The consultant conducted a profitability analysis of a 5-star hotel in North Goa that was not meeting the owner's expectations. They analyzed financial statements, evaluated processes, and created revenue verticals. Observations included unjustified costs, low occupancy, and process issues. Suggested changes were to create separate marketing and stores/purchasing functions, implement stores and consumption tracking, increase pricing, improve marketing, and adopt more efficient processes and technologies. The analysis estimated revenue could increase 30% or INR 150 lakh annually and costs could be reduced INR 121 lakh annually through the recommendations.

1. Delivering Excellence, Partnering Success
Case Study I
Profitability Analysis

2. Executive Summary
 The Client is a 5 star hotel in North Goa.
 The hotel was making operating profits but
the same were not up to the expectations of
the Owners.
 The owner already had a highly reputed Audit
firm engaged for the purpose of Internal Audit
of the hotel, however, no value add was
received from them.
 In this respect, the promoter-director of the
hotel, approached MAS to conduct a
Profitability Analysis, and suggest ways and
means of rectifying the same.

3. Process
•The Financial statements for the previous three years were obtained and detailed cost
Analysis of
rationalisation was carried out.
Financial •The movement of costs and incomes were studied for irregularities
Statements
•Processes and controls were understood through interviews with department heads
•Audit of processes was carried out to check the level of adherence by staff
Evaluation •Controls, checks and balances were analysed and evaluated for process risk
of
Processes
management.
•The Income was broken down into revenue verticals based upon source of income
•Costs were allocated to the revenue verticals on the basis of certain cost drivers so as to
Creation of obtain a Revenue Vertical – wise P&L which reconciled with the overall P&L
Revenue
Verticals
•The Revenue verticals were created for a 3 year historic time horizon.
•Understanding of the overall business strategy
Strategic •Evaluating the business strategy for sustainability
Evaluation

4. Observations
From Financial Statements
• The cost structure of the company did not
change much year on year which indicated
consistency in operations.
• The cost of guest transportation was found to be
unjustified for the scale and occupancy of the
hotel.
• At almost 30% of Revenue, Staff Related
expenses (including salary and welfare expenses)
were found to be unjustified for the scale of the
hotel

5. Observations
From the Process Evaluation
• The front desk attendants were given the
additional responsibility of marketing, which they
were not able to carryout in the best way
possible.
• The laundry was sub contracted to a vendor
which was charging the hotel on a per Kg
basis, however, the housekeeping department
did not have any way of weighing the outgoing
laundry. Bills were approved without a weight
check

6. Observations
From the Process Evaluation
• Both Purchase and stores were handled by the same
person, which meant no checker-doer relation
• There were no sub stores maintained on the system.
Housekeeping and Kitchen items were issued directly to
the department at the time of material receipt.
• There was no reconciliation done of material issued to
housekeeping or the kitchen to ensure proper control.
• F&B service time was a major issue. Overall time from
ordering to receiving an item was measured to be 25
minutes.

7. Observations
From the Process Evaluation
• The purchase process was not consistent. In some cases,
purchases were made having taken only one
quotation.
• There were no checklists for housekeeping staff to follow
at the time of minibar replenishment or checkout which
caused a number of instances of under-billing
• There was no formal process for obtaining guest
feedback after a stay.
• There was no segregation of food stock into in-room
dining, restaurant dining and banquets.

8. Observations
From the Revenue Verticals
•Room sales accounted for over 50% of total revenue, however
occupancy was found to be very low at just 53%
•The revenue from F&B sales was found to be very low
contributing just 19% of the total revenue vis-à-vis an industry
norm of over 30%
•The revenue from the Casino was really high in spite of it being
just rental income. This contributed to over 25% of the income.
•All other sources of income contributed to hardly 3% of the total
income which is very low.

9. Observations
From the Revenue Verticals
• Margins on room rent were very low. This was
attributed to firstly low occupancy rates and also
to high expenditure on guest transfers
• Margins on F&B were found to be negative. This
was attributed to a possible pilferege/ wastage of
raw materials as the consumption recorded and
the cost in the statements did not reconcile.
Moreover, it was observed that the pricing of the
restaurant was quite low (about 30% lower than
the competition)

10. Observations
From the Revenue Verticals
• In spite of the property having 2 banquet
halls, the revenue from banquets contributed
just 5% of the income.
• Minibar pricing was found to be quite low. 30%
lower than the nearest competitor.
• Spa materials were sourced from a consultant
who was hired to advice on the running of the
spa. There was no evidence of the company
trying to source an alternate vendor.

11. Observations
From the Revenue Verticals
• It was observed that Rs. 10 lakh
worth of maintenance supplies were
purchased for which there is no
documentation in the system.
Maintenance stock is directly issued
to the maintenance department
showing it consumed.

12. Changes Suggested
Organisational Changes
• Front desk should be independent of
marketing. A separate marketing
department to be put in place which will
increase focus on marketing and hence
improve occupancy rates.
• Stores and purchase should be
independent functions so as to have a
doer- checker process in place. Increase in
income by at
least 20 lakh
per annum

13. Changes Suggested
Process Changes (Stores and Purchase)
• Sub stores to be made for
Housekeeping, Kitchen, and
Maintenance.
• The sub stores to be handled by the
respective departments and
consumption recorded on a daily basis.
• A weekly reconciliation of consumption
vis-à-vis production to be done in all saving
Possible
cases. opportunity of
INR 16 Lakh

14. Changes Suggested
Process Changes – Housekeeping
• Minibar checklist was created and handed over to
Housekeeping HOD
• Minibar checking Process was revamped so as to
ensure responsibility and accountability
• A weighing scale was installed into the laundry
dispatch area so as to verify the weight of laundry
before dispatch.
• Quotes were taken from other laundry vendors and
overall cost was reduced by 10% through
negotiations
Possible
savings of INR
2 lakh
annually.

15. Changes Suggested
Process Changes – F&B
• Introduction of a second out-door Tandoor
was suggested as most of the Tandoor
items were found to consume a lot of time.
• A reduction in the room service menu
offerings was suggested so as to ensure a
shorter service time
• Overall pricing was increased to match up
to the nearest competitor Gross Profit
increase by
INR 49 Lakh
per annum

16. Changes Suggested
Process Changes – Room Sales
• The main reason for low occupancy was
found to be lack of awareness.
• Use of special promotions through online
portals was suggested so as to increase
awareness
• Usage of better marketing channels was
suggested such as advertising in airplane
magazines, e-marketing and use of travel
agents in other cities. Estimated
Income Increase
of 21% and profit
increase of 36
Lakh

17. Changes Suggested
Other Changes Suggested
• Usage of Eco friendly methods of
housekeeping which help in cost saving such
as interval of sheet changes for same
guest, use of soap dispensers.
• Use of a bus for guest transportation rather
than outsourcing the same through cabs
• Implementation of a CRM system so as to
improve the guest service.
Estimated
Cost Saving
of INR 8 Lakh
per annum.

18. Summary
 Estimated Revenue Increase by proposed
changes – INR 150 Lakh per annum (30%)
 Estimated cost saving opportunity – INR
121 lakh per annum

19. Thank You!!
Delivering Excellence, Partnering Success