Greenhill Suites Essay For The Regency International Hotel In Adelaide.

Background of Greenhill Suites

You are the Director of Acquisitions and Development for Greenhill Suites. Your role within the Hotel Company is to grow and develop the number of hotels within the company’s portfolio. Greenhill Suites started in the United Kingdom two decades ago and is now one of the most recognised 4-star hotel brands in the world. The hotel caters to a variety of target markets but is particularly loved by the corporate market because of the consistent level of service offerings and affordable pricing.

The hotel’s unique selling points are the complimentary fast-fibre connected WiFi throughout the hotel and comprehensively fitted-out business centre that the corporates just love. Each hotel houses the signature business centre with a dedicated staff to assist guests in basic secretarial duties like photocopying, faxing, research and on the ground assistance that the corporate clients would normally only obtain in a luxury 5- star executive floor service. The hotel also includes as a standard the complimentary continental buffet breakfast with every booking at the brand standard Go Green Cafe. Guest can choose to upgrade this to a full cooked breakfast for an additional charge. The Go Green Cafe’s unique selling point is the daily fresh fruit juices and healthy meal options with fresh ingredients and loaded with superfoods.

These offering and complimentary additions have placed the brand highly on the preferred listing of many major companies. The hotel brand is currently the preferred accommodation provider for several large blue- chip companies like Telstra, BHP, Microsoft and HP.

Greenhill Suites now have a total of 115 hotels worldwide with approximately 40% of the portfolio owned and operated by the company, with the remaining 60% under management. Last year you had successfully negotiated and signed on a Greenhill Suites hotel in Tasmania making it the 23rd hotel in Australia but have struggled to achieve a presence here in Adelaide and Alice Springs. The lack of a presence here in Adelaide is starting to take its toll from pressures from the corporate buyers. Without a hotel presence in the South Australian city, these corporate clients are having to negotiate rates with other hotel brands there. This is not only unproductive for those buyers but a real risk that Greenhill Suites could lose out to a competitor especially when they’ve got a foot in the door via Adelaide.

The board of directors are very concerned about this and have instructed you to focus on gaining ground in Adelaide. You had attempted to secure a management agreement with a new development due to be opened in 2020 but had lost out to Allwood Hotel Group which will be branding it as an Allwood Styles. Rumours of another development in the CBD have surfaced, but the 80-room is a little too small for the Greenhill Suites concept making it unfavourable. The owners were going to operate the hotel themselves under a self-branded MuMu Hotel but due to lending pressures, they are now keen to explore a branding partnership with Greenhill Suites. Discussions with this party is still ongoing.

In the meantime, you’ve been given the opportunity to present to James Canavan from The Regency Group. Their proposed development is a 110 room 4 star serviced apartment style hotel. It is the right size and the scale is perfect for a Greenhill Suite, but the concept plans currently does not include the brand standard offerings typical for a Greenhill property. However, this can easily be changed as part of the Technical Assistance Agreement you can offer the owner. The location of the hotel is also not as favourable as you’d much prefer a hotel in the CBD. But financially a 110-room hotel will provide much better returns than an 80-room hotel. You understand that James have considered operating the property himself and you are also aware that other hotel companies have approached them for an agreement. Due to the pressures from the board, you are highly motivated to secure this contract.

You are to negotiate a Letter of Intent with The Regency Group’s – Owner’s Representative. The board has authorised you to negotiate the terms of the key items on the HMA and to only sign off if it is a good deal. You are not to disclose this document to your counterpart. The following has been prepared for you in accordance with the company policy and guide for negotiations. Everything is negotiable.

1.Negotiate and complete a Letter of Intent.
2.The operator should be the first to make an offer. CC a copy to Aaron Oh on all formal letters.
3.Use template attached, modify as necessary.
4.Word the terms of the offer using examples found in the references below or from any other resources.
5.Achieve a deal, make concessions where necessary and keep priorities in order.
6.Include a 300-word equivalent conclusion and self-reflection on the negotiation process.

