GROUP 3

Benchmarking have been taken as a solution to cost reduction. Show how it

can be of use to a service provider of your choice.
Name Registration number
NYASHA TEMWA WINNIE KWENDA C19138306C
KUDAKWASHE MUDEKWA C18134656Z
BLESSING BESTER PHIRI C19138873L
WAYNE MUNJERI C19137419O
MCDONALD TAKUDZWA MADIGI C19137280X
CALVIN T MADANIRE C19136754E
TARIRO HOPE MUGADAGADA C19138736R
GETRUDE R PIWA C19138733A
SHADRECK MWAKONA C19137068X
BRANDON MUNYARADZI MUGONI C18132778N
 BENCHMARKING

• This is the process of evaluating an organization’s performance by measuring it

against external standards or best practices. It provides insights into how well
your team or company is doing compared to others.
• You can benchmark within your industry or even expand your analysis to review
the broader marketplace.
 PURPOSES OF BENCHMARKING

• Remaining Competitive: Understanding how other organizations operate can

help you develop a competitive advantage. This distinguishes your product or
service from others in the marketplace.
• Continuous Improvement: Benchmarking supports ongoing evaluation and
betterment of processes. It’s a valuable tool for continuous improvement
professionals.
• Data Collection: Most benchmarking methods involve gathering and analysing
quantitative data about internal processes and results.
• Financial Management: Benchmarking may reveal cost-cutting opportunities,
sales boost strategies, and profit-enhancing approaches.
 TYPES OF BENCHMARKING

• Strategic Benchmarking: Analysing best practices and winning strategies from successful companies
and adapting them to your own context. You can draw inspiration from companies in other industries.
• Performance Benchmarking: Comparing performance metrics (such as productivity, efficiency, or
quality) with similar organizations.
• Process Benchmarking: Focusing on specific processes within your organization and comparing
them to those of other companies.
• Functional Benchmarking: Comparing similar functions (e.g., HR, finance) across different
organizations.
• Internal Benchmarking: Comparing different departments or teams within your own organization.
• Competitive Benchmarking: Analyzing direct competitors’ strategies and performance.
• Product Benchmarking: Evaluating your product against similar products in the market.
• Best-in-Class Benchmarking: Studying the best-performing companies regardless of industry.
 DONRUE HOTELS
• The following is an illustration in context of a hotel that is situated in Harare and has just
entered the market and management has considered benchmarking as a technique the hotel
could use to improve performance and become competitive in the hospitality industry.
 1. IDENTIFYING KEY COST
DRIVERS
• After analyzing their financial records and conducting cost breakdowns, they identified the
following cost drivers:

Cost Drivers $ per year

Labor $500,000
Food and Beverage $300,000
Energy Consumption $200,000
Maintenance $100,000
Marketing $50,000
 2. SELECTING BENCHMARKING
METRICS
• Based on the identified cost drivers, the hotel selects the following benchmarking metrics
• These benchmarking metrics allow the hotel to measure their performance and compare it to industry
standards
Metric
Labor cost per available room 100 rooms available in the $5,000 = ($500,000/100)
hotel
Food and beverage cost The hotel generates 30% = ($300,000 /
percentage $1,000,000 in revenue $1,000,000)
Energy consumption per The hotel has an average $285.71 = ($200,000 / (100
occupied room occupancy rate of 70% rooms * 70%))
Maintenance cost per square : The hotel has a total of $2 = ($100,000 / 50,000
meter 50,000 square meters square meters )
Marketing cost per guest The hotel serves 10,000 guests $5 = ($50,000 / 10,000 guests)
per year
 3. IDENTIFYING BENCHMARKING
TARGETS
• The hotel researches industry standards to identify benchmarking targets
• By comparing their own performance with these benchmarks, the hotel can set realistic
targets for cost reduction
Industry standard metrics
Labor cost per available room $4,000
Food and beverage cost percentage 25%
Energy consumption per occupied room $250
Maintenance cost per square meter $1.50
Marketing cost per guest $4
 4. ANALYZING PERFORMANCE GAP
• By comparing these figures with the benchmarking targets, the hotel can identify areas where their
performance falls short and where cost reduction efforts are needed

