Example of a Karachi Entrepreneur INTRODUCTION

Hotel

In a Metropolitan city like Karachi good quality and low cost hotels are essential. Keeping this in mind, Mr. Zeeshan Pervaiz struck upon the idea of building Hotel Sky Towers. Hotel Sky Towers is conveniently located in the center of the city that is Saddar. It is twenty minutes distance from the Quaid-e-Azam International Airport. It is a nine story building and has ninety nine rooms which have been categorized as Standard, Deluxe, Super Deluxe and Executive rooms. The rent charged varies from Rs. 700 to Rs. 2000 per night depending on the category of the room. The rent is variable depending upon the relationship with the customer however the minimum charges are Rs. 700 per night. The hotel is a 3-Star hotel according to the owner. He emphasized that in the local hotel management scene it can be classified as a 3-Star hotel. However keeping the international hotel management standards in mind, he further added that the hotel would be given at most, a 2-Star rating. This does not imply that the hotels in Pakistan are not competitive enough on international standards. We have some very good 3 and 4-Star hotels in the country such as the Shalimar hotel in Rawalpindi and the Serena Tourist Hotel chain.

Hotel Sky Tower has one restaurant by the name of Rubas and a coffee shop named Fizza. The construction on the hotel started five years ago on an empty plot in the main Saddar locality but due to the ever deteriorating law and order situation the project was delayed. The hotel was completed and opened in January 1995. The hotel was fully financed by the owners. The hotel currently has ninety rooms for guests, while the remaining are occupied by the management and the staff. The hotel is centrally air-conditioned as well as centrally heated.

OWNER’S PROFILE

Mr. Zeeshan Pervaiz belongs to a business family. He is 24 years old and has a very charming personality(ideal for an entrepreneur). He is polite and balding fastly. His father entered the coal mining business twenty years ago and gradually established himself as an entrepreneur in that industry. After achieving success in the mining industry, his father decided to diversify his business. Mr. Zeeshan, currently doing his Bachelors in Business Administration from Greenwich University, gave the idea of opening a hotel in Karachi. The owners had no previous experience in this competitive field but they wanted to capitalize on the growth potential in the hotel management industry. With his preoccupation in the mining business, his father decided to give him the task of setting up and managing this hotel.

Mr. Zeeshan is currently devoting eight to ten hours daily to his pet project. Mr. Zeeshan started with no previous experience in managing a hotel but the fourteen months he spent as the owner/manager of this hotel have given him valuable knowledge which no books in Greenwich could impart. Mr. Zeeshan believes that practical experience is more important than textbook knowledge. He employs this philosophy in the selection and recruitment of his managers.

MANAGEMENT PHILOSOPHY

Mr. Zeeshan’s management philosophy is based on the achievement of two objectives; Quality and Profit. He does not believe in increasing his profit through cost minimization. He contends that hotel management is essentially a service industry and if you concentrate on minimizing the cost you would fail in achieving the desired quality standards. Profits cannot be made by sacrificing quality.

Mr. Zeeshan is a “delegating manager”. He believes in decentralization of control and delegation of authority. unlike other entrepreneurs he is of the view that ownership and management are two different spheres of activity. He gave the example of Holiday Inn Crowne Plaza previously known as The Taj Mahal. He said that the hotel was doing better before the takeover of the international chain. The Seth that was given the license did not separate the management from the ownership. He employed his family members as heads of the various departments with no prior experience in hotel management. This led to a downfall in the quality and service standards of the hotel. The managers of the five departments at Hotel Sky Towers are given full authority to make day-to-day decision. Moreover they are consulted whenever an important long term decision is to be made by the owner. Mr. Zeeshan believes in promotions from within and discourages the influence of family members. He believes that ethics have no place in the competitive world of hotel management.

PERSONNEL MANAGEMENT

The international standards of hotel management require 1.5 employees per room. Hotel Sky Tower meets these standards with 130 employees for ninety rooms. The hiring and firing is the responsibility of the departmental heads. There are five departments namely House Keeping, Food and Beverages, Sales, Accounts and the Front Office. The managers of these departments have been with the hotel since its inception. These managers were initially hired as consultants while working for other hotels. Later they were offered full time jobs as departmental heads in the hotel. The emphasis on hiring these managers was on experience rather than qualification. The well established contacts of these managers brought a lot of customers from competing hotels. The owner does not believe in giving formal titles to the jobs. The employees personally know their standing and their responsibilities.

The hotel currently employs no MBAs as the owner believes that the pay scale of the industry does not meet the demands of business graduates. The work environment desired by these graduates is not present in the smaller hotels. The pay scale of the lower level employees matches that of the competitors, however it is on the lower side. Their turnover rate is high because of the low pay scale. Moreover they cannot make both the ends meet just by one job. Therefore they work in shifts at the hotel and hold other jobs as well. Presently there is no union to represent the employees at the hotel and the management discourages the formation of one.

COMPETITION

The main competitors of Hotel Sky Towers are Hotel Sarawan and Hotel Mehran. Hotel Sarawan is located just opposite Hotel Sky Towers in the Saddar area. Mr. Zeeshan Pervaiz said that he does not include other 3-Star hotels like Hotel Faran and Embassy Hotel in the competition because their services are inferior to that of Hotel Sky Towers. Moreover he disclosed a startling revelation regarding Best Western Hotel Plaza. He said that it is common knowledge in the hotel management industry that they do not have an official license from Best Western international chain of hotels.

