You have recently been appointed by an investment company who wish to relaunch the Yang Sing Hotel (see Case Study Introduction below) under a new name after recently buying the building but they have concerns over the problems that caused the Yang Sing Hotel to close.
Your assignment is to write a report on the prospective New Yang Sing Hotel as a project. The assignment contains information from news and other sources. We have sought to make this as close as possible to a live project brief. You may wish to conduct relevant research but please do not contact anyone involved without first contacting your module tutor.
Table of Contents
Yang Sing hotel Manchester
Advertisement for the hotel
The Yang Sing Oriental offers 48 individually designed bedrooms and suites inspired by the cultures of Japan, China, India, Thailand and beyond fused together in a grade II listed building in the heart of Manchester. We offer a level of service never seen before in the city. Guests can tailor make their service using the online booking system, selecting from our extensive personalised menus from pillows and Japanese silk duvets to your complimentary bathroom products and even which scent will fill your room.
A boutique Hotel which was refurbished from a former paper mill, the hotel extends over seven floors and includes 48 individually designed bedrooms, bar, lounges, breakfast and spa rooms and is located in a prominent position on the corner of Princess and Portland streets, close to the China Town area within Manchester city centre. The conversion of the mill to a hotel cost £4 Million.
This building is a Grade II listed “Manchester” warehouse, with cast iron internal columns, timber beams and masonry external walls. The building had been left vacant for a number of years and extensive repair works were required to prevent further deterioration (to remove dry and wet rot, leaking roof, leaning parapet brickwork etc.), before plans to convert into hotel were developed.
Structural conversion works included removing the original central staircase and lift; constructing a new lift and stair-core, repair and strengthening works to timber floor beams; adaption and strengthening works to roof trusses to allow formation of mezzanine floor to top floor suites; formation of new plant room at roof level; repair of cast iron column, and enhancing stability of external masonry walls. The considerable work required meant that rebuilding and redesign work went over budget and over time.
Yang Sing Closes
Manchester Evening News, 2/3/2009
Yang Sing Oriental, the luxury Manchester city centre boutique hotel, closed its doors today less than eight months after it opened – victim of the deepening economic crisis. The company will be placed into the hands of a liquidator.
Managing director Gerry Yeung, who realised a long-standing ambition when he launched the £8m project in a listed building in Princess Street last July, said: “It is a tragedy. My team are amazing and one of the saddest outcomes of this is that 30 people will be made redundant. Together we have created the best hotel in Manchester and business was growing. Everyone who stayed here loved it, but we couldn’t have picked a worse time to open a luxury hotel: with a global banking crisis, credit crunch, and the worst recession since the 1930s.”
“I have committed an additional £1m of my personal money to the Yang Sing Oriental since it was launched, but with room rates being massively discounted across the luxury hotel market, and with no end to the recession in sight, the business is just not sustainable.”
The nationally renowned Yang Sing Restaurant, located next door and run jointly by Mr Yeung and his brother Harry for more than 30 years, is unaffected by the hotel’s closure.
The Yang Sing Oriental offered 48 individually designed bedrooms and suites inspired by the cultures of the Far East, with rack rate tariffs ranging from £179 – £569 per night.
A statement on the hotel’s website said: “Gerry Yeung and his amazing team at Hotel Yang Sing Oriental deeply regret to inform you that, despite their hard work and best efforts, Yang Sing Oriental Ltd has been placed into liquidation.
“As a result of this, Hotel Yang Sing Oriental closed its doors on Monday 2nd March 2009.
“We thank you all most sincerely for your support and the generous and wonderful reviews that you have kindly sent to us. It has been an honour and a privilege to welcome you to the hotel over the past eight months. We are so glad that you have enjoyed staying with us.”
Critics were impressed by the hotel after its launch. The international travel website TripAdvisor rated the Yang Sing Oriental Number 1 of 147 Manchester hotels in its Popularity Index.
