Operational Analysis
Operational Analysis
1.Under what scenarios could a foodservice operation achieve excellent food and beverage cost percentages, yet incur excessively high labor costs? Which of these different scenarios do you think is occurring at the Barcena Resort? Upon what case facts do you base your assessment?
F&B product cost percentages is fine (Variable Cost) = increases as sales volume increases and decreases as sales volume decreases
Break-even point: Revenue = Expenses
Food and Service quality is outstanding
Labor cost is very high (Fixed Cost) => eats up all the profits (does not change with the increase or the decrease in volume)
Based on the information given for the costs at the Barcena Resort, we could say that they have too many employees in F&B Department. Obviously, the problem is coming from the fixed costs, because the variable cost percentage is good (F&B product cost percentage is fine). We first pay the variable expenses, then with the rest we should cover our fixed costs and still earn revenue. However, when the fixed costs (the labor cost in the particular case) are too high, we do not generate revenues and there we have a problem. The case states that service quality is outstanding, which confirms the fact that most probably there are too many employees, doing the same job, so that it seem like it is perfectly done.
The goal is to have the work done (high service level and excellent food) with the minimum number of labor hours. It is not necessary that the hotel keeps all its employees, but they should keep the productive ones and implement a strategy with rewards (either monetary or nonmonetary).
Moreover, if the prices are too high and there are not a lot of customers, but too main employees, we would end up in the same situation of not earning enough, because costs exceed the revenues, or they generate just enough to break-even (as it is mention in the case).
2. Assume you were Beverly. What specific actions would you likely undertake if you were given a 10 percent cut in your operating budget for the coming year? What impact would each of these actions likely have on your guests’ view of the value they receive for the money they spend while staying at the property?
Firstly, I would cut the amenities offered in the rooms. I would wither find cheaper ones or if this do not work our – I might remove them completely. This would most probably have negative impact on the guests’ view, but it is a possible solution.
Secondly, reduction on the energy consumption might have positive effect on the financial performance of the property. According to statistics: “A 10 percent reduction in energy consumption would have the same financial effect as increasing the average daily room rate (ADR) by $0.62 in limited-service hotels and by $1.35 in full-service hotels.” This could be achieved, by switching lights off, switch TVs off while guests are not in their rooms, unplugging guests’ chargers while they are not using them and are not in the room, using not so frequently cleaning machines that consume a lot of energy. This measure, should be applied carefully and do not affect negatively the level of cleanliness, because this will be crucial for the level of quests’ satisfaction. If we apply this carefully, it would be most probably accepted well by our guests.
Last, but not least, cross training of the employees might help in the situation. There is days of the week when housekeeping is not so busy, so if it is possible for the employees to do something else at these days, I might need less staff. However, if I achieve good results with the first two strategies, I would not go for cross training – it would lower the quality of the service and the guests will be unhappy.
3.Assume Sofia is an experienced and talented GM. From the point of view of new guests arriving at the resort, how important to them will be