Price, Product, Promotion in Hospitality Industry

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Introduction

The company offers hotel services. The current situation has not been pleasing since it is marked by a decline in performance, occupancy, regular daily rate, and gross working profit. In the leisure market, the company makes extensive steps to attract a city get-a-way experience that will encompass entertainment and architecture currently lacking in their home operation. The company has identified the most attractive points that reserve the potential of increasing their performance are the city’s sports, arts, and entertainment settings. As such, setting up business near these settings will immensely contribute to increased sales. Customers seeking leisure would prefer to receive the best benefits of a center city hotel at an affordable price which may be at the market rate. On the other hand, the leisure market will be more attracted when offered rooms at premium prices (Schmidgall 2010). Tour groups are potential clients to the business. These customers visit the cities frequently to enjoy the festivals, schoolmates’ reunions, as well as, planned historical, tours. These potential customers are likely to consider rooms that contain two people so as to reduce renting or lodging cost. They would also prefer utilizing the meeting area for organizational meetings. The company reserves a significant product for the large groups to enjoy their interconnection. The groups need enough area for lodging and holding conferences. The company has diversified its products for these clients from meeting space, banquets, as well as, audio visual, services to cater for the conference meetings. Again, business facilities and decoration come in to cater for large groups holding ceremonial events like weddings (Jagels & Ralston 2006). The small groups have not been an exception. Hotelism ensures that its products cut across all markets, which show indication of growth, development and of higher frequency including the small groups. As such, the business provides products for small groups like families and couples on honeymoon. The market also includes in social gatherings groups, which collectively prefer enjoying meals and beverage as well as recreation outlets.

Human Resources

Hotelism is endowed with highly efficient computerized staff guide that facilitates display recommendation according the staffing stage of advancement for all positions. The staff are proportionately distributing among the occupancies with respect to their duties as indicated below.

Position Staffing Guide
Front Office Supervisor 1 per 40% occupancy
Front Office Attendant 1 per ea 10% occupancy
Housekeeping Supervisor 1 per 40% occupancy
Room & Public Area Attendant 1 per 20 occupied rooms
Food & Beverage Service Attendant 1 per 40 covers per day
Food Production Supervisors 1 per 175 covers per day
Room Service Attendant 2 per 25% occupancy

According to the local hotel association, area hotels have traditionally invested between 1% and 3% of Salary and Wages on management and staff training and development.

Facilities

The company offers a number of facilities, which make their chain of products unique. They have over 250 guest rooms of which are offered at a premium (50 rooms) and at standard price (200 rooms). The restaurant are furnished with over one hundred seats with adjoined 50-seat bar lunge section that regulars constrains constant flowing visitors from all groups. Notwithstanding, the company has a conference hall that contains over 200 people not to mention of its flexible configuration. Their efficient business equipment is crowned with one bay exercise area, a pool and open-air recreational area.

Stockholders

Food & Beverage Performance (breakfast lunch and dinner) earned the shareholders a gross of $194,609. Price Points comparison gave the competitive prices range within the limit; thus they were within the covers. According to the current financial statement, reveals that the stockholders will have a 70% return on investment in the current year as well as security of $40,995,000 accruing from the company assets.

SWOT Analysis

Strengths

The company prides in having the biggest guest rooms, as well as F & B facilities that enable the business to be convenient and accessible from the streets. The spacious areas renders exterior acquaintance for signage and increases their flexibility in reconfiguration. The company has been in business for several years. The business experiences escalation in restaurant closing, as well as an effective pricing strategy that has contributed to the influx of customers in the hotel restaurant. Today the company reserves a stiff competitive niche marked by the escalation in requests for proposal.

The proposal acceptance will mean regular flow of customer since the main visitors expected are military, tour and technical professionals. The products have an efficient décor with a mixture of old and new architecture that attracts customers from all market segments. The business is located next to underground public transport, not to mention of its exclusive ground-breaking meeting places. It also reserves immense pride of historic attachment to historic photographs and memorabilia that fall in line with the hotel position statement. Its main entry is positioned on the backside of the street to offer an element of accessibility making it is the unique form its competitors.

Weaknesses

The business experiences challenges in financing its activities coupled with immense reduction in profit from operation. The company does not have the capacity to refurbish its projects, neither is it able to expand its investment, which would crease value and a competitive advantage over its competitors in the neighbouring industry areas. This is a time when the company has experienced internal dormancy since it has not been allowed to undertake any hotel construction because no permits have been given in the annual period making it difficult to develop ADR.

