Strategic
RM Project:
Apply
pricing methods and forecasting; and examine strategy applications and compare
management of different revenue streams within a luxury hotel organisation.
2000 wordsFaculty of Creative Industries and ICT Unit Name:Yield and Revenue Management Unit Code:HM301 Assessment 02:PART ACompetitive Analysis and Positioning strategy PART BGroup Displacement Analysis Marks:40 marks Words:2000 [not including reference] Upload both Word document as well as Excel workbook calculation on StudentWeb Individual Assessment Due Date:As per Unit Outline Revenue Management Competitive Strategy Part A – Competitive Analysis and Positioning Strategy QUESTION 1. MARKET INDICES (14 MARKS) Five hotels given in Table 1 Competitive Set Data operate in the same market. On an Excel spreadsheet, compute the three indices’ figures – MPI, RGI AND ARI, for each hotel for Quarter 1 of 2020. Data given is for 90 days in Q1. Table 1 Competitive Set Data Quarter 1 - January to March 2020 (days) 90 Hotel Name Alpha Backwaters Citadel Downtown Excellence Total Available rooms 13,500 18,000 22,500 16,200 10,800 Room Revenue $1,800,000.00 $2,700,000.00 $1,750,000.00 Rooms Sold 9,900 10,800 16,200 9,000 9,180 Occupancy percentage 60.0% 55.6% ADR $187.50 RevPAR $100.00 MPI RGI ARI QUESTION 2. STRATEGIC PLANNING IN REVENUE MANAGEMENT (16 MARKS) Assignment Introduction Noone, Canina, & Enz (2012) have stated that a firm should have a clear vision of how it wants to position itself in the long-term vis a` vis its competitors, whether communicated in highly objective statements (for example, ‘we will always be within $5 of brand X’) or more subjective statements (for example, ‘we will always be the lowest priced brand in this market’). Once established, these positioning goals, in addition to a number of other goals or constraints (for example, market-share goals, product/service differentiation constraints) should inform the regular pricing tactics adopted by the firm. In other words, day-to-day pricing decisions should comply with strategic price positioning such that progress is made towards the firm’s long-term goals. Further, room price is linked to the presence or absence of various hotel items. That is, the existence of a certain item will influence hotel quality, and the quality will influence a customer’s willingness to pay. (Zhang, Ye, & Law, 2011) . The availability and easy access of travel advice sites make it easier for customers to disseminate their viewpoints. Background A market research firm is commissioned by one of the hotels in Table 1, prior to Q1 2020, to determine customer perceptions of value in the competitive set. The dimensions of value that were studied included hotel Servicescapes, staff professionalism, facilities, equipment and amenities, processes (website, reservation, check-in-check-out, concierge, F&B dining, conferencing & events and location (including physical access to airport, city centre and local transportation). Among its proposal is a price-value map (Figure 1) indicating the relative positions of the five hotels in the market based on perceived value. Figure 1 Price-Value Map of the competitive set Positive values are on the high side while negative ones are low for both price as well as value. As executive manager for one of the hotels, you are required to critique your hotel’s market position for Q1, using the indices computed in Table 1. Following this, you are required to develop a competitive strategy for your chosen hotel in Q2. Your strategy should address the key question of whether or not your hotel needs to change its position in terms of price-value perception. Either way, you need to · justify your position in terms of projected metrics for Q2 using a rate strategy and/or an occupancy strategy. (For further information see Hayes & Miller, 2011, pp. 486-487) · Assess your hotels facilities and services and other variables that would optimize Q2 revenues · Focus on the promotional aspects in your strategy – including packaging, fencing, social media, channel and inventory management, generating loyalty · Consider the possibilities of the other hotels shifting their relative position as well. Marking criteria 1. Word limit for Question 2 is 2000 words 2. Structure in the form of a report: Abstract (Executive Summary or Summary) Table of Contents Introduction Body Conclusions Recommendations List of References Appendices (or Appendix if there is only one) 3. A total of at least five academic references must be included. Of these, at least three must be from peer reviewed journals and/or industry sources 4. Use in text citation with Harvard style Table 2 AT2 Marking Part B – Group Displacement Analysis (10 marks) Background One of the major revenue management decisions is the choice to accept transient room demand vs. group demand. The displacement decision analysis involves many variables that compares expected hotel