The ImperialMay, 2014 Case Study

Mombasa, Kenya

Roger Williams• Citizen of the UK• Made large fortune in the

primary sector• Wanted to diversify his

investments

1906

The Imperial

Early years• Sole trader• Financial problems: especially cash

flow and liquidity management.1906

1950s

1920The Imperial became the most famous seaside hotel in Mombasa• Positive corporate image and

reputation.• High quality service & elegant

décor.

Change!World War II – British Empire• turbulent times in Kenya• independence movement

SOLD!1.Roger’s heir – Jeff –

sells in 1959.2.Until 1989 – five

different owners.PROS CONSAttractive 200-room property with a private beach & easy access to Mombasa airport

Recurring political unrest in neighboring countries; fear the situation in Kenya would deteriorate.

Global properties International investment group

Private limited company Shareholders: US, Japan & South

Korea

1989

Hands off management style; preferred to have a manager on-site.

Manager would generate profits that would be paid in dividends to GP.

Yearly meetings: Calculate break-

even quantity Set target profits Determine margin of

safety

Jomo Kimathi

The Imperial groundskeeper for the

Williams family.

1959 Jeff sold the hotel Helped Jomo obtain

work permit in UKJomo worked in the hotel industry in UK until he retired.

Martin Kimathi

Jomo’s son, born in London grew up in a multicultural

society he was a victim of racist

bullying

Graduated from university with a degree in Hotel Management.

When Jomo retired and returned to Kenya, Martin decided to go home as well.

Martin @ The imperial

The Imperial was recruiting & Martin was hired as one of five receptionists.

2009

5 Years LaterPromoted to head of reception

4 Years Later GENERAL MANAGER!!

GP liked that he was African

descent

& westernized – perfect

combo!

Expectations & career…Kenyan

employees thought he

was too westernized.

Martin• Well-paid professional; salary-

performance related pay. • Married Anima & had 2

daughters.

Proud of managing the hotel where his dad was groundskeeper.

Martin spoke some

Kikuyu, but…

Long-term problemsOnce the premiere seaside hotel – The

Imperial’s competitive position had slowly deteriorated.

Competition Luxurious hotels Spas Themed restaurants WiFi access

Modern, high tech feel

Colonial charm i.e. old fashioned

Long-term Trend

GP sole interest was profits.

Martin was given limted budget

each year for improvements.

The Imperial’s market share was

shrinking.

ImperialDecline in bookings. Kenya

# tourists increasing.

Market researchMartin’s efforts:• statistics from KNBS• secondary market data• marketing audit

Safaris!Cultural Tourism!

Financial worries

Martin found that:• Working capital presented difficulties –

seasonality of hotel operations• Occasional problems following the monthly

budget• He had to design & implement strategies for

dealing with liquidity problems.

Accountant recommends…

Hotel, restaurant & special events

Profit Centres

Cost Centres

Non-revenue producing departments (i.e. housekeeping)

Martin had to prepare final accounts for GP:• Profit &

loss• Balance

sheet

Stock controlCatering Department CHALLENGE:• struggle to manage stock• make appropriate calculations for

closing stock

LIFO ?

FIFO ?

Craig chapman

Humanitarian Motivations• Opened an orphanage• After independence stayed

to work for other non-profit organizations.

Early 20th century

Susan chapman

Craig’s grand-daughter left to study hotel management & returned to work at The Imperial.

2002

Susan applied for the manager position, however Martin was appointed.

Head of Housekeeping

Human resources

Discrimination

Martin needed to improve his working relationship with Susan.

Three years after she was not selected she was still angry.

She felt she had been discrimated against.

Leadership StylesSusan:• efficient, hard-working and

committed, was very task-oriented• liked bureaucracy, formal

accountability, and a clear chain of command.

• had a scientific approach to decision-making.

• staff found her cold, official and impersonal

Martin & Susan-similarities: • same age• similar

university educations

• neither fitted perfectly well in Kenyan society.

Martin:• much more laissez-faire style• believed in empowerment and

delegation.• was always careful to let

supervisors resolve problems (even if anxious about problems)

• warm, friendly and outgoing

Autocratic

Focusing on her job – goal to make the hotel spotless & shining.she demanded more of the employees was intolerant of even minor mistakes

Susan wants to prove GP made a mistake.

Employees began to complain amongst themselves.

Informal communicationGossip moved quickly through the hotel-stories and anecdotes of Susan acting overly autocratic.

appraisal

Martin:Did not want to dismiss Susan; he considered her a valuable member of the staff.

Martin suggested:Susan soften her leadership style.

Susan’s response:She resisted any discussion about how she managed her staff.

Quality

The Imperial is très magnifique

Article by French travel journalist praised the high quality of its housekeeping:“We reach here the top of the

highest international standards”, he wrote, “in terms of benchmarking, The Imperial is très magnifique”.

*Martin appreciates professional importance of Susan; professionally, she needed leadership training.

