Auckland Campus: Rooms Division Operations Management Analysis Report

This report provides a comprehensive analysis of the Rooms Division Operations Management at the Chatham Hotel. It identifies key problems and issues, including increased operating and total expenses, reduced profitability, and operational inefficiencies such as outsourcing linen services and a lack of standardized laundry procedures. The report presents specific facts and data, including a recomputed income statement with corrected figures and a detailed breakdown of revenue and expenses. The analysis also highlights issues like staff distribution and employee motivation. Based on these findings, the report recommends actions such as improving hotel efficiency to reduce operating expenses, better staff distribution, employee motivation, and potentially instituting an in-house linen system, along with improvements to the internal control system. The conclusion emphasizes the importance of immediate action to improve the hotel's financial performance and ensure its long-term success. The report is based on an assignment brief from Auckland International Campus's Bachelor of Applied Management & Graduate Diploma in Hotel Management program.

Running head: ROOMS DIVISION OPERATION MANAGEMENT
Rooms Division Operations Management
Name of the Student:
Name of the University:
Authors Note:

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ROOMS DIVISION OPERATIONS MANAGEMENT
Contents
Introduction:....................................................................................................................................2
Key problems and issues:................................................................................................................2
Reference to specific facts and data:...............................................................................................4
Actions and recommendations:........................................................................................................7
Conclusion:......................................................................................................................................8
References:......................................................................................................................................9

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Introduction:
Running a business organization properly is a very complex task in the modern business
environment. Management must manage an organization efficiently to achieve organizational
objective. With the continuous pressure of competition management must take appropriate
decisions to ensure that the resources of the organization are used effectively to maximize the
profit of the organization. In this case the key problems and issues in Chatham Hotel shall be
discussed and addressed.
Key problems and issues:
Huge increase in operating expenses:
The operating expenses of the hotel has increased significantly in reality. Thus, compared to the
budgeted operating expenses the hotel has experienced significant increase in the amount of
operating expenses. The actual operating expenses of the hotel has increased by almost 63%
from budgeted operating expenses (Mansour Ghazi, 2016).
Huge increase in total expenses of the hotel:
As per the budget the hotel was expected to incur a total expenses of $342,816 however, the
actual expenses has been $395,582 which is an increase of 15%.
Reduction in profitability:
Despite the increase in room occupancy Chatham Hotel has experienced slight decline in net
profit margin. As per the budget it was estimated that the hotel will earn a net profit margin of
51% however, in reality despite the increase in room occupancy and overall revenue the hotel

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has only managed to earn a net profit of 47% on the gross revenue from room (Chu & Choi,
2016).
Outsourcing linen services:
The hotel has no in-house linen facility and uses the services of outside organization for linen
purposes. Leaving the entire control of linen to the line room supervisor is not correct as this
burdens the supervisor with unnecessary activities which are supposed to be on the shoulder of
an in-house system within the organization.
No standard system is followed for laundry:
Currently the hotel does not follow a standard laundry system while providing the clothes and
other laundry materials to the outside organization for cleaning purposes. In fact the hotel staff
does not even count the dirty linen while supplying them to the laundry for leaning purposes. As
a result at the time of acceptance of clean linen there is no accuracy check with the number of
dirty linen supplied. The reason that the hotel staffs fail to count the dirty linen while sending
these for laundry is due to the lack of time management in linen system (Rezaee, 2016).
Frequent negative discrepancies in linen:
Negative discrepancies in laundry materials is quite frequent due to lack of system in place in
linen system. This obviously results in significant loss of profit as the hotel continuously
experienced negative discrepancies between the number of dirty linen supplied to the laundry
and the number of clean linen received from laundry.
Lack of motivation of the line supervisor:

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The lien supervisor is given the responsibility of the linen system however, he absolute hates his
job. Thus, it would be extremely foolish to expect that he will give his 100% while discharging
his duties as the line supervisor.
Reordering of cleaning materials take significant amount of time:
The current system is taking too much time to reorder cleaning materials thus, resulting in
significant amount of employee time spending on such nonproductive cause. Considering the
huge payroll expenses of the hotel necessary improvement in the system shall be made to reduce
the reordering time of cleaning materials to improve the performance of the hotel (Lockyer,
2017).
Wrong distribution of hotel staffs:
The distribution of hotel staffs as shown in the statement of hotel staffs clearly depicts the
mistake that the hotel has made in distributing the hotel staffs. The hotel has two receptionist
shift leaders whereas only one night manager and one driver. In fact the hotel also has only a
single executive house keeper and a single public area supervisor. Thus, it is clear that the hotel
staff distributions in different areas within the hotel is not proper and correct (Iqbal, 2018).
Reference to specific facts and data:
Calculation of net profit and net profit ratios are provided correctly in the statement below as the
statement provided in the document to show the budgeted and actual profit and loss of the hotel
contained arithmetic errors.
Particulars Budget ($) Actual ($)

