Marketing and Financial Management in Hospitality and Tourism
In the following report it will be analyzed the economic accomplishment of a hospitality business. The study has as a goal to have look on the new boutique hotel situated in Coventry. The Bespoke Hotels team is thinking out the evolution of a new boutique hotel designed with a 1950’s theme.The report will examine the connection between customer relationships and business performance in the tourism and hospitality sector and how there could be made improvements to customer service in order to gain better customer relationships. Moreover, it will judge the financial performance of this hospitality company and will characterize different methods of pricing products or services in the hospitality industry.
THE NEW BOUTIQUE HOTEL’S BACKGROUND
The Complex Development Projects from Coventry has big plans for this hotel in former Evening Telegraph in order to advance and to create a better image for Coventry. The planning department accepted to construct around 100 bedrooms, a ground floor restaurant and bar, meeting rooms dedicated to businessmen, penthouse suites and also a rooftop bar sanctifyed to everybody, such as students or other people coming to visit this city. (Coventry Telegraph, July 2018)
ROLE OF MARKETING IN THE TOURISM AND HOSPITALITY INDUSTRY
Whenever we are taking about companies, the marketing strategy will always remain a very strong point in developping the business, in order to gain more customers and make them loyal to your brand. The integrity of the brand is one of the key points, when you are having a look at the tourism, which is almost part of the hospitality industry. The marketing strategy needs always to be renewed and the business has to make people aware of the brand, in this way they will win more profit, trustworthy clients and good feedback.
The financial analysis process contains a lot of advantages beginning with the allowance of identifying the connections between the elements of the economic assertions. Moreover, the investors of the new boutique hotel can evaluate liquidity, profitability, their financial advantages and long efficiency for the hotel, and this leads to very good investment decisions. By using the financial analysis, the manager of the hotel can compare every year the business’ performance and can predict the future anticipations of the company.
THE LINK BETWEEN CUSTOMER RELATIONSHIPS AND BUSINESS PERFORMANCE
First of all, customer relationships could be defined as the expansion of the link between a business and its clients, which draws in sales, marketing communications and also, the customer service. In addition to this, the relationship between consumers and companies is always measured by the client’s fulfilment through the buying cycle of goods or services. However, there is a very powerful link between the customer relationships and the company’s performance at the business level. In order to increase the number of customers that choose the service, a hotel, in this case, the company needs to allocate more attention to marketing strategy. One study which was done in 2013 shows that to increase the performance, the profit of your own business, you should take into consideration the retention, revenue and stock price of the customers.
The question of “how you can improve the customer satisfaction?” when it comes to the Tourism and Hospitality Industry has always been in the persuasive managers’ minds (Zeithaml, 2000). It was stated that “no greater challenge exists in the marketplace than for a business to be responsible for providing satisfactory tourist and hospitality services.”(Noe, 1999: Introduction”). The interactions between people are vital in humans lifecycles, so the poor service of the hotel may affect the quality of your own service. Tucker and Lynch had a look in making the clients as homestay hosts and they suggested that tourism boards and other people involved in tourism promotion could psychologically lead to raise the number of customers.
By having loyal consumers to your service, it will definitely guide to high profit. On the other hand, there are some disadvantages when it comes to maintain your customers faithful, like the loyalty programs, such as discounts or loyal cards, but in time, this marketing strategy could help the business’ gaining. Devoted customers means happy consumers, which means choosing and ordering your service whenever they are thinking about picking the company instead of others.
The Tourism and Hospitality Industry is about people, so if the organization will take care of the satisfied and faithful consumers, they will gain more profit every year.
For the new boutique hotel that it will be placed in the city centre of Coventry, the best marketing strategy should be to offer discounts to new students looking for accommodation, to offer breakfast or dinner, in the dining area, restaurants. Moreover, in order to improve the business performance of the new hotel, they should host events for the students, as Coventry’s heart is full of them. Also, they should take care of their people, their customers, because always the communication is the key to success. If the hotel’s staff will be well-behaved, will talk with the clients and offer them the best experience, people will definitely come back to the good service.
