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COSTING IN SERVICE INDUSTRIES (FIVE STAR HOTEL)
CHAPTER NO: - 1. INTRODUCTION
1.1 Back-Ground
The quality of service in hotel industry is an important factor of successful
business. The existing trend of complete quality management in hotel
industry ensures the achievement of competitive advantage of hotel
companies and is therefore the subject of contemporary research into service
quality in hotel industry. The concept and the conceptual model of service
quality is indispensable if we wish to understand the genesis of service
quality and potential gaps in quality. The aim of this paper is to show the
importance of service quality in hotel industry from both the conceptual
standpoint and that ofservice quality measurement. The paper describes the
most common criteria for measuring service quality, namely the model of
internal service quality and the SERVQUAL model. The shown results are
those of quantitative and qualitative application of such models in hotels.
Meaning
In economics, a service is an intangible commodity. That is, services are an
example of intangible economic goods.
Service provision is often an economic activity where the buyer does not
generally, except by exclusive contract, obtain exclusive ownership of the
thing purchased. The benefits of such a service, if priced, are held to be self-
evident in the buyer's willingness to pay for it. Public services are those, that
society (nation state, fiscal union, regional) as a whole pays for, through
taxes and other means.
By composing and orchestrating the appropriate level of resources, skill,
ingenuity, and experience for effecting specific benefits for service
consumers, service providers participate in an economy without the
restrictions of carrying inventory (stock) or the need to concern themselves
with bulky raw materials. On the other hand, their investment in expertise
does require consistent service marketing and upgrading in the face of
competition.
Service definition
The generic clear-cut and complete, concise and consistent definition of the
service term reads as follows:
A service is a set of one time consumable and perishable benefits
delivered from the accountable service provider, mostly in close coaction
with his internal and external service suppliers,
effectuated by distinct functions of technical systems and by distinct
activities of individuals, respectively,
commissioned according to the needs of his service consumers by the
service customer from the accountable service provider,
rendered individually to an authorized service consumer at his/her
dedicated trigger,
and, finally, consumed and utilized by the triggering service consumer for
executing his/her upcoming business activity or private activity.
Service specification
Any service can be clearly and completely, consistently and concisely specified
by means of the following 12 standard attributes which conform to the MECE
principle (Mutually Exclusive, Collectively Exhaustive)
1. Service consumer benefits – describe the (set of) benefits which are
triggerable, consumable and effectively utilizable for any authorized
service consumer and which are rendered to him as soon as he triggers one
service. The description of these benefits must be phrased in the terms and
wording of the intended service consumers.
2. Service-specific functional parameters – specify the functional
parameters which are essential and unique to the respective service and
which describe the most important dimension(s) of the servicescape, the
service output or the service outcome, e.g. maximum e-mailbox capacity
per registered and authorized e-mailing service consumer.
3. Service delivery point – describes the physical location and/or logical
interface where the benefits of the service are triggered from and rendered
to the authorized service consumer. At this point and/or interface, the
preparedness for service delivery readiness can be assessed as well as the
effective delivery of each triggered service can be monitored and
controlled.
4. Service consumer count – specifies the number of intended, clearly
identified, explicitly named, definitely registered and authorized service
consumers which shall be and/or are allowed and enabled to trigger and
consume the commissioned service for executing and/or supporting their
business tasks or private activities.
5. Service delivering readiness times – specify the distinct agreed times of
every day of the week when
o the described service consumer benefits are
triggerable for the authorized service consumers at the
defined service delivery point
consumable and utilizable for the authorized service
consumers at the respective agreed service level
o all the required service contributions are aggregated to the
triggered service
o the specified service benefits are competely and terminally
rendered to any authorized triggering service consumer without
any delay or friction. The time data are specified in 24 h format per
local working day and local time UTC, referring to the location of
the intended and/or triggering service consumers.
6. Service consumer support times – specify the determined and agreed
times of every day of the week when the triggering and consumption of
commissioned services is supported by the service desk team for all
identified, registered and authorized service consumers within the service
customer's organizational unit or area. The service desk is/shall be the so-
called the Single Point of Contact (SPoC) for any authorized service
consumer inquiry regarding the commissioned, triggered and/or rendered
services, particularly in the event of service denial, i.e. an incident. During
the defined service consumer support times, the service desk can be
reached by phone, e-mail, web-based entries, and fax, respectively. The
time data are specified in 24 h format per local working day and local time
UTC, referring to the location of the intended service consumers.
7. Service consumer support language – specifies the national languages
which are spoken by the service desk team(s) to the service consumers
calling them.
