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Selected City and Reason for Selection

Question:

Discuss about the Revenue Management of Selected Hotels.

The city Hobart is selected for selected in this paper of revenue management due to several reasons. Hobart city has experienced 70% growth in number of nights stayed by the visitors. This is equal to 32% of the visitors night resided within the state by the international and national visitors (Abrate and Viglia 2016). Moreover, revenue management of the selected hotels in Hobart is considered for the reason that it also experienced 72% growth in visitor’s nights. Moreover, the hotels also experienced growth in accommodation supply and growth in demand. Over the past few years, number of rooms and available and accommodation stock has increased by 20%. In addition, this city is also deemed to be suitable for evaluation as due to the seasonal nature of the hotel industry, Hobart city is attaining increased capacity with yearly average occupancy rate of 76%. In addition, at the time of economic uncertainty, Hobart city served as only capital city to indicate growth in revenue from hotels recording 3.4% growth in comparison to -8.2% national averages (Akan, Ata and Dana 2015). Hobart city is deemed to follow appropriate revenue management as the city has grown at an average of 70 rooms each year for over the past seven years.

Lbis Style Hobart, Hadleys Orient Hotel and Wrest Point hotels are considered as the competitor set of the selected Best Western Hobart Hotel for numerous reasons. Numerous categories of hotels are observed to be present in the Hobart region in Australia (Arenoe, van der Rest and Kattuman 2015). These hotels are quite different from one another considering the areas of services and quality provided by them. Conversely, there are some aspects that remain common between the selected hotel and the competitor hotels due to which these are selected in the current paper. The hotel that is selected in this paper belongs to a five star category. This is the reason; the selected hotel is put into comparison with its rivals that falls within the category of either four or five star hotels. There are many other criteria relied on which the competitive set is chosen that includes location, type, brand and ADR (Bayoumi et al. 2013). All among the selected competitor hotels belong to full-service category that has attached restaurants, lounge services and meeting spaces which offers them a competitive edge in comparison to other hotels in the region. In consideration to these aspects the hotels those are chosen as competitors within the region include Lbis Style Hobart, Hadleys Orient Hotel, Wrest Point hotels and Best Western Hobart.

Competitive Set Analysis

Book figures and the occupancy forecast of the hotel are carried out through analyzing its selected competitor’s room rates along with their service benefits. “On the book (OTB)” rate of the hotels are selected based on analyzing the group trends and patterns that is quite distinct from the regular demand. These OTB figures are gathered from analyzing number of reservations and pick-ups. Forecasting of occupancy rate is conducted through analyzing previous forecast for that period (Board and Skrzypacz 2016). The major factor that was focused on while carrying out occupancy forecast is through setting rate strategies for each day within the booking window along with allowing tactical decisions in departmental level.

OTB figures are derived based on the consideration that, it along with forecast can provide a group rate along with ceiling with respect to room capacity. Forecasting was conducted on daily basis in order to decide the occupancy forecast figures as every day indicates a new situation for optimization. Occupancy forecast for all the selected hotels was conducted based on the number of anticipated room arrivals, number of estimated room stopovers and number of anticipated room no-shows (Crossan 2014). Occupancy forecast of the selected hotels is calculated based on anticipated room arrivals and anticipated room overstays. The forecast is a vital driver of revenue management optimization initiative. The hotels forecast at a detailed manner in case actual benefits are available from revenue optimization.

Taking into consideration the competitor hotels namely Lbis Style Hobart, Hadleys Orient Hotel and Wrest Point in the market, Best Western Hobart Hotel is deemed to perform in a better manner (Ferguson and Smith 2014). This is for the reason that Best Western Hobart Hotel has set the highest sell rate for each day in comparison to its competitors with high occupancy rate as per the forecast. Such forecast indicates that because of high sell and occupancy rate, the hotel is deemed to contribute on the highest revenue in comparison to other competitor hotels.

Moreover, the hotel is forecasted to perform well enough to provide tough competition to its selected hotels based on instant revenue status overview, everyday based budget comparison along with daily performance index (Ivanov 2014). Best Western Hobart Hotel is also observed to have high occupancy rate and increased number of rooms that provides it with high competitive advantages over other hotels. In addition, it is observed from the revenue management forecast that the food and beverages section focuses on optimizing the profits and revenue. Room revenues are deemed to be the major aspect of attaining increased total revenues. Considering the ADR (Average daily rate) it is gathered that productivity of the hotels is assessed relied on occupancy rate of the hotels and ADR is quite high for Best Western Hobart Hotel.

