Costing in Service Industries

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