THE FINANCIAL PERFORMANCE AND THE USE OF CAPITAL INVESTMENT
The new boutique hotel that will be build before the big event, Coventry being UK City of Culture in 2021, will keep the original features of the Evening Telegraph building, such as the panelled Board Room and the Lord Iliffe Suite and it will be designed in a 1950’s theme, in this way retain the old Mid-Century architecture. Ian Harrabin, of Complex Development Projects, claimed that this new boutique hotel will be completely different from the ones that are built here, in Coventry. This piece of history will give an opportunity to find a job, as there will be released approximately 130 jobs before 2021.
Ian Harrabin also said that this new boutique hotel will increase the city’s economy and will bring a lot of tourists, not only during the City of Culture period, but after, because the theme and the architecture are even more special than any other hotel in this region. People will choose this instead of others during a leisure break. (Coventry Telegraph, July 2018)
Whenever we are talking about defining a company, the customer reviews are one of the most important things that we should consider. The positive feedbacks will have a strong impact on the economic performance of the new boutique hotel, because it will definitely increase the number of people that will choose the service. Considering the development of technology nowadays, humans will always know everything about a service judging from the Internet, so a beneficial review will help to improve the economics of the new boutique hotel.
On the other hand, the negative feedback that comes from the clients that passed over the new boutique hotel could have also a powerful impact on the financial performance of the hotel, as the incomes will decrease steadily and new clients won’t choose this hotel. If the business is high-rated by customers, this fact will be shown on the financial performance, indicating that people will choose again the service and will revenue, in this way the profit will be developed.
As the Coventry, UK City of Culture for 2021, is not in top 20 when it comes to tourism, but it is classified in the systems as the 13th in top 20 business travel cities, with a 13% decline spending, so the target market of the new boutique hotel should be the businessmen, the tourists that will come during the celebration or the new students looking for accommodation.
The new boutique hotel which will be opened in Coventry, UK City of Culture in 2021, is now thinking about this unique project, to replace the Evening Telegraph from Coventry and has big plans to increase the profits of Coventry until becoming City of Culture, during this celebration and right after this. The big company, Bespoke Hotels, will be the one that will operate this hotel. Moreover, the Chairman of Bespoke Hotels, Robin Sheppard claimed that this new enterprise will be a very popular destination, with a lot of character and impudent smile. In order to increase the number of clients that will choose the boutique hotel, they plan to design it in a different way, to build a rooftop bar exclusive for all the customers. The capital investment is going to improve the economic performance of the enterprise. All the planning costs of this capital investment include costs for market research, competitor research, economic estimation and overall business planning. The capital investment is approximate as 4 million pounds. The capacity of the rooftop bar/restaurant of the new boutique hotel is settled between 60 and 100 people.
During the peak season, for example the celebration of City of Culture, the rooftop bar will have a lot of discounts and parties, with free entrance, where all the people can enjoy festival music. Moreover, the profit will be increased during these period, especially on weekends.
On the other hand, the seasonality could be a very concerning problem, but the rooftop bar won’t be closed because of the fact that they will develop it in order to have customers coming to the events especially when the weather is not favourable.
THE COSTS OF THE NEW BOUTIQUE HOTEL
In the Tourism and Hospitality Industry, the expenses are divided in two main classes:
Direct expenses, such as cost of sales( cost of food, for example) or cost of calls
Indirect expenses are as well divided into two categories:
- Fixed charges which includes rent, insurance, property taxes, advertising costs, reservation expenses, human resources, sales and marketing, interest on loan.
- Undistributed charges which includes electricity, energy, and water expenses.