Dear Mr James Canavan              14^th October 2019

The Regency Group

137 Days Road, Regency Park

RE: Greenhill Suites Letter of Intent

Proposed Greenhill Suites Adelaide (The Regency International Hotel)

Dear Mr Canavan,

On behalf of Greenhill Suites, please accept this Letter of Intent for both Technical Services/ Pre-Opening Services and Hotel Management Services for The Regency Group’s review and acceptance as the Owner of the to-be-developed The Regency International Hotel (proposed to be branded as a Greenhill Suites, Adelaide, SA). We look forward to working with The Regency Group on this exciting new project and will provide our services and assistance on the terms outlined as follows:

Pre-Opening: Fees of $120,000 to include $50,000 as pre-opening fees and $70,000 as technical assistance fees. All the fees are determined by identifying the operator’s goals and owner’s priorities in addressing the current competitive advantage (Anuradha 2016). The operator must be entitled for the duties assigned to the operator. The operator must consider some control measures such as markups, travel and overhead and provide some complimentary rooms. The operator determines the issues that can impact heavily in the business. The operator have determined the pre- opening fees by depending on the long –term HMA. Owners considers prestige as their first priority, and to attract business people to stay in that hotel. All the budget is calculated first for the effectiveness of the plan. The operator considers time, scope of view, owner’s approval, and dispute of budget needs to be resolved.

Management Term: Initial term of 10 years with a 5 year of option to extend upon mutual consent. The management have designed a standard. The issues with long- term commitments by the managers needs to recognize brand license agreements and brand management agreements. The management must observe the performance of the employees so as to monitor the area that lack for improvement. The management must ensure an effective improvement in solving the issues of lack in control in hotel operations (Fu 2014). The term of long- term agreements do not protect the owner from brand declination. The brand managers provides a number of benefits to the company. The brand cannot argue that the operating standard is not met by the manager of the hotel.

Base management Fee: 5% of gross revenue. The base management fee by the operator is planned to be high as it may lead to low incentive fee. The base management fee must be paid to the employees in quarterly basis. The base management fee considers all the day- to -day management of the property. The fees includes collecting and processing the rent, tenants and conducting annual property inspection and many more. The operator needs to address the base management fee so that an effective management fee can encourage the management to provide effective managerial activities that result in better outcome of the plan. The proposed base management fee can help to increase the revenue of the hotel within 5 year in the future.

Unique selling points of Greenhill Suites

Incentive Management Fee:  With 2% of the gross operating profit the hotel can gain more profits with the plan that can help to manage the operational activities in the hotel. The incentive management fee will be equal to the percentage of gross operating profit. The operator must negotiate for a low incentive fee instead of focusing on the management fee to manage risk (Grobelna 2015). The operator must analyze the base fee as the incentive depends on the base fee. If the base fee is low, the incentive must be high to manage the risk. The operator determines that a good deal can be in a range of $500,000 per annum in fees within 5 expected year plan. The plan is determined so that the deal does not fall down to $250,000 that is expect within two years. The incentive fees are determined by the operator to make the management more conscious about the bottom line in hotel hierarchical levels. The return is achieved by the owner that helps the owner to pay their debts from profits and not for revenue. The incentive fee encourages the employees to work hard and dedicate themselves for more productive approach in the growth of the business (Jiang 2016). The sustainability of the business can be gained through improved aspects in the performance if each employees and a recommended incentive fee that can help the company to have effective payroll for the employees.