8. Service fulfillment target – specifies the service provider's promise of
effectively and seamlessly deliver the specified benefits to any authorized
service consumer triggering a service within the specified service delivery
readiness times. It is expressed as the promised minimum ratio of the
count of successful individual service deliveries related to the count of
triggered service deliveries. The effective service fulfillment ratio can be
measured and calculated per single service consumer or per service
consumer group and may be referred to different time periods (workhour,
workday, calenderweek, workmonth, etc.)
9. Service impairment duration per incident – specifies the maximum
allowable elapsing time [hh:mm] between
o the first occurrence of a service impairment, i.e. service quality
degradation, service delivery disruption or service denial, whilst
the service consumer consumes and utilizes the requested service,
o the full resumption and complete execution of the service delivery
to the content of the affected service consumer.
10. Service delivering duration – specifies the promised and agreed
maximum allowable period of time for effectively rendering all specified
service consumer benefits to the triggering service consumer at his
currently chosen service delivery point.
11. Service delivery unit – specifies the basic portion for rendering the
defined service consumer benefits to the triggering service consumer. The
service delivery unit is the reference and mapping object for the Service
Delivering Price, for all service costs as well as for charging and billing
the consumed service amounts to the service customer who has
commissioned the service delivery.
12. Service delivering price – specifies the amount of money the
commissioning service customer has to pay for a distinct service delivery
unit or for a distinct amount of service delivery units. Normally, the
service delivering price comprises two portions
o a fixed basic price portion for basic efforts and resources which
provide accessibility and usability of the service delivery
functions, i.e. service access price
o a price portion covering the service consumption based on
fixed flat rate price per authorized service consumer and
reference period for an unlimited amount of consumed
services,
staged prices per authorized service consumer and
reference period for staged amounts of consumed services,
fixed price per single consumed service delivering unit.
Service delivery
The delivery of a service typically involves six factors:
The accountable service provider and his service suppliers (e.g. the
people)
Equipment used to provide the service (e.g. vehicles, cash registers,
technical systems, computer systems)
The physical facilities (e.g. buildings, parking, waiting rooms)
The requesting service consumer
Other customers at the service delivery location
Customer contact
The service encounter is defined as all activities involved in the service delivery
process. Some service managers use the term "moment of truth" to indicate that
defining point in a specific service encounter where interactions are most intense.
Many business theorists view service provision as a performance or act
(sometimes humorously referred to as dramalurgy, perhaps in reference to
dramaturgy). The location of the service delivery is referred to as the stage and
the objects that facilitate the service process are called props. A script is a
sequence of behaviors followed by all those involved, including the client(s).
Some service dramas are tightly scripted, others are more ad lib. Role congruence
occurs when each actor follows a script that harmonizes with the roles played by
the other actors.
In some service industries, especially health care, dispute resolution, and social
services, a popular concept is the idea of the caseload, which refers to the total
number of patients, clients, litigants, or claimants that a given employee is
presently responsible for. On a daily basis, in all those fields, employees must
balance the needs of any individual case against the needs of all other current
cases as well as their own personal needs.
Under English law, if a service provider is induced to deliver services to a
dishonest client by a deception, this is an offence under the Theft Act 1978.
Lovelock has used two issues of number of delivery sites (whether single or
multiple) and the method of delivery to classify services in a 2 x 3 matrix. Then
implications here are that the convenience of receiving the service is the lowest
when the customer has to come to the service and must use a single or specific
outlets. As his options multiply, the degree of convenience can go on rising, from
being able to choose desirable sites, .to getting access at convenient locations.
1.2 Objective Of The Study
To Get A Knowledge
To Increase a Knowledge
The help full to the economy in Service industries
And also profitable to indian country pepole
1.3 Significant Of the Study
. To increase my Knowledge
. To know about all five star hotels costing
. And this is very profitable to economic in hotel industries
1.4 Problem of Study
This is secundary data
This very difficult to put right information
And this information are ready but very difficult to find out
And this not sutable to studies.
1.5 Research of Desire
The study of secondary data
Book, News Paper, Articles, etc, are referred to get the relevant
information.
Data obtain to various sources observation are made and accordingly
conclusion is derived
This study is base on the information available for the time period etc.
1.6 Chapter Schemes
Chapter No 1.In this chapter full information about Service industries
Chapter No 2.In this chapter efforts are made to review various research
articles of research on Costing in service industries
Chapter No 3. Characteristics Of Service Industries
Chapter No 4. Analysis of Costing in Service Indusrties in TAJ HOTEL
Chapter No 5. Service Quality Measurement In Taj Hotel
Chapter No 6. Tips And Tools For Controlling Food Cost In Five Star
Taj Hotel.