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Revenue from:
Rooms 679,120.00 706,762.00
Meeting rooms 23,000.00 39,480.00
(A): Total revenue from room 702,120.00 746,242.00
Expenses:
Payroll expenses
Salaries and wages (FO) 121,248.00 122,448.00
Salaries and wages (HK) 100,750.00 104,756.00
Staff meal expenses 6,000.00 6,600.00
Accrued holiday pay 22,198.00 22,198.00
Burden of payroll 17,758.00 17,680.00
(B): Payroll expenses in total 267,954.00 273,682.00
Other operating expenses:
Linen hire expenses 10,080.00 19,520.00
uniform expenses 1,900.00 2,550.00
Contract cleaning expenses 1,120.00 1,584.00
Laundry & valet 6,720.00 9,240.00

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Expenses on flowers 1,000.00 2,402.00
Expenses on in-house video 840.00 1,680.00
Expenses for supplies 20,310.00 27,824.00
Fruit && chocolate 636.00 818.00
Expenses on cleaning materials 1,250.00 2,054.00
Expenses on telephone & fax 9,100.00 13,832.00
Transportation expenses 4,550.00 21,600.00
Postage and telegram expenses 2,274.00 1,740.00
Commission paid to the agent 13,582.00 16,004.00
Miscellaneous expenses 1,500.00 1,052.00
©: Total operating expenses 74,862.00 121,900.00
(D): Total expenses (B+C) 342,816.00 395,582.00
Net profit (A - D) 359,304.00 350,660.00
Net profit ratio 51.17
%
46.99
%

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ROOMS DIVISION OPERATIONS MANAGEMENT
As per the income statement of the hotel, i.e. budgeted income statement, the total room revenue
was $704,120 and net profit of the hotel was $361,304 however, there was arithmetic error in
both these figures as the budgeted revenue and net profit should have been $702,120 and
$359,304 respectively as are shown in the above income statement recomputed by using the
figures from the income statement of the hotel.
The budgeted revenue from hotel room was expected to be $702,120 however, the actual revenue
from hotel room increased to $746,242. Thus, despite the significant increase in gross revenue
the hotel has experienced significant decline in net profit margin. In fact as against the budgeted
net profit of $359,304 on a total revenue of $702,120 the hotel only managed to earn an actual
net profit of $350,660 on a total revenue of $746,242. From an expected 51% net profit margin
the hotel manages to earn only 47% of net margin on gross revenue (Iqbal, 2016).
Actions and recommendations:
Taking into consideration the specific issues and problems currently faced by the hotel the
following recommendations and actions are suggested.
I. Improving the efficiency of the hotel to reduce the operating expenses.
II. Better distribution of hotel staffs in different activities within the hotel to manage the
hotel and the services in the hotel better.
III. Ensuring that the employees are motivated and given responsibilities where they can
excel and contribute to the overall development and growth of the hotel.
IV. If possible instituting an in-house linen system.
V. Internal control system in the hotel shall be improved (Heaton, 2017).

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Conclusion:
Taking into consideration the discussion above it is clear that the Chatham Hotel has certainly
experienced significant increase in the total operating expenses to run the day to day activities in
of the hotel. This has negatively impacted the profitability of it. Taking appropriate course of
actions immediately would help the hotel to improve its financial performance in the future to
continue the business in the long run.

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References:
Chu, R., & Choi, T. (2016). An importance-performance analysis of hotel selection factors in the
Hong Kong hotel industry: a comparison of business and leisure travellers. Tourism
Management, 21(4), 363-377. doi: 10.1016/s0261-5177(99)00070-9
Heaton, D. (2017). Business in the Big Picture: Managing for Sustainability. Journal Of
Business & Hotel Management, 01(5), 10-27. doi: 10.4172/2324-9129.1000e105
Iqbal, U. (2016). Book Review ‘Business Principles and Success Factors of Chinese People'
(Malay Version). Journal Of Hotel & Business Management, 5(1), 29-32. doi:
10.4172/2169-0286.1000135
Iqbal, U. (2018). Financial Performance in Daily Hotel and Business Management. Journal Of
Hotel & Business Management, 05(02), 11-21. doi: 10.4172/2169-0286.1000e113
Lockyer, T. (2017). The perceived importance of price as one hotel selection
dimension. Tourism Management, 32(4), 529-537. doi: 10.1016/j.tourman.2004.03.009
Mansour Ghazi, K. (2016). Hotel Maintenance Management Practices. Journal Of Hotel &
Business Management, 5(1), 31-264. doi: 10.4172/2169-0286.1000136
Rezaee, Z. (2016). Relevance of Business Sustainability Education for Hospitality
Management. Journal Of Business And Hotel Management, 02(01), 12-369. doi:
10.4172/2324-9129.1000106