Study of Hotel Industry Management Control System

Yogesh Kulkarni Manoj Alat Mahesh Kothale Koustubh Pawar 0532 0501 0531 0543

Disclaimer
The presentation has used storyboard format to illustrate the various management control systems in hotel industry. All names including the name of the hotel is used solely for the purpose of illustration. All characters are fictitious as well.

Mr. & Mrs. Saurabh go to Goa for their Honeymoon!!

Glossary of Terms
PMS : Property Management System. POS : Point of Sales System Revenue Management : Pricing and Product availability management system CRS : Central reservation system Chain : Hotel chain like Hilton , Marriott Front Office : The hotel reception area Housekeeping : Hotel guest service operation after check-in Room Service : Self explanatory Banqueting : Large group dining on fixed menu Night Audit : Daily Reconciliation and revenue recognition process

The Plan

Mr. Saurabh is busy person and has managed to take out 5 days from his busy schedule, however his manager expects him to be available on call if required. Mrs. Saurabh is expecting a dream honeymoon and has plans to enjoy her stay, do shopping and relax.

Getting best Hotel Deal

Reservation system
Call centre Third party agents (e.g. websites) Direct Marketing offers

Saurabh wants to know more about hotels

External Rating
Forbes (Mobil travel guide Star ratings) Trip Advisor American Automobile association

Travel Plan for Saurabh

Day Day 1 Travel Airport-Pickup provided by Hotel Arrive at Hotel To South Goa by cab arranged by Hotel Activity Relax at Hotel Dinner at Hotel Morning Breakfast Sightseeing South Goa Dinner and music show at Hotel Morning breakfast Visit Beaches Lunch and Dinner at Hotel Shopping, Eating outside as per Mrs. Saurabhs wish Breakfast at Hotel, return back to Pune

Day 2

Day 3

To beaches by cab arranged by Hotel Cab as per request, arranged by Hotel Airport-Drop provided by Hotel

Day 4 Day 5

Behind the scene - Revenue Management

While Mr. Saurabh was trying to book, the Hotel revenue management was at work. Products being highly perishable, the hotel industry tries every trick to sell the products before they perish. Hotel room rates fluctuate on daily basis based on forecasted occupancy. The occupancy rate changes based on many factors like day, month, year, time, business segment etc. Companies use sophisticated forecasting software to manage their selling price.

Hotels can offer Saurabh attractive deals if

His wedding/honeymoon were in the lean period: 10-30% saving can be achieved since rates are this much higher in peak season than in the months preceding it. (June September)

Mid-week travel plans: 10-15%

Advance Booking, On-Line Booking: 15-20% All inclusive packages

Behind the scenes - Customer Centricity

Customers
Domestic International

Customer satisfaction target 100% Communication Co-ordination

While customer centricity is unavoidable in the service industry, it may be worthwhile to understand which products may bring value to the customer and which do not. It is also important to appreciate the fact that customer centricity does not necessarily mean that the industry adopt ad-hoc methods

Behind the scene -Industry models

Franchisee Model: Le Meridien Operating contract model: Ambience Group Ownership model: Taj, Oberoi Branding and Certification: Best Western, Ibis Business Hotels / Leisure Hotels: Courtyard by Marriott

Airport to Hotel

Airport Pickup

The Arrival
Front Office

Room Service

And they open champagne

Foods and Beverages

Spa

Services Used by Saurabh at Hotel

Dinner at the Beach Wireless Internet to send mail Hotel Phone

Booked a car for city travel

Hotel laundry service

Video on demand for movie

Food through room service

Video Conferencing

Used hotel concierge to seek information

Various functions
Club Management Financial Management Food & Beverages Front Office Gaming General Management Guest Service Housekeeping Human Resources Maintenance & Engineering Risk Management Sales & Marketing Health Club & Spa

Definition and types of Management Control

DEFINITION The process by which the managers influence other members of the organization to implement the organization strategies (Anthony & Govindarajan) Control Part of Strategy Implementation

TYPES OF CONTROL
Strategy Formulation Management Control Operational Control

Formal Management Control

Control Processes
The main aspects of the Control process deals with: Risk management Audit Process Disclosures Capital Budgeting

Risk Management and Concerns

General Economic Conditions Socio-political Risk Competition from international hotel chains Increased Outbound travel Foreign Exchange fluctuation risk

Capital Budgeting
Concentrating on the budget planning and asset allocations. There is a strict allocation of budget for the respective hotels under group and pre-determined targets for the appraisals. The company divisions are the profit centers and have set guidelines to be met under the budgetary planning done by the organization. All the approvals regarding the capital investments are from the top

management and there is nothing which can be done without the managements
go.

