The Luzern Townhouse Hotel

This report advises the owners of The Luzern Townhouse Hotel on their current and future financial position, and provides recommendations for improving accommodation sales and profitability. It includes a SWOT analysis, new revenue management strategy, budget proposal, and menu engineering techniques.

The Luzern Townhouse Hotel 1
THE LUZERN TOWNHOUSE HOTEL
By (Student’s Name)
Professor’s Name
College
Course
Date

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THE LUZERN TOWNHOUSE HOTEL
Executive Summary
This report is prepared for the owners of the Luzern Townhouse hotel advising them on
the current and future financial position/situation of their hotel. It entails implications alongside
possibilities via the new property acquisition and the proposals for improvement of hotel rooms’
sales and subsequent profitability over the next year. The report preparation follows two stages.
Stage 1 entails the analysis and evaluation of current financial and market position of the hotel
using SWOT analysis model. Stage 2 encompasses an outline of the novel revenue management
strategy including the price structure alongside room packages for the hotel. Stage 2 also
presents a budget proposal (given in attached excel) for coming year 2019. Also, the menu
engineering is used to evaluate the restaurant operation and proposed revenue management
strategies. The data is then evaluated using the prepared budget based on the standard hospitality
and business ratios highlighting the weaknesses and strengths.

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THE LUZERN TOWNHOUSE HOTEL
Table of Contents
Executive Summary.........................................................................................................................2
Introduction......................................................................................................................................4
Discussion........................................................................................................................................4
STAGE 1: SWOT Analysis:........................................................................................................4
(2) Operating and Financial Benchmarks.............................................................................5
(3) New Acquisitions’ Opportunities and Threats...............................................................6
STAGE 2:.....................................................................................................................................7
1. New Revenue Management Strategy................................................................................7
2. Budget Proposal for Coming Year 2019...........................................................................9
3. Techniques and Propose of Menu Engineering...............................................................10
4. Analyzing and Evaluating Data.......................................................................................13
Conclusion.....................................................................................................................................14
References......................................................................................................................................15

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Introduction
The report has been prepared to advice the owners of the Luzern Townhouse hotel on
how they can improve their accommodation sales and profitability for the coming year. The
analysis and evaluation of the hotel’s current and future financial and market position is
performed to recommend to the hotel owners on the new revenue management strategies they
should implement to become more competitive and meet their business target.
Discussion
STAGE 1: SWOT Analysis:
(1) Hotel Accommodation Operation
Strengths
The first strength in the accommodation operation is that the Hotel has many rooms
compared to their competitors which give it a competitive edge. Having many rooms for
accommodation implies that the hotel can get more revenue relative to its rivals. This accounts
for the highest rooms’ operating profit or sales of 81.87% for the hotel. This means that the hotel
accommodation is doing exceedingly well since it is above the industry average. The room sold
or occupancy rate is also high at 62.0% and 55.0% for Mon-Thurs and Fri-Sun respectively. This
clearly shows that the rooms are sold every night. Another accommodation operation’s strength
is that the costs of operation are low while there is high revenue from the rooms.
Weaknesses
A weakness in the room operation is that Luzern hotel is charging low prices for the
rooms and this lowers its profit. Such is a weakness since for a 3 star hotel, it is wrong to charge

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such low rates. Moreover, the price inelasticity of demand in the accommodation should make
the hotel to increase prices since there will be low effect and guest will still come. Another
weakness is that it has not ventured in additional accommodation markets like leisure,
conference, events hosting (wedding, parties and birthdays), workshops as well as seminars.
Another weakness is that its management is yet to purchase public address systems install
decorative light in the conference rooms as well as liaise with design firms to make sure that the
decorate their rooms based on theme of functions. For instance, if theme of a wedding remains
green, the hotel needs to make sure that all decorations are performed in theme colors. This
would have ensured that this hotel has diversified its sources of revenue from being primarily
dependent on room bookings. Such diversification of accommodation services shall further assist
the hotel to make sure that it has a sustainable income source.
(2) Operating and Financial Benchmarks
Strengths
The strength from anticipated financial and operating benchmarks of hospitality operation
alongside its allocation is that Luzern hotel will be able to charge more tariffs and guest will still
come because it is a 3 star hotel. We can clearly see from the response report that this Hotel is
doing exceedingly well in terms of its location. It has been strategically located in the Lucerne
city and this makes it have an advantage over the others. The occupancy percentage is also
benchmark for comparing this hotel with others. In terms of occupancy percentage, it is clear that
the hotel is performing well and drawing revenue which can sustain its operation.

