CHENNAI VENUS HOTEL

EVALUATING STRATEGIC INVESTMENT OPTIONS

Subject - Strategic Management
Guided By Prof. Gagan Bhatia
Specializtion - Operations
Submitted By

Name Roll No
Ameya Velapurkar 2013173
Abhishek Belkar 2013185
Shrikant Devadkar 2013191
Mahesh Ghule 2013194
Dishank Khandelwal
2013205
Siddarth Mestri 2013211
Vivek Miner 2013212
Subin Nair
2013213

Deepak Pandey 2013217
Deven Sawant
2013226
Arshan Sheikh 2013231
Manish Sharma 2013232


Summary


Chennai Venus Hotel is a 5 star category located in Chennai near airport is established in
1980s. The property has three restaurants in the ground floor, four banquet halls of varying
capacity, five business centers and large shopping area. The frontage as an ethnic
presentation depicting the heritage of the Pallava and cola dynasties through the use of rocks,
carvings and woodwork combined with regular floral and lighting arrangements.
Since the hotel has a quiet ambiance and is conveniently located in terms of both the central
business district and the airport, it attracts guests from business and leisure segments.
Chennai is a hub for automobile & IT services, business travelers mostly constitute of 75% of
hotel guests, with rest of leisure segment. Business travellers arrive mostly between August
and April whereas leisure travelers mostly occur from September and March.
As of now, TCVH has approximately 500 employees. Along with Chairman Ram Gopal
Sharma, management team consist experienced professionals from different functional areas.
Management team plays pivotal role in the process of decision making & problem solving.
Looking at current scenario of industry, 100% FDI is permissible in sector via automatic
route. Foreign Trade policy in 2006 offered number of incentives to hospitality industry.
Liberalization in aviation sector and pricing policy on aviation turbine fuel are supporting
growth of industry.
Chairman and MD held meetings with his team to evaluate strategic moves such as adding on
rooms and facilities, brand building, and evaluating tie ups with international hotel chain
operators on operations and marketing franchise. Issues to address are falling revenue per
available room (RevPAR) and occupancy, and customer dissatisfaction.









Q.1 Complete a SWOT analysis to identify key success factors in for TCVH
STRENGTH
Good Location
Excellent Appearance
Experienced Management Team
Positioning
WEAKNESS
Dropping rate of customer retention
Falling RevPAR
Low Employee Morale
Capital intensive
OPPORTUNITY
Strong Economic Growth
Increased FDI
Government Support
International/Sports Events
THREATS
Increasing intensity of competition
Losing Market Share due to lack of
operational efficiency


Strength
1. Good Location
Chennai Venus Hotel is located on Grand Southern Trunk (GST) Road on the way
from Chennai city to airport at Meenambakkam. As airport handles both domestic and
international traffic, different business travelers, tourists can be expected. can be
expected.
2 Excellent Appearance
Hotel has 3 restaurants in the ground floor, four banquets hails of varying capacity,
five business centres, and a large shopping area. The frontage as an ethnic
presentation depicting the heritage of the Pallava and cola dynasties trout e use of
rocks, carvings and woodwork combined with regular floral and lighting
arrangements
3 Experienced Management Team
Chennai Venus Hotel has skilled and experienced set of management professionals
from different functional areas. This experience can help Venus Hotel in decision
making and problem solving.
4 Positioning
Massive statues, cultural pieces, and elegant imported furnishings create a lavish
environment. Hotel has a quiet ambiance and is conveniently located in terms of bot
central business and airport; it positioned itself as 5 star Hotel serving both business
and leisure segments.

WEAKNESS
Dropping rate of customer retention
Lack of operational efficiency and reducing customer satisfaction are main reasons
for dropping rate of customer retention. Overall customer rating came down from
4.35 to 3.6 in last two years.
Low Employee Morale
HR Department that the morale of staff has fallen. The number of operations staff
has been varying from 560 to 500 420 and 390 during last four years, starting from
2005-06 to manage the drop in revenue. Increments during years have been
significantly low which barely covers cost of living.
Capital Intensive
The development of hotels is a highly capital intensive activity and new hotel
properties typically have a high break-even point. Therefore financial flexibility is
essential, especially during early years of operation

Falling RevPAR
Operations of hotel are profitable but there is serious it in revenue during last lump in
business conditions. Although occupancy and RevPAR is better than market in
Chennai, this is inadequate.

