Final Project Hotel "Sunflower" Analysis by Dzmitry Aleinik

EXECUTIVE SUMMARY

This following consultancy project is written for the three-star hotel Slunchogled in Golden Sands Resort, Bulgaria. Our task was carefully to analyze the existing Macro-, Industry- and Microenvironment in which the hotel operates, then to evaluated the hotelâ&#x20AC;&#x2122; s marketing mix concept and on the base of the received information to make a thorough SWOT analysis. We tried to propose rational and substantial ideas for improving the overall performance of the hotel and reach considerable occupancy and reasonable profits. For that purpose we choose the most appropriate according to us marketing strategies to be applied and led by them we developed a new modified marketing plan. There we expose all the innovations and suggestions we propose for the further enrichment of the Hotel Slunchogled product and services in the following three years and finally based on the anticipated outcomes of our actions we evaluate the effectiveness and efficiency of our results.

PREFACE We are a group of five students studying in International College Albena and this is our final diploma project for the third year of our education. We are given the assignment to work out a consultancy project for the three-star hotel Slunchogled in Golden Sands Resort. The members of our team are â&#x20AC;&#x201C;Nevena Zhekova, Irina Mitkova, Boryana Radkova, Ventsislav Rubanisti and Dmitry Oleinik. Our task is to analyze the business establishment and to offer feasible and applicable strategic options for further development during the next three years. Our aim is to give recommendations which will improve the product and services in the hotel as well as to improve and achieve reasonable financial results in future. Our analyses are based on primary information, which is given to us by the Project coordinator as well as on our personal observations of the product and services of the hotel.

I. Mission

Our hotel is a small 3-star establishment, offering a variety of relaxation, entertainment and business opportunities designed to satisfy the needs of both the middle class and upper middle class, business and leisure tourists. The efforts of our helpful and friendly staff are aimed towards the provision of high-level professionalism, friendly welcoming attitude, and high quality of service. Through the achievement of outstanding experience and exceptional customer value, we want to establish a position on the market and generate reasonable profit. Guests are welcomed to experience a pleasant stay in Hotel Slunchogled as we will take care of the rest! We are aware that the staff happiness is a main tool for our success and that is the reason for us to try to assure a nice and favorable working atmosphere. We want to make each of our employee feels as an integral part of the establishment and personally involved in the achievement of our goals, by assuring constant training, competitive payment and employee benefits.

II. Business description of Hotel Slunchogled Hotel Slunchogled functions as a place for accommodation of leisure and business tourists as well as for conducting different training courses and conference tourism. It is a 3-star establishment according to the Bulgarian categorization standards. It is opened in March 2004 and works with guests all-year-round. It is situated in the resort complex Golden Sands on the Black Sea coast, only 300m away from the sea, and 14km northwest from Varna on the main freeway Varna â&#x20AC;&#x201C; Golden Sands between hotel complex Journalist and restaurant Trifon Zarezan. The owners have invested 1 500 000 BGN own capital into land, building and construction, furnishing and equipment, shuttle bus and a hotel & restaurant software program. For this purpose they took a long-term debt of 633 600 BGN that should be repaid within 10 years at 10 % interest rate. The owners do not take direct part in the management of the hotel, so they have appointed a Hotel Manager who is responsible for the overall operation of the hotel. Hotel Slunchogled offers comfortable accommodation into 21 double rooms, 1 single room and 3 suites. The overall capacity is 50 beds. The rooms in the hotel are spacious and furnished in bright colors. All rooms have balconies with sea view and are equipped with air conditioning, telephone, satellite TV, minibar, and bathrooms with bathtub. The hotel disposes of a 3-star restaurant with 50 seats (and during the summer period the capacity could be extended with more 40 seats in the summer garden), and a lobby bar with 10 seats. A free-of-charge parking with 8 lots is available to the guests. The hotel offers also two conference rooms â&#x20AC;&#x201C; with capacity of 30 and 15

seats. Both rooms are fully equipped with multimedia, overhead projectors, flip charts, and copy machine; fax machine, computer, and Internet connection. The hotel offers the following extra services: Internet access, fitness room, sauna, billiards, safe, VCR and video movies, iron and ironing board placed on each floor. The guests of the hotel can order additionally laundry service, a hairdryer, hairdressing services, massages and manicure. The main guests of the hotel are leisure tourists, corporate guests and business tourists. 90 % of them are foreigner mainly from Russia and Germany. In 2004 the hotel reached 40 % occupancy and the restaurant reached 25 % occupancy.

III. Macro environmental analysis 1. Bulgarian Economy during 2004 The Bulgarian economy continues to demonstrate positive results during 2004. A proof for that are the main macro economical indexes as well as the assessments of many European organizations. The interest towards the country has increased considerably in the recent years and the level of the foreign investments reached €2 milliard in 2004, which are about two times more than in 2003 and 9.2% of the total GDP for the year. The economic growth of 5.6% in 2004 is even greater than that in the countries from the EU and with 1.6% higher than in 2003, when it was 4.3%. The government expects the same pace in the national economic growth for the next several years, as for 2005 the GDP is expected to be with 5.2 – 5.3% higher than in 2004. The interest rate that was about 5-6% in 2004 and is expected to fall to 2-3% in the future, which is the average in the other European countries. The improved favorable conditions for obtaining a bank loan lead to boom in the given credits in 2004 and increase of 49% compared to 2003. That is why the National Bank intends to slow down that process in 2005 and keep it to 2530%. The new funds obtained by the businesses give the opportunity new modern technologies to be introduced and the production cycles to be improved. The index for the inflation is also an evidence for the steady environment in the country. The percentage has increased to 6% in 2004, compared to 2.3% in 2003, but it was due mainly to the increase of the fuel prices on the international market and the electricity, telephone and transportation on the internal market. The forecasts anticipate price stability in the future and the level of the inflation to be between 3.5 – 5% in 2005. The unemployment rate reached its lowest point up to now in 2004 – 12.1%, when it was 13.7% in 2003. It is still higher than the average for the West European countries, but a constant policy towards reducing it is applied by the government through different programs. The future positive expectations predict that in 2005 the unemployment will fall to 10.9% although the

percentage of the long-term and the young unemployed will probably remain an important matter of concern. Along with this the problem for the real growth in the average income of the population has to be overcome. The efforts of the government in that sphere are not so successful, having in mind that the actual growth in 2004 is only 0.2%. The average monthly wage reached 301BGN in 2004 and it was 284BGN in 2003, but compared to the newly employed and the inflation these figures are not promising. The Bulgarian labor force remains one of the cheapest in Europe – 2.74BGN per hour and the wages in the hospitality industry – one of the lowest – 184.50BGN average per month. That is the main reason greater part of the young and qualified labor force to be attracted by the foreign market, which offers more favorable conditions. Those figures cannot be so reliable, due to the fact that there are many entrepreneurs claiming lower employee wages, because of the high tax burden. The authorities hope that with the introduction of the new taxation system in 2005 the employers will increase the salaries and the average monthly wage will reach 344BGN and will indicate a more significant growth in the personal income of the population. Although the country has to catch up with the other countries from the EU in many aspects, the figures demonstrate that the situation is improving. The increased productions as well as the foreign investments are prerequisite for a future positive development. It will lead to more open working positions and so higher personal incomes. The rivalry between the entrepreneurs will be enhanced and thus improving the quality of the products and the competitiveness of Bulgaria on the international market. (Appendix 1- Main economic indexes) (Sources of information – www.nsi.bg; Capital newspaper, edition 13, p.3; Manager Magazine - January, February 2005)

2. Bulgarian Politics Having in mind the future integration of Bulgaria in the European Union (EU) in 2007 and the supervision of the International Monetary Fund (IMF), each decision that has been taken during the recent years was in correspondence with the slightly contradictory requirements of these two organizations. The IMF insists on constant reduction of the national deficit, achievable through the collection of more taxes, while the EU asks for higher economic growth and the creation of favorable business environment. That is the reason the reformations that has been introduced the last several years to be directed towards reduction of the tax burden and stimulating the future development and enlargement of the businesses. Following that policy, the corporate tax is being reduced every year. In 2003 it was 23.5%, then in 2004 it was 19.5% and from the beginning of 2005 it fell to 15%. The aim of the government is to attract more foreign investments as well as the

owners to generate more profit and be able to reinvest it. The intention of the authorities is to lower it to 12.5% in 2006, which will make it closer to that in the other European countries. Another tendency in the recent years is connected with the Social Securities. They were paid in proportion 75: 25 up to 2005, which means that the employer was obliged to pay 75% of them and the employee only 25%. Since the beginning of 2005 this correlation was changed to 70:30 and the entrepreneurs can benefit of it by reducing their labor expenses by 1.55 to 2.25%. From 32.2% in 2004, the sum spent on Social Securities fell to 29.55% of the employee’s wage plus additional percentage between 0.4 and 1.1% paid for labor caused incidents and illnesses, depending on the risk included in the profession. This percentage is 0.5% for the hospitality industry so the total amount for Social Securities accounts for 30.05% of the employee’s wages. The government plans to equalize both parties and turn the proportion into 50:50 and reduce considerably the tax burden and also urge the entrepreneurs claim their real personnel expenses. Slowly the level of the minimal salary has also been increased the last several years. In 2003 it was 110BGN, in 2004 – 120BGN and now in 2005 it is 150BGN. This caused many small businesses using not qualified labor force to think about their future expenses that will increase considerably. That step will not result in raise in the average salaries or in the personal incomes as a whole, since its aim is to reduce the poverty in the country. In order the purchasing power to be increased a reformation in the personal income taxes has also been introduced from the beginning of 2005. A total decrease of 7% was made. The limit for the minimal taxed sum was changed from 1440 BGN income per year to 1560 BGN. The percentage in the different groups of incomes varies according to the taxed amounts. (Appendix 2) The VAT (Value Added Tax) is one of the taxes that have not been changed in the recent years, although it is comparatively high. In 2005 it stays the same as in 2004 and 2003 – 20%, but the plans are to be lowered to 15% by the year 2010. According to the Bulgarian law all the companies whose revenue per year exceeds 50 000BGN are obligatory to register profit amounts of VAT and the turnover is then taxed with 20%. One of the ways all those favorable for the entrepreneurs reformations to be compensated is by introducing increase in other fields for taxation such as the licenses for categorization in the hospitality establishments and some additional facilities (beaches, ski slopes), which have been raised by 25% in 2005. (Appendix 3) Categorization has been also introduced for the beaches and the valid so far three years categorization for establishments was changed for an indefinite period of time.

Having in mind that in June 2005 there will be governmental elections in Bulgaria, the entire situation cannot be considered as so stable and the current projections and expectations about the future are not so reliable. (Sources:

Capital newspaper, edition 3, 2005, p.9; Manager Magazine, edition 1, 2005;

www.econ.bg, www.government.bg)

3. Social and Cultural factor The social classes according to the Classification of Social Grades (Source: Hotel Management reader Module 10) are: Upper-middle class (A), middle class (B), lower-middle class (C1), skilled working class (C2), working class (D), and people at the lowest level of subsistence (E). According to this classification we can say that in Bulgaria the most prevailing social classes are those of the lower-middle, skilled working class and working class in difference with the other countries, where the representatives of the middle class are the most. A negative tendency in the last years is the overall ageing of the population which leads to more senior citizens, who in Bulgaria compared to other countries are with very low incomes and this makes the entrepreneurs loose a great number of potential customers.

