Part one
Charlotte Hotel has a mission of improving the value of its shareholders by adjusting the net income. Similarly, the hotel also focuses on the revenue increase in different departments such as rooms, food and beverage among others. Concerning marketing and advertisement, Charlotte is portraying good performance. Therefore, the management has decided to maintain their advertising methods for the next coming years. However, the management has maintained the current facilities to manage the operations and maintenance of the hotel. Charlotte hotel also has a mission of exceeding the expectation of its guests by inspiring and rewarding its associates, and this will enable the hotel to develop strong financial results to the shareholders. In addition, Charlotte hotel has a mission of providing outstanding lodging facilities and best services to its customers. The hotel also focuses on the individual business, leisure travel, and travels that are associated with group meetings.
There are high quality standards in the rooms and beverage departments of the hotel. Lastly, the hotel provides a good return on investment for the shareholders, and this effort has been achieved by Charlotte hotel because of well-trained personnel that are also motivated to become enthusiastic workers. The management of Charlotte decided to reinvest the cash generated in the business so that to boost the return on equity in the next coming years. Therefore, this why the hotel does not have a plan to distribute the dividends in the next two years.
The main aim of Charlotte hotel is to maximize profit, and this has been achieved because there has been an increase in revenue collection and the cost of management in various departments of the hotel. Despite the increase in revenue collection, there have been some challenges such as customer complaints concerning the hotel meals. The implication of the complaints indicates that at some point of the operation, the quality of meals in Charlotte hotel sometimes goes down due to high demand. However, the management has put some measures in place to correct the above issue. For instance, they increased the food prices after improving the quality of food, and this will increase the cost of food. Regarding the rooms, the hotel management has reduced the prices for the rooms to attract more guests to the hotel. Moreover, the hotel has proper cost management in the sense that it increases the cost of food and beverage to improve the quality of food. Besides, it increases the cost of rooms to boost the sales of the rooms.
In the next three years, Charlotte hotel has a vision of becoming a global hotel that offers consistent products and services in its main area of operation such as leisure destinations. Therefore, the growth of the hotel will be attained through the hotel ownership, selective franchising, and the management. Hotel Charlotte will be known for its innovative ideas, good financial performance, and standard services. Therefore, Charlotte is committed to being the best employer in the hospitality industry.
Goals are the activities and standards that any company has to undertake to carry out its missions in an effective manner. Therefore, goals are more specific as compared to the mission because it requires some levels of achievement that are observable and measurable. Therefore, Charlotte Hotel has measurable objectives that have encouraged its staff to perform effectively. Similarly, the measurable goals have assisted the management of the hotel in supervising the progress of its employees. Therefore, the hotel has achieved many goals such as the average occupancy level have been increased by 2% in Dec Y3 above the previous year (Dec, Y2). Similarly, the volume of the repeat guest business have been increased by 10 %, and the number of check-ins and check-out time have been reduced by two minutes.
Part two
Sales Prices and product definition
The report will consider some departments such as rooms, Food and Beverage and the Extra services when analyzing the definition of sales price and products.
Rooms
According to the statistics of the hotel, the ADR for Dec Y1, Y2, and Y3 are $180, $174, and $169 respectively. It indicates that the ADR is decreasing from Y1 to Y3. Therefore, the hotel management has decided to increase corporate contract prices to attract more travelers especially on weekends and during the vacations. Similarly, they will also decrease the revenue from the rooms and make some improvements on the occupancy for new arrivals in Y2 and Y3.
Food &Beverage
Charlotte Hotel increased the revenue from Food and Beverage department by almost ten percent during Dec Y3 to increase the cost of food for better production of quality meals. However, the hotel management reduced the kiosk prices by 5% of the mini bar to promote the business of the hotel regarding the packaging to attract more travelers.
Extra Service
The estimation of Charlotte Hotel is to increase the extra services by around 10% just like its competitor since the business peak of the hotel started in February Y2. Therefore, this will bring good feedback about the occupancy. Similarly, the decrease of the ADR in Y3 will lead to a reduction in the occupancy.
Staff
Source: (Leysin.v2.redhotelsim.com, 2016).
Staffing
The hotel will increase the number of its employees from eighty-one (81) to eighty-three (83) in Dec Y3 to compensate higher occupancy of the facilities. However, the management would wish to high some workers on contract basis for budget saving. Regarding their wages, employees will maintain their previous remunerations with an additional bonus to create loyalty and boost their morale. Moreover, some funds will be allocated for the employee training. However, this amount will remain below the total sum of salaries and wages.
Advertisement action plan
The investments on advertisement usually target specific goods and services in different segments through specific channels. Therefore, the effects of decisions of adverts in any market depend on the amount of investment, placement of expenditure, the expenditure of the competitor on the advertisement. Concerning the investment amount, an advert should target the right product, right segment, and the correct channel for the anticipated demand. The expenditure for any targeted advertisement should be around 4% of the total sales. If any company spends more than 4%, it will lead to additional cost though with fewer effects. Similarly, the amount that is spent on 6% of the total sales will cause little additional effects on the market share.