November, 2013GUTHONI: Housekeeping Department employee frequently calling in sick and did not come to work. SUSAN: Rather than enquiring about the reason, she dismissed Guthoni for repeated absenteeism. Unbeknownst to Susan, Guthoni had been diagnosed with a terminal illness and required frequent medical treatment.

Employees react!

Outrage

• Collective action gave the employees a sense of solidarity that they previously never displayed.

• Martin noticed that many other frustrations were coming out into the open –the threat of strike action as empowering for the employees.

• Employees taking responsibility for the operations of the hotel to a far greater degree than before.

Martin wanted to channel their frustrations toward constructive ends. • The Imperial would emerge stronger from the

conflict; necessary with big changes on the horizon.

Neg

otiati

ons

December: busiest month; Martin worries he won’t make his target profits if employees go on strike.

External Environment

Martin believes with the long-term external issues facing The Imperial that strategic decisions were necessary.

OPTIONS

Option 1

Make the case to GP that The Imperial needs to close for a whole year to allow for mass renovations in order to upgrade the hotel and reposition it to its former place as the premier hotel in Mombasa. Martin had recently travelled to Dubai and Muscat to see the most luxurious hotels in these regions. He understood that The Imperial had reached the decline phase of its product life cycle and needed rejuvenation. He believed that it was possible, although this would require substantial investment:• in the physical condition of the hotel almost to rebuild it entirely• in its marketing in order to relaunch it, maybe even with a new brand name.The new hotel would attract the same customer types, but the product would be much improved. It would also need an improved workforce to match its new vision. Martin sketched out two possible approaches for a Human Resources Strategic Plan

Option 1

Make the case to GP that The Imperial needs to close for a whole year to allow for mass renovations in order to upgrade the hotel and reposition it to its former place as the premier hotel in Mombasa. Martin had recently travelled to Dubai and Muscat to see the most luxurious hotels in these regions. He understood that The Imperial had reached the decline phase of its product life cycle and needed rejuvenation. He believed that it was possible, although this would require substantial investment:• in the physical condition of the hotel almost to rebuild it entirely• in its marketing in order to relaunch it, maybe even with a new brand name.The new hotel would attract the same customer types, but the product would be much improved. It would also need an improved workforce to match its new vision. Martin sketched out two possible approaches for a Human Resources Strategic Plan

Option 2Change the nature of the hotel by transforming all the rooms into self-contained apartments with small kitchens. The target market for these apartments would be business travellers staying at least one week. The marketing audit had revealed that:• there is an increasing demand for such apartments• very few hotels in Mombasa offer such apartments• the market is still small• the market has high growth potential.The revenue from these apartments would almost match the revenue from the current hotel operations; it would be more stable, with fewer seasonal fluctuations; both fixed costs and variable costs for cleaning and maintenance would be much lower. The apartments would be serviced once a week, rather than daily. According to Martin’s workforce planning, this option could reduce the housekeeping staff by 70 %.

Option 2Change the nature of the hotel by transforming all the rooms into self-contained apartments with small kitchens. The target market for these apartments would be business travellers staying at least one week. The marketing audit had revealed that:• there is an increasing demand for such apartments• very few hotels in Mombasa offer such apartments• the market is still small• the market has high growth potential.The revenue from these apartments would almost match the revenue from the current hotel operations; it would be more stable, with fewer seasonal fluctuations; both fixed costs and variable costs for cleaning and maintenance would be much lower. The apartments would be serviced once a week, rather than daily. According to Martin’s workforce planning, this option could reduce the housekeeping staff by 70 %.

Option 3Form a strategic alliance with the famous safari tour company KenSafar. Together they would offer a two-week package tour. Customers would arrive in Mombasa, spend three nights at The Imperial, go on a seven-day safari tour, and then return to The Imperial for four more nights. This would allow tourists to go on a safari, first getting adjusted to the time zone and climate and later rest for four days before returning home. The owner and manager of KenSafar was Kamau Onyango, a spontaneous, dynamic and charismatic Kenyan who had many networks and contacts, and intuitively knew market trends, even without market research. Kamau insisted that if the strategic alliance were to go ahead The Imperial would have to:• make some improvements to the appearance of the hotel• pay Kensafar a 20 % commission for all hotel guests staying at The Imperial and booking through KenSafar• undertake a marketing audit.

Option 3Form a strategic alliance with the famous safari tour company KenSafar. Together they would offer a two-week package tour. Customers would arrive in Mombasa, spend three nights at The Imperial, go on a seven-day safari tour, and then return to The Imperial for four more nights. This would allow tourists to go on a safari, first getting adjusted to the time zone and climate and later rest for four days before returning home. The owner and manager of KenSafar was Kamau Onyango, a spontaneous, dynamic and charismatic Kenyan who had many networks and contacts, and intuitively knew market trends, even without market research. Kamau insisted that if the strategic alliance were to go ahead The Imperial would have to:• make some improvements to the appearance of the hotel• pay Kensafar a 20 % commission for all hotel guests staying at The Imperial and booking through KenSafar• undertake a marketing audit.