The

educational

system in Bulgaria is undergoing changes during the last years, bringing up to date many educational programs and designing them according to the needs of the labor market. These changes are made in order to improve the quality of education and reach the standards of the countries in the EU. The result is better educated people with higher expectations and increased demand for quality products and services. The improved working conditions worldwide give the opportunity for traveling to more people and they are willing to try something new and interesting. The issues about healthy way of leaving are becoming more popular and therefore the customers are ready to pay more money for better quality and service. (www.nsi.bg, www.mi.government.bg)

4. Demographic factor In 2004 the total number of the Bulgarian population is 7 761 049 people. It is decreased compared to the previous year by 0.5% to 7 537 929 people. The tendency of decreasing of the population of the country continues also in the year 2005. The average age of the population is 41 years. In 2004 the average life expectancy of the population was 72 years. The age structure in 2004 is the following: 0 â&#x20AC;&#x201C; 14 years: 15.1%;

15 â&#x20AC;&#x201C; 64 years: 61.6%; 65 years and over: 23.3%;

The economically active population by the end of 2004 is about 4 782 000 people which is 61.6 % of the total population. Compared to the previous year, this category has increased with about 35 000 people. As a whole, Bulgaria faces serious demographic problems in the last few years. The strongly advancement in age of the Bulgarian population could be a problem after several years in finding work force. The large number of people who emigrate in other countries in order to find a better working and payment conditions as well as options for careers causes one of the reasons for the decrease in the population for the last years. Some forecasts project that after 2007 the emigration process will become higher because of the expected jump in the prices without equal increase in the income of the population. Another reason is the low birth rate in the country 9% in 2004.

5. Technological factor Nowadays technologies are very important issue in the hospitality industry. Many hoteliers and restauranteurs use more and more technologies in their working process. Today’s technology increases effectiveness and efficiency, increases the quality of the offered products and services, increases safety and security, saves guest service time, and eases human resources issues. Almost every hotel uses computerized technologies and systems for documentation, online reservations, accounting and other important matters. In order to be competitive on the market hospitality establishments have to follow frequently the trends in technologies and innovations and constantly improve and update their products and services. The most widespread and good hotel software is Fidelio. In Bulgaria this computer program is not very often used due to financial considerations. Lately, Point of Sale (POS) software programs became more popular and used in the country. The newest product of that kind on the market that is sold by the company UCS that offers a software programs divided into mobile modules for each department with possibility to be connected into one system. These modules are Shelter – for hotels, R-Keeper – for restaurants, Storehouse – for storehouses and Timekeeper – for the personnel. Another company on the Bulgarian market is the company Dolphin that offers a large variety of software programs for different establishments. The one for the catering establishments and for the accommodation establishments is Elit ™ that is widely used by many hotels and restaurants in the country. Both companies offer training and support. A negative fact is that the worldwide trend of paying by credit cards is not so well developed in the country yet. Such terminals have only the bigger hotels and restaurants as well as few international shops that have branches in the bigger cities. Problem in Bulgaria is that buying

new equipment or software products is often expensive and sometimes there is no support service after that. Also there are not so many companies offering spare parts and hotels and restaurants have to wait weeks for their delivery.

IV. Industry analysis

Bulgarian tourism is continuing to develop dynamically. Both the continually increasing number of tourists and therefore the revenues from tourism approves this. The World Tourism Organization that shows Bulgaria as a successful tourist destination in Europe confirms these favorable results also. The tourism industry in Bulgaria gives the opportunity to entrepreneurs for starting new business, creating new job positions and thus creating conditions for economic growth. During 2004 Bulgaria was visited by 4 629 854 foreign tourists which is with 14.38% more than in 2003. About 87% of all visitors entered the country with the purpose of leisure â&#x20AC;&#x201C; 4 010 326 people, which is 13.56 % more than in 2003. 271 857 people visited the country for business as their number increased by 26 % in 2004 compared to 2003. The tourists from Central Europe and EU continue to increase, as the countries from EU are the most important tourist market for Bulgaria, led by Germany and Greece. The interest from British and Scandinavian tourists increased recently, indicating an increase of 60 % in 2004, which is a promise for Bulgaria to host new great flow of visitors in the future. The Bulgarian tourism industry is mainly private owned â&#x20AC;&#x201C; 98 % of it, characterized by modern tourist infrastructure and continuous improvement of the product quality. The standard of the establishments is still medium, but currently about 70 % of them are already renovated and modernized. Another option for achievement of better quality is the opportunity many hotels to join

the big international chains through franchise and/or management contract. The places for accommodation have increased by 50 000 beds only the recent several years as a result of the intensive building processes. In 2004 there were about 330 000 beds, 180 000 of which in 3-, 4- and 5- star big hotels and the other 150 000 beds are dispersed between the small family owned properties, and the lower class places for accommodation. The Black Sea coast still keeps its leading position in the Bulgarian tourism industry and about 70% of the beds are located there, 20% are in the city hotels, and 10% are in the winter resort. During the last 2-3 years the tendency changed and the hotel investments became more dynamic inside the country, especially in the winter resorts, as they are one of the new popular destinations for skiing in Europe. In case that the investments and the development of modern sport infrastructure in them continue with the same pace in the next few years, the Bulgarian winter resorts have the potential to become as popular tourist destination as the summer resorts and therefore generate similar revenues. (Hotels & Restaurants Magazine, edition 20/ May 2005, magazine Tourist Markets â&#x20AC;&#x201C; edition 5/May 2005) The expected entering of Bulgaria in the European Union in 2007 will bring many changes in the country some of them in the hospitality industry. One of them is the newly accepted law, which states that all F&B establishments must have separate seating areas for smoker and nonsmokers. Bulgaria accepted this law on January 2005 but there is a grace period till 1 July 2005. The Union of private hoteliers and restauranteurs forecasts that at least 20% of the all F&B establishments would bankrupt because they will not manage to allocate their seats in accordance to the new law. Another change for the Bulgarian F&B establishments is the new obligatory requirement to update their kitchen equipment according to the European standards of the systems ISO 9001 and HACCP till the end of 2006. Now this equalization is difficult for the Bulgarian restauranteurs and hoteliers because first, there is a shortage of certified companies who are able to introduce the system and maintain the training programs to the personnel and second, because this leads to extra expenses for the owners of F&B establishments. If all establishments do not fulfill the requirements of the EU in time, Bulgaria will have to pay fines. (www.cash.bg/br07-05/iko-4) Another requirement that owners of hospitality establishments must fulfill was accepted February 10, 2005. It forbade the existence of two different price lists (with two different currencies) for local people and for foreigners. This was a common practice in many hotels in the recent years, especially in the resorts, visited mainly by foreigners. The reason for it was the great differences in the social status between the Bulgarians and the foreigners and the will of the

entrepreneurs to be attractive for both markets. Bulgaria will have to manage with them before the entering in the EU, if not there will be fines again. (www.netinfo.bg) Bulgaria strives to be more and more competitive on the world tourist market and to offer quality product and services by attracting tourists in new interesting destinations everywhere in the country. The high level of competition in most of them gives good opportunity for their fast development in accordance with the international standards.

Tourism Industry in the Region of Varna The tourism is one of the main economic branches in the region of Varna. The region is a popular international destination offering favorable climate conditions, 17 km long beaches, recreational, rural, congress and spa tourism opportunities, many natural reserves and interesting historical spots. The city and the whole region offer great variety of entertaining places that supplement additionally the natural resources and assure nice stay of the visitors. There are many restaurants of all kinds, discos, amusement parks, casinos, bingos, and sport opportunities. Varna hosts several significant national and international events during the summer each year. There are 5 big sea resorts in the district - Golden Sands, Saint Konstantin and Helena, Riviera, Sunny Day and Kamchia and three of them have won the best beach international award – “Blue Flag”. They comprise 264 hotels, 128 of which 3, 4 and 5-star most of which operate only short period of the year due to the seasonality in the customers’ demand (May-October). About 30% of the total overnights in the country are realized in the region of Varna each year and between 85-90% of them are realized by foreigners. In 2004 645 381 tourists visited those resorts, 453 678 of which foreigners. Golden Sands, St. Konstantin and Helena, Riviera and Sunny Day are popular destinations on the international market since long time ago and during the years they have built up their reputation as an average class cheap ones. That is why in the current situation the prices of the services offered can not be increased, although that the tendency is most of the newly built hotels to be high class and their quality to be in conformity with all the international standards. The greatest parts of the foreign visitors coming to the Black sea coast are representatives of the mass tourists and are very price sensitive. On the other side the European tourists are actually the reason these resorts to become too expensive for the average Bulgarian and small percentage of the locals to prefer them. Golden Sands is the biggest resort on the North part of the Black Sea coast, located on 17km away from Varna. Except for the long 3.5km beach strip, there are a lot of very famous and ancient mineral water springs in it, combined with very beautiful forests protected as a National park. There are 5 five-, 24 four-, 35 three- and 15 two-stars hotels, holiday clubs, two villa complexes and 10

luxury villas in Golden Sands. Most of the hotels are private, corporation or consortium properties that are either totally new constructions or completely renovated and modernized old ones. The mass building recently in that area and in St. Konsatntin and Helena resort have led to a high density and overpopulation and at the same time to endangering of the ecological balance in them. The purifying water systems and the electricity stations are not planned to carry out such a great capacity. Currently they have to handle about 34 000 beds with the tendency to reach 50 000 in the next few years, when they are designed only for 19 000 and the municipality did not undertake any actual actions up to that moment. Although the great potential of the area and the desire of the entrepreneurs to build up its new image as destination on the international market, the existing discrepancies become a reason the foreign tourist to leave the county disappointed in many aspects and thus Bulgaria to lose many funds. Such frustrations cause the working processes of the constructions that continue even during the tourist season, because of the lack of control. This leads to enormous amount of refused reservations and shrinkage of the anyway not long season. Another part of the tourist product that the guests often dislike is the bad infrastructure in the country (airports, highways, and the lack of clean and maintained green areas). A problem that has existed for many years in the spot of Golden Sands is the landslides. Many hotels are built in a short period without thoroughly designed plans and now they suffer problems with landslides; the roads are also being closed very often as it going to happen during the summer 2005 and the attractive â&#x20AC;&#x153;Panorama Roadâ&#x20AC;? probably will not be opened. The result of the different pace of progresses between the private and the social institutions results in many financial losses for both parties. The municipality of Varna accepted a strategy for the future development of the tourism in the region, which is planned for the years between 2006 and 2013. As the most prioritized points for investments are the infrastructure, the superstructure and the transportation improvements and accessibility, but up to that moment the entrepreneurs can just hope that there will be left any tourists who still desire to visit Bulgaria until that time comes.

(Sources of information: : www.varna.bg, www.goldensands.bg, www.varna.info.bg, , www.moreto.net, magazine HoReMag, Jan., March , May2005www.barda.bg)

V. Micro Analysis

General overview of the city The city of Varna is the third largest city in Bulgaria and the largest city in the northeastern part of Bulgaria. It is composed of 12 municipalities with а total population of 465 012, which is 5.4% of the whole population in the country. The greatest part of the people live in the city of Varna - 70 % (346 000 people). Varna is an important communication, economical and tourist center, generating 5.4% of the total national GDP in 2004. The city takes third place in the country by international investments. The level of unemployment is 5.26 % in 2004, which is about two times less than the average for the country (12.1%). Another positive index is that the level of education in the socalled “sea capital of the country” is comparatively high – 25% of the people have graduated universities and 50 % have graduated high schools. There are 30 600 students now studying in 8 universities in Varna. The figures demonstrate that the city of Varna is an attractive place for future investments and one of the cities that offer favorable environment for operating a business and for living.

Infrastructure The infrastructure in the region is one of the well developed in the country, accessible by road, rail, sea and air transportation links by many national and international destinations. Despite that it is much beyond the international standards and those flows in it bring a lot of unpleasant emotions to the tourists visiting the region. Since there is no subway, the buses are the means of public transportation. They cover all the neighborhoods and the near resorts and villages but they run in inconvenient hours (not enough early and late transportation). Since the beginning of 2005 the Varna International Airport, which is the second biggest airport in the country and is the main carrier of tourists, was given on concession to the international company Copenhagen Airport. It plans to make improvements in the amortized, old technology and fields, to improve the slow level of services and up to the end of 2008 to open a completely new terminal. The number of its passengers has increased by 20% in 2004. In 2005 33 international companies are going to assure charter flights for the visitors. The port of Varna is the largest port complex in Bulgaria. Its strategic location makes it a gateway between Europe and the Middle East. Shipping companies operate regular lines to Istanbul, Athens and other cities in the Western Mediterranean. The city is connected with Western Europe by railway (Varna-Rouse) and the corridor "Rhein-Main-Danube".

