INTERNATIONAL HOSPITALITY MANAGEMENT  

INTERNATIONAL HOSPITALITY MANAGEMENT

QUESTION

As one of the senior management team for an international hotel chain with its headquarters in the USA and wish to establish a hotel unit in Kenya, you have been tasked to prepare a proposal on the best entry strategy. respond to this request providing your chosen strategy and why you consider it the best option.

INTRODUCTION

Belnut Hotel Overview

Best glowing hotels are influenced by the global expansions of hotels that are ongoing in various parts of the world. The hotel industry also has been existing for a long time because of the service that is offered there. But the differences within the market place is nothing but the different competitions that one has within the market place through the provision of various things such as accommodation for the guest or the travellers, tourist, visitors. They will expect services such as food and drinks, laundry, fitness centre, swimming pools, conference room and business room, childcare. Since the hotel will be a long-term business then the issues of break-even point is not an issue to the business expect it to dominate more in Kenya its initial in the United State of America. I am expecting Belnut hotel to be the best five-star hotel in the next five years to come with the provision of all ecohotel take to be.

Executive Summary of Belnut Beach Hotel

Belnut Beach Hotel will be located at the heart of sandy beach in Mombasa county less than a 5-minute drive from Mombasa town and 15 minutes’ drive from Moi International Airport.  We are conveniently located in the world’s headquarter for beach clubs, tourist attraction centres, travellers from different parts of the world as well as a commercial centre. Belnut Beach hotel believes in the passionate pursuit of excellence and financial success with uncompromising services and integrity to the guest/travellers, tourist and the domestic customers intending to venture into the hospitability industry by establishing our hotel in Mombasa county in Kenya. I am certain that our values will help us drive the business to enviable heights and also help us attract the number of clients that will make our hotel fully booked all through the year with the full range of customer satisfaction as well as enhancing customer loyalty.

We are going to be a customer-centric hotel with a service culture that will be deeply rooted in the fabric of our organizational structure of the Belnut Beach Hotel and indeed at all levels of the organization. With this information at hand, I am certain that the hotel will be able to consistently achieve our set business goals, increase our profitability and reinforce our positive long-term relationships with our clientele, partners, and all our employees as well.

Belnut Beach Hotel facility will be decorated in an exquisite and elegant facade, so much so that it will be a conspicuous edifice in the city where it will locate with provision of  a conducive spot for our customers to take a break from their various busy schedule, to a place where they can find comfort and luxury. It will also be equipped with a business centre and a VIP lounge, as well as a Fitness room (Gym) and self-service laundry, shuttle services, business centre, entertainment areas which will be made available for resident guests at no extra cost. We will also install a free Wi-Fi that will enable our guests to surf the internet with their laptop in the hotel room and for the free of charge, and there will be wireless access in all the public area in the hotel; we will also provide mobile phones for loan to business travellers for their convenience so as to enable them to stay in – touch with their family members, friends, and business partners while in Belnut Beach Hotel.

With no doubt, our business class guest rooms will provide our customers with a warm and comfortable recommendable home away from home experience, large banquet venue to avoid congestion while serving our guest, as well as Chinese and Intercontinental cuisine. We are set to give our esteemed guests an unforgettable experience whenever they patronize our hotel.

Belnut Beach Hotel is a branch of the hotel from the United State of America that is owned by the senior partner of the business investor in the hospitality industry. The hotel started some years ago and now they are targeting the global market. Over and above we are building a hotel business that will be the cynosure of all eyes. One that competes favourably with other hotels that are in existence in Las Vegas. We plan to do this bearing in mind that it would take hard work, loads of financial commitment, as well as well-trained employees who can be indoctrinated in the quest for building a top-notch hotel in the Mombasa town in Kenya.

The vision of the hotel

The ideology behind the hotel vision is to start up a standard hotel that will become the best in customer satisfaction through application highest standards of service quality and in that way justify and uphold the reputation that we have among the guests, partners, competitors and the wider country.

The mission of the Hotel

Our mission is to meet our guest perception through deliver of reliable, genuine, caring, excellent service, place for encounters, business success, pleasant meetings, conferences, exhibitions shows and gala ceremonies superior to what our competitor within the market can offer in any location where our hotel will be situated and to ensure that our hotel enjoys over 90 per cent occupancy in most parts of the calendar year.

