Four Seasons Hotel Revenue and Cost Management

This assignment delves into the business strategies of Four Seasons Hotel, focusing on revenue management, cost optimization, and operational efficiency. The document examines the importance of resource utilization, waste management, training, and supply chain management in reducing costs while maximizing revenue. It also discusses the effectiveness of open pricing strategies, demand-based pricing, loyalty programs, and discount offerings as promotional tools. Additionally, the assignment evaluates the current management structure of the hotelier and identifies areas for improvement to achieve greater efficiency.

Business plan

EXECUTIVE SUMMARY
The current business plan was about expanding Four Season Hotel in the USA market for
the purpose of building a global image and combat competitive threats. The research investigates
that company is facing tough competition from the Ritz Carlton therefore; it is a good option for
it to arrange a strategic alliance with it to reduce competition and expand their business. Besides
this, debt reduction, demand-based pricing, customer loyalty program, website marketing,
quality management and waste management strategies had been suggested for the future growth.

TABLE OF CONTENTS
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................1
BUSINESS OVERVIEW................................................................................................................1
Type of Business..........................................................................................................................1
Status of the business...................................................................................................................1
Products........................................................................................................................................1
Customers.....................................................................................................................................2
Special or uniqueness about the business....................................................................................2
Main issue or problem..................................................................................................................2
EXPANSION STRATEGY.............................................................................................................2
COST REDUCTION.......................................................................................................................3
ASSETS REDUCTION...................................................................................................................4
REVENUE GENERATING............................................................................................................4
PRODUCT STRATEGIES..............................................................................................................4
PRICING STRATEGIES................................................................................................................5
PROMOTIONAL STRATEGIES...................................................................................................5
COMPETITION..............................................................................................................................6
HRM- MANAGEMENT AND OPERATIONS.............................................................................7
CONCLUSION................................................................................................................................7

