Hotel Effectiveness, a 120-room select service hotel with a strong ambience, was having issues with its gross operating profit (GOP) margins including overtime, labour costs and distribution expenses. Two years ago, the hotel began experiencing a steady escalation in overtime hours due to increased occupancy combined with tight labour market issues. The significant increase in hourly wages created a challenge—some roles were up by 25%+. And, guest collection and dropping costs at various locations have been on the rise due to rising fuel prices. All these cost increases posed a problem for the hotel’s management company. The staff comprises of 40 people, blending longtime employees with newer hires. The hotel has ten different job positions, including supervisory roles. Since opening 15 years ago, the hotel has welcomed a balanced mix of leisure and business travellers—with particularly healthy weekend bookings, which include room-only guests, and small groups for social events and sports teams.

Question

Hotel Effectiveness, a 120-room select service hotel with a strong ambience, was having issues with its gross operating profit (GOP) margins including overtime, labour costs and distribution expenses. Two years ago, the hotel began experiencing a steady escalation in overtime hours due to increased occupancy combined with tight labour market issues. The significant increase in hourly wages created a challenge—some roles were up by 25%+. And, guest collection and dropping costs at various locations have been on the rise due to rising fuel prices. All these cost increases posed a problem for the hotel’s management company. The staff comprises of 40 people, blending longtime employees with newer hires. The hotel has ten different job positions, including supervisory roles. Since opening 15 years ago, the hotel has welcomed a balanced mix of leisure and business travellers—with particularly healthy weekend bookings, which include room-only guests, and small groups for social events and sports teams.
List four(4) micro-environmental factors that Hotel Effectiveness faced. Motivate your answer from the case study.

GPT 3.5 · Answer

1) Increased occupancy: The steady escalation in occupancy rates has led to an increase in overtime hours for the hotel staff. This has resulted in higher labour costs for the hotel, affecting its gross operating profit (GOP) margins.

2) Tight labour market issues: The tight labour market has made it challenging for the hotel to hire and retain qualified staff. This has further exacerbated the overtime issue and resulted in increased labour costs.

3) Rising hourly wages: The significant increase in hourly wages, with some roles up by 25% or more, has put additional pressure on the hotel's labour costs. This has a direct impact on the GOP margins, affecting the profitability of the hotel.

4) Rising fuel prices: The hotel's guest collection and dropping costs at various locations have been on the rise due to rising fuel prices. This increases the distribution expenses for the hotel, further impacting its GOP margins.

Overall, these micro-environmental factors directly affect the hotel's profitability by increasing labour costs and distribution expenses. They highlight the challenges faced by the hotel's management company in maintaining a healthy GOP margin.