TCS Smart Manager Case Contest # 60

Last date for submission : 18th October 2012

the spinning wheel of fortune

by dr kaushik mukerjee

 

A hotel with a fading reputation faces the classic business dilemma—should it bow out gracefully or stay put and fight?

The grand building of the Hum Safar Hotel had endured many monsoons since its foundation in the 1960s. Thousands of boarders had passed through its doors and enjoyed the warm hospitality that it was known for over the past few decades. However, since the late 1990s, the hotel was no longer the favored destination for visitors who thronged the city. The owner, Vinit Kohli, was distressed because profits were declining steadily, and in 2009 the hotel suffered a financial loss for the first time in its history.

keeping up with the customer The chequered history of the Hum Safar Hotel dates back to the time when customers were pleased with minimum facilities. Those were the days when all that customers really expected was a comfortable bed, good food and courteous behavior from the staff. Periodically, to cater to the customers’ changing preferences, the hotel had been upgraded to incorporate modern features. Earlier in the 70s, common toilets were the norm. But in the 1980s, the Hum Safar found that many competing hotels were offering attached toilets, and so the management spent considerable money in refurbishing the rooms and creating attached toilets.

Likewise, a number of modern features such as a 24-hour coffee shop, airport pickup and drop service, telephonic booking facilities, etc, were introduced. Apart from these, the hotel’s branding was updated through better signages and corporate communication. In spite of all these efforts, Kohli was rather upset with his product manager, Dipak Sehgal, for failing to ensure high occupancy and good profits. When Kohli questioned Sehgal, the latter merely replied that lack of advertising was responsible for falling occupancy. But in reality, the advertising budget had been increased. This prompted Kohli to take matters into his own hands and try and set things right for the Hum Safar.

analyzing trends To begin with, Kohli asked his top managers for customer data that was generated through transactions–billing, customer inquiries, customer feedback, etc.

He was informed that this was already aggregated and was given a fat file to rummage through. There were large stacks of papers of all the transactions neatly filed away but nothing much could be made out of them. When Kohli glanced through the feedback forms, he did not find anything that could help in diagnosing the problem with the Hum Safar. In fact, most customers had given the hotel a good rating–only a few had taken the effort of making small suggestions for improvement.

The reality was that the customer loyalty had been falling steadily over the past few years. When the loyalty records of customers were tracked, it was found that those who were very loyal to the Hum Safar had grown too old or had passed away. The next generation did not seem very keen on staying at the Hum Safar.

kohli’s introspection Kohli was stumped for an answer. He swore by the standards followed at the Hum Safar and even took pride in the fact that the staff were quite well trained, and had served the hotel for many years. Once a year, a training program was organized to upgrade the skills of the employees, and Kohli always felt that they were a happy lot. In fact, many of them had been loyal to the hotel without making outrageous demands for raises.

But when a friend of Kohli’s dropped in for dinner at the Hum Safar, he casually remarked that the staff was ‘disengaged’. This made Kohli rather upset and he decided to get some ‘engagement training’ done by an HR trainer. This was followed by the installation of a new system that would track staff engagement. However, even this measure did not help in improving the off-take of the rooms in the hotel.

When he discussed the aspect of falling sales with some of his friends, they said that the Caravan Hotel, which had opened three years ago and promised people ‘the ultimate place for work and party’, seemed to be attracting a lot of traffic.

the bigger picture The Caravan had a Jacuzzi and a discotheque–both of which were great attractions for young executives. In fact, Kohli realized that the Caravan offered better features and was priced 15% cheaper! Further, he was also given to understand that the Caravan had many attractive stewardesses which helped in attracting traffic.

During a brainstorming meeting, one Hum Safar manager mentioned that the hotel was lagging behind since they had not tied up with websites such as Journey and Plan Your Picnic, which its competitors had done. But Kohli had already created a website for the Hum Safar and wasn’t convinced that he should have tied up with travel portals.

Another manager opined that the Hum Safar was losing business as they had not invested in creating a relationship with the cab drivers at the airport. Tourists that planned to check into a hotel on arrival usually relied on the cab drivers’ recommendations. Most hotels in the town generally sweetened the deal for the cab drivers by offering them a complimentary meal. The Hum Safar had not walked this path.

An advertising agency had approached Kohli sometime ago and they had convinced him to launch an ad campaign to woo new customers. The agency had advised Kohli to target the travelers from Tier II and Tier III cities in India since they would not be too choosy when it came to the hotel’s amenities. Acting on their advice, Kohli had advertised in the local dailies of small towns in India. Despite this, the increase in the number of customers was not noteworthy. In fact, Kohli felt that the whole exercise was a waste of money. Kohli was rather exasperated and wanted to get to the bottom of the problem and come up with credible solutions that would help the Hum Safar to get back to its glorious days.

For a start, Kohli took stock of the hotel’s features and made the following list:

restaurants and bars • Gulnar (24-hour coffee shop): A la carte menu and buffet breakfast, lunch and dinner. Healthy delicacies–eggless and sugar-free desserts.• Gulshan (restaurant): Specialty restaurant serving a range of selected Indian, continental and Chinese delicacies with live ghazals in candle light.  • Vanakkam: A south Indian vegetarian food paradise. • Juany: Well-stocked bar attached to Gulnar. • Room service: Round-the-clock; serving multicuisine delicacies.

hotel amenities Centrally air-conditioned, non-smoking rooms, travels and tours counter, reputed travel agencies and state tourism offices, 24-hour money exchange counter, laundry, beauty parlor and hair dresser, safe deposit lockers, doctor-on-call, unique health check-up and lab test services, ample parking, valet parking and major credit cards accepted.

Category of Room/Suite Season tariff (`) Off season tariff (`)

Regular Single 7,000 6,000

Regular Double 8,000 7,000

Executive Single 9,000 8,000

Executive Double 10,000 9,000

Executive Suite 12,000 11,000

Maharaja Suite 15,000 15,000

After this analysis, Kohli was considering the following options:

1. Get a private investor and undertake a major renovation to modernize the hotel so that it appeals to younger travelers. This would also entail giving up management control (albeit partly) and pander to the whims and fancies of a new partner. Kohli did not seem enthused by this idea given the fact that he found most of the venture capitalists who approached him to be brash and unmannerly.

2. The advertising agency had suggested a branding exercise whereby the Hum Safar Hotel’s brand would be given a complete makeover, and a new positioning strategy along with the accompanying merchandizing and signage would be prepared. This new identity could provide the Hum Safar the desired boost in its fortunes.

3. A retired senior executive of the Samrat Hotels happened to drop in at the Hum Safar. When Kohli took the opportunity to have a chat with him regarding the poor performance of the hotel, the gentleman suggested that overhauling the IT systems to enable better customer relationship management and a proactive culture would do the trick for the Hum Safar.

4. The fact that Kohli’s son had decided to stay put in the US (he was an engineer with a leading dotcom) was also a reason for Kohli to consider selling off the hotel and enjoying his last years playing golf and making merry.

your questionsIf you were in Kohli’s position, would you persist with the hotel or sell it off? If yes, what steps would you take to ensure that the hotel is able to perform well again? If no, why?

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