BY:
1.0 Introduction........................................................................................................................1
1.1 Background...............................................................................................................................1Overview...........................................................................................................................................1
2.0 Macro-environmental analysis (PEST).......................................................................................2
3.0 Micro-Environmental analsysis (SWOT)....................................................................................2
4.0 Market Strategy analysis............................................................................................................4
5.0 Staff performance analysis........................................................................................................6
6.0 Conclusion and recommendations...........................................................................................6
The monograph of this report to provide a comprehensive analysis on the Bill Reynolds’ report with respect to the operational management strategies of Barchester Hotel. As John Curtis has recently purchased this hotel, this report serves as a consultancy guidance for future hotel managers to optimize their management efficiency and effectiveness. Both macro-environmental and micro-environmental factors would be assessed through PEST and SWOT model. Current marketing strategies would also be assessed in details. Through identifying the internal and external factors, it would be feasible for the hotel managers to develop competitive advantages for Barchester Hotel to outperform the rest competitors.
1.0 Introduction
1.1 Background
The Barchester Hotel is located in Hampshire, England. The Barchester town itself is more famous for its ancient buildings, which could be dated back to the 14th century. According to Bill Reynolds’ report, there are several richly carved chantry chapels and beautifully carved stalls and coffers Barchester’s architecture. They are collaboratively called the Barchester Abbey. Besides, it also seems that Barchester also has a relatively small population of 48,000. The employment structure is coherent with the UK’s national pattern. In other words, majority of the employees are working for the manufacturing sectors. Bill Reynold, the senior hotel manager, has managed to collect data of the company sizes according to the number of employees. There are only four large companies with more than 500 employees. But companies with employees lower than 10 or between 10 and 50 are in much larger number. It shows that there are more small and medium-sized companies in Barchester. Investors who have interests in hospitality industry need to be cautious about this information(Santich, 2007). For instance, if a company is situated very close to the manufacturing factories, it would cause the hospitality services less promising to customers. Very unfortunately, the Barchester Hotel is located very much closer to the unfavorable industrial areas. However, there are very feel factories nearby the Barchester Hotel. Customers could also enjoy an open view of Barchester Abbey in the hotel. Moreover, it is also undeniable that customers could enjoy very good accessibility as the hotel is very close to M3, which connects to Southampton to London. In other words, individual or group travelers often choose the Barchester Hotel as an intermediate stop for their tour coaches to and from the South coast(Mills, Han and Clay, 2008). Besides, the Barchester is also very close to “Brewester Town”, a local prestigious football club. Professional football players are trained in the stadium. In addition, there is also an old theatre nearby the hotel. Each year, a musical festival would be organized for local residents.
1.2 Overview
John Curtis recently has bought the Barchester Hotel. Previously, he had paid several visits to this hotel. He had very good impressions about the local environment and finally made the decision. In 2016, Bill Reynolds worked on behalf of John Curtis to produce an operational management report for the hotel operators. However, it is more relevant and meaningful to re-evaluate the current marketing and management strategies to ensure that the data are up-to-date. As a professional consultant team, our report would provide a very systematic and comprehensive analysis on the macro and micro environmental factors, current marketing strategies, staff performance. Recommendations would also be proposed according to guide the hotel operators’ decision-making process in order to enhance the overall management effectiveness and efficiency.
In this business report, in section 2.0, a PEST analysis would be performed in order to evaluate the macro-environmental factors. In section 3.0, SWOT analysis would be conducted to investigate the micro-environmental factors. In section 4.0, current marketing strategies would be critically evaluated. In Section 5.0, staff performance would be assessed accordingly. H.O.T.S Simulation model would be employed to assess the staff performance based on different factors. In the last section, conclusion would be made based on the analyses. Recommendations would be also proposed to facilitate hotel operators to realize the short-term and long-term target in the overall management process.
2.0 Macro-environmental analysis (PEST)
PEST is an acronym for political, economic, soico-cultural and technological factors. PEST model is often employed to provide a macro-environmental analysis for hotel operators to understand the current market situations.
Politically, the U.K has a comparably stable political environment as compared with other European states. The political stability is a prerequisite for conducting business operations and activities. However, there are some other political factors which might affect the hospitality industry in U.K. First, the controversial “Digital Economy Act 2010” was launched by the Parliament. Even though the original motive of this law is to discourage the illegal file-sharing, hotel managers would be very reluctant to execute this act (Farrand, 2010). It is largely because hotels would provide free Wifi connection for customers. However, if they stop providing free Wifi or strictly regulate the internet access, it is obvious that customer experience would be adversely affected. In addition, under the Brexit policy, many European residents are restricted from entering and working in U.K. The New Immigration polices of the U.K have also changed significantly. It would be difficult for foreign chefs, hotel managers and so on, to work in U.K hotels(O’Carroll, 2017). As such, it is expected that there would be a remarkable shortage of manpower in the local hospitality industry.
