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Buena Vista Hotel

Final Report
Rachel Buttery

May 4th, 2015

Executive summary
SWOT Analysis
Internally, this hotel starts off with a few great internal strengths including high employee
satisfaction and be able to stay close to the budget. However, at the moment the hotel is a little
behind some of the competition in terms of new facilities.
Externally, the hotel has opportunities to grow and expand more, and gain more revenue in the
next few years. Unfortunately, we will need to gain the awareness after building the new
facilities, whereas the competition will already be known to have all of the additional facilities
available.
Market Analysis
Currently, the market is saturated with business travelers interested in using conference rooms
within the hotels. This is mainly due to the fact that tourism had decreased drastically along this
seafront area before the area renovation began in year 1.
We do intend to bring back tourism to the area in the upcoming years since the new facilities will
be more accommodating toward them. We will advertise more toward leisure travelers since the
business travelers will be accustomed to coming to the area from the previous 3 years.
Customers will stay within the original age frames of 30-50 years old and they are middle to
upper management.
We will participate in competitive pricing against our direct competitors. These include the
hotels that offer the same amenities and facilities that we do. Since we will be growing and
adding new facilities over the next few years, our direct competition could change and prices
could go up.
Goals and Objectives (years 1, 2, and 3)
We began with goals of keeping turnover low to save money training and keep employee
satisfaction high. Also to build the conference room to attract the business customers that were
already coming to the area. Making a positive amount of income was essential to keeping my
business going. Finally, we wanted to give our hotel a star rating to let potential customers know
what they will get if they stay here.
Goals and Objectives (years 4, 5, and 6)
For the upcoming years, we will be maintaining facilities conditions to above average to keep
customer satisfaction high. We will continue to keep turnover low to keep employees happy. And
to make a positive amount of income after taxes so we will be able to continue building new
facilities and making out hotel better.

Financials (years, 1, 2, and 3)


Most recently, we were able to keep staff pay below budget as occupancy increased. During the
peak summer months, our occupancy raised above budget and that caused us to go a little over
budget on some revenues and, therefore, expenses related to food, beverage, and rooms.
Refurbishments went different than planned in year 3 and that cut refurbishment costs by 50%
than planned. And finally in year 3 we were able to make a positive amount of income after taxes
due to our increased occupancy, lowered rates, and better quality rooms.
Financial Estimates (years 4, 5, and 6)
Over the upcoming few years, predictions that occupancy will grow due to the increase in
tourists, causes some expenses and also revenues to increase from previous years. With the
increase in occupancy, we will be able to charge more for our facilities without losing too many
guests. In order to keep facilities nice, refurbishments have been planned according to how long
they could last without dropping below average conditions.
Facility Expansions
To start out, this hotel needs more parking to be able to accommodate the growing occupancy in
the upcoming years. And for the increase in events, conferences, and groups in the previous
years, the addition of a second bar will come in handy and increase liquor revenues.
The following year 5, we will add the new facility of a leisure health club that will draw in the
attention of leisure travelers and will be essential to increasing tourists to our hotel.
Finally, we would like to add on the hotel shop that will simply increase revenues for the hotel
and increase guests interests being able meet their needs all in one place.

SWOT Analysis
Years 4, 5, and 6
Strengths

Weaknesses

Years 4, 5, and 6
High employee satisfaction
Able to stay within certain budget limits
Have a relative portion of the market share
Able to forecast future occupancy and sales
based on previous years.

Year 4
Not as many facilities as competition
Hotel quality not as high as competition

Opportunities

Threats

Years 4, 5, and 6
Room to advance and expand hotel facilities
and grounds
Can increase public awareness
Room to increase room rates
Will make as much revenue as competition

Year 4
Competition slightly better in most aspects

Year 5, and 6
Slightly behind some competition in terms
of new facilities

Years 5, and 6
Competition will have already be known to
have all facilities imaginable, whereas,
Buena Vista will be just catching up.

