Oberoi Hotels Case Study (1).pptx

7/22/2019 Oberoi Hotels Case Study (1).pptx

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A case study on

Presented by

Kulsoom Samina = 140

Lata Sarkara = 158

Namita Sanwal = 157

Prashant Katarkar = 146

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Abstract:

Oberoi Hotels acquires a small Bangalore based chain of hotels. They Plan to retainhalf of the acquired hotels & rebrand them. Whereas rest half will be sold to increaseliquidity & support further expansion plans. The company is planning thetransformation of the acquisition in budget hotel segment where guest would stay forshort duration. The hotels are situated in downtown location which is frequented bytransit guests & tourists who come to see popular destination.The organisation feels that re-deployment of existing Mumbai based employees tolead in Bangalore would be an effective decision after they re-open. The Oberoigroup envisions the ownership of 150 more hotels in 5 years & 300 hotels in 10 years.If the Bangalore plans succeed, It will set a tone of further expansion across country &internationally as well.The company never recruited anyone to work outside Mumbai & has trouble

deciding the compensation. As per information on Internet, they understand :Existing salary of managers in Mumbai is Rs 55000 + bonusesAverage salary of managers in Bangalore is Rs 60000 without bonus.The directors want to hire internal Managers to operate in Bangalore & they shouldbe enticed to relocate to Bangalore.

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Problem Identification:

A) The management wants to review wether,

I) Managers to be hires only locally?

II) Managers to be hired from all over India?

III) Managers team should be mix of local as well as non-locals?

B) How should the compensations to be decided to lure the internal key staff to

Bangalore hotel operation?

C) How should the training plans are to be designed considering the hotel opensin One Month?

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Boundaries:

1. The companies limited knowledge on recruitment & compensationdesign outside Mumbai.

2. Preference of Existing staff over Local staff due to fear of unknown.

3. Very short duration to design a comprehensive training program ashotel opens in 1 month.

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Fast Facts:

1) It is mentioned in the case that company would prefer to station existing

employees in the Bangalore but that doesnt mean the ONLY want existing

Mumbai based employees : It Means Local staff can also be employed

2) The case says that if the Bangalore plans are successful then company

would follow the same trend for future domestic & internationalexpansions.

3) The internet information says average salary of Hotel Managers in

Bangalore is Rs 60000 without scope for Bonus. Internet information is not

a standard to be followed, it helps only in decision making. That mean the

managers in Bangalore can be offered Bonuses.

4) As we know, a small hotel chain has been acquired, there must be some

staff working for it. The same staff can be useful during recruitment

process.

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Recommended solutions:

Staff Selection

Short period for hotel to be re-opened

Relocate key Managerial positions:

Manager: Front Office ServicesExecutive ChefManager: Food & BeveragesManager: Housekeeping

Retention of existing staff of acquired hotel chain at Midle management and

Junior level

The company can retain all non-management positions available from theacquired chain of hotels to save recruitment costs.

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Compensation Structuring

Bonus in the form of Performance IncentiveHike in salary structure dramaticallyMotivate to increase productivityInculcate team spirit

Targets for Bonus:100% Occupancy ratios ie minimum amount of occupancy rates to achievedesired profit levels.Eg:hotels having 100 rooms may decide to have Average Daily Rate (ADR) foreach room of Rs 10,000 at 100% occupancy. That means hotels potential sale was100 X 10,000 = Rs 1,000,000.However if the occupancy forecast falls to 75% then the room rate goes to ,1,000,000/75 = Rs 13,333

Loss to company as the clients will prefer other hotels for best price.

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CTC (Cost To Company) is vastly different from Take Home Pay - Taxes.

Efficient structuring of salary to save taxes:

I. Allowances: Paid irrespective of the employee actually incurring them, fullytaxable.

II. Reimbursements: Expenses actually incurred, bills provided, not taxable up to aspecified limit under each head.

Components which can be used to reduce the tax liability on salary income:-

Conveyance: Rs.800 per month exemption i.e Rs.9,600 per annum

Medical Reimbursement: Rs.15,000 per annum, can be claimed for self,spouse, children, parents and siblings who are dependent on the assessee

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Leave and Travel Allowance: Up to one months basic salaryallowedtax free for2 trips in a block of 4 years for travel within India only.

Education Allowance: Up to Rs.2,400 per annum is exempt

Training Allowance: Up to Rs.14,000 per annum is exempt onproduction of relevant bills.

Telephone Allowance: Up to Rs.12,000 per annum is tax free if thephone is used for official purposes and bills submitted.

Qualification Allowance: Up to Rs. 24,000 per annum tax free ifqualification being acquired in line with current job performance

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House Rent Allowance: Tax rebate available u/s 10 if one lives in rentedpremises and the rent exceeds 10% of the salary. Actual HRA exemptedfrom tax is least of the following:

The actual amount of HRA received.

40% of salary. This increases to 50% if you are renting out the house inMetropolitan City

Rent paid minus 10% of salary (basic component + dearness

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Compensation structure for existing managers can be designed in thefollowing way to lure them to relocate

BONUS ON TARGET COMPLETION

***Apart from the above structure, the existing managers can be assuredthat theyll be given preference for promotions when expanding the company

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Training

As the hotel is supposed to re-open in 1 month, there is short period to experiment withTraining design. The training can be carried at the property itself & divided in 4 stages

#Stage 1 (For 3 days) Training about the Hotel cultureIn this, the relocated managers can be trainers as they know the company very well. Thetraining can have modules like History & Information of the company, Reporting relations &Key people, Company expectations from the employees.

#Stage 2 (For 4 days) Training about Bangalore Oprations

In this, the local managers can be trainers to give information about the city & local marketscene, ways to retain the clients of acquired hotel chain and overall operation plan for thehotel.

#Stage 3 (For 3 days) Team building activitiesTeam building activities like games , simulations & employee excursions can be organised so

that the newly formed Team understands each other & gives full output.

+Stage 4 (for 20 days) Soft OpeningIn this stage, internal people like, Owners , Head office Managers & Trainers can come tohotel as Guest to see effectiveness of Training & experience progress of the development.

# denotes Off job training & + denotes On the job training

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Advantages

1. Acceptance of Local Managers & non-management staff will gain loyalty &sympathy of the Locals. Besides, It will cut down recruitment costs drastically.

2. Offering Bonus, to Managers will not only boost their morale but also increaseproductivity levels. Moreover, Existing Mumbai based managers will readily agreeto relocate if a tax savvy handsome salary is being offered with preference forpromotion in future when expanding.

3. Employing both local managers & existing managers for Training will reducetraining costs and also act as refreshers for managers before opening.

Disadvantages

1. It may be difficult for the Oberoi to offer the standards for which they are knownfor in budget segment as most people coming to the hotel will build high

expectation after seeing the brand name. The company will need to carefullyconvey the message of budget hotels.

2. The existing managers who are transferred to Bangalore may find it difficult tomanage as the lifestyle, culture & climate differs in new locality.

3. Clash between Local Managers & Transferred Managers may happen if theTransferred managers dont behave diplomatically.

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8. Conclusion:

To conclude, We suggest that the right mix of employees to beconsidered during recruitment. The pre-opening team can be trainedcarefully & given same responsibilities & benefits so that everybody

feels equal. Focus on showing a big picture of career to existingemployees to relocate. The relocating employees to be supportedinitially after relocation until they are settled properly. And finally, Tobe very careful while testing the new waters in every possible way.

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Documents

Oberoi Hotels Case Study (1).pptx