STRATEGIC BUSINESS PLANNING PROCESS
STEP 3
DEMAND ANALYSIS AND BUSINESS ACTION PLANS
DEMAND ANALYSIS
The purpose of the demand analysis is to (1) examine current and past overall market demand, overall demand for each segment, and overall and segment demand for your property and your competitors, and to (2) forecast demand for ensuing (3 or more) months.
Demand affects all the firms in the industry and in the market area equally. Demand analyses must be included as evidence to show and support the arguments related to causes of performance gaps. Realize that market demand and segment demand cannot be considered a cause of a performance gap since it affects all of the companies and competitors in a given marketplace the same way. It is a cause only in terms of how a company responds to demand conditions.
Demand cannot be controlled the way a company can control price, advertising, wages, etc., but the company must react to and take into account the demand by forecasting and considering past history. The analysis of demand not only explains why occupancy is lower, etc., but it allows management to have some clue or ideas on how to respond to different demand conditions in the future for strategic business decisions.
Examination of the current and past overall and segment demand for the overall market, your property and your competitors will enable you to determine if your previous management decisions were accurate and if you reacted to changes in demand appropriately. It will also enable you to examine if your competitors reacted to changes in demand accurately.
Examining how you reacted in the past to changes in demand will enable you to identify your weaknesses and develop strategies to eliminate them. Forecasting will enable you to identify opportunities for future growth and threats that must be minimized. If you can forecast the demand levels for each segment for the next few months, you can easily use that knowledge to develop strategies that may give you a competitive advantage over your competitors, assuming that you will do a better job forecasting the demand than your competitors. Forecasting the overall and segment demand for the market and for your property will influence the type of operational decisions you will make. For example, if you forecast that the demand for a specific segment is likely to increase, you may want to allocate more rooms to that segment and budget more resources to amenities and attributes important to that segment. You may also spend more money on marketing tools that are critical for that segment.
To analyze demand, you are required to calculate the past demand from the beginning of the simulation and then forecast the demand for ensuing (at least 3) months for:
Overall market area demand and each segment market area demand.
Overall demand and demand for each segment for your hotel, your competitors and average overall market and segment demand.
Using the same information, you are also required to create line charts for:
Overall market area demand for all months
Each segment market area demand for all months
You will also create charts for:
Overall demand for your hotel, your competitors and average overall market demand.
Each segment demand for your hotel, your competitors and average overall segment demand.
At this stage, it is important to examine if you are able to meet the room demand from each segment. The demand report of the simulation gives you information regarding rooms demanded, rooms allocated and rooms sold. If the report indicates that there was a deficit, this suggest that your management team either did not do a good job of forecasting demand or your team did not react the changes in demand appropriately. If the demand report indicates that there was a deficit (your property was not able to meet the demand for certain segments), you will need to:
Reexamine your segmentation strategy
Reexamine your room allocation strategy.
Reexamine your pricing strategy
Reexamine your capital and operating expenditure decisions
To better analyze your room allocation strategy, you are required to create a table showing the number of rooms you allocated to each segment, number of rooms demanded by each segment and the number of rooms sold to each segment. Then, you are required to create a bar chart for each segment, similar to the one presented below. Be sure to include accurate labels on your table and charts, and include an explanation of each one.
SUMMARY
Generate line graphs that present past demand and forecasted demand (for at least 3 months) for:
Overall market area demand and each segment market area demand
Overall demand and demand for each segment for your hotel, your competitors and average overall market and segment demand
Provide a short interpretation for each chart/table/graph
Discussion of strategies to address changes in demand
Examine room allocation strategy
Create a table showing the number of rooms allocated to each segment, number of rooms demanded by each segment and the number of rooms sold to each segment
Create a bar chart for each room allocation decision showing the number of rooms allocated, number of rooms demanded and the number of rooms sold
Provide a short interpretation for each chart/table/graph
DETERMINE STRATEGIC BUSINESS ACTION STEPS
SBP FOR THE NEXT BUSINESS PERIOD
The purpose of this section is to develop strategic business plan for the next business period that will solve the top three performance gaps you identified earlier.