Marketing intermediaries

There are quite a lot of representative offices of all the national and regional media intermediaries in Varna, such as radios, televisions, newspapers and magazines. There are several magazines specialized on topics and trends in the field of the hospitality industry, which have offices in the sea capital of the country. These are Tourist Market, HoReMag, Happy Weekend, Bacchus, Gulliver, etc. A variety of advertising agencies on the Varna’s market is also available. Some firms are specialized in the preparation of advertising materials - “Extreme Bulgaria”, “Euroreklama”, “Tiholov” etc.

Financial intermediaries The financial intermediaries are of great importance for those, who operate in the field of the hospitality industry, because most of them need a financial support in order to start their own business. Varna’s region offers great variety of financial institutions such as banks, which give a variety of possibilities to the entrepreneurs, so they can choose the most appropriate for them. In Varna they are 28 and some of the most famous are SG Express bank, Raiffeisen Bank, Central Cooperative Bank, etc. The main representatives of the financial sectors have their own offices in the sea resorts such as “Golden Sands” in order to ease both the foreign visitors and the entrepreneurs.

Suppliers There are many supplying companies, operating in the Varna region, delivering all kinds of goods and working with their own means of transportation in order to facilitate the supplying process. There is a strong competition among them, so they regularly offer promotional prices of the products. The main chain supermarkets, operating on Varna’s market are Metro Cash & Carry, Piccadilly, Burlex Ltd., etc. Some of the most popular supplying companies for food and beverage goods are “Mekom”, “Boni Oborot”, “Festa Holding”, “Bulbrew”, “Phoenix”, “Chicko”, “Ice Food”, “Richie”, etc. Leader on the market of selling alcoholic beverages are “Begein” Ltd. and “Vodolei”, which offers most of the high-class beverages known on the Bulgarian market. All of them have good reputation and are preferred, because of the quality of their products and the frequency of the deliveries.

Distribution channels As a sea capital of the country, the city hosts the main headquarters of many tour operators and travel agencies. Famous international brands operate in Varna and in the near resorts - “TUI”, “ITS”, “Thomas Cook” and they bring the major foreign tourist flow to the country. Some of the

Bulgarian companies specialized in planning and organizing of leisure and congress trips in Varna are “New Balkan Tours”, “Alma Tour”, “Prista Tour”, “Inter Tour”, “Elita Travel”, and “Bohemia”. Important advantage of each of these tour agents is their good image on the international tourist market and the variety of their proposals.

Current competitors and assessment of their strengths and weaknesses The sea resort Golden Sands is a place where many hotels are located and their target markets are leisure tourists, which leads to a strong competition in the region. We determine as our main competitors: hotel Exotica, hotel Rai, and park hotel A la Fiesta. These hotels are situated near hotel Slunchogled. All of them are 3-star hotels, and offer capacity, facilities, services and prices similar to those offered by hotel Slunchogled. (Appendix 4) We think that hotel Exotica is the major competitor of hotel Slunchogled because it has almost the same capacity, similar facilities and is offering the same services. That hotel has even more advantages as it disposes of a swimming pool, sports facilities and greater number of additional services. Hotel Rai and hotel A la Fiesta are in a cloze proximity to hotel Slunchogled and are offering similar capacity, facilities and services, but both do not have conference facilities. So they are also competitors but their strengths are more expressed concerning the leisure visitors not the business and conference visitors. (Sources: www.goldensandshotels.bg, www.goldensands.bg, www.varnahotels.net)

Threat of entry of new competitors The ever growing popularization of Bulgaria as a tourist destination made it preferred investment opportunity both for Bulgarians and foreigners. Currently, there is interest towards the sea resorts and more specifically those in the Varna region and the Sunny Beach (district Bourgas), but this process is going to slow down soon, since the market is already over saturated. Another reason for that is the seasonal character of these hotels and the difficulties for every new establishment to create a brand name and to gain market share in that competitive environment. Only the big hotels or those that are parts of popular international chains will continue to invest in the field. Many of them have the brand name of the main tour operator companies carriers of the main flow of foreign tourists on the national market – TUI, ITS (Iberostar, RIU, Primasol) and Thomas Cook. Different is the situation with the small hotels. Less are the ones who dare to enter the market and compete with the famous consortiums, even those who exist on the market long time ago are endangered of losses. The statistics show that 90 % of the visitors on the Black sea coast prefer to stay in larger hotels and only 10% in small family hotels. In this case only the unique

features and the aggressive promotional campaign, combined with the search of new markets can be the base for their success.

(Sources for the whole analysis: www.varna.bg, www.moreto.net, www.varna.info.bg, www.varnabg.com, HoReMag magazine, Tourist Markets magazine)

VI. Internal analysis

1. Market segmentation and target markets The fact that hotel â&#x20AC;&#x153;Slunchogledâ&#x20AC;? offers leisure and conference facilities, means that it is appropriate place for accommodation for a wide range of people. The prices as well as the services offered are purposed to satisfy the taste of the middle class foreigner and the Bulgarians with income above the average. The leisure tourists are the basic target market in the summer and in the other seasons the hotel operates mainly in order to attract business and corporate clients. During the first operational year the visits of the corporate clients were the most and 90% of the guests were foreigners, mostly from Russia and Germany. The main purpose of their stay was conducting of different types educational courses, which shows that the management of the establishment did not manage to take advantage of its location and the potential leisure group of customers. 2. Evaluation of the product â&#x20AC;&#x201C; Product mix 2.1. Place Hotel Slunchogled is situated in a popular as tourist destination area that offers a wide range of entertainments combined with many natural treasures and that is one of its greatest advantages. The entire zone is easy accessible and public and private bus lines run through it on a regular basis, connecting it with all the cities and resort in the region. The hotel is placed on a small hill, 300m away from the sea. It is in close walking distance to all the attractions in the resort, the bus stations as well as to the beach itself and at the same time

away from the main stream from the noisy construction spots and the crowd. The main disadvantage of the hotel’s location is that it is built near to a risky zone endangered by earth slides. 2.2. Product Hotel Part - Hotel “Slunchogled” offers the guests accommodation in 21 double rooms, 1 single room and 3 suites. The total capacity of the hotel is 50 beds. All the rooms are large, furnished in bright and warm colors that predispose to nice and calm rest. Each of them has balcony with incredible sea view and is noise isolated, which is a great advantage for the hotel. The rooms are equipped with air conditioner, satellite TV, mini bar, direct dial telephone, Internet connection, and bathroom with bathtub. There are rooms for non-smokers, which is conformity with the new requirements of the quests. The facade of the whole building is colored into orange-yellow, light beige and green colors that are explicable by the name of the hotel, which means sunflower. The property of the hotel is very well maintained. It possesses own hydrophore, which solves its problems with the water pressure. The electricity is the main source of energy, which results in more expenses for the establishment. The hotel daily operations are eased by the use of a software program of the company Dolphin – Elite ™ that consists of two connected modules for the hotel division and the restaurant division. This program is exceptionally fitting the needs of the hotel and the restaurant and is user-friendly. Restaurant and Lobby Bar - The hotel disposes of restaurant with a capacity of 50 seats, corresponding to the beds capacity and more 40 seats are planned to be available in the summer open-air terrace from 2005. Its interior and atmosphere predispose to a pleasant and delightful time, but its hall is too small and this may cause problems when 50 persons have to be hosted at once. Despite this, the separation for non-smokers already exists in the restaurant. The menu is well arranged and designed, offering a rich assortment of Bulgarian dishes, fish specialties as well as European cuisine. Guests can present their own recipes to be prepared by the Cooks or even to cook themselves if they wish. The equipment in the kitchen is modern and easiness the staff in their every-day work. All the hygienic regulations are kept strictly and the HAACP system is already introduced. Proper storage and use of fresh products maintain the healthy and nutrition value of the food. The lobby bar of the hotel has a capacity of only 10 seats, as it is placed very close to the reception desk and right next to the restaurant’ entrance. It offers a variety of Bulgarian and imported beverages. Actually, there is only one bar area, which serves the needs of the restaurant and the lobby bar, and the summer garden is also on the disposal of both. Their close location permits such a combination, without slowing down the service time.

In spite of the fact that it is a new establishment, the occupancy rates reached in 2004 demonstrate unsatisfactory results. The restaurant had only 25% and the hotel part only 40%, which is quite insufficient having in mind also its small capacity.

Conference Facilities -The hotel disposes of two conference rooms. The big one is with a capacity of 30 seats and the other 15. The seats can be distributed and arranged according to the needs of the guests. Both rooms are fully equipped with multimedia, overhead projectors, flip charts, copy machine, fax machine, computer, and Internet connection. Business and mail services are also available upon request. Additional Facilities and Services - Hotel guests can use the free-of-charge parking with 8 parking lots - not enough for the 25 rooms. On every floor are situated an iron with an ironing board. Safety deposit boxes are also available to the guests against payment. It is good that there is an opportunity for payment with credit cards, which is of great use by the foreigners and is still not very well spread system in Bulgaria. But the thing that is missing in the hotel is a currency exchange service, when the main stream of customers definitely needs such. A 24-hour room service is available â&#x20AC;&#x201C; during the day from 6.30 a.m. till 23 p.m. guests can order from both the restaurant and the lobby bar and from 23 p.m. till 6.30 only beverages are served. The orders for it are taken on the reception desk. Fitness room and VCR can be used free-of-charge. Guests who wish to use a swimming pool benefit such free of charge in the nearby hotels Astera or Grand hotel, where they are driven the hotel shuttle bus. In that way the establishment has solved the problem with the lack of that facility. Billiards, sauna, and a hairdryer, laundry, dry cleaning service, hairdressing, professional massages, manicure, and pedicure are also on guestsâ&#x20AC;&#x2122; disposal upon request and against payment. There is a wheelchair for disabled people, but there are not any rooms designed for them.

PRODUCT LIFE CYCLE ANALYSIS: Sales & Profits (BGN) Sales Profits 0 Time

Losses/

Investment (BGN Maturity

Product

Introduction

Growth

Decline Development Stage

The hotel is opened for guests since March 2004 and is now in the product development stage where there are still no profits because of the big investment and the short period of operation. The establishment is unknown and in order guests to be attracted the advertising costs should be high. After doing this the hotel will be able to host more customers, generates more profit and reach

BCG PORTFOLIO:

Market growth rate Low High

the introduction stage of its lifecycle. Stars

Question marks

Cash cows High

Dogs

Low Relative market share

According to the BGG portfolio analysis Hotel Slunchogled is a question mark because it is a newly opened establishment which needs a lot of investment and is not yet well positioned, not so well known on the tourist market and there is still low consumer interest. The hotel should be well advertised and customers should be intrigued in order to turn it into a star and start to be a profitable business. 2.2.1. Price A common used method in Bulgaria for the accommodation establishments is to set their prices on the competition based method. The same is the situation with hotel Slunchogled, whose prices are competitive and close to those of its rivals in the area. They correspond to the categorization, the quality of service and the facilities offered by the hotel. The one night price includes also breakfast, the use of the fitness hall, use of another hotelâ&#x20AC;&#x2122;s pool and transportation. For the organized groups and the corporate clients the management offers other prices that usually are on the all inclusive principal and are lower than the regular ones. In such cases the conference rooms and the equipment can also be included in the payment, but those rates are usually

negotiated. All the other prices are claimed in Euro on the reception desk and differentiate by seasons. A problem is that the already illegal practice to change them in BGN for the Bulgarian guests still exists in the hotel. In that case the ones offered in BGN are a little bit lowered and this may result in under positioning of the product. When setting the prices in the restaurant except for the competition-based method, the cost based method is also used. The meals and beverages in Slunchogled cost almost as much as those in the other 3-star outlets in the area and are usually with a high mark-up. They correspond to the customersâ&#x20AC;&#x2122; expectations and are well perceived since they are already used to their levels. The prices of the room service items and those in the mini bars are calculated on the base of the restaurantsâ&#x20AC;&#x2122; ones. They are a little bit higher due to the fact that the guests expect to pay more for the convenience to have their order in the room. 2.2.2. Promotion and advertising The promotional strategy of hotel Slunchogled seems to be not well developed. According to the information we have the hotel was not aggressively promoted on the market, when it is still in the product development stage and the advertising is the way to inform the potential customers about its existence. Up to now the hotel was advertised in the both most popular national daily newspapers, but only with its New Year offers. These two media tools can be seen as appropriate and assuring a wide range of audience that corresponds to the potential customers of Slunchogled on the Bulgarian market. Recently the hotel started to promote itself in the magazine Happy Weekend. It is specialized in the field of the hospitality industry and is becoming mire popular although that is comparatively new on the market. Another tool for advertising is the presentation of the hotel in the business and tourism site www.kras.net. The site is very well designed and is already famous among the representatives of the different business fields. The hotel has its own web site on the Internet but the information inside is not so fully presented. The hotel is not included in any catalogue or website, purposed for the foreign market, which means that the management of the establishment should focus on the ways to reach this audience too. As a whole the taken actions for promotion during the first year of operation of the hotel are insufficient. For every new establishment the well-designed promotion can be seen as a long-term investment that has to position it in the mind of the potential customers.

