DAT2236
Hotel Management Simulation Notes
In every Country around the world, the hotel industry is one of the most visible segments of the
service economy. Public lodging is essential for conducting business and enjoying leisure time. This
hotel simulation exercise will allow you the opportunity to boldly explore the marketing and
management of a hotel operation in such an economy without the usual and attendant risks of
failure. You may even reap the joys of a financial success!
Management begins with understanding the customer. This is the foundation of marketing:
understanding the customer and the reasons for traveling away from home, selecting a hotel, and
choosing a specific room from an available inventory. There are many surveys of important
marketing factors. These factors most often are listed as critical components:
•
Cleanliness
•
Ease of placing a reservation
•
Guest room servicing during the stay
•
Price
•
Courtesy and friendliness of the staff
•
Accessibility of shops or recreation facilities
•
Atmosphere
•
Speed of check-in and check-out
•
Amenities
When the exercise begins you will be part of an executive committee responsible for directing a
relatively new 185-room hotel. Your challenge as a group is to make key decisions about marketing,
managing, and financing this enterprise. There will be several hotels in competition with your
operation. The management committees of these operations will also be making similar plans in
their attempts to be profitable, and most likely attempting to be more profitable than your
operation. Expect to have keen competitors.
After all firms' market planning has been completed and rates have been advertised, the public can
react and make their decisions about patronage. A software package will be used to speed up the
customers' reaction time and reduce the accounting period from three months to a few moments.
In the following week of class, your executive committee will receive a variety of reports on your
operation demonstrating your business levels as well as your competitive and financial condition.
Just as in managing a hotel, your task will then be to communicate, analyze, and make fresh
decisions to improve your customers' satisfaction, your financial condition, and your enhanced
understanding of lodging management. At the conclusion of the exercise following 4 to 5 business
quarters (4 to 5 weeks in class) your management team will be responsible for developing an annual
report describing your actions, key marketing decisions, financial strategies, your successes,
failures, and what you will take forward from this management experience.
1
Marketing:
People travel for only one of two reasons; they have to or they want to. Yet, hotel designs seem to
have infinite appeals ranging from the passive grace characteristic of the Chateau Laurier to the
speedy service and efficiency of the Comfort Inn with a plethora of hotels filling every niche
between those two -- the Inter-Continental Hotel in Quito, Equador, provides oxygen bottles in
guest rooms and The Embassy Suites Hotels offers "free" cocktails every afternoon. Marketing is
creating, promoting, and performing to meet the spectrum of guest expectations.
The Marketing Plan:
The marketing plan records a firm's action with respect to the creation of guest expectations.
There are tour major parts in this creative step: price, promotion, people and product.
The marketing plan is, when compared to actual hotel operations, very straightforward. However,
these key decisions represent three months during which period no corrective action may be taken.
It is this simple, visible, three month commitment to a course of action, which makes your task a
strategic challenge. You must think of your decisions as positioning statements equally important to
the guest and competitors alike.
The hotels:
There are 6 competing hotels in your marketplace. Each of them has 123 Kings and
62 double/doubles totaling 185 rooms. They have all been in operation for the first quarter from
Jan to March as average hotels offering average services at an average rate. Basic
results from that first quarter will be distributed in class. You and your management team will be
taking over the operation of one of these hotels for the next 4 to 5 quarters (4 to 5 weeks)
Source of Business:
There are two sources of business in your hotel's marketplace, business guests and leisure guests.
The business guest is traveling because he "has to." Generally he/she travels alone and has the cost
of accommodation reimbursed by an employer, or by his/her own business organization. The leisure
traveler is away from home because he/she "wants to." The leisure traveler usually has another
person along to enjoy the experience, such as a spouse or other family members.
2
Market Periods for Travel:
The demand for accommodation by the two sources of business coincides with their traveling
Preferences. Not too surprisingly the businessperson travels mostly during the weekday period, or
Monday through Thursday, and the leisure person enjoys getting away during the weekend, or
Friday through Sunday. The two sources of business and two periods for travel create a market
matrix, or challenge, for your hotel. This matrix is "two by two" and creates four market
segments, which your marketing plan will address.
The Weekday
Business Traveler
The Weekday
Leisure Traveler
The Weekend
Business Traveler
The Weekend
Leisure Traveler
(Friday to Sunday)
(Friday to Sunday)
(Monday to Thursday)
(Monday to Thursday)
Preferred Accommodation and Room Type:
A recent market study for your hotel indicated that the businessperson prefers a large bed and
ample working space. The businessperson will spend more time in the guest room because of the
space and also because it serves as a temporary office. The leisure guest is in town to "see the
sights" and, conversely, will not spend as much time in the guest room as the businessperson. The
two types of rooms are referred to by the bedding arrangements, King rooms and Double/Double
rooms. Both room types can easily accommodate two persons.
The preferred room type adds another dimension to your market segmentation.
Weekday Overnights
The Weekday
Business Traveler
The Weekday
Leisure Traveler
(Monday to Thursday)
(Monday to Thursday)
King
King
