Blue Mountains Hospitality International School – HTL302 – Hotel Revenue Management – DI 73/100

Analysis and Evaluation of the property’s current Operation Activities: 

 

Occupancy and Revenue:

Based on the data provided on Rooms Occupancy and their corresponding Average Daily Rate (ADR), it seems that the hotel’s overall revenue figure has improved slightly compared to the same time last year.

In detail, the total room nights booked same time last year have increased from 330 to 356 this year, representing an increase of 7.88%, boosting Occupancy percentage from 47.14% to 50.86% as a result. The drivers for these changes mainly arrive from the increase in bookings on weekend days, which are Friday, Saturday, and Sunday at 18.46%, 12.86%, and 20% respectively. (Appendix 1)

The increase in the number of bookings can be partially explained by the decrease in the ADRs, most noticeably for the weekend’s days. Friday rate decrease by 7.89% from 190$ to 175$, Saturday rate decrease by 9.09% from 220$ to 200$, and Sunday rate decrease by 6.67% from 150$ to 140$. As for the total figure, the average rate also dropped from 160.29$ to 154.06$(Appendix 2)

The hotel’s pricing strategy therefore can be concluded as boosting bookings by offering a lower rate for the weekend days to its customers. The result was rather positive, as the Revenue has increased from 52,895$ (same time last year) to 54,847$ (On the Books figure), indicating an increase of 3.69%. (Appendix 3)

 

Market Segmentation:

With the data provided on the other three competitors (Old Care Hotel, Veriu Broadway Hotel, and Four Points by Sheraton), it can be seen that the prices offered by Alto are closet to Veriu Broadway, indicating they share the same segment of customers, while the Old Care and Four Points are possible on the higher-end spectrum. (Appendix 4)

The leisure group of customer contributes the most bookings for the three weekends day, from Friday to Sunday, and out of the four hotels, only Veriu Broadway has sold out for those days. Intangible factors such as guest service or reputation shall not be discussed as relevant data were not provided; however, Alto hotel can apply “Competitor-based Pricing Strategy”, adjusting with those of Veriu initially, then follow up and evaluate if changes in prices can boost booking.

Alto’s prices are currently around 10% less than those offered by Veriu Broadway, so a further discount (say 5%) can be set in order to prevail on the market share. (Appendix 4)

As stated above, Old Care and Four Point would probably have customers from a higher segment of the market, so discounts would probably not attract customers to reside there. However, if resources are invested effectively into Alto to enhance its quality and facility, Alto shall be more competitive in the future. Following the “Penetration Positioning Strategy”, prices can be increased gradually, in combination with re-branding/positioning strategies which aims to penetrate the higher end of the market by offering a lower rate initially.

 

Recommendation:

  1. a) Distribution Channels: 

As per research (“Analysis of Major Online Travel Agencies – OTAs – Cloudbeds”, 2020), the commission rate currently charges by Booking.com and Expedia is 15% and 16.5% respectively, which was among the lowest when compared with other OTAs.

As these two channels have a large customer base worldwide (over 50 million each), Alto hotel could also try to make itself available on other OTAs in the Asia region, where a large customer base exists.

With a similar commission rate, two considerable OTAs are Agoda (16%) and Traveloka (15%). Although their customer base is smaller, but as the demand for “City to Surf event” spikes, the hotel would ideally need to be present on as many applicable OTAs as possible.

 

  1. b) Inventory Control: 

With the introduction of new OTAs as mentioned, problems such as Overbooking and Double Booking can occur, which can damage the hotel’s reputation in the long run. (“How Hotel Inventory Distribution Impacts Revenue Management”, 2020)

Consequently, more resources would need to be spent on a cloud-based CRM (central reservation system) for instance. The rooms assigned to each OTAs would be updated in Real-Time as the rooms are booked by customers, avoiding circumstances where multiple customers can book the same room when demand spikes for the City to Surf event rise.

 

  1. c) Price adjustment: 

With the segment report provided, it is noticeable that for bookings from Corporate clients, the difference between Consortia and Negotiated are different significantly. (Appendix 5)

Room nights occupied by Consortia are only a humble 200 compared to 1,130 by Negotiated guests, leading to a striking revenue difference between the two consequently (31,000$ and 135,600$ respectively). This might indicate that the hotel is heavily dependent on reaching out to the cooperate segment, rather than being approached by Consortia seeking for deals for the cooperate clients. Hence, Boosting the hotel’s visibility as suggested would seem beneficial to approach this segment that the hotel is currently missing.

In addition, with the current ADR of 155$ for Consortia when compared with 120$ for Negotiated, it is advisable that the price is to be decreased further so that the offers would seem desirable to Consortia.

 

  1. d) other recommendation: 

With the Competitive Intelligence report, special attention would be required for the RevPAR figure. Although Alto’s figure of 78.44 is close to the RGI of 79.30, the figure achieved by the competitor was 98.94, which is 20% of Alto’s current RevPAR. (Appendix 6)

To improve the figure, revenue from room sold would need to be increased consequently; through volume-discounting offers for corporate groups which book for conferencing.

If such an attempt is unsuccessful, other revenue centers should be focused on and offered for the corporate segment, such as F&B catering service or In-Room Dining.

 

Conclusion: 

Though Alto has improved its Revenue compared to last year, further improvements on Pricing strategies at each stage is required to maximize profitability. “Competitor-based pricing” should be adopted currently, while in the future, when further investments are made into the hotel with the introduction of other OTAs, “Penetration Pricing” approach should be used to wins market share.

 

Appendix 1: Room Occupancy %

Appendix 2: Rooms ADRs

 

Appendix 3: Rooms Revenue

 

Appendix 4: Competitive Pricing Report

 

Appendix 5: Market Segmentation Report

 

Appendix 6: Competitive Intelligence Report

References:

Analysis of Major Online Travel Agencies – OTAs – Cloudbeds. (2020). Retrieved 30 October 2020, from https://www.cloudbeds.com/articles/analysis-of-major-online-travel-agencies-otas/#bookingcom

 

How Hotel Inventory Distribution Impacts Revenue Management. (2020). Retrieved 30 October 2020, from https://hospitalitytech.com/how-hotel-inventory-distribution-impacts-revenue-management:

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