Behind the Scene

Reservation
Parameters
Call Conversion Talk time FIT business Up-sell Cross-sell Reservation Guest feedback CRM

Front Office
Parameters
Check in time Check out time Problem resolution Up-sell Cross-sell Customer feedback PMS Guest feedback

Housekeeping
Parameters
Zero defect room Time to re make Response time Resolution time Customer feedback PMS Guest feedback Service delivery

System

System

System

Restaurant Service
Parameters
Time to serve Accuracy of serve Up-sell Customer feedback

Laundry Service
Parameters
Zero defect laundry Time to service Customer feedback PMS Customer feedback Service delivery system

Credit Function
Parameters
Error in invoicing DSO Customer feedback Internal customer feedback PMS Customer feedback AR

System
System
POS Customer feedback Service delivery system

System

Behind the scene Value Chain

Sales & Marketing Support Finance & legal responsibility Centralized Procurement

B R A N D I N G

Standard Operating Procedure & guest feedback system Construction and Project Management

Taj
Exotica

Reservation Network

Training

B R A N D I N G

Loyalty Programs

Workforce

Employee Motivation Program

Organization Structure

Balanced Scorecard

Balanced Scorecard
Financial Perspective Goal Weight Description Performance Measure Target Customer Perspective (x of 10) (%) unit Values Goal Weight Description 53.63% Performance Measure Target 3 (x It ofrefers 10) to wage cost (%) Values Wage Costs as a % of total sales 3 40% % 0%unit Efficiency as a % of total sales of 3 65.56% Goal Weight It refersDescription the Number of positive feedbacks 3 hotel. to number of 9 Performance Score Measure 10 Target (x of 10)positive (%) unit Values feedbacks Staff perspective Annual operating profit per room 3 Hotel Management It refers to annual 10000 $ 25000 Balanced Scorecard 2 profit 29.67% received Goal Weight Description Performance Measure Target operating per from the Perspective Performance % of room booked through 2 customers It refers (on a to scale % of room 25% 100% Values (x of 10) (%) % unit room available in the reservation channels of 1 to 10). booked through Financial Perspective 53.63% hotel. 2 65.78% reservation channels Staff turnover 3 It refers to staff 10% 10 % 0% Number of complaints received 2 2 It refersmaintained to number of the % 3 Score Customer 65.56% Food cost as a % of food sales Perspective Metric is not available 40%by 0% turnover rate at the complaints received in trial version hotel. Efficiency 29.67% hotel. from the customers Staff perspective Internet bookings 2 regarding the services the % of the 30% 65.78% 100% Technological competence of staff 2 indicates It means 9 % Score 10 % increase in labor costs 2 Metric is not available 20% % 0% provided bookings by hotel received (on a competence of staff to Total Performance in trial version 54.85% scale ofthrough 1 to 10).internet accurately utilize Scorecard includes 4 services. technological Response rate 3 Metric is not available 1 minutes 1 Financial Perspective 53.63% categories, 17 indicators like POS,60% Room occupancy 2 in trial version Metric is equipment not available % 100% telephone, etc. (on a in trial version scale of 1 to 10). Frequent customers as a % of total 2 Metric is not available 30% % 100% Rate of sales inquiry conversion 2 in trial Metric is Metric not available 30% 60% customers Average length of employment 3 version is not available 7 % Score 10 in trial version in trial version Average length ofof stay Number training sessions 2 Customer Perspective 65.56% not available 2 2 Metric is Metric is not available in trial version in trial version

3 days

#4

Efficiency Staff perspective 29.67% 65.78%

Thank you.