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HOS3100 Hospitality & Tourism Management

Semester 2, 2011 Final Examination Case Study


The Island view hotel and resort is a five star property and is situated on the coast just 80 kilometres north of a major regional city. That city has a population of 1.75 million people and is the commercial centre of the state in which it is located. The hotel and resort is a family owned and operated business and is not aligned with any other hotels or hotel management companies; however it is a member of an independent hotel cooperative. This cooperative which is an association consisting of 87 independently owned hotels and resorts operating in 26 countries does not provide any management or operational support but does supply a central reservation facility and considerable marketing for its members. Known as the Primo Hotel Alliance the cooperative maintains a Central Reservation System (CRS) which maintains a web based reservation system covering all properties. In addition it deals with email, phone, and fax enquiries. When guests at one property express interest in staying at another member property their information is entered into the CRS and dealt with appropriately. Management of the Island View has conducted several cost/benefit assessments of their membership of the cooperative and each has indicated that the business generated more than compensates for the cost of membership. Indeed the last cost/benefit audit revealed that 54% of rooms sold for the period had been booked via the CRS. Of the remaining 46% of rooms sold half (23%) were booked via the properties own web site directly, 11% came through travel agents, 7% were future bookings by guests checking out, and 5% were passing trade. Almost all passing trade occurred during the winter months which are the low season for the property.

The Island view hotel and resort is a small property of just 28 suites and 22 standard rooms. It is a single storey complex spread over 3 hectares of sand dunes. Each of the suites is a standalone structure while the standard rooms are joined in a U shape building which also encompasses the reception and restaurant with adjoining kitchen, receivables area, and plant (i.e. Air-conditioning, Water treatment etc). The swimming pool and gymnasium are located 40 meters from the standard rooms and approximately equal distance from each of the suites. The resort is set back from

the beach a mere 100 metres and is sheltered from the ocean winds by a row of sand dunes. Guests access the beach by walking along a boardwalk which is raised 300mm to prevent sand building up and covering the walkway.

The vast majority of guests at the Island View Hotel & Resort (98%) responded to a survey by saying that the main reason they chose to stay there was the opportunity to engage in water based activities. These water based activities include surfing, scuba diving and snorkelling, wind surfer or kite sailing, fishing, or just swimming. The resort provides equipment and instruction in all of these activities for beginners through to experienced people. There are even deep sea fishing charters on a 42 metre purpose build boat conducted by the resort. However there is no marina or jetty available for guests to moor their own boats, but a launching ramp is maintained by the Island View. Management would like to build a marina but the cost of 2.85 million dollars is considered to be prohibitive. It is also thought that any plan to construct a marina would invite protests from environmental groups which ran a very forceful campaign against the establishment of the resort when it was built. Their contention was that the area to be developed for the resort was too sensitive to be developed for high density occupation. Eventually the environmental protection authorities gave the go ahead only after the original plans were scaled down considerably. The activities offered at the resort were not actually run by the resort itself but by an Adventure Tourism company contracted by the resort. This was not evident to the guests as all staff (both resort and activity) wore the same uniforms and seemed to guests to know both sides of the operation. The Island View had conducted all the activities in-house until 4 years ago when the then GM decided to change track and concentrate on the core business of running the hotel. The problems of attracting and retaining staff for the activities had become a real headache and was consuming too much of the management teams time. Time that the GM believed could be better spent on the many operational issues of the hotel.

Max Harvey, the general Manager of the complex, has been in his current position for 3 years now and was the assistant GM for just over 2 years prior to that. He is a strong advocate of succession planning believing that his move into his current position was seamless upon the retirement of his predecessor. For this reason he has made a concerted effort to mentor his own assistant (Louise Labatt) and

challenged her with several special projects recently. One of these challenges was to look into the huge fluctuations in occupancy rates at the complex during the year. It seemed to Max that the fluctuation had become more and more pronounced over the last 2 years. He believed it was to be expected that the summer months would always be busier than the winter time but the difference was getting out of hand and unsustainable. The figures compiled by Louise showed that during the peak season occupancy was 100% both mid week and weekends and that guest satisfaction during these periods was exceptionally high compared to industry norms. However the occupancy over the winter months had plummeted from an average of 47% three years ago to just 36% for the last winter. Weekend occupancy was OK considering but mid week the resort was like a ghost town Louise reported. This apparent desolation was having an impact on the satisfaction of guests who reported that the place had no VIBE about it during their stays. One of the main positive selling point of the property during the low season was the promise that all activities provided during the high season were also available during the low season. Living up to this promise was starting to be a drain on resources for the property. Safety issues meant that each of the activities had to be staffed at all times in case a guest turned up wanting to have a go. One of the instructors had suggested that a better way to go would be to make guests book for each activity by say 9:00am each day so numbers of participants would be known. He further suggested that staff could be cross-trained so they were able to run more than one activity.