INTRODUCTION
Business plan is a plan about establishing a new start up or expanding the existing one.
Four Season Hotel is a luxurious 5-star deluxe hotel that is operating a year-round opulence to
the visitors. It is currently looking for expanding its global presence through expansion in US
market. The current plan covers the key strategies about revenue maximization, cost, assets,
product, pricing, HRM and other aspects.
BUSINESS OVERVIEW
Type of Business
Four Seasons Hotel is a prestigious luxurious 5-star hotel established in 1993 owned and
managed by Muskita Hotels Ltd. It is situated on the sandy beach to 8 km East to the Limassol
city centre. It is a 5-star deluxe property hotel with 304 rooms, 6 restaurants, 4 bars. Moreover,
various facilities such as conference, Shiseido Spa and full range of fitness & sport activities and
a shopping area with boutique, watches and ornaments. Thus, the business operates in the
hospitality sector and is the pinnacle of luxury style combining with impeccable facilities with
the top quality services.
Status of the business
The hotel is running a successful business by providing the best quality hotel facilities to
the guests to develop great experience. The current plan is about its expansion so as to build a
global image by serving people all around the world. It is a private limited organization that is
looking for expanding its business in new geographical market so as to gain more brand
popularity. Being a growth stage of its life cycle, business takes many measures for
diversification through the influx of digital media, diversified merchandise assortment and others
(Four Seasons Hotel and Resorts, 2016). With new hotel opening all around the globe, there is a
strong opportunity for the company to grow their business in many areas.
Products
The hotel offers exceptional facilities and year-round opulence to their guests and also
provides wide range of complimentary services and amenities to the people. Its product portfolio
includes luxurious rooms for accommodation, food and beverages, in-house facilities and many
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recreation facilities such as outdoor saltwater pool, spa and fitness centre, Hammocks for
relaxation, separate smoking areas, lawn games i.e. giant jenga, ping pong and others. All the
products had successfully met the demand of hotel guests (Four Seasons Hotel and Resorts,
2016). Hotel has completed renovations and reopened the business with a refined atmosphere,
feel and functionality. The renovation mainly targets to deeply search the trends of elite living
combining with personal involvement and passion.
Customers
Four Season Hotels had established their image as a finest global luxury hotel chain. It
has a simple mission statement that is every customer must be treated as a special guest.
Company specially targets people who prefer to enjoy a luxurious life style. It means that high-
class people are the target people of it. However, company also offers services to other people
and offers them world-class hospitality experience.
Special or uniqueness about the business
Specialty customer service is the main unique point that offers to the guests. It uses
OCAAT means one customer at a time model and provides customized facilities to the people on
their requests. The Power of Personal Service is its business mantra that defines its
competitiveness.
Main issue or problem
The main challenge for the Four Season hotel is high competition threat from the industry
players like Ritz Carlton & Starwood hotels and resort. It can be mitigated through expanding its
business in US market.
EXPANSION STRATEGY
There are three ways by which Four Season Hotel can expand their presence in the US
market. Some important ways by which business can be expanded are discussed below:
Alliance: An alliance can be defined as an agreement between two or more individual
parties, both work together to secure their common interest.
Merger: It is a process or agreement in which two existing or running companies merges
and form a new company.
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Acquisition: It is a corporation action in which a firm purchase an existing company by
purchasing more than 50% shares in the target company so as to gain the controlling power.
Among these strategies, it is better for Four Season Hotel to conduct a strategic alliance
with its tough competitor which reduces competitive threats as both the hotels will work together
for common goals. Joining hands with the competitor like Ritz Carlton will be of great
significance for the Four Season Hotel to reduce rivalry threats (Four Seasons Looks Ahead to
2017 and Beyond, 2017).
COST REDUCTION
Cost reduction is the main requirement of every business and there are number of ways
by which Four Season Hotel can cut cost. Some important cost curtailment decisions are
explained below:
Better Supply Management: Four Season Hotel needs to improve its procurement and
supply management strategies, in which; it must purchase the products from the localized area
without compromising the quality. It helps to minimize Co2 emission via transportation and
helps to meet sudden increase in the customer demand.
Waste management: Waste incurs cost not only for the business but also for the
community. Company must focus on its recycling process to reduce waste by minimizing the use
of plastic and paper or compost all the glass, oils, plastic, cardboard and food waste.
Efficient use of resources: In order to utilize natural resources efficiently, Four Season
Hotel must use solar panels for hot water supply and Air Condition Systems for heat recovery.
Water flow restrictors must be use for saving water consumption (Four Seasons Hotel strategies.
2016). Despite this, electricity needs to be used efficiently by the use of LED lights, light sensors
and timers, low energy refrigerators and others.
Training: Four Season Hotel at Cyprus conducts trainings for their workers to provide
them knowledge about the use of appropriate measures of energy conservation, waste
management, resource utilization and others to save cost.
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Cutting investment on R&D: Four Season Hotel invests lot money in investigating the
current market trends about Elite living. Thus, it is advised to the hotelier to cut their spending
on R&D activities to save cost.
ASSETS REDUCTION
Divestment: It is an action or process through which assets are sold out in the market for
meeting financial or political goals. Four Season Hotel can dispose-off those assets that are
unproductive or no longer fit for its operations or technologies which became completely
obsolete from the use. As the hotel continuously looks towards innovation through advancement
of technologies therefore, it is a better option for the hotelier to dispose its underperforming
assets and gain money which can be used for acquiring new technology.
REVENUE GENERATING
Regardless the size of the hotel, revenue management is of huge importance to succeed in
the competitive market place by generating maximum revenue.
Open pricing strategy: Price has a direct influence over revenue. Four Season Hotel must
use open pricing strategy in which prices of the rooms must be charged on the basis of the
demand instead of using a fixed modifier. It will allow hotelier to have greater flexibility as well
as adaptability. Moreover, in the off season, it must offer flexible discount rather than a static
percentage to drive more bookings.
Debt reduction: Excessive use of debt in the business reduces interest burden and
provides high net profitability. However, at the same time, it must be noticed that interest offers
tax benefits and excessive use of equity is also risky because it diverts control to the shareholders
(Kawamoto, 2017). Hence, it is better to created balanced capital mix and use debt to the level
where Four Season Hotel is able to make regular payment of the installments and interest. .
PRODUCT STRATEGIES
The product strategies are also crucial for the company. There will be effective delivery
mechanism of goods to customers so that they extract benefit. Moreover, there is a need to
introduce new products and services such as providing ancillary services to customers. It will
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increment costs to company but alternatively benefits will be extracted by maximising customer
