STRATEGIC BUSINESS PLAN. “PLANNING FOR THE FUTURE”

By G. Angelini

Updated on Jan-2020

STRATEGIC PLANNING WORKSHOP (For Hotel Companies)

A Useful Process for a Strategic Business Plan

(Ideally a two days focused session. Please read the whole document before the session)

 

It is of critical importance for hotel organizations to properly plan for the future and have in place an up-dated, medium-long term, “rolling” strategic business plan-forecast.

Anticipating changes and identifying new opportunities requires hotel leaders to understand what’s drives changes and most importantly how to respond to new business trends and on what has to be done. Be pro-active, plan and respond to those continuous changes.

The following is a recommended process and guidelines to develop a useful medium-long term (5+ years) strategic business plan for an Hotel company.

Objective:

The main objective is to develop a comprehensive & efficient planning document for the organization to be implemented in the years to come (future planning). This is perhaps one of the most important document of any organizations therefore all topics addressed in the document have to be researched, discussed, measured in great details and approached with an “open mindset”.

Priority: Continuous Growth & Expansion (and what it takes?)

  • What the company/brand want/needs to be? Recognized as what?
  • How to go about? Who will do what? Who is responsible?
  • Yearly monetary growth (%) needed for the company to progress (survive).
  • No. of operating units & rooms that the company needs in order to achieve economy of scale and be able to compete;
    • Yearly increase/target (over previous year)
    • Target in 3 and in 5 years, minimum necessary and ideal number
    • Average revenue per operating unit per year (Owned and Managed)
  • Why your brand over the competition? What’s the brand is offering?
  • Where are the opportunities?
  • Strategies to grow/expand; invest, lease, HMA’s, franchise, partnership and/or?
  • Is classification (star or others) of hotels remains a factor for customers? Would the industry go for smaller or larger size properties? What needs to be done to create efficiency, lower operating costs and faster response to customers? Will the revenue markets prefer lower room rates vs expensive larger/expensive rooms? What products/facilities to be developed in future that can generate the best ROI? What new services and facilities are needed?

A purpose-driven Leadership:

In order to lead, leaders must know where the organization is heading, and what are the objectives. In order to grow and prosper, an organization requires the discipline of a well prepared strategic plan-formal document stating how the organization can be improved and continuously transformed. How to be competitive, respond to the latest business trends and requirements and most important be highly profitable in the short and in the long term.

It is highly recommended that the Long Term Planning for any organization is researched and compiled by a professional & qualified team (task force) and it is the responsibility of the Leader to appoint, guide the team and set strategic objectives, targets and deadlines including the vision-mission-people-culture, the product/ competitive advantages, the growth, the performance and others as appropriate.

Team and coordinator:

For efficiency purpose, the team should be composed of 5–6 key executives covering all major functions of the organization and also it is very important that, for the workshop session/s, a facilitator-moderator is appointed either from inside the company or an outside consultant.

The facilitator will lead and motivate the team to cover all aspect of the business, will drive the team to think about how the industry will/may change over the coming years, stimulate discussion and ensure that a draft document is prepared to be reviewed and accepted by all members’ of the team and by the head of the company before it is formalized.

As the plan is of critical importance to the future of the company, it should be kept strictly confidential and for internal use only. Leaders have the responsibility that the plan is properly implemented and it is also up-dated on a yearly basis.

Process:

  • Develop a list of important changes that need to take place for the organization to be successful during the next 5 years; products, services, innovations, technology, growth & expansion, training & people development, succession plan and leadership, and the most efficient ways to respond to customers’ expectations/needs.
  • Prepare the whole document in draft format and must ensure that it is reviewed and commented by all members of the task force and by the Chief Executive.
  • Make all necessary changes, formalize the whole document and start implementation.
  • Very important to evaluate and adjust the plan on a yearly basis and automatically making it a “Strategic rolling plan”

Self evaluation: (open & honest)

  • Will the small-unaffiliated hotel groups survives in the future or some of them will be taken-over or merge with the global groups who are in better position and have the mussels to compete and respond to most market’s situation?
  • Has the organization access to capitals in order to maintain-improve its physical product and to expand-grow the network? How and where to expand in order to strengthen the brand?
  • What’s make the organization special/unique in the market and why customers & developers should choose you over the competition? What’s your differentiation that customers recognize? And how the organization is/should be marketed and promoted?
  • How the organization measures with the direct competitors? Where the organization is vulnerable and what it needs to be done in order not to fall behind the direct competitors?
  • Recognize the potential treats of the competition, what they are doing/where are they going and of the disruptive new product/s and innovation/s that may/will come into play.
  • How the organization has to adapt and structured to the fast changing business environment and industry trends. Understand & define the key trends that are happening now that in time will affect the performance.
  • Is the brand strong enough to earn customer loyalty? Do your people first, then your customers, believe and respond to your brand promises?
  • Strengths and compliance with brand’s promises, product consistency and commitment for continuous improvements.
  • Is the company culture accepted by your people? Recognized by the customers? And what is the level of empowerment vs micromanaging?
  • Is there a qualified and committed team of professionals at Corporate and the hotels who are capable to respond to business needs and grow the organization?
  • What are the innovations in revenue management, in market responsiveness/ efficiency, in pricing integrity and in making easy for customers?
  • Short-term fixes vs long term strategic needs/actions approach.
  • Operating philosophy; revenue vs cost controls.
  • Planning and handling of operating cost’s increase and operating efficiencies.
  • Allocation of funds/reserve for the physical product improvements and periodical renovations
  • Level of product regular maintenance, security, safety and hygiene.
  • Focus on environmental sustainability and eco friendly products.