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Weakness
The noted weakness is that it has not enhanced the size, decoration as well as features of
its rooms relative to the other hotels in the industry. This would have otherwise help the Hotel
meet it needs effectively and hence create a competitive edge. Moreover, the rooms are not yet
much comfortable for the guests. The hotel requires making sure that the rooms stay as
comfortable as feasible. Another weakness is that the hotel has never effectively liaised with
management of outsourced hotel on ground floor which would have helped the hotel make sure
that its guests are provided breakfast as well as supper. Another weakness is that the hotel has
not ensured that the quality of the drinks and foods it gives to customers is high. There is a need
for this hotel to enhance its booking whereby customers can book its rooms from home via the
website of the hotel. Another weakness is that this hotel has never accepted a range of methods
of payment. Thus there is a need for this hotel to liaise with tour firms alongside additional
leisure services firms to develop its tourism business segment.
(3) New Acquisitions’ Opportunities and Threats
Opportunities
This novel acquisition accords the hotel new opportunities for additional sources of
revenue for this hotel which shall include business referrals as well as recommendations for
additional services like events’ organization alongside tour firms, in the long term, the hotel need
to invest in additional markets like stock- and bond markets. The hotel should take the advantage
of this new acquisition to additionally draw income from other sources including employee
outsources to public event, revenue telephone as well as other room charges. The hotel need to
take the advantage of this new acquisition to venture in additional accommodation markets like

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leisure, conference, events hosting (wedding, parties and birthdays), workshops as well as
seminars.
Threats
This hotel is facing increased threats from other rivals as it aims to diversify from this
new acquisition. There will be a stiff competition or even imitation threats from the rivals who
might also engage in new acquisition as strategies to account the hotel. This will involve
additional cost of operation for the Company. Thus, there is a need for the hotel to be ready to
face such new challenges arising from the acquisition. Moreover, there is a threat relative to new
employees coming in and hence the firm must come up with effective strategies to ensure that
workforce has cultural competencies needed for smooth integration and working as a team.
STAGE 2:
1. New Revenue Management Strategy
(1) Current Room Rates Review
The hotel needs to raise its room rates. Presently, the hotel is charging merely Sf200 a
room night for its business from Monday to Thursday nights where it is charging Sf 150 for the
tourist market from Friday to Sunday. Such a tariff stays extremely low for Hotel (3-star hotel).
Business, as well as the tourist market, has a comparatively inelastic price elasticity of demand.
This implies that a rise in price shall never affect the attendance behavior of customers. Raising
the tariffs shall assist the hotel to target high end market that shall get more profitable and which
will enhance the reputation of the hotel (Abrate and Viglia 2016). The current room rate review
upwards shall boost the revenue per year. Based on the price-quality effect higher price shall
signal that the hotel is offering high quality services. The hotel thus needs to adopt market-

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centric pricing. In such a pricing strategy, the hotel shall undertake a research as well as analysis
of the hotel industry in the region as well as utilize the outcome to upwardly adjust the prices.
The variables which needed to be taken into account encompass the prices of the competitors and
the perception of the customers.
(2) Accommodation revenue Increase
The hotel needs to focus on accommodation market. This should be undertaken by
marketing itself as the tourist and business hotel. It needs to enhance the size, decoration as well
as features of its rooms. This will help the hotel meet it needs. The hotel requires making sure
that the rooms stay as comfortable as feasible. The hotel needs to liaise with management of
outsourced hotel on ground floor to make sure that its guests are provided breakfast as well as
supper (Akan, Ata and Dana Jr 2015). The hotel also needs to ensure that the quality of the
drinks and foods their give to customers is high. The hotel must improve its booking whereby
customers can book its rooms from home via the website of the hotel. It should further accept a
range of methods of payment. The hotel has to liaise with tour firms alongside additional leisure
services firms to develop its tourism business segment.
(3) New Accommodation Markets Identification
The hotel need to venture in additional accommodation markets like leisure, conference,
events hosting (wedding, parties and birthdays), workshops as well as seminars. The
management need to purchase public address systems install decorative light in the conference
rooms as well as liaise with design firms to make sure that the decorate their rooms based on
theme of functions (Board and Skrzypacz 2016). For instance, if theme of a wedding remains
green, the hotel needs to make sure that all decorations are performed in theme colors. This shall