Business Structure

The business structure of the organization influence most the organization growth and the larger the organization the bigger the structure and each of the section of the structure is headed by the qualified and experienced experts who occupy the available role. Belnut Beach Hotel will work with a well-elaborated business structure that will give room to employees to explore their creativity, give a sense of belonging, as well as grow through the corporate ladder of the organization. the organization will also work hard to ensure that we only recruit the right set of people with the right mindset to help us achieve our business goals and objectives in record time. The intended business structure of the hotel will also show the line of communication within the process of running the business behead as follows

• Chief Executive Officer (C.E.O/Owner)
• Hotel General Manager
• Operation Manager
• Human Resources and Administrative Manager
• Accountants / Finance Officer
• Food and Beverage Manager
• Housekeeping Manager
• Marketing Manager
• Front Office Manager
• Production Manager
• Procurement and Purchasing Manager
• Bartender / Baristas
• Security Officers

Each of these managers is assigned various responsibility to follow so that to ensure the hotel working towards the achievement of the hotel goal. They are also the head of every department and the failure of any will be held accountable for the mistake. They manage various departments within the hotel of which each of them is expected to give out the best result ever to the hotel.

SWOT ANALYSIS OF BELNUT BEACH HOTEL

Since the hotel industry is an area with so many competitions and each is striving to come up with the best strategy to become market dominant within coastal region and Kenya at large, there is a need to evaluate the market well so that to pay much attention to SWOT analysis for the organization to acquire the available resources and be able to mitigate the shortcoming. One thing that I know is that once we are able to identify our strengths, our weaknesses, our threats and the opportunities that are available to us, we will be able to come up with good business strategies that will help us achieve all our business goals and objectives( Rodrı́guez 2002)..  one of the ways to build a successful business in the long run, is having the ability to glean some lessons from the weak points we have found ourselves in and convert it to an area of strength to advantage on them. Cases where there is little or nothing that can be done, we may also work so hard so that our areas of strength blossoms more, so that are the weak area is very less visible for the competitors. Based on the SWOT analysis that has been carried earlier before I found that;

• Strength

The location of the hotel is so perfect for the business, having a management team has robust experience in the industry, the financial aspect is well budgeted to cater for everything up to break-even point, hotel maximizing on the maintenance of the environment, best customer services which are second to none of the competitor as per the analysis of the Mombasa region.

• Weakness

The only perceived weakness as per the organization is that we are new to the market,

• Opportunities

Being in one of the cities in Kenya that never goes to bed, plus the fact that Mombasa is regarded as one of the world attractions sites as far as tourism is concerned. It means that loads of tourist, business executives and travellers/guests would want to visit Mombasa and we are well-positioned to welcome them since our hotel facility is just 5 minutes’ drive and 15 minutes’ drive from Mombasa town and Moi International Airport in Mombasa, and also at the heart of the beach.

• Threat

One of the threats that are likely going to confront us is; unfavourable weather changes that may rain at any time, downturn in the economy which is likely going to affect sales and perhaps the emergence of new hotels competitors within the same location where our hotel is located.

MARKET ANALYSIS

Due to peak periods and off-peak periods, hoteliers know this and have been able to make provision to properly handle the changes in seasons. For example, during spring when there is a lot of visitors from different part of the world, or during any major sporting event or business summit, most hotels in Mombasa are almost fully booked. As a matter of fact, that is the period that some hotels make the money that will sustain the business for the rest of the year. Due to this wave, some hotels are well-positioned and they enjoy rich patronage all through the 12 calendar months of the year. Another trending feature in the hotel industry is that it is profitable to build your brand and then venture into the sale of a franchise if you now you can’t manage various branches of your hotel. And others can operate under management by contract (Shoemaker, et al, 1999).

Over and above, hoteliers are quite aware that they are in the industry not for quick returns on their investments, but to steadily build a brand that can become a global brand while growing their profits year in year out which make some of these hotels to operate on a break-even analysis.