Maybe the hotel

management started to think about the ways to advertise their product for leisure and non-corporate clients only after the opening of the hotel, which influenced negatively their occupancy and financial results in 2004.

3. Management and Human resources The capacity and the services offered by hotel Slunchogled predetermine small number of personnel and positions that combine the responsibilities of more than just one. Although there is a lack of developed organizational structure, which is advisable to present in every establishment, it is not difficult to follow the flow of authority and communication. There are 17 employees altogether working in the establishment, which is in conformity with the occupancy and the capacity of the hotel. As an obligatory requirement for them is the knowledge of Russian and one other foreign language, especially for those serving the guests. Each of them has a developed Job description and specification, which can avoid misunderstandings in the distributions of the duties. It should be noticed that the management pays attention to the constant training. Every-day discussions on some problematic issues are performed with the restaurant staff and every employee has been cross-trained. The owners of hotel are Russians and Bulgarians. They do not manage the everyday operation of the hotel, only one of them visits the establishment on a regular basis and helps the manager that is hired in order to take care of this. He is also an accountant and sales and marketing person. Actually the middle management level is missing and that makes the information flows easy and avoids misunderstandings in the set goals and objectives. The Chef Cook, who is an experienced person in the field of the F&B operations, is the only one responsible for the proper operation of everything connected with the restaurant. He is also Maitre dâ&#x20AC;&#x2122;hotel in the guestâ&#x20AC;&#x2122;s hall, trains the personnel, orders the deliveries, participates in the preparation of the meals, organizes and takes part in the guestâ&#x20AC;&#x2122;s amusement program. Among the responsibilities of the other 4 cooks are those of dishwashers, since the hotel does not have any. There are 4 waiters in the lobby bar and the restaurant, who are also bartenders at the same time. During the summer season when the capacity of the seats will enlarge, the management predicts to hire 2 more waiters and 1 bartender as seasonal employees. The receptionists have probably the broadest scope of duties. They have to perform all the possible operations on the reception desk and should have some knowledge in the field of the F&B services as well, since in the cases the waiters are busy the receptionists carry out the bartenders' work. In the policy of the hotel lays the practice the front desk personnel on night shift to be male. They have to be able to take care of the lobby bar, the room service orders and some guests' needs. That means that in some cases there is no one on the reception desk, which is unacceptable even for such a small establishment. There are also 3 housekeepers working in the hotel, who are under the supervision of the receptionists and the hotel manager. The laundry, the maintenance, the care for the green areas and the deliveries are performed by outside companies. It

is a rational decision for such a small hotel and is definitely less expensive. Also the additional beauty services offered are performed by contracts with professionals called upon guestsâ&#x20AC;&#x2122; requests. The management of the hotel has a good policy, concerning the motivation of the staff. The wide range of duties of each employee actually motivates them. They feel more important for the organization and make them feel more integrated in it. The wages are competitive and adequate. The employees also receive meals, beverages (coffee, tea, water) and transportation from and to work. The personnel also can use the restaurant on discounted prices â&#x20AC;&#x201C; the employee receives 30% and his/her guests- 10% discount. The fact that up to now there is a 0% labor turnover, when this kind of industry usually demonstrates the highest figures in that field shows that the working conditions are really good. The other index the one of the labor cost is not so favorable - 27%. It is a normal percentage but for the establishments in the West European countries. For Bulgaria it is still very high and is much above the average of 10- 15%.

SWOT analysis Appendix 5

VII. Short term and long-term goals

Short-term goals

To increase hotel and restaurant occupancy by 5 % till the end of 2005

To keep to the standard level of food cost of 30 %

To keep to the standard level of beverage cost percentage of 18 %

To reduce the labor cost percentage by 5 % till the end of 2005

To keep minimum labor turnover percentage

To attract Bulgarian business and leisure tourists

To sign contracts with at least 5 corporate companies

To keep constant advertising expense of 3 % from the total revenue

Long-term goals

To reach hotel occupancy of 70 % by the end of 2007

To update the hotel product by presenting new packages in 2006

To make the required facilities for disabled people by the end of 2007

To keep the same level of food and beverage cost percentage of 24 %

To continue to keep minimum labor turnover percentage

To pay off the loan by the end of 2014

To organize more corporate and family events in order to attract more guests

VIII. Proposals for future strategic options After a careful observation of the current situation in hotel Slunchogled and analyzing the environment we have come to the conclusion that the property needs to make several changes and to implement some innovations in order to establish a stable market position and to improve its performance. It has built up the main aspects for its future development, but the ideas still need to be worked out and applied. For the achievement of its goals we recommend the following intensive grand marketing strategies to be applied: Market Penetration Strategy - The usage of that strategy is appropriate for hotel Slunchogled because it is a new establishment that aims to attract more customers from its current target groups by slightly enriching its product. Its implementation we suggest to be done through the diversification of its current offered products and services and more aggressive promotional campaign. We think that the development of some leisure, holiday and weekend packages on preferable price levels as an addition to the existing ones is an appropriate way for the hotel to catch the attention of more Bulgarian leisure and business tourists. Also the summer garden with the barbecue gives the opportunity to diversify the product offered by the restaurant and to attract more guests. We also propose the development of some daily excursions in the region as part of the existing products for the foreign and Bulgarian leisure visitors.

Market Development Strategy - It means that the actions of the hotel will be directed towards the attraction of new market segment, by offering them the same range of products and services. The new group of potential customers is the Bulgarian business people and corporate clients to whom we will sell the already existing conference facilities and business packages that are just slightly modified and adjusted according to their needs.

IX. Implementation plans 1. Marketing plan Market segmentation - According to us the current target markets, represented mainly by foreigners, greater part of which â&#x20AC;&#x201C; Russians are well chosen and appropriate for hotel Slunchogled. We recommend the management to try to keep them but to pay more attention to the Bulgarian leisure tourists and to increase their percentage. The potential customers among the Bulgarians are both young families and couples as well as middle-aged people with incomes above the average. The new potential market for the establishment that has to be included and worked out is that of the Bulgarian business people. The representatives of big and middle size national and international companies can benefit the business facilities of the hotel and conduct different meetings and events on regional level there. The offers of the restaurant are suitable for all the citizens of the Varna region. 1.1. Place We do not foresee any changes in the location of the hotel, first because it is in a favorable for development of tourism business area and secondly because it cannot be accomplished. The popularity of the region and the easy accessibility of the establishment are only the advantages from which it should benefit in achievement of its future growth goals. 1.2. Product Hotel Slunchogled is a comparatively new establishment on the market that as a generally does not have any major gaps in the product it offers. That is why we think that there is no need of some basic alterations in the overall concept of the hotel. Our suggestions are directed mainly

towards the introduction of some changes aimed to enrich and redevelop the current diversity of facilities and services and thus to meet the needs of greater number of potential customers. We do not predict any changes in the interior of the establishment. The only thing that is missing in the guestrooms is the availability of hairdryers in each of them. They can be bought and put in the bathrooms at the beginning of October 2005 for greater customer convenience and till that moment we recommend they to be given at the reception desk but free of charge. In 2006 as an alteration of the interior can be added some more or different decoration attributes. In 2007 we advise the management to close the establishment for 10 days in January and make a light touch up in the rooms and the public area. At that period we suggest them two of the double rooms to be adjusted for the needs of disabled people. The restaurant also is managed and designed in an appropriate way. Its small area is used rationally and it disposes of the necessary 50 seats. The management of the establishment already has the idea to enlarge its capacity by opening its nice garden during the summer. The space is big enough for the placement of 40 seats as well as a bar and a barbecue. The garden area is covered so it can be used a whole summer round and the wooden benches and tables we suggest to be placed assure pleasant atmosphere for lunch or dinner. Thus not only the guests of the hotel can visit the restaurant, but also some of the tourist of the resort and citizens of the city of Varna. The musician and the inviting smell of the barbecue in the evenings can easily catch the attention of the people passing by. The bar will be opened 24-hours. The chef cook will be taking care for the entertainment of the guests by cooking in an attractive manner on the barbecue and some new items will be added to the current range of meals. The opening of the designed in this way summer garden can be accomplished till the beginning of July. In order to increase the restaurant occupancy we propose events as marriages, birthdays, anniversaries and company holidays to be organized in the restaurant of the hotel all year round. There are special offers depending on the number of the guests and the season in which the events can be carried out. Various types of menus will be presented to the guests in advance in order to choose the one they want for the gala dinner (Appendix 6 Sample offers). In December 2005, 2006, 2007 effort should be put for the attracting of the big and middle size companies from the region for the organization of the common for all companies at that time of the year celebrations. The high percentage of foreign guests â&#x20AC;&#x201C; 90% requires the availability of currency exchange service for their easiness. The receptionists can perform that service on the reception desk. Another additional service that can be of interest for the foreign and leisure tourist is the organization of daily excursions in the nearby historical and amusement spots. The main destinations are Aladja Monastery, Pobitite Kamuni, Theme park Fanagoria, Nessebar (The Old Town), Balchik (The

Botanical Garden), Dobrich, Cape Kaliakra, the natural reserves- Jailata and Durankulak Lake, visits in the Aquapolis. Such daily excursions are offered on the territory of the Golden Sands resort by the company Anons 94 AD. The hotel can make a contract with it and sell its offers to its guests. They will be requested in advance at the reception desk and some of them will be sold as part of the packages. Our idea is this additional service to be performed mainly from March till October. In order to increase the percentage of the Bulgarian leisure and business tourists we propose a number of packages to be developed, especially designed for the needs of those target groups. There are several types of offers that we created and believe can catch the attention of the leisure tourist, because of the preferable price levels and the comfort and location assured by the hotel. One of them is the special Three days summer package. This package program is suitable for young families and couples as well as mainly for those from the Varna and the region that need a quick recreation from their everyday busy life. It includes two all-inclusive days stay and usage of all the sport and recreational facilities of the hotel and swimming pool in neighbor hotels free of charge. For the young families with children it can also include one-day visit in the nearby Aquapolis Park. It will continue from the beginning of May till the end of October. The other type of summer leisure package that we propose for the vacation of the leisure tourists is the One-week leisure offer. It includes 6 days all-inclusive stay in the hotel, usage of all the sport and recreational facilities, as well as one excursion at guest’s choice. In 2005 it will be sold from the beginning July till the end of September, and in 2006 and 2007 its sales will start earlier and will be valid for the periods 1st June – 31st September. We consider as suitable the development of some packages for national holidays such as The New Year Day, The St. Valentine’s Day and The Woman’s Day for all kinds of guests during the year. The New Year package includes three overnights Full Board (from 30th December till 2nd January), and as one gala dinner with special program is predicted. The guests can use all the hotel facilities free of charge. This package is appropriate for customers from the whole country, while the packages for the St Valentine’s Day and The Woman’s Day are purposed mainly for the market in the region of Varna. It includes just one overnight with breakfast and one gala dinner with entertainment program. The other target group towards the attraction, of which the establishment should direct its efforts, is that of the business and corporate clients from the Varna region. Having in mind their basic needs we created some packages. They will be sold all year round and mainly in the period October - May. They are suitable for the middle size and big national and international companies, banks, and different associations, foundations that perform 3-4 day conference meetings. Those can be seminars, team building meetings, performance appraisal and future marketing policies