In order to come up with the perfect plan, first, you are required to develop three strategic business action plans utilizing the most critical causes you identified in the previous section for the next business period. It is critical that each of the three plans you develop provides acceptable solutions to your top three performance gaps. You are expected to provide a sound justification for each of the proposed strategic business plan. Then you are expected to choose the business action plan that will provide the best solution to the three performance gaps identified earlier.
You are expected to develop your three proposed strategic business plans using the most critical top three causes you identified in the previous section. Therefore, it is critical that causes you identified are directly related to your performance gaps. Present your three proposed strategic business plan (SBP) in a 3 by 3 table as shown below.
Room Rate
Family Segment
Advertising
Affluent Mature Traveler Segment
Rooms
Business Segment
SBP 1
$200
$40,000
$500,000
SBP 2
$185
$60,000
$300,000
SBP 3
$210
$50,000
$550,000
After you develop these three proposed strategic business plans, you must provide a sound justification for each plan. Next, you will choose the one that will provide the best solution for all of your three performance gaps.
To determine the strategic business plan that will provide the best solution for your performance gaps, you must forecast how much each of the proposed plans will improve each of your performance gaps. You are also expected to estimate how each proposed business action plan will impact some of the financial performance measures. You must include at least three financial ratios in your analysis.
You are expected to present your forecast in a table format and as a bar chart. Below are examples of the table format and the bar chart. You are also expected to create a similar table and charts for financial performance measures. Show the absolute change and percentage change for each of the 3 financial ratios. Be sure to include accurate labels for your tables and charts, and a detailed explanation for each one.
Yield Management
Operating Efficiency Ratio
REVPAR
SBP 1
60%
.30
170
SBP 2
80%
.25
180
SBP 3
70%
.35
185
After creating these tables and charts, you are expected to explain the assumptions you made in the forecasted business action plans; specifically, demand and competitor action and reaction assumptions (e.g., in terms of price (rates) and marketing activities, etc.) Provide supporting graphs, charts and data to support your explanation.
ADDITIONAL INFORMATION
Overall Format of Document
This is a business simulation, and your team is expected to produce documents that are professional and error-free. Please double-check your spelling and grammar, and ensure professional formatting prior to submitting each assignment.
Data for Year 2 Assignments
Your group will complete this assignment a second time for year two. For this assignment, you must use data (actual prior results) from the simulation to support your analysis.
EVALUATION FORM
SOLUTIONS: SBPS FOR THE NEXT BUSINESS PERIOD
Team Number:
Team Name:
Section
Points Earned
Weight %
Introduction of Demand Analysis
5
Line graphs that present past demand and forecasted demand (for at least 3 months) for:
Overall market area demand and each segment market area demand
Overall demand and demand for each segment for your hotel, your competitors and average overall market and segment demand
Includes an interpretation for each chart
10
Discussion of strategies to address changes in demand
10
Examine room allocation strategy
Create a table showing the number of rooms allocated to each segment, number of rooms demanded by each segment and the number of rooms sold to each segment
Create a bar chart for each room allocation decision showing the number of rooms allocated, number of rooms demanded and the number of rooms sold
Includes an interpretation for each chart
10
Brief conclusion of Demand Analysis
5
Introduction of Strategic Business Action Plans
5
Three Proposed Business Action Plans
Used a 3×3 table – 3 BAP by 3 major causes
Explain each proposed plan in detail
Write a clear justification for the differences in business action plans
10
Determine the best strategic business plan of the 3 proposed
Forecast how much each of the proposed plans will improve each of your performance gaps
Include at least 3 financial rations
Present the changes using both tables and bar charts using absolute change and percentage change for the 3 performance measures associated with the biggest performance gaps and in the 3 selected financial ratios
Provide a clear interpretation of each table, graph and chart
10
Assumptions on Competitors and Future Demand
Explain your demand forecast assumptions
Explain your assumptions about your competitors’ future actions in terms of price (rates), marketing activities, and operating and capital investment
Provide evidence (charts, graphs, tables, etc.) to justify your assumptions
10
Conclusions of Strategic Business Action Plans
10
Overall conclusions
10
Overall format of document (professional and error-free)
5
TOTAL POINTS
100%
Additional Comments:
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