Total Revenue and Net Income – Financial Analysis
In the graph, Total Revenue and Net Income marked the lowest in January, and oppositely it marked the highest in the third quarter. In the Third Year, it maintained the most stable rate, not showing any fall downs to minus. In August of that Third Year, it marked the highest revenue and Net Income. On February of the First Year, net income has marked lowest because of the hotel has spend lots of money to the refurbishment. 3. 2. Rooms Department revenue, and net income overall The rate of Room revenue and Net Income had a certain increase, and it marked the lowest in first quarter, and marked the highest in the third quarter.
In August of the Third Year, it marked the highest rate, revenue of $610,775 and Net Income of $438,950. Revenue and Net Income marked the lowest in January, and oppositely it marked the highest in the third quarter in rooms department. Average revenue in Rooms department was $230,779 (Year1), $327,417 (Year 2) and $435,222 (Year 3). And average net income was $165,243 (Year 1), $231,961 (Year 2) and $317,316 (Year 3). 3. 3 Food and beverage departments revenue and net income overall The graph shows that after extending the restaurant on March in third year, the Revenue had a gradual increase.
F&B Revenue and Net Income marked the lowest in January, and oppositely it marked the highest in the third quarter. Extra Services and Facility Status has influenced on the F&B department, especially, the second bar that has completed in March of the second year and the restaurant extension that has completed in April of the third year are influenced. It marked the highest rate, revenue of $583,774 and Net Income of $252,587 in August of the third year. 3. 4 Other departments revenue and net income overall After the completion of the hotel shop in April of the Second Year, revenue of the other department had increased.
Also, the graph clearly shows that in the first quarter of the third year, after the completion of the health club, revenue of other department had a sudden increase. After the completion of building a health club in the other department, am average revenue has increased over eight times ($102,494 of the maximum revenue on August). 3. 5 ROCE The graph shows that the increasing percentage of the Return on Capital Employed from year 1 to year 3. There is a 13. 80% gap from Year1 to Year2, and 15. 70% differences between Year2 and Year3. 3. 6 Occupancy and ADR
In the First Year, Room Rate had been lowered, offering a better price then other competitors. There had been a difference in occupancy due to the seasonal influence, however, it shows a gradual increase, giving a stable average room rate. 3. 7 ADR and Revpar The graph shows a gradual narrow down of ADR. It has not many differences between Year 1 and Year 3 because the hotel has not changed the product prices for maintaining lowest rate compared to other 4 star competitors’ hotel. However, the Revpar is slowly increasing each year in the graph. 3.
8 Refurbishment spending and occupancy By a continual refurbishment in the First Year, the status of all rooms, bar, restaurant and the front desk maintained to the highest standard, supporting a continual ascend of Occupancy. Especially, on February of the First Year, the hotel spent $522,380 to the refurbishment because of the hotel need to develop refurbishment status to the highest standard. 4. 0 Business Plan for Year 4 4. 1 SWOT 4. 1. 1 Strengths According to HSU and Powers (2002), strength is very advantageous resource or skill which is relative to competitors.
One Strength of Treasure Paradise Hotel relative to its competitors would be its high occupancy rate and revenue relative to its competitors. For the past three years of operation of Treasure Paradise Hotel, revenue and occupancy rate has been increasing unprecedentedly resulting to a better market position. Hotel facilities refurbishments of Treasure Paradise Hotel served as its backbones in upgrading the customer satisfaction especially with regard the improving hotel room conditions (Building Corporation, 2008).
Sales from weddings are where Treasure Paradise Hotel has a comparative advantage over its competitors since the hotel has able to dominate the said category towards the end of Year 3 due to the hotel’s cheap price for wedding occasions relatively to Teams 1,2,3 and 5. This can be utilized by the hotel management to serve as the stepping stone of Treasure Paradise Hotel in further improving its profit and revenues. Furthermore, weekday room of Treasure Hotel Paradise are relatively cheaper compared to Park and Mariner Hotel, but slightly higher compared to Palace Hotel.
