Michaela Horn

Professor Conrad
Issues in Hospitality
Reflection Paper for Hotel Horn

Letter from the General Manager

Michaela Horn
General Manager
Hotel Horn
123 Hotel Street

Dear Management Team:

Hotel Horn is well on its way to improvement; welcome to the team! Roughly two years ago I
took over the position of General Manager for Hotel Horn. Although making a name for this
hotel hasnt been an easy journey things are certainly beginning to take a turn for the better.
This full service hotel has been operating for 10 years now and is rated between three and four
stars. In comparison to our competitors we are the most profitable hotel, generating a positive
net profit! Out of the six hotels located in the area, Hotel Horn currently holds 15.20 percent of
the market share for rooms sold; through continuing renovations and expanding guest services
we hope to increase our market share and dominate the competition. When I first started my
positon as General Manager two years ago occupancy levels were at 54 percent; a year later
they reached 62.88 percent. Unfortunately, Hotel Horn currently runs at 57.77 percent for
occupancy levels; this is due to the numerous strategic changes made throughout the hotel
within its tenth year of business.
Overall, Hotel Horn is starting to shine through in a positive light. Many changes have been
made throughout the hotel based off of the wants and needs of our guests. With your ideas
and extensive industry background hopefully you can give Hotel Horn the push it needs to
operate at five stars. Thank you for joining our team; I look forward to seeing the success you
bring within years to come.
Best Regards,

Michaela Horn
General Manager
Hotel Horn

Industry Environment
Hotel Horn is located in a city setting with a population of 580,000 people and a regional
population of 2,150,000 people; the area has a 1.5 percent annual population growth rate.
With a median age of 42 years old, the average individual throughout the area makes 53,000
dollars annually and roughly homes price for a median value of 380,000 dollars. Hotel Horn sits
on a beautiful waterfront property with access to excellent roadways and bridges; a
dependable rail service is also located nearby. Other features to the city include a newly
renovated and expanded air terminal, upgraded taxi fleets, seven quality museums, noted
vineyards, city riverfront walks, and a sports stadium; also the city is a well-known art and
restaurant district. Alongside all of the wonderful features the city has to offer there are
numerous demands bringing people to the location, such as: regional corporate offices,
regional service offices in legal and accounting, two universities, upgraded and expanded
regional healthcare facilities, medical specialist centers, and year-round arts/agriculture/music
festivals. The features and demands listed above will draw people from all over the region to
the city and our hotel.
Despite having all of the features and demands it does, certain sectors in the hospitality
industry havent been performing as well as expected. As of two years ago annual air arrivals
were down 21 percent, hotel occupancies were down 18 percent, and restaurant seatings were
down 16 percent. Along with the airline, hotel, and restaurant sectors, event attendance
dropped 19 percent and city-wide conventions were down by 28 percent. Hotel Horn hopes to
bring some life back into the areas hospitality industry; by utilizing the cities features and
demands we can do just that!

Strategic Management
Strategic management consists of analyzing the internal and external environments of
the company to arrive at organizational strengths, weaknesses, opportunities, and threats
(SWOT). Strategy is devising a plan of action that will utilize a companys strengths and
opportunities, while also trying to overcoming the weaknesses and threats. Hotel Horns
strategic decisions were valued through finances and customer complaints/comments; and the
companys competitive advantage focused mainly on providing reasonably priced rooms to all
leisure and business travelers.

Intended Strategy vs. Realized Strategy

Taking over this hotel as a new General Manager my strategy was to provide reasonably
priced rooms to all leisure and business travelers. Not fully understanding what I was up
against, I was lead to believe this was a source of not only the hotels decreasing success but of
the cities struggling hospitality industry as well; no one was willing to pay the price. Based off of
my previous history and experience in the hotel and restaurant sector I instantly created room,
food, and beverage prices I believed to be reasonable. My hopes for the prices set were to
increase occupancy and drive up the hotels revenue. Quickly I learned there was more to
setting a price than I had ever imagined. I only ever changed my room prices one other after I
initially set them; this I believe stunted the financial growth I was expecting. The other part of
my intended strategy focused on finances and renovations. My first month as GM I was
allocated 500,000 dollars to put towards renovations, added services, and amenities for hotel
and guest use; however, I did not find it reasonable to spend all of the 500,000 dollars within
the first month. Therefore, initially I spent money on smaller projects and added more services

for guests. My hope was that the money left over would accumulate drastically with each
month that passed; that was not the case. With the money I expected to accumulate I had
intentions of renovating numerous sections of the hotel at different times, focusing on one
each quarter; this plan was to include the restaurant, bar, and guest rooms. However, due to
guest complaints and not enough financing the plan didnt go accordingly. Instead, I started to
try and keep up with my competitors; making sure I offered just as much, if not more, amenities
for the guests. Also due to the hotels lacking financial situation I took out a loan in the amount
of one million dollars; ultimately this money was used for soft-good renovations to the
premium and standard guest rooms.
Within my first year as General Manager my intended plan held strong; however, I
wasnt as lucky the second year around. Although in the second year the hotel struggled to
afford renovations for the bigger projects, conserving money in the first year is what I believe
helped me to become the more profitable hotel overall.

Strengths and Weaknesses

In comparison to my competitors, ultimately Hotel Horns financial situation was the
strongest. Mainly throughout the first year and part of the second year Hotel Horn generated
the most revenue; consistently for months the hotel was even generating a return on
investment. Ultimately, at the end of year two, Hotel Horn managed to be the leader in ADR
with $139 dollars per day and it was also the most profitable hotel out of six.
A weakness Hotel Horn had was not keeping up, renovation wise, with competitors. Due
to underestimating the amount of revenue that would be generated each month the hotel fell
behind in up keeping the rooms, restaurant, and bar. Therefore, as GM, I had to take out a loan

in order to afford such expenses. This ultimately put Hotel Horn behind the play when
compared to its competition.