Market Analysis
Previous market changes.
Initially, my hotel was taking in about half of the number of reservations on weekends than we
were on weekdays. Due to this ratio, I decided to advertise toward weekdays and business
travelers and to bring in my share of the market by adding on a conference center. Our numbers
increased drastically, however, the ratio stayed about the same throughout the next two years. We
began to receive twice as many conferences throughout the week than we were on weekends. I
believe this was due to the right advertisements.
Buena Vista Hotels rooms market share increased each year from 11.4% in year one, to 24.07%
year two, and then to 30.93% in year three. Our relative market share also increased from 11.5%
in year one, to 15.7% in year two, and finally to 17.8% in year three. This shows that my hotel
does have the experience and potential to increase its market share each year forthcoming as it
did previously.

Upcoming market changes.


Since tourism was initially lower in year one, I believe that the market will begin to gravitate
back towards having more weekend and leisure travelers visit the area in the near future. Since
my hotel has been advertising toward business customers since year one due to the lowered
leisure customers and continued number of business customers, there is a clear potential to
increase the number of leisure guests if my hotel was to now begin to advertise toward that
market. It was necessary to refurbish and add facilities to gain any customers, but adding health
facilities and extra bars will help to market toward leisurely guests more.
Current and potential target market.
Buena Vista Hotel is currently marketing toward business travelers. These customers are not as
price sensitive as leisurely travelers are. The market seemed to be catering more toward business
by having multiple hotels with conference centers. Also since the number of tourists were
decreasing over the previous years, it was easier to cater toward customers that would be visiting
the seafront no matter the season due to the nature of their business.
The whole point of the renovations and refurbishments of the hotels in this area was to bring
back the tourists. In order to bring back tourism to the area over the next few years, my hotel will
be advertising toward leisurely guests on the weekends. Now that the hotel is refurbished, clean,
properly treating its employees and customers, and also will have more leisure departments or
activities such as the health club, second bar, and hotel shop, we will better be able to
accommodate the leisure travelers and bring their demand for rooms back up to an average of
50% year round.
Intended pricing strategy.
Throughout year one and two, my prices were too high to gain the occupancy needed to
pull my hotel out of debt. During year three, I had figured out a good pricing strategy for rooms
and meals that would increase occupancy and drive Buena Vista Hotel into having a positive
income. Over the next three years, I will first keep my prices low to gain the occupancy I need to
make a positive amount of income after taxes. I do intend to increase my prices slightly during
peak seasons and also each upcoming year as my occupancy grows high enough that I will be
able to do so while still keeping customers.
We will be participating in competitive pricing against our direct competition. As we add
facilities, we will need to increase prices to compete with the other hotels that offer the same
amenities.

Goals and Objectives


Years 1, 2, and 3
Previous Goals and
Objectives

How were they


measured?

Were they
acheived?

Justification

Year 1
Decrease annual
turnover to less
than 10%

According to the
sum of year ones
annual staff
turnover
percentage shown
in the Average
Indicators Report.

Year 1 - No

In year 1, I received an annual


turnover rate of 33.3%. After
receiving this percentage for
year 2 as well and also
receiving the lowest turnover
rating for year 2 of 36.3%, I
realized that a 10% turnover
rate was too low of a goal to
begin with.
I had changed this goal for
years 2 and 3 to increase the
percentage to a more realistic
percentage of 30%.

Years 1, and 2
Build conference
rooms

When the
conference rooms
were marked
installed.

Year 1 - No
Year 2 - Yes

My initial plan in year 1 was


to hold off on building new
facilities or refurbishments in
order to gain some income.
Since that was not effective in
comparison to my competitors,
I began the construction of the
conference rooms at the start
of year 2 and it wasnt
installed / fully functional until
May of year 2.
In future years, I will not hold
off on renovations or new
facilities since they take so
long to build, the faster I begin
the construction, the faster I
am able to gain revenue from
the facilities.

Previous Goals and


Objectives

How were they


measured?

Were they
acheived?

Justification

Years 2, and 3
Make a positive
amount of income
after taxes

Based on the
number in the
Income Statement
of the sum of each
year individually.

Year 2 - No

In year 2 I lost even more


income than I did in year 1
because of the new facilities
being built, but not making
any revenue until later in the
year.

Year 3 - Yes

Based on strategies and


mistakes I had made in years 1
and 2, I was able to stick to
budget more carefully in year
3. I adjusted staff levels to
match occupancy, and
advertised strictly. With the
addition of the new facilities,
low spending, and lower room
rates, I was able to make a
positive amount of income in
year 3.
I will continue the strategies
used in year 3 to maintain a
positive income in future
years.

