Premium Resorts Limited maintains a five-star deluxe facility under the brand name Diamond Palms, with 150 rooms of various categories ranging from Standard to Presidential Suites, spanning 15 acres of land, and surround

CS Professional · Multidisciplinary Case Studies · PYQS · June 2023
Premium Resorts Limited maintains a five-star deluxe facility under the brand name Diamond Palms, with 150 rooms of various categories ranging from Standard to Presidential Suites, spanning 15 acres of land, and surrounded by lush vegetation on all sides. Tariffs vary based on the room category. In addition to a 24-hour coffee shop and specialty restaurants serving cuisine from various areas, such as Indian/Chinese/Italian cuisine, etc., the resort features 7 banqueting facilities ranging from a Board Room to halls that can accommodate 1,000 guests. In addition, the property features one of the large swimming pools, dining options in the open air adjacent to the pool area, facilities for various games, a well-laid badminton court, an excellent SPA offering wellness treatments, a health club, and a well-appointed bar selling premium spirits. The hotel has been operating for close to fifteen years, and its brand is well-known. Being located outside of the city, it is mostly a resort that caters to corporate clients that hold one- to three-day courses for their employees. As a result of its expansive size, the resort also a popular wedding location. These events provide a consistent source of revenue for the resort. In addition, outside catering is provided for important events, such as international cricket matches and trade shows. The resort is preferred for outdoor catering for exhibitions due to its proximity to the International Exhibition Centre, which is only three kilometres away. Additionally, the resort operates a membership loyalty programme with an outside firm. Members who enrol in the programme and pay a set price receive benefits and privileges. Marketing has been outsourced to an external organization that is responsible for bringing in business for rooms, banquets, and corporate events such as day trips or Sunday brunch, etc. for the entire property. Additionally, the agency is responsible for collecting consumer payments. The agency receives commission on sales based on monthly statements reviewed by Finance, the Front Office manager, and the Food & Beverage manager. The agency is not responsible for marketing the SPA; instead, business is generated through in-house visitors and word of mouth. The resort has also partnered with online travel sites to generate hotel bookings, primarily for leisure travellers. Despite all the above agreements, location and amenities, business has been dismal and consistently falls short of the budget. Being a sprawling resort property, maintenance and upkeep are challenging. In addition, age-related malfunctions of equipment result in substantial repair and maintenance expenses on a regular basis. Besides this, there are further issues that are High fixed costs that necessitate continual occupancy levels of 70% to achieve Breakeven. Dependence on outsourced marketing activities places the business at the mercy of the agency, which may have additional agreements with other companies. In addition, they frequently complaint about the poor maintenance which attributes to low business Resort. The loss of revenue and the selection of unsuitable members resulted from the selection of an incompetent agency to manage the Loyalty Program, which failed to appropriately market the initiative. Memberships were sold to anyone without verification of their background. Membership requirements included clearly specified advantages. This was disregarded the agency, which promised benefits beyond the ordinary. In addition, the Agency has not remitted the sum collected from Members and owed to the Resort, citing various issues. Simultaneously, they issued cards to Members and granted them access to the program's benefits. The agreement required the agency to provide weekly updates on the number of members enrolled and the amount collected, but they did not comply. This resulted in a loss for the resort, and members who paid the membership price were unable to utilise the advantages since the resort did not get its portion of the cost, resulting in negative publicity from potential members who were made to suffer through no fault of their own. It was discovered that the resort lacked a proper system to monitor the programme, including the number of members, the amount of money due and collected, and the monitoring of member-by-member benefit utilisation, which posed further issues. Frequent breakdowns disrupted service to customers. Due to a lack of business, much-needed expenditures on equipment, including replacement, were not made since management was unwilling to contribute further Rupees. In the hotel industry, it might be challenging to find trained personnel. This is especially true with vacation properties located away from the major metropolis. Despite the enormous potential to market the resort as a weekend escape, online agencies that were intended to generate more revenue did not bring in the anticipated amount of bookings. Resort had delegated the management of its website, including comments and/or inquiries, to an outside organisation. It is to the credit of this organisation that they did the best they could, but they did not fulfil their obligations in full. The agency's location in a distant city did not assist the situation. Realisations were delayed as a result of the marketing agency's inadequate collection follow up, resulting in cash flow concerns. This resulted in delayed payments to suppliers, who consequently increased the cost of supplies to offset their expenses. This resulted in an increase in procurement costs and frequent supply disruptions. The problem was exacerbated by the regular resignations of department heads who were tasked with overseeing operations. Added to this resort's responsibilities were legacy difficulties resulting from the property's previous owners. This strained the available resources. Certain ideas to cut costs and increase operating efficiency, such as the conversion of dieselfired boilers to LPG and the adoption of enhanced gas consumption techologies, were not implemented. This would have saved the property approximately ₹ 3 million per year. Additionally, the resort did not have the practise of generating a Profit & Loss Account by event. Thus, it was impossible to determine the profit or loss of a particular event in order to make an informed choice. Management accepted all of Marketing Agency's leads regardless of their feasibility. Staff unionisation was another unstable aspect. The resort obtained Duty Credit Scrip under the Serve from India Scheme in exchange for ₹ 7 million in free foreign exchange earned over a three-year period. Almost fifty percent of the unused scrip could not be utilised correctly by the resort. This may have saved the resort a significant duty sum and much-needed funds. Similarly, ensuring reasonable accommodation rates, banquet prices, and F & B costs is crucial for sustaining and growing revenue. Marketing is essential, because attempts to sell at any cost in order to fill a facility will fail. The management approaches you and demands a comprehensive report covering the following areas as well as recommendations for resolving the issues. (c) Risk mitigation strategy with accompanying checkpoints.

