Hospitality Operations Management
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Published: Thu, 06 Jul 2017
1.1. You have recently been promoted to the position of a General Manager of a 200 bedroom city centre hotel with a conferencing and banqueting rooms. Unfortunately, the hotel has been miss-managed in the past to the extent that occupancy rates have fallen to 55% during the week and 23% at the weekends. Staff turnover is high and staff motivation is low. The owners expect from you to make any changes necessary to increase occupancy rates and profit maximisation.
Increasing Occupancy Rate and Profit Maximisation (1.1)
The objectives must be clearly stated and it’s important to let every single employee know what is expected of them. To be realistic, staff must give full cooperation to the achievement of the objectives. Vice versa it’s necessary to make sure that employees are highly motivated to perform the tasks efficiently and effectively. If necessary on the job training and education must be provided to improve performance.
Maslow crystallised the idea that all behavior has a cause and that a person only acts because of some conscious or even unconscious reason. The most well known theory of causation is Maslow’s ‘need theory’. He suggested that people are in a continuous state of motivation but that its nature is variable and complex as one need is satisfied, another assumes prominence and motivates further effort until satisfied. Needs are built up in a hierarchy from basic physical and physiological needs (food etc.) through safety and security, love and society, esteem and ego to finally self actualisation needs. Lower level needs have to be satisfied before higher order needs are met. Despite certain rigidities in the theory this basic classification of needs has enduring relevance to modern management it informed motivation, i.e. incentives must depend on the workers’ current level of need satisfaction. It is in the organisation’s interest to ensure that basic conditions of work are met so employees become motivated by higher needs for achievement and recognition.
Operation objectives have to be clearly decided at department management level. They are then passed on to subordinates for implementation including the desired rate of occupancy, alternative uses of areas to maximise occupancy, maximum use of all facilities, gain at least the minimum average spend per customer. Serving at least the minimum number of customers per service period, the desired ratio of customers per meal service period, the require gross profit for each department has to be taken into account.
1.2. Analyse the conferencing facilities with a view to increase the usage of these rooms through business meetings and private bookings.
Analysis of Conferencing Facilities (1.2)
The planning of each of the areas that together form the catering department of a hotel should be viewed over the long term to take account of possible changes in operation. In order to identify the customers’ requirements, it’s important to consider their socio-economic status; their reason for visiting the establishment, whether for business or pleasure; and the changing nature of their needs at different times such as at a business lunch or a romantic need.
Environment and atmosphere must be considered in the planning of facilities and the decor and layout must be flexible enough to cope with the changing demands. When managing the conferences, the follow things have to be considered into details.
- Flow of drinks and food service
- The number of people
- Seating planning
- Technological facilities
Other factors are the number of customers expected and the time they can spend (incentives on accommodation), the time they can spend on restaurants which have to be reflected in the prices charged. The higher the prices charged, the better the facilities have to be; how the level of facilities is achieved is part of the organisation’s policy.
An analysis of each item of equipment, facilities should be carried out. Once the total area of the catering operation has been allocated to the main departments, the next stage is to plan the way in which they will be furnished and fitted to meet the practicalities of production and service and at the same the customers’ needs and expectations as identified.
1.3. Critically evaluate the staffing issues, with a review of levels of training, motivation, and reversing the high turnover trend through staff maximisation, internal and external marketing and staff management.
Evaluation of the Staffing Issues (1.3)
In order to operate efficiently, all catering establishments must first set up a sound organizational structure, based on a strong supportive framework. It must cover every department of the business, each of which has a particular part to play and has its own specialists in charge who are skilled and experienced in the operation.
Staff are expected to increase productivity but without having a resort to conflict with management. The authoritarian approach has led to much staff dissatisfaction. A more recent management approach takes the view that employee participation in the running of the business will help enhance their performance and lead to greater efficiency and profitability. The notion of empowerment of front-line staff is a concept that has gained considerable currency within service-focused companies. Empowerment is frequently taken to mean a process that enables and encourages front-line staff to make decisions that will help to solve customers’ problems or meet their needs without reference to an interminable management hierarchy. The ability to deal professionally and competently with immediate queries, problems and complaints is an attribute that is rated very highly among customers of tourism, hospitality and leisure organisations and makes a major contribution to effective relationship marketing.
