With a melodious“Good morning, dear friends,” Paul Jones, chief executive oficer of LUX* Resorts &Hotels, started the hotel group ‘s monthly senior management meeting at the end of January 2016.
The board of directors has asked me to pass its appreciation to you and your teams for the heartfelt guest feedback and the preliminary financial results for last year. The board believes that we will do even better this year, thanks to our marketing analytics team, which is bringing us ever more guests from all over the world, and our passionate staff who are continuously innovating our products and services to delight guests in our Celebrate Life concept. In order to reward our loyal stakeholders, and also to fund capital and renovation expenditures, the board has set for our standard rooms segment an EBITA’ target of E38 million,2 to be achieved from our foreign guests at our 10 hotels this calendar year.
The board has also noted the enthusiastic response from local residents when we offered them discounted rates for standard rooms at our five hotels in Mauritius throughout last year, except for the peak season when foreign demand for our rooms exceeds our supply. Local residents are generally not able to pay our full rates. By offering them discounted rates, we get some revenues from rooms that would otherwise be left empty. The board has decided that subject to satisfying the E38 million EBITA constraint, some standard rooms that are not occupied during the other four seasons (that is, high,shoulder, shoulder low, and low) in our five hotels in Mauritius will be made available to local residents this year. Based on the pattern seen last year, we forecast local demand for about 400, 900, 1,600 and2, 100 room nights in these four seasons respectively.
Our finance department has estimated that with the discounts to be offered, local guests will contribute net revenue per room about half as much as our foreign guests. The board is thinking of using this revenue stream from our local guests to finance our corporate social responsibility program in Mauritius.
Therefore, dear friends, the first item on our agenda today is to figure out the room mix we need to market across the different seasons in our 10 hotels in order to meet the E38 million EBITA target from foreign guests. Secondly, we have to report to the board the net revenue that can be raised from local guests. The board needs this number in order to decide which corporate social responsibility programs to sponsor (for example, education, trade and life skills empowerment programs for socially vulnerable groups, assistance for health aflictions such as thalassemia, flora and fauna conservation, civic
embellishment projects, and so on). We want to give back as much as possible to society.
THE REBRANDING JOURNEY
The LUX* Resorts & Hotels company started as Naiade Hotels. In 1998, it opened a seaftont luxury hotel called Beau Rivage on the east coast of Mauritius. As Beau Rivage became a quick success, Naiade Hotels started acquiring and building more hotels along the Mauritius coastline.
Fast expansion and a myriad of management problems led to deteriorating service, dissatisfied guests, and eventually, cash flow shortfalls. In 2011, Naiade Hotels almost went bankrupt. A new management team stepped in under the leadership of veteran Jones, whose experience in the Mauritius tourism industry dated back to its early days in the mid- 1970s. As the team instilled new energy, rigour, and innovations in the operations, the company was rebranded as LUX* Resorts & Hotels.
Innovations rested primarily with the staff, as their passion was critical to delighting the hotel guests. Staff were given incentives to offer suggestions on re-engineering the training programs and guest service offerings.Jones and his team believed that these were the fundamental drivers of the financial bottom line. Many creative suggestions were tested out, and those deemed successful were implemented under the unified“Celebrate Life”concept. This concept aimed at making every guest stay memorable, based on the premise that a stay was not only luxurious but also more hospitable, lighter, and brighter than at other hotels.
The“Celebrate Life” experience was delivered through simple, fresh, and sensory experiences guests indulged in throughout their stay. These experiences included customized health and spa sessions, a magical tree of wishes, junk art galleries, impromptu on-the-beach film screenings, pop-up surprises such as free ice cream carts,“call anywhere but the office”phone booths, treasure bottle hunting, fairly priced in-room mini-bar products to mitigate unpleasant surprises at billing time, and so on. Jones and his team attributed the efusive feedback and lofty rankings achieved by the group’s hotels on travel websites such as TripAdvisor and Booking. com to the memories guests treasured from their“Celebrate Life”experience.
As of2016, LUX* Resorts & Hotels managed 10 hotels across four countries. Additional management contracts were being planned. Cash flow problems diminished, but the company was still servicing huge loans from the past. Some hotels were also approaching their 10th year of existence and needed to be renovated.
HOTEL LOCATIONS AND SEASONALITY
LUX* Resorts & Hotels operated five hotels in Mauritius, labelled A to E. Hotels F and G were located in China. Hotels H and I were in Reunion Island, located about 30 minutes by plane from Mauritius. Hotel J was in the Maldives. The hotels were all rated four or five stars except for Hotel E, which was slated for a complete overhaul during the coming shoulder low and low seasons. After renovation, it would have fewer rooms but its rating would leap from three to five stars (see Exhibit 1).
The 10 hotels had between 22 and 190 standard rooms each. Room prices varied across the hotels and the five occupancy seasons specific to each country. In Mauritius, the peak season lasted about 29 days- from December 18 to January 15. It coincided with summer locally and the popular Christmas and New Year celebrations, when foreign guests flocked in to escape winter from countries such as France, the United Kingdom, and Germany. The high season occurred over several periods (around Easter,October to mid-December, and so on) and covered about 91 days. The shoulder (or average ) season lasted about 1 1 7 days,while the shoulder low (below average) and low seasons lasted about 74 and 53 days respectively. The low season occurred in July and August, with low temperatures ranging from 15- -20° Celsius, steady drizzle,and gusty winds. Room occupancy was generally high even in the low season, as new streams of guests came in from the emerging markets of India and China.
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