Extract of board report
 Financial aspect of performance
revenue
the revenue seems to have increased from the previous year from 121701 to
131072. It has also exceeded the budget by 1725. This increase seems to be due
to the increase in occupancy rates of Zilber accompanied by the increase in room
rates from 145 to 150. This seems to give a good picture of Zilbers financial
performance, however looking at revenue in isolation can be misleading.
Revenue after discounts is 3.4% higher than the previous year however it is 2.4%
lower than the budget. This would seem to be because of the huge number of
discounts offered to encourage an increase in occupancy rates but ultimately
leads to a decline in revenue.
Furthermore, it has be highlighted that demand from customers has been
declining as a result of tough economic conditions, this would make the decision
to increase room rate to 150 seem unwarranted. This might have led to the
increase in discount offers to help maintain and or attract customers.
In light of all of this, additional revenue has become an important source of
income as it could help recover the loss from offering higher discounts on the
rooms. In fact, the other revenue has exceeded the budget by 1.3% and has
successfully exceed last year’s results. Zilber could use this additional stream of
revenue to their advantage by encouraging the customers to indulge in these
additional activities.
Operating profit and margin
Despite the increase in revenue the operating profit margin has declined by 1.6%
compared to last year and is 3.5% below the budget. The main reason would be
because of the large discounts offered however an increase in operating costs
have contributed to this.
Operating costs have increased by 5.3% as compared to last year and are almost
2% above the budget. It should be the priority of Zilber to control costs especially
in the current economic downturn.
According the board of Zilber Operating profit margin is a key performance
indicator and according to the results, Zilber does not seem to be doing too well.
ROCE
The ROCE has declined from 48.3% last year to 42.8% this year and is 8% below
the budget. A major contribution to this decline would be the falling in operating
profits. Furthermore, the fact the Zilber has yet to invest in its refurbishment
which will bring the ROCE down is further should be considered.
 Non-financial indicators
Customer satisfaction scores
According to the board of Zilber, customer satisfaction scores is another key
performance indicator and would be just as important as operating margins.
Customer satisfaction scores declined from 8.9 to 8.5 effectively moving Zilber
from the top 10% of hotel to the top 25%. This is a detrimental declining
considering the period was 1 year. Zilber cannot afford to lose their position and
reputation especially in light of current economic conditions.
According the customer, the comfort of rooms, convivences of hotel locations, and
the quality and efficiency of the customer services are the most important to the
customer. Considering this, there having been customer complaints and in
particular many customers complained on the decline in the standard of service as
compared to previous visits. They have also stated that the rooms would benefit
from redecorating, however this is an issue for Zilber as they lack the necessary
capital for such investment.
It is important that Zilber not lose focus on the customer satisfaction as it would
lead to loss of market share and a contraction of customer base. Furthermore, it
would mean that the customers might not recommend Zilber to others and in fact
spread negative reviews which would be detrimental to Zilber.
FAO Finance Director
 Suitability
The acquisition of Havis might seem to be a decision that is beneficial to Zilber as
it would enhance Zilber’s growth. Furthermore, Havis has a 4* rating, similar to
that of Zilber.
However, there are other considerations that must be taken into account before
the acquisition of Havis can be considered to be in the best interests of Zilber.
Different customers. Havis has a different target market compared to Zilber.
Where Zilber caters to business customers, Havis caters to leisure customers. As
such 6 out of the 10 hotels of Havis are located in rural areas, areas where it
would not be in the convenience of Zilber’s business customers. Furthermore, the
design of Havis hotels is different to Zilber’s. This can be an issue for Zilber as all of
its hotels have the same specification and facilities to ensure business customers
know what to expect. The different designs may be disruptive to Zilber’s
customers.
Additionally, Zilber’s main reason for this acquisition is that they were not able to
find any suitable buildings to be able to grow organically as they have in the past.
Hence this acquiring is a substitute to growing organically, which would not be a
valid reason for acquisition.
Considering the above reasons, it would not seem strategically sound for Zilber to
acquire Havis, unless Zilber aims to obtain a diversified market.
 Feasibility
To be able to acquire Havis, Zilber would need to have access to sufficient funds to
be able to buy Havis, but not only that, they would need funds for extra
expenditure on Havis’s hotels. It has been stated that the conditions of these
hotels are in relatively poor condition and would require expenditure. Also, since
the designs of the hotels are different to Zilber’s, increased expenditure may be
required in order to standardize its design. The fact that Zilber has delayed its own
refurbishment due to lack of capital should be noted.
Up till now, Zilber has grown organically and this would be the first time it would
be endeavoring in acquisition. For an acquisition to be successful, there must be
previous experience and the lack of this increases the risk of such a transaction.
The risk appetite of Zilber’s board would have to be considered.
 Acceptability
It is in the shareholders interest to grow as they have increasingly become vocal
about it. In this context it is acceptable however if more information was available
a better shareholder response would be able to be analyzed.