satisfaction. This will have positive image of the company.
New services such as fitness centre, indoor lap pool should be introduced so that Four
seasons hotel may achieve revenue by implementing new services' portfolio. It is advised that
implementation should be done in accordance to the stated budget so that expenditures may not
exceed revenue (Eltayeb and Kadoda, 2017). Thus, monitoring is essentially required in the
company.
PRICING STRATEGIES
Pricing strategies are important part of the company so that it may be able to provide
goods and services at desired price to earn revenue. Four seasons hotel is the finest hospitality
company established in the year 1993 in Cyprus and has earned award for cleanliness as well. It
provides effective services to customers and earn revenue quite easily. The pricing strategies
play crucial role in earning profit and attain satisfaction level of customers. The prices are
significantly high of the hotel which may have negative effect on the profits. It is required that
prices should be set in accordance to preferences of customers so that desired revenue can be
garnered. It is suggested that prices of goods should be set moderately so that customers may be
lured. The pricing strategy should be the highest quality of goods and services to provide exotic
experience to customers (Smorodinskaya and Katukov, 2017).
The customers will pay for the price as they are loyal towards hotel and as such, goods
and services will be availed by them. The credit policies should be strict enough and customers
will be asked to pay within stipulated time. This will have positive effect on company as timely
payments will be achieved. Customers will be disheartened because of strict policies and may
change their preference. Loyalty is the main key which protects Four season hotel from
competition. It has positive effect on hotel as customers are ready to pay for even high prices.
Business can add value by implementing more ancillary services such as providing internet
access to customers. It is advised that changes should be implemented in accordance to
preferences of customers so that maximum satisfaction can be achieved.
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PROMOTIONAL STRATEGIES
The target markets of Four seasons hotel should be reach out to USA market so that it
may earn revenue. Moreover, for reaching these markets, various media can be used. In relation
to internet is the main promotional strategy for exploring goods and services to customers. It
bears cost to the company as operational expenses will be injected. However, positive effect can
be seen as promotion will enhance customer's mind, they will attract towards firm, and
promotional activities can be easily accomplished. The customers will be motivated by providing
ancillary services (Gauthier, 2017). The message of Four seasons hotel will be to stressed upon
high quality of products and services to be given to customers and imparting exotic experience.
For achieving feasibility, business has adequate business management which will accomplish
required objectives. The negative effect will also be there as more resources will be required to
accomplish effective promotion and costs will be incremented as well.
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COMPETITION
Figure 1 Porter's 5 forces
(Source: Porter's Five Forces, 2018)
Competition is the modern business scenario and as such, market entry is not that easy to
accomplish set targets with much ease. Competitors are various in the new markets and pricing
of commodities should be kept low so that customers may be attracted easily. The business will
face losses initially because of low pricing and more promotional costs. The positive effect will
be seen on customers as they will be attracted in the best possible manner. The major competitor
of the company will be Langham hotel situated in Chicago. This hotel has more well-structured
strategies and moreover, costs are comparatively lower which will be the biggest threat to
company. In this relation, Michael Porter Five forces can be evaluated. In this model, there are
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five forces such as competitive rivalry, power of suppliers, power of buyers, substitution threat
and threat of new entry (Porter's Five Forces, 2018).
In the event of competitive rivalry, Langham hotel will cut down prices to attract
customers and as such, it will have negative effect on the company as it will face serious
competition. Power of suppliers will have serious effect on Four seasons hotel as discounts will
be less available to them and as such, costs will be injected to purchase materials. Power of
buyers is also another force on company as they will bargain for availing price cuts in the form
of discounts. Threat of substitution will be there as competitor will be try to imitate products in
order to earn revenue. This will impact products of the company as it will face threat of
substitution. New entry of competitors will further result into lower down profits of company.
HRM- MANAGEMENT AND OPERATIONS
The current management of company is overall good but in the future, it will require
more resources so that it can add value to organisation. Employees are required in every sphere
and Four seasons hotel also require them to expand its reach to more markets and earn revenue.
The positive effect will be seen on operational activities of the company as it will higher more
personnels in the current situation and also in the future course of action. The functional areas of
business are technological and finance department (Taneja, 2017). The technological aspect of
the business is quite effective and focused on providing more services to customers with lower
costs. Moreover, company’s website is well developed and booking can be easily done on it by
the guests in the best possible manner. Moreover, finance department is also well-structured with
adequate resources and strictly adheres to control costs to gain desired revenue.
There are personnel available for company and it can hire them to achieve efficiency.
Employee's needs are changed now and they need more incentives which will inject costs to
company. Moreover, for expansion, more employees need to be hired and training to be provided
to them so that they may have full efficiency in attaining goals.
CONCLUSION
The investigation concluded that optimum use of resources, waste management, training
and better supply management are the best ways to reduce the cost while revenue can be
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maximized through open pricing strategy and debt reduction. Besides this, it is discussed that
demand based pricing strategy will be so helpful to succeed in the market with strong
competitiveness. In addition, it is evaluated that loyalty program and discount offerings are the
attractive strategies for the promotion and lastly, current management of the hotelier is found so
effective & well-managed.
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REFERENCES
Books and Journals
Eltayeb, S. and Kadoda, G., 2017, November. The impact of knowledge management practices
on business strategies and organizational performance. In Computer Science and
Information Technology (SCCSIT), 2017 Sudan Conference on (pp. 1-7). IEEE.
Gauthier, J., 2017. Sustainable business strategies: typologies and future directions. Society and
Business Review. 12(1). pp.77-93.
Smorodinskaya, N. V. and Katukov, D. D., 2017. Dispersed Model of Production and Smart
Agenda of National Economic Strategies. Economic Policy. 6. pp.72-101.
Taneja, N. K., 2017. Driving airline business strategies through emerging technology.
Routledge.
Online
Four Seasons Hotel and Resorts. 2016. [Online]. Available through: <
https://storify.com/cmiller5/four-seasons-hotels-and-resorts>.
Four Seasons Hotel strategies. 2016. [Online]. Available through: <
https://www.fourseasons.com.cy/sustainability>.
Four Seasons Looks Ahead to 2017 and Beyond. 2017. [Online]. Available through: <
https://www.hospitalitynet.org/news/4080622.html>.
Kawamoto, R., 2017. 5 Revenue Management Strategies for Hotel. [Online]. Available through:
< https://roomkeypms.com/blog/5-revenue-management-strategies-multi-property-hotel-
brands/>.
Porter's Five Forces, 2018. [Online] Available Through:
<https://www.mindtools.com/pages/article/newTMC_08.htm>
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