Analyze and answer the questions in the Word doc file about the case study in the Tristar hotel group pdf file
MGMT 4037 (Spring/Summer 2023) Project Management Case Studies Matt Simioni Assignment #1 – Tristar Hotels (10%) Assignment Questions: 1. In your own words describe the likely project scope, purpose and expected results? (3 marks) 2. What were the main drivers for change? (3 marks) 3. How did/will the Tristar Leadership and operations lead the project to delivery? (4 marks) Microsoft Word - 9B20D023.docx 9B20D023 TRISTAR HOTEL GROUP: CUSTOMER SATISFACTION AND TECHNOLOGY ADOPTION Thomas A. Maier and Ken Edwards wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e)
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[email protected]. i1v2e5y5pubs Copyright © 2020, Ivey Business School Foundation Version: 2020-10-21 Tristar Hotel Group (Tristar), a privately owned company that operated in the hotel sector, owned and managed multiple limited-service hotels throughout the United States. In August 2017, the US hotel industry was facing rising labour costs, increasing workforce shortages, and pressure on profits associated with changing travel and tourism market demand patterns. In light of those challenges, the founder and chief executive officer (CEO) of Tristar, Ken Edwards, had to make important decisions concerning the adoption of technology as a means of improving performance across the company’s expansive hotel portfolio. Edwards felt that the early adoption of technology provided Tristar with a first-mover advantage over its competitors. He had to consider how introducing robots into Tristar’s hotels would affect the workforce and the delivery of customer service. More specifically, he needed to evaluate the cost–benefit analysis regarding the adoption of automated robots in relation to the room service delivery process. Edwards felt that the risk of introducing robots into the hotel environment could pay off in the long term. Tristar had run a pilot project in 2017 at their Silicon Valley-Gilroy, California, managed Hilton property. Edwards had learned that ARCHIE the robot was able to deliver upward of 200 orders per month within the hotel at a lease cost of US$1,9001 per month (see Exhibit 1). On the basis of that information, Edwards wondered whether Tristar should incorporate ARCHIE into the customer service experience. Did ARCHIE represent a favourable value proposition as a room service delivery robot? TRISTAR’S BACKGROUND Tristar was founded in 1996. After graduating from the University of Nevada, Las Vegas (UNLV), Edwards pursued his dream of forming his own hotel company. He started work as an assistant food and beverage manager at the Holiday Inn hotel located at St. Louis Lambert International Airport. At the time, the hotel was the largest in the Holiday Inn portfolio, with 428 rooms, two restaurants, and two lounges. During a one-on-one interview session with Edwards, the general manager asked what he wanted to be doing in ten years’ time. Edwards knew his goal and replied, “I want to own my own hotels one day!” Edwards envisioned an organization focused on high-quality service, with the hotels characterized by well-appointed 1 All currency amounts are in US$ unless otherwise specified. A ut ho riz ed fo r us e on ly b y R ic ha rd B at ch el or fr om 1 /1 1/ 20 22 u nt il 9/ 11 /2 02 2. U se o ut si de th es e pa ra m et er s is a c op yr ig ht v io la tio n. Page 2 9B20D023 physical attributes, technological innovation, and solid financial performance. Edwards proceeded to gain experience working in several hotels, thereby acquiring first-hand knowledge of hotel operations and management. The first hotel managed by Tristar was located in Orlando, Florida, and Edwards joined the company following the acquisition of Tristar’s first hotel in 2000. Thereafter, Edwards and his management team began managing and acquiring a wide variety of limited-service branded hotels. He was recognized for his exceptional managerial competencies and risk-taking entrepreneurial spirit, culminating in his appointment to the board of directors of the International Hotel Group. Hotels came in many shapes and forms. For example, hotel classifications could range from economy to midscale to luxury positioned products.2 The costs associated with constructing hotels ranged from $200,000 to $500,000 per key. The costs per key were calculated on the basis of the total number of rooms under construction, including the (1) land acquisition, (2) building envelope, (3) furniture, fixtures, and equipment, and (4) technology systems. For a 100-room hotel, the construction costs could range from $20 million to $50 million. According to Edwards, the hotel business was highly volatile due to the capital investment needed to build a hotel. He was intimidated by the fluctuations in the economy, prevailing market conditions, and increased competition. As a manager, he needed to constantly focus not just on the hotel construction costs, but also on the operating margins and returns on investment capital. As he developed his company, Edwards retained several managerial competencies as well as an underlying focus on technological experimentation, which was at the forefront of Tristar’s value proposition. For Edwards, exploring technology and linking innovation with the customer experience represented critical elements of his company’s success. His adoption of prospective technology was a core competency of his bustling hotel company. Unlike competitors, as technological advancements in artificial intelligence and augmented reality continued to improve the customer service capabilities within the hotel sector, innovative owners such as Edwards often chose to explore the capabilities of technology as a means of improving operational efficiencies and “wowing” customers with unique service experiences. Tristar