Economically speaking, the travel and tourism industry of U.K has developed very fast in the past decade. According to the Bill Reynold’s report, more and more local and foreign travelers choose U.K as their tour destination. Due to fast and rapid transportation system, it is very convenient for travelers to travel around country. For instance, as the M3 connects Southampton to London, it is more likely for travelers to choose Barchester for tour coaches.
Social-culturally, the dominant religious group in the U.K is Christian(Furman et al, 2004). In other words, people who believe Christianity would be more interested in religious architectures. In Barchester, there are beautifully carved chapels. Therefore, people might enjoy their religious tour in the small town. Besides, there is also a very strongly football culture in U.K. people are fascinated by football games. A large number of people would take the premier league as part of their life. It would be beneficial if a hotel is situated besides a football club(Giulianotti, 2002).
Technologically, due to the rapid technological development, individual or group travelers would prefer that they could make online bookings beforehand(Sparks and Browning, 2011). It would be more time-efficiency as they could check-in directly without reception. Currently, hotels would usually cooperate with online travel intermediaries to jointly promote the early booking services. Besides, customers would also require very good internet accessibility. It would be much easier for them to be connected with the world outside.
3.0 Micro-environmental analysis (SWOT)
Micro-environmental analysis is usually conducted for hotel operators to identify internal strengths, weaknesses and external opportunities and threats. Through understanding these factors accurately, it would be beneficial for hotel managers to make rational and conscious decisions.
Table 1: SWOT analysis for Barchester Hotel
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Strength Ø Historical heritage and architecture Ø Good accessibility (Accessible to M3) Ø Ensuite Bathroom Ø Well-cooked food Ø Moderate suite price Ø Close to football club
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Weakness Ø High Turnover rate (75%) Ø Old bedrooms Ø Unexciting and a-la-carte style of food Ø Near the industrial area Ø Distant from the airport (50 miles) |
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Opportunities Ø To explore business opportunities in historical and religious tour Ø To promote business trips
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Threats Ø Vigorous competition in the local hospitality industry Ø Depreciation of the currency |
The SWOT analysis is conducted based on Reynolds’ report. First, to identify the internal strengths and weaknesses of Barchester would help the hotel managers understand the strategic capabilities and potential problems more sharply. Through realizing the internal strengths and identifying the respective internal problems, it is more feasible for hotel operators to develop more competitive advantages in order to ensure the business success in the local hospitality industry.
In terms of strengths, according to the Reynolds’ report, Barchester town has long been famous for its natural attractions and historical sightseeing. From Barchester Hotel, customers could enjoy an open view of the most beautiful spots, namely the Barchester Abbey. It is also has a very good accessibility to the M3, which connects Southampton to London. In other words, if individual or group travelers would prefer to choose Barchester hotel for the tour coaches if they are heading for the South Coast. Besides, even though the bedrooms are quite old, there are very accomplished ensuite bathroom for each traveler. Customers could also enjoy the well-cooked food. Currently the restaurant on the ground floor is operated by a 75-year-old lady. The best recipes are the breakfast and English grill. Most important, Barchester also provides very competitive price as compared with its competitors. The Bed and Breakfast price is only £55.00 for double room and £45 for individual room. Last, the hotel is also close to a local football club. Even though the football team is “relegated from the "N Power" second division to the Southern Premier League”, people could still hold social activities such as wedding, buffets and so on, in the club.
However, it is also necessary to point out that there are still many weaknesses in Barchester Hotel. The most severe weakness is the high turn-over rate. Even though the hotel operator is trying to bring down the rate to 35%, according to Reynolds’ report, the turnover rate last year was as high as 75%. It means that three quarters of the employees choose to leave the hotel. It suggests that the current staffing policy should be readjusted. Moreover, the Barchester’s suites tend to have very low specification. In order to enhance the customer’s experience, it would be advisable to renovate the rooms and try to introduce more promising furniture. Furthermore, even though the food is well-cooked, the a-la-carte style might make the recipes “unexciting” for customers. It would be necessary to increase the variety of recipes. In addition, the Barchester hotel is also very distant from the airport. In other words, even though local travelers might choose the hotel for tour coaches as they are travelling by train, it would be difficult for foreign travelers to go to the hotel directly by air. Another weakness is that customers would feel irritated as the hotel is located near the industrial area. Even though there are no factories besides the hotel, customers might still feel that Barchester Hotel is not their ideal choices(Brotherton, 2012).
Besides the internal factor analysis, it is also necessary and essential to identify the various external factors. Currently, as Barchester is famous for its historical architecture and natural attractions, it would be viable for Barchester hotel to promote local sightseeing to individual and group travelers. Barchester hotel could cope with online travel agencies or intermediaries to jointly promote local scenery such as Barchester Abbey, Barchester Tower, chapels and so on. Local and foreign travelers could know more about the town through rating system in their apps. Moreover, as the hotel is located in the industrial area, the headquarter should consider to provide business trip accommodation to business travelers. For instance, conference room should be provided for this target group.