Chapter No 7. The Hotel Classification Criteria
Chapter No 8. Conclusion
CHAPTER NO:- 2.ARTICLES ON SERVICE INDUSTRIES
2.1 Service industry downturn accelerated in March:
Survey
Reuters Apr 3, 2014, 11.26AM IST
Activity in India's service industry contracted at a faster pace last month as
new business fell, although firms hired more staff to meet a small order backlog, a
survey showed on Thursday.
The HSBC Services Purchasing Managers' Index (PMI), compiled by Markit, fell
to a three-month low of 47.5 in March from 48.8 in February, chalking up its
ninth straight month below the 50-mark that separates growth from contraction.
"Following some stabilization in recent months, service sector activity weakened
again in March led by softer domestic demand," said Leif Eskesen, chief
economist for India & ASEAN at HSBC.
New business fell at a faster pace - the sub-index was at 47.6 in March, down
from February's 49.5.
Still, firms increased headcount for the fourth month after building up a small
amount of outstanding business and were the most optimistic about the future than
they have been since July.
That optimism could be in anticipation that an upcoming election will usher in a
new government led by the opposition Bharatiya Janata Party, which is perceived
to be more business-friendly.
Persistently high inflation has pushed the central bank to increase interest rates
three times since September, although price pressures eased in February.
The Reserve Bank of India kept its main refinancing repo rate unchanged this
month after inflation dipped and the Governor cited a downward risk to his
growth estimate of 5-6 percent this fiscal year.
"Growth is expected to remain subdued in coming months, but pick up gradually
during the second half of 2014. This, however, assumes that the election outcome
provides the elected government with a workable mandate," Eskesen said.
Indian manufacturing activity grew at a slower pace in March as weaker domestic
demand dragged on output growth, a similar business survey showed on Tuesday.
2.2 Luxury Hotels in India By Pramila N. Phatarphekar Sep-2011
Five-star hotels with pedigrees in India offer extraordinary hospitality.
“An ancient cultural protocol of equating the guest with God
differentiatesIndia from the rest of the globe,” says Raymond Bickson, CEO
of Taj Hotels Resorts and Palaces. Indeed, the hospitality business in Indiahas
opened its arms to global travelers—including the recent influx of business
travelers—with properties and services that are uniquely Indian and unrivaled
worldwide.
Business travel in India has grown from an $11 billion industry to $23 billion in
the past decade. The country’s tourism ministry projections show that by 2015,
India will have more than a quarter-million luxury hotel rooms, with luxury
commanding a whopping 48 percent of total demand. That’s when leading U.S.
hoteliers will debut and announce top-end brands, such as the W and Conrad.
Right now they offer only upscale Hiltons, Sheratons and midmarket offerings
such as Aloft (see sidebar).
Even without a Waldorf Astoria or a Mandarin Oriental, India has one of the
world’s most unusual luxury hotel landscapes. Brands such as Oberoi, Taj, Leela,
the ITC Luxury Collection and the Park—built by a league of Indian hoteliers—
are now ranked among the globe’s best. Last year, American readers of Travel +
Leisure rated the Oberoi’s Vanyavilas, in Ranthambhore, as the world’s best
hotel. In the past 10 years, Bengaluru hotels alone have hosted more than 100
visiting heads of state in the global IT capital. Like the two most recent American
presidents before him, Barack Obama chose to stay at the ITC Maurya, New
Delhi and dine at the Bukhara, India’s most internationally awarded restaurant.
(The Presidential Platter, commemorating Bill Clinton’s 2006 visit, has been
ordered by more than 10,000 diners.)
2.3 Back in business: 60% occupancy at Taj Hotel
Reeba Zechariah, TNN Dec 22, 2008, 11.21am IST
MUMBAI: Taj Mahal Tower seems to have bounced back by recording over 60%
room occupancy on its reopening day. While Trident had 18% room occupancy,
like Taj it had several guests checking in to show their support or staying there
due to an emotional attachment. Both the five-star hotels rolled out the red carpet
on Sunday after 24 days of them being attacked by terrorists.
Said R K Krishna Kumar, vice chairman of Indian Hotels Company, which owns
the Taj chain of hotels, ''Even before the official reopening date was announced,
we had received several requests from well-wishers expressing their desire to be
the first ones to check in to the hotel or dine at the restaurants.''
The tower block of Taj saw 150 of its 268 rooms booked on day one. Krishna
Kumar said that one floor at the Tower wing remained shut as this floor was used
as an 'administrative base' by the terrorists. It will open in due course. In the case
of the Trident, 100 of the total 550 rooms were booked on Sunday. Their charges
were upwards of Rs 10,000 per night. At the Trident, guests checked in early in
the morning as against the regular check-in time of 2pm, while at the Taj guests
were let in only at 7pm. The regular check-in time for the hotel is noon.