Forecasting of Occupancy Rates

Target consumer segment for Lbis Style Hobart, Hadleys Orient Hotel and Wrest Point hotels are selected considering certain attributes like age, gender, education level, residential area and household income (Kimes and Ho 2017). Target market of these hotels includes ambassadors of architecture along with gallery and gourmet blazers. The target market of ambassadors of architecture includes young, newly married, university graduates and the honeymoon travelers. These target consumers seek luxury services and entertainment within their budget. Travel plans of these target consumers encompass spending time together, getting involved in quality walking sightseeing tours along with following passion of visiting places in Hobart.

Target consumer segment that falls under gallery and gourmet blazers are the ones those are greatly interested in visiting art galleries in Hobart and are particularly fond of museums (Kimes 2016). Moreover, the target market segment of the selected hotels belongs to the age group of 25 to 60 years and is focused on feeling entitled to luxurious experiences. Most of these consumers have a professional career with income over $100,000. As the target consumers greatly enjoy regional foods, they tend to be very interested in globally renowned restaurants within the city. Moreover, the target market segment for the selected hotels includes couples belonging to the profile of upper-middle age; they decide to avoid waling long distances or climbing stairs. This target market prefers taxicabs or any other public transport for travelling to touring spots in Hobart. These people also tend to consider certain guided tours to the destinations all through Tasmania.

Revenue management measures that can be taken by the selected hotel in a scenario that the demand happens to be slower than the anticipated are described below:

  • Yield management can turn out to be a technique that can be used in order to increase the room revenues. This revenue management process can turn out to be an efficient performance measure. This is for the reason that this includes occupancy percentage along with average everyday rate in a specific statistic which is yield statistic (Masiero, Pan and Heo 2016).
  • Discount allocation can serve as another measure of revenue maximization in case of slow demand. In account to such measure, increasing the available product mix at discounted or lower rates and extending time can increase revenue over the time. In addition, increasing discounts revealed on room features might increase revenue for the hotel. The price sensitive group of consumers needs to be displaced and appropriate mix of target market must be estimated in low demand for offering maximum room rates.

Revenue management measures that can be taken by the selected hotel if the demand is higher than anticipated are explained under:

  • To deal with increasing demand, most appropriate revenue management activity is to reduce room bookings through selling hotel rooms at high rates. This strategy of revenue management can facilitate in enhancing profitability of the selected hotel. Room rates must be increased in order to elevate the rate in high demand in case the demand is high than supply (Vulcano and Weil 2014).
  • In high demand, the hotel can stop selling rooms at discounted rates and should also ensure decreased length of stay of consumers. In addition, the hotel must also consider that whether a drastic increase in room rates can act as an effective business practice. Discounted packages must not be provided to consumers those have agreed to pay more.
  • In high demand, staffing levels must be checked including front desk, ancillary venues and the outlets. The front desk must be today staffed that will be able to address the needs of high demand and increasing average room rate that can increase revenue.

References

Abrate, G. and Viglia, G., 2016. Strategic and tactical price decisions in hotel revenue management. Tourism Management, 55, pp.123-132.

Akan, M., Ata, B. and Dana, J.D., 2015. Revenue management by sequential screening. Journal of Economic Theory, 159, pp.728-774.

Arenoe, B., van der Rest, J.P.I. and Kattuman, P., 2015. Game theoretic pricing models in hotel revenue management: An equilibrium choice-based conjoint analysis approach. Tourism Management, 51, pp.96-102.

Bayoumi, A.E.M., Saleh, M., Atiya, A.F. and Aziz, H.A., 2013. Dynamic pricing for hotel revenue management using price multipliers. Journal of Revenue and Pricing Management, 12(3), pp.271-285.

Board, S. and Skrzypacz, A., 2016. Revenue management with forward-looking buyers. Journal of Political Economy, 124(4), pp.1046-1087.

Crossan, M., 2014. Hotel revenue management: Principles and practices.

Ferguson, M. and Smith, S., 2014. The changing landscape of hotel revenue management and the role of the hotel revenue manager. Journal of Revenue and Pricing Management, 13(3), pp.224-232.

Ivanov, S.H., 2014. Hotel revenue management: From theory to practice. Browser Download This Paper.

Kimes, S.E. and Ho, J., 2017. Revenue management in luxury hotels. Journal of Revenue and Pricing Management, pp.1-5.

Kimes, S.E., 2016. The evolution of hotel revenue management. Journal of Revenue and Pricing Management, 15(3-4), pp.247-251.

Masiero, L., Pan, B. and Heo, C.Y., 2016. Asymmetric preference in hotel room choice and implications on revenue management. International Journal of Hospitality Management, 56, pp.18-27.

Vulcano, G. and Weil, A., 2014. Joint optimization of virtual capacities and bid-prices for revenue management. Working Paper.

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