roccocco new york hotel

8/9/2019 Roccocco New York Hotel

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Roccoco New York Hotel

1. How important is the customer service in the boutique segment of the hotelindustry? What other factors are important to the success of the hotelscompeting in the segment?

The boutique hotels the have characteristic of being relatively small, quiet, convenient,well staffed and offer upscale high-end and ample amenities. The boutique segmentalso provides a specialised and personalised service. This would be integrated into theoverall experience concentrating on making the customer feel at home or ascomfortable as humanly possible. This segment would also offer unique services thatwould not normally be provided by low cost orientated segments.

When a customer stays at the hotel they want the whole experience to be carefree andcomfortable. Excellent customer service is a key component in satisfying this need.Factors such as speed of service and handling of special requests certainly enhancethe customer service of the hotel, which if performed correctly gives positive customer

perceptions. Another key dimension of customer service is the attitudes that theemployees display towards the customers when interacting and performing tasks. Nomatter how excellent the hotel facilities and amenities are if employee attitudes arenegative the entire outlook of the hotel becomes negative. Due to the competitive natureof the hotel business, customer service needs to incorporate innovative ideas andmethods on how to differentiate it self from other hotels. This would call for the serviceto be proactive on the part of the employee, for example, finding out the names of eachcustomer and greeting them using their names. All of these factors eventually end upmaking the customer happy which increases the repeat customer base.

Thus, customer service plays a very important role in the success of the boutiquesegment hotel. Excellent customer service in such a segment forms one of the primaryrequirements that a potential customer would seek. Customer service has a direct linkto the customers perceptions, which influences their decision for a repeat stay. This inturn relates closely to the occupancy levels of the hotel, which in turn affects the hotelbottom line.

Other important factors:

PriceThe price rate of rooms also contributes to the success. Although at this level thecustomers are not purely price sensitive but would definitely be aware of the price for

quality of service received. Thus the room rate must be competitively priced for theservice offered and must also take into account the room rate of competitors.

AmenitiesThe amenities are one of the factors that are used to differentiate one hotel fromanother. If a hotel offers unique amenities that are appreciated by the customer it willhave a positive effect on their stay and promote a desire for a comeback. Additionalamenities would include that of complementary shoeshine, coffee delivery with wake-upcalls, fresh flowers in rooms, standardised bath amenities, slippers, bath robes, fruitbaskets, and entertainment services.

Atmosphere & Cleanliness of property

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The atmosphere of the hotel is another important factor, as it is related to a persons firstimpressions and perceptions, both of which are important characteristics in attractingcustomers.

Special facilitiesSpecial facilities include areas such as meeting facilities for business travellers together

with a business centre. The need for office facilities such as internet, e-mail,printer/copier, fax and teleconferencing are some of the unique facilities that woulddifferentiate the hotel from its competitors and provide a competitive edge, sincemajority of the guests (weekdays) would be that of business travellers.

Geographic locationThe geographic location of the hotel is very important since it determines or increasesthe chances for the number of potential customers. If the hotel is located in an areawhere there are lots of attractions or places of interest, which attracts people, it is mostlikely that the people would book into these hotels due to the convenience.

Support systems to get customersAnother important factor is for having a support system that would direct potentialcustomers to the hotel instead of being taken up by a competitor hotel. This can beachieved by striking up an alliance with other hotels in the vicinity so that if they are fulltheir customers can stay in the alliance hotel. This works particularly well if both hotelsare part of the same holding company. Thus the business stays in the family andeveryone benefits.

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2. What are the Roccoco New York Hotels resource strengths and competitiveliabilities? What do you see as the competitive strengths of the Roccoco NewYork Hotel relative to other hotels in the New York City Market?

Resource Strengths

The grand atmosphere of the hotel can be viewed very positively and considered asa resource strength. `As commented by Ms. Bressner, I was pleasantly surprisedwith the grand atmosphere at this hotel. It can be described as an oasis in the heartof Times Square. The lobby area is small, yet elegant and quaint. This indicatesthat the money used for the renovation of the hotel was well spent since the object ofcreating a boutique type hotel has been achieved.

The care and beauty of the rooms and publics areas are also considered as aresource strength. The guestrooms offered great convenience for computer modemhook-up and have plenty of workspace. These provide further positive impressionsof the hotel, which is ideal for attracting customers.

The hotel has an excellent food and beverage manager who is well trained an ableto prepare superb banquets and creative menu concepts. This has a positive outlookon the customers especially concerning that of room service orders. This has beenindicated by the increase in food sales.

The hotel has an excellent doorman who portrays a positive outlook on the hotel.This is highly invaluable since he creates the first impression of service expectationon the customers.

The hotel has a 24-hour room service and the answering of the hotel room serviceorder is considered positive since it is very personalised.

