Hospitality Operations Management: IHG Expansion Project Analysis

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Hospitality Operations Management
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Table of Contents
Introduction..............................................................................................................................3
Task 1......................................................................................................................................4
Task 2......................................................................................................................................6
Task 3......................................................................................................................................9
Task 4....................................................................................................................................11
Conclusion.............................................................................................................................13
Reference List........................................................................................................................14
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Introduction
In the existing study, understanding of the economical and operational characteristics of
entire hospitality sector will be analysed from the perspective of a famous organization
named IHG (InterContinental Hotel groups). They are currently trying to expand their
business presence through building attractive hotels, restaurants, community in addition to
banquette halls. This group of hotel was initially founded back at 2003 and it has almost
780,000 rooms in their different hotels. Understanding the actual value of developing
products and services and the concept of hospitality operation and profitability will be
analysed from the perspective of IHG. Lastly, evaluation of different performance appraisal
techniques and measurements will also be discussed the study.
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Task 1
The management of InterContinental Hotels Group is getting prepared to build some
restaurants, luxury hotel rooms, glamorous banquette centres and conference halls.
Different positive and negative effects of planning this expansion project will be criticized in
the part for assisting the expansion planning executive team of IHG.
1.1 Analyse the nature of the different products and services offered in the UK
hospitality sector
From the perspective of different products, hospitality industry mainly deals with different
kinds of foods and beverages. However, this industry provides a range of different services
such as management skill, preparation of foods, cleaning and maintenance and many more
(Bowie et al., 2016). Nature of different products and services belonging from IHG has been
discussed below:
Tangible elements: Different services of IHG can be delivered as their tangible element. As
an instance, both exterior and interior design of hotels, diverse equipments of restaurant
kitchens and other plethora of services goes under the tangible elements. All of these
services attract enormous consumers and resulting into increased revenue. However, the
qualities of the services are needed to be maintained as tangible elements take huge part at
the expansion project of any hospitality organization.
Intangible elements: Intangible element contains different factors of services such as
customer reliability, responsiveness, empathy and reliability, which can be analysed by
conducting market analysis (Xu and Gursoy, 2015). The customer service executive team of
IHG is mostly responsible for managing these intangible elements of services.
Areas of services: Main service area of most hospitality organization contains things like
preparing foods and beverages for their customer base, creating luxurious and exotic hotel
suits, building conference, seminar halls for arranging gala dinner, launch. These types of
services can be delivered as the best possible way to earn even revenue than anticipated.
Products: Hospitality industry mainly deals with two different products, such as food and
beverage. However, they are not as much important as services since these two products
are perishable and different people have different aspect of consuming their food.
1.2 Evaluate the different influences that might affect the patterns of demand
Since IHG is currently strategizing for expansion, they need to understand the influence of
different factors that can affect demand of their existing and future consume base. It is
needed to be taken into consideration that hospitality industry does not deal with same
demands at the entirety of their financial calendar (Brandon-Jones et al., 2016). Different
factors that might affect consumer demand in context to IHG have been described below:
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Seasonality: IHG faces a range of different customers in different seasons. As an instance,
at summers the demand of their customers centre around taking sun baths, whereas in
winter the demand certainly changed towards skiing, hiking and other activities (Chan and
Hsu, 2016). Therefore, the expansion program of IHG has to mitigate different demands in
diverse seasons for being successful.
Timing of a week: Weekend is the time when different hotels and restaurants get busy with
the high demand of luxury hotels rooms and exotic food flavours since an important
customer group of hospitality industry, which are couples and families prefer weekend for
travelling.
Economical factors: The demand of customer can fall for two different reasons. Extreme
price range of products and services can make the demand worse. Additionally, any kind of
crisis in regional or national level that affects the GDP of entire nation might also negatively
affect the demand of certain services in context to hospitality industry.
Standard of living: The quality of sanitation and hygiene inside hotel rooms and restaurants
also matters in the level of demand at certain extension.
1.3 Compare customer profiles and their differing expectations and requirements
Customer profile of entire consumer base varies from the perspectives of different
organizations of hospitality industry. Based on some expectation differential, the consumer
profile of IHG has been demonstrated below:
Pricing factors: Different families and couples are the key consumer of IHG. These types of
consumers mainly focus into the quality if different services rather than the price of those
services (Gursoy, 2018). It allows IHG to make more revenue since they can charge
relatively high prices for their services if they maintain diversity and quality at their range of
different services.
Components of entire hospitality sector: Lavish accommodation, quality and actual
presentation of different foods and beverages can be identified as the key components of
entire hospitality sector. Customers of IHG mainly opted for their accommodation service
rather than their food service.