The costs percentages will be divided in this way:
- Food has approximately 30% of the costs
- Manpower & Welfare costs has between 18%-20% of Total Revenue
- Room distribution costs has approximately between 13%-16% of Rooms revenue
- Lighting, heating and fuel costs maintain between 9%-12% of Total Revenue
- MOD direct costs has between 15-20% of MOD Revenue
- Repair cots has between 8-12% of Total Revenue
- Housekeeping and Gardening costs has between 5-8% of Total Revenue
- Insurances costs maintain between 1-3% of Total Revenue
- Administration costs has between 3-6% of 3-5% of Total Revenue
- Sales and Marketing costs has between 3-6% of Total Revenue
- Other minor costs maintain between 3-6% of Total Revenue
(Prashant G. Arabhavi, 20 years of experience in Hotel Industry, June 2016)
CHALLENGES OF THE NEW BOUTIQUE HOTEL
HOTEL AT RICOH ARENA
One of the biggest challenges that the new boutique hotel will have is the new hotel that will be built on one of the car parks at the Ricoh Arena. The new hotel is going to be built in order to sustain a lot of events and conferences that will take place in Coventry. Members of the Coventry City’s Council have a lot of trust in this new hotel considering the fact that new rooms for accommodation will be needed until the big event of 2021. (Cllr Jim O’Boyle, Coventry City Council’s Cabinet Member for Jobs and Regeneration, July 2018).
THE DEVELOPMENT OF BELGRADE PLAZA COVENTRY
Another challenge that the new boutique hotel in Coventry will face during and after City of Culture for 2021, will be the Belgrade Plaza, which will be developed next to the Premier Inn and the multi-storey car park. This block will have 385 rooms for student accommodation and another 100 rooms for tourists that will visit the city. Moreover, the improvement of the plans illustrate that residents and students blocks will be in completely different areas.
|Good placement (City centre of Coventry)||Noisy area||Partnerships||Competition|
|Mid-Century architecture||Clean services|
|Political climate||Business Travel||Cultural diversity of people||Online marketing|
DIFFERENT METHODS OF PRICING AND MARKETING PRODUCTS OR SERVICES IN THE TOURISM AND HOSPITALITY INDUSTRY
“A product’s price is that which consumers exchange with the market in order to purchase the product. Consumers consider price to be an important criterion in their evaluation of alternatives, both before and after making a purchase.” (Wells and Prensky, 1996: 92) When it comes to pricing decisions, this is one of the most essential parts in order to increase the profitabilty of a new company and it has a strong impact on the volume of the sales. (Meidan, 1994:357) The clients are the ones that decide if the price is equal to its quality. The price is the characteristic that will bring the profit to the company and that’s why the managers of the hotel should pay attention on the pricing methods.
First of all, the new hotel managers should know that the price need to be multiplied by the quantity that has been sold. By doing this, it is determined the hotel’s total revenue, in this way, the company will survive.
Moreover, taking into consideration the range of competitors in the city, the prices are determined by the force of demand and supply. Also, the price is dependable on the consumers, because they are the ones that are willing to pay.
In order to increase the profit of the new boutique hotel that will be opened in Coventry in the near future, the managers of the hotel should consider the following strategies:
- Set the price in order to match the competitors prices( If they will set the price for one of the rooms identical to the competitors’ and for another one a little bit higher, the profit will be increased)
- Psychological pricing (means to set the price of one service as 99£ instead of 100£)
- Besiege the middle market
- Trying to be much better that the surrounded competitors
- Penetrate the market
In addition to this, if the company offers discounts to students during school time or any deals for the businessmen that will choose their service, or to visitors during their leisure break time, they will earn a lot of profit, increasing in this way the financial performance of the new hotel as for Coventry itself.
THE USE OF BREAK-EVEN POINT ANALYSIS IN NEW BOUTIQUE HOTEL’S SHORT DECISIONS
The Break-Even analysis is the one that will help the company when it comes to the costs and sales of the new boutique hotel. This analysis is expected to include all the payments and the future profit. In order to find out the Break-Even Point, it is needed to divide the fixed costs by the price minus the variable costs.
Let’s assume that the new boutique hotel from Coventry has 100 rooms. Moreover, the total fixed costs for this new hotel by nigh should be 6500.00£. The variable costs of the new hotel are 8.50£. The average daily rate for the hotel one night before is 80.50£.
Total fixed costs of the hotelSelling price per unit-Variable costs
By doing the Break-Even analysis, the managers should find out the number of rooms rented in one night.
Taking everything in mind, the new boutique hotel of UK City of Culture for 2021 will bring a lot of new customers to Coventry if the managers will penetrate the market, will be better than the others and will set the price to match the competitors.
Considering all the factors, financial performance and the pricing methods and strategies, the new boutique hotel should be a real success in the future, raising the number of people visiting Coventry and the profits.
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