The alliance that the Roccoco hotel has with a nearby property to refer their

customers to Roccoco hotel when the are fully booked is a resource strength. Thisprovides for a source of customers, who if, were not referred would have stayed at acompetitor hotel.

The room rate of the Roccoco hotel is also very competitively priced as compared tothe other hotels of its segment in the vicinity.

The Hotel is located in the hub of the city and is surrounded by corporate buildings,restaurants, shopping and the theatre district. This is an advantage since customershave access to these facilities and this would make it convenient for them if theystay in the Roccoco hotel.

Competitive Liabilities

The overall customer service is bad The room service menu is too limited and the food takes too long to reachthe customer. The service trays are not timely collected. The cocktail bar service is too slow. The service at the lobby desk is bad and the employees have a badattitude. The booking requirements were not correctly implemented, for examplein the case of Ms. Bressner, king-size bed and non-smoking.

The bell boy takes too long to deliver the baggage and is not well trainedon how to properly deliver the baggage and lacks customer communication skills.

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Employees are disempowered and cannot make routine decisions sinceapproval is needed from supervisors. This causes delays to the customer.

The old corporate culture of the employees. Most of the employees were part of theold hotel whose strategy was that of a low cost hotel. They thus bring the old way ofthinking and customer service, which is wrong for the boutique type hotel.

Weak brand image or reputation.

The companys meeting facilities were limited to less that 2000 square feet with nobusiness centre.

The formal training program has been cancelled. The new employees are notformally trained but are trained on the job. They are also provided with the hotels500-page operations manual, which is not user friendly and not easy to learn.

The hotel does not have any middle management. These positions have been leftopen due to the high labour cost.

Competitive strengths of the Roccoco New York Hotel relative to other hotels

They offered a personalised atmosphere, which is cosy, quaint, and quiet and isoriented towards a specific niche market. Excellent design and arrangement of thelobby, restaurant and guestroom.

Nearby property support for a source of customers. They have an excellent chef and food is of exceptional quality The room rate price was competitive.

3. What steps does Roccoco Management take to build core competencies andcompetitive capabilities that ensure a pleasurable stay for Roccoco guests?

Roccoco NY Hotel is designed to offer a personalised atmosphere and targets aspecific clientele as compared to its major competition whom are too large and willhave a general clientele focus.

The Roccoco has a great hotel property and the rooms are considered extremelyfavourable. Roccoco provides a personal fax machine in the rooms on request byguests. The rooms are also designed to have modem hook-up and plenty ofworkspace.

Roccoco contracted a famous New York artist to design an art deco lobby area,restaurant and guestrooms.

The hotel also provides special amenities such as complementary shoeshine, coffeedelivery with wakeup calls, and entertainment services were available to all guests.

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4. What is your assessment of the financial strength of the Roccoco Hotel? Howdoes its financial performance compare to the industry averages?

Financial Analysis1996 1997

Gross margin = Income before Fixed Charges 19.58% 24.32%Total Revenue

% Room Contribution Margin 63% 66%%

% Food and beverage Contribution Margin 8% 10%

% Other Contribution Margin 20% 28%

% Admin & General to Total revenue 15% 13.5%

% Admin & General to Total Undistributed Exp. 44.12% 43.27%

% Marketing Cost to Total Revenue 7.5% 7%

% Marketing Cost to Total Undistributed Exp 22.05% 22.43%

% Increase in total Revenue (from 1996 to 1997) 11.6%

Marketing cost - Operation & Maintenance $181066 $202207

4% diff. bet Industry Gross operating Income $147719 $204902

From the financial analysis above the following can be deduced:i) The gross margin for 1996 and 1997 are 19.58% and 24.32% respectively. This

is as indicated by the positive growth in the occupancy levels.ii) From the contribution margins of the three revenue bases:

The rooms have a contribution margin of 66% for 1997. This is highlyfavourable. The other contribution is 28% for 1997 and has increased by 8% since1996. The Food and beverage contribution margin is 10% for 1997.

These figures indicate that although there are varying rates in the contributionmargins each department contributes positively to the bottom line of thebusiness. Thus it will not be favourable to drop any of the departments since thecontribution margin will be negatively affected and the fixed costs of the hotelwould not be adequately offset.

The industry financial comparison showed that the level of gross operating income wasabout 2 to 4 % points below the average for comparable properties. This means that for

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1997 Roccoco hotels were below the average gross operating income by $204902. Theadministration and general expenses for 1997 consist of 43.27% of the totalundistributed cost and is 13.5% of the total revenue generated. It is also evident fromthe Roccoco financials that the marketing cost for 1997 contributed for 22.43% of thetotal undistributed cost. This cost was also more than the operation and maintenancecost by about $202207. Considering that the hotels most important activities and costs

should be in operations, this high marketing cost is unacceptable. From this analysis itis also clear that Roccoco is spending too much of money on marketing. Although it isimportant for the hotel to effectively market itself it can make better use of the theirfinancial resources by rather focusing on training and development of the employees toimprove the customer service competency.

