The Asian Business Case Centre, Nanyang Business School
AFTERNOON TEA AT AT THE PENINSULA HONG KONG
Publication No: ABCC-2007-008 Print copy version: 21 Jan 2008
Sheryl E. Kimes
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Even though Afternoon tea at The Peninsula Hong Kong was extremely successful with both guests and local residents, it seemed that there might be opportunities to increase revenue. You have been asked to t o evaluate the situation si tuation described in the case and then use revenue management concepts to develop ideas on how to improve its performance.
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This case has been prepared by Professor Sheryl E. Kimes, Singapore Tourism Board Distinguished Professor of Asian Hospitality Management at Cornell-Nanyang Institute of Hospitality Management, Singapore . It is based on internal company sources and intervi ews with key personnel from The Peninsula Hong Kong. As the case is not intended to illustrate either effective or ineffective practices or policies, the information presented reflects the authors’ interpretation of events and serves merely to provide opportunities for classroom discussions.
COPYRIGHT © 2008 Nanyang Technological University, Singapore. All rights reserved. Not to be reproduced, stored, transmitted tran smitted or altered in any way without the written cons ent of Nanyang Technologic Technological al University. For copies, please write to The Asian Business Case Centre, Nanyang Business School, Nanyang Technological University, Nanyang Avenue, Singapore 639798, Singapore Phone: +65-6790-4864/5706, Fax: +65-6791-6207, E-mail:
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It’s just after 2.00 pm in The Lobby of The Peninsula hotel in Kowloon, Hong Kong. Afternoon tea, a venerable tradition at the hotel, has just begun.The tables are full and 20 people are already waiting in line for a table. Classical music from the 4-piece string quartet drifts through The Lobby and the clatter of eating, talking and laughing fills the room. Afternoon tea originated in the United Kingdom and has been adapted by many other countries (including Hong Kong) that were part of the former British Empire. It is typically served at 4.00 pm and generally consists of loose tea served in a teapot with milk and sugar along with small sandwiches (usually cucumber, egg and watercress), scones and pastries. The food is often served on a tiered stand. In some places it is sometimes referred to as high tea, although traditionally in England, high tea was a light meal eaten in the early evening.
residents alike, with queues developing every day of the week. In 2007, it was offered each day from 2.00 pm to 7.00 pm at the 210-seat dining hall - The Lobby . On weekends, the queue for tables would form by 1.30 pm as customers arrived early so that they would be among the first to be seated. By 3.00 pm or 4.00 pm, the queue could reach over 50 people and the wait would often exceed 45 minutes. Reservations were not accepted, but hotel guests and VIP customers were given preferential treatment and did not need to wait in the queue. On average, 408 guests were served Afternoon tea each day with a slightly higher demand on weekends. [See Table 1.] Over a three-month period in 2007, the daily number of guests served ranged from 287 to 537.
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The Peninsula Hong Kong 1 opened in 1928. In July 2007, the rates for its 300 rooms and suites ranged from HK$3,700 – HK$6,500 for rooms and from HK$6,000 – HK$48,000 for suites. 2 The hotel had eight restaurants, a spa and numerous upscale retail stores. It had received a number of awards for quality and was considered one of the best hotels in the world.3
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Table 1 Average Number of Guests by Day of Week [3-month period in 2007] Day of Week
Sunday Monday Tuesday Wednesday Thursday Friday Saturday
Average No. of Guests
449 379 374 370 404 433 450
For the Afternoon tea, the dining room was split into two parts with 48 tables for four and 3 tables for six. [See Figure 1.] The tables were comfortably spaced with plenty of room to allow for the movement of staff and guests. The queue line was located between one side of the dining room and several retail shops. Customers could chat, take pictures of the lobby, read tour books or people-watch while waiting to be seated.