In addition to this, Treasure Paradise Hotel has also a stable balance sheet that reflects the level of assets and liabilities it currently has. The said stability of Treasure Paradise Hotel on its balance sheet seconded the occurring hotel facilities extension and refurbishment that the management has been implementing to improve the services and facilities of the hotel and so with the customer satisfaction. 4. 1. 2 Weaknesses Weakness can be defined as a deficiency that seriously impedes effective performance of business operation (HSU and Powers, 2002, p.
132). One of the possible weaknesses of Treasure Paradise Hotel would be its weak action on extending their hotel rooms compared to its competitors. This is the one of the main reason why Treasure Paradise does not have the competitive advantage in terms of their hotel room facilities that oftentimes leads to the deterioration of its customers. Moreover, aside from Treasure Paradise’s weak hotel room refurbishments relative to its competitors in the market, another weakness would be its significant turnover rates of its staffs.
Though there were some programs that the management of Treasure Paradise Hotel has been implementing in order to boost the productivity and efficiency of its workforce like recruiting more workers, increasing the budget for training and payments, still the quality of Treasure Paradise Hotel remains low with less improvement from the previous years. It is therefore a must of the hotel management to review its strategies on productivity development in order to address their problem regarding high turnover rates. Another weakness of Treasure Paradise Hotel would be its weak sales on weekdays and weekends compared to its competitors.
This maybe primarily due to the low customer satisfaction of their hotel rooms and low customer service that made its target clients to turn to Teams 1, 2, 3 and 5. Though Treasure Paradise is presently upgrading its hotel facilities, including their hotel rooms, earning again the trust of those already disappointed customers is already a hard time on the part of the hotel management, and Treasure Paradise Hotel’s competitors have always excellent rating on their hotel room improvement which allows them to attract more customer.
4. 1. 3 Opportunities Looking at the external factors, the opportunity is a major favorable situation and threat is a major unfavorable situation in the environment (HSU and Powers, 2004, p. 132). One possible opportunity for Treasure Paradise would be to increase its budget allotted for the refurbishment and extension of its hotel rooms and bars since these facilities are some of the sources of weakness of the hotel compared to the rate of its competitors in the market.
By allotting more budgets into these areas, Treasure Paradise Hotel can easily attract new customers as well as improve the integrity of the hotel in terms of providing high quality hotel facilities. Furthermore Treasure Paradise Hotel could also provides new strategies of improving the skills of their employees by developing new training programs and adding significant amount of resources in order to lower down its high turnover rate.
By the time Treasure Paradise successfully lower down its turnover rate, significant improvement on its occupancy rate and customer satisfaction is being expected which later on leads to higher sales and profits. Furthermore, based from the increasing occupancy and revenue rate and considering the stability of cash flow of Treasure Paradise Hotel, its management can establish new facilities aside from the Health Club. This kind of opportunity was already proven to be effective as the newly established Health Club of the hotel is already accounted to 7 percent of Treasure Paradise Hotel’s revenue during the year 3.
4. 1. 4 Threats The main threat for Treasure Paradise would be the tight competition in the hotel industry considering the high quality services and facilities of its competitors. Teams 1, 2, 3 and 5 compete at par with Treasure Paradise Hotel. It is therefore a must of the hotel management to take deliberate action on addressing all of the above identified weaknesses of Treasure Paradise Hotel as well as the intensification of its strengths that will later on serve as the pillar and stepping stone of the hotel in acquiring better position in the hotel industry.
Another threat on the Treasure Paradise Hotel would be the high turnover rate of its employees despite of various programs and strategies that the management has been implementing since their first year of operations. Though turnover rates of Treasure Paradise improves after every programs and strategies, but the rate of improvement is still way far behind to the “optimal” turnover rate wherein the hotel can minimise its adverse effects to the entire performance on the company (The Rain Maker Group, 2008).