Lot of questions to be asked, lot of topics to be analyzed and lot of work to be done to develop an appropriate plan for the organization and be prepared for the future.

Analyze the past 5 years:

  • What were the changes & improvements during the previous 5 years?
  • Analyze the business and demand trends; the growth years and the declining years and reasons for it.
  • What were the value drivers of the customers & travelers and how it changed during the past 5 years?
  • How did the business model changed, what it worked and what it did not?
  • Impact of the OTA’s, and of the shared economy and of other disruptors.
  • Changes within the sources of business and spending power.
  • Status and activities of the competition in particular of the competitive set.
  • Product’s improvements over the years and comparison with direct competitors.
  • Impact of disasters (financial crisis, natural disasters, epidemic/pandemic, etc...) and most important, what did the organization learned from past crisis and what has to do to better handle it in future?
  • Impact of the political, economic, social changes, and crisis if any.

Yearly statistics, past 5 years (prepare in advance)

  • Number of hotels and number of rooms per brand/per year;
  • Achieved Room Rates, Occupancy, REVPAR, and of the yearly average growth range.
  • Operating profits in $ and in percentages by year and over the 5 years and ROI’s.
  • Return on investments, value of shares and others related.
  • Loyalty program: number of members and contribution (R/NTs).
  • Business generated by the corporate systems (R/NTs x %).
  • Market position/RGI of each hotel and aggregate.
  • Business generated by OTA’s (R/NTs) of each hotel and aggregate.
  • Business mix percentage; Rooms-F&B-others.
  • Average length of stay, (R/NTs).
  • Percentage of repeat business (rooms).
  • Delivering of brand promises and customers surveys rating/satisfaction.
  • Clean data and customer relationship management programs/activities.
  • Employees satisfaction surveys, score/results.
  • No. of full time employee (corporate).
  • Employees turnover (corporate) %.

[See/complete the form (page 5) for targets & yearly updates.]

 

Jan 2002

Medium-Long Term Strategic Plan, Yearly Update

Vision-Mission-Targets-Actions
 

 

Present

5 years

10 years

  1. Growth & Expansion:

                            (Examples)

 

  • Company Vision & Mission

Strengthening regional presence,

From regional to an international brand,

From international to global Hotel brand,

  •  Economy of scale/size

 

 

 

 No. of Hotels & No. of Rooms:

Units

Rooms

Units

Rooms

Units

Rooms

  • Brand A …………………………..

 

 

 

 

 

 

  • Brand B …………………………..

 

 

 

 

 

 

  • Brand C …………………………..

 

 

 

 

 

 

  • Brand D …………………………..

 

 

 

 

 

 

                                                   Total:

 

 

 

 

 

 

   Average Rooms per unit

 

 

 

  •  Others

 

 

 

 

 

 

 

  1. Market Leadership:

 

 

 

* A- Market position: REVPAR & RGI

 

 

 

B- Loyalty program - No. of members R/NTs generated, % of total

 

 

 

C- Total R/NTs from corp. systems

 % of total

 

 

 

D- % of total repeat business

 

 

 

E- Length of stay R/NTs

 

 

 

* F- Customers sat. survey score

 

 

 

G- Others

 

 

 

 

 

 

 

  1. Human Resource:

 

 

 

A- Size of corporate office/staff

 

 

 

B- Employee turnover % Corp.

     Employee turnover % Hotels

 

 

 

* C- Employee’s sat. survey score Corp.

       Employee’s sat. survey score Hotels

 

 

 

D- Others

 

 

 

 

 

 

 

  1. Performance:

 

 

 

  • GOP, % of GOR (group average)

 

 

 

  • Room occupancy (group average)

 

 

 

  • REVPAR (group average)

 

 

 

  • Total management fee

 

 

 

  • Corporate expenses

 

 

 

  • Profitability

 

 

 

  • Others

 

 

 

 

 

 

 

*Surveys done by 3rd party

What the future will hold? (Stimulating topics)

