Ilios (Hilton Worldwide) Consulting Solution Delivered

Presented By:Ezechiel Dezine

Lauren Greenberger Luchi MoralesKristen Ouzts

Cesar Ramirez

Relevant Facts and Analysis Within the Hotel Industry, Food and Beverage is the second largest department in a hotel, contributing to 20% of Total Revenues for the hotel. Food and Beverage departments must consider costs such as:

Cost of food Cost of beverage Operating

equipment

Comping At the Hilton Ft. Lauderdale Beach

Resort:Average Price Breakfast - $27Average Price Lunch - $17Average Price Dinner - $30

On a monthly basis, the Hilton Ft. Lauderdale Beach Resort comps approximately $5,000 worth of meals in the Food and Beverage Department.

Identify the Problem At the Ilios Restaurant located within the

Hilton Ft. Lauderdale Beach Resort, the hotel is losing revenue due to a high amount of meals that are being offered as complimentary to guests. There doesn’t seem to be alternative means of applying customer service other than this “comping” of meals when guests are dissatisfied. Why is it that management has allowed this problem to not only develop but persist for so long?

A helpful way to approach customer service issues

o When customer service issues arise, service recovery can be used as a guide to take action in response to service failures (Murphy, Bilgihan, Kubickova & Boseo, 2014)

Management’s Role in the Service Recovery Process (cont.)Four (4) stages in the Service Recovery Cycle:

o Pre-recovery stage involves policies and procedures, adequate reward system, and training.

o Immediate recovery stage refers quickly responding to the customer complaint. When doing so staff must listen, empathize and place themselves in the customer’s shoes.

o Follow-up stage entails identifying trends in common service failures and finding solutions to them

o Lesson learned stage: management takeaways from the follow-up stage are shared and implemented in the first three stages to prevent repeat occurrences

(Murphy, Bilgihan, Kubickova & Boseo, 2014)

Management’s Role in the Service Recovery Process (cont.)If implemented correctly, the service recovery

cycle can be a useful tool for managers to avoid service failures, prepare for them, and handle them effectively if they were to occur.

This in turn lead to improved customer satisfaction ratings, increased guest retention rates, and most importantly increased revenue (Murphy, Bilgihan, Kubickova & Boseo, 2014)

Original Consulting Solution A New Employee Empowerment System

Employee Empowerment SystemIf the Food and Beverage Department no longer

comped $5,000 worth of meals per month, the department would save approximately $60,000 in revenue per year.

With comping $5,000 worth of meals per month, the Food and Beverage Department of the Hilton Ft. Lauderdale Beach Resort’s revenue per year calculates to being $550,000. Take the amount of comping out of the equation, and the department of Food and Beverage can average revenue each year around $610,000.

Initial Revenue Per Year

Analysis Annual revenue starts in January at highest level ($70,000) due to an increase in sales based on presence of high volume visitors in South Florida during winter season. The chart on the previous slide shows that the sales revenue declines through the year, reaching its lowest level in September and October. Then sales revenue increases again in November and December. The average monthly sales revenue is $45,833.33 but this number doesn’t yet include the $5,000 per month in comps that the Hilton Department of Food and Beverage calculates into the monthly average.

Revenue changes related to comps

Analysis According to our analysis, if Hilton Department of Food and Beverage reduces its comps by $5,000 per month, this will help to increase the net revenue amount up to $610,000 due to a reduction in variable costs that are affecting the operating cash flow. This cash that has been used to cover the comps if no longer spent will increase the efficiency in cash flow.

Increasing Revenue via Empowerment System

Analysis The new equation empowerment system shows via the graphic on the previous slide that after implementing our consulting solution, the net revenue will increase due to an effective reduction in variable cost related to the comps. The equation generates a red area that has been adding to the revenue and with this cash flow, will generate at the end of the fiscal year a positive balance in the department results.

Evaluating Alternatives Evaluating AlternativesRather than giving complimentary meals, there are

other options that cost less revenue for the Food and Beverage Department:Giving a complimentary bungalow for the day: costs the

department $0, but the guest is provided with a private lounging area at the pool and personal concierge.

Adding a complimentary dessert: costs only the amount it takes to make the dessert, instead of an entire meal from the restaurant.

Sending a complimentary amenity up to the room: an example would be wine bottles which cost guests much more than the hotel actually purchases them for due to upcharges in order to make profit.

Recommendations The Ritz Carlton

The Empowerment System is widely used in Marriott’s Ritz Carlton. Employees working at any Ritz Carlton property are empowered to $2,000 per day to comp.

While $2,000 per day seems like a lot, the Ritz Carlton has calculated this amount according to the amount of revenue the hotel brings in daily.

With that being said, this empowerment system works for Ritz Carlton because there is a specific amount set as the maximum per day for employees, in which Hilton should begin to implement.