Financial Condition
The graphs below represent the financial condition of Hotel Horn as of my second year
as General Manager. The first of four charts shows the departmental revenue generated by
Hotel Horn in comparison to the expenses generated and the profit/loss at which each
department function at. The last section of the chart shows the total revenue, expense, and
profit for all three department categories; rooms, food and beverage, and other departments.
$12,000,000
$10,000,000
$8,000,000
Dep. Revenue

$6,000,000

Dep. Expenses
$4,000,000

Dep. Profit

$2,000,000
$0
Room

F&B

Other

Total

-$2,000,000

Overall Hotel Horn generated over ten million dollars in revenue and only accrued a little more
than six million dollars in expenses; this totaled out to be over four million dollars in profit.

The second graph deals with the ADR, REVPAR, and TREVPAR on a quarterly basis for year two.
$160
$140
$120
$100
ADR
$80

REVPAR

$60

TREVPAR

$40
$20
$0
Q1

Q2

Q3

Q4

Hotel Horns ADR managed to be consistent throughout each of the four quarters, holding
steady around $139 dollars. However, the situation was different for REVPAR and TREVPAR.
Both REVPAR and TREVPAR stayed consistent in quarter one and two; in quarter three
however, there was a major spike. Quarter three for Hotel Horn consists of July, August, and
September; the hotels busier season and reasoning for the drastic rise in REVPAR and
TREVPAR.
The third chart below represents the revenue and profit analysis for all six competing
hotels in the area. The orange line represents the total revenue generated at each location, the
blue line represents the gross operating profit for each location, and finally the red line
represents the net profit generated at each location.

$1,300,000

$1,100,000

$900,000
Total Revenue

$700,000

Gross Op. Profit

Net Profit

$500,000

$300,000

$100,000

-$100,000

Postale

Lee

Glode

Horn

Chapin

Lavoie

As seen above, Hotel Horn remained the only profitable hotel out of six. Although our revenue
wasnt the highest and neither was our gross operating profit, collectively Hotel Horn managed
to stay right around the same level as its competitors.
Lastly, chart four shows the occupancy levels over the course of four quarters.

Occupancy Rate
80.00%
70.00%
60.00%
50.00%
40.00%

Occupancy Rate

30.00%
20.00%
10.00%
0.00%
Q1

Q2

Q3

Q4

Overall, Hotel Horn managed to have occupancy levels that followed the pattern of busier
seasons. Quarter three had the highest occupancy levels of all due to it being the hotels busiest
season.

Physical Property Condition

Since taking over Hotel Horn as General Manager I have made numerous renovations to
the hotel through refurbishments, improvements upon the facilities, and added numerous
services. Ideally, I wanted to focus on renovating each part of the hotel at separate times in
order to conserve money; this was not the right strategy. However in the course of two years I
completely refurbished the parking, grounds, pools, front desk, meeting rooms, lobby, and
public areas. I also financed money to make soft-good renovations to the premium guest
rooms, standard guest rooms, restaurant, and bar-lounge. Financially, within the next two
years, Hotel Horn is on track to complete an entire renovation to its premium and standard
guest rooms; hopefully with the money generated you will also be able to do another softgoods redo to the restaurant and bar-lounge. Also as General Manager I have made
improvements to the facilities around the hotel. Since I took office I added a business center,
fitness center, travel and tour desk, valet parking, and executive lounge for premium guests,
and retail shops. Lastly, Hotel Horn has also added guest services such as parking, telephone
access, guest laundry and dry cleaning, guestroom internet, guestroom entertainment, foreign
exchange, express check in/out for premium guests, and a turndown service. In order to expand
upon our food and beverage options, the hotel has added room service from our restaurant
and a mini-bar convenient to all guests. To add an entertainment factor, Hotel Horn has also

inquired a concierge service and music and entertainment in the lobby area. Currently the hotel
is in good condition and guests are satisfied with the additions that have been made.

Cost Control
Throughout my two years as General Manager the costs of Hotel Horn have been stable.
Ultimately, over the course of two years, we have been the leader in the wages we pay our
employees. Our staffing levels have stayed consistently around 100 percent and so has the
amount allocated to pay them. In the beginning the hotel struggled with marketing and
advertisement; we werent getting our name out there enough. Guest left comments
mentioning how it was difficult to find our hotel; therefore we put more money into marketing
our location. Turn around for the marketing difficulty was quick and Hotel Horns occupancy
levels began to rise.
Currently Hotel Horn is struggling with the food and beverage section of the hotel.
Customers are finding the food too variable and have noticed a difference in the way things are
being prepared. Therefore more money needs to be spent on kitchen staffing and food
percentages.

Recommendations
As the new General Manager and management team for Hotel Horn I believe there are a
few things you should all know in order to succeed. During the transition period between
management teams I feel it would be valuable for you to read and examine the hotels last eight
quarterly results; also be familiar with the annual records from the first eight years of
operation. There is much information to be taken from these documents. Also, it is
recommended that you are knowledgeable of the communities surrounding the hotel; such

notes can be found in the Travel and Tourism Commissions annual highlights. These notes will
help you get a better feel for the demographics you are serving and what key features of the
city will help you generate business. Lastly, it is important for your management team to have
monthly meetings to go over the information youve gathered in the last month; doing so will
aid you in making proper strategic decisions. Below is an example of the monthly scorecard
balance; if you work off of these numbers you will definitely be on your way to success.

From one General Manager to another, it hasnt been an easy road running this hotel. However
Hotel Horn is well on its way to improvement. By aiming to become 100 percent in each of
these categories you and Hotel Horn will be a five star hotel in no time!