grew to operate over 70 hotels across more than 16 states in the United States. In 2017, Tristar boasted more than 17 branded hotel flags. Over the course of his career, Edwards had transformed the hospitality sector, setting in motion several critical aspects of hotel ownership: (1) educating the workforce, (2) taking risks, and (3) embracing technology. As Edwards acknowledged, “I always knew I would be successful; never did it occur to me that the risk could be greater than the reward.” HOTEL SERVICE SYSTEM DESIGN Edwards understood the impact of service quality and customer satisfaction on the financial sustainability of his hotel properties, especially in the ever-evolving and expanding US hotel industry. Customer loyalty programming was a key consideration, with major hotel brands promising and often developing service value and rewards for customer loyalty. Edwards knew all too well that the willingness of hotel customers to recommend a brand to others was heavily dependent on customer satisfaction. He understood that customer satisfaction and loyalty were highly valued by leisure travellers and business executives who desired a comfortable, pleasant, and affordable hotel stay. 2 According to Smith Travel Research, “class” is defined as follows: “A categorization of chain-affiliated and independent hotels. The class for a chain-affiliated hotel is the same as its Chain Scale. An independent hotel is assigned a class based on its ADR, relative to that of the chain hotels in their geographic proximity. The class segments are: Luxury, Upper Upscale, Upscale, Upper Midscale, Midscale and Economy.” “Glossary,” Smith Travel Research, accessed January 30, 2020, https://str.com/data-insights/resources/glossary/c. A ut ho riz ed fo r us e on ly b y R ic ha rd B at ch el or fr om 1 /1 1/ 20 22 u nt il 9/ 11 /2 02 2. U se o ut si de th es e pa ra m et er s is a c op yr ig ht v io la tio n. Page 3 9B20D023 In the hotel industry, both the front- and back-of-house operational elements were planned and synchronized to generate customer satisfaction. Typically, the back-of-house processes were designed to support front-facing customer interactions. Conversely, the front-of-house customer interactions were designed to respond to customer needs by creating seamless arrival, in-stay, and departure experiences. The typical organizational structure of a hotel reflected a top-down hierarchy designed to ensure coordinated decision-making protocols and standardized operating procedures. The Tristar operating structure was based on the division of work in three main areas: (1) the rooms department, (2) the food and beverage department, and (3) the kitchen department. The organizational structure was designed to execute the daily service requirements associated with hotel-driven customer experiences (see Exhibit 2). Edwards felt that his organizational structure was adequate; however, customers’ expectations with regard to service were growing and the integration of technology was rapidly evolving. The value proposition for hotel operators was based on personalized service and customer satisfaction, and Edwards recognized the need to experiment with technology in order to keep pace with the explosion of data and its relationship with consumer activities on social media. He knew that he had to address the challenges stemming from a tightening labour market that was making it increasingly difficult to staff his hotels. The value proposition for Tristar’s guests was based on seamless customer service and value for the price they paid for their hotel experience. The benefits associated with a solid price–value relationship, including (1) accruing loyalty reward points, (2) quick and efficient arrival and check-in, (3) integrating mobile device technology for in-room services, and (4) enhancing customer experiences in various realms, provided differentiation from Tristar’s competitors.3 For Tristar, the price–value relationship was benchmarked against its competitors’ customer satisfaction scores and market share data using analytics such as that provided by Smith Travel Research (STR). STR’s key performance indicators included (1) the occupancy percentage, (2) the average daily room rate, and (3) the revenue per available room indexes, which pitted local hotel competitors against one another to determine their share of the market hotel room demand.4 Edwards also knew that a service blueprinting tool depicting front- and back-of-house employee actions would play an important role in the design of more technologically engaging customer experiences (see Exhibit 3). Edwards was particularly intrigued by the notion of introducing robots into the service sequence at Tristar’s Silicon Valley-Gilroy, California, managed Hilton property. In a typical hotel service system design, employee and customer activities were delineated into front- and back-of-house activities, which were divided into (1) physical evidence and those things customers saw; (2) customer actions, which represented activities customers performed during the room service ordering process; (3) onstage contact, which described what kitchen- and restaurant-based guest-facing employees did; and (4) backstage contact, which described what employees did behind the scenes to prepare and maintain the delivery robot (see Exhibit 3). ROBOTIC AUTOMATION Edwards had studied emerging technological trends in the hotel sector and beyond, and he realized that automation, artificial intelligence, and robotic adoption in service delivery programming were gaining 3 B. Joseph Pine II and James H. Gilmore, “Welcome to the Experience Economy,” Harvard Business Review, July–August 1998. Available from Ivey Publishing, product no. 8147BC. 4 See the definitions of “occupancy,” “average daily rate,” and “revenue per available room” provided by Smith Travel Research. “Glossary