The main competition of the hotel is Hotel Sarawan. Hotel Sarawan is the oldest hotel among the competition. It has been in service for ten years. By initially hiring people from the well established hotels(Mehran and Sarawan), Hotel Sky Towers was able to make a dent in their clientele. Mr. Zeeshan admitted that Hotel Sarawan is the number one hotel in the 3-Star category. However he added that presently Hotel Sky Towers has left behind Hotel Mehran in the competition. The reason for this was the poor management in Hotel Mehran. The Hotel Sky Towers is fully computerized whereas the competitors still rely on manual paperwork.

CLIENTELE, SERVICE, AND MARKETING STRATEGY

Hotel Sky Towers relies on a varied clientele. This is in contrast to the competitors which have fixed clients and target particular segments of the market. A case in point is Hotel Mehran which is mainly dependent on the Russian clients. The main customers of the Hotel Sky Towers are pharmaceutical companies, banks and some Russian customers. Some Russian flight screws and over-night customers are also regular customers of the hotel. Mr. Adeel Qazalbash, Manager Housekeeping department added that the hotel discourages some Russian customers belonging to Tajikstan and Azerbaijan which are very dirty and messy people. The hotel has had some embarrassing experiences with these customers.

The hotel has allocated two separate floors for the use of the Russian customers and has another floor for executives. This floor has a Conference Room which is equipped with all audio-visual aids. This room is primarily used by pharmaceutical companies which have their annual general body meetings here. There is a separate Meeting room which is ideal for small meetings. This room is converted into a disco every Thursday night for the needs of the Russian clients. Moreover there is a Business Center which has the facilities of telephone, computers, photocopiers, fax and photocopying machines for the busy businessman.

The services that the hotel offers are 24 hours room service, Laundry and valet services, availability of a doctor on call, safe deposit facility and acceptance of Visa and Master Card. The rooms contain a color TV with a choice of 7 channels, a two channel music system, climate control ( they have installed a Siemens Air Conditioning system for the cooling purposes; cost Rs. 50 lacs), Automatic wake up system, direct dialing facility from the rooms and a mini-bar. Good service is the main aim of the hotel and the managers and staff go out of their way to fulfill all valid and invalid demands of the customers.

There is a separate Sales Department for marketing purposes. However Mr. Zeeshan believes that like other competitors they cannot afford to advertise on TV and magazines. He believes in word-of-mouth publicity and Personal Selling. Mr. Ishtiaque Ahmed is the head of the Sales Department. He is a very talented and experienced individual and since his joining the hotel, business has boomed dramatically. He employs personnel selling. He has been instrumental in bringing large groups of customers to the hotel. Package promotions as offered by large hotels are not possible in the 3-star category. Mr. Zeeshan emphasizes on business customers as there is no scope for tourism in a city like Karachi.

RECORD KEEPING

The housekeeping department keeps a log book of every complaint made by the customers. The department has three shifts which have varied number of employees. The head of the department is responsible for looking into these complaints. A separate register is maintained for noting the inventory of the rooms daily. This was necessary due to the shabby behavior of the Russian clients. The clients are provided an opinion card to give their opinions about the hotel and its services. Files are maintained for each employee and due care is taken to eliminate inefficient employees.

FINANCIAL STRUCTURE

Mr. Zeeshan admitted that the management lacked in this field of operations. No records were maintained in the beginning but soon they established an Accounts Department for this purpose. All the filing and paperwork is regulated by this department. The hotel maintains its accounts at Muslim Commercial Bank. He refused to disclose the actual amount spent for the construction of the hotel but said that after being fourteen months in operation, they have managed to recover 15-20 percent of the initial investment.

Mr. Zeeshan added that the first year of operations was disastrous for the hotel. Initially they had only 20-30 customers per day. Certain mismanagement on the part of the personnel department caused more employees and less work. The management decided to lay off some of the employees. Then gradually as the customer base started to build up, they hired new staff.

A drawback of the hotel is the lack of maintaining proper financial records. Presently there are no financial ratios available for analysis. However, the owners are now planning to change the hotel from Sole Proprietorship into a Private Limited Company. This requires the establishment of a separate finance department.

GOVERNMENT REGULATIONS AND SUPPLIERS

The hotel has to deal with 15 separate regulatory authorities. This involves a lot of hassles and as the owners are not very ethical in their dealings, they exploit loopholes in the system. In the owner’s view the government, instead of helping the small businesses, has a negative effect on them. This results in malpractice’s on the part of the entrepreneurs.

Initially the hotel was dependent upon suppliers and wholesalers for various services. gradually they have managed to reduce the involvement of these suppliers in the business. An example of this is the Laundry service available to the customers which is managed by the owner. Now the hotel relies on middlemen only for the procurement of food and beverages.

FUTURE PLANS

The owner currently owns Hotel Arsalaan at Tariq Road along with Hotel Sky Towers. However that hotel is a small one and is not the focus of their attention. Mr. Zeeshan seems to be content with his present project. He plans to open a Chinese restaurant in Quetta in the near future. He wants to stay in the hotel management industry and open a chain of fast food joints in Karachi. When asked about acquiring a franchise(McDonalds, Burger King, KFC etc.), he said that it is a hassle to get a franchise in Pakistan and that he lacked the proper experience required to manage them. However, he intends to complete his Masters and then do a Diploma course in Hotel and Restaurant Management.