In 2006, the Hong Kong hotel market was thriving and there were 47,128 hotel rooms, with 10,809 in higher-priced hotels. Higher-priced hotels averaged 85 percent occupancy with an average daily rate of HK$1,691. Approximately 35 percent of higher-priced hotel revenues came from food and beverage and about 25 percent of expenses were attributable to food and beverage operations. The gross operating A host constantly surveyed the dining room looking margin (before taxes) was about 35 percent. 4 for vacant tables. Once a table was available, he would mark it down on a piece of paper, hand it to the Afternoon tea at the Pennisula Hotel was started in customer at the head of the queue and escort the the early 1980’s. Since then, it had become extremely party to the designated table. On his way back, he popular with both tourists and local Hong Kong would look for other available tables and then seat the next party, should another table be free.
1 2 3 4
For more information on Hong Kong, please see Appendix 1. The exchange rate was HK$7.82 to US$1 as at 1 July, 2007. For more information on The Peninsula, please see http://hongkong.peninsula.com/ Horwath Consulting.(2006). Hong Kong Hotel Industry Review 2006.
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ABCC-2007-008
Figure 1 Peninsula Lobby
Door
Dining Area
Dining Area
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Shop
Kitchen
Elevator
Front Desk
While Afternoon tea attracted many repeat customers, new customers were often confused as to how to get a table. When they walked in through the main entrance of the dining hall and noticed the bustle, they were often uncertain of what to do or where to go as the queue was not particularly visible from the main entrance. They frequently approached a server or manager to ask for a table. Since tables were generally not available, the guests were directed to the queue.
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A manager assigned to each side of the dining room ensured that the service flow was maintained, and informed the host when tables became available. They also helped to clear and reset tables, if necessary. The kitchen was located at one side of the dining room and servers walked back and forth picking up and delivering menu items or returning used dishes. When guests had finished their meal, the table would
be cleared, reset and reseated in approximately three minutes.
Afternoon tea attracted a large number of couples as well as some parties of 6 to 8. In July 2007, about 70 percent of the guests of The Lobby ordered the Peninsula Afternoon tea which was then priced at HK$248 per person and HK$368 for two persons.The Peninsula Afternoon tea service offered each customer a choice of teas and an attractive multi-tiered tray of assorted sandwiches, scones, pastries and other sweets. On average, customers stayed at the table for about 45 minutes, with some customers lingering much longer.The pace of The Lobby was fast, the music pleasant (and definitely audible) and light from its signature chandeliers was augmented by light streaming in from the outside. A fair number of guests asked their server to take pictures of them at the table so that they could preserve the memory of their Afternoon tea experience.
ASSIGNMENT
You have been asked to develop a plan for increasing Afternoon tea revenue by 10 percent. Obviously, Afternoon tea is very popular and busy, but what could you do to make it even more successful? Be sure to consider how they can better manage their space, their timing and their pricing.
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APPENDIX 1 HONG KONG FACT SHEET
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Geographic Data
Location
Eastern Asia, bordering the South China Sea and China 1,092 sq km Subtropical monsoon; cool and humid in winter, hot and rainy from spring through summer, warm and sunny in fall
Land Area Climate
People
Population Age structure
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Population growth rate Life expectancy at birth Ethnic groups Religions Languages
Literacy rate (population 15 years and older)
6,980,412 (July 2007 est.) 0-14 years: 13% 15-64 years: 74% 65 years and over: 12.9% 0.561% (2007 est.) Male: 79.0 years Female: 84.6 years (2007 est.) Chinese 94.9%, Filipino 2.1%, other 3% (2001 census) Eclectic mixture of local religions 90%, Christian 10% Chinese (Cantonese) 89.2% (official), other Chinese dialects 6.4%, English 3.2% (official), other 1.2% (2001 census) 93.5%
Economy
GDP at current market prices GDP—real growth rate GDP—per capita at current market prices Inflation rate Labour force
Purchasing power parity – US$258.8 billion (2006 est.) 6.8% (2006 est.) Purchasing power parity – US$37,300 (2006 est.) 2.2% (2006 est.) 3.63 million (2006 est.)
Source: Central Intelligence Agency. The World Factbook. Retrieved 19th November, 2007, from https:// www.cia.gov/library/publications/the-world-factbook/geos/hk.html