Opportunities

The industry has shown signs of potential customers in the non-resident social gatherings and holding of events to escalating in the first quarter of the year. The freshly relocated hotels are about to be completed which will mark exceptional facilities in the industry. Sensing an upswing in the economy, there is increasing room demand for three to four day corporate and association meetings.

Threats

As the company experiences improvement in the general economic status, there is the existence of inefficiencies that threaten the hotels operation below capacity. A soft economy, along with increased competition from other cities, has combined to erode occupancy, average daily rate, and gross operating profit. Finance and credit have been nearly impossible to obtain. It is clearly a ‘buyer’s market’, where both Individual and group clients expect exceptional value at discounted prices (Schmidgall 2010).

Position, Product, Quantity, Promotion

The highly competitive market in hospitality has forced Hotelism to increase their sales through the product diversification and flexibility in the reconfiguration of services at fairly cheap prices that enable the consumer afford and take up the services in large quantities and numbers. Thus, the cheaply Low cost services will enable the business to immensely penetrate Asian, Europe, USA, Middle East, and Latin America markets. Over 50% of the hospitality industry products sell at low costs have had a significant increase in the sales of their products and services as compared to those who profess on the notion that quality goods are meant to be expensive.

Hospitality leisure and tourism closely interrelated. In many instances, anybody spending his leisure time would opt to tour a restaurant that offers hospitality services. Hospitality is popularly referred as a friendly reception between guest and host (stranger). In the hospitality industry, it is a relationship created between a guest (tourist) and a host (the hospitality industry). Particular, hospitality covers the reception and entertainment of the tourists and other guests spending their leisure in resorts.

The quality of hospitality will attract the resorts to be a home of tourists and leisure spending. As such, hospitality, tourism and leisure act in a vicious cycle in complimenting each other as a reserve for attraction and special events.

In effect, sophistication and system integration has there has been rapid and demanding in an effort to enhance the operational efficiency in the sector (Schmidgall 2010). The industry is a big contributor in building venues for redesigning and impact positively to the local environment. The processes of tourism and hospitality have made it possible for people from various parts of the world to meet and exchange ideas. The hospitality and tourism industry serve as strong economic contributors since they influence diverse set of related sectors of the economy. Ultimately, socialization has made many individuals get business ideas to build their lives. Again, the activities in the industry provide the best avenues to have investors, coincidentally, meet investment opportunities. In addition, many businesses today enjoy applying more sustainable practices to enhance a green image that pleases consumers. For instance, using organic products, recycling waste products and reducing the amount of using toxic products ensure efficient environmental practices. The hospitality and tourism industry are not sustainable because of their contribution and effects from the environment. Among the major factors that contribute are leadership in environmental energy design, Indoor air quality, and green lodging certification.

Sales prices and product definition

It is an increasing notion that increasing demand might do little wrong. However, when the demand goes up, the costs attached for increased production, unless the business is able to get the economies of scale and has enough technological resources to minimize the costs. On the other hand, approaching from the demand decrease it may be quite impossible to make a decision on retrenching employees and the subsequent reduction in production.

The following price points and limits are expected as the economy rebounds. The best rate strategy is the one that produces the highest departmental profit. Generally, higher rates reduce occupancy but increases profit, but only to a point. When rates approach the price point limit in the market, occupancy can drop dramatically to the point that profit is severely affected. There would probably be no occupancy at the price limit.

ADR ($) Quarter 1 Quarter 2 Quarter 3 Quarter 4 (Est.)
Leisure Premium 180 190 210 190
Leisure Standard 150 160 180 160
Business Premium 180 190 210 190
Business Standard 150 160 180 160
Corporate 130 140 160 140
Tour 120 150 150 130
Large Group 120 150 150 150
Small Group 130 140 160 140

The number of staff will range with the proportion of work and responsibilities required in a certain area of work. As such, they will be paid a minimum basic salary and commission in case the expected tasks surpass the predetermined amount. Capacity building shall be undertaken through seminar semi-annually. Again, training shall be carried out during the working hours to increase efficiency.

