Evaluating and mitigating the effect of seasonality on the performance of a 5 star hotel in Gozo : a financial analysis

Abstract

Literature shows that seasonality creates several financial effects on tourism-related establishments, especially those situated in specialised and/or island destinations. Numerous efforts can be expended into mitigating these effects. However, it proves to be very difficult in eliminating it completely. First and foremost, this research is intended to evaluate the effects arising out of seasonality and also assess and recommend courses of action which could possibly mitigate this phenomenon. This research, which is of a case-study nature, focuses on a 5 star hotel in Gozo. The data collection, mainly obtained through interviews conducted with hotel management and tourists and also through the use of the hotel's accounting data and reports, present a realistic picture of the seasonality effects and the mitigation thereof as experienced by this 5 star hotel. The findings show that seasonality is creating quite a difficult situation on this 5 star hotel. The low occupancies and the resultant sales instability lead the hotel to incur high losses during the low demand period. Moreover, the fact that this hotel relies to a large extent on tour operating business makes revenue generation inadequate due to the substantial discounts rendered. The case study hotel does engage in seasonality mitigation efforts. However, other courses of action seem to be required. These are aimed to tap inexistent potential high-generating market segments including principally the Conference and Incentive Travel (CIT) segment. This strategy can enable the hotel to reduce seasonality effects and yet trigger investment in other attractions and facilities. The findings recommend that the hotel lessens its dependency on tour operating business so that revenue levels could be improved. Finally, h in its own right and also taking other marketing initiatives. An effective implementation of strategies is required so that the Gozitan tourism industry is strengthened and continues to contribute to the island's Gross Domestic Product.