Louise considered this but still saw problems. Getting skilled staff to work in such a remote resort was proving to be a real problem during the winter months. Summertime was easy, there were plenty of students looking for holiday jobs and the lure of working in a resort was an easy sell. Accommodation was provided on site for staff so the need to hire local people was never really considered. In fact because of the remoteness of the location there really was no local staff. The economy of the region had been growing steadily over the last decade but the pace of growth was expected to skyrocket in the near future. In addition a new costal road was due for completion within the next 6 months. Currently the main highway North passed the resort 80 kilometres inland. This new road would bring travellers 30 kilometres nearer to the entrance to the resort. This would make the area slightly more accessible to travellers. A major promotional message of the Hotel has been the pristine condition of the area surrounding the property. This has also been one

of the most common comments by guests. I went for a walk for an hour or so through the sand dunes and came back along the beach and didnt see another soul the whole time. I felt like I was the only person for hundreds of miles around. The solitude really heightened my senses and I started looking at the country through different eyes. That experience alone was worth the money and time it cost me to stay here said one guest. The management team had started to wonder what impact the new road would have on this perception and their messages relating to remoteness. A search of the bookings data base revealed that just 1.8% of visitors came from either overseas or interstate. The marketing division considered this as both a positive and negative. Negative because it meant the target market was very narrow. If anything happened to that market the property would be in trouble. Positive because it meant promotional materials needed to be pitched at a fairly narrow audience.

It was also noted that the current market segment was not particularly demanding when it came to service standards. This news flew in the face of the promises made by advertising by the cooperative which pushed messages like Our guests are amongst the most discerning and we live up to their expectations. Indeed a number of the web pages and print material produced by the cooperative depicted guests in formal attire dining in luxurious restaurants. One of the mottos used was Perfection is just the start of our service standard. Rita Chew, the front office manager, said at the last staff meeting that this seemed really out of place for The Island View Hotel & Resort. Our guests wouldnt recognise perfect service if they saw it. Our guests want relaxed service with a smile not a bow.

Max has decided that the most pressing and important issue facing the future of the property at this time was the decline in low-season occupancy. If the recent slide was not arrested then real hard times were ahead. He recognised that because the business is small it does not have personnel that are expert in every area necessary to gather the information necessary on which to base decisions about the best way forward. He took the view that outside help was needed. Max had worked for a multinational hotel chain before deciding to settle in one place and take a position at the Island View Hotel & Resort and still maintained close contact with some of the people he had worked with there. He knew that his former company operated a consultancy arm which drew on the experience of not just a dedicated team but also

the management groups of the 122 properties the company managed around the globe. After several months of negotiations the consultancy arm of the multinational company was engaged to undertake a strategy management review of The Island View Hotel & resort. The brief to the consultants required them to undertake a review of the intelligence gathering of The Island View and to suggest strategic options they saw as optional for the firm.

The consultants identified several things that the management of the Island View both did and neglected to do as far as environmental scanning was concerned. On the positive side were the facts that management maintained a close working relationship with the local council and had regular contact with the local member of the state government. The hotel was a member of the Industry association but because of the distances involved neither Max nor any of his staff attended the monthly meetings. Max always claimed he was too busy to have time to read newspapers and made a joke about always hearing news at least one week late. The company accountant John Johnson constantly tried to keep Max and the rest of the management team informed on current economic news that he thought could impact on the firm. However as no one else in the organisation had any formal financial or economic training they all believed that while John was interested his news had no bearing on the operation of the Island View Hotel & Resort. How could anything thats happening in Timbuktu or anywhere else in the world have any bearing on what we do Jill Smith the F & B manager said after Johns latest instalment. Max Harvey was inclined to agree with this sentiment. He reminded those at the meeting of the low percentage of guests coming to the Island View from overseas. Though Rita Chew had no finance qualifications either she thought there was merit in the team paying heed to what John had to say. She remembered how the management team had buried its head in the sand when they had first heard about the new road being constructed. As a result of ignoring that news when it had first come to light the Island View had done nothing proactive to influence the authorities responsible for the alignment of the road. She thought this was a lost opportunity. If the new road had been planned to pass much closer to the resort (and there was no practical reason why it couldnt) it could have availed an opportunity to attract increased passing trade and more importantly to negotiate with bus tour companies to stop over for at least one night 3 time a week. This could add

