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| AN U C O LLE G E O F B U S I N E S S AN D E C O N O M I C S
October 2015
Contents
1.
Introduction..............................................................................................3
2.
Overview...................................................................................................4
Vision...........................................................................................................4
Organisational objectives............................................................................4
3.
Business case...........................................................................................5
Objectives....................................................................................................5
Outcomes....................................................................................................5
Benefits........................................................................................................5
Project governance......................................................................................6
4.
5.
6.
7.
Implementation strategy........................................................................17
Implementation risks and risk management for Option 3..........................18
8.
Project preparation.................................................................................21
Sources and References.............................................................................21
1. Executive Summary
This document outlines the business case for implementation of an
electronic check-in and room access system at Crowne Plaza Hotel
Canberra.
The Crowne Plaza Hotel Canberra specialises in providing high-end
accommodation for business travellers. To remain competitive, Crowne
Plaza Hotel must continue to refine its focus on convenience and customer
service.
The existing manual check-in process is time-consuming for staff, and
guests can spend long periods of time waiting in line to check-in. This
sometimes results in complaints and can result in the need for
compensation.
Three options are assessed to address the problem:
1. No change to current practices.
2. Implementation of a Key Card Mobile System (KCMS) for check-in
and room access using an enterprise cloud located off-site.
3. Implementation of a KCMS using an enterprise server located onsite.
The aim of the Key Card Mobile System (KCMS) is to enhance the
customer experience and customer service provided by the hotel. The
project will see the replacement of the automation of the check-in process
and room access system. The KCMS will allow guests to use a mobile
application to check-in and receive a barcode. The barcode will provide
electronic access to their room. The application will integrate with Crowne
Plaza Hotel Canberras existing reservation system (ERP system). ASSA
ABLOY will build and supply services for the KCMS.
Option 3 is considered the best option to deliver on this aim as it will
reduce guests wait times during the check-in process, KCMS will also freeup the front-desk staff for better customer service, reduce guest
complaint levels and compensation level should decline.
Page 3 of 45
Page 4 of 45
2. Introduction
Crowne Plaza Hotel is part of the Intercontinental Hotel Group (IHG)
international chain, one of the world's largest hotel group by number of
rooms. The Crowne Plaza Hotel specialises in providing high-end
accommodation for business travellers. This focus provides Crowne Plaza
Hotels with the opportunity to tailor their product, offering comprehensive
business services and meetings facilities. Crowne Plaza Hotel continues to
find innovative solutions to improve their guests experience.
Technology remains at the centre of Crowne Plaza Hotels growth,
providing guests with the conveniences of home and the environment to
do business. Technology continues to offer ways to increase productivity
and free-up time for leisure. A recent focus for Crowne Plaza Hotel has
been the development of a sophisticated service and application to make
it easier to find, book and manage accommodation. Guests can manage
reservations, get hotel updates and offers, find and book hotel rooms and
view their reward points balance.
To remain competitive, Crowne Plaza Hotel must continue to refine its
focus on convenience and customer service. As such, the existing manual
check-in process at Crowne Plaza Hotel no longer aligns with the
companys strategy and should be automated where possible.
To maximise Crowne Plaza Hotels investment in technology and the flowon benefits to guest, the company should now consider expanding the
accommodation management service and ICT application. This expansion
would include the implementation of an electronic room key system,
managed through a mobile application.
The implementation of a Key Card Mobile System (KCMS) will provide two
direct strategic outcomes for Crowne Plaza Hotel:
Page 5 of 45
ensure that rival companies of Crowne Plaza Hotel are not seen
to be innovating quicker or providing a better product for
business travellers.
This business case focuses on the Crowne Plaza Hotel Canberra and
outlines what would be required to implement the KCMS, and the potential
benefits of installing the system.
Page 6 of 45
3. Overview
Investment in Crowne Plaza Hotel Canberras customer service is critical
for company success. This report outlines an investment project to further
enhance positive guest interactions with the company.
The project will implement a Key Card Mobile System (KCMS).