Answer & Explanation:

Risk mitigation strategy with accompanying checkpoints. Preparedness measures, include a system for keeping tabs on potential dangers- The resort has many problems, including an inefficient control system, a poorly implemented contract that allows the service provider to disregard the agreement without repercussions, a weak marketing structure, and a lack of internal control and auditing. Despite the resort's convenient location and stellar reputation, business has suffered as a result. Having said that, it is advised to establish a reliable mechanism for monitoring, complete with built-in controls and processes, and to ensure tight adherence to process with zero tolerance for non- adherence. Recommended Actions- Money Fiscal: Clearly, the lack of responsible financial management has put a significant pressure on resources, causing disruptions in supplies and services. Ineffective means of collection are one such example. Bad fee-collecting mechanisms for loyalty programmes, etc. Establish a procedure for holding periodic reviews of collections with the marketing agency: The agency should be held accountable for any delays or failures in the collection of past or present debts. Customers may withhold payment if they have outstanding issues with billing or service that have not been resolved. Taking care of this quickly will prevent any financial difficulties. All signed agreements, including any provisions made to protect the resort, should be reviewed: The agreement concerning the Membership loyalty programme appears to have been badly structured, putting the resort at danger. An illustration of this would be the agency's ability to avoid paying the resort fee while yet granting the benefit to members. It is necessary to reconsider the entire agreement, fire the responsible agency, and take legal action to recoup the overdue payments. A clause allowing the property to receive the money straight into a designated account should be included in any newly executed agreement. The agency's fees can be paid over on a regular schedule if both parties agree to this. It's likely that the resort is paying more than necessary because of a backlog in collecting dues to suppliers, therefore it should review all of its contractual commitments, particularly those involving outsourced activity like security services, car rental services, supply contracts for perishables, etc. This issue must be resolved through negotiations with relevant vendors and service providers on terms that are acceptable to all parties. Build a comprehensive budgeting system that accounts for all expenses, and use a detailed management information system (MIS) to analyses the numbers every month, identifying who is to blame if goals aren't met. The operational obstacle is more of an issue that affects the whole and must be dealt with effectively. Keep all of the food and other consumables as well as the supplies used to entertain guests on hand at all times. To achieve this goal, coordination between the operations and supply departments is essential. Regular planning is required, with the results conveyed to the procurement team and enough time allotted to actually acquire the necessary supplies. The resort's declining revenue can be traced to the inefficiency of the outside marketing firm. Their commission may be withheld if drastic action is required. They need to be provided clear parameters for minimum allowable rates, below which they are not to go unless market conditions necessitate quoting of lower rates. Such an action requires the prior consent of Management. Establish a system of checks and balances to ensure that all operational aspects, including deviations, are reviewed on a regular basis. Serious problems call for urgent meetings to be called in order to find a solution. Establish a monthly evaluation of Food & Beverage expenses to ensure they are staying within budget. Recipe costs and guidelines must be in place to guarantee accurate food and beverage pricing. A Profit and Loss Account that details earnings for each individual event, with projections for the future as needed, is essential. This will allow for more precise price decisions and the elimination of any operational deficiencies. Each division must have its own set of standard operating procedures (SOPs), which must not be altered under any circumstances. Standard Operating Procedures need frequent reviews and updates. Establish an Internal Audit system that focuses on identifying and communicating risks in order to prompt preventative measures. There should be strong internal controls and solid financial policies in place. Employees are the backbone of the hospitality business. A major obstacle is the lack of available skilled labour at all levels. In order to attract and keep the best employees, the HR department must implement effective HR practices, such as a competitive wage strategy. All costs must be made to suppress union activities. Strategic Danger: The present-day business climate is loaded with danger on all fronts: Only forward-thinking leadership can ensure the company's success. There needs to be discussion about hiring a Chief Strategy Officer. Noncompliance with a variety of regulations has been the downfall of many a company, causing irreparable harm to their brand and bottom line. Establish and review on a regular basis a comprehensive checklist for ensuring compliance with all requirements. New compliance needs should be reflected in the compliance calendar. It is imperative that the Chief Compliance Officer be given authority over compliance matters.

Topics: Risk Management

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