The Four Seasons Another hotel in which implements the Empowerment System. The Four Seasons does not share a specific amount of empowerment given in dollars, but empowers its

employees to provide unique experiences for its guests. The Four Seasons strives to gain trust from the employees, in regards to empowerment, and believe that

the employees will handle this empowerment with logic and cautiousness. These two well-known, elegant hotel companies have used the empowerment system for

decades. But, both companies are cautious in how the empowerment is handled and is specific in amounts that are comped. With that being said, both companies have shown that the empowerment system is a successful way to run a business and draw in more loyal guests, while still gaining revenue annually.

This issue with comping that the Food and Beverage Department is experiencing could be a symptom of a bigger issue with management and a neglect of big issues that could be affecting revenue and guest experience. More time and attention should be given to reviewing departmental issues by management.

Offering Recommendations A complimentary meal should only be

offered in direst of situations. Think of this solution as a last resort offering.

Simply speak with guest: find out why they are upset or weren’t happy with their experience (SO much can be resolved by simply taking the time to ask questions & admitting a mistake was made)

Offer a discount on the meal or a free dessert (avoid comping entire meal at all costs). This will result in a much smaller loss of revenue for the restaurant.

Staff meetings are a vital step towards increased revenue. Use these meeting times with staff to train them on what to do in situations of dissatisfied customers so they are best equipped and not having to make judgment calls in the moment as far as what to do. Empower them to have a plan of action and carry it out.

Offer a gift certificate for free meal on next visit: guest will more than likely bring others with them and that is an opportunity to retrieve new revenue. In addition, guest will feel that you truly care about their business.

Specific to Ilios, the restaurant can offer a dissatisfied guest a complimentary bungalow for the day (part of the F&B Department and the dept will not incur any cost for this)

Keep track of monthly and annual traffic to better project demand and be prepared for peak times when “comping” really becomes an issue.

Implementing a New Empowerment System The Hilton Ft. Lauderdale Beach Resort carries out the empowerment

system throughout every department. With this system, employees are free to fix an issue any way they would like, i.e., giving away complimentary meals.

With the use of critical thinking, one will realize giving the Hilton employees empowerment is the main source of why the comping takes place.

Using logic, one can realize that giving away $5,000 worth of complimentary meals per month does not make sense in regards to the success of the company. Does this solution make sense in this situation? Is this solution logically solving the issue?

Implementing a new empowerment system for employees may reduce the amount of revenue lost per month in the department. Options for a new empowerment system include:

Every employee is empowered up to $100 a month. Employees cannot give away more than 3 complimentary meals per month. Employees cannot comp specific meals found on the menu in the restaurant.

Q & A Time -What is your opinion on this consulting solution?--How do you think it will actually work out for your facility?--Do you think you will actually implement this plan?

ReferencesBrigham, E. & Ehrhardt, M., (2011).    Financial Management – Theory and Practice

(13e)                                          South-Western Cengage Learning – United States

Doane, D. & Seward, L., (2013)     Business Modeling

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HILTON FORT LAUDERDALE BEACH RESORT. (n.d.). Retrieved November 23, 2015, from http://www.sunny.org/listings/hilton-fort-lauderdale-beach-resort/4683/

References (cont.) Jordan, B.; Ross, S. & Westerfield, R., (2011).

Essentials of Corporate Finance (7e)McGraw-Hill Irvin – United States

 Economics – Dictionary Web Site

International Business Modeling Theory, United StatesRecovered from the Internet on October 27, 2013 of:

    http://www.economics-dictionary.com Encyclopedia2- The Free Dictionary Web Site

Business Modeling Definitions, United StatesRecovered from the Internet on October 27, 2013 of:

     http://www.encyclopedia2.thefreedictionary.com

References (cont.) Main, B. (2002).Comps. Retrieved November

21, 2015, from http://www.restaurantbusinessonline.com/archive/comps

Otto, J. (2015). How to retain unhappy restaurant customers. Retrieved November 20, 2015 http://www.businessknowhow.com/marketing/restaurantcs.htm

References (cont.) Michel, S., Bowen, D., & Johnston, R. (n.d.). Closing the Gap Between Best and Actual

Practices. Hospitalist News. Retrieved November 23, 2015, from http://www.dienstleistungsmarketing.ch/documents/michelbowenjohnston_servrecmgt_reformated.pdf

Murphy, K., Bilgihan, A., Kubickova, M., & Boseo, M. (2014). There is No ‘I’ in Recovery: Managements’ Perspective of Service Recovery. Journal of Quality Assurance in Hospitality & Tourism, 16(3), 303-322. Retrieved November 23, 2015.

Microsoft Office Excel 2007 Microsoft Corporation USThe Decision Tools SuiteAnalysis ToolKit

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Solomon, M. (2013, October 28). How Ritz-Carlton And Four Seasons Empower Employees And Uphold Customer Service Standards. Retrieved November 23, 2015, from http://www.forbes.com/sites/micahsolomon/2013/10/28/four-seasons-and-ritz-carlton/

Thank you for your time and attention!This concludes our presentation.