150 room nights per week. Wouldnt that be handy during the low-season she mused? The marketing messages of the property included one that included Everything we offer we offer all the time. It was becoming harder to live up to this promise in the low occupancy periods. The Activity Tourism company that provided the water based stuff was making noises about reducing the range of offerings because of low numbers during the winter months. It was simply proving unprofitable to offer some experiences for as few as 2 guests at a time. Certainly the cost of operating the large fishing boat could not be sustained at these rates of occupancy. The consultants provided the following information but did not say how or why this information would affect the Island View Hotel & Resort:

A combination of global warming and a prolonged drought is expected to have a negative impact on agricultural output for at least 2 more years. Average wages are tipped to increase 5% a year over the next 3 years Average room rates in 4-5 star hotels have gone up by 3% in the past year Satellite broadband internet access costs have plummeted and are now on par with wire or fibre optic connections. There are some issues surrounding security of satellite connections but it is thought these issues will be resolved very shortly

Domestic inter and intra-state tourist travel to regional centre city has stabilised but international visitation is expected to expand by 58,000 next year due to an extensive promotional campaign by the State Tourism Authority and lower air fares due to increased competition in the industry.

Inflation is running at 4.2% per annum

Visitors were asked to complete a Guest Comment Card at the end of their stay. Some of the responses were predictable and very complimentary; in fact the raw data portrayed a hotel/resort that was really in tune with the needs and expectations of its guests. The service was almost invariably described as 1st class. Comments such as The service is casual, which is fitting for this resort, but you never have any trouble getting what you want. In fact you usually get it before you need to ask. The food in all of the outlets received excellent comments too. Just about the only complaints about the restaurant came from very few guests who wanted to see more real meat dishes on the menus instead of nearly all fish. The F&B manager Jill

spoke to the chef about this issue and together they came to the conclusion that because of the location of the resort, the dcor of the restaurant, and the availability of high quality fresh off the boat sea food the menu shouldnt be altered drastically. The chef offered to include more steak dishes in the next menu but warned that this would definitely increase the inventory in stock value because it moved quite slowly. He pointed out that the supplies were only delivered once per week because they nearly all came from the city 80 Kilometres away. He went on to add that during the peak season storage space would become an issue. Parents were especially glowing in their comments about the way their children were supervised and occupied by the staff running the activities. It was like having a personal nanny. My husband and I had a real holiday because we felt our kids were being looked after and safe. The kids really loved it too and because they were busy all day they slept all night. I dont remember seeing anything about this on the web site when were deciding whether to book or not.

Louise Labatt who had been give the task of overseeing marketing as part of her duties had asked the CRS web site operators to include information about activities for children on the web site but nothing had changed. The response was along the lines of We are promoting all the member properties as being similar. You know our thrust Perfection is just the start of our service standard. The promotion of kids activities does not sit well with that statement. In fact the promotion of kids activities at your property may well turn people off the other properties. Remember we are advertising the group as a whole not as individual properties. Maybe we could add a hot link to your own web site and you can put whatever you want on there. You know that wouldnt be a bad idea for all of the properties.

Louise had suggested there needed to be activities other than water based during the low season. She believed that more guests could be enticed by offering land based activities in winter but recognised that this would require even more personnel be retained by the contracted activity company if the water activities were also retained. Other staff disagreed with Louise saying that adding land based activities would dilute the impact of the advertising about all the water stuff. Max said he would consider Louises recommendation, but needed more information on which to base a decision. What is happening at other properties he wondered, and how can we find out. There is no point phoning them to ask. I wouldnt tell them what we do

so why would they tell me? As it happened a local tour operator (Bill Jenkins) conducted escorted tours of the hinterland 3 days per week in winter and daily during summer. These tours started just 12 kilometres along the road leading to the highway. He reckoned that around about 45% of his customers came to him from the Island View Hotel & Resort. However as he never had any contact with people from the hotel he hadnt told anyone there. He had tried 2 years ago to get his brochures into the hotel but had been refused. As the situation currently stood he relied on a sign on the side of the road leading to the resort to attract their guests to his tours. During conversations with these guests during his tours he had come to the opinion that they thought the water based activities were great, the accommodation was fantastic, the service brilliant, and the location second to none, but that if the weather turned bad or they wanted something different to do nothing was available. Some had said they expected the resort to have such things as tennis and squash courts, mini golf and maybe bicycle tracks along the coast. One guest had added Mind you at these prices you certainly get value for money. Bill wondered if the management of the resort was getting this information as well, and if not what they would do if they did get it. If only they had allowed him to put his brochures in the lobby he would have gladly offered them the information he had.