It is therefore important for the executives of Treasure Paradise Hotel to search for alternative means of lowering down their employee turnover rate at a faster level to prevent further losses on the part of the management and dissatisfaction of their customers. 4. 2 Objectives a. Increase training expenditure to $14 per employee to reduce the employee turnover rate to 25 percent b. Increase the occupancy rate of the hotel by 80 percent by the end of year 4 by adding recreational facilities on the hotel and launching of promotional activities during off peak season
c. Lower down cost of meals by 5 percent by searching for cheaper food supplier 4. 3 Strategies 4. 3. 1 Human Resource Management One way to lower down the turnover rate of Treasure Paradise Hotel’s employees would be to increase the training expenditure to $14. By adding and intensifying the training programs of Treasure Paradise’s employees, there is a great potential for it to reduce its employee turnover rate to 40 percent.
Furthermore, Treasure Paradise Hotel can include the launching get-togethers, especially after training sessions to boost the relationship among their employees, and so with their collaboration and teamwork (Chartered Institute of Personnel and Development, 2007). 4. 3. 2 Physical Property Condition and Marketing Strategies On the other hand, one way to increase the occupancy rate of Treasure Paradise Hotel would be to add more recreational facilities on its area. Establishing Golf Course would be a good start for the management especially in attracting corporate people to visit the hotel.
Since golf is one of the favourite sport of most corporate people, the number of corporate guest of Treasure Paradise will surely improve after its name become well known to these group of people. Furthermore, another way by which the management could further improve the occupancy rate of the Treasure Paradise Hotel would be to raise budget for advertising specifically launching of promotional activities like discount rate, 3 percent of the total bill of a customer, during off peak seasons (Advertising and the Effectiveness of Advertising Media, 2008).
This will attract more customers even during off peak season starting from October until the end of the year. 4. 3. 3 Cost Control With regards to lowering of cost of meals of Treasure Paradise, the management could search for new suppliers that can offer relatively lower food supplies to them yet still in high quality in order to protect the integrity of Treasure Paradise Hotel. This will give the management enough margins to lower down the prices of their meals which will later on attracts more customers on the side of the hotel (Dunbar, 2008). 4. 4 Budgets With regards to the raising of training expenditure of employee from $9.
2 to $14 per employee in order to reduce the employee turnover rate of Treasure Paradise Hotel, the management will also give a corresponding increase on the budget of Human Resource Department of Treasure Paradise Hotel to finance its annual objective of reducing the employee turnover rate to 40 percent. The management will increase the budget of their human resource department by 15 percent in order to finance the said raising of employee training expenses by around $5 and this is still subject to evaluation at the end of the year to determine if the management will continue the said strategy to Year 5.
On the other hand, the budget for the development of physical property condition will be increased by 25 percent until the establishment of golf course is finished. The said 25 percent will also cover the existing refurbishing activities being held by the management on its key facilities. With regards to the promotional activity of Treasure Paradise – discount rates during off peak season, the management will increase the budget of the marketing department by 10 percent considering that this strategy will only takes place from October until the end of the year.
The last but not the least, as for the cutting down the prices of Treasure Paradise restaurant’s meals, the hotel management do not have to increase their present budget of the food and beverage department considering that they only have to replace their existing supplier of food and beverage supplies to suppliers that can offer relatively cheaper food and beverage supplies to give the restaurants and bars of Treasure Paradise Hotel enough margin to cut their existing meal prices by 5 percent.
This is being expected to attract more customers to visit their restaurants and bars as well as serve as an avenue towards competing at par with Teams 1, 2, 3 and 5.
Building Corporation (2008). Hotel Refurbishment – Cost Model. Retrieved May 30, 2008, from http://www. building. co. uk/story. asp? sectioncode=113&storycode=1019180&c=1 Chartered Institute of Personnel and Development (2007). Employee Turnover and Retention. Retrieved May 30, 2008, from http://www. cipd. co.
uk/subjects/hrpract/turnover/empturnretent. htm Dunbar, J. (2008). Menu Specials Strategy. Retrieved May 30, 2008, from http://www. hotelresource. com/modules. php? op=modload&name=trends&file=detail&sid=32149 HOTS (2008). Advertising And The Effectiveness Of Advertising Media. Oxfordshire: The Orange Group Ltd. HSU and Powers, 2002, p. 132). The Rain Maker Group (2008). The Real Cost of Employee Turnover. Retrieved May 30, 2008, from http://www. therainmakergroupinc. com/add. asp? ID=94