• Customer Analysis

To offer various cuisines that will accommodate all the customers not only in Kenya but also to the foreign countries ensuring acceptable and pleasant accommodation to the customers at an affordable rate with high customer services. Attaching prices to various cuisines that will long and also allow the customers to make budget especially those targeting the budget plan for the conferences and meeting. Ensuring also customer satisfaction is maintained through affordable prices.  The hotel will also ensure there is a free offer of starters to every customer wishing to order any meals within the hotel.

• Target customers

I as the one sent to start the hotel in Kenya, I managed to carry feasibility studies and market survey and I was able to identify those who I expect will eventually become our loyal customers to our hotel. Out of analysis that I did in the market put the market, I was able to identify various gaps in that if well utilized and targeted maximumly then they will yield a better result to the hotel. The hotel aims to focus on the following, Corporate Executives from a various government institution, Business People, Sports Men and Women, Government Officials, College Students, Tourists, Travelers, Travelling Agencies, Event Managers, Religious Organizations. Care and maintenance of these customers will be enhanced by the way the hotel staff will sacrifice to enhance their loyalty and perception as well.

• Competitive Advantage

Winning the market is not the amount of sales volume that you make on a daily bases but what you offer to the customers that are not offered I any other hotel. Belnut Beach Hotel is an excellent and customized service that we offer to all our guest irrespective of their status. We can boldly say that the location of our hotel is going to give us an edge over our competitors in Mombasa. From the location of our hotel, you can connect any part of the city with little or no stress. This means that the hotel is located in a place where the accessibility is very okay. Another significant competitive advantage that we are bringing to the hotel is the robust experience of our management team. We have a team that has a combination of 40 years of experience in the hospitality industry in the United States and Canada. They are considered as core professionals in their own right.

MARKETING STRATEGY

Marketing strategy is another key concept that I want to use to ensure that I acquire the bigger market share the reason behind my thought is that, my hotel industry is new and failure to think well and come out with the best tools that I can incorporate to achieve my goals will all be in vain. I have realized that some of these hotels in Mombasa are run by the owner-manager and others are being operated under franchising strategy. Coming up with these two strategies to enter the market then I will have time to complete them due to this reason I have decided to employ hotel management contract as hotel marketing entry strategy of which it will influence more to the hotel due to the availability of the resources the hotel has.

Hotel Management Contract

This is an agreement between a management company, and the property owner, whereby the management company assumes responsibility for managing the property by providing direction, supervision, and expertise through established methods and procedures. The operator will run the hotel, on behalf of the owner, with or without the presence of the owner for a fee, according to specified terms negotiated with the owner. Negotiating the terms of a hotel management contract will not be approached lightly since otherwise, I will be questionable by the owner of the hotel in the United State of America, as it will characterize the property’s identity for decades and produce differing results to them which is against my expectation. I expect that negotiation between the owner and the management agreement will align with the interests of both of us. As an owner, the major goals should be to select the management company that will maximize profitability and therefore the value of the asset and to secure the best possible contract terms with that operator, while at the same time ensuring the operator is properly incentivized to maximiser profitability. They will ensure the following from their sales and marketing department so that to meet our goal;

• Open our hotel in a grand style with a party for all which will involve the president of Kenya and other delegates from the USA
• Advertise our hotel brand in travel and tours magazines, national newspapers, Satellite TV stations and Radio station
• Promote our business online via our official website and all available social media platform
• Continuously Improve the performance of our brands
• Hire the services of experts to make our brands the first choice for guests
• Deliver consistent customer experiences to all our guest; making our first impression count positively
• Continuously Improve the efficiency of our hotels and operating processes
• Ensure that we put our market scale and knowledge to good use
• Using our worldwide scale and experience to convert more hotels to our brands
• Make the most of our global presence – guests choose brands they know when they travel
• Build strong partnerships within our own company and with our stakeholders across the world so that to become global.
• Make use of attractive handbills to create awareness and also to give direction to our bar
• Position our signage / Flexi banners at strategic places
• Position our greeters to welcome and direct potential customers
• Create a loyalty plan that will enable us to reward our regular customers and give back to society.
• Engage in roadshows within our neighbourhood to create awareness for our hotel.

There are some terms that the management contract or the operator will ensure secure their terms during the operation.