Termination Rights: The contract voidable by the consent of the both the parties. If any party to this contract breach any provision of the agreement, then the contract can be terminated by either of the party having legal and justifiable grounds with the claim of damages. Unless there is any breach of contract and damages caused by the operators or managers, the owner cannot terminate the contract. The policy states that the key monies will not be paid. The hotel facing any exceptional issues, then the key money that is paid to handle such issues can deem as termination clause invalid. The owner cannot terminate the operator, but the operator can terminate the planned contract whenever there is a need for renewing strategy of the hotel. The hotel must ensure that the plan that is developed by the operator must not be voided. The avoidable methods must be implemented by conducting a meeting with the higher authority who can only access the plan and make changes if necessary. The tracking of operational processes can deal with sustainability of the business in long term aspects. The operator must evaluate the termination policy to determine the strengths and weakness of hat policy and what changes is required for affectivity in the business.

Importance of a presence in Adelaide

Control: Operator to have absolute operation control and the owner would not be interfering in the management process while the operators are working under the contract. The operator must also consider the alternatives for the plan to be executed in future as the location of the property is not ideal. The operator must keep the options open to way out some effective ways to meet the needs of the customers. The management must have a control plan that can check for issues and strategies to control such problems from heavy losses. The hotel can initialize loyalty programs that can help to benefit the hotel. The owner must also consider the extra cost is beneficial for the company or not. The considerations must be with loyalty programs and redemption by the guests. The operators considers these programs as these programs are not optional. The hotel must improve the control measures that can put an alternative to the issues of competition. The competition is a big issues for this hotel, the problem can be solved with effective managing of services where the customers can get the benefit of all the services and luxurious service within standard price for the customers. The level of risk must be identified by the operators so that the challenges in meeting the objective of the hotel can be addressed.

Employees are employed by Owner: All Hotel Employees and agencies will be employed by the owner and will be paid under the owner’s payroll. Only the managers will be working under this agreement. The employees with key skills in secretarial duties such as photocopying, faxing, research and employees having ground assistance that the corporate clients would feel luxurious service benefits that can increase the value of the hotel (Lin 2017). The employees must be skilled with all the activities in the ground level so as to gain competitive advantage.

Brand Standards: The owner agrees that 2% of the Revenue on top of the management fees. The operator must ensure that the brand is maintained through effective services by providing great lodging for guests, good food with complimentary breakfast service to the customers. The operator and the owner must make sure that the planned operation processes are efficient for the hotel that can satisfy the legitimate needs of the operators. The operation must provide a fair return to the owner and their capital partners. The certainty and flexibility must be maintained by the operator to address the brand standards of the business. As brand provides several benefits to the hotel and intends for a consistency within all the operations. The brand standards must convey the customers that the hotel is providing with better assured to get better level of service and operating mutual (Bilgihan 2014). The operating mutual provides a turnkey approach in the operational plan of the property. The turnkey approach improves the reduction of mistakes and help to ensure that the property have brand standards. To maintain cost it is recommended not to use brand. As brand charges variety of fees such as management, license fees, royalty, marketing fees, loyalty program fees, training fees and reservation fees (Bharwani 2016). Several fees are unrelated to the performance of the brand. The operator must focuses on the base management, marketing fees as the gross revenue.  The brand can be compensated for occupancy even if the brand is not responsible for it. Owner must consider Greenhill Suites brand rather than Regency International Hotel.

Negotiating a Letter of Intent for The Regency International Hotel

Mr Canavan, upon receiving a counter signed copy of this Letter of Intent we will proceed to drafting and finalization of a Pre-Opening & Technical Services Agreement and Hotel Management Agreement. We look forward to hearing from you.