discussions, companies’ celebrations and events, train the trainers and training courses. We created business weekend, three- and four-day business packages, as usually that is the duration of the different conferences. Each of them includes the 2 or 3 overnights in the hotel, 2 coffee pauses per day and the use of the conference and the recreational facilities and an outside swimming pool. The aim is to reach as much as possible potential buyers of that product and to assure their visits on a contractual basis for a period of at least on e year. Of course we project different rates and flexible offers depending on the different companies’ needs. The hours of the coffee pauses, the menus, the necessary equipment, the arrangement of the conference rooms, the accommodation (single/double), and all these additional elements will be negotiated in advance with every single company. The same packages will be offered in the next two years as the management can observe their acceptance among the customers by the Questionnaire that we propose to be distributed on the reception desk (Appendix 7). In case the guests are not satisfied with some services and require their change or addition of new the management can react and introduce them. 1.3. Price The current prices of hotel Slunchogled as we already said generally correspond to those in the other hotels nearby, although they are a little bit lower, especially for the Bulgarian guests. The main problem is that the double pricing method still exists in the establishment although it contradicts to the Bulgarian law system. That is why we recommend the management of the hotel to introduce new price list and start charging its guests equally for accommodation. Reference to the new price list that we propose can be seen in Appendix 8. The prices in the new list are with about 25% lower for the foreigners. The new charges will be more attractive for them and since they are usually middle class price sensitive travelers this can result in more leisure foreign guests for the establishment. In order to solve the problem that can occur with the Bulgarian visitors, who are not yet used to the equalized price lists we suggested the development of several packages, designed for both the business and the leisure tourists, assuring them preferable discounts. The prices of the additional services and those in the restaurant we consider as appropriate and do not suggest changing them. Only the use of the hairdryers and the use of the billiards we think it can be free of charge. The additional cost of € 6 (6 BGN) for Half Board and € 12 (12 BGN) for Full Board we equalized to 10 BGN per meal, using the same price principle as with that for the accommodation. When setting the prices of the developed by us packages we used mainly the cost-based method. We calculated the selling price of each of the components included in the package and then set different percentage of discounts, depending on the purposed target market and its needs.

Then we tested the prices on the market as we took into consideration the potential customer’s expectations for the value of each package and decided the final sum of each package. Calculation of all package prices can be seen in Appendix 9 Having in mind that the group of the leisure tourists is the more prices sensitive the discounts we set for them are higher than the ones for the business customers are. Our main purpose is to create new competitive price levels of the hotel’s services that do soften the considerable increased introduced by us for the accommodation and responds to the expectations of the Bulgarian leisure customer. We suggest discount of 15% for the summer packages. In calculating the package price for the corporate clients we decided that the prices would not depend on the season, but on the volume of the contracted business. We considered first the number of the attendees in each event and suggest a 15% additional discount for every meeting for more than 25 persons. The frequency with which each company will organize its conferences, the duration of the contracts and of course the expected price value of each of those potential corporate clients is also taken in mind and the discount can be negotiated additionally. The price setting of the gala dinner menus purposed for different celebrations are also on the basis of the cost-based method and the competition based. We propose a discount of 10% only for the events for more than 30 people, because anyway the prices in the restaurant are very competitive. We do not project any changes in the prices for the following two years and suggest the management of the hotel to follow the same pricing methods and observe closely both the competition and the new trends in the customers’ requirements. 1.4. Promotion and advertising The advertising campaign of Slunchogled hotel needs an improvement in order more people to be informed about the existence of the establishment and its offers. From July 2005 the hotel offers new package programs for Bulgarian corporate and leisure guests, so they have to be presented to the customers through well chosen advertising tools. When picked them up, we took into consideration the preferences of those target groups and the budget that the hotel can afford, since it is small and can not spend a lot for promotion. We defined a limit of about 2 to 4% of the expected revenues each year, which is normal for the industry. As the main goal of hotel Slunchogled is to develop the package programs for Bulgarian corporate guests and leisure tourists, different tools are used for the different target markets. The most appropriate edition for advertising is “Manager” magazine for business customers. The ads inside will be published once a month, but only in September and October in 2005 and in 2006 and 2007- in February, March, September and October. It is an expensive tool and that is why we

picked up only some of the months during which the hotel hosts mainly business guests and is focused on that activity. The web side www.kras.net is also a good tool that is purposed for both the business and the leisure tourists and we recommend the management to keep advertising in it in the following 2 years. “Happy Weekend” magazine we see also as an appropriate, because it can reach again the two target markets. The establishment will be advertised differently in the different seasons once per month, each month till the end of 2007. The media tool that we chose is BG Radio as we see it as a suitable for the leisure market. The broadcasts in it will be twice a day, three times per week from July till December 2005 and the whole 2006 and 2007. The hours are between 7-11 and 18-24, since those are the peaks and are suitable for catching the business listeners as well. The content of the broadcasts will be changed regularly according to the special offers at the time. For the special New Year packages and The Summer Packages ads will be published from the beginning of November till 20th of December 2005, and in May and July 2006 and 2007 in the most popular and with the broadest readers range newspapers “Trud” and “24 Chasa”. Slunchogled hotel will be included in the web sites www.bulgarianresorts.com and www.tripadvisor.com, which is a free catalogue with more than 50 000 hotels over the world in order to catch the attention of some foreign leisure tourists. There will be printed 1000 brochures in 2005 and 2000 in 2006, 2007 years, which will be distributed as point of sale advertising materials and as part of the offers that will be sent to the companies. The new advertising campaign for 2005 will start at the beginning of July. For 2006 we propose the hotel to start advertising in the site www.abv.bg, as it is also one of the most popular among the Bulgarians. The web site of the hotel should also be well maintained and frequently updated, giving the opportunity for direct reservation. The advertising campaign in 2007 will be the same as in 2006, if there are not any unpredictable conditions, such as new competitors’ products or new customers’ requirements. Total advertising expense can be seen in Appendix 10

1.5. Sales forecasts Appendix 11

2. Human resources Organizational structure, working time and working schedules - Because the hotel does not have an organizational chart we propose one that can clearly show to all the employees the pattern of authority and the communication flow that exist in the establishment. We included in it also the new positions (from July 2005) that we consider as necessary (Appendix 12). We think that most of the responsibilities and the duties are well distributed in the hotel and are in conformity with its size. The new position that we suggest to be introduced is that of the bellboy. Two people

will be hired from July 2005 and they will be only on night shifts. Their responsibilities will not be that of a common bellboy and they will be cross-trained like the others employees, so they will be also bartenders and a waiters for the room service orders. In that case the receptionist will not have to leave their desk and there will be a constant presence there. We also suggest a maintenance person to be hired from the beginning of July. Except for his regular duties, he will be a diver of the bus and will perform the transfers of the guests. He will be responsible for the delivery of some additional conference equipment, when necessary, and some other supplies that are not delivered on the spot. For the sales and distribution of the new business packages will be responsible one of the owners. He/she will communicate with the companies, present to them the conference opportunities and carry out the negotiations, helped by the manager of the hotel. The manager will do the sale of the leisure packages. We project two waiters and two bartenders to be hired during the periods, when the summer garden is opened. They will be cross-trained by the Chef Cook like the other employees. According to us the establishment does not need any more additional personnel and those employees can carry out all the duties. All the shifts cover the working schedules and are spread according to the anticipated occupancy. The working hours and payments are in correspondence with the law requirements (Appendix 13 Shifts). Recruiting and selection of personnel - We recommend the hotel to recruit and select young and graduated people who possess some qualification in the field of the hospitality industry because they are more reliable and adaptive to training. Such young people are more easily socialized in the hotelâ&#x20AC;&#x2122;s organization and culture. The hotel can publish job advertisements in the local media or use its current employee as referrals because good employees tend to refer other good employees. Training and performance evaluation - We advise the management of the hotel to consider training as an important issue in order to facilitate the employees to develop their skills and abilities to perform their duties in an effective and efficient manner. Training must be done on a regularly basis not only in the beginning of the job placement. The Chef Cook (the F&B Manager) should continue to train the kitchen and restaurant personnel. This is appropriate because he has selected, trained and evaluated the personnel so far since the opening of the hotel. He knows exactly what and when should be improved in both the employee skillfulness and their service. The Hotel Manager should also continue to train and evaluate the Receptionists and the Room attendants, as she has done that so far. We advise the management of the hotel to consider periodical employee performance evaluation because this is very important for the employees in order to be appraised and given

directions for their further job performance. Such evaluations could be done semi annually and contain aspects like employee’s competence on the job, attitude toward guests and colleagues, teamwork, motivation, willingness to perform the job, way of reacting in different situations, overall appearance, etc. We propose a sample evaluation form which can be seen in Appendix 14. The people who evaluate the personnel are the ones who conduct the training - the Chef cook and the Hotel manager. Job descriptions and specifications - Job descriptions and specifications already exist in the hotel’s organization and we advise the management of the hotel to regularly update or add additional information inside them in order to be accurate and precise and facilitate employees to perform their duties better and to know exactly what is expected from them as well as to know who their superiors and/or subordinates are. (Appendix 15). Salaries and payroll expenses, benefits - The salary and payment policy of the hotel is well set and does not needs general changes. We can just suggest an increase of 5% in the wages of the employees from the beginning of July 2005, because all of them have already worked there for more than a year. In order to keep its employees loyal we suggest every year an increase of 5 % to be introduced for those who work for longer time. (Appendix 16). The meals the transportation and the uniforms cover the main aspects, concerning the employees’ benefit issues. We propose the management to offer additionally laundry and dry cleaning for the employees’ uniforms .The introduction of more extra labor expenses is limited for the moment by the size and the profit amounts of the hotel as well as by the competitive wages. Standards of performance - Standards of performance are already constructed and are available to the personnel. We advise the management of the hotel to periodically review and update if needed these standards because they are very helpful tool for employees in order to know what in a job and how exactly it should be done. Motivation - Employees must be made satisfied and loyal by offering them pleasant and healthy working environment. We recommend the management of the hotel to consider annual salary increases and performance appraisals. In this respect there could be and increase in the salaries of the personnel by 5% from July 2005, by more 5% in 2006 and in 2007. It is also advisable to socialize the employees make them feel part of the company and to be concerned about the future of the hotel by expressing their views on the performance of the hotel and what can be done in order to be improved.

3. Operational plan 3.1. Distribution channels

3.1.1. Direct distribution channels The products, offered by the hotel are all directly sold during the whole year on the spot. The other channel is the web site of the hotel itself, which should be adjusted for direct reservation possibilities. Another way that we suggest to be used is through the personal selling method. It is especially advisable for the attraction of corporate clients among the Bulgarian companies. It can show the personal attitude that the hotel is ready to assure to each of them. We think that the owner who is regularly in the hotel can deal with this matter, since it will again demonstrate respect and the person should be very diplomatic and experienced. Our suggestion is the hotel first to choose about 200 middle size and big companies of all business fields operating in the region of Varna and to send them either by email or by post the offers for the conference tourism. Then the sales person should contact those companies by telephone and see if any of them are interested in the offers. Because usually only 5% of the primary demonstrate interest, the owner can appoint a personal meeting with them and explain thoroughly the opportunities and the advantages of the establishment. That is actually the most important step that determines to a great extent the future contracts. We think that after meeting with the representatives of the 28 banks in Varna, the hotel Slunchogled can convince at least 3 Banks that it is an appropriate place for conducting their team building and marketing selling discussion meetings. After the conduction of the first such meeting the owner then will meet with the bank representatives again and will sign a contract with those three banks for two years and a half. We see as those potential clients of the hotel Raiffeisen Bank, SI Bank and Bulbank.The same procedure concerns all the companies in the region and the other 3 companies that we predict as future possible clients are like Automotor Corporation, Promobile Ltd, Kia Motors Bulgaria Ltd. The hotel can design for them then a special rates and packages for them, according to their needs and requirements. Sample calendar of the bank and companies events can be seen in Appendix 17

3.1.2. Indirect distribution channels The product of Slunchogled hotel could be distributed through two indirect channels. The first one is by joining the hotel to the international tourist site www.tripadvisor.com, which operates all over the world and a direct reservation link can be created in it and the other channel is the web site of the hotel itself, which should be adjusted for direct reservation possibilities. The other channel of distribution is by tour operator. We advise the hotel to sign a contract for two years and a half with the well-known tour operator Alma Tour. It will assure the establishment occupancy of 40 in June and 75% in July and August, by selling the summer packages to the leisure tourists. The commission will be 10%.