Experience of food and beverages: Customers who visit IHG general has an expectation
of highly quality meals. In addition to that, since customers are getting more health
conscious in recent context, they expect some light foods in the restaurant menu of IHG.
Expectation of existing customer base: IHG experience different types of customers from
diverse cultural, social, financial background and their expectation vary from each other. IHG
is very successful at mesmerising the attention of their entire consumer base as their
services is meeting with the expectations of their customer base.
1.4 Analyse factors affecting average spending in hospitality business
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A variety of factor can influence the ASP (average spending power). Different services, price
ranges can bring up average spending power. Size of the income, cultural or social aspects,
status and economic situation can directly affect ASP at certain extension. The income
levels of customers are highly relatable with the diverse functionality of ASP. The social
status of a group of different customers can also affect ASP. In addition to that, social status
of people can influence their average spending power. Different social and cultural festivals
might also influence the average spenders to spend more money than usual. Lastly, the
economic situation of nation might also manipulate average spenders.
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Task 2
2.1 Evaluate the key stages in product and service development in the hospitality
industry
Since IHG is currently planning to expand their areas of service and product, key stages
regarding their expansion plan has to be executed within product development plan.
Different components of product and service development have been described below:
Evaluation of existing idea: In the part, the key idea regarding product and service
elevation has been tested. The viability of existing expansion ides has also been done in this
part of product development plan.
Conducting market research: The current demand of expansion idea can be evaluated
through the help of conducting market research. The preference of different consumer base
can also be analysed through the help of market research.
Advertisement: This component can be delivered as the most important factor regarding
upholding the special features of the market expansion plan in front of existing consumer
base (Moutinho and Vargas-Sanchez, 2018). In addition to that, new consumers can also
get attracted through the help of advertisement.
Segmentation of existing market: Market segmentation can be delivered as the key
aspect of developing new product or service from the perspective of different organizations
belonging from hospitality industry. Differentiate cost structure is the main aspect of this
expansion program as the management of IHG need to reduce the cost of their new
products in order to attract more customers.
2.2 Assess the features which contribute towards the customer’s perception of
products and services
IHG need to retain their existing market position, service quality and brand image in order to
attract more consumers towards their expanded services. It certainly helps them at attaining
prefabricated consumer perception towards their expansion program. Different feature that
contributes towards bringing consumer preference towards an existing product has been
described below:
 Strapping brand image and brand equity of IHG can gain consumer preference
regarding their new service areas.
 Delicious, nutritious and dietary food items in the food menu can assist IHG at
achieving customer preference at certain extension.
 Special arrangements for physically or mentally disabled people can also be very
helpful at getting consumer preference.
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 Availability of a range of different necessary and luxurious products might gain
consumer preference.
 The quality of actual product and service also varies at attaining customer
preference in context to hospitality sector. Style, actual presentation and texture of
products and service also matters at gaining customer preference.
 Responsible pricing strategies are also very helpful at gaining consumer
preference.
 Giving needed space towards customers might be a very attractive factor towards
them, which ultimately helps different hospitality organization to further expand their
strategies regarding expansion.
2.3 Assess the opportunities and constraints regarding new product and service
development
Different opportunities regarding products and services might become the reason of
exponentially increased sales revenue and profit structure (Ogbeide et al., 2017). However,
different constraints are also closely associated with the formulation of new products and
services that might or might not negatively affect the sales revenue and profit structure of
IHG. Different opportunities and constraints regarding the development of new product and
service idea have been described below in context to IHG.
 IHG generally experiencing greater opportunities than their exiting competitor base
since their range of different products and services are much better than a major
portion of their entire competitor base.
 This hotel is always opted to attract a range of different people such as couples,
single persons, big families and many mothers in order to increase their revenue to a
far greater extension. It helps them at grabbing a major share of entire hospitality
industry economy, which makes their market position very strong.
 However, the organization does not have as much luxury suits as per the demand of
their consumer base. Therefore, some of their customers do not even get the
opportunity of enjoying their luxury suits. It is a constraint towards their market value
as they are not exactly satisfying their entire consumer base at once.
 In addition to that, another constraint is in recent context it has been observed that
quality of foods that has been delivered by different restaurants of IHG is not at
optimum level. They need to rethink about this aspect for mitigating the constraint.
2.4 Evaluate the different merchandising opportunities for hospitality products and
services
At the era of globalization, it has been experienced that most of the people are more opted
to travel for conducting their recreation and business purpose (Buhalis and Leung, 2018).