Both hotels are expecting occupancy levels to record strong gains in the coming
weeks. The heritage wing of the Taj and the Oberoi at Nariman Point are expected
to open next year. Last year, around the same time, both the hotels saw room
occupancies of over 80%.
The Taj's celebrated restaurants - Zodiac Grill, Souk, Masala Kraft and Shamiana
- welcomed their first diners at 7.30pm and, according to Taj executives, the
restaurants were overbooked for the evening. At the Trident, the Frangipani, India
Jones, Opium and Verandah restaurants opened earlier in the day and were almost
packed. For hotels, food and beverages contribute a significant portion of total
revenue.
The terror attacks added to the woes already being faced by the global meltdown,
due to which people have cut travel expenditure. The November-February period
is when tourism is usually at its peak. ''Occupancy levels had gone down in the
last three weeks across hotels in the country. However, we are seeing a rebound.
For instance, the Taj Mansingh in Delhi was completely sold out last week,''
Krishna Kumar added.
CHAPTER NO :-3 CHARACTERISTICS OF SERVICE INDUSTRIES
CHARACTERISTICS
Services can be paraphrased in terms of their key characteristics, sometimes
called the "Five I's of Services".
1. Intangibility
Services are intangible and insubstantial: they cannot be touched, gripped,
handled, looked at, smelled, tasted. Thus, there is neither potential nor need for
transport, storage or stocking of services. Furthermore, a service can be (re)sold
or owned by somebody,but it cannot be turned over from the service provider to
the service consumer. Solely, the service delivery can be commissioned to a
service provider who must generate and render the service at the distinct request
of an authorized service consumer.
2. Inventory (Perishability)
Services have little or no tangible components and therefore cannot be stored for a
future use. Services are produced and consumed during the same period of time.
Services are perishable in two regards
The service relevant resources, processes and systems are assigned for
service delivery during a definite period in time. If the designated or
scheduled service consumer does not request and consume the service
during this period, the service cannot be performed for him. From the
perspective of the service provider, this is a lost business opportunity as he
cannot charge any service delivery; potentially, he can assign the
resources, processes and systems to another service consumer who
requests a service. Examples: The hair dresser serves another client when
the scheduled starting time or time slot is over. An empty seat on a plane
never can be utilized and charged after departure.
When the service has been completely rendered to the requesting service
consumer, this particular service irreversibly vanishes as it has been
consumed by the service consumer. Example: the passenger has been
transported to the destination and cannot be transported again to this
location at this point in time.
3. Inseparability
The service provider is indispensable for service delivery as he must promptly
generate and render the service to the requesting service consumer. In many cases
the service delivery is executed automatically but the service provider must
preparatorily assign resources and systems and actively keep up appropriate
service delivery readiness and capabilities. Additionally, the service consumer is
inseparable from service delivery because he is involved in it from requesting it
up to consuming the rendered benefits. Examples: The service consumer must sit
in the hair dresser's shop & chair or in the plane & seat; correspondingly, the hair
dresser or the pilot must be in the same shop or plane, respectively, for delivering
the service.
4. Inconsistency (Variability)
Each service is unique. It is one-time generated, rendered and consumed and can
never be exactly repeated as the point in time, location, circumstances, conditions,
current configurations and/or assigned resources are different for the next
delivery, even if the same service consumer requests the same service. Many
services are regarded as heterogeneous or lacking homogeneity and are typically
modified for each service consumer or each new situation (consumerised).
Example: The taxi service which transports the service consumer from his home
to the opera is different from the taxi service which transports the same service
consumer from the opera to his home – another point in time, the other direction,
maybe another route, probably another taxi driver and cab.
5. Involvement
One of the most important Characteristic of services is the participation of the
customer in the service delivery process. A customer has the opportunity to get
the services modified according to specific requirement.
Each of these characteristics is retractable per se and their inevitable coincidence
complicates the consistent service conception and make service delivery a
challenge in each and every case. Proper service marketing requires creative
visualization to effectively evoke a concrete image in the service consumer's
mind. From the service consumer's point of view, these characteristics make it
difficult, or even impossible, to evaluate or compare services prior to
experiencing the service delivery.