The impacts of advertising in Charlotte Hotel is about the investments that is made by its competitors, and this has enabled the hotel to achieve its aims especially through increasing the revenue while adopting better methods of cost management. It also changed some limitations to be easy ways for its customers to get first-hand information about the hotel through the website. Consequently, they decided to maintain the significant customer trend for the coming years while spending about 10% of the total sales in the advertising department.
Refurbishment, Facility, and Services
At Hotel Charlotte, the satisfaction of the customers relies on the refurbishment, the facility, and the service. The customers were fully satisfied throughout the three years. The hotel management decided to carry out some renovation especially during low seasons where the turnout of the guest were low. It also carried out cleaning on the contract during the high season, and this made its clients fully satisfied. The management also promised to renovate public utility areas and rooms during low seasons in Dec Y3. The contract cleaning became a routine in every season just like its competitor. Since the hotel carried out proper renovation in the rooms department, the revenue in this department has been increasing steadily throughout the three years. Therefore, it has maintained its facilities and services for the last three years.
Part three
Debt & Reimbursement
The available fund at the end of Y1 December was $ (196069). The amount was insufficient for renovation and refurbishment. Therefore, Charlotte Hotel borrowed $ 15,000,000 from the bank to finance its activities. However, the main objective in Y3 December is to put more investment on the revenues to repay all bank loans.
Rooms Revenue
According to the adjustment that took place between Y2 and Y3, the total revenues from the room department increased by $111,405 representing about 1.3%. This is because the prices for the rooms were stable and was the same with the average pricing. Consequently, the management conducted a strategy known as the high price low occupancy strategy. Similarly, the rate of the rooms were kept above the average throughout the three years.
F&B Revenue
Between Y2 and Y3, the revenue for Food and Beverage increased by 2.5%. Even though this variance was lower than that of the competitor, the management decided to maintain the situation and some theme restaurants in Y3.
Rooms Cost
Always the increase in sales is equivalent to the variable cost, and then it seems that Charlotte Hotel has adopted this assumption, and the cost of rooms will increase by about 2%.
F&B Cost
Similarly, the increase in sales will always be equal to increase in variable cost. Therefore, the hotel also assumes the increase of cost in Food and Beverage by 2.5%.
Rooms Revenue
The rooms were renovated to attract additional guests and to keep the occupancy strategy to increase the revenue of the room department.
F&B Revenue
Since the key competitors of Charlotte are offering their meals at a lower price, Charlotte Hotel reduced the price for Food and beverage to offer a fair competition. However, the cost of food is substantial, and this provides a guarantee of the quality of food. The hotel invested more money on advertising food and beverage for the sales forecast to reach 10% in Y3.
Room Cost:
As variable cost increase in proportion to the sales increase, the cost of rooms in Charlotte will also increase by 2.5%.
F&B Cost
As variable cost increase in proportion to the sales increase, the cost of food and beverage in Charlotte will also increase by 2.5%.
Sales and marketing
The investment in marketing influences the market share of the Charlotte Hotel instead of targeting a product or a segment of the hotel. Moreover, the degree of the influence on market share depends on the available money for investment and the rank of the marketing investment that is done by the competitors. According to the management perspective, if the advertisement cost is less than that of the competitor in Charlotte, then there is less influence of market share. Similarly, if this hotel spends more on marketing than its competitors, there will be a greater influence of the market share. Lastly, if the expenditures are equal, then there will be an equal impact on the market share.
The investment in sales and marketing is important especially towards the total sale. Therefore, total cost for Y2 and Y3 are $ 2,411,489 and 1,052,568 respectively. The hotel invested more money in sales and marketing in Y2 December, and this gave a positive feedback from the customers. In Y3 December, the hotel reduced the cost of sales and marketing department by $ 1,358,921.
Administration & General Cost
The hotel hired additional workers to guarantee the quality of food and services. In Y2 December, the administration and general cost were $ 2,371,274 while, in Y3, it was $ 2,511,128. The increase in administration cost in Y3 led to the increase in sales revenue, and this will continue for the future years.
Property Operation & Maintenance
The addition of some facilities in Y3 made the cost of property operations and maintenance rise by 6.6%.
Operational budget (diagram)
Source :( Leysin.v2.redhotelsim.com, 2016).
Financial Plan
Provisional Balance sheet
Source: (Leysin.v2.redhotelsim.com, 2016).
Contribution margin: Rooms
Contribution margin= total revenue – total cost
(8,720,901-2,827,186)/8,720,901*100%
= 67.58%
F&B
Contribution margin= (3,467,803- 910857)/3,467,803 *100%
= 73.73%
The contribution margin for the F&B is higher than that of the revenues. The higher the contribution margin, the better performance of the Food and Beverage department. It implies that food and beverage department has sufficient margins to cover the additional costs and overheads. On the other hand, the contribution margin for the rooms is low because of the sales advertisement that was conducted to attract more guests, and this came with additional costs.
References
Leysin.v2.redhotelsim.com. (2016). Swiss Hotel Management School - Leysin. Retrieved 21 January 2016, from http://leysin.v2.redhotelsim.com/participant/months/36/result/qtr_income_summary
Leysin.v2.redhotelsim.com. (2016). Swiss Hotel Management School - Leysin. Retrieved 21 January 2016, from http://leysin.v2.redhotelsim.com/participant/months/37/result/guest_service