Previous Goals and


Objectives

How were they


measured?

Were they
acheived?

Justification

Years 2, and 3
Keep annual
turnover below
30%

The percentage of
annual staff
turnover shown in
the Average
Indicators Report
for the sum of
each year
individually.

Year 2 - No

I received a annual turnover


rate of 36.3% for year 2 and a
rate of 37.2% for year 3.
Unfortunately, I did not reach
this goal identically, however
these percentages are close
enough that that they have
given my hotel one of the
highest staff satisfaction
percentages in comparison to
the competition.

Year 3 - No

Buena Vista Hotel will


continue to keep turnover as
close to 30% as possible to
maintain the high level of staff
satisfaction.
Years 1, 2, and 3
Have a two star
hotel rating

Based on the
specifications
listed in the
Background
Document to
qualify for a 2, 3
or 4 star hotel.

Years 1, 2,
and 3 - No

Based on the specifications in


the Background Document for
my hotel, I thought it easiest to
try to gain the lowest star
rating to begin with. Since I
did not have a conference
room in year 1, and half of
year 2, I wasnt eligible for a
two star rating. After I built the
conference rooms, I just
needed to keep my rooms at
Excellent Standards. However,
with my rising occupancy in
years 2 and 3, I realized it
would have costed too much to
maintain Excellent Standards
of rooms constantly.

Goals and Objectives


Years 4, 5, and 6
Future Goals and Objectives

How will they be measured?

Justification

Year 4
Refurbish the bar and
conference room to
maintain a good standard
facilities rating all around.

According to the Monthly


Indicators Report, after
refurbishments of these
areas, their conditions will
change from Average to
Good.

Based on the Monthly


Indicators Report of
December of year 3, all
facilities are in good
conditions except the bar
and conference rooms
which are in average
conditions. A level 1
refurbishment will perk
them back up to a good
condition.

Years 4, 5, and 6
The Monthly Indicators
Report will list the current
Continue to make
refurbishments as needed to
standards of all facilities
keep all facilities above
each month. They will need
average condition.
to be Good or
Excellent.

Above average conditions is


where I want my hotel to
stay in order to keep guest
and staff satisfaction high.

Years 4, 5, and 6
According to the Statement Making a profit is important
of Income at the end of each
in a business in order to run
Gain a positive income after
taxes with growing numbers
upcoming year. This report
effectively (or even stay in
each upcoming year.
will inform me of all
business). Years 1, and 2
revenues and expenses that
were so bad with a loss of
affect having a profit (or
income after taxes. These
loss).
first two years had put this
hotel a few steps back from
recovery. With year 3 finally
gaining a positive income, I
feel my hotel will continue
to use the same tactics to
gain even more of a profit
each upcoming year.
Years 4, 5, and 6
Within the Indicator
Averages Report of each
Maintain an annual turnover
rate below 40%
entire year will show the
percentage of the annual
staff turnover.

Maintaining an annual
turnover between 30% and
40% has given my hotel an
advantage of having high
staff satisfaction.

Financial Targets
Years 1, 2, and 3 Results
Actual
Year 1
Results

Actual
Year 2
Results

Actual
Year 3
Results

Year 3
Estimated
Targets

1) Available
Rooms

91,000

90,003

89,953

91,250

2) Occupied
Rooms

20,762

44,618

56,220

54,750

Explanation for difference and


what steps will be taken to prevent
this next year
(if varies by $50,000 or 15%)

3) Rooms
Revenue

1,715,7152,995,1683,606,999 3,633,210

4) Front
Office
Payroll

296,981 315,158 311,561

392,301 21% decrease: Adjustments were


made each month to accommodate
the occupancy rate of that month.
This kept expenses low during
slow months.

5)

461,938 565,077 562,993

708,472 21% decrease: Each month


staffing was adjusted based on
turnover and occupancy rate.

147,353 357,805 439,404

379,443 16% increase: Due to the increase


in occupancy during the peak
summer months, laundry was
more than expected.

Housekeeping

Payroll
6) Total
Room Direct
Costs
6a)
Laundry

78,829 171,451 213,919

6b)
Training

18,547

21,540

29,568

6c) Guest
Comfort

49,829 159,621 203,945

240,375

7a) Total
Food
Revenue

21,945

109,500

1,191,3892,195,0322,774,318 2,095,100 32% increase: previous reports


show that the restaurant had
always been successful due to
marketing and advertising meals
to the local community.