Mass generation and delivery of services is very difficult. This can be seen as a
problem of inconsistent service quality. Both inputs and outputs to the processes
involved providing services are highly variable, as are the relationships between
these processes, making it difficult to maintain consistent service quality. For
many services there is labor intensity as services usually involve considerable
human activity, rather than a precisely determined process; exceptions include
utilities. Human resource management is important. The human factor is often the
key success factor in service economies. It is difficult to achieve economies of
scale or gain dominant market share. There are demand fluctuations and it can be
difficult to forecast demand. Demand can vary by season, time of day, business
cycle, etc. There is consumer involvement as most service provision requires a
high degree of interaction between service consumer and service provider. There
is a customer-based relationship based on creating long-term business
relationships. Accountants, attorneys, and financial advisers maintain long-term
relationships with their clientes for decades. These repeat consumers refer friends
and family, helping to create a client-based relationship.
CHAPTER NO:- 4 . ANALYSIS OF MUMBAI
“FIVE STAR TAJ HOTEL”
4.1 About Mumbai
Commonly known as 'Bombay' until 1996, Mumbai is the commercial capital of
India. Its original name "Bombay" emerged from the Portugal term "Bom Bahai"
meaning good bay or harbour. The city was formed by the reclamation of 7
islands on the central-western coast along the Arabian Sea. Mumbai lies 1400 km
west of the Indian capital, New Delhi. It is
also known as Manchester of India. Mumbai
boomed into news as a textile city in the 19th
Century. With the opening up of the Suez
Canal in 1869 the city's future as India's
primary port, was assured. Now it is the
second biggest city in the world. The glamour
of a prolific film industry, cricket on the open areas on weekends, bhel puri
(Indian snack) on the Chowpatty beach and red double-decker buses symbolizes
the sprit of the city.
4.2 The Taj Mahal Palace
The history of Mumbai and The Taj Mahal
Palace are dramatically intertwined. The hotel is Mumbai's first harbour landmark
(built 21 years before the Gateway of India) and the site of the first licensed bar in
the city. For more than a century, the Taj has played an intrinsic part in the life of
the city, hosting Maharajas, dignitaries and eminent personalities from across the
globe. Today it is a Leading Hotel of the World and favourite destination for
discerning business travellers.
A treasure-trove of invaluable memorabilia, there is a story to tell behind every
pillar, a landmark deal in every boardroom, and a storied celebration under every
awning. Come be a part of the legend
CHAPTER NO:- 5 SERVICE QUALITY
MEASUREMENT IN TAJ HOTEL
In order to achieve rationality the models of business excellence also, in a way,
determine whether the criteria have been met, but the evaluation of business
excellence is based not only on the fulfillment of the set criteria but also on the
determination of the level up to which the criteria have been fulfilled (systems of
points).
When analyzing the quality of service it is desirable to analyze the largest
possible number of companies supplying the same type of service. As we already
mentioned, if a company carries out a research and finds that the results are
negative, it can interpret this information in the wrong way and conclude that it
provides services in a totally wrong way. On the other hand, when analyzing a
large number of companies, it is possible to compare data and obtain a realistic
picture of the position of an individual company compared to others regarding
quality.
The upper part of the model (Image 1.) includes phenomena tied to the
consumer, while the lower part shows phenomena tied to the supplier of services.
The expected service is the function of earlier experiences of the consumer, their
personal needs and oral communication. Communication with the market also
influences the expected service. Experienced service, here called perceived
service, is the result of a series of internal decisions and activities. The
management’s perceptions of the consumer’s expectations is the guiding principle
when deciding on the specifications of the quality of service that the company
should follow in providing service. If there are differences or discrepancies in the
expectations or perceptions between people involved in providing and consuming
services, a “service quality gap” can occur, as shown in image 1. Since there is a
direct connection between the quality of service and the satisfaction of clients in
hotel industry, it is important for the company to spot a gap in the quality of
service.
The first possible gap is the knowledge gap. It is the result of the differences
in managing knowledge and their real expectations. This gap can lead to other
gaps in the process of service quality and is, among other things, caused by:
incorrect information in market researches and demand analysis;
− incorrect interpretations of information regarding expectations;
− too many organizational layers that hinder or modify parts of information in
their upward movement from those involved in contact with the consumers.
The second possible gap is that of standard. It is the result of differences in
managing knowledge of the client’s expectations and the process of service
provision (delivery).
This gap is the result of:
− mistakes in planning or insufficient planning procedures;
− bad management planning;
− lack of clearly set goals in the organization; and
− insufficient support of the top management to service quality planning.
The management can be right in evaluating the client’s expectations and develop
business methods to satisfy these expectations, without the employees being
correct in providing service. For example, a restaurant can order the waiters to
serve the customers in two minutes after they sit at the table. Nevertheless, the
waiters can ignore that specification and talk between them on the side. The
fourth possible gap is the communication gap arising when there is a difference
between the delivered service and the service that the company promised to the
clients via external communications.