• Term

The term of the management contract company is the period within which the agreement is required to remain effective which is calculated from the very effective date to the agreed specified period that it is supposed to cover. It’s usually a couple of years which is not less than 15 years. Within this period the hotel will have to meet the agreed terms. Based on the renewal of the contract it will be based on the performance of the management team or goal achievement.

• Operation fees

This is the fees that the operators are remunerated with for the performance of the duties that are detailed on the management contract. The fees will be structured in such a way that they encourage the operator to optimally maximize the financial performance of the hotel which will be calculated based on reference to various formulae. For example, the base fees, incentive fees, other fees which can be claimed by the operator.

• Operator performance test

This is the agreement that will allow the hotel to terminate the contract in case the management operator fails to meet the agreed performance criteria after a specified period of building up which is not less than the fourth year on average. Examples of these test will be; Room Revenue Per Available Room (RevPAR) and the GOP level for an operating year which is not less than agreed budgeted GOP level.

• Approval Rights

This is defined as the extent to which the owner’s consent is required for decisions impacting the hotel’s operation. This allows the owner to remain involved in key decisions regarding cash flow. Besides, if stipulated, an owner can place restrictions on expenditure based on the budget, employment of key senior management positions, outsourcing of resources, capital expenditure and lease and concessions

• FF&E and Capital expenditure

For the management to maintain the asset in a marketable condition and replace the furniture, fixtures and equipment (FF&E) of a hotel at regular intervals, a sinking fund is created to raise capital for this periodic FF&E replacement. It’s usually a percentage of gross revenue and somewhat dependent on the positioning/level of the hotel. Included in this category are all non-real-estate items that are typically capitalized rather than expensed, which means they are not included in the operating. These capital improvements may include; route capital improvements and discretionary capital improvements.

• Territory Restrictions

This is agreement that assure the owner that no other property with the same brand is allowed to open within a certain radius of the subject hotel, for a certain period of time (ideally being for the whole duration of the agreement) in order to minimize or even pre-empt any form of cannibalization from the same brand, or sometimes also from another brand of the same company. No variation is expected since the Mombasa its area geographically located. This means that territorial restriction, the negotiations should be centred around the area of the exclusion clause, the brands that will be included in the clause, the period and also the provision of an independent impact study of the development of a similar brand on the subject property’s performance.

• Non-Disturbance Agreement

This is an agreement between the hotel operator, the owner and the owner’s lender. In the event of default or the owner’s insolvency, the lender takes over the ownership of the hotel, agrees not to terminate the existing management contract and remove the manager after a foreclosure. At the same time, the hotel operator agrees to stay and operate the hotel for the lender in case of insolvency or enforcement.

• Operator Guarantees

This agreement ensures that the owner will receive a certain level of profit or net operating income. If this level of profit is not achieved by the operator, the operator guarantees to make up the difference to the owner through their funds.

Having laid down these agreements that they are going to meet, then I think this goal of the Belnut Beach Hotel will meet it strategized goal. This management contract will lead to the achievement of my dream as well in Kenya and the world as a whole. Various reasons lead to this decision of management contract in the hotel.

Reasons behind the management contract as an entry strategy

• Management contract will increase the financial value of the hotel

Since the earlier stated management of the Belnut Beach Hotel will always be anxious to see the progress of the hotel, the operators will maximumly utilize the available resources well so that they can meet the agreement tied between them as well as creating the value for their returns an even meet the goals of the management that they need to achieve.

• They follow standardized processes and procedures in running the business

This helps to decrease maverick buying and decrease supply risk while increasing spend leverage. The net effect is that buys as a whole become less costly and more valuable and a much greater percentage of negotiated savings are captured by the business.

• Rebate management

Contract Management systems make it easy to track rebates and ensure that all of the savings negotiated in a sourcing cycle are captured.

• Management contractsallow investors with relatively little knowledge and experience in the hotel industry, or who cannot directly manage hotels for a variety of reasons, to invest in hotels.

Because competitive supply is increasing, hotel investors have attempted to realize efficiency gains by assembling specialists to be responsible for the various components of their hotel investments.

