A postcard from Greece

As I sat in the hotel restaurant and watched the teenager to my left consume his sixth large plate of desserts and fruit, my mind turned to the concept of statistics and how this affects the hotel and leisure industry and business practices in general. A strange dinner pre-occupation no doubt, but this is what twenty years as a teacher and examiner does to you!

When I first started to teach the IB in 1985, statistics played a more significant role in the Business and Management programme. Students were expected to understand and apply the concepts of distribution, standard deviation, probability and even (very strangely) Pascal’s triangle. So how does this relate to my Greek holiday? My consideration at dinner concerned a conversation I had with the hotel manager about food. More and more hotels are moving to half-board, or fully inclusive, packages. Here the price paid for the hotel/holiday includes a combination of breakfast, lunch and dinner and possibly snacks and drinks as well. The hotel where I was staying had changed to a half-board and buffet approach about 18 months previously. The advantages are clear; the hotel resident is offered meals in the hotel at an attractive price, so there is little incentive to leave the premises. The overall cost of the holiday plus meals allows the hotel to make a profit margin not only on the room, but on the meals as well. In addition, the hotel may be able to offer a range of ancillary services to an increasingly captive audience and, as a result, boost revenues even further. These can include alcohol and beverages to half-board residents and personal services, such as spa and entertainment options in addition to the fully inclusive package. As residents tend to be more static, there are further opportunities in terms of vehicle hire, sports activities and trips to tourist and historic sites, on which the hotel can earn significant commissions.

So it is clear that the hotel stands to gain considerably from this enhanced offer. However, there are drawbacks and dangers, not only for the hotel, but for the local community and economy and even for the holidaymaker. In the highly competitive leisure industry, perception is all. A quick look at travel sites, such as Trip Advisor, provides access to customer reviews, which can make or break a hotel. For hotels offering full or half board, the hotel will be judged in terms of the facilities and the quality and quantity of the food in addition to the levels of service. Poor reviews will make potential visitors wary of making a booking.

For the local community, the increase in fully inclusive packages offered by hotels can be disastrous. Local restaurants and shops offering food, drinks and snacks will be severel affected. Even those shops offering ancillary products, such as souvenirs and clothing, will be harmed if holidaymakers choose not to leave the perimetered idyll of their hotel complexes. Visitors are likely to receive a sanitised and often ‘Westernised’ version of local culture through their experience within the hotel complex and may leave a country not having come into contact with its authentic history, language and traditions.

So, back to my dining room experience. Apart from my amazement that following on from a starter and two major main courses, the avaricious teenager could eat his way through six slices of gooey cakes, two dishes of rice pudding, four peaches, two pears and well over ten large slices of water melon (and annoyingly remain remarkably thin), I began to wonder how the hotel planned the volume and range of its meal offerings. The advantages of the half-board and buffet approach is standardisation and economies of scale.  Ingredients bought in bulk are far cheaper than offering an à la carte approach. However, like other restaurants, the concept of stock comes into play. The worst possible scenario for a hotel is a stock-out situation. If a customer has purchased a full package they will want their meal even its only 10 minutes before the end of the meal session.  Playing safe and over-buying, and over-cooking meals, to create a ‘buffer stock’ is likely to lead to significant waste and reduction in profit margins (just-in-case stock control). However, introducing a just-in-time approach by preparing meals to order, is unlikely to work for cooked meals and set meal sessions. Indeed, the manager of the hotel where I was staying reported that, on the previous Sunday, 80% of guests sat down for their breakfast during the last 30 minutes of the meal session.

So how does a hotel plan its stock purchases and meal preparation? It is possible to use the concept of a normal distribution and standard deviation, although possibly not consciously. It is likely to examine previous records to establish a mean consumption level and then identify the range around this. In other words, in some weeks residents consume lower than the average, and in others more. The hotel will seek to cover these variations when preparing its meals. As you mathematicians will know, three standard deviations from the mean account for 99.7% of the sample population being studied, but what about those extreme outliers, who can distort the picture and cause real planning and logistical issues? Should a small hotel build into its food planning a contingency for exceptionally avaricious teenagers, or guests who select large volumes of food and leave most of it on their plates, or simply face the wrath of dissatisfied customers on Trip Advisor?

IB Style Questions

1. Define the following terms:

• logistics
• profit margin

2. Explain the difference between just-in-case and just-in-time stock control using examples from a hotel.

3. Examine how hotels can improve the efficiency of their supply chain.

4. Evaluate different methods of market research that a hotel can employ to check on customer satisfaction.

Extension Activity

Examine the following articles and website

• Hidden cost shock for ‘all inclusive’ holiday families
• It’s all inclusive
• Honey, have you packed the Holiday Fat Map?
• Tui Travel profits from hard-up Brits’ taste for all-inclusive holidays
• Greek economic crisis: Timeless values help villagers
• All-inclusive holidays by Club-Med

See if you can find more details about, and examples of all-inclusive holidays

Prepare a presentation and/or report, covering the following:

• definition of all-inclusive holidays
• the advantages and disadvantages of all-inclusive holidays for travel companies, hotels, holiday makers and local communities