Implementation of the project will see the automation of the check-in and
room access system. Guests will be able to use an application on their
mobile phone to check-in and receive a barcode on their phone that will
provide electronic access to their room. The application will provide the
guest with the details of their room number. The application will integrate
with Crowne Plaza Hotel Canberras existing reservation system (ERP
system).
Design and planning of the project are focussed on Crowne Plaza Hotel
Canberra. If successful, there is potential for the project to be applied to
all of IHG 4,700 properties in almost 100 countries.
Vision
The aim of the project is to enhance the customer experience and
customer service provided by the hotel.
The system will allow guests to control their experience at the hotel and
reduce waiting times for hotel services. The KCMS will see a significant
reduction in human resources required for the manual check-in procedure,
freeing up the front desk staff to provide better customer service.
Organisational objectives
Crowne Plaza Hotels focus is to encourage repeated stays at their hotel
chain by business travellers. As such, all investment and decisions should
be to support Crowne Plaza Hotels focus strategy.
Implementation of a KCMS aligns with Crowne Plaza Hotels objectives and
strategic plan. A KCMS will contribute to the companys trend of improving
customer services through technology.
Page 7 of 45
Page 8 of 45
4. Business case
Objectives
Objectives of the project are:
1. Increase guests loyalty
2. Increase occupancy rate
3. Increase revenue
Outcomes
The anticipated outcomes of the project are:
1.
2.
3.
4.
5.
6.
7.
Benefits
The project should result in non-financial and financial benefits.
Non-Financial Benefits
1. Streamlined front-desk operations, reducing costs and freeing up the
front desk team to focus on other important aspects of guest
service.
2. New hotel experience. Guests book room using their mobile phone
or device. Then, they can use the phone to check-in.
3. Skip front office desk (no queues): When they arrive, they can go
straight to their room and use their own smartphone to open the
door. No need for keys or key cards. No need to wait in a queue at
the front desk after a long journey.
4. Better guest experience: Mobile Access builds customer loyalty as
well as the hotels image and brand.
5. Revenue and Cost: More efficient operations that reduce cost and
drive revenue, improved profitability and increased competitiveness.
Financial Benefits
1. 8% increase in sales.
Page 9 of 45
Project governance
The business case has been prepared by Group 7C (Project Champion), to
seek funds from IHG (Funder), in order to implement the KCMS project in
Crowne Plaza Hotel. The business case will be presented to the general
manager of Crowne Plaza Hotel who is the project sponsor.
The project will adhere to clear project governance protocols. The project
manager will coordinate project implementation and will report to the
project sponsor and steering committee. Reference groups and
assurances advisors will be used to ensure the project is informed and
considered. A complete project governance structure is provided in
Appendix A.
Page 10 of 45
Internal
Strengths
Page 11 of 45
External
Threats
Problem statement
The check-in process is lengthy and the procedure is manual, it includes:
guests arrives to front desk, waits in queue, identification, looking up
booking, filling out check-in form, provide credit card and issuing key-card.
The time-consuming check-in process creates a problem from two
perspectives:
the hotel must use staff to conduct the manual check-in process,
which reduces the time staff can spend on other customer service
activities, and
guests can spend long periods of time waiting in line to check-in. This
sometimes results in complaints and the need for compensation.
Page 12 of 45
Room
s
Average
check-in
time /guest
296
5 minutes
Total time in
minutes / day
(296*5)
1480
Total
time in
hours /
day
24.6
minutes/day
h/day
Receptioni
st
Gap analysis
The hotel objectives are to increase guests loyalty to increase the
occupancy rate. Consequently, it is expected that this will lead to an
increase in revenue. However, current practices lead to lengthy and
manual check-in procedures. Guests complaints are increasing due to the
long queues, and they are switching to other hotels. As a result, the
occupancy rate is not reaching the hotels target and the hotel loses
bookings and revenue. On the other hand, the front desk staff are also
exhausted because they spend hours processing check-ins and fail to
deliver the customer service guests expect.
