2. Relevant Facts and
Analysis
Within the Hotel Industry,
Food and Beverage is the
second largest department
in a hotel, contributing to
20% of Total Revenues for
the hotel.
Food and Beverage
departments must
consider costs such as:
Cost of food
Cost of beverage
Operating equipment
3. Comping
At the Hilton Ft. Lauderdale Beach Resort:
Average Price Breakfast - $27
Average Price Lunch - $17
Average Price Dinner - $30
On a monthly basis, the Hilton Ft. Lauderdale
Beach Resort comps approximately $5,000 worth
of meals in the Food and Beverage Department.
4. Identify the Problem
At the Ilios Restaurant located within the Hilton Ft.
Lauderdale Beach Resort, the hotel is losing revenue
due to a high amount of meals that are being offered as
complimentary to guests. There doesn’t seem to be
alternative means of applying customer service other
than this “comping” of meals when guests are
dissatisfied. Why is it that management has allowed
this problem to not only develop but persist for so
long?
5. A helpful way to approach
customer service issues
o When customer service issues arise, service recovery
can be used as a guide to take action in response to
service failures (Murphy, Bilgihan, Kubickova & Boseo,
2014)
6. Management’s Role in the Service
Recovery Process (cont.)
Four (4) stages in the Service Recovery Cycle:
o Pre-recovery stage involves policies and procedures, adequate
reward system, and training.
o Immediate recovery stage refers quickly responding to the
customer complaint. When doing so staff must listen, empathize
and place themselves in the customer’s shoes.
o Follow-up stage entails identifying trends in common service
failures and finding solutions to them
o Lesson learned stage: management takeaways from the follow-up
stage are shared and implemented in the first three stages to
prevent repeat occurrences
(Murphy, Bilgihan, Kubickova & Boseo, 2014)
7. Management’s Role in the Service
Recovery Process (cont.)
If implemented correctly, the service recovery cycle can be
a useful tool for managers to avoid service failures, prepare
for them, and handle them effectively if they were to occur.
This in turn lead to improved customer satisfaction ratings,
increased guest retention rates, and most importantly
increased revenue (Murphy, Bilgihan, Kubickova & Boseo,
2014)
9. Employee Empowerment System
If the Food and Beverage Department no longer
comped $5,000 worth of meals per month, the
department would save approximately $60,000 in
revenue per year.
With comping $5,000 worth of meals per month, the
Food and Beverage Department of the Hilton Ft.
Lauderdale Beach Resort’s revenue per year calculates
to being $550,000. Take the amount of comping out of
the equation, and the department of Food and
Beverage can average revenue each year around
$610,000.
11. Annual revenue starts in January at highest level ($70,000) due to an
increase in sales based on presence of high volume visitors in South
Florida during winter season. The chart on the previous slide shows
that the sales revenue declines through the year, reaching its lowest
level in September and October. Then sales revenue increases again in
November and December. The average monthly sales revenue is
$45,833.33 but this number doesn’t yet include the $5,000 per month in
comps that the Hilton Department of Food and Beverage calculates
into the monthly average.
13. According to our analysis, if Hilton Department of Food and
Beverage reduces its comps by $5,000 per month, this will help
to increase the net revenue amount up to $610,000 due to a
reduction in variable costs that are affecting the operating cash
flow. This cash that has been used to cover the comps if no
longer spent will increase the efficiency in cash flow.
15. The new equation empowerment system shows via the graphic
on the previous slide that after implementing our consulting
solution, the net revenue will increase due to an effective
reduction in variable cost related to the comps. The equation
generates a red area that has been adding to the revenue and
with this cash flow, will generate at the end of the fiscal year a
positive balance in the department results.
16. Evaluating Alternatives
Evaluating Alternatives
Rather than giving complimentary meals, there are
other options that cost less revenue for the Food and
Beverage Department:
Giving a complimentary bungalow for the day: costs the
department $0, but the guest is provided with a private
lounging area at the pool and personal concierge.
Adding a complimentary dessert: costs only the amount it
takes to make the dessert, instead of an entire meal from the
restaurant.
Sending a complimentary amenity up to the room: an
example would be wine bottles which cost guests much more
than the hotel actually purchases them for due to upcharges
in order to make profit.
17. Recommendations
The Ritz Carlton
The Empowerment System is widely used in Marriott’s Ritz Carlton. Employees working at any Ritz
Carlton property are empowered to $2,000 per day to comp.
While $2,000 per day seems like a lot, the Ritz Carlton has calculated this amount according to the
amount of revenue the hotel brings in daily.
With that being said, this empowerment system works for Ritz Carlton because there is a specific
amount set as the maximum per day for employees, in which Hilton should begin to implement.
The Four Seasons
Another hotel in which implements the Empowerment System.
The Four Seasons does not share a specific amount of empowerment given in dollars, but empowers its
employees to provide unique experiences for its guests.
The Four Seasons strives to gain trust from the employees, in regards to empowerment, and believe that
the employees will handle this empowerment with logic and cautiousness.