Accordingly to Reynolds’ report, the vigorous competition in the local hospitality industry would a potential threat to Barchester Hotel. So far, there are four other hotels in the same region. The hospitality market seems to be saturated. Therefore, in order to surpass the competitors, Barchester hotel would have to develop more competitive advantages. Besides, the depreciation of the U.K currency has also contributed its part to the net loss generated last year.
4.0 Marketing strategy Analysis
Majority of hotels would practice market segmentation in order to identify the different target customers. So far, accordingly to the Reynolds’ report, there is no very noticeable market segmentation measures have been done. In fact, based on customers’ behaviors, demographics, geographics and psychographics, it is very feasible to divide customers into different target group. From the business report, it could be inferred that the dominant group is travelers. However, as there are only two types of suites available in the hotel, namely the double room and single room, it would be quite important to propose very different marketing strategies for individual travel and group travelers respectively.
Individual traveler would prefer the individual room more than the double room. In order to motivate them to consume the accommodation services in Barchester, the hotel operators would have to provide them hospitality services with higher quality. For instance, the suite should be beautifully designed. The living environment should be clean. So far, according to the Reynolds’ report, the service quality could meet customer’s expectation as the room is clean. Even though the suites might be very old, it does have accomplished facilities such as bathroom. On the other hand, group travelers are often identified to be close friends, family members and so on. The hotel managers should ensure that the double room should be spacious enough for them.
Generally speaking, the pricing strategy employed by Barchester is still price leadership(Tyagi, 2001). In other words, in order to survive in the vigorous competition, Barchester has to lower its suite price to earn a competitive advantage over its major competitors. It is also the major reason why the suite price is very low. However, it is more advisable for Barchester to employ a value-based pricing strategy as shown in the diagram below.
Figure 1: Cost-based Pricing vs Value-based Pricing
From fig 1, it is obvious that through introducing the cost-based pricing strategy, hotel manager would have to estimate the cost of “hospitality” service and introduce a reasonable price to customers. However, hotels would have to lower the price in order to convince customers that the hospitality service is provided with a reasonable price but in a good quality. If a hotel does not offer a lower price, customers could easily switch to another one. However, based on the value-based pricing strategy, hotel managers could impress the target customers with the “value” created. Once target customers are convinced that the value is unique and meet their expectations, they would not consider the price factor too excessively(Hinterhuber, 2004).
Besides, it is also advisable for Barchester to employ a price discrimination strategy. From Reynolds’ report, during the weekends, the occupancy rate would be higher. Hence, it is more advisable for the hotel operators to charge a higher price during the weekends and a lower price during the weekdays. It would maximize the profit margins and fully capture the consumer surplus.
5.0 Staff Performance assessment
In order to assess the staff performance assessment, usually strategic human resource management strategies would be introduced in the overall management process. Usually employees are assessed based on a very accomplished appraisal system. If employees could render desirable services, they would be rewarded. Otherwise, they would be punished by removing the bonuses. In the Barchester Hotel’s case, it seems that even though the salaries and wages account for very high percentage of the operating cost, the turn-over rate is still very high(Cho, Woods, Jang and Erdem, 2006). In my opinion, in order to reduce the economic loss, the hotel managers would have to lay off employees who have anti-productive behaviors or very low productivity. It would tremendous reduce the labor cost. More permanent employees would be recruited in Barchester Hotel. However, in order to be permanent or formal employees, staffs would have to be trained for at least 3-month. After assessing their work performance during the test-period, they could be qualified as the formal employees of Barchester Hotel.
In addition, the current business strategies in regards to the Food&Beverage department should be readjusted. Even though the food catered in the restaurant on the ground level is well-cooked, more variety of recipes should be introduced. As different customers might have very different tastes, it is very necessary to provide the food according customers’ demand.
6.0 Conclusions and Recommendations
Overall speaking, it could be read from the given report that the current management in Barchester Hotel is not effective and efficient. On the whole, the management team has made a loss of 26,508. The loss might be attributable to many factors but the overriding problem is the high turnover rate. Even though Barchester is paying heavily on the wages and salaries of employees, they still quit their jobs. Besides, as a huge number of customers are identified to be travelers, they only spent one or two nights in the hotel for tour coaches to other places. The occupancy rate is still low. Hence, it would be more necessary to re-identify target customer groups. Currently, as Barchester hotel is also close to the industrial site, it would be recommendable to design more professional suites such as conference rooms in order to attract business travelers. Moreover, the current pricing strategy should also be readjusted to be value-based rather than cost-based.
The short-term goals for the hotel managers is certainly to lower the turn-over rate and reduce the economic loss. The first goal could be achieved by training more formal employees. The second goal could be achieved by reducing the labor cost and increasing the net occupancy rate. However, in the long run, Barchester hotel should continue to expand its services to reach more customer groups. Besides developing business traveler market segment, Barchester should cooperate with online intermediaries. Both parties could enjoy a win-win situation.
Reference
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