It is also clear that the Hotel does not generate enough revenue to adequately cover itsfixed costs and Debt service depreciation and taxes. For 1996 it had a net cash loss of$905970. In 1997 although the situation improved it only made a net cash flow of$419534. It is clear that Roccocos debt service is really putting a strain on the hotel onachieving real profits. For 1997 the debt service was 15.74% of the total revenues. This

value is too high and makes one re-evaluate the real benefit of spending all that moneyon the upgrade of the hotel.

The hotel has three options of increasing the bottom line. These are;1. Decrease internal expenses2. Increase the average daily rate3. Increase the occupancy levels

Option 1 should always be explored but it must not be the core focus since certainareas like money spent on effect training needs to be revisited.Option 2 would work but this is seen as a short term solution since it is has also beenclear that rate increases results in the decrease in the number of customers. Howeverthe link between value for money and the room rate needs to be explored in more detail.Option 3 would be the ideal focus area since the other two options would results in amarginal increase in cash flow of small proportions and are short term. If the occupancylevels were increased with great customer service, the repeat customers and newcustomers (word of mouth) would increase thus maintaining the hotels market shareand increased revenue.From the Occupancy levels graph below it can be seen that the Roccoco hotel has

always been below the industry average occupancy rate. The competitive set 1 and 2 ofhotel groups have always maintained an occupancy level greater than the industryaverage. It is thus evident that the core focus of Roccoco Hotel should be on the aim ofincreasing the occupancy levels

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5. Do you think that Roccoco employees find the hotel a pleasurable place towork? What actions have been taken by Roccoco management to create astrategy-supportive corporate culture that motivates employees go to greatlengths to satisfy customer expectations?

No, the Roccoco employees do not find the hotel as a favourable place to work.Employee satisfaction is very low due to the shifts in management and the ambiguousnature of policies, procedures, and management support.

From the results of the Employee satisfaction survey, the three worst scoringdimensions are hotel policies, the training you receive and your opportunities foradvancement. These factors all affect how the employee carries out their tasks and itdirectly affects the level of customer service of the hotel. Due to cost cuts the previousHR manager terminated the two-week training program for new employees. Eventhough this showed short term financial rewards the long-term failure is now becomingevident in the low customer service levels, high customer complaints and number lost

customers. The new employees are not properly introduced into the culture of the hotelor the processes that are followed by the hotel. They do not learn how to do a task thecorrect way but are expected to learn from other employees whom might be performingthe tasks wrongly in the first place. The employees are rather given a 500 page-operating manual that is difficult to understand and implement. This adds to theirfrustration.The other issue of significance is that the employee turnover rate is low, which meansthat employees remain in their current positions for a long time, as there is no room formovements or promotions. This is a factor that would eventually de-motivate theemployee causing them to exhibit this feeling in their attitudes towards customersleading to bad customer service and low occupancy levels.

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Occupancy levels

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72

74

76

78

80

82

84

86

88

1995 1996 1997

Ye ars

OccupanyLevel(%)

Roccoco Comp set1 Comp set 2 Average


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From the results of the Roccoco Employee Survey (non-managerial employees) thefollowing are highlights of the points that scored low. Roccoco management needs tonoted and addressed these concerns: Employees do not receive clear guidance on the extent to which they can bend the

rules to satisfy customers.

Employees do not receive clear guidance on how to best serve the guests. They do not receive clear, planned guidelines for doing their job. They work on unnecessary things. Employees are not allowed to perform work in a way that suits their own style and

approach and they do not ignore guidelines in order to do their job. Employees do not receive clear guidance on how to resolve customer complaints.

From the key points listed above it is clear that the employees lack clear guideline onhow to best perform their jobs. It is also clear that the 500-page operation manual is notadequate to introduce and teach the employee the skills needed for a hotel that

demands high customer service. The employees are not given the freedom to expressthemselves thus they cannot promote innovative ideas that may be found in competitorhotels. The work performed is too procedurally orientated and these are also not welltaught or followed. The employees thus feel dis-empowered and eventually lose interestin their jobs.

Basically apart from the initiation of the employee survey Roccoco management havenot implemented or taken any action to create a strategy supportive corporate culture.This would be very important action seeing that there is a low employee turnover ratewith most employees being carried over from the previous hotel whose strategy wasthat of a low cost hotel as opposed to the boutique type hotel.