OPPORTUNITIES

Strong Economic growth
Foreign trade policy announced offered number of incentives to hospitality industry.
Along with these procedural changes such as making land available for construction
for hotels and allowing the setting up of guest house, the rationalization of tax rates in
the hospitality sector, increased promotions and branding influenced hospitality
sector.

FDI
100 % FDI is permissible in the sector via automatic route. This move will bring new
investment from other countries which will be helpful to Venus hotel making decision
of Strategic alliance, joint venture or international tie up.



THREATS

Increasing intensity of competition
Competition in the Hotel Industry anywhere in the world is intense within strategic
groups subject to the level of industry growth. Industry growth in major cities,
capitals or financial centres is high at present partly due to the travellers from tourist
groups, business and independent leisure travellers, resulting in low levels of
jockeying. Competitive position involves Cost and Differentiation.


Expectation of clients in terms of better operational efficiency
Hotels business clients are mature. That is between age of 35 to 65. This has
contributed to Venus Hotels customer base of nearly 60%. Unfortunately, customer
retention rates has been consistently dropping in last few years and this repeat base as
declined by about 10% in reaction to increased competitive pressure and hotels drop
in operational efficiency.

Q.2 What are the approaches to be taken to address issues with respect to customer
satisfaction and improving service levels?
Ans - Customer satisfaction has to be one everyones mind as they begin the work day. These
days, customers start their hotel searches online and spend time comparing prices and reading
reviews. If the customer is a smartphone or tablet user, the time spent studying and reviewing
various choices increases, meaning hospitality impressions begin long before the customer
walks through the door. Following are the points to remember to satisfy and retain customer.

1. Great customer websites improve customer experience: - Customer satisfaction
extends beyond the human interaction. Customer satisfaction is affected by your
digital online presence. With customers getting their first information about
hotels online, the most successful hotels have stand-out websites that are also easy to
navigate. Websites with numerous photos, clear directions including maps, nearby
points of interest, good restaurants and reviews will do better holding the attention of
an online shopper. The online shopper should be able to look and book quickly with
minimum hassle.

2. Improve customer satisfaction by addressing customer complaints quickly
Service recovery is the last line of defense to your customer satisfaction. The hotel
industry can be a tough one with requests and complaints coming in online, by phone,
email or in person with the guest leaning over the welcome desk. One of the key
responsibilities of any guest services manager or customer service leader is customer
satisfaction measurement.
By addressing requests quickly, a hotel will have fewer complaints. When asking the
hospitality staff for an extra pillow, blanket or batteries for a dead remote, a guest
expects quick service. Waiting an hour or more for remote batteries or that extra
blanket will earn a hotel a bad review for not caring or slow service. A quick
turnaround to a question online could make the difference between gaining or losing a
potential customer as well.

3. Train staff on improving customer service & improving service level

When management provides a well-trained staff with an emphasis on working
together for the benefit of the customer, a hotel runs more smoothly and this
translated to greater customer satisfaction. The constant goal in the mind of all staff
members should be centered on customer satisfaction. Customers in the hotel industry
are notorious for high expectations and complaints. A staff well trained in managing
complaints, but more importantly avoiding them in the first place, will do better
overall.
4. Track, analyze and report on customer satisfaction
Customer satisfaction will often times be tied to your level of customer
communication. By creating a dialogue with customers, hotel management can see
strong points and weak spots in customer service. Feedback can be gathered online in
review section of websites combined with review cards in room and front desk logs.
These tools, used correctly, can be extremely helpful in staff meetings and training
sessions, and at the management level for implementing policy.
There are a number of customer satisfaction tracking companies and tools available.
Some of these other tools include analysis of how customers book and what led these
customers to choose a particular hotel versus a similar one down the street. Gathering
this type of information with hotel reservation service tools and using it properly can
be a huge plus in gaining new customers and keeping existing ones