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make sure that this hotel has diversified its sources of revenue from being primarily dependent
on room bookings. Such diversification of accommodation services shall further assist the hotel
to make sure that it has a sustainable income source.
(4) Possible Revenue Sources
Potential revenue sources for this hotel entail business referrals as well as
recommendations for additional services like events’ organization alongside tour firms, in the
long term, the hotel need to invest in additional markets like stock- and bond markets. The hotel
should additionally draw income from other sources including employee outsources to public
event, revenue telephone as well as other room charges.
2. Budget Proposal for Coming Year 2019
The hotel is anticipated to have total room revenue of Sf 4,072,744. Following the
acquisition of additional office building, the hotel shall have eighty well-appointed as well as
stylish, twin-studio type rooms. The analysis has been done in Excel

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3. Techniques and Propose of Menu Engineering
Menu Engineering (ME) implies balancing low as well as high food costs items and
entails strategically featuring and promoting menu items which help hit the target of the
Company. Even though the hotel is probable to have a target general food costs, it must be
understood that not each menu item shall carry precisely the uniform percentage of food cost.
Certain items remain increasingly expensive than other items, however, furthermost of the hotel
shall have an array of prices which all menu items can fit into effectively. Thus, it remains
imperative to balance hotel menu to ensure that high as well as low food cost items can
effectively work collaboratively to assist hotel hit its food cost target.
It must be noted that cost of share drawn from yield test performed on major menu item
ingredient often denote the highest portion of cost for item preparation. It is also important to
consider portion cost factor. This is utilized in determining cost of the share of foremost
ingredient irrespective of price of item charged by supplier provided the hotel’s preparation of
the item stays unchanged (Norris and Sweatt 2017). This cost per portion is arrived at via the
multiplication of the portion cost factor by packing house price a kilogram.
In the hotel dishes, the major ingredients remain unsold as the entities; however, as
portion of the dish prepared, all items’ cost in a given recipe has to be established to determine
the precise price of portion cost. Thus, recipe particulars alongside cost-sheet are utilized in
determining menu items’ cost price. After determining the menu item possible cost, the selling
price of item is computed using food cost percentage. The Menu Engineering has shown that the
dishes are all-star and this makes the hotel at a better position to boosts its profitability. The
detailed application of menu engineering is in the attached excel sheet.
(1) Classifying Dishes

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The classification is based on two attributes: menu item demand or popularity and menu
item profitability or contribution margin (CM).
1. Contribution margin (CM) = Menu Price (MP) - Food Cost (FC). Where the menu
item’s CM is greater than the average contribution (Av. CM) for the whole menu, it receives the
rating “High’ or “H”. This indicates that the item has above average CM.
2. Demand = No. of items sold of a given menu item divided by total No. of menu items
sold. The decision rule is that where the item’s percentage of sales is higher than the average
sales percentage for the whole menu, it is given a rating “High” or “H” which indicates that
specific item has a higher sales percentage than demand matrix.
From the Menu Engineering computation, it is found that the average items C for starters,
mains and deserts are 4.854, 11.273 and 5.199 respectively. However, all items average C=
7.786 SFr. Thus our classification will be based on comparing each item with the all item
average which is 7.786% (popularity). When we compare in terms of popularity percentage, all
items except receive “High” ranking status except Baudin Noir (4.9%), steak tartare (7.6%)
(Starters); Provencal fish stew (7.6%) and Risotto vert (6.4%) (Mains); and Tarte fine aux
pommes + van ice (7.6%) (Desserts) that receive “low” ranking status (see the attached excel
file).
(2) Alternative dishes Recommendation
The Hotel can add delicious dinner based on modern Swiss dishes versions with starters
including selection of items served in small glass jars like pumpkin soup, cabbage, and pork
dish; for entrees the hotel can add delicious vegetarian platter alongside wonderfully gooey
Chicken Kiev. It can also add a juicy and moist beef meatloaf accompanied by delicious mashed
potatoes alongside veggies.

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(3) Pricing strategy Review
The hotel should adopt a cost-plus pricing strategy based on the forecasting for profit
contribution maximization for the brasserie. As seen in the profit contribution category, the hotel
has a “High” or “H” ranking. Therefore, it should use cost-plus pricing strategy whereby it will
account for all costs going into the dish of food. This would include such fixed cost as wages,
rent, and utility bills. These need to get distributed among various offering it makes to its clients.
After, the cost of dish of food is determined reliably, the hotel will then add the profit margin,
premised on what it regards a reasonable profit.
(4) Strategies Recommendations for the brasserie
Cover refers to a diner who eats or a meal which is served. A cover is different from a
table because cover represents solely one of meals served at a specific table. It also differs from a
dish because it includes extras which a diner orders like drinks, desserts and appetizers.
Therefore, it is effective for the hotel to project its sales’ computation on anticipated number of
covers instead of expected number of tables to achieve greater accuracy degree. For cover turn
over maximization, the hotel needs to turns over its covers more frequently as this implies more
dinners being served and hence more revenue made. Thus, the Hotel must strike a balance
between creating a relaxing, enjoyable experience and turnover since failure will make diners
feel rushed.
Therefore, for maximized cover turnover, the hotel service has to be smooth and efficient.
The best strategy is to train servers and cooks to be efficient and avoid mistake so that customers
do not too long to get their food. Therefore, this balance will meet with efficient cooks and
servers so that no diners are rushed to seat next table promptly. Another strategy to maximize
cover turnover is to ensure hotel has effective systems and services with steady, relaxing rhythm

