Starhotels Group: A Case Study

Control Process

The centralized corporate management conducts strategic planning for the Starhotels Group. Future oriented strategic perspective emphasis the following aspects:

• Respect for the environment: applying criteria and techniques of environmental sustainability and reduced consumption

• New frontiers of communication that becomes emotional, targeted, direct and interactive

• Internationalization

The Group has a very clear objective that is the renewal and enhancement of the portfolio of existing properties and expansion abroad. In the restructuring of the E.C.HO 13 million euros were invested. Capital budgets are made at the group level including 24 properties. The forecasts are made for 3 to 5 years. Clearly investments are

Budgets are compared against actual spend with the flexibility to adjust to changing business conditions (budget is adjusted quarterly to provide an updated sales forecast). This finding is in line with the theoretical propositions about the importance of the budgets in the hospitality industry (see Kreul, 1978; Schmitgall and Ninemeier, 1986; Brander Brown 1995; DeFranco 1997; Collier and Gregory 1995). Before the budget preparation, the GM and head managers discuss the possibilities of increasing revenues and improving the cost control. After that the preparation process begins with each business unit manager proposing the figures to be approved by Ms. Lombardi. The approach in the budget preparation is usually bottom-up. Ms. Lombardi explained budgeting in more

Ms. Lombardi stated that head office usually inflates the projections. The budget represents clear realistic targets that a GM is expected to meet. Of course, variance analyses are used in terms of control.

Price determination is market oriented. Hotel has a politics of prices for the each market segment. However, depending on the market conditions and competitors’ actions, price can change but not below the variable costs per room.

Starhotels group has a very strong Revenue department in the head office. All the instruments are developed in the company. Every possible situation is evaluated. As mentioned previously in the literature review the aim is to maximize profitability by allocating the right inventory to the right customers at the right price. The primary focus is to forecast the expected daily demand to ensure that dicounts are only been given when the anticipated demand is low. The market segments are divided into business travelers, leisure travelers, meetings etc. Overbooking is not used. Ms. Lombardi explained:

“We do not use overbooking. We have six properties in Milan but still it is very difficult to use it, it destroys reputation. If it happens, it has to be an