By automating the check-in procedures: KCMS will greatly reduce queues,
and reduce pressure on front desk staff. Guests will be satisfied and their
loyalty should increase. Eventually, the occupancy and the revenue should
increase and the hotels objectives met.
Page 13 of 45
Constraints:
Page 14 of 45
Page 15 of 45
However, continuing with existing practices will lead to a number of disbenefits. Long check-in lines will not be resolved and guest complaint
levels will remain higher than acceptable. In addition, rival companies will
continue to leverage technology and gain a competitive advantage over
Crowne Plaza Canberra. Competitors have already begun rolling out
mobile check-in solutions, which could become increasingly attractive to
business travellers looking for convenience and flexibility.
The status-quo is estimated to cost the company $2.9 million in 2015,
with this value increasing in future years.
To continue with this option, the return is estimated to be $ 26.07 million
in 2015 with a Net Present Value (NPV) of $117.31 million (see Appendix E
for calculations).
Option 2 KCMS enterprise cloud
To address the problems created by a lengthy, manual check-in process,
Option 2 proposes to install a mobile check-in system referred to as KCMS.
The system will use an enterprise cloud service to store data and process
mobile bookings. ASSA ABLOY will build and supply services for the KCMS.
Guest must download KCMS application on their mobiles phones or tablets
in order to receive the Mobile Key-Card when they make a booking. The
process for Option 2 is presented in Figure 1.
Page 16 of 45
To shift to Option 2, the hotel will require physical and cultural change.
New door locks will be installed on all doors and affected stuff will have to
be trained in new areas.
An enterprise cloud will create a significant risk to security of guest
information and room access information. Data security and guest privacy
is critical to the hotel. An off-site server may generate too great a risk for
the hotel even when considering the likely benefits gained from
implementing Option 2.
A contract manager will be required to oversee the service level
agreement with the infrastructure-as-a-service operator.
The total initial investment for Option 2 is $400,142 (refer to Appendix E).
There is an annual cloud service fee of $43,416 and an initial project
investment cost of $0.4 million in 2015.
Total cost to the hotel in 2015 to implement Option 2 is estimated to be
$3.15 million.
Page 17 of 45
Page 18 of 45
Process starts
Guest arrives to hotel and heads straight up to the allocated room.
Guest swipes mobile on the door-lock system on the door.
A notification is generated to inform KCMS server to activate the
Mobile Key-Card.
Page 19 of 45
Recommendation of options
A comparison of key considerations between the options is presented in
Table 3.
Table 3 summary of key advantages, disadvantages and stakeholder impacts
for each section.
Option 1
Advantages
Stability
Data
security
Low risk
Option 2
Provide better
service
New customer
experience
Higher revenue
Lower HR cost
Disadvantages High HR
cost
Reduced
competitiv
e
advantage
Stakeholder
Impact
No risk of
failure
Option 3
Provide better service
New customer
experience
Data security
Higher revenue
Lower HR cost
Security risk
Dependence on ASSA
ABLOY
High annual fee for
High capital cost
cloud server
Dependence on IT
personnel
Risk of project
failure
Take risk on project
Page 20 of 45
Page 21 of 45
8. Implementation strategy
The KCMS project consists of the following deliverables (outputs):
the new KCMS server will be integrated into the current ERP server
the new KCMS software will be integrated into the ERP software
the electric readers (KCMS lock system) will be installed on all room
make bookings
the communication between the Lock System, the KCMS server, and
There will also be training for the front desk and reservation staff on how
to use the KCMS software. Most importantly, the marketing campaigns will
focus on the new check-in procedures to attract more customers.
The project is proposed to last for three months from 1st November2015
until 31st January 2016. There will be three milestones during the project:
the first milestone is on 30 November 2015 when testing the server, the
Page 22 of 45
R1: ERP server downtime: The ERP will be switched off during the
hotels.
R8: Scope creep: The scope may be changed due to the existence of
other options in the project (cloud computing); this will cause cost
Page 23 of 45
Severity
Likelihood
High
High
Medium
Low
Medium
R1,R2
Low
R4,R8
R3,R5
R6
R7
R9,R10
The red highlighted risks are the most serious risks and highest priority,
the yellow highlighted risks are medium priority, and the green
highlighted risks are low priority. Detailed interpretation of the Likelihood
and Severity Matrix:
system downtime.