Dbl /Dbl
Dbl /Dbl
Weekend Overnights
The Weekend
Business Traveler
The Weekend
Leisure Traveler
(Friday to Sunday)
(Friday to Sunday)
King
Dbl /Dbl
King
Dbl /Dbl
3
The objective of the marketing program is to recognize these market segments and create
the ideal combination of price, promotion, personnel and product that will maximize the
appeal to all segments.
The Quarterly Decisions
(1 quarter = 3 months -- this equals 1 week of class)
Rates:
You will be required to determine a rack rate for each of your market segments (8 in total) these
rates will be quoted and made known to customers and competitors alike. In other words, these
rates are the ones that are published and offered when someone calls to make a reservation.
Limitations:
The minimum rate for our market place is $69.00 / night and the maximum rate is $325.00 / night
Rate Incentives:
It is customary to give good customers an incentive for their repeat patronage. This incentive is a
reduction from the rack rate expressed as a percentage. This would be the "savings" for the guest
resulting from a frequent traveler program. Of course this incentive would increase your market
share in competition with other properties and give all customers a sense of a "better deal."
Limitations:
You can’t offer more than a 25% incentive
Commissions:
Your hotel can and will engage travel agents as channels for the selling process. Of course the
higher the commission rate the higher the incentive for the travel agency to refer guests to your
hotel. You will be able to determine the travel agency percentage commission on the marketing plan.
It is important to note that most guests contact the hotel directly through an "800" number or
through the hotel sales department. Commissions are paid only upon revenues booked through
travel agencies.
Information:
Typical commissions are 5 to 10%
4
Advertising:
Your management team will decide the gross dollar expenditure for advertising and promoting the
hotel. These funds would be used for media placements, printing, trade advertising, and other
various guest promotions.
Advertisements are placed with appropriate media to continuously inform your potential guests
about your hotel. The higher the commitment to advertising, the greater the coverage and
exposure outside the hotel. However if other factors are already creating a positive image with
your customers, advertising expenditures might be reduced because they are no longer as
effective.
Information:
This usually represents around 3 to 4% of your room revenues. This amount is expressed in dollars
Staff & Personnel Commitments:
Number of Staff:
This commitment represents the extent of production and service given to the guest. These
decisions translate into the number at employees scheduled for a typical day's work (8 hours).
These are "Full time or full time equivalents persons.
Clarification: If put 8 staff for guest services it means that I am budgeting (8*8hours) or (64
person hours) at the desk per day for the entire quarter. This could translate to any combination
of shifts and number of people working at the desk as long as we get 64 person hours for each 24hour period.
There are four staffing areas to make decisions on:
1.
Front Desk Staff: Reception, cashiers.
2. Rooms department support staff: Bell staff, house person
3. Number of Rooms cleaned per Room Attendant: room attendants are automatically scheduled.
4. Managerial staff for department supervision: managers and supervisors for all
operating departments
Note: In a high-end hotel with many services, you will need higher staffing level. Rooms will likely
be bigger and have more amenities which will in turn take longer to clean; guests will demand more
attention and so on.
On the other hand a limited service facility would require lower staffing levels, as guests will have
lower expectations.
5
Average Compensation & Training per Hour:
These figures represent your commitment to recruit, select, train, compensate, and continuously
motivate your hotel’s hourly staff.
This is an important strategic decision. If your hotel’s marketing plan is suggestive of a $250
average rate, the service staff must be able to render "$250 service". This does not mean that
the rate of compensation is $250 per hour for the staff. However, a price image does carry an
expectation of service to the guest. An upscale operation would need to provide upscale service.
You will need staff that have been properly trained in the production and delivery of an upscale
experience.
Conversely, if your hotel's strategy is toward minimal service, fewer skills are necessary in
production and service because of lower guest expectations. You would therefore not need to
spend as much on employees.
Product, Service and Fulfillment:
There are four decisions in this section:
1.
Laundry & Linen: This is a cost per occupied room (CPOR). Every time you sell a
room you budget this amount for all the in room bedding, the bathroom linen and
laundry expenses. A higher expenditure would mean, for instance, that extra towels
are available in the bathroom. This type of extra attention is really appreciated by
the regular business travelers
2. Guest Room Supplies: Once again this is a cost per occupied room (CPOR). These
are the in room amenities which make the room more comfortable and useful, such
as extra modem hook-ups, writing papers, soap, shampoo, plants flowers and perhaps
complimentary beverages.
3. Operation and Maintenance: This figure represents a cost per available room
(CPAR). This expenditure ensures that "everything works" in the guest rooms and in
the public spaces of your hotel. This insurance is provided by spending money on
maintenance staff labor, materials, overhead operational costs, and preventive
maintenance costs.
4. Guest Entertainment: This is a Quarterly total that represents your commitment
to the guest in the areas of guest relations and entertainment. This money is
allocated to in-house music and activities in the lobby area or on the grounds. A
weekly cocktail party for all the guests would be an example of this commitment.
6
The Process
Every week following your previous week’s decisions you will receive a series of quarterly reports
that demonstrate your performance levels for that quarter. Generally your reports will include:

