Operations Management - Starbucks ( section 1)

Milestone One - Operations Management Plan

Teresa Reed

Southern New Hampshire University

Professor Jeff Myers

September 23, 2017

Significant Forces –

Operations management in the hospitality industry in the past was focused on increasing pricing to offset gains in operating expenses, hotel management practices were documented manually and upper management made decisions regarding personnel management. Today, there are significant forces both internal and external that have an impact in the operation of a hotel and hotels have had to change how they do business.

Internal factors affecting operations are the business reputation, staffing, management structure, physical décor and creditworthiness to name a few.

External factors include; government regulations, taxes, competition, terrorism, natural disasters and the economy.

Other factors in play are the competition in a global environment, innovation, consumer confidence, and a shift in consumer spending from goods to services and experiences and rising consumer demand.

In the development of an operations management plan, each area of the Inn will be analyzed for appropriate financial management, staffing, inventory, training and up to date technology available to ensure the efficiency of the department and to best analyze operations to ensure the most accurate forecasting of supply and demand.

The Inn will be focused on satisfying stakeholder needs or preferences to achieve above average returns. Consumers are making their choices with regards to whom they do business with based on how business decisions are made by companies and the impact they are making on the environment. Objectives and goals of The Inn at the Ranch will be developed while making a positive social impact and maintaining sustainability (Reed, 2017).

The hospitality industry is sensitive to changes in price and price is sensitive to changes in demand (Starfleet Media, 2017, Reed, 2017). The concepts that are in play when determining demand for a product or service are perishable and elasticity. Perishable means that they lose their usefulness and value if not utilized within a certain period. Price elasticity of demand looks at the demand of a product or service that is sensitive to changes in price and price is sensitive to changes in demand (Starfleet Media, 2017). Hotels have a lot of elasticity because their main product, guest rooms, are both perishable and fixed in capacity (Reed, 2017).

In determining demand, first these questions need to be answered.

· Who are the customers? (Demographic, geographic, lifestyle choices (tastes and values), personality traits).

· What are the goods and/or services that potential customers need? (Knowing ones’ customers is very import in obtaining and sustaining a competitive advantage).

· How to satisfy customer needs? (Determine how to bundle resources to satisfy customer needs).

("Business Level Strategy," 2017, Reed, 2017)

Intelligent pricing in the hospitality industry looks at key factors when determining price.

· What is the best price to charge to maximize revenue?

· What is the best rate for a guest room, considering the type of room and length of stay?

· When discounted rates, how to not reduce revenue and profits in the long run?

(Vashisht, n.d., Reed, 2017)

Forecasting demand while using Intelligent pricing will answer these questions by analyzing demand forecasts, competitor rates, price sensitivities and other demand drivers like seasonality, day-of-week differences and market dynamics (Starfleet Media, 2017). Revenue management is a core competency and will be important to the Inn’s success. In forecasting the demand for the Inn during the first 6 months of operation the type of product and pricing strategy is taken into consideration for the demand forecast to be as accurate as possible.

Key Obstacles –

Today, technology plays a vital role in the hospitality industry. The Ranch at the Inn will have a web page with the ability to view room availability, see pricing, read reviews, and have the ability to make reservations online. The website will also give information on area sites and available entertainment and activities available. The facility will have to date technology, culinary and beverage options to cater to guests. It is also important to develop partnerships with OTA’s (Online Travel Agencies), suppliers and area businesses.

Customer Service is key in the hospitality industry today. The key is to understand peoples wants, needs and preferences. Collecting data on each guest will be done through the collection of data at the time of reservation, interaction during check in/out, any interactions with staff whether it be the housekeeper or the bartender. It is important to understand the guest at every aspect of their stay.

Customer satisfaction begins with employee satisfaction. Training and incentive programs will be developed to ensure that employees are just as happy to be at work at the Inn as the guest is to be staying there.

Security is also a very important aspect of this business. Customers depend on their information being safe when utilizing a website to make purchases, and also have appropriate safety measures for those customers who are using the internet while staying on site.

Operations are also managed through information systems that control inventory, financial management, property operations, risk management, preventative management and energy use. All operations of management are handled through technology.

Changes –

Hotel reservations used to be done via telephone, check in and check out used to be done in person. Today, with the technology available, reservations are done online and checking in and out of your room can be done with keyless entry via an application on your phone. Technology not only make things easy on customers, but technology also is important to collecting data on those customers to ensure that their needs are met. This data is also used in forecasting, marketing, inventory control and the determination of services that should be provided to clients based on their demographic and personal taste information.