Labor cost per available room $5,000

Food and beverage cost percentage 30%
Energy consumption per occupied room $285.71
Maintenance cost per square meter $2
Marketing cost per guest $5
 5. LEARNING FROM BEST
PRACTICES
The hotel learns from industry best practices to bridge the performance gaps.
• Labour cost per available room: The hotel studies best practices in labor management, such as
optimizing scheduling, cross-training employees, and implementing productivity improvement
initiatives.
• Food and beverage cost percentage: The hotel explores best practices in procurement, portion control,
menu engineering, and waste management to reduce food and beverage costs.
• Energy consumption per occupied room: The hotel researches energy-efficient technologies, such as
LED lighting, smart thermostats, and water-saving fixtures, to reduce energy consumption.
• Maintenance cost per square meter: The hotel learns about preventive maintenance strategies,
implementing condition-based maintenance programs, and leveraging technology to optimize
maintenance operations.
• Marketing cost per guest: The hotel studies successful marketing campaigns, digital marketing
strategies, and guest loyalty programs to optimize marketing expenditure.
 6. IMPLEMENTING
IMPROVEMENTS
Based on the knowledge gained from studying best practices, the hotel implements improvements to achieve cost reduction.
These improvements are tailored to address the specific performance gaps identified through benchmarking analysis and
learning from best practices.

• Labour cost per available room: The hotel implements an optimized labour scheduling system, resulting in a reduced labor cost
per available room of $4,500.
• Food and beverage cost percentage: By improving procurement processes, portion control, and waste management, the hotel
reduces the food and beverage cost percentage to 27%.
• Energy consumption per occupied room: The hotel invests in energy-efficient technologies and engages guests in energy
conservation practices, reducing the energy consumption per occupied room to $250.
• Maintenance cost per square meter: Through the implementation of preventive maintenance programs and leveraging
technology such as computerized maintenance management systems (CMMS), the hotel reduces the maintenance cost per
square meter to $1.80.
• Marketing cost per guest: By optimizing digital marketing strategies and leveraging social media platforms, the hotel reduces
the marketing cost per guest to $4.50.
 7. MONITORING PROGRESS
The hotel establishes a monitoring system to track the impact of the implemented improvements. They regularly measure
and analyze the benchmarking metrics to assess progress.
Monitoring progress allows the hotel to assess the impact of their efforts, identify any deviations from the desired
outcomes, and make necessary adjustments if needed.

• Labor cost per available room: The hotel tracks the labor cost per available room on a monthly basis. After
implementing the improvements, they achieve a steady reduction in this metric, reaching the target of $4,000 per
available room.
• Food and beverage cost percentage: The hotel monitors the food and beverage cost percentage to ensure it remains
below the target of 25%. They observe a gradual decrease in this metric over time.
• Energy consumption per occupied room: The hotel tracks energy consumption per occupied room monthly. They
consistently achieve the target of $250 per room.
• Maintenance cost per square meter: The hotel measures the maintenance cost per square foot quarterly. They see a
steady decline in this metric, approaching the target of $1.50 per square meter.
• Marketing cost per guest: The hotel regularly reviews the marketing cost per guest and observes a downward trend,
approaching the target of $4 per guest.
 8. CONTINUOUS IMPROVEMENT
• Benchmarking is an ongoing process for the hotel. They understand that industry
practices, customer preferences, and cost structures evolve over time. Therefore, the
hotel engages in continuous improvement by periodically repeating the
benchmarking process. They stay updated with industry practices, identify emerging
cost reduction opportunities, and adjust their operations accordingly.
• By continuously benchmarking and improving their performance, the hotel achieves
long-term cost reduction and operational efficiency in the hospitality industry.
THANK YOU