Medium likelihood and Medium severity: R3 Room-doors not
software.
Medium likelihood and Low severity: R7 Noise pollution.
Low likelihood and Low severity: R9 Project not attracting guests.
R10 Guests are not using the new service.
Risk management
The risks will be managed by applying risk strategies, including mitigation,
avoidance, transfer and risk acceptance. Mostly importantly, the highly
severe and likely to occur risks (ERP downtime - R1 & R2) will be mitigated
by applying the best IT professionals at the hotel at the time of server and
system downtime. This will minimise the time of installation and errors
and the time taken to get the system back online as soon as possible.
Page 24 of 45
9. Project preparation
This business report was prepared as a result of a concerted effort by
Moh'D Alsharif, Steven Portelli, Mohammad Tapal and Zhen Zeng.
Following is a brief schedule showing the work done by each group
member in the completion of this report.
Team Member
Moh'D Alsharif
Steven Portelli
Mohammad Tapal
Zhen Zeng
Tasks Completed
Implementation strategy
The business case and situational
assessment
Problem statement
Business processes maps and steps
Report review
Introduction
Overview
Assumptions and constraints
Description and analysis of options
Report review
Project preparation
Development of presentation slides
Cost and financial analysis of options
References and sources
Sources
Our research into the business case has revolved around how to create a
business opportunity and competitive advantage for Crowne Plaza
Canberra by the implementation of the latest ICT in the form of key card
mobile systems (KCMS).
The financial reports of Crowne Plaza and their competitors were analysed
to gain a better understanding of how the Crowne plaza could benefit
financially by implementing this latest ICT development.
Our group member, Moh'D Alsharif has previously worked at Crowne Plaza
as a night manager. He has been a key source of information and has
provided contacts for within the organisation for further information.
The supplier for our KCMS technology, ASSA ABLOY has been contacted on
several occasions for information and quotes.
Page 25 of 45
The data is also drawn from the global website which shares revenue,
daily occupancy rate, and average rate for all the hotels worldwide
www.strglobal.com.
Online journal and articles have been taken into account to assess how
ASSA ABLOY and the KCMS can help create an opportunity for Crown
Plaza.
References
Alibaba 2015, Alibaba, viewed 10 September 2015,
<http://www.alibaba.com/trade/search?
fsb=y&IndexArea=product_en&CatId=&SearchText=vingcard+hotel
+lock+rfid>.
Assa Abloy 2015, Assa Abloy, viewed 10 September 2015,
<http://www.assaabloyhospitality.com/en/aah/com/products/hotel/m
obile-access/>.
Australian Bureau of Statistics 2006, The cost of training Australia's
workers, Australian Bureau of Statistics, viewed 10 September 2015,
<http://www.abs.gov.au/ausstats/abs@.nsf/Previousproducts/1301.0
Feature%20Article152004?
opendocument&tabname=Summary&prodno=1301.0&issue=2004&
num=&view>.
Capterra 2015, Capterra, viewed 10 September 2015,
http://www.capterra.com/hospitality-property-managementsoftware/spotlight/13824/roomMaster/InnQuest%20Software>.
Dell 2015, Dell, viewed 10 September 2015,
<http://configure.ap.dell.com/dellstore/config.aspx?
c=au&cs=aubsd1&l=en&model_id=poweredget630&oc=u421604au&s=bsd&fb=1&vw=classic >.
Imason 2015, Imason, viewed 10 September 2015,
<https://www.imason.com/mobile-app-calculator>.
Intercontinental hotels group 2010, Annual Report and Review 2010,
Intercontinental hotels group, viewed 7 September 2015,
<http://www.ihgplc.com/files/reports/ar2010/docs/ihg_annual_report
_2010.pdf>.
Intercontinental hotels group 2011, Annual Report and Review 2011,
Intercontinental hotels group, viewed 7 September 2015,
<http://www.ihgplc.com/files/reports/ar2011/docs/IHG_Report_2011.
pdf>.
