part of the renovation is the boarding rooms, dining and the front rear. However, the other parts are still up to the task, for another year. However, the whole process is estimated to take almost 78, 598 dollars. It is mainly paintings and a little or repairs. 6.1.9. EMS The planning committee will be meeting every day to ensure the process stated above will come into existence within the shortest time possible. However, the expected period for the completion of the above plan is less than six months. Meetings are expected to take twice in a week, to ensure the above are implemented. It is encouraging to note that the company is determined to give out the best so that it can remain in the highest position, in the world market. The motto; “is togetherness for the best.” References Mathews, J. (2008). Hotel management. Jaipur, Raj., India: Pointer Publishers Sheela, A. M. (2002). Economics of hotel management. New Delhi: New Age International (P) Singh, R. K. (2006). Hotel management. New Delhi, India: Aman Publications Kim, G. J. (2005). A SWOT analysis of the field of virtual reality rehabilitation and therapy. Presence: Tele-operators and Virtual Environments, 14(2), 119-146. Yang,J.T.(2010).Antecedents and consequences of job satisfaction in the hotel industry. International Journal of Hospitality Management, 29(4), 609-619. Bard, j. A. (2011). Hotel Front Office Management. john willey and sons. Michael J. O'Fallon, D. G. (2011). Hotel Management and Operations. johnwilley and sons. Ingram, H. (2013). Business of Hotels. Routledge. 5. Appendices 5.1 Current sheet 5.2 Statement of income for the third year 5.3 monthly indicator report Read More