The policy is a set of rules and guidelines which determines the way a business is run. To be effective, it must be simple and realistic It goes without saying that the policy must include codes of conduct for every individual in the business. A policy can be looked at from both the micro level, which is concerned with the internal factors of the business, and the macro level which is the involvement of the business in its external affairs in society.
2.1. Mr Wallace has been working in the Hospitality Industry for the last 25 years. Recently he bought a building and decided to open a restaurant. Introduce opportunities (brand image, disabled access and provision, style of service) and constraints (nutrition and dietary requirements in a restaurant, availability of human, and financial resources) to Mr Wallace to familiarise him with his product and service development.
PRODUCT AND SERVICE DEVELOPMENT (2.1)
Macro Environmental Analysis
– Political Environment. The UK is fairly stable politically, with a government that has been in power for over 10 years. The café relies on imports of food products from South Africa and some European countries. Being part of the European Union is unlikely to be any changes to international trade legislation that will affect imports.
– Economic Environment. The UK is currently suffering from a decline in economic growth and has entered recession. The economic environment has been very unstable in the last few months, with the government having to take drastic measures to support the UK economy and its financial system, interest rates are falling and banks are restricting the use of credit for both businesses and consumers, despite government intervention to try to encourage bank lending. The result of these factors is that consumers are spending less, particularly on luxury items. Businesses are finding it hard to raise capital for investment, and the management of cash-flow is becoming a priority, as overdraft facilities are being withdrawn.
– Social Environment. The restaurant is based in a prosperous part of the city, with a predominately A, B, C1 social group. The restaurant population is a mix of elderly and families, with single people preferring nearby larger towns. The area has its own local schools, social and sports club, and is served by a few shops, such as a newsagent, butcher, hairdresser and grocery store. The result is that there is a very strong feeling of community within the area and residents will tend to will tend to support and remain loyal to local businesses There are also a high percentage of families with only one partner working, whilst the other remains at home to bring up the children.
– Technical Environment. The internet plays an important role in most people’s lives, particularly the higher social groups. Most homes in the UK now have computers and internet access. There has been a significant growth in on-line shopping in areas such as food, books, music, entertainment, etc.
- Owners have experience and expertise in the catering industry, having managed many cafés in the past. Owners have resources and connections in other countries and can source unique products cost effectively.
- Site is in a unique position
- Reliant on owners for management.
- Premises are small and therefore seating numbers are restricted.
- No brand recognition with local consumers.
- Government grants to support small businesses through recession.
- Availability of cheap labour
- No local competitors offering food all day.
- No direct competitor for family market or café-style food.
- Loyal consumers.
- Increased competition from major brands in nearby towns.
- Economic recession will decrease consumers’ disposable income and therefore luxuries such as lunch in a café may be foregone in place of necessities.
2.2. Familiarise Mr Wallace with merchandising objectives of building customer/brand awareness, and encourage consumer/ brand loyalty.
BUILDING BRAND AWARE NESS AND BRAND LOYALTY (2.2)
Branding is an image and message portrayed by an organisation in a name, term, sign or design that instills expectations and distinctive values in the minds of customers in relation to the perceived benefits of its products and services, thereby differentiating the products/brands from their competitors’. By understanding the brand image and message, customers recognise and know what to expect from a product or service in terms of performance, quality and image.
Building a brand takes time and investment; even established brand images need to develop and change with developing and changing customer needs and expectations, and a changing external environment. Organisations firstly need to understand the existing image, perceived value and market/competitive position of their brands in the minds of their customers. They need to identify the core values of the brand and the extent to which these meet with customer expectations. Once this is understood, organisations need to develop strategies to maintain, build and deliver these values to the customers consistently over time. For new brands it is important that the organisation understands its customers’ needs and wants and its competitors’ positioning strategies in order that it can proactively develop brand values that develop a unique competitive position within the market -thus differentiating the brand clearly from its competitors.
A brand of course is intangible, hence organisations need to find ways to make the brand recognisable for customers. This is often achieved through the use of logos and colours on all packaging, labelling, promotional materials, advertising, etc. Customers then recognise the logo as representing the brand and associated values. An example of a very effective logo is the McDoanlds, which is used by McDonalds’ restaurants on its labelling, packaging and advertising, and is instantly recognisable by millions of customers worldwide.
