BAO111: Core Competencies for the Business Analyst Scenic Hotels Case Study Sample Business Case Online Reservation and Internet Marketing Project 1. Executive Summary This document presents the rationale for adopting an online reservation system and Internet marketing program that will help preserve and increase revenue for the Scenic Hotels chain. 2. Introduction and Summary a. Current Business Process When a guest or a travel agent wants to make a reservation, he or she uses one of the following methods: Call the Scenic Hotels Toll Free 800 Number Call one of the hotels directly Send an e-mail from the website, asking about room availability and/or requesting a reservation b. Description of the Problem Scenic Hotels currently has a website, but the website does not have an online reservation system. Room bookings in the last fiscal year were handled as follows: 21% were booked as a result of a direct guest inquiry via telephone, fax, or e-mail. 36% were booked by groups for social functions or business meetings. 43% were booked through the traditional travel agent network. The number of reservations from travel agents has been declining steadily. Surveys conducted by Scenic Hotels indicate that individual guests prefer the option of making their own reservations online, and industry reports confirm this trend. If an online reservation system is not implemented soon, Scenic Hotels can expect to see a decline in bookings, leading to a decline in revenue. c. Opportunity An online reservation system will close a critical gap in the IT infrastructure necessary to meet the company s revenue goals. A state-of-the-art website will provide new ways to build long-term relationships with guests. An Internet marketing program will attract new guests who cannot be reached through any other form of marketing or advertising. d. Project Objectives Provide a secure infrastructure for processing and recording guest and travel agent transactions. Increase efficiency of processing reservations. Improve relationships with our guests, leading to increased loyalty. Increase the skill levels and job satisfaction of our employee base. e. Project Scope The existing website will be replaced by a new website with an online reservation system. The online reservation system will interface with a credit card validation system provided by an outside agency. 2012 Corporate Education Group, operated by Vatterott Educational Centers, Inc. All Rights Reserved. 1
Scenic Hotels Case Study Sample Business Case Reservation and check-in procedures will be modified as the online reservation system is integrated into current operations. Staff will be trained to use the new system. An Internet marketing program will be launched to coincide with the rollout of the new website. The online reservation system and new website will be in place within one year. f. Business Benefits/Objectives Increased revenue due to an increase in occupancy rates by 3% in two years, 10% in three years, as an Internet marketing campaign attracts new guests. Reduced annual labor costs of $160,000 in two years, $320,000 in three years, as existing guests transition from making reservations by phone, e-mail, or fax to the new online reservation system, thus reducing staff time handling reservations. Increased guest satisfaction as measured by online and in-room survey, reflecting the convenience of online reservations. A more efficient room allocation process, resulting in fewer empty rooms and additional capacity during busy periods. Increased opportunities to up sell additional services, such as special trips and events, when guests book rooms. Ability to use e-mail to inform guests of special offers during off-peak periods. g. Project Costs See attached Cost/Benefit Summary. h. Assumptions All infrastructure improvements can be completed within one year. Common IT standards will allow us to continue to do business with the same credit card validation agency that we are using now. Competition for new business on the web will not drive down average daily room rates. 3. Approach a. Metrics The impact of the project will be projected and measured over a five-year period. Some of the metrics to be gathered include: Occupancy rates during peak business periods Off-peak occupancy rates Average daily room rates (ADR) Percentage of bookings from online reservation system Percentage of bookings from e-mail or phone Guest satisfaction ratings from online and in-room satisfaction surveys Labor costs b. Alternatives Evaluated In considering the objectives of this project, several alternatives were considered: Outsource the online reservation function via a third party online distribution channel. Outsource the design and operation of the website to a firm specializing in web design, maintenance, and hosting for the hospitality industry. Outsource the operation of the Internet marketing program to an outside web marketing firm. 2 2012 Corporate Education Group, operated by Vatterott Educational Centers, Inc. All Rights Reserved.