7b)Total
Food Costs

466,087 779,961 970,142

628,530 54% increase: In relation to the


increase of food revenue, the food
cost will increase as well because
we had to order more food than
expected.

8a) Total
Beverage
Revenue

460,320 646,012 795,995

607,579 31% increase: Previous reports


show that the beverage sales went
along with the meal sales and were
always more successful than
planned.

8b) Total
Beverage
Costs

188,171 258,385 318,364

301,694

9) Total F&B 603,157 1,030,0361,039,032 1,234,397 16% decrease: Due to the constant
Payroll and
turnover of staff in this
Related
department, decreasing the
number of staff was a strategy that
was tried in year 3.
10) Total
F&B Direct
Costs

120,891 187,548 219,643

178,377 23% increase: Because food and


beverage sales were higher than
expected, their related direct costs
were also more than expected.

11) Total
Other
Revenue

52,241 216,968 279,197

239,843 16% increase: Charging for the


internet access data point had
proved beneficial to the increase
in occupancy during the summer
peak months.

12) Total
Other Costs

33,930 121,084 148,534

133,832

13) CAC
Total Payroll
& Related

329,899 430,572 420,477

430,572

14) Sales &


Marketing

57,665 220,276 220,510

220,276

15)
Refurbishing
Costs

0 1,336,834426,646

16) Other
Direct Costs

644,852 720,328 887,320

806,154

17) Total
Fixed Costs

1,123,4141,067,586992,480

1,067,586

18) Other
Income

19) Income
Taxes

0 149,809

888,750 52% decrease: The planned 3


times room refurbishments had
turned out to seem too expensive
and unneeded. With addition to the
unplanned refurbishments of the
restaurant and front desk that were
needed.

0
0 $149,809 increase: Because
refurbishments were cut from the
budgeted amount and also staff
expenses were lower than
budgeted, the hotel was able to
make a positive income after
taxes.

Financial Analysis
Years 4, 5, and 6 Estimates
Estimated
Year 4
Targets

Justification
for Year 4
Targets

Estimated
Year 5
Targets

Justification
for Year 5
Targets

Estimated
Year 6
Targets

Justification
for Year 6
Targets

1)
Available
Rooms

91,250

Total rooms
available

91,250

Total rooms
available

91,250

Total rooms
available

2)
Occupied
Rooms

54,750

60%
occupancy

63,875

70%
occupancy

73,000

80%
occupancy

3) Rooms
Revenue

3,558,750

4) Front
Office
Payroll

$65 ADR
(close to
previous year)

4,471,250

54,750
occupied rooms
/365 days/year
=150 rooms/
day

398,034

9 staff/day
*7 days/week
=63 shifts/wk
/5 shifts each
=12.6 staff/wk
12.6 staff/wk
*486 level 3
pay

*52 weeks/
year
*1.25 taxes

464,373

$70 ADR
(slightly
increased rates)

$80 ADR
5,840,000

(increased rates
due to new
facilities)