Customer expectations are constantly changing, as is the external environment; and it is important that managers continue to develop their brands to ensure that they continue to match and sometimes exceed customer expectations and perceptions. One of the most recent impacts on brand image is the environmental and social issues that have caused many brands to change suppliers or move production in response to customer concerns about working practices that are contrary to the brand values.
Brand values of course need to be delivered, and it is through the integration of the marketing mix, messages and service-levels that these values are made ‘tangible’ for the customer. It is therefore vital that the staff of an organisation also understand the brand values and related customer expectations in order that they can ensure their actions and work portray these at all times.
3.1. As a General Manager of a big city restaurant you were asked to prepare a proposal for the owners of possible pricing and profitability concept of your restaurant. Introduce methods of pricing (cost-orientated, market-orientated, additional pricing considerations, service charge, cover charge, minimum charge, etc).
3.2. Analyse and give explanation of factors that have an effect on revenue generation (e.g. sales mix, customer turnover, average spending power)
Methods of Pricing (3.1) Factors affecting revenue generation (3.2)
Pricing levels can often be used to differentiate a product from its competitors either by charging a lower price than competitors, or by setting a higher price to reflect added value or a unique brand position. Prices can also use price variations to separate its products or services for different target markets. In the travel industry, examples of price differentiation can be seen with the use of peak and non-peak fares which in no way reflect a change of cost, but do reflect the different needs of the particular target markets.
Marketing orientation can make many contributions towards the achievement of organisational objectives, which will especially be met by understanding and building long-term relationships with an organisation’s customers, thus resulting in customer loyalty and increased profitability.
Marketing research is used to gain an understanding of an organisation’s customers and its competitors. For example, an organisation will need to know who its customers are, their needs and wants, their buying behaviour and their decision-making process. It is also important that an organisation understands the competitive environment of the market in which it operates, and it will need to know who are its competitors, what products and services they offer and are planning to offer in the future, the customer perception of the organisation’s products versus ompetitors’, etc.
Porter provides us with three competitive strategies:
Here in running a new restaurant business, a differentiation strategy should be adopted as it has unique aspects and can fill unique gaps in the market, such as all-day opening, family-orientated food and service.
The restaurant will need to develop a detailed marketing mix to deliver this strategy to market. Below is a rough outline of a suggested marketing mix:
– Café-style food, sandwiches, hot meals, family breakfast, crisps, cakes, etc.
– Unique products, other than those that can be found in the local supermarket, that can be bought to be consumed at home, such as fresh pasta and fresh pasta sauces, fresh soups, coleslaw, potato salads; and also unique biscuits, cereals, teas that are sourced from other countries, etc.
– Takeaway service for passing trade, e.g. takeaway drinks, sandwiches, etc.
– Reduction for children’s portions.
– Premium pricing for unusual foods, as market is not particularly price-sensitive.
Aim at building relationship and loyalty with local customers and developing a brand that is recognised within the local community:
– Local noticeboard that consumers and other local businesses can use.
– Advertising in local village magazine.
– Sponsorship of events such as school fetes, local village summer fair, etc.
Aim is to provide a comfortable and family environment:
– High chairs
– Toy Box
– No music, to encourage elderly who will wish to talk.
– Outdoor seating on green, to support families with young children.
Different Products and Services of Hospitality Industry
Providing refreshment in the form of food and drink is a very old and honourable trade, as old as civilisation itself. Its end result is almost always to increase the bodily comfort and well being of the individual. It’s therefore an extremely important aspect of today’s highly organised and complex society. The business activity which provides refreshment is carried out by the catering industry, a fairly loose term which is commonly bracketed with that of hotel keeping. Recently the term hospitality industry has been used to give a more precise image of this section of the service industry. The hotel and catering industry is closely associated with the tourist industry and provides food and shelter for people away from their home, on business or pleasure.
Composition of the commercial sector:
- Residential Hotels
- Restaurants, cafes, snack bars
- Fast food and take away outlets
- Public house catering
- Catering Contractors
- Recreation Parks and Centres
- Holiday Camps
Hotels developed from inns and the growth of road travel meant that more hotels had to be built. They were needed in city centres for business people and tourists, and at resorts for holiday makers. Emerging countries which gave a boost to their economy as well as providing jobs and bringing in foreign exchange from visiting countries. An ever increasing rage of commodities is transported across the world, making it possible to global menus.
The catering cycle is therefore an interrelated sequence of activities which are always ongoing and in a state of flux and modification.
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