BAO111: Core Competencies for the Business Analyst c. Key Selection Criteria Cost of services Reliability of solution Speed of implementation d. Constraints and Limitations The success of this online effort will be limited by the technical capabilities of potential guests, their personal computers, and their access bandwidth. 4. Recommended Alternatives Outsourcing the online reservation function to a third-party reservation service is not recommended. The estimated transaction cost for this service is $27 per booking vs. $5 per booking for a system owned by Scenic Hotels. Also, a third party distribution channel requires dedicated blocks of discounted rooms, which removes the rooms from the inventory available to other channels. Finally, the image presented to the public through a third-party distribution channel detracts from the value of the Scenic Hotels brand. Scenic Hotels should acquire its own online reservation system, rather than outsourcing this function. Scenic Hotels should outsource the design and operation of the new website to a firm specializing in web design, maintenance, and hosting for the hospitality industry. The operation of the Internet marketing program should not be completely outsourced. Scenic Hotels needs to develop its own internal Internet marketing expertise, in order to protect and enhance its brand. This can be done by adding an Internet marketing specialist to the Marketing Department and contracting out for additional services. While outside vendors will be used to perform most of the project activities, it is recommended that requirements planning and project management be coordinated internally to provide close monitoring and control of the project. A detailed set of requirements will be developed, followed by a request for proposals. Solutions will be sought from providers of off-the-shelf hotel reservations systems and from developers of custom software solutions. Care will be taken to guarantee that the new infrastructure is aligned with business processes and strategic goals. a. Analysis of Potential Impact on Business and Staff IT Manager Juan Cabrera will be devoting half his time to managing this project during Year 1. Frank Melanson, who will develop the requirements management plan for the project, will also be spending half his time on the project in the first year. Contract workers will be hired to supplement the IT work force while Juan and Frank carry out these responsibilities. Several staff members will be asked to join the requirements team, and they will need to set aside adequate time for this in the first 6 months of the project. As new systems and processes are implemented, all staff that is affected will need to be trained. Eventually, the new systems should reduce the amount of staff time needed to process and manage reservations. Two new positions are recommended for conducting the new operations that will result from this project. A new staff member in the IT Department will support staff who work directly with the online reservation system. A new member of the Marketing Department will develop and implement Internet marketing programs. 2012 Corporate Education Group, operated by Vatterott Educational Centers, Inc. All Rights Reserved. 3
Scenic Hotels Case Study Sample Business Case b. Analysis of Potential Impact on Technology The new website and online reservation system will be hosted by an external vendor. However, there will be several points of interface between these external services and the internal network linking all Scenic Hotels with headquarters and each other. To ensure reliability, security, and compatibility, the IT Department will be upgrading all internal hardware and software systems. 5. Risk Management Plan A risk management committee will be created, consisting of the project sponsors, project manager, finance manager and marketing manager. During the planning stage, risks will be identified, recorded in a risk log, assessed and prioritized, and risk handling strategies will be developed. Each risk will be assigned to a risk owner who will monitor that risk, and execute the risk response plan should the risk occur. Throughout the project, risks will be reviewed at every project status meeting, and the risk log will be updated accordingly. Project risks: Because the website is the first point of contact for potential guests, it may not make a positive impression, leading to loss of business and revenue. Because we are automating how we determine available rooms, there may be errors that would prevent the processing of reservations, leading to reduced revenue and customer dissatisfaction. Because we have several corporate partnerships, we may inadvertently share private guest data with third parties, leading to security breaches and guest dissatisfaction. 6. Conclusion and Recommendations Scenic Hotels should adopt an online reservation system as soon as possible, to attract new guests, to meet the expectations of existing guests and travel agents, to keep up with competitors, and to improve operations. Scenic Hotels should also launch an Internet marketing program as an essential component of its online strategy. Successful implementation of these twin goals is key to the future success of Scenic Hotels. A return on investment for this project is projected at 245%. Furthermore, the improvements to the company's IT infrastructure and the expansion of our marketing efforts will provide a firm foundation for other strategic initiatives. 4 2012 Corporate Education Group, operated by Vatterott Educational Centers, Inc. All Rights Reserved.
BAO111: Core Competencies for the Business Analyst Cost/Benefit Summary Sample External Costs Initial Year 1 Year 2 Year 3 3 -Year Total Online design and development 250,000 Online system maintenance 10,000 10,000 10,000 Online system licensing fees 5,000 5,000 5,000 Internet marketing startup package 6,500 Internet marketing support 4,500 4,500 4,500 Location photography 12,000 2,000 2,000 2,000 Pay-per-click advertising fees 25,000 25,000 25,000 Internal Costs: Labor Internal Costs: Expenses IT staff time 80,000 Requirements team staff time 30,000 Internet Marketing Manager (new position) 80,000 80,000 80,000 IT Technical Support (new position) 65,000 65,000 65,000 Hardware 120,000 Software 30,000 Training staff 10,000 2,000 2,000 2,000 Subtotal Costs 538,500 193,500 193,500 193,500 $1,119,000 Benefits Revenue Increases (see next page) 0 844,800 2,534,400 Reduced staff time handling reservations 160,000 320,000 Subtotal Benefits 0 0 1,004,800 2,854,400 $3,859,200 Net $2,740,200 ROI 245% 2012 Corporate Education Group, operated by Vatterott Educational Centers, Inc. All Rights Reserved. 5
Scenic Hotels Case Study Sample Business Case Scenic Hotels Projected Revenue Increases Year 1 Year 2 Year 3 Total Number of Hotel Rooms in System 960 960 960 Peak Season # of Nights in Peak Season 75 75 75 Peak Room Rate 200 200 200 Peak Occupancy Rate: Without New System 76% 76% 76% Peak Revenue: Without New System 10,944,000 10,944,000 10,944,000 Peak Occupancy Rate: with New System 76% 78% 82% Peak Revenue: with New System 10,944,000 11,232,000 11,808,000 Peak Revenue Increase - 288,000 864,000 Off-Peak Season # of Nights in Off-Peak Season 290 290 290 Off-Peak Room Rate 100 100 100 Off-Peak Occupancy Rate: Without New System 52% 52% 52% Off-Peak Revenue: Without New System 14,476,800 14,476,800 14,476,800 Off-Peak Occupancy Rate: with New System 52% 54% 58% Off-Peak Revenue: with New System 14,476,800 15,033,600 16,147,200 Off-Peak Revenue Increase - 556,800 1,670,400 Combined Annual Revenue Total Revenue: Without New System 25,420,800 25,420,800 25,420,800 Total Revenue: With New System 25,420,800 26,265,600 27,955,200 Total Revenue Increase Attributable to New System - 844,800 2,534,400 Percentage Increase in Revenue with New System 0% 3% 10% 2012 Corporate Education Group, operated by Vatterott Educational Centers, Inc. All Rights Reserved. 6