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which allows covers to turn over seamlessly without diners feeling rushed. Another strategy is
for the hotel to determine the specific menu items which go well with a certain type of wine, as
this will make menu or server suggesting such pairing, hence encouraging clients to order two
items together.
(5) Recommending Potential Closer Synergies
The hotel should use direct booking sales strategy which will help it earn direct bookings
virtually from as several guests as feasible which will generate more revenue. The hotel
management should implement this strategy by investing in a virtual booking system which
syncs with its current website alongside property management system. The hotel should also use
destination marketing sales strategy by working with tourism business professional in their
destination to promote region as a whole. Revenue management sales will help maximize booked
room number at any given time per year, irrespective of typical travel traffic at such a time. This
will be implemented by dropping room rates in low season to encourage bookings whereas
increasing rate at high traffic period when guest are willing to pay extra to get rooms.
4. Analyzing and Evaluating Data
As seen in analysis of the budget as presented in the Excel sheet, Luzern Townhouse
hotel is doing fairly well relative to the industry ratios. The hospitality sector remains a big area
under service business which encompasses minor fields like accommodation and hotels,
transportation, event planning, theme parks, cruise-lines alongside additional arenas inside the
tourism business. With hospitality sector being the overall form, it is imperative to delineate as
set of financial ratios utilized in analyzing firms across the whole industry, irrespective of
operations. Hospitality sector is heavy in tangible and fixed assets, hence needs an explicit
financial ratios set to analyze this industry accurately as well as come to deductions premised on

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individual firms’ performance (Tom and Annaraud 2017). The key financial ratios include
liquidity, financial leverage ratios, and profitability ratios. As seen in the calculation, the Luzern
hotel has promising food revue.
From the analysis, it can be seen that Luzern Townhouse hotel is doing well in terms of
its total food revenue. Looking at the total variable cost (49650.30) against the total revenue
(112,869.20), we can clearly see that the revenue is more than the cost consumed and hence a
profit. Moreover, the average items (mains) are 11.27 and the average item (desserts) is 5.199.
The average of all items is 7.786 which clearly show that the hotel is doing well. The main
strength of the hotel is their ability to undertake menu engineering for effective balancing of the
low and high cost items which ensures effective food placement in the menu. With this, the hotel
will be able to make profits and sustain its business effectively. This is strength since it shows
that a well-performed initial menu engineering help the hotel increase its profits relative to the
rival hotels. It is imperative for a hotel to squeeze extra profits out of the existing menu, despite
customers having picked low-hanging items. The firm should always continue to exploit its
much low-hanging engineering profit that awaits picking.
Conclusion
The report has presented a comprehensive analysis and evaluation of the present and
future financial position of Luzern Townhouse hotel. This analysis has informed the
recommendation to the owners of the hotel that they need to take up the management of the
restaurant after the completion of the outsourcing. It has also informed the recommendations on
how the room sales and profitability can be improved through new revenue management
strategies.

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References
Abrate, G. and Viglia, G., 2016. Strategic and tactical price decisions in hotel revenue
management. Tourism Management, 55, pp.123-132.
Akan, M., Ata, B. and Dana Jr, J.D., 2015. Revenue management by sequential
screening. Journal of Economic Theory, 159, pp.728-774.
Board, S. and Skrzypacz, A., 2016. Revenue management with forward-looking buyers. Journal
of Political Economy, 124(4), pp.1046-1087.
Norris, J. and Sweatt, J., 2017. Menu and Menu Item Management System. U.S. Patent
Application 15/273,415.
Tom, M. and Annaraud, K., 2017, July. A fuzzy multi-criteria decision making model for menu
engineering. In 2017 IEEE International Conference on Fuzzy Systems (FUZZ-IEEE) (pp. 1-6).
IEEE.