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6. What recommendations would you make to Roccoco management and itsboard of directors to improve the hotels performance? How does thecomplaint letter from MS. Bressner or the results of September 1998 ShopperSurvey influence your suggestions? Should the complaint letter and theShopper Survey influence your recommendations?

From the industry and competitive analysis it is clear that Roccoco Hotel has nocorporate strategy for the running of the hotel. The culture of the hotel is not one for aboutique type hotel. This can be seen in the operational processes set up for theemployees together with inadequate training. These are not well defined or controlledand thus the employees do not know how to handle situations when they come up. Thisleads to bad customer service, which is directly linked to low occupancy levels and lostrevenue. Thus the following recommendations are made.

i) Firstly, management needs to identify a clear strategy for the Hotel. This musthighlight the position of the hotel in the industry and its target market.

The following strategy it suggested. It would be appropriate for Roccoco Hotel toselect a distinct competitive strategy approach that is Focused (or market niche),based on differentiation and concentrate on a narrow customer segment by outcompeting rivals by offering outstanding customer service and a uniqueexperience. The focus of the competitive advantage is for the ability to offer nichemembers a service that they perceive is better suited to their own unique tastesand preferences.

ii) Management must instil into its culture and get the commitment from employeesto remain totally dedicated to serving the niche customers better than any othercompetitor.

iii) Emphasis should be on building a capable organisation. All employees mustbe properly trained on how to effectively carry out their duties and enlightened onthe implications of bad customer service. Employees must be given some degreeof responsibility and flexibility in carrying out their jobs. The focused niche marketstrategy will definitely require employees to be empowered with some degree ofauthority.

iv) The budgets of the hotel must be linked to the strategy . Ample resourcesmust be allocated to the strategy critical activities such as operations and human

resources (to develop service capabilities).

v) Management must then create strategy supportive polices and proceduresto provide top down guidance to supervisors and employees wherebyestablishing some degree of regularity and stability in how the operations is to becarried out. Specific tasks and procedures from the 500-page operations manualmust be extracted and presented to relevant employees in a clear easy tounderstand format. This must be designed for quick reference only with the majorfocus being on formal training. Management must create a process flow for thehotels operations strategy. This will help to identify problem areas and tooptimise the whole process to ensure maximum customer satisfaction.

vi) The hotel structure and work effort must match the strategy. The importanceof middle management for the leadership and control functions cannot be further

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emphasised. Roccoco hotel must consider employing competent middlemanagers that have experience in high service environments or hotel services.The marketing effort must be included in the overall hotel strategy so that allattempts are made to successfully satisfy the target market.

vii) The hotel should consider instituting best practices and a commitment to

continuous improvement. On the job training can be very effective if it isapplied in the right way and when it is directed towards achieving the corporatestrategy. The hotel should carry out environmental scanning and actively seekinformation on how activities are carried out by world class hotels. This will allowthem to benchmark themselves to the leaders in the industry. They must createprocesses and the culture to always improve in every activity that is performed.This will help to improve the customer service.

viii) The hotel should consider creating internal support systems to facilitate thehotels service delivery processes. The hotel can make use of computer softwareand IT systems to integrate the whole process to keep a database that keeps

track of customers personal preferences.

ix) The Hotel must establish an effective reward system that must be aligned toachieving the strategic goals of the hotel. This will help to motivate and create aservice-induced environment.

x) The specifics of customer service enhancement:

The doorman needs to be rewarded and made aware that he is doing agreat job and keep up the good work.

The reservations desk/personnel must be adequately staffed and onstarting their shift correctly identify the specific requirements of the customersthat will be checking into the hotel that day, before they arrive and make surethat the necessary arrangements have been made.

They must be alerted to new customers entering the hotel and immediatelyturn their attention to the new customer. In fact, it would be great if thedoorman had a device to signal that a potential customer will be entering thehotel. This would give the lobby personnel the prompt to focus their attention

on the customer.

The bellboy needs to be informed of the importance of his job and thenegative effects that he can have, if his job is not properly carried out. Heneeds to be trained on the proper way to deliver the baggage to the relevantroom and how to indicate to the guest the special amenities that is offered bythe hotel. A special delivery time must be set within which the baggage mustbe delivered. In fact as far as possible the baggage must be delivered at thesame time when the guest enters the room.

The answering of room service calls should be carried out as present

since it is in line with the personalised attention that the hotel is striving tooffer guests. The food menu should try to incorporate more easy to prepare

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options although the quality of the food should remain excellent. The guestmust be properly alerted to the lead times for elaborate meals.

The hotel must set up a routine for room service tray pick up, which shouldpreferably be carried out after 10pm. In fact proper records of all room serviceorders for the day should be kept and the person should make sure that these

rooms are targeted. This would optimise the time for this task.

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roccocco new york hotel

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