Q.3 How do you think the current downtrend in the financial performance of TCVH
should be addressed?
Ans- The Chennai Venus Hotel has been performing well as compared to other 5 star hotel in
Chennai. But there has been downtrend in the financial performance of the hotel.
The occupancy rate has been decreased to 50% during weekends which is a serious
issue. This could be resolved by providing attractive package and discounts.
The existing customers are dissatisfied due to poor service. The management have to
keep the existing customer happy so that they visit the hotel next time they come.
Existing customer helps to get the new customer. It is the happy customer who does
the Word of Mouth marketing.
The total operating expense of TCVH has increased drastically. This is squeezed the
profit of the company. TCVH can control the operating expense by planning the
budget and monitoring it. They should also remove Non Value Add cost if there is
any.
The operating income of TCVH has reduced drastically as compared to the last
previous 5 years. This is because of low gross income, high operating cost and high
depreciation and amortization. Operating income can be increased by reducing the
Cost of Goods sold, Reduce labour and operations cost and by increasing sales
revenue.
Success in the hotel and tourism industry depends on understanding the key
factors of customer satisfaction. Customer satisfaction leads to purchase repetition,
intention to revisit, and potential increased future patronage of the hotel.
Satisfying customers during their first visit and prolonging their stay can help
develop customer loyalty and thereby encourage the desire to revisit the
destination found that the relationship between customer satisfaction and repeat
purchase was bolstered when the customer found value in the product. Hence,
consumption emotions are important components of customer response and
influence customer satisfaction and repeat patronage. Many firms recognize that
they compete more efficiently through the service quality and customer
satisfaction. It is because the importance of service quality evaluation can be
demonstrated by the fact that when a firm delivers an excellent service, this
typically leads to the higher satisfaction, which it implies for the customer
retention and consequently an increase in profits.












Q.4 Do you propose TCVH add further room and facilities? How would it impact hotel
strategically? What positioning should hotel acquire in such case?
Ans- Going by the current scenario, adding rooms and facilities would incur additional
expense. With the company not going great guns, we personally feel that it should not add
more rooms. In fact what we recommend is that the management should look into and try to
improve the current rooms and existing problems should be rectified. This way they can
retain the existing customers and also win their trust

If hotel were to add rooms and facilities it would become hindrance or a liability. As we have
already seen, the employees are dissatisfied and their incomes are decreasing. Also the
number of employees is decreasing. So that would mean additional workload the existing
employees. This may cause them to revolt and may bring the work to a total halt.
RevPAR
Chennai 12 month growth of RevPAR (Rs) is declining by 17.7%, RevPAR(Rs) of Five
star Deluxe is declining by 16.2% so primary concern of TCVH is should be to retain
customers
Occupancy
Occupancy rate of Chennai of 12 month growth is declining by 2%. During weekends
occupancy rate is decreasing by 50% in TCVH. So when occupancy is decreasing, adding
further room does not seem logical.
Q.5 Would you recommend an international tie up for the hotel? If so, how should the
management team look at the same strategically?
Ans- TCVHs key for growth is the repeat and referral customers. They firstly need to satisfy
the existing customers. Getting new customer is a must for TCVH. This could be done by tie
ups with online travel agent and advertising on travel website. New customer would come
when there is visibility. TCVH would get maximum visibility when they tie up with an
international chain. Tie up is the best source for expansion of the business and to get the
maximum visibility. Since now the great threat for TCVH is the MNCs and large hotel chains
with international networks.
International tie ups will give TCVH to play in volumes.
One of the major benefits of corporate tie-ups is that both the parties gain mutually
from the association.
Nowadays, most of the Hotels pamper their employees to the fullest to get the best
from them. They facilitate them with pre-employment check-ups, annual health
check-ups, preventive health check-ups and many more customized check-ups. TCVH
should make sure that their employees get all the above mentioned check-ups done to
acquire loyalty of their employees and to provide them with the best health facilities.
As we all know, healthy employees means healthier business
Marketing is very important for every business to grow. TCVH should hire an
advertising agency. They should also do marketing through direct mails, SMS and
through few other mediums
TCVH should tie-up with Citi Bank and American Express, as per which, TCVH will
get access to the database of both the companies and in return, provides all its clients
a specific discount at their outlets pan India.
Getting a new customer is easy, but to retain them is difficult in this cut throat
competition. TCVH should conceptualize many special privileges like membership
rewards, value added services, corporate parties and additional discount schemes to
retain their clients.
More the number of clients more will be the credibility of the brand in the industry.

Giving the current dilemma the company is facing, a tie up with international hotel
chain would make good sense. It would help to inject some foreign currency. Also a
new working style, working culture might turn out to be the tonic the company needs.
Also it could help in marketing and operational activities as seen from the eye of a
foreign company. Additionally the hotel would reach out to regions untapped due to
its alliance with a foreign hotel.