revenues from the usually higher Average Daily Rates (ADR) generated from transient demand vs. lower ADR’s generated from group room demand. (Morse & Beckman, 2016) However, group room demand has the potential to generate additional ancillary non-room revenue such as catering, food and beverage sale, meeting room rental, audio/visual services and other activities. Case Study Hotel Mount View is a four-star hotel with 200 rooms, a bar-cum-dining room facility and a conference hall for 250 guests with courtyard dining facility for conference delegates. OTB demand for the Easter weekend in 2018 as on 15 March 2018 is as follows: On the Books Friday, 30 March 2018 Saturday, 31 March 2018 Sunday, 1 April 2018 120 160 150 The rooms are booked by the transient market segment at a rack rate of $180 per room night on each of the three Easter weekend nights. Forecasted transient demand (as of 15 March 2018) is for 100% rooms occupancy on each of those three nights at rack rate. The revenue manager has received a proposal from the local Rotary club for booking the remaining 40 rooms on Saturday at a contracted rate of $ 120 on single occupancy basis. The rate includes breakfast vouchers worth $20 per room (food cost is 35%). The Rotary Club also wants to book the conference hall (and the audio-visual facilities) on Saturday for a rate of $1000 and also organize a courtyard dinner for 100 delegates at $40 per delegate for food only at cost of sales of 35%. Based on historical data, each transient-occupied room usually spends $40 on average for food (breakfast, lunch and dinner) at an average cost of sales of 35% and beverages worth $25 with a beverage cost of sales of 20%. Approximately 70% of transient bookings are made on the hotel website which has a channel cost of $5 per room. The remaining 30% of transient bookings are made via the OTA channel attracting a commission of 20%. Room cleaning and variable wage costs are $30 per occupied room. The revenue manager is debating whether to displace the transients in favour of accepting the group. Do a displacement to advise the RM. References Dev, C. S., & Piccoli, G. (2012). Emerging Marketing Channels in Hospitality: A Global Study of Internet-enabled Falsh Sales and Private Sales. Ithaca: Cornell University. Retrieved April 30, 2020 Hayes, D. K., & Miller, A. (2011). Revenue management for the hospitality industry. Hoboken: Wiley. Morse, S. C., & Beckman, E. (2016, September 1). A Decision Model for Hotel Revenue Management Displacement Analysis for Transient Room Demand vs. Group Room Demand. Journal of Hotel & Business Management, 5(2), 141. Neirotti, P., Raguseo, E., & Paolucci, E. (2016, April 1). Are customers’ reviews creating value in the hospitality industry? Are customers’ reviews creating value in the hospitality industry? International Journal of Information Management, 36, 1133-1143. Noone, B. M., Canina, L., & Enz, C. A. (2012, November 22). Strategic price positioning for revenue management: The effects of relative price position and fluctuation on performance. Journal of Revenue and Pricing Management, 12(3), 207-220. Tranter, K. A., Stuart-Hill, T., & Parker, J. (2014). An Introduction to Revenue Management for the Hospitality Industry: Principle and Practices for the Real World. Edinburgh Gate: Pearson Education. Zhang, Z., Ye, Q., & Law, R. (2011, March 4). Determinants of hotel room price: An exploration of travelers’ hierarchy of accommodation needs. International Journal of Contemporary Hospitality Management, 23(7), 972-981. PRICE VALUE MAP ALPHA BACKWATERS CITADEL DOWNTOWN EXCELLENCE 24-2032-1-114PRICE VALUE Box Hill Institute Group: Box Hill, Lakeside Lilydale, CAE CI&ICT Phone 03 9286 9695
[email protected] 1 Marks allottedMarks obtained PART A Question 1 Market Indices (0.5 × 28) 140 PART A STRATEGIC PLANNING IN RM Outlined the chosen hotel's competitive position in terms location, facilities and service quality dimensions 2.5 Demonstrated a focus on how the consumer perceives values in the purchasing decision 2.5 Considered the competitive situation in terms of a SWOT analysis of the competitive set using the market indices 2.5 Considered a rate strategy versus an occupancy strategy in determining a chosen price value position 1.5 Applied use of basic RM concepts like market segmentation, rate fences and price parity 1.5 Considered a promotional mix strategy including social media and User generated content 1.5 Considered packaging/bundling and distribution channel efficiency in the price value realtionship 1.5 Report format, explanation and structure1.5 References and in-text citations1 160 PART B GROUP DISPLACEMENT ANALYSIS Calculated room, F&B and conference revenues2 Calculated room distribution costs and variable costs accurately2 Calculated F&B and conference operating costs2 Calculated Total Operating profit per avaliable room2 Advice on accepting or rejecting the proposal2 100 TOTAL400