Sincerely,

Director of Acquisition and Development

Greenhill Suites

14^th Oct, 2019

Director of Acquisitions and Development

Greenhill Suites

Agreed to and Accepted by: James Canavan

The Regency Group

By: Director of Acquisitions and Development

Greenhill Suites

Date: 14^th Oct, 2019

CC: Aaron Oh (CEO at [email protected])

Conclusion

The letter of intent specifies a plan that can have a successful aspect in growth and development of the number of hotels. The plan developed for Greenhill Suites can be beneficial as the operator have designed the financial plan as per 110 room of 4 star serviced apartment style hotel. The operator has taken initiative to clearly identify the issues and possibilities to develop the hotel for a competitive advantage. The deal intends to offer certain parts for growth, where instead of 80 rooms the hotel is planning for 110 rooms for accommodation and more profit gaining aspect from the business. The conservative internal projection also helps the owner to understand the benefits by adopting the plan. The five year projected revenue helps the owner to identify the expected profit in the future. The policy and standards made by the operator can lead a better growth for the company and owner can provide employment to the candidates who are expert in this sector. The plan have exceptional control plan that can protect the plan from mislead and ensure confidentiality in implementing the plan. The financial plan have five year projected revenue for the proposed plan that have calculated that with the technical assistance fees, pre –opening fees, base- management fee, and incentive management fee has been calculated and can be negotiable in future as per the requirement of the hotel. The hotel has the unique selling points as it provides high quality services such as fast fibre- Wi- Fi in the hotel. The employees with key skills in secretarial duties such as photocopying, faxing, research and employees having ground assistance that the corporate clients would feel luxurious service benefits that can increase the value of the hotel. The plan is effective for further implementation of the plan. It can provide a competitive advantage to the hotel business in the market.

References

Anuradha, K.P., 2016. Skill development and management a study of hospitality professionals.

Bharwani, S. and Mathews, D., 2016. Customer service innovations in the Indian hospitality industry. Worldwide Hospitality and Tourism Themes, 8(4), pp.416-431.

Bilgihan, A., Berezina, K., Cobanoglu, C. and Okumus, F., 2014. The information technology (IT) skills of hospitality school graduates as perceived by hospitality professionals. Journal of Teaching in Travel & Tourism, 14(4), pp.321-342.

Fu, J., Kapiki, S. and Mu, L., 2016. Reengineering Knowledge for e-Tourism and Hospitality Curriculum. Journal of Tourism, Heritage & Services Marketing, 2(2).

Grobelna, A., 2015. Intercultural challenges facing the hospitality industry. Implications for education and hospitality management. Journal of Intercultural Management, 7(3), pp.101-117.

Gumussoy, C.A., 2016. The effect of five-factor model of personality traits on turnover intention among information technology (IT) professionals. AJIT-e, 7(22), p.7.

Huang, Y., Lalopa, J. and Adler, H., 2016. An analysis of entry level management requirements: Are there differences in perceptions of hospitality recruiters versus hospitality students?. Journal of Human Resources in Hospitality & Tourism, 15(3), pp.346-364.

Ivanov, S. and Webster, C., 2019. What should robots do? A comparative analysis of industry professionals, educators and tourists. In Information and Communication Technologies in Tourism 2019 (pp. 249-262). Springer, Cham.

Jiang, L. and Alexakis, G., 2017. Comparing students' and managers' perceptions of essential entry-level management competencies in the hospitality industry: An empirical study. Journal of hospitality, leisure, sport & tourism education, 20, pp.32-46.

Lin, C.Y., Chang, W.H. and Lin, T.Y., 2014. The study on constructing a curriculum model of hotel English for undergraduate hospitality management in Taiwan. Theory and Practice in Language Studies, 4(10), p.2001.

Mathew, A., 2015. Talent management practices in select organizations in India. Global Business Review, 16(1), pp.137-150.

Ruetzler, T., Baker, W., Reynolds, D., Taylor, J. and Allen, B., 2014. Perceptions of technical skills required for successful management in the hospitality industry—An exploratory study using conjoint analysis. International Journal of Hospitality Management, 39, pp.157-164.

Tracey, J.B., 2015. Hospitality HR and big data: Highlights from the 2015 Roundtable.

Yang, L.T., Partlow, C.G., Anand, J. and Shukla, V., 2014. Assessing the competencies needed by hospitality management graduates in India. Journal of Hospitality & Tourism Education, 26(4), pp.153-165.