  • The past is known, the future is not. No one can see the future but at the same time, organizations must plan for it as business demands it, stakeholders expects it and employees wants/needs it. Planning for the future is a major challenge for every decision maker and it is essential.
  • Changes will continue to happen and every organization will have to face it. A year from now the situation will already be different and have to be prepared.
  • How will we live our lives in 5-10 years and how will we run/operate business?
  • Will technology advances so much to control our lives? All indications are that technology will continue to advance and move forward. There will be new discoveries and inventions in all fields and we will live in a mobile world.
  • From past experiences we know that good times will not last forever and there will be the “ups” and the “downs”. Looking at the hotel industry in particular, one has to assume that out of 10 business years there may be 5-6 good years, 2-3 average years and there will also be 2-3 years of decline in revenue and in profitability. Of course there will continue to be winners and there will be losers. What an organization has to do to be a winner?
  • In all probabilities, hotel business will continue to be affected by the ups and downs of the business cycles. Hotels are, and will be, at the mercy of the global financial waves, of the local/national political situation, of unexpected crisis/disasters and of what the destination is offering. It is anticipated that travel and tourism business will remain the 2nd largest employer in the world (after the governments). It is also expected that the hotel industry will remain highly competitive with the global brands getting larger & stronger (consolidations) and there will be newcomers entering the markets with new and innovative products.
  • We have seen crises come and go and this is expected to continue in the future as well. In Asia we have seen several financial crises; 1997/8 & 2008/9, trade wars, political situations, virus/epidemics, natural disasters and others, all with direct impact to hotel business. What will be the impact of the Chinese economy in the world, of the Chinese travelers and of the Chinese currency? And of the potentials of India?
  • Will Asia, driven by China, continue to grow at a higher level than the rest of the world? Which countries will generate new markets for the hotels and which countries will have to face declining trends?
  • Will unemployment and spending power improves? or the use of technology combined with weak economies will keep the unemployment high?
  • What would be/is the consequence to business and to society the impact of planet warming and drier weather that creates shortage of food, water and malnutrition/famine problems? Are we moving toward the age of scarcity? Will the control of basic commodities like oil, minerals, coal, gas, food, water and others be reason for political conflicts and wars during the next 5-10 years

Planning and responding to business trends and changes: (important)

  • Travel trends are changing, but must accept that the basic of hotel business is still effectively the same; providing experiences on its key services; shelter and food.
  • Needs to fully understand where the opportunities lie that generates revenue and profitability growth. What are the potentials and the options to the organization to be a winner over the decade, not a loser?
  • Identify the business driving forces; economic, competition, technology, innovations, markets, governments, environment, trends, etc. and take long term view on all those.
  • Try to assess (anticipate) the uncertainties over the next 5 years, which countries expected to grow and generate new potentials and which countries is expected to decline.
  • It is anticipated that leisure business will grow more than corporate and more than MICE business. Also it is anticipated that the Asian continent will generate much more travelers as compared with the West. What the company has to do to maximize on this?
  • Involve existing and potential customers (research) to better assess what are their future expectations, changes to be made to retain attract them. Important to pay equal attention to existing and to potential customers as it is to be noted that normally existing customers are not demanding for many changes and this is not healthy in the long term.
  • Unforeseen events that may have major effect to the organization; political, economic, natural disasters, terrorism, wars, etc. and set guidelines on preparing a contingency plan that can be put in place as soon as those unforeseen events happen and prevent that the organization loses valuable time/value and revenue.
  • Extremely important to clearly identify the competitive advantage including the business & market position, strengths, weakness, product and services.
  • Importance of understanding traveler motivations, preferences, expectations and also how a total stay experience can and should be delivered to succeed in the future.
  • Assess and ensure that business is/will be well balanced and not depends too much in few markets-segments and consider how vulnerable is the organization if one or more of those markets or segments will experience difficulties (on making recommendations, apply the “Rule of Thumb”: do not exceed 1/3 of the total revenue from one market/source or one segment).

Human Asset:

  • Clarity on company’s vision-mission-values simply a must. Cannot accept non-compliance or lone rangers in this area.
  • Competition for talent is expected to increase and what’s the organization has to do to attract and retain an efficient and motivated labor pool? Trainings, competitive short and long term compensation, providing career opportunities, social contributions, etc.
  • Why employees should choose you over the competitors and what needs to be done in this very important area? (Hotels are labor-intensive and needs lot of motivated and efficient collaborators).
  • Inefficiencies, poor systems, “dead-wood managers”, poor handling of labor, training & developments, promotion within, incentives, etc….
  • Culture and consistency on setting measurable and aggressive, but achievable, financial objectives-targets (KPI’s) supported by competitive incentives-rewards.
  • Expectations of the new generations/young people.
  • Areas such as information management and the global economy are revolving so rapidly that many organizations find they lack the specific high-level business “Brains” needed to progress and compete in the future, what the organization is doing to attract and retain good talent?.

Technology:

  • Try to anticipate changes & advancements within the technology world/industry that will have direct or indirect impact on the business (revenue), on the operation (costs) and profitability of the organization and of the individual units (hotels). Impact of new IT solutions, software, mobile technologies, the spread of electronic data exchange and others.
  • As much as possible, must respond to innovations and technology used/introduced by competition and by 3rd parties agents; websites, search systems, distribution channels, mobiles, loyalty, efficiency, safety and others. Cannot remain behind.

Investment in new products and services necessary to compete:

  • Wellness; feel good/look good and longevity facilities/services
  • New interesting F&B concepts (including gourmet genomes?)
  • Innovation/technology; smart rooms, robot butlers, neuro technology, virtual reality, AI etc.….
  • Security, safety hygiene, quality of indoor air and others related.
  • Customer’s services that will distinguish you from your competitors.
  • Others.