In-depth Analysis On Revenue Management Strategy For Hotel Sydney

Revenue Management Strategies Applied at Hotel Sydney

Hotel Sydney remains one of the most famous destinations in this part of town. The number of visitors could be attributed to the attractive suites in addition to the quality of services offered. It is however a fact worth noting that the hotel, like any other in the industry faces a number of inconsistencies in the flow of revenue (Abrate and Viglia, 2016). Based on a comparative study of the financial performance of the hotel for two different years, I shall give an account of the noted improvements or declines in revenues in the various departments within the hotel. By supporting the arguments with facts from HOTS, the strategies which could be responsible for the improvement in performance shall also be extensively outlined with references to specific parameters. This reflective report shall therefore entail a critical analysis of the Hotel’s performance by benchmarking the two different but consecutive years. I shall also include an outline the individual efforts which could have contributed in the improvements in performance by comparing the outcomes of the current year by the initially set targets. Additionally, this reflective report focuses on advertising as the main tool for revenue management. Consequently, the personal experiences gained during the process shall also be indicated before ending the report with a list of recommendations for the hotel management on some of the strategies which could be implemented in order to enhance effective revenue flow and performance improvement.

In order to achieve my set target, I settled on advertisement as the most appropriate revenue management strategy. This approach was picked due to the vast impacts that it has on various parameters with the hotel. The merits that come with proper advertisement are numerous. The strategy does not only enhance the consumer awareness about the products and services but also stabilizes sales by ensuring a consistent market presence (Alderighi, Nicolini and Piga, 2015). I also picked on advertisement due to the fact that various avenues can be used to implement the marketing strategies. These include the use of online platform to complement other standard procedures. The comparison in the statistics is a sure indication of improvement which in turn affirms the effectiveness of the chosen tactic of revenue management.

		Current Year		Last Year
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Rooms		448,309		444,696
Food & Beverage		228,442		225,215
Other Operated Departments		40,674		39,721
Other Revenue		0		0
		717,425		709,632
Rooms		116,981		111,668
Food & Beverage		133,478		130,820
Other Operated Departments		30,307		29,679
Administrative & General		34,773		34,027
Sales & Marketing		21,083		17,064
Property Operation & Maintenance		92,868		90,522
Utilities		20,624		20,183
Property Taxes & Insurance		15,788		15,552
Bank Charges		2,308		2,357
Interest Expense		9,997		11,506
Depreciation		110,249		121,896
		588,456		585,274
		128,969

Statement of Income from HOTS

By comparing the two years, it can be deduced that the total revenue of the hotel improved by about 0.01% which is comparatively a positive deviation. Despite its marginal value, the improvement in the hotel’s revenue could be attributed to the efficient advertising strategies which played a crucial role in increasing awareness among the consumers about the packages offered in the hotel (Aubke, Woeber, Scott and Baggio, 2014).

Out of the total revenue, the percentage of room was 62% while the percentage of the food and beverages was approximately 31% of the total revenue. The room percentage increased by 1% from 61% which had been recorded the previous year.  The statement above therefore reveals an improvement in the room income. The improvement was as a result of the enhanced quality of services to the customers which in turn enhanced their loyalty hence stabilizing the market base for the rooms. Additionally, online advertising strategies were used to inform the prospective customers of the available room services and varying prices. The advertising approaches played a crucial role in increasing awareness among the clients. The statement of income above however indicates a marginal improvement in the sales of foods and beverages. A comparative analysis of the two years reveals a slight improvement of about 0.02% hence the need for the implementation of more effective marketing strategies in addition to quality and price control.

Benchmarking Hotel Performance

The F & B gross profit is 146, 014. This is a slight improvement on the previous year’s grows profit which was 144,940. Despite the registered improvement in the profit margin by comparing the two years, I can note that this change is not satisfactory. The minimal change in profit indicates that the management strategies aimed at enhancing the sales of food and beverages at the hotel were not effective enough in achieving their objectives. With reference to retained earnings, an increase in the earnings has been registered. In order to achieve this, the expenses were greatly minimized and reduced after critically analyzing the past balance sheet in a bid to identify the specific areas which could have brought about overspending. 