63,875

73,000

occupied rooms
/365 days/year
=175 rooms/
day

occupied rooms
/365 days/year
=200 rooms/
day

10.5 staff/ day


*7 days/week
=73.5 shift/wk
/5 shifts each
=14.7 staff/wk

12 staff/day
*7 days/week
=84 shifts/wk
/5 shifts each
=16.8 staff/wk

530,712

14.7 staff/wk
*486 level 3

16.8 staff/week
*486 level 3

pay
*52 weeks/yr
*1.25 taxes

pay
*52 weeks/yr
*1.25 taxes

5)
Housekeepi
ng Payroll

723,996

6) Total
Room
Direct
Costs

6a)
Laundry
6b)
Training

6c)
In-Room

383,561

109,500

29,700

62,963

150 rooms/day
/9 rooms
=16.7 staff/day

175 rooms/day
/9 rooms
=19.4staff/day

200 rooms/day
/9 rooms
=22.2staff/day

16.7 staff/day
*7 days/week
=117 shift/wk
/5 shifts each
=23.4 staff/wk

19.4 staff/day
*7 days/week
=136 shift/wk
/5 shifts each
=27 staff/wk

22.2 staff/day
*7 days/week
=155 shift/wk
/5 shifts each
=31 staff/wk

835,380

959,140

23.4 staff/wk
*476 lvl 3 pay
*52 weeks
*1.25 taxes

27 staff/wk
*476 lvl 3 pay
*52 weeks
*1.25 taxes

31 staff/wk
*476 lvl 3 pay
*52 weeks
*1.25 taxes

109,500

127,750

146,000

laundry

laundry

laundry

+29,700

+34,568

+39,435

training

training

+62,963

544,495

+170,546

563,575

training

+194,910

in-room
entertainment

in-room
entertainment

in-room
entertainment

+181,398

+211,631

+183,230

amenities

amenities

amenities

$2 * 54,750
occupied rooms

12.6 FO staff
+23.4 Hsk staff
*$825 level 3

127,750

34,568

$2 * 63,875
occupied rooms

14.7 FO staff
+27 Hsk staff
*825 level 3

146,000

39,435

$2 * 73,000
occupied rooms

16.8 FO staff
+31 Hsk staff
*825 level 3

training

training

training

$1.15 level 2
* 54,750

$2.67 level 3
* 63,875

$2.67 level 3
* 73,000

170,546

194,910

Entertainment

occupied rooms

occupied rooms

occupied rooms

6d)
Amenities

$2.51 level 2
*54,750

$2.51 level 2
*63,875

$2.51 level 2
*73,000

181,398

occupied rooms
*1.32 guests/
room

211,631

occupied rooms
*1.32 guests/
room

183,230

occupied rooms
*1.32 guests/
room

7a) Total
Food
Revenue

280 covers/day
*.6 occupancy
=168 covers/
day

10.41 menu 3/
2,127,804

supplier 2 food
cost
/.3 food cost
percentage
= 34.70 menu
cost

2,482,438

638,385

8a) Total
Beverage
Revenue

617,063

8b) Total
Beverage
Costs

246,825

280 covers/day
*.8 occupancy
=224 covers/

day

day

10.41 menu 3/

10.41 menu 3/

supplier 2 food
cost
/.3 food cost
percentage
= 34.70 menu
cost

supplier 2 food
cost
/.3 food cost
percentage
= 34.70 menu
cost

2,837,072

*196 covers/

*224 covers/

day
*365 days/year

day
*365 days/yr

*365 days/year

10.41 menu 3/

10.41 menu 3/

10.41 menu 3/

supplier 2 food
cost
*168 covers/
day
*365 days/year

supplier 2 food
cost
*196 covers/
day
*365 days/yr

supplier 2 food
cost
*224 covers/
day
*365 days/year

*168 covers/

7b) Total
food Costs

280 covers/day
*.7 occupancy
=196 covers/

744,600

day

851,180

795,955

795,955

795,955

year 3 total
beverage
revenue

year 3 total
beverage
revenue

year 3 total
beverage
revenue

/2,774,318

/2,774,318

/2,774,318

year 3 total food


revenue
=.29 beverage
ratio

year 3 total
food revenue
=.29 beverage
ratio

year 3 total
food revenue
=.29 beverage
ratio

719,907

822,751

2,127,804

2,482,438

2,837,072

total food
revenue
*.29 beverage
ratio

total food
revenue
*.29 beverage
ratio

total food
revenue
*.29 beverage
ratio

617,063

719,907

822,751

beverage
revenue
*.4 gross profit
margin level 3
liquor

beverage
revenue
*.4 gross profit
margin level 3
liquor

beverage
revenue
*.4 gross profit
margin level 3
liquor

287,963

329,100

9) Total
F&B
Payroll and
Related

168 covers/day
/10 covers each
=16.8 servers
+12 kitchen

1,247,501

10) Total
F&B Direct
Costs
170,182

11) Total
Other
Revenue

196 covers/day
/10 covers each
=19.6 servers
+12 kitchen

staff

staff

staff

=28.8 staff/day

=31.6 staff/day

=36.4 staff/day

28.8 staff/day
*7 days/week
=201.6 shifts/

31.6 staff/day
36.4 staff/day
*7 days/week
*7 days/week
1,368,786
1,576,702
=221.2 shifts/
=254.8 shifts/