A newspaper travel writer said: “Manchester is a world class destination and has the accommodation to match. It [Yang Sing Oriental] is incredibly stylish, luxurious and laid back…”
Guest feedback on the Late Rooms website showed that 98 per cent of visitors would recommend the hotel and would return.
The hotel was full at the weekend, but guests were taking advantage of rate cuts of up to 50 per cent which are now becoming commonplace across the industry.
Gerry Yeung, the boss of the city centre boutique hotel, told Manchester Confidential that there were a combination of factors all rooted in the economic crisis which have led to the failure of the business.
“We’re operating at 60% capacity at the moment which isn’t too bad but the problem is we can’t get the room rates we need. Even at 60% we’re discounting. In another economic time I believe we would have been fine, but we opened just as things start to get bad globally. We were ambitious too, we wanted to provide very individual accommodation, with 24 hour room service and five star customer service generally.”
Funding for the hotel was provided by the Yeungs, private investors and Natwest Commercial Banking. Total losses are estimated in the region of £7 Million.
SOLUTION
Risk Assessment for Yang Sing Hotel Project
Threats and Opportunities
The threats and opportunities facing the project include evolving technology, debt funding, uncertain economic environment, and staff recruitment. These risks can lead to specific challenges such as hiring and retaining the staff, operational issues, change in marketing trends and dynamics, the rising cost of consumables, change in guest expectations and irregular cashflows. These risks have been identified to be symmetrical across the highly dynamic and competitive hotel and hospitality industry. Hiring the qualified staff that resonate with the hotel’s market niche, being focused on the Eastern cultures is a challenge. The debt funding of the project gives rise to credit risk and the financing risk which are highly dependent of the global financial performance, as was witnessed in the hotel’s former operations and subsequent failure (Nunes & Serrasqueiro 2017). Technology is an important aspect of any modern business and lack of proper and competitive technology poses a significant risk to any business due to its rapid advancement (Salvioni, 2016).
The opportunities that come with this project include a preexisting reputation of the hotel, its strategic location in the heart of Manchester being a busy business tourist destination and its target market and proximity to the China Town. Other opportunities include existing staff that could be rehired back as well as using the former hotel’s well reviewed website and supply chain for its products and services. Another opportunity is the use of existing experience of the former management and staff to reincarnate the hotel’s name and glory. These risks were determined based on the analysis of the hotel industry as well as reviewing the market in relation to the projects mode of financing and existing organizational operations such as communication. Risks inherent in the market include uncertain economic environment which may affect all other hotel operations such as procurement and pricing.
Analysis of Risk
a. Change in Technology – The fast-changing technology in has taken root in the hospitality industry with the sole aim of improving customer experience. Such technology includes online bookings and customization of the hotel rooms to guest experience before the guest arrives to more superior technology such as artificial intelligence and robotics technology in the hospitality industry. This technology is being used in most hotels to reduce human risk and protect clients’ privacy and data (Yang et al., 2020). The hospitality industry has one of the highest privacies and security breaches where a lot of sensitive information such as names, addresses and credit card details are vulnerable and easy target for hackers. This is a high-risk security with a high probability which may lead to loss of customer trust and therefore loss of clients.
b. Uncertain Economic Environment – This is a risk inherent in the hospitality industry and ranges from unfavorable tax laws, immigration laws, economic slowdowns or recessions which lead to high loan rates and low investment returns. Other economic risks may include travel restrictions as well as disease outbreaks such as the coronavirus pandemic. The likelihood for the occurrence of such risks is minimal though their severity is high when they happen. The impact of such economic risks will cut across the industry including the competitors with the only difference being the individual hotel mode of financing.
c. Debt Funding – Debt funding reduces the net income of the company as well as cashflows due to interest payments. This will impact on the operations of the hotel and inhibit the management from using other management and marketing strategies such as discounts and offering prices that are lower than the market prices. It will also increase the debt-to-equity ratio and reduce the profitability of the company. The case will be worse in the case that there is an economic crisis. This risk has a medium probability of occurrence and a medium impact on the hotel.
d. Staff Recruitment – The Yang Sing Hotel has established its market as uniquely offering comfort service to Asian clients. This creates a unique staffing risk, since the hospitality industry is highly reliant on customer experience and interpersonal relationships. Hiring the right staff for catering, cooking and other services may prove difficult in Manchester area. this is because such staff as highly trained and professional will also have to possess a rich Middle-Eastern culture and diversity to offer the guests a homely environment. Hiring the wrong staff will pose a high probability and impact risk since it is at the very core of the hotel operations.