	Current Period	Year-To-Date
		Current Year	Last Year	Current Year	Last Year
		$	%	$	%	$	%	$	%
Rooms		448,309	62.5	444,696	62.7	5,289,990	61.5	5,386,158	61.2
Food & Beverage		228,442	100.0	225,215	100.0	2,807,514	100.0	2,893,066	100.0
Other Operated Departments		40,674	5.7	39,721	5.6	510,416	5.9	528,210	6.0
		717,425	100.0	709,632	100.0	8,607,920	100.0	8,807,434	100.0
Rooms		116,981	16.3	111,668	15.7	1,439,690	16.7	1,468,408	16.7
Food & Beverage		133,478	18.6	130,820	18.4	1,654,804	19.2	1,708,808	19.4
Other Operated Departments		30,307	4.2	29,679	4.2	376,723	4.4	391,531	4.4
		280,766	39.1	272,167	38.4	3,471,217	40.3	3,568,747	40.5
Administrative  General		37,081	5.2	36,384	5.1	472,859	5.5	488,323	5.5
Sales & Marketing		21,083	2.9	17,064	2.4	273,112	3.2	318,734	3.6
Property Operation & Maintenance		92,868	12.9	90,522	12.8	1,123,247	13.0	1,171,305	13.3
Utilities		20,624	2.9	20,183	2.8	253,698	2.9	264,489	3.0
		171,656	23.9	164,153	23.1	2,122,916	24.7	2,242,851	25.5
		265,003	36.9	273,312	38.5	3,013,787	35.0	2,995,836	34.0
Fixed Charges		15,788	2.2	15,552	2.2	204,100	2.4	212,593	2.4
Interest Expense		9,997	1.4	11,506	1.6	139,016	1.6	168,208	1.9
		25,785	3.6	27,058	3.8	343,116	4.0	380,801	4.3
		239,218	33.3	246,254	34.7	2,670,671	31.0	2,615,035	29.7

Room Occupancy (%)	50.3
Standard Room Occupancy (%)	43.97
Executive Room Occupancy (%)	96.96
Suite Occupancy (%)	98.57
Average Room Rate $	123.40
Weekday Standard($)	114.20
Weekend Standard($)	133.59
Weekday Executive($)	150.00
Weekend Executive($)	165.00
Weekday Suites($)	201.79
Weekend Suites($)	220.00
Contract ($)	0.00
Conferences ($)	106.94
Groups ($)	42.48

From the tables above, it can be deduced that the room occupancy for the previous year was 49% while the recorded room occupancy for the current year was 50%. This indicates that the room occupancy increased by 1%. The increase in occupancy could be attributed to the increase in number of visitors to the hotel. The data also indicates that the executive rooms had more occupants compared to the case for standard rooms. There are two explanations to this positive deviation. First, the advertising strategies have been enhanced over the past 10 months by harnessing every possible avenue to inform the prospective customers of the packages offered at the hotel. Secondly, the quality of services was adjusted by introducing new procedures aimed at customer satisfaction and retention. These strategies have led to customer loyalty which can be confirmed by the outlined statistics (Bilegan, Brotcorne, Feillet, and Hayel, 2015).

The MPI currently stands at 18.63 which is an improvement from the previous years since the value then was 18.58. The revenue per available room has also increased from 61 in the previous year to 62 in the current year. The average daily rates as well as the RGI remained fairly constant over the months owing to the little emphasis laid on the short term objectives on sales improvement.