Changes in operations and organizational structure happen as a result of multiple factors:

· Business affected by global policy and regulation

· Relationship with online travel agencies

· Threats

· Competition

· Changes in economic and Political conditions

· Increase cost of healthcare coverage

· Labor shortages

· Decrease in business travel due to virtual meetings

It is important to make adjustments in operations, based on internal and external factor changes. Staffing changes are a result of a high turnover industry, training and updating recruitment and retention practices. Government regulation could mean changes to healthcare costs, health and safety regulations, and environmental changes.

Business Operations -

The Inn at the Ranch operations will consist of:

· General Manager of Operations

· Human Resources – Recruitment and Retention, Training of staff and benefits management

· Accounting and Cash Management – Financial operations and payroll

· Purchasing and Inventory Management – Inventory control and supply management

· Customer Services – All aspects of customer contact

· Front Desk Management

· Housekeeping

· Licensing and Permitting

· Marketing and Sales

· Property Operations to include Maintenance, Security and IT management

· Restaurant Management/Food and Beverage

· Grounds Keeping and Maintenance

· Barn Management

· Event Planning

· Public Relations

Key Trends –

Research show that more business travelers are blending work related trips with vacation time. The “bileisure” group is expected to grow in 2017, this group is a combination of the business traveler who is either coming early for leisure activities or extending their stay beyond the business meeting. 49% of business travelers already extend their business trips to further enjoy the destination while 75% intend to do so the same or more in the coming year. Business travel is increasingly appreciated as an opportunity to expand horizons, find inspiration and progress in a career. ("8 Big Travel Predictions for 2017," 2016 ; Reed 2017)

The trends for 2017 are:

· Local Experiences

· Technology – mobile bookings to plan trips and social networking to share experiences.

· Millennials – expected to rise 47% from 2013 to 320M trips by year 2020

· Bileisure Traveler

· Wellness Retreats and Spa’s

· Sustainability in the Environment

(Ellis, McGroarty 2016; Reed 2017)

Millennial travelers, the generation now between the ages of 18 and 34, represent a huge opportunity for the industry. The Millennial traveler is looking to spend time away from their normal environment. They are looking for that “adventure”. More Millennials are traveling solo, wanting the freedom to explore. The coming year will see many travelers prioritizing health conscious trips that promise harmony for the mind, body and soul (Reed, 2017)

The Inn at the Ranch will develop changes in operations and services based on the trends in the industry. The Inn will be focused on wellness and providing experiences to guests, whether those be adventure experiences, or health and wellness activities within the Inn.

Impact –

The sustainability and the measurement of environmental performance have become standard within most major hotel companies around the world. This has been driven by interest in improving operational efficiency, costs, and lessening one’s environmental impact in response to growing evidence of climate change. When a property can find solutions to local problems, they may be truly innovative in their own destination even though the practices are common elsewhere. This can be on-site installation of solar heating in a remote area where technology is not commonly available, or providing environmental training to staff (Reed 2017).

Trends in the marketplace are always changing. It is important that a business pay attention to the currents trends and take advantage of the opportunities that present themselves in the industry. In the hospitality industry, it is important to understand the motivations of travelers. Trends that have been identified for 2017 are:

· Responsible and sustainable tourism:

· The wellness trends

· Millennials, seniors and female solo travelers

· Experiential travel and authentic experiences

· Adventure travel

· Remote working

· Travel Photography

· Bleisure traveler

· Food tourism

· Be authentic unique and personal

("2017 Travel and Hospitality Industry Outlook | Deloitte US," n.d.)

Sustainability and socially conscious travel is being promoted globally and the Inn would do well to adapt to this mindset of travelers (Burkhard, Kow, & Fuggle, 2016, Reed, 2017). Consumers are more in tune with the environment and how businesses are making an impact on the environment. The Inn will develop a reputation for having a positive social impact and sustainability which will have positive effects in promoting this new type of accommodations.

Hilton Worldwide has a proprietary process of measuring success within its brands. Hilton’s “Framework for Action”. A strategic approach to sustainability and delivers value to owners without additional cost (Hilton Worldwide, 2016). This system is used to reduce impact, improve the guest experience and drive economic returns (Hilton Worldwide, 2016). This framework is equivalent to the SMART system used by businesses to measure success.

· Measurement

· Reporting

· Learning

· Continuous Improvement

In evaluating the success of the Ranch Inn and Spa there are several metrics to be evaluated. Utilizing the Framework for action and a SMART system to identify data needed to determine the actions necessary to the success of this new portfolio of accommodations. These metrics will be measured quarterly for the first year and later analysis will be completed based on seasonal occupancy (Reed, 2017).