Page 26 of 45
Page 27 of 45
Steering Committee
Reference Groups (Advisors)
IHG (COO)
IHG (CFO)
IT Consulting Services
Assurance Counsellors
Operation Manager
Front Desk Manager
Project manager
IT Manager at Crowne Plaza
Project team
Internal
Procurement officer
IT Personnel
Financial officer
External (Contractors)
Suppliers
Page 28 of 45
Page 29 of 45
Page 30 of 45
Deliverables (outputs)
Start
Finish
Mileston
31/1/201
1.1
KCMS
Hardware
15
1/11/201
6
30/11/20
1.1.1
5
Lock System (wireless card, 1/11/201
15
30/11/20
es
5
1/11/201
15
10/11/20
1
1.1.1. Purchase Lock System
5
11/11/20
15
20/11/20
2
1.1.1. Install Lock System
15
21/11/20
15
30/11/20
15
15
Page 31 of 45
WBS
Deliverables (outputs)
Start
Finish
Mileston
es
1.1.2
1/11/201
30/11/20
5
1/11/201
15
10/11/20
1
1.1.2. Purchase Server
5
11/11/20
15
20/11/20
2
1.1.2. Install Server
15
21/11/20
15
27/11/20
3
15
1.1.2. Integrate KCMS server into ERP 28/11/20
15
30/11/20
4
server
1.1.2. Test Server
15
30/11/20
15
30/11/20
5
1.2
Software
15
1/12/201
15
e1
31/12/20
KCMS Software
5
1/12/201
15
31/12/20
5
1/12/201
15
10/12/20
1
1.2.1. Purchase Software
5
11/12/20
15
15/12/20
2
1.2.1. Install Software
15
16/12/20
15
20/12/20
3
15
1.2.1. Integrate KCMS software into 21/12/20
15
26/12/20
4
ERP system
1.2.1. Test software Integration
15
27/12/20
15
31/12/20
5
1.2.2
15
1/12/201
15
31/12/20
5
1/12/201
15
10/12/20
1
1.2.2. Purchase Application
5
11/12/20
15
15/12/20
2
1.2.2. Integrate App into ERP server
15
16/12/20
15
25/12/20
3
1.2.2. Launch App
15
26/12/20
15
31/12/20
4
1.3
15
1/1/2016
15
e2
10/1/201
1.2.1
KCMS - Server
Mobile Application
Mileston
Mileston
Page 32 of 45
WBS
Deliverables (outputs)
Start
Finish
Mileston
es
1.3.1
8/1/2016
1.3.2
9/1/2016
10/1/201
1.4
Training
11/1/201
6
e3
31/1/201
1.4.1
6
11/1/201
6
20/1/201
6
21/1/201
6
31/1/201
Marketing
6
1/1/2016
6
31/1/201
1.4.2
1.5
1.5.1
6
31/1/201
process
into
marketing
Mileston
campaigns
Page 33 of 45
Page 34 of 45
output value, and then multiply the irregular factor to get forecast value
of year 2016 to 2019.
Our competitor Marriott hotel has launched mobile application for customer
to check-in at all its 500 hotel in the first half of 2014. Its revenue increased
by about 8%. Therefore, it is reasonable to assume 8% increase in revenue
in option 2 and 3. The data is drawn from the global website which shares
revenue, daily occupancy rate and average rate for all the hotels worldwide
www.strglobal.com.
The front desk staff will decrease from 5 to 3, or by 60%. However, HR cost
includes the entire staff in the hotel and front desk staff are part of HR so it
should be much less than 60%. As such, a realistic percentage of the front
desk staff compared to the entire hotel staff is around a 10% decrease in HR
cost for option 2 and 3.