Risk Appetite and Matrix
The matrix below shows the identified risks and their probability of occurrence as well as the organizational risk appetite for the project owners.
| Risk | Probability | Risk Appetite | ||||
| Low | Medium | High | Low | Medium | High | |
| Change in Technology | ✔ | ✔ | ||||
| Uncertain Economic Environment | ✔ | ✔ | ||||
| Debt Funding | ✔ | ✔ | ||||
| Staff Recruitment | ✔ | ✔ |
Understanding the risks involved in the project, the project owners should adopt an overall medium risk appetite. This is because the risk s available in the industry are diverse and entrepreneurial passion is high, thereby increasing their risk appetite (Fang & An, 2017). Change in technology has a high probability of occurrence and since its impact is high, the project managers should have a low risk tolerance towards it. High risk tolerance for uncertain economic environment is due to the universal nature of the risk as it cuts across the industry and hence will not give competitors an advantage in the nature of its occurrence. Debt funding risk is inherent in the system, thus lower probability of occurrence and medium appetite for it. This means that the project owners can take a moderate amount of debt funding to run the project. Finally, staff recruitment is mapped under high probability and high impact and thus the managers should tolerate low risk appetite for it. This means that the project managers should pay particular attention to the staff recruitment process.
Risk Action Plan
a. Technology Risk – The project managers should put considerable investment into the purchase of superior systems with high security systems to protect client data. The first step will be identification of the vulnerable data such as guest schedules, personally identifiable information as emails, addresses and credit card information. Guest profiles should also be considered when setting up security and overall information systems. The second step will be sourcing for credible IT providers. This will include the steps in finding the best system that complements the hotel’s management and operation. Finally, the management will allocate priorities on the data that needs to be most protected as well as establishing protocol and clearance level for obtaining client data as well as accessibility to the hotel online systems. Other measures will include identifying the current technology used in the hospitality industry through benchmarking and pilot studies to offer the best in the market.
b. Uncertain Economic Environment – Dealing with economic uncertainty is one of the biggest challenges in starting a new project. This is because of the many factors that influence and determine economic volatility. As an action plan, the managers of the project should analyze all the existing economic trends such as stock prices and hospitality index as well as inflation, bank rates and government policies. Other factors will include economic crises and terrorism risks which adversely affect the hospitality industry. After these analyses, the management should then come up with a risk assessment and mitigation profile in which it will group the risks based on their severity and ease of mitigation. The company should moreover invest in less volatile assets to cushion the hotel from these economic risks.
c. Debt Funding- This involves use of loan to finance the project. The management should explore alternative methods of project funding before considering use of bank loans. This may include strategies such as stock options for employees as well as use of private funders and investors (Du, Wu & Zhao, 2018). This will reduce the interest payment that would have otherwise been used in the servicing of the bank loan and instead, a more flexible payment system may be agreed upon by the investors based on the market performance of the hotel.
d. Staff Recruitment – This will be best achieved through an elaborate recruitment program. The hotel should first outline its recruitment goals and policies which will align with the objectives of the project. The recruitment process will then outline the roles and responsibilities of each staff and personnel. The recruitment should focus on competency, professionalism, experience and innovativeness (Nestoroska & Petrovska, 2014). The company should thereafter engage in the training and development of its employees to ensure the best services are rendered to the guests who board the Yang Sing Hotel. Such improvements and training will include competency in Asian culture, food and diet as well as accommodation practices.