The reasons are:
− the planning of communication with the market is not integrated with the
services;
− lack or insufficient coordination between traditional marketing and procedures;
organizational performance not in keeping with the specifications, while the
policy of communication with the market abides by the given specifications; and
− tendency to exaggerate in accordance with exaggerated promises.
Should any of the mentioned gaps arise, the “service gap” will also appear
because the real service will not satisfy the client’s expectations. Hotel companies
try to detect the “service gap” with survey questionnaires. Gap analysis is the fil
conducteur for the management to find the causes of problems regarding quality
and to find suitable ways to remove such gaps. For this reason the first four gaps
are also called organizational or internal gaps.
CHAPTER NO:6 TIPS AND TOOLS FOR CONTROLLING FOOD COST IN FIVE STAR TAJ HOTEL.
6.1 TIPS
How to Calculate Food Cost
The Formula
Food Cost % = (Beginning Inventory + Purchases – Ending Inventory) / Food Sales
Memorize this: FC% = (BI + P - EI) / S
Food cost is calculated by taking your beginning (AKA opening) inventory for the
period (e.g. at Oracle it’s one week) and adding all of your purchases to that
number. You then subtract the ending (AKA closing) inventory number. This
gives you the theoretical value of what you used that week in product. That
number is divided by your sales and a percentage of sales is calculated for the
cost. So when we say you have a food cost of 40% that means you spent .40 for
every dollar you took in sales.
Lewis’ Tips
It is absolutely necessary to use the same dates for sales and purchase
activity
You need to take the inventory after all sales activity has ceased (either
late at night or early in the morning)
There should be no deliveries during your inventory
The value of the inventory is the most recent cost paid for each item
Food cost dramatically too high or too low?
These are the usual suspects Lewis identifies for an out-of-whack food cost:
You physically counted items incorrectly during inventory (too many or
too few items)
You counted and input units different than the inventory pricing (i.e. you
counted 10 cans of San Marzano tomatoes, but you’re charged by the case
for that item)
You are missing the invoice for product you have counted into inventory
(tip: you have to get the invoices in on time before closing the period)
You got an invoice processed for product you do not have (e.g. returned
product for which you do not have a credit processed)
You have transfers that have not been credited to your costs
6.2 CONTROL YOUR FOOD COST
But first, what is food cost? It’s the percentage of total restaurant sales spent on
food product. The formula for calculating food cost is simple: net food purchases
divided by net food sales (net means after the change in inventory). The rule of
thumb within the fine dining industry is to maintain a 30% food cost, or less.
How do they do it? Controlling food costs is multifaceted to be sure, but simple at
heart. Chung summarizes his method to control food cost into a four basic
principles: order as necessary, maximize each ingredient, cook seasonally, and
have more than one vendor. For Stowell, who operates four successful restaurants
in Seattle (Union, Tavolàta, How to Cook a Wolf, and Anchovies & Olives), the
starting point and key is keeping a finger on the pulse of food cost at all times.
Track Your Food Cost and Inventory
Stowell’s chefs are required to track food costs on a daily basis, so Stowell and
each of his kitchen leads know where they are each day. “I know exactly what my
food costs are daily; I look every day,” he explains. “If I find out in the third week
[of the month] that food costs are 5% too high, I can look and say we had a soft
month, that’s the reason, or we’ve been selling too much of this or not enough of
that. I look at what menu items are not selling. If you have a consistent idea of
where you’re at, it gives you an idea of where to look.” Stowell and his team
adjust their ordering, dishes and menu to compensate for their food costs, or if
they’re on target, they know they can order and run a more expensive dish. It’s a
very organic and flexible methodology, but one that works for Stowell.
Robbie Lewis is the corporate chef for the software company Oracle in Northern
California’s Silicon Valley. He oversees eight cafes on the corporate campus and
has an annual food budget; they run a weekly inventory in each café and order
daily. Zach Allen’s inventory assessment depends on the product: “we do a
nightly inventory on our cut steaks and usage at our steakhouse [Carnevino]... we
do a weekly inventory on our beef warehouse... [and] a monthly inventory on all
items.” No matter the system, it pays to know what you have and the rate at which
you burn through your inventory.
Order Wisely
Allen is certain that ordering is essential for his exceptional food cost. “The best
way that we control food cost is by ordering correctly.” In other words, know
what you need and how much—something that keeping inventory will tell you.
Allen also order in bulk for certain items they use in large quantity—for three
high volume Italian restaurants that translates to containers of extra virgin olive
oil, San Marzano tomatoes, sea salt, and specialty pastas. But because so many of
the products Allen gets are from Italy, the chef has to be careful of the exchange
rate. “With the Euro being so strong, that hurts us a lot.”
Stowell also takes advantage of his buying power: “Having four restaurants, I buy
more direct from the source than I used to, whether straight from the farm or fish
auction, so there’s no middle man. Whereas, if you have one restaurant, it’s
harder to buy anything from a fish auction. They’re like, ‘you’re not buying
enough with only 20 pounds at a time,’ but with four restaurants you can buy 150
pounds at a time.”
Control Portion Size
Sometimes even small things can be the difference in meeting a target food cost.
For Allen, portion control has been that detail—“that’s our biggest area of
concern,” he says. “We have to be very diligent with our staff to make sure that
they are portioning the proteins at the proper weight,” Allen goes on. Training
staff to know that one ounce—not two—of duck prosciutto goes on the plate or
that each portion of salmon fillet should be four ounces and not any more, can
make the difference to meet a food cost target, order the right quantities, not raise
menu prices, and potentially have a profitable restaurant—not to mention a
consistent dish for your patrons.
Decrease Waste
Chris Chung is careful to train his employees on his rules about not wasting food.
A factor that’s especially crucial for a restaurant that specializes in a high-cost—
not to mention highly perishable—item like seafood. Chung makes a point to
have his cooks understand the value of using every piece of a product and to be
creative with the scraps.
Allen concurs: “We find many outlets for every part of the protein or vegetable
that we use from—braised beet greens for raviolis to ciccoli from the pork that is
left from making salumi.” To decrease waste from spoilage, he orders proteins
and other short shelf life items daily and advises chefs to “not be afraid to 86
items” from the menu during service.
Balance Your Menu
Dealing with an annual budget for multiple themed venues, corporate chef Lewis
looks to find a menu balance between all of the cafes. “The food costs are
different for all eight cafes, which are themed, based on cuisine,” he explains.
“We have rice-heavy cuisine, protein-heavy cuisine... the Chinese [café] is cheap
because there’s lots of rice [used]; the taqueria is protein-heavy and more
expensive; it all has to balance.” Lewis analyzes each menu and “delves into the
subtleties of the cuisine to figure our major food costs” and how they can cut
back. While some cafes will have a food cost of 40%, others will be significantly
less at 23%, but averaging off at the golden 30% mark.
Stowell finds success in weighing his menu with both low and high cost items,
and adjusting the menu to meet their food cost targets. “Make your menu work for
you,” he counsels. “Some months we have to sell more pasta. In every restaurant I
have, I have homemade gnocchi because it’s a low cost item people really enjoy.
If food costs are really low, I can have a steak dish and not charge as much—
those things balance out. I can run turbot as a fish: a portion costs you $10 to put
it on the plate; I don’t feel comfortable charging $35 for it, so I run other lower
cost food items to balance it out so I can charge $18 that item. I take a hit on it,
but I do it because I enjoy it. But I have to be smart about my menu and balance.”
Slow months are when you have to be the most mindful of upward creeping food
costs, but Stowell says they should still remain the same as even your busiest
month with careful attention. “If you’re expecting January and February to be
softer months, you don’t want as many high food cost items.”
Work with FOH
Additionally, Stowell advises chefs to be “more interactive with servers” to tell
them what menu items needs to be pushed. When food costs are running higher
than he likes, or when business is dropped off, he tells his wait staff what low cost
menu items to sell to customers. “If you have lower food cost items on your
menu, you have to motivate your staff to sell those at certain times,” he explains.
Avoid Menu Price Increases
For all four chefs, raising menu prices is a last resort or not an option at all.
Robbie Lewis says flat out “we don’t raise prices” for the campus cafes; instead,
they “reconstruct the dish to include less expensive ingredients.” Stowell
institutes price caps for each of his restaurants. He explains, “My goal in Seattle is
to keep prices as low as possible. I have rules with maximum prices at each
restaurant so guests don’t feel uncomfortable going.” And he continues, “I don’t
preach if you’re food cost is high, you’re not charging enough. I don’t believe in
that. If your food cost is high and you say you’re not charging enough—that’s
how restaurants get into trouble! By raising their prices when they can really
make their food costs work for them, and make their menu function in a way that
is good for the restaurant.”
In the end, Stowell reminds chefs that “food cost has to be a living and breathing
thing.” Knowing where it’s at—if it’s running high or low—and working with
your menu, your staff, and vendors to reduce waste, order wisely, and control
portions are all essential elements that play a crucial role in food cost. “You have
to pay attention,” Stowell says, “it’s better to find out your food costs on the 17th
than the 22nd [of the month]. Then you can react to that and say, ‘okay, fine. It’s
been slow this month, so I can’t run the turbot, but I can still put on the gnocchi
dish because that’s a low cost item.“
6.3 MORE TIPS TO REDUCE FOOD COST
Implement An Organized Inventory System
Negotiate With Vendors
Use Multiple Vendors
Use Less Expensive/Seasonal Ingredients
Buy In Bulk (Fresh For Multiple Restaurants; Preserved/Dried For A Single
Restaurant)
Get Creative With Leftovers
CHAPTER NO:7 THE HOTEL CLASSIFICATION CRITERIA
The different star ratings as summarized in Swedish Hotels and Restaurants
web pages have the following mandatory criteria examples:
One Star
Hotels in this category mainly have common area bath / toilet, towels, central
heating, breakfast and timing with a possibility of wake-up call and daily cleaning
of rooms. Superior status is attained by one (1) star if all the rooms must have
private bath / toilet and television.
Two Stars
Two (2) star hotels have in addition to requirements for one (1) at least 40%
private bathroom / toilet and TV, bath towels and washbasin in rooms with soap
and shower cream as well as bedside lamp. Likewise for two (2) stars to attain
superior status, all the rooms have private bath / toilet and television.
Three Stars
These hotels have service desk function (at least 14 hours a day), all rooms
equipped with private bath / toilet, hairdryer, full-length mirror, luggage stand,
desk, radio, TV, access to internet, access to the baggage service, laundry bag,
shoe shine equipment, elevator.
Four Stars
Four (4) star hotels have reception desk staffed at least 18 hours a day and a bar at
least 6 days a week. In addition to this there should be comfortable furniture, safe,
guest computer, internet connection in rooms, mini bar / room service, dinner
service at least 6 days a week and room service with food for hotels that do not
serve breakfast only, newspapers, sewing services, elevator. Superior status is
attained if dinner restaurant is opened at least 6 nights a week.
Five Stars
Hotels in the five (5) category have reception desk staffed 24 hours, suites, extra
toiletries in the room, bathrobe and slippers, extra pillows, choice of pillows,
comfortable seating in rooms, bar 7 days a week, lunch and dinner 7 days a week,
mini bar, room service round the clock, luggage service, ironing service, same day
laundry service, second service / turndown, mystery checking, etc.
All star categories need a number of additional criteria beyond the mandatory
criteria, in order to achieve star rating. In addition, the hotel is also considered as
a whole in terms of maintenance standards, quality of furniture and equipment,
and general impression.
However with effect from 1 January, 2010, a Single European hotels
classification system has been adopted and at present Sweden, Germany, Austria,
Switzerland, Holland, Hungary the Czech Republic and the Finnish islands of
Åland take part in the same classification system. The hotels are assessed for 270
criteria and can be awarded between 1 and 5 stars.
The New Criteria 2010-2014 is divided into 2 categories: - Mandatory criteria (M) that must be met to obtain star rating.
Additional criteria where a certain percentage of points must be achieved to obtain the star category which the mandatory criteria indicates
For every star category, it is possible to achieve a so-called superior assessment
for hotels that receive a large number of extra points. The Swedish Hotel and
Restaurant Association, (SHR) is responsible for the Swedish classification with
its own inspectors who annually visit the hotels for inspection.
(www.hotelstars.se).
The table below shows the minimum criteria, minimum points and number
points required for a hotel in each category.
Table 1: Maximum and minimum points categorization
Source: Classification Criteria 2010-2014 / page 22 of 22)
A sum total of the superior and minimum points are added up as the supplement
superior for each hotel category in the table below. As an example the 4 star
hotels obtained 570 points by adding 380 (minimum) and 190 (superior) in table
1, likewise 5-star obtained 650 from 570+80. These points establishes that facts
that the furniture, fittings and equipments required for these class of hotels are
varied therefore requiring more efficient maintenance strategies in room and
buildings.
Table 2: Supplement superior points:
Minimum points
An Extract of Criteria 2010-2014 covering building / room furniture and equipments required for 1-5 star hotels
CHAPTER NO:8 CONCLUSION
The quality of service in hotel industry is an important factor of successful
business. The existing trend of complete quality management in hotel industry
ensures the achievement of competitive advantage of hotel companies and is
therefore the subject of contemporary research into service quality in hotel
industry.
The concept and the conceptual model of service quality is indispensable if we
wish to understand the genesis of service quality and potential gaps in quality.
The aim of this paper is to show the importance of service quality in hotel
industry from both the conceptual standpoint and that of service quality
measurement. The paper describes the most common criteria for measuring
service quality, namely the model of internal service quality and the SERVQUAL
model. The shown results are those of quantitative and qualitative application of
such models in hotels.
Key words: Quality, Service, Hotel industry, Measurement criteria