For options 2 and 3, we assumed 8% increase in revenue annually and 10%
decrease in HR cost. The new forecast revenue value in 2015 is 1.08
multiplied the previous forecast value,
1.084
for 2018,
Time
Year
0
1
2
3
4
2015
2016
2017
2018
2019
Room
Revenue
28.97
29.92
30.75
31.63
32.52
Front Desk
Salaries
1.44
1.52
1.58
1.66
1.73
Front Desk
Expense
1.46
1.58
1.62
1.69
1.77
Page 35 of 45
The cost and benefit analysis of Option 1 is shown in Table 6. The calculation
considers the total expenses for front desk expense:
In 2015, the total cost is:
= Front desk salaries + Front desk expense
= $1.44 million + $1.46million
= $2.9 million
The total benefit equals $28.97 million.
The return is:
Total Benefit - Total cost = $28.97 - $2.9 = $26.07 million.
Table 6 - Cost and Benefit Analysis for no change option in $million
Costs
2015
2019 Total
Front desk
1.44
1.52
1.58
1.66
1.73
7.93
Front
desk
Salaries
1.46
1.58
1.62
1.69
1.77
8.12
Total
expense
2.90
3.10
3.20
3.35
3.50
16.05
Benefit
201
201
201
2018
201
Total
Room Revenue
28.9
5
29.9
6
30.7
7
31.63
32.5
9
153.79
Total
28.9
7
29.9
2
30.7
5
31.63
32.5
2
153.79
ROI
201
201
201
2018
201
Total
Costs
2.90
5
3.10
6
3.20
7
3.35
3.50
9
16.05
Benefit
28.9
29.9
30.7
31.63
32.5
153.79
Return
26.0
7
26.8
2
27.5
5
28.28
29.0
2
137.75
27.55
28.28
29.02
+ 1.0553 + 1.055 4 + 1.0555
= $117.31
million
*The NPV calculations has used 5.5% interest rate.
Tim
e
Year
Room
Revenu
e
Front Desk
Salaries
Front
Desk
Expense
NPV
Page 36 of 45
0
1
2
3
4
2015
2016
2017
2018
2019
1.44
28.97
29.92
30.75
31.63
32.52
1.52
1.58
1.66
1.73
1.46
$117.3
1
26.07
26.83
27.55
28.28
29.02
1.58
1.62
1.69
1.77
WBS
#
Deliverables (outputs)
1.1
1.1.
1
1.1.
1.1
1.1.
1.2
1.1.
1.3
1.1.
2
1.1.
2.1
1.1.
2.2
1.1.
2.3
1.1.
2.4
1.2
1.2.
1
1.2.
1.1
1.2.
1.2
1.2.
1.3
1.2.
1.4
1.2.
Material
s
(Hardwa
re)
Equipm
ent
(Softwa
re)
HR
19,872
3,500
9,072
3,700
3,600
Cloud Server
18,705
Identify Suppliers
Purchase Server
Install Server
3,550
43,415.8 3,650
8
1,239
Test Server
3,600
SaaS
Software as a Service
15,895
Identify Suppliers
Purchase Software
Total ($)
3,400
1,495
Install Software
3,800
Integrate
Software
to
KCMS Server
Test software Integration
3,650
3,550
Page 37 of 45
1.5
1.2.
2
1.2.
2.1
1.2.
2.2
1.2.
2.3
1.2.
2.4
1.3
1.3.
1
1.4
1.4.
1
1.4.
2
1.5
1.5.
1
Mobile Application
139,600
Identify Suppliers
3,700
Purchase Application
128,800
3,500
3,600
KCMS
System
Integration
Integrate the entire KCMS
into the Hotel ERP system
Training
Organize Staff Training
3,600
3,600
4,380
780
3,600
Marketing
Include the new check-in
process into marketing
campaigns
Cost
57,600
57,60
0
9,072
173710.
88
113,6
19
29,6401.
5
Overhead Cost 10%
29,640.1
5
General and Administrative Cost 10%
29,640.1
5
Contingency 15%
44,460.2
Total Cost
400,142
The total initial investment for the project is $400,142 (refer to Table 7), with
the breakdown of total investment as follows:
There is an additional annual cloud service fee of $43,416. The project life
cycle is predicted to be five years. Table 8 forecasts the five-year room
revenue, front-desk salaries and front desk-desk expenses and adjusted for
inflation.