3.2. Supplies There are many suppliers in the Varna region that try to attract more customers by offering them favorable conditions. So in case a new better offer occurs the hotel can choose easily amongst them and since the power of the buyers is stronger than the power of the suppliers in this situation. We recommend them to pick up their future suppliers using the following criteria: product quality, favorable prices and discounts, packaging, accurate transport delivery and reputation. Having in mind that the hotel is satisfied with its current suppliers and keeps to a normal food cost percentage we recommend keeping them. The current suppliers of the hotel are: Chicko – meat products, Angelica – pastries and breads, Vodolei and KMB – alcoholic and non-alcoholic beverages, Richi – fruits and vegetables, Ice Food – poultry products, RVD Ltd – cleaning supplies and detergents. The hotel keeps small quantities on stock and has the practice to order its food and beverages items on a very regular basis. The suppliers offer daily services so there is no problem for both parties everyday orders and deliveries to be made depending on the hotel occupancy. Even in the cases when there is an emergent order the current suppliers come forward in several hours. The detergents are ecologically clean. They are ordered in advance and are stocked for several months. The laundry services are carried out by the outside company Bagra which comes on the spot and transport them.

3.3. Fixed assets 2005 New equipment is going to be bought for the summer garden in order to open in July 2005. A whole bar construction and bar equipment, a barbecue, wooden chairs, benches and tables will be bought. The tables and chairs will be placed on the first level of the terrace. The bar and the equipment on the second level which higher than the first. We also plan 26 hairdryers to be bought and put into guests’ bathrooms. Appendix 18 (Sources: www.noviz.com, www.intimpex.com, www.areximgarden.com, www.bps.bg)

4. Financial plan Income statement Year 2005

Year 2006

Year 2007

I. Hotel department Revenues Rooms

326 044.10

440 341.00

457 954.70

9 781.30

13 210.20

13 738.60

335 825.40

453 551.20

471 693.30

16 302.20

22 017.00

22 897.70

319 523.20

431 534.20

448 795.60

153 151.30

213 936.50

224 633.30

Cost of food & beverages

36 756.30

51 344.80

53 912.00

Other expenses Restaurant

4 594.50

6 418.00

6 739.00

Department income

111 800.50

156 173.70

163 982.30

GROSS INCOME

431 323.70

587 707.90

612 777.90

111 580.10

127 654.50

134 037.20

Employee benefits

8 244.00

8 351.70

Employee meals

9 072.00

9 216.00

39 118.10

39 900.50

40 698.50

Additional services revenue

Expenses Other expenses Department income II. F & B Department Revenues Food & Beverage revenue Expenses

IV. Undistributed expenses Salaries, wages and payroll taxes

Utilities

Repairs

4 000

12 123.30

20 741.70

Administrative & general

3 500

Additional services

2 400

4 889.80

6 674.90

6 963.30

2 400

3 675.60

4 278.70

4 492.70

14 365.70

197 002.90

239 483.70

251166.80

234 320.80

348 224.20

361 611.10

2 250

2 250.00

57 024

50 688.00

44 352.00

103 552.80

10 242.80

14 594.20

15 886.60

61 251.20

177 139.20

195 569.70

9 187.70

26 570.90

29 335.50

52 063.52

150 568.30

166 234.20

Advertising

Laundry services Maintenance Musicians Tour operator Total undistributed expenses V. Income before fixed charges Property taxes Interest expense Depreciation & Amortization Tourist taxes TOTAL

VI. Income before taxes Corporate tax 15 % NET INCOME

Cash flow Year 2005

Cash at the beginning

3 000

Year 2006

Year 2007

69 158.90

244 908.90

Room sales

391 252.90 528 409.20

549 545.60

Restaurant sales

183 781.50 256 723.80

269 560.00

Inflows:

Additional services

11 737.60

15 852.24

16 486.30

Total Inflows 589 772.00 870 144.10 1 080 500.80

Outflows:

Supplies (Hotel)

19 562.40

26 420.40

27 474.20

Supplies (F&B â&#x20AC;&#x201C; Restaurant)

44 107.60

61 613.80

64 694.40

5 513.40

7 701.60

8 086.80

109 569.90 127 420.50

133 505.30

Other expenses restaurant Salaries & Payroll taxes Employee benefits

9 892.80

10 022.00

Employee meals

9 027.00

9 216.00

46 941.70

47 880.60

48 838.20

2 400

14 548.00

24 890.40

3 500

13 912.80

4 000

2 400

Laundry service

4 889.80

6 674.90

6 963.30

Musicians

3 675.60

4 278.70

4 492.70

Tour operator

17 238.90

Property taxes

2 250.00

Tourist taxes

10 242.80

14 594.20

15 886.60

120 384.00 114 048.00

107 712.00

Utilities Maintenance Advertising Administrative & general Fixed assets Repairs Additional services

Loan payment Corporate tax

9 187.70

26 570.90

97 795.30 133 497.50

139 265.30

Total Outflows

520 613.10 625 235.20

659407

Cash at the end of the period

69 158.90 244 908.90

421 093.80

VAT

Ratio analysis 2005 Paid occupancy percentage = 44.9 %

Profit margin = Net income: Total revenue = 52 063.52: 488 976.7 = 10 % Operating efficiency = Income before fixed charges: Total revenue = 234 320.8 : 488 976.7 = 48 % Labor cost % = Total labor cost: Total revenue = 111 580.1 : 488 976.7 = 22.8 % Food & beverage cost % = Cost of food sold + cost of beverage sold = 36 756.3 = 24 % Food sales + Beverage sales

153 151.3

2006 Paid occupancy percentage = 66.64 % Profit margin = 150 568.30: 667 487.7 = 22.5 % Operating efficiency = 348 224.2 : 667 487.7 = 52.2 % Labor cost % = 127 654.5 : 667 487.7 = 19.2 % Food & beverage cost % = 51 344.8 = 24 % 213 936.5 Debt to equity ratio = 0.26 to 1

2007 Paid occupancy percentage = 70.64 % Profit margin = 166 234.20 : 696 326.6 = 23.8 % Operating efficiency = 361 611.1 : 696 326.6 = 51.9 % Labor cost % = 134 037.2 : 696 326.6 = 19.2 % Food & beverage cost % = 53 912 = 24 % 224 633.3 Debt to equity ratio = 0.18 to 1

X. Evaluation control proposed strategies

According to the results of the ratio analysis we reached the conclusion that our strategies would be successfully implemented for the development of Slunchogled hotel. The percentage of the profit margin is higher than the average for the industry (2- 10 %), which shows that the hotel generates very good number of sales and has appropriate control over the expenses. The food & beverage costs percentage is very good and responded completely to the standards of the hospitality industry. The labor cost percentage is decreased due to the high occupancy percentage reached and the reasonable revenues. In order to keep our personnel satisfied we will increase the salaries of the employees every year which will improve the motivation and the their involvement in the working process. After executing our primary goals and analyzing the results of them, we would advise the hotel to continue to keep to these proposals in the future in order to reach constant positive results and update them if needed.

Appendix 1 Main Economic Indexes Indexes -- GDP GDP, thousands BGN GDP, real growth in % -- Inflation in % -- Unemployment rate Labor Force, thousands Number of Unemployed, thousands Unemployment Rate- % Long-term Unemployed-% Unemployed Young People, up to 24years old% -- Average Income indexes Total Income, average per capita, BGN Total Expenditure , average per capita, BGN Gross average monthly wage, BGN Net average monthly wage, BGN

2003

2004

34 419 244 4.3 2.3

38 388 116 5.6 6.0

3 283.1 449.1 13.7 65.4 28.2

3 322.0 399.8 12.1 59.3 25.8

139.28 145.77 284 225.09

153.99 162.39 301 238.76

Projected for 2005

5.2-5.3 3.5 - 5

10.9

344 267.92

Appendix 2 Income taxes according to the sum received 2005, 2004 and 2003 years INCOME per month Until130BGN 2005 From 130BGL -150BGL From 150BGL-250BGL From 250BGL -600BGL Over 600BGL 2004 Until 120BGL From 120BGL -150BGL From 150BGL-250BGL From 250BGL -600BGL Over 600BGL 2003 Until 110BGL From 110BGL -150BGL From150BGL - 250BGL From 250BGL -600BGL Over 600BGL

TAX Not obliged 10 % of the sum over 130BGL 2 BGL+ 20 % of the sum over 150BGL 22 BGL + 22 % of the sum over 250BGL 99 BGL + 24 % of the sum over 600BGL Not obliged 12 % of the sum over 120BGL 3.60 BGL+ 22 % of the sum over 150BGL 25.60 BGL + 26 % of the sum over 250BGL 116.60 BGL + 29 % of the sum over 600BGL Not obliged 15 % of the sum over 110BGL 6BGL + 22 % of the sum over 150BGL 28BGL + 26 % of the sum over 250BGL 119BGL + 29% of the sum over 600BGL

Appendix 3 Tariffs for Categorization of Tourist Establishments – year 2005 Hospitality Establishment Hotels, Motels and Tourist Villages Up to 30 rooms From 31 up to 150 rooms From 151 up to 300 rooms From 301 up to 500 rooms Over 500 rooms Restaurants, Snack bars, Cafés and Bars Up to 20 seats Up to 50 seats Up to 150 seats Up to 300 seats

Tariffs 500BGN 1000BGN 1870BGN 2750BGN 5000BGN 110BGN 250BGN 500BGN 940BGN

Slunchogled *** Hotel Presents to Your attention:

Weekend/ 3-day Business Package and 4-day Business Package We would like to offer You a quiet and pleasant atmosphere to carry out Your meetings and seminars in a hotel, equipped according to the world standards for conference tourism. The packages include accommodation-full- board, usage of the conference halls and the facilities offered by the hotel. The price for a weekend business package is 134 BGN and for a four-days business package is 201 BGN. Groups over 25 persons receive a discount of 15% from the total price of the package. These offers are valid from September till May; the dates are additionally negotiated according to the requirements of the corporate customers.

If You are interested do not hesitate to contact us: 052/ 385 746- Neli Dimova (Sales & Marketing Manager)

It will be a pleasure for us to work with You! 40

Appendix 6

Sample package offers

Slunchogled *** Hotel would like to invite You to carry out Your business events in a splendid hotel, situated in the heart of the Black sea resort - Golden Sands.

Please, be our guest Mr. / Mrs. ……… In case you want to reserve the hotel for your business events, please register directly in the hotel or at telephone: 052/ 385 746- Neli Dimova (Sales & Marketing Manager).

RSVP

Slunchogled *** Hotel Presents to Your attention: 1-week Summer Package and 3-day Summer Package We offer You a great opportunity to spend a wonderful holiday in Golden Sands - on The Black Sea coast The packages include accommodation-full- board, usage of all the sport and recreational facilities of the hotel, as well as swimming pool in neighbor hotels and excursion*(only for 1-week summer leisure package). The price for summer 1-week leisure package is 490/460 BGN (depending on the month) and for summer weekend package is 140 BGN. All tourists receive a discount of 15% from the package price. These offers are valid from May till October.

If You are interested do not hesitate to contact us: 052/ 385 746- Neli Dimova (Sales & Marketing Manager)

It will be a pleasure for us to make Your holiday unforgettable!