The average Market Image Index increased from 49 to 50 indicating a deviation of 1. Similarly, the Public Awareness Index increased from 38 to 40. With respect to marketing related expenses, the percentage of revenue spent on marketing can be approximated at 0.02%. The amount is comparatively low as the strategy here involved minimizing expenses as much as possible. Adequate marketing resulted in positive impacts as the hotel was able to receive an increased number of visitors due to increase in awareness. The minimized expenses equally served well to ensure the hotel registered a good return on investment at the end of the financial period (Board and Skrzypacz, 2016).

(Kimes and Wirtz, 2015)

In summary, the stated targets were as 75% improvement in revenue during the summer season and a 58% improvement for the winter season. This implies that the average target at the beginning of the year was 66%. Based on the analytical comparison of the two years above, it can be deduced that the percentage improvement in revenue was 62% which is only 4% shy of the original target. Despite the fact that the target was to reached, the statistical records indicate that the revenue management strategy was effective in enhancing better sales and minimizing related expenses (Solnet, Boztug and Dolnicar, 2016).

The period provided an excellent platform for learning. Through the meetings, it was possible to learn from the other members of the team, identifying the strengths and hence making use of each other’s unique abilities to gain the best. The experience also helped to build my team management as well as communication skills (Bodea and Ferguson, 2014). The group comprised individuals with varied personalities hence obtaining a common ground required the right approaches. Finally, the interaction with the other members of the group enabled me to establish new insights especially those that are associated with management. It was not only an interesting experience working with different people but a good avenue for learning as well.

Conclusion and recommendations

This reflective paper was basically aimed at analyzing the impacts that the revenue management strategy would have on the total revenue at the hotel. The arguments above reveal the fact that advertisement which was the chosen strategy played a pivotal role in increasing the market image of the hotel and its products thereby increasing the number of visitors. However, the fact that the registered improvements were only in small margins reveals the need for more effective measures that could be used to complement the current strategy in a bid to improve sales further (Di Foggia and Lazzarotti, 2014).

Consequently, the following recommendations are presented to the hotel management:

• The management ought to explore other strategies of enhancing market presence. This could be achieved through product and service variation, variation in prices as well incentives to loyal customers.
• The management ought to continuously work on minimizing expenses through constant evaluation of the performance indicators to identify the less effective areas which tend to increase process costs/expenses.
• There is need for staff empowerment through motivation and training. This enhances the quality of services offered at the hotel which in turn improves the rate of customer retention.
• The management may also need to vary its cuisine and hence provide the customers with a wide variety of food and beverage options to pick from.
• There is need to replace the existing facilities with new ones as this forms part of quality assurance and ultimate customer satisfaction.

References

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

Alderighi, M., Nicolini, M. and Piga, C.A. (2015). Combined effects of capacity and time on fares: insights from the yield management of a low-cost airline. Review of Economics and Statistics, 97(4), pp.900-915.

Aubke, F., Woeber, K., Scott, N. and Baggio, R. (2014). Knowledge sharing in revenue management teams: Antecedents and consequences of group cohesion. International Journal of Hospitality Management, 41, pp.149-157.

Bilegan, I.C., Brotcorne, L., Feillet, D. and Hayel, Y. (2015). Revenue management for rail container transportation. EURO Journal on Transportation and Logistics, 4(2), pp.261-283.

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

Bodea, T. and Ferguson, M. (2014). Segmentation, revenue management and pricing analytics. Routledge.

Di Foggia, G. and Lazzarotti, V. (2014). Assessing the link between revenue management and performance: insights from the Italian tourism industry. Measuring business excellence, 18(1), pp.55-65.

Fiig, T., Cholak, U., Gauchet, M. and Cany, B. (2015). What is the role of distribution in revenue management?–Past and future. Journal of Revenue and Pricing Management, 14(2), pp.127-133.

Kimes, S.E. and Wirtz, J. (2015). Revenue management: Advanced strategies and tools to enhance firm profitability. Foundations and Trends® in Marketing, 8(1), pp.1-68.

Solnet, D., Boztug, Y. and Dolnicar, S. (2016). An untapped gold mine? Exploring the potential of market basket analysis