• Contract by management will work hard to ensure that both parties meet the contractual obligations.
• Working under the instruction management contract will ensure the risk of financial loss is achieved and no loss will affect the hotel. This means that they will work to maximize the financial increase and operational performance will also be enhanced.
• The establishment of a contract repository also facilitates the delegation process because multiple individuals can access the database, and the assigned personnel can plan contractually requisite actions accordingly.

FINANCIAL PLAN

This is another section of the hotel that needs a lot of attention to ensure the growth of the business. Since Belnut Beach Hotel is a branch of the hotel from the United State of America the financial aspect will not bring the hotel down. There is a good created financial projection of income statement, cash flow statement, balance sheet

Income statement

This statement will show all the revenues, expense and the profit for a particular period. This will show whether you are making any profit or not. These details are supposed to be produced on the bases of quarterly on the fiscal year. This information will then be used to plan and check the progress of the business. This information will be needed to be included in the financial statement.

Cash Flow Projection

This will show how the flow of the money in and out of the business premises which is so useful in business since it shows how the cash flow and this will be used to show the expenditure on daily and even know how to make some further investment within the hotel. It will prove to the owner whether the business is good credit risk and if there is enough cash in hand to make the business a good candidate for a line of credit, short-term loan or long-term investment.

The Balance Sheet

This will report our hotel net worth at a particular point in time. It also summarizes all the financial data about your business in three categories; assets, liabilities, and equity. These are the details that are supposed to be included in the balance sheet

• Assetsare tangible objects of financial value that are owned by the company.
• A liability is a debt owed to a creditor of the company.
• Equity is the net difference when the total liabilitiesare subtracted from the total assets.

Retained earnings will be earnings kept by the company for expansion; that is, not paid out as dividends.

Current earnings will be earnings for the fiscal year up to the balance sheet data (income – the cost of sales and expenses).

All accounts in our general ledger will be categorized as an asset, a liability, or equity. The relationship between them is expressed in this equation: Assets = Liabilities + Equity.

For our business plan, you should create a pro forma balance sheet that summarizes the information in the income statement and cash flow projections. A business typically prepares a balance sheet once a year but ours will be analyzed on twice per year so that to check the progress of the business.

The Budget

The budget for the start-up will not be so complicated but detailed. This will ensure that the business does not operate or start under the bases guesswork but the projected expenditure. Here are the key areas that are supposed to be included in the budget;

• Legal expenses for obtaining licenses and permits.
• The Total Fee for Registering the Business in Mombasa county
• Marketing promotion expenses expected
• Cost for hiring Consultant
• Insurance that will cover everything tied in the entity.
• Cost for acquiring a facility for the hotel
• Cost for facility remodelling and design
• Other start-up expenses including stationery
• Phone and utility deposits that will be required to run the business for the first time.
• Operational cost for the first three years
• The cost for Start-up inventory
• Storage hardware that is (bins, utensil rack, shelves, glasses case)
• The cost of counter area equipment.
• Cost for serving area equipment
• Cost for store equipment (cash register, security, ventilation, signage)
• Office equipment and furniture
• The cost for the purchase of furniture and gadgets (Computers, Printers, Telephone, TVs, Sound System, tables and chairs)
• The cost of Launching a Website.
• The cost for our grand opening day
• Miscellaneous

This budget is a bit clear but also complex for eligibility to the management and also the owners of the hotel. There is a need to keep keen into these details to enhance the hotel goal.

Conclusion

The success of any business is no longer based on the information kept in the books but the implementation of that information to convert the theoretical into practical. Once this process has started then I wish it will bring changes to the owner as well as changing the people of Mombasa since it will be the source of income to many. Putting interest on customer satisfaction and hotel turnover will enhance hotel goals. The hotel should not only look at the management and fail to anticipate for the future which may in one way or the other be affected by the immerging issues that may influence the company negatively. Management contract team should also be analyzed to ensure they are in line with the processes and the procedures.

                                Reference

Rodrı́guez, A. R. (2002). Determining factors in entry choice for international expansion. The case of the Spanish hotel industry. Tourism Management, 23(6), 597-607.

Shoemaker, S., & Lewis, R. C. (1999). Customer loyalty: the future of hospitality marketing. International journal of hospitality management, 18(4), 345-370.