An income statement: Detailing your revenues, expenses and net income for the previous
period

A balance sheet: Detailing your overall financial position (Assets, Liabilities and Owner
o Equity)

A summary of reservation requests, actual reservations and rooms sold by market
segment: This will give you information on how the public reacted to your product and
service offerings.

A guide to published rack rates in the market place: This will show you what your
competition is doing. Where are they attempting to position themselves?

A general market place analysis: This comes in the form of an Excel file and will always be
located in courseware at the beginning of each class. This is an ideal analysis tool to help
you better understand the business environment and your competitors.

Other Reports: During the simulation I will from time to time add more reports for
analysis. These include:
A comparative financial summary: A secret report that allows you to gain more
insight on your competitors.
Guest Comment Card Analysis: Gives you an insight on how your guests judge you.
Once you have received and reviewed your reports, we will proceed to a specific weekly analysis
using your data and Excel, giving you even more insight on your operation.
Once we have completed the analysis (must be done by all members). Your executive committee
(team) will be given a period of time to consider all the information and make some new decisions
for the following quarter. Following your deliberations, you will record your new decisions onto the
marketing plan for that period.
It is important that your decisions be recorded accurately. Once the committee has reviewed all
the information, the manager should sign and authorize the final marketing plan and then deliver it
with the previous analysis to myself for input.
A copy of the marketing plan form can be found on the last page of this document.
7
Considerations for your decisions:
Managing involves the continuous functions of communication, problem analysis, and decision-making.
There will be a great deal of interpersonal communication between you and the other members of
your executive committee. Communication between your hotel and its competitors will take the
form of market research and focus upon the strength of product offerings. Communication
between you and the guest is handled through the reports that I will hand back every week (they
will speak through your results).
Problem analysis will involve assessment of all the communicated information, generation of
alternative courses of action, establishment of criteria for guiding your deliberations, and
documentation of your thoughts.
It’s imperative to save all your information and summarize simple notes and
thoughts for each quarter's analysis for recollection when you create your
hotel dashboards.
Decision-making involves specific action as a result of your problem analysis. A new marketing plan
must be developed for the each business quarter. Prices must be adjusted for seasonal or
competitive changes. Advertising budgets must be detailed and explicitly communicated to the
agencies and media. Staff must be retained, expanded, or reduced. There may be as many as 35
decisions to be reviewed and refreshed for the each marketing plan.
Good luck and enjoy!!!!!
8
The Marketing Plan
Hotel Name:
Firm #
Period #
Members:
Business Market
Rates ($)
King
Dbl /Dbl
Leisure market
King
Dbl /Dbl
Weekday:
Weekend:
Incentives (%)
Business Market
Weekday:
Leisure market
%
%
Weekend:
Commissions (%)
Business Market
At all times
%
%
Leisure market
%
Advertising ($)
Weekday:
Business Market
Leisure market
$
$
$
$
Weekend:
%
Staffing and personnel commitments
# Of 8 hour shifts per day
Position
Hourly rate $
Front Desk Staff
Rooms Department Support Staff
# of Rooms per room attendant
Managerial staff for departmental
supervision
Product, Service and Fulfillment
Laundry & Linen
(CPOR) $
Guest Room Supplies
(CPOR) $
Operation & maintenance
(CPAR)
Guest Entertainment
Total $ for the quarter
Hotel Authorization:
9
Period 1
Winter
st
1 Quarter Review
Included
Copy of the completed marketing plan for Q1
Income Statement for Q1
Balance Sheet for Q1
Request for reservations and rooms sold summaries
A guide to competitive published rack rates
10
st
Decisions already made for the 1 Quarter
The Black Door
Hotel Name:
Firm #
Period #
1
1
Members:
Business Market
Rates ($)
King
Dbl /Dbl
$100.00
$70.00
Weekday:
Weekend:
Incentives (%)
Weekend:
Commissions (%)
Dbl /Dbl
$100.00 $110.00 $110.00
$70.00 $80.00 $80.00
Leisure market
%
%
Business Market
5
At all times
King
Business Market
5
5
Weekday:
Leisure market
5
5
%
%
Leisure market
%
5
%
Advertising ($)
Business Market
Leisure market
Weekday:
$10,000
$10,000
$10,000
$10,000
Weekend:
Staffing and personnel commitments
# Of 8 hour shifts per day
Position
Hourly rate $
8
6
14
4
Front Desk Staff
$8.00
$8.00
$8.00
$15.00
Rooms Department Support Staff
Rooms per room attendant
Managerial staff for departmental
supervision
Product, Service and Fulfillment
Laundry & Linen
(CPOR) $
Guest Room Supplies
(CPOR) $
$2.50
$3.50
Operation & maintenance
(CPAR)
Guest Entertainment
Total $ for the quarter
$2.50
$15,000