Slunchogled *** Hotel Presents to Your attention: New Year Package We would like to offer You a great opportunity to meet the New Year Eve in Golden Sands on The Black Sea coast

The package includes accommodation â&#x20AC;&#x201C; full board (from 30th December till 2nd January), gala dinner with a special program and use of all the sport and recreational facilities of the hotel â&#x20AC;&#x201C; fitness, sauna, massage, and billiard. The price of the package is 214 BGN. *The final date for reservations is 22nd December. * Exemplary types of New Year menus are enclosed.

If You are interested do not hesitate to contact us: 052/ 385 746- Neli Dimova (Sales & Marketing Manager)

It will be a pleasure for us to meet the New Year with You!

NEW YEAR’S CELEBRATION DINNER OFFER ~ Snow-white’s menu ~

~ Santa’s menu ~

* Paned cheese with honey & walnuts

* Mushroom stuffed with ham & cheese

(Crispy paned white cheese with honey & walnuts)

(Sautéed mushrooms filled with mix of chopped ham & cheese)

* Salad Snow-white (250g)

* Assorted winter salad (300g)

(Coupled Snejanka salad, yogurt & red peppers)

(Ham, yellow cheese, apple, potatoes, mayonnaise)

* Snow-white’s specialty (350g)

* Santa’s bag (350g)

(Chicken breasts, sweet corn, cheese, cream,

(Pork fillet, bacon, mushrooms, French cheese,

almonds and steamed rice)

and mashed butter potatoes)

* Snow-white chocolate mousse

* Santa’s fruity cake

(Light white chocolate parfait cream with vanilla topping)

(Rich assortment of jellied fruits and vanilla cream)

~ The Dwarf’s menu ~ * Eggs stuffed with mushrooms, cheese (Boiled eggs filled with chopped mushrooms & cheese over a tomato slice)

* Mixed vegetables salad (Carrots, cabbage, tomatoes, cucumbers, onion, soy-bean sprouts)

* Winter rice noodles with vegetables (Rice noodles, Tofu, vegetables, mushroom sauce, peanuts)

* Flourless vanilla cake (Dietetic flour cake with raisins & hazelnuts)

Drinks: * White or Red wine 250ml * Champagne 150ml * Mineral water 50ml

* Rakiya or Vodka 50ml * Cocktail 150ml * Coca-Cola or Fanta or Sprite 250ml

******************************************************** **********************************

Slunchogled *** Hotel 44

Presents to Your attention: St. Valentine’s Day Package (14th – 15th February)

We would like to offer You a romantic atmosphere on a splendid place - Golden Sands to meet the St. Valentine’s Day with Your beloved The package includes one overnight with gala dinner and special program in the restaurant of the hotel, breakfast and lunch. The price of the package is 80 BGN and all guests receive a discount of 20 % from this price. *The final date for reservations is 10th February.

If You are interested do not hesitate to contact us: 052/ 385 746- Neli Dimova (Sales & Marketing Manager)

It will be a pleasure for us to share our love with You!

Slunchogled *** Hotel 45

Presents to Your attention:

December â&#x20AC;&#x201C; The Holiday Month We would like to offer You a splendid restaurant and holiday atmosphere to spend Your corporate events! Restaurant Slunchogled organizes different types of corporate events for the end of the year. It offers You 50 seats and delicious meals to celebrate the coming holidays with Your colleagues. The gala dinner includes four - course menu and alcoholic and non- alcoholic drinks. The price of the voucher is 21 BGN. Examples menus are enclosed.

If You are interested do not hesitate to contact us: 052/ 385 746- Neli Dimova (Sales & Marketing Manager)

It will be a pleasure for us if You are our guests!

OFFER December 2005 Corporate Events GALA DINNER

Sample menus: Menu # 1

Menu # 2

~ Paned cheese (100g)

~ Stuffed ham rolls (100g)

(white cheese in a crispy pane)

~ “The Angry Boss” Salad (350g) (Tomatoes, cucumbers, Russian salad, Snejanka salad, ham, yellow cheese, egg, corn, olives)

~ Chicken “Day off” (400g)

(ham stuffed with Russian salad)

~ “The Mad Boss” Salad (350g) (Tomatoes, cucumbers, cabbage, carrots, red peppers, potato salad, cheese, ham, egg, olives)

~ Pork “Late for work” (350g)

(Barbecue chicken breasts with cream sauce,

(Pork fillet with mushroom sauce and

steamed vegetables and rice)

roasted potatoes)

~ The chocolate cake of the boss (120g) (Dark chocolate with vanilla filling & grated almond)

~ The fruity dream of the boss (150g) (Exotic fruits, ladyfingers, cream, raisins, walnuts)

~ Rakiya/ Vodka 50ml

~ White wine ½ bottle

~ Red wine ½ bottle

~ Mineral water 500ml

~ Coca-Cola, Fanta, Sprite 250 ml

~ Coca-Cola, Fanta, Sprite 250ml

PRICE: 21 BGN

****************************************************************************************** * For reservations and special requests (i.e. persons on a vegetarian or a vegan diet) contact us in advance.

Appendix 14 Evaluation form for an employee of hotel Slunchogled Name of employee: Position: Performance areas Responsibility Competence on the job Attitude toward guests and colleagues Teamwork Motivation and enthusiasm for work Willingness to help guests and colleagues Way of reacting in different situations Quality and consistency of work Keeping safety & security procedures Keeping standards of performance Initiativeness Personal appearance

Person who evaluates: Date: Rating Excellent Good Average

Poor

Appendix 10

Advertising Expenses for 2005

Media BG Radio “Happy Weekend” magazine “Happy Weekend” magazine

Size/Durati on 30 seconds

Frequency

Period

2 times a day/ twice a July –December week January – June

Price without VAT 69 BGN per day/ 138 BGN per week

1/4 Page

Once a month

July – December

380 BGN

“Manager” magazine

10 cm²

Once a month

September - October

600 BGN

“24 Chasa” and “Trud” newspapers

10 cm²

Once a week

www.kras.net

November20th December (6 weeks) All year round

Own website update

Once a year

All year round

www.bulgarianresorts.com Personal selling Printing materials – Leaflets

380 BGN

158 BGN -

Total price + VAT 3312 BGN + 662.4 VAT = 3974.40 BGN 2280 BGN + 456 VAT = 2736 BGN 2280 BGN + 456 VAT = 2736 BGN 1 200 BGN + 240 VAT= 1 440 BGN 948 BGN+ 189.6 VAT = 1137.6 BGN 30 BGN + 6 VAT = 36 BGN 30 BGN + 6 VAT = 36 BGN

Entering into catalog edition for free -

1 500 BGN

560 BGN + 112 VAT = 672 BGN Making an advertising audio clip 4 times x 100 BGN = 400 BGN + 20 % = 480 BGN

1000 brochures will be printed. The price is 560 BGN without VAT

TOTAL: 14 548 BGN

Advertising Expenses for 2006 and 2007 Media

Period

Price without VAT 69 BGN per day/138 BGN per week

Size/Duration

Frequency

BG Radio

30 seconds

2 times a day/ twice a week

January- December

“Happy Weekend” magazine

1 / 4 Page

Once a month

January- December

“Manager” magazine

10 cm²

Once a month

“24 Chasa” and “Trud” Newspapers

10 cm²

Once a week

www.kras.net

All year round

www.abv.bg

3 000 000 impressions

All year round

Own website update

Once a year

All year round

February, March, September, October January, May-July (16 weeks total)

380 BGN 600 BGN 158 BGN

Total price + VAT 6624 BGN + 1324.8 VAT = 7948.8 BGN 4560 BGN + 912 VAT = 5472 BGN 2 400 BGN + 480 VAT = 2 880 BGN 2528 BGN + 505.60 VAT = 3033.6 BGN 30 BGN + 6 VAT = 36 BGN 1800 BGN + 360 VAT = 2160 BGN 30 BGN + 6 VAT = 36 BGN

www.bulgarianresorts.com Free subscription Personal selling Printing materials – Leaflets

1 500 BGN

1120 BGN + 224 VAT = 1344 BGN Making an advertising audio clip 4 times x 100 BGN = 400 BGN + 20 % = 480 BGN

2000 brochures will be printed for 2006. The price is 1120 BGN without VAT.

TOTAL 2006, 2007: 24 890.4 BGN per year

Hotel name Category/ Stars Location

Hotel Exotica

Appendix 4 Competitors Hotel Rai

Three stars

In room facilities

Target market

Three stars

Chaika, resort Journalist, Varna Chaika, resort Journalist, Varna Chaika, resort Journalist, Varna

Number of guestrooms 17 double, 10 suites (total capacity 64 beds) Restaurant 70 seats F & B facilities Lobby bar, Cocktail bar Swimming pool bar Conference facilities Conference room 40 seats

Other facilities & Services offered

Three stars

Park Hotel A la Fiesta

Swimming pool Tennis court, Table tennis Children playground Computer room, Billiards Fitness room, Sauna, Massage Currency exchange Souvenir shop Car parking , Rent-a-car Laundry & dry cleaning Room service Transfer, Excursions Air-conditioning Satellite TV Direct dial phone, Safe deposit boxes Minibar, Balconies Leisure and business travelers

20 double, 7 suites (total capacity 68 beds) Restaurant Lobby bar No conference room Children swimming pool Tennis court Children playground Currency exchange Car parking Rent-a-car Room service Transfer Excursions Safe deposit boxes Air conditioning Satellite TV Direct dial telephone Minibar, Bathtubs Leisure and business travelers

24 double rooms (total capacity 48 beds) Restaurant Summer garden with barbecue Lobby bar, Night club Conference room Swimming pool Children swimming pool Children playground Tennis court, Room service Safe deposit boxes Currency exchange Play room, Billiards Fitness, Sauna, Massage Car parking, Rent-a-car Laundry & dry cleaning Transfer, Excursions Air-conditioning Satellite TV Direct dial phone, Minibar Leisure and business travelers

Appendix 12 Proposal for organizational structure of hotel Slunchogled

Owners

Hotel/ Marketing/ Accounting Manager 1

Chef Cook/ F&B Manager 1

Cooks 4

Waiters 4 + 2*

Bartenders 2*

Receptionists 4

Room attendants 3

Bellboys 2

Maintenance 1

* - Seasonal employees

Appendix 16 Total Labor Expenses for 2005, 2006 and 2007

Total Labor Expenses for 2005 (January - June)

Position

Hotel Manager Position Chef Cook (F&B Manager)

Number of employees Number 1 of employees1

Cooks

Receptionists

Room Attendants

Waiters

Total Social per Salary in Total Security employee Additional employee expenses Total Labor Expenses for 2005 (July-December) BGN for the period 30.05 % per + Social securities month Total 1000 300.50 1300.50 6 months x 1300.5 = 7 803.00 0 Social per Salary in Total Security employee Additional employee expenses BGN800 forxthe period 240.40 1040.40 6 months 1040.4 = 6 242.40 0 30.05 % per + Social securities month 6 months x (4 x 494.20) = 32h x 1.38 = 44.11 x 6 months 380 114.20 494.20 6x1976.80 = 11 860.80 = 264.66 6 months x (4 x 409.65) = 6 x 360h x 0.13 = 46.82 x 6 months 315 94.65 409.65 1638.60 = 9 831.60 = 280.91 6 months x (3 x 260.1) = 6 x 200 60.1 260.1 0 780.30= 4 681.80 6 months x (4 x 364.15) = 6 x 32h x 1.014 = 32.45 x 3 months 280 84.15 364.15 1456.60 = 8 739.60 = 97.35

Total: 49 159.20 BGN

Hotel Manager Chef Cook (F&B Manager)

1050

840

Cooks

399 Salary in 330.75 BGN

119.80 Social Security 99.40 30.05%

Room Manager Attendants Hotel

210 1102.5

63.1 331.3

518.80 Total per 430.15 employee per month 273.1 1433.8

Waiters

294

88.35

382.35

Waiters *(Seasonal)

280

84.15

364.15

Bartenders *(Seasonal)