Table 8 - Five-year forecast for enterprise cloud option in $million
Page 38 of 45
Year
Room
Revenue
Front-Desk
Salaries
Front-desk
expense
2015
2016
2017
2018
2019
31.29
34.90
38.74
43.03
47.78
1.30
1.37
1.43
1.49
1.55
1.46
1.58
1.62
1.69
1.77
Cloud
server
annual fee
0.04
0.04
0.04
0.04
The cost and benefit analysis of Option 2 is shown in Table 9. The calculation
considers the total expenses for front desk expense. In 2015, the total cost
includes an initial project investment cost of $0.4 million. From 2016 to
2019, there is annual fee of $0.04 million for the enterprise cloud service.
In 2015, the total cost is:
= Front desk salaries + Front desk expense + Initial investment
= $1.297 million + $1.457 million + $0.4 million
= $3.154 million
The benefit (room revenue) is $31.288 million, and the total rate of return is:
Total Benefit - Total cost = $31.288 million - $3.154 million = $28.13
million.
In 2016, the total cost is:
= Front desk salaries + Front desk expense + cloud server annual fee
= $1.37 million + $1.58 million + $0.04 million
= $2.99 million
The benefit (room revenue) is $34.90 million, and the rate of return is:
Total Benefit - Total cost = $34.90 million - $2.99 million = $31.91
million.
Table 9 - Cost and Benefit Analysis for cloud sever option in $million
Costs
2015
2016
2017
201
2019
Total
Front desk
1.30
1.37
1.43
1.49
8
1.55
7.13
Front
desk
Salaries
1.46
1.58
1.62
1.69
1.77
8.12
Cloud
server
expense
0.00
0.04
0.04
0.04
0.04
0.17
Initial
annual fee
0.40
0.00
0.00
0.00
0.00
0.40
Total
investment
3.15
2.99
3.09
3.23
3.37
15.83
Page 39 of 45
Benefit
2015
2016
2017
201
2019
Total
Room Revenue
31.29
34.90
38.74
43.0
8
47.78
195.74
Total
31.29
34.90
38.74
43.0
3
47.78
195.74
ROI
2015
2016
2017
201
2019
Total
Costs
3.15
2.99
3.09
3.23
8
3.37
15.83
Benefit
31.29
34.90
38.74
43.0
47.78
195.74
Return
28.13
31.91
35.65
39.8
3
44.41
179.91
1
NPV for Option 2 (cloud computing) in million dollars
The NPV is calculated using the total initial investment of $400,142.
NPV at begin of 2015 calculation
28.53
NPV = -0.40+ 1.055
31.91
35.65
39.81
44.41
+ 1.0552 + 1.0553 + 1.055 4 + 1.0555 =
$151.79 million
*The NPV calculations has used 5.5% interest rate, 8% increase in revenue and
10% decrease in human resources cost.
Yea
r
20
15
20
16
20
17
20
18
20
19
Room
FrontRevenu desk
e
Salarie
s
1.30
31.29
1.37
34.90
1.43
38.74
1.49
43.03
1.55
47.78
Frontdesk
expens
e
1.46
Cloud
server
annual
fee
Profit (at
the end
of each
year)
Initial
investment
paid at begin
of 2015
0.40
28.53
1.58
0.04
NPV
($
m)
151.
79
0.00
31.91
1.62
0.04
1.69
0.04
1.77
0.04
0.00
35.65
0.00
39.81
0.00
44.41
WBS
#
Deliverables (outputs)
Material
s
(Hardw
Equipm
ent
(Softwa
HR
Total
($)
Page 40 of 45
are)
1
1.1
1.1.
1
1.1.
1.1
1.1.
1.2
1.1.
1.3
1.1.
2
1.1.
2.1
1.1.
2.2
1.1.
2.3
1.1.
2.4
1.2
1.2.
1
1.2.
1.1
1.2.
1.2
1.2.
1.3
1.2.
1.4
1.2.
1.5
1.2.
2
1.2.