Refurbishment decisions and Investment decisions

Expectations of both hotel guests and non-resident guests continue to change and intensify. The hotel will require investment in refurbishment, facilities, and services in order to stay competitive. This is through replacement Reserve Fund. This will involve the annually budgeted capital investment fund for the property. This fund is topped up each month by a percentage of total revenue. It is the first and primary source of funding.

Again, the company may use Investment borrowing. This is undertaken when the hotel is in excellent financial condition and able to pay for an additional debt, funds can be borrowed from the bank to make up for any shortfalls in the refurbishment reserve fund. A bank request and interview is required. Shareholders capital will be used when there is a high cash balance. The owner may be willing to apply some of these funds to additional refurbishment, facilities, and services. If so, the hotel would save the interest expenses resulting from additional bank loans.

Budgets for Year 1, Year 2 and Year 3 including

Assumptions used to determine revenues and costs

The fluctuations in the Volume of products demanded by customers are usual as indicated by the changing seasons and different business cycles. Sudden plunges of recessions within a country and global economic recession as recently experienced calls for a firm that is flexible enough to shift its production as per the market trend and demand. It is an increasing notion that increasing demand might do little wrong. However, when the demand goes up, the costs attached for increased production, unless the business is able to get the economies of scale and has enough technological resources to minimize the costs. On the other hand, approaching from the demand decrease it may be quite impossible to make a decision on retrenching employees and the subsequent reduction in production. The ability to effectively change in a dynamic industry benefits the company essentially on their flexible operational strategies.

Operations Budget

The effectiveness and efficiency in the capacity to easily change from one product to another through reconfiguration of the spaces and rooms is significant in this endeavour. In light of high costs and, production of new products at a high speed is crucial for the success of any hospitality industry in a highly competitive industry.

Financial Plan

Improving economic conditions and increased capital investment should support higher room rates. According to the present financial situation, the company will advance to reduce cost as a way of serving and developing the market. With a cost minimization strategy, it is evident that retained earnings will increase through an increase in depreciation and seeking more funds. It is evident that the company is liquid having a cash balance of $325,000. The company has identified the most attractive points that reserve the potential of increasing their performance are the city’s sports, arts, and entertainment settings. As such, setting up business near these settings will immensely contribute to increased sales. Customers seeking leisure would prefer to receive the best benefits of a center city hotel at an affordable price, which may be at the market rate.

Financial position

Cash in bank 325,000
Accounts Receivable 520,000
FF&E replacement reserve fund 150,000
Bank loan outstanding 8,250,000
Line of credit available for operations 500,000
Bank interest rate on cash on deposit 3%
Interest rate on bank loan 6%
Interest rate on line of credit in use 8%
Accounts Receivable collected in 30 Days
Accounts Payable paid in 60 Days
Amount of sales made with credit and credit cards 80%
Amount of sales made with cash 20%
Income tax rate 30%
Book value of property and equipment 20,000,000
Book value of FF&E 11,250,000

The proposal acceptance will mean regular flow of customer since the main visitors expected are military, tour and technical professionals. The products have an efficient décor with a mixture of old and new architecture that attracts customers from all market segments. Therefore, specific focus shall incline of funding leisure and the large groups because they showed the highest percentages in frequencies according to the table below.

Channel Demand (%) Direct Travel Agent OTA Tour Opaque
Leisure 30 10 40 0 20
Business 40 20 40 0 0
Corporate 40 40 0 0 0
Tour 0 0 0 100 0
Large Group 100 0 0 0 0
Small Group 35 30 35 0 0

Conclusion

The company tooling industry is an extensive establishment of the provider of the service in cooperation of the local and international drivers’ in the hospitality industry. The country’s hospitality industry has developed a strong standing of the complexity, excellent quality tooling at comparatively reduced costs in comparison to the competitors in Asia, Europe, USA, Middle East and Latin America. The market’s competitiveness is engineered by the advanced technological advanced and a strong quest from outside forces for investment, ground-breaking designs, highly diversified products of refreshment and comfort with a professional touch for large groups. Eventually, it accrues a leading advantage in capital equipment that facilitates a highly efficient hotel services.

References

Schmidgall, R 2010, Hospitality industry managerial accounting 7th edn, Educational Institute American Hotel & Motel Association, New York.

Jagels, MG & Ralston, CE 2006, Hospitality management accounting, John Wiley and Sons, London.

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