280

84.15

364.15

Bell Boys

250

75.1

325.1

Driver

200

60.1

260.1

Position Receptionists

Number of 4 employees

315.50

1365.50

6 months x 1365.5 = 8 193.00

252.40

1092.40

6 months x 1092.4 = 6 554.40

Total Labor Expenses for 2006

6 months x (4 x 518.8) = 32h x 1.38 = 44.11 x 6 months = 6x2075.6 = 12 453.60 264.66 Additional employee 6 months x (4per x 430.15) Total Year = 360h x 0.13 = 46.82 x 6 months expenses + Social 6 x 1720.60 = 10 323.60 = 280.91 securities 6 months x (3 x 273.1) = 0 12 months x 1433.8 17 205.6 6 x 819.3 = 4=915.8 6 months x (4 x 382.35) = 6 x 32h x 1.014 = 32.45 x 3 months 529.4 = 9 176.40 = 97.35 3* months x (2 x 364.15) = 3 x 728.30 = 0 2 184.90 3* months x (2 x 364.15) = 16h x 1.014 = 16.23 x 3 months 3 x 728.30 = 2 184.90 = 48.69 6 months x (2 x 325.1) = 360h x 0.13 = 46.82 x 6 months 6 x 650.2 = 3 901.20 = 280.91 6 months x 260.1 = 1 560.60 0

Total: 61 448.4 + 972.52 additional yearly expenses = 62 420.92 BGN

Chef Cook (F&B Manager)

882

265

1147

Cooks

418.95

125.90

544.85

Receptionists

347.3

104.35

451.65

Room Attendants

220.5

66.25

286.75

Waiters

308.7

92.75

401.15

Waiters *(Seasonal)

280

84.15

364.15

Bartenders *(Seasonal)

280

84.15

364.15

Bell Boys

262.5

78.9

341.4

Driver

210

63.10

273.1

12 months x 1147 = 13 764 12 months x (4 x 544.85) = 12 x2179.4 = 26 152.8 12 months x (4 x 451.65) = 12 x 1806.6 = 21 679.2 12 months x (3 x 286.75) = 12 x 860.25 = 10 323 12 months x (4 x 401.15) = 12 x 1604.6 = 19 255.2 4* months x (2 x 364.15) = 4 x 728.3 = 2 913.2 4* months x (2 x 364.15) = 4 x 728.3 =2 913.2 12 months x (2 x 341.4) = 12 x 82.8 = 8 193.6 12 months x 273.1 = 3 277.2

0 32h x 1.38 = 44.11 x 12months = 529.32 360h x 0.13 = 46.82 x 2months = 561.84 0 32h x 1.014 = 32.45 x 8 months = 259.60 0 16h x 1.014 = 16.23 x 4 months = 64.92 360h x 0.13 = 46.82 x 2months = 561.84 0

Total 2006: 125 677 +1 977.52 additional yearly expenses = 127 654.52 BGN Total 2007: 127 654.52 BGN + 5 % = 134 037.20 BGN Employees’ benefits Year 2005 •

Employees’ meals = 20 employees x 24 working days x 1.50 BGN = 720 BGN per month (1 meal = 1.50BGN) 12 month x 720 BGN = 8 640 BGN 24 days x 4 seasonal workers x 1.50 BGN = 144 BGN per month x 3 months = 432 BGN Total employees’ meals expenses = 432 + 8 640 = 9 072 BGN

•

Uniforms = 24 employees x 2uniforms x 36 BGN = 1 728 BGN per year 56

•

Transportation = 20employees x 27 BGN per month = 540 x 20 % VAT = 648 BGN per month 12 months x 648 = 7 776 BGN 3 months x 4 employees x 27 BGN = 324 BGN x 20 % VAT = 388.80 BGN Total transportation expense for the year = 8 164.80 BGN

Year 2006 and 2007 •

Employees’ meals = 20 persons x2 4 working days x 1.50 BGN = 720 BGN per month (1 meal = 1.50 BGN) 12 month x 720 BGN = 8 640 BGN 24 days x 4 seasonal workers x 1.50 BGN = 144 BGN per month x 4 months = 576 BGN Total employees’ meals expenses = 576 + 8 640 = 9 216 BGN

•

Uniforms = 24 employees x 2 uniforms x 36 BGN = 1 728 BGN per year

•

Transportation = 20 employees x 27 BGN per month = 540 x 20 % VAT = 648 BGN per month 12 months x 648 = 7 776 BGN 4 months x 4 employees x 27 BGN = 432 BGN x 20 % VAT = 518.40 BGN Total transportation expense for the year = 8 294.40 BGN

Appendix 8 New price list of the hotel 1 May - 30 June / 1 September - 30 September Number of rooms

Price per night

Double room for single Occupancy

Single room

70 BGN

Double room

90 BGN

70 BGN

Suites - two beds - three beds

2 1

100 BGN 120 BGN

Additional services Free

Iron & ironing board

Free

Laundry

BGN 3

4-hour Internet access card

BGN 10

Hairdryer

BGN 2

Sauna

BGN 10 per hour

Fitness VCR & video cassette movies

Billiards

1 July – 31 August

Number of rooms

Price per night

Double room for single Occupancy

Single room

80 BGN

Double room

Suites - two beds - three beds

2 1

100 BGN

120 BGN 140 BGN

Transportation to and using of a nearby swimming pool

Free

BGN 5 per day

Free

Conference rooms Room # 1 (capacity 30 seats)

100 BGN per day

Room # 2 (capacity 15 seats)

60 BGN per day

Conference room equipment

80 BGN

Safe deposit box

Multimedia

80 BGN per day

Flipchart

20 BGN per day

Overhead projector

20 BGN per day

1 January - 30 April/ 1 October - 31 December Number of rooms

Price per night

Double room for single Occupancy

Single room

50 BGN

Double room

70 BGN

50 BGN Discounts for children:

Suites - two beds - three beds

2 1

90 BGN 110 BGN

Additional payment for Half-board

10 BGN

Additional payment for Full-board

20 BGN

Day stay

25 BGN

- Up to 12 years old – 50 % - Up to 2 years old – free-of-charge

Prices include breakfast, insurance and tourist tax.

Appendix 13 Shifts Waiters Dates/ Shifts* I Shift Mid Shift II Shift Day off • •

1st

2nd

3rd

4th

5th

6th

7th

8th

9th

10th

11th

12th

13th

14th

15th

A B

E F

C D

B A

F E

D C

A B

E F

C D

B A

F E

D C

A B

E F

C D

C D E F

A B C D

EF C D A E B F

A B C D

E F A B

C D E F

A B C D

E F A B

C D E F

A B C D

E F A B

C D E F

A B C D

EF A B

A, B, C, D, E, F are the 6 waiters during the summer period I Shift 7:30 – 15:30; Mid Shift – 11:30 – 19:30; II Shift 15:30 – 23: 30 20 days x 8h = 160 working hours per month

Cooks, waiters from October till June Dates/ Shifts* I Shift Mid Shift II Shift Day off •

1st

2nd

3rd

4th

5th

6th

7th

8th

9th

10th

11th

12th

13th

14th

15th

A B

D A

C D

B C

A B

D A

C D

B C

A B

D A

C D

B C

A B

D A

C D

B C

A B

D A

C D

B C

A B

D A

C D

B C

A B

D A

C D

B C

A B

I Shift 7:30 – 15:30; Mid Shift – 11:30 – 19:30; II Shift 15:30 – 23: 30 23 days x 8h = 184h

Bartenders Dates/ 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th 13th 14th 15th Day shift Day off

Day shift – 11:30 – 23:30 15 days x 12h = 180h

Receptionists Dates/

1st

2nd

3rd

4th

5th

6th

7th

8th

9th

10th

11th

12th

13th

14th

15th

Day shift Day off

2nd

3rd 4th 5th 6th 7th 8th

Dates/ 1st Night Shift Day off

9th 10th 11th 12th 13th 14th 15th

CE DF

CE DF CE DF CE DF CE DF

DF CE

DF CE DF CE DF CE DF CE

Day shift 8:00 – 20:00 Night shift 20:00 – 8:00

A and B female receptionist only on day shifts C and D male receptionists only on night shifts E and F bellboys’ shifts

15 days x 12h = 180h

Room attendants Dates/ 1st 2nd Shifts* Day A A Shift B B C Day C off*

3rd 4th

5th 6th

7th 8th

9th 10th 11th 12th 13th 14th 15th

B C

A C

A B

B C

A B C

A C B

A B C

B C A

Day shift – 8:00 – 15:00 That is a principal schedule of housekeepers’ days off, but they depend on the hotel’s occupancy and are not fixed 25 days x 7h = 175h

Appendix 18 Fixed assets Item

Quantity

Price per item without VAT

Total price with VAT 1 500 000

2 073.60

Depreciation per year in BGN 1 500 000: 15 years = 100 000 2 073.60: 4 = 518.40

3 500

4 200.00

4 200: 5 years = 840

2 200

2 640.00

2 640: 5 = 528

10 12 2

59 196 85

849.60 849.60: 3 years = 283.20 2 822.40 2 822.40: 3 years = 40.80 204.00 204: 3 years = 68

156

1 123.20 1 123.2: 3 years = 374.43

Building Hairdryers Bar & Bar equipment Barbecue Wooden chairs Wooden benches Wooden tables 90/90/75 Wooden tables 90/120/75

Total fixed assets 13 912.80 BGN

Total depreciation 103 552.80 BGN

(Sources: www.noviz.com, www.intimpex.com, www.areximgarden.com, www.bps.bg)

Appendix 5 SWOT analysis

Hotel Slunchogled STRENGTHS

• • • • • • • • • • • • • • • •

Strategic location Operating all-year-round New and modern equipped property Rooms for non smokers Balconies with a sea view in every room Noise isolation in the rooms Conference and business facilities Availability of Internet access Availability of hydrophore system 24-hour room service A contracted constant flow of guests Own web site on the Internet Opportunities for payments with credit card system Well set human resource policy Favorable suppliers policies Restaurant corresponding to the capacity of the hotel Cooperation with professional outside companies (maintenance, grassing, laundry)

WEAKNESSES

• • • • • • • • • • •

Not well known on the market Not enough parking space 2 different price lists for Bulgarians and foreigners Poor advertising & promotion Low hotel & restaurant occupancy Missing organizational structure Not well developed channels of distribution Lack of constant presence on the Reception desk during the night shifts High labor cost percentage Lack of rooms for disabled people Low % of Bulgarian leisure and business guests

OPPORTUNITIES

THREATS

Macroenvironment • Stable economic condition and policies • Relatively high economic growth that creates more favorable environment for the businesses • Increase of the foreign investments • Becoming easy to obtain a credit • Stable policy towards decrease in the taxation system • New technology developments & innovations are entering in the country more intensively

• • •

• •

• • • •

• •

• The low level of payments causes dynamic emigration of young people • Increase in the taxes for licenses and categorization in the hospitality industry • Aging and constant decrease in the number of the population • Difficulties in maintaining and supporting technologies, as well as high prices for supporting services • Expected high inflation in 2007 without the same increase in the payments • Small % of middle class and upper middle class people Industry The most dynamically developing • Lack of cooperative action of the industry in the country private and governmental institutions More foreign tourists • The apprehends of the entrepreneurs that the new requirement for The introduction of some international standardization systems (HACCP, separating smokers from nonsmokers smokers /non-smokers separation) will reduce the number of customers will lead to increase in the common • The new standardization systems are quality standards related with great expenses for the entrepreneurs Tendency increase in the overall quality in the establishments • Insufficient qualified personnel Increase in the popularization of the country, which opens new potential markets for it Microenvironment – Varna region Already well known and popular • Shrinkage of the anyway short season destination on the international market due to the chaotic building processes Well developed tourist superstructure • Extremely high level of competition and saturation of the market Municipality programs for sustain development of tourism in Varna • Difficult for the small properties to region in the future establish a brand name Tendencies for improving and • Problems with the landslides in the developing the infrastructure region (improve the airfields and new • The greatest part of the foreign visitors terminal in the Varna Airport) are mass tourists and are very price Higher than the average income of the sensitive population • The main flow of tourist is assured by big international tour operators, who All major national & international companies have their offices there prefer to accommodate them in own or big properties • Not enough capacity of the water purifying and the electricity systems in the resorts 63