2.1
1.2.
2.2
1.2.
2.3
1.2.
2.4
1.3
re)
19,872
3,500
9,072
3,700
3,600
KCMS - Server
18,704.
6
Identify Suppliers
3,550
Purchase Server
6,666
3,650
Install Server
1,239
Test Server
3,600
KCMS Software
Software
15,895
Identify Suppliers
3,400
Purchase Software
1,495
Install Software
3,800
3,650
3,550
Mobile Application
139,60
0
Identify Suppliers
3,700
Purchase Application
Integrate App with KCMS
Server
Launch App
KCMS
Integration
System
128,800
3,500
3,600
3,600
Page 41 of 45
1.3.
1
1.4
1.4.
1
1.4.
2
1.5
1.5.
1
3,600
3,600
4,380
780
Marketing
Include the new check-in
process into marketing
campaigns
Cost
57,600
57,600
15,738
130,295
113,61
9
259,651
.6
25,965.
16
25,965.
16
38,947.
74
350,529
.66
The total initial investment for the project is $350,530 (refer to Table 10),
with the breakdown of total investment as follows:
The project life cycle is predicted to be five years. Table 11 forecasts the
five-year room revenue, front-desk salaries and front desk-desk expenses
and adjusted for inflation.
Table 11 - Five-year forecast for enterprise server in $million
Year
Room
Revenue
2015
2016
2017
2018
2019
31.29
34.90
38.74
43.03
47.78
FrontDesk
Salaries
1.30
1.37
1.43
1.49
1.55
Front-Desk
expense
1.46
1.58
1.62
1.69
1.77
Page 42 of 45
The cost and benefit analysis of Option 3 is shown in Table 12. The
calculation considers the total expenses for front desk expense. In 2015, the
total cost includes an initial project investment cost of $0.35 million.
In 2015, the total cost is:
= Front desk salaries + Front desk expense + Initial investment
= $1.297 million + $1.457million + $0.35 million
= $3.104 million
The benefit (room revenue) is $31.288 million, and the total rate of return is:
Total Benefit - Total cost = $31.288 million - $3.104 million = $28.184
million.
Table 12 - Cost and Benefit Analysis for enterprise server in $million
Costs
201
201
2017
201
201
Total
Front desk
1.30
5
1.37
6
1.43
1.49
8
1.55
9
7.13
Front
desk
Salaries
1.46
1.58
1.62
1.69
1.77
8.12
Initial
expense
0.35
0.00
0.00
0.00
0.00
0.35
Total
investment
3.10
2.94
3.04
3.18
3.33
15.6
Benefit
201
201
2017
201
201
Total
Room
31.2
5
34.9
6
38.74
43.0
8
47.7
9
195.
Revenue
Total
9
31.2
0
34.9
38.74
3
43.0
8
47.7
74
195.
74
ROI
201
201
2017
201
201
Total
Costs
3.10
5
2.94
6
3.04
3.18
8
3.33
9
15.6
Benefit
31.2
34.9
38.74
43.0
47.7
195.
1
Return
28.1
9
31.9
0
35.69
39.8
3
44.4
8
180.
74
8
6
5
5
NPV for option 3 (enterprise server) in million dollars
14
Page 43 of 45
28.53
NPV = -0.35+ 1.055
31.96
35.69
39.85
44.45
2
3
4
+ 1.055 + 1.055 + 1.055 + 1.0555 =
$151.98 million
*The NPV calculations has used 5.5% interest rate, 8% increase in revenue and
10% decrease in human resources cost.
Year
201
5
201
6
201
7
201
8
201
9
Room
Reven
ue
Frontdesk
Salaries
Frontdesk
expense
1.30
1.46
1.37
1.58
1.43
1.62
1.49
1.69
1.55
1.77
31.29
Initial
investment paid
at begin of 2015
NPV
($m)
0.35
151.
98
28.53
34.90
0.00
31.96
38.74
0.00
35.69
43.03
47.78
Profit (at
the end of
each year)
0.00
39.85
0.00
44.45
Page 44 of 45