week
/5 shifts each
=40.32staff/wk

week
/5 shifts each
=44.24staff/wk

week
/5 shifts each
=50.96staff/wk

40.32 staff/wk
*476 lvl 3 pay
*52 weeks/year
*1.25 taxes

44.24 staff/wk
*476 lvl 3 pay
*52 weeks/year
*1.25 taxes

50.96 staff/wk
*476 lvl 3 pay
*52 weeks/year
*1.25 taxes

2,127,804

2,482,438

2,837,072

total good
revenue
+617,063 total
beverage
revenue

total food
revenue
+719,907 total
beverage
revenue

total food
revenue
+822,751 total
beverage
revenue

=2,744,867

198,545

=3,202,345

226,909

=3,659,823

*.062 year 3

*.062 year 3

*.062 year 3

total other
expenses
percentage

total other
expenses
percentage

total other
expenses
percentage

2.50 telephone

2.50 telephone

revenue

revenue

*63,875
=159,688

*73,000
=182,500

2.50 telephone
revenue

270,400

224 covers/day
/10 covers each
=24.4 servers
+12 kitchen

*54,750
=136,875
+133,525
internet year 3
revenue

293,213

+133,525

316,025

+133,525

internet year 3
revenue

internet year 3
revenue

(plus revenue
from new
leisure club)

(plus revenue
from new hotel
shop)

12) Total
Other Costs

13) CAC
Total
Payroll &
Related

143,853

53.2% year 3
total other costs
percentage
*270,400 total
other revenue

420,477

year 3 total
payroll and
related expenses

14) Sales &


Marketing

328,701

15)
Refurbishin
g Costs

155,989

53.2% year 3
total other costs
percentage
*293,213 total
other revenue

169,125

53.2% year 3
total other costs
percentage
*316,025 total
other revenue

420,477

year 3 total
payroll and
related expenses

420,477

year 3 total
payroll and
related expenses

3,558,750

4,471,250

5,840,000

rooms revenue

rooms revenue

rooms revenue

+2,127,804

+2,482,438

+2,837,072

food revenue

food revenue

food revenue

+617,063

+719,907

+822,751

beverage
revenue

beverage
revenue

beverage
revenue

+270,400

398,340

other revenue

=6,574,017

= 7,966,808

= 9,815,848

total revenue

total revenue

total revenue

*.05 sales

*.05 sales

*.05 sales

percentage

percentage

percentage

1,203 *250

1,203 *250

=300,750
+4,315 Bar
Level 1

312,375

total revenue

*11.9%

commission

1,203 *250

Rooms Level 1

Rooms Level 1

=300,750

=300,750

+5,606 Front
Desk Level 1

324,415

+6,019

948,050

*11.9%

commission

Level 1

Conference
Level 1

7,966,808

total revenue

+4,315 Bar
+19,350

Restaurant
Level 1

6,574,017

782,308

+316,025

other revenue

+19,350
Conference
Room Level 1

16) Other
Direct Costs

490,792

other revenue

Rooms Level 1

324,415

+293,213

9,815,848

1,168,086

total revenue

*11.9%

commission

17) Total
Fixed Costs

992,480 year 3

992,480 year

fixed costs

1,006,286

+8,629 extra

3 fixed costs

parking
depreciation
+ 5,177 second
bar depreciation

1,078,770

HOTS guideline

HOTS guideline

.3
* -240,507

62,600

.3
*208,665

+ 86,290

992,480 year 3
997,657

leisure club
depreciation

fixed costs

+5,177 hotel
shop
depreciation

18) Other
Income

19) Income
Taxes

income before
taxes

income before
taxes

HOTS guideline

362,393

.3
*1,207,976
income before
taxes

Facility Expansions
Actual
Year 1

Actual
Year 2

Actual
Year 3

Estimated Year
4&
Justification

Estimated Year
5&
Justification

Estimated Year
6&
Justification

Room
Mini-Bar
Internet
Access
Data Port

Quick
Check In/
Out

Business
Services

Extra Car
Parking
Area

X
This will be
beneficial as
occupancy grows

Hotel Shop

X
This will gain
more revenue from
its attraction to
leisure travelers
and event guests.

Room
Extension
Leisure
Club

Conference

X
This will draw the
attention of leisure
guest travelers to
return to the area.

Rooms
Second
Bar

Restaurant
Extension

This will relieve


bar congestion
during events and
conferences.