This effect is also increasing in the overall hospitality industry as a whole. Nonetheless,
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business sectors belonging from hospitality industry generally get opportunities regarding
conducting merchandising. Diverse aspects of merchandising have been described below:
 In majority, travellers generally expect quality food items as per their individual
purchasing power. It is the key reason why famous hospitality organizations like IHG
can increase the value of their merchandise products and services after applying
premium pricing strategy.
 The merchandise option might be very helpful in order to stable the economic
condition of a traveller at certain extension.
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Task 3
3.1 Evaluate different methods of pricing in the hospitality sector taking into account
additional pricing considerations
As per the operations of different hospitality sector, different pricing techniques and policies
are closely associated with it. Techniques such as pricing strategy based on competition,
pricing regarding getting market orientation, cost plus pricing has been taken into
consideration. Factors that affect the pricing strategy of IHG have been described below:
Pricing based on cost-orientation: It can be described as the simplest method of
formulating pricing strategies. Here, the price of certain product or service is actually defined
after evaluating its production cost (Evans, 2015). Brief percentage regarding profit has been
taken into consideration while making cost orientation pricing.
Pricing based on market direction: Market research has been taken into consideration in
order to make market based pricing strategy. Consumer preference and prediction regarding
the certain price of a product or service has been considered for making this kind of pricing
strategy.
3.2 Assess the factors which might affect revenue generation and profitability of the
new products and services in the hospitality sector
The revenue generation and profitability of different products and services belonging from
hospitality industry is adhering of different factors. Revenue generation factors consist of
customer turnover rate, sales mix and average spending power of entire consumer base.
Diverse profitability factors are also closely associated with revenue generation at certain
extension (Lugosi and Jameson, 2017). Intensity of labours, standardization, portion control,
elasticity regarding demand, shelf life also affects the revenue generation of different
organizations belonging from hospitality industry. Brief description regarding the factors has
been described below:
Intensity of labours: It considers diverse elements like the number of labour that has been
used for constructing certain products and services, amount regarding capital usage. In
general hospitality industry mainly deals with less capital than actual labour. Therefore,
intensity of labour base can certainly affect the revenue generation of different organizations
belonging from hospitality industry.
Shell life: The basic components of this factor is consist of range and number of customers,
brand value of the organization, level of consumer satisfaction and the level of positive
initiatives taken by the management of the organization (White and Roberts, 2017).
Extraordinary development in the range of products and services can help different
organizations of hospitality industry to sustain at their current market position. Additionally,
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increased customer satisfaction can positively increase revenue generation at certain
extension.
Standardization: Components of the factor consists selection of food items from a provided
food menu, sanitary and hygiene issues and some other things. High standard of food item
menu and standard cleaning can gain customer preference and resulting into increased
productivity.
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Task 4
Both performance management and performance appraisal can be elaborated as best
methodologies for measuring the performance level of a well-known organization. The
performances of individual workers are also needed to be taken into consideration for
enhancing the quality of existing products or services in context to organizations like IHG.
Service cost of different products, quality of the products and time management generally
varies the performance appraisal at certain contexts.
4.1 Apply different performance measures and appraisal techniques to new products
and services
Different pros and cons of entire operational department of IHG can be measured in order to
enhance the overall productivity of the entire organization. Different appraisal techniques
have been described below in order to measure the overall performance of HG.
Quality management: In the process of quality management, analysis of the quality of
entire product and service range has been done in order to determine the way of conducting
future improvement.
Delivery speed of different products and services: Accomplishment of customer orders
while maintaining a fast pace are needed to be considered while measuring the performance
of a certain organization belonging from hospitality industry.
Developing quantitative and qualitative data analysis process: Collection and
development of a range of different quantitative and qualitative data are needed to be
considered at the process of measuring the scale and range of performance. Qualitative
data analysis can be done through the help of customer satisfaction level, reliability level of
consumers, quality of service and many more, whereas quantitative data analysis process
consist some comparison between the different pricing strategies of their existing competitor
base, number of customer in every week and many more.
Data evaluation and analysis: Data that has been gathered through the help of quantitative
and qualitative process has to be analysed further in order to compare the actual
performances with expected performances. The performance level of IHG can be analysed
while conducting data evaluation and analysis at certain extension.
Analysing sales performance: It can describe as the most common and complex free
analysis of performance measurement techniques (Secchi et al., 2018). Analysis and
evaluation of the increased or decreased growth rate and revenue generation from the
perspective of organizations like IHG can be very helpful at measuring their current scale of
performance.
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