These two well-known, elegant hotel companies have used the empowerment system for
decades. But, both companies are cautious in how the empowerment is handled and is specific
in amounts that are comped. With that being said, both companies have shown that the
empowerment system is a successful way to run a business and draw in more loyal guests, while
still gaining revenue annually.
This issue with comping that the Food and Beverage Department is experiencing could be a
symptom of a bigger issue with management and a neglect of big issues that could be affecting
revenue and guest experience. More time and attention should be given to reviewing
departmental issues by management.
18. Offering Recommendations
A complimentary meal should only be
offered in direst of situations. Think of
this solution as a last resort offering.
Simply speak with guest: find out why
they are upset or weren’t happy with
their experience (SO much can be
resolved by simply taking the time to ask
questions & admitting a mistake was
made)
Offer a discount on the meal or a free
dessert (avoid comping entire meal at all
costs). This will result in a much smaller
loss of revenue for the restaurant.
Staff meetings are a vital step towards
increased revenue. Use these meeting
times with staff to train them on what to
do in situations of dissatisfied customers
so they are best equipped and not having
to make judgment calls in the moment
as far as what to do. Empower them to
have a plan of action and carry it out.
Offer a gift certificate for free meal on
next visit: guest will more than likely
bring others with them and that is an
opportunity to retrieve new revenue. In
addition, guest will feel that you truly
care about their business.
Specific to Ilios, the restaurant can offer
a dissatisfied guest a complimentary
bungalow for the day (part of the F&B
Department and the dept will not incur
any cost for this)
Keep track of monthly and annual traffic
to better project demand and be
prepared for peak times when “comping”
really becomes an issue.
19. Implementing a New
Empowerment System
The Hilton Ft. Lauderdale Beach Resort carries out the empowerment system
throughout every department. With this system, employees are free to fix an
issue any way they would like, i.e., giving away complimentary meals.
With the use of critical thinking, one will realize giving the Hilton employees
empowerment is the main source of why the comping takes place.
Using logic, one can realize that giving away $5,000 worth of complimentary
meals per month does not make sense in regards to the success of the company.
Does this solution make sense in this situation? Is this solution logically
solving the issue?
Implementing a new empowerment system for employees may reduce the
amount of revenue lost per month in the department. Options for a new
empowerment system include:
Every employee is empowered up to $100 a month.
Employees cannot give away more than 3 complimentary meals per month.
Employees cannot comp specific meals found on the menu in the restaurant.
20. Q & A Time
-What is your opinion on this
consulting solution?
--How do you think it will
actually work out for your
facility?
--Do you think you will
actually implement this
plan?
21. References
Brigham, E. & Ehrhardt, M., (2011).
Financial Management – Theory and Practice
(13e)
South-Western Cengage Learning – United States
Doane, D. & Seward, L., (2013)
Business Modeling
Customized Reading for QNT 5040
Nova Southeastern University
McGraw Hill – United States
HILTON FORT LAUDERDALE BEACH RESORT. (n.d.). Retrieved
November 23, 2015, from http://www.sunny.org/listings/hilton-fort-
lauderdale-beach-resort/4683/
22. References (cont.)
Jordan, B.; Ross, S. & Westerfield, R., (2011).
Essentials of Corporate Finance (7e)
McGraw-Hill Irvin – United States
Economics – Dictionary Web Site
International Business Modeling Theory, United States
Recovered from the Internet on October 27, 2013 of:
http://www.economics-dictionary.com
Encyclopedia2- The Free Dictionary Web Site
Business Modeling Definitions, United States
Recovered from the Internet on October 27, 2013 of:
http://www.encyclopedia2.thefreedictionary.com
23. References (cont.)
Main, B. (2002).Comps. Retrieved November 21, 2015,
from
http://www.restaurantbusinessonline.com/archive/co
mps
Otto, J. (2015). How to retain unhappy restaurant
customers. Retrieved November 20, 2015
http://www.businessknowhow.com/marketing/restaur
antcs.htm
24. References (cont.)
Michel, S., Bowen, D., & Johnston, R. (n.d.). Closing the Gap Between Best and Actual
Practices. Hospitalist News. Retrieved November 23, 2015, from
http://www.dienstleistungsmarketing.ch/documents/michelbowenjohnston_servrecmgt
_reformated.pdf
Murphy, K., Bilgihan, A., Kubickova, M., & Boseo, M. (2014). There is No ‘I’ in Recovery:
Managements’ Perspective of Service Recovery. Journal of Quality Assurance in
Hospitality & Tourism, 16(3), 303-322. Retrieved November 23, 2015.
Microsoft Office Excel 2007 Microsoft Corporation US
The Decision Tools Suite
Analysis ToolKit
Palisade 2013
Solomon, M. (2013, October 28). How Ritz-Carlton And Four Seasons Empower
Employees And Uphold Customer Service Standards. Retrieved November 23, 2015, from
http://www.forbes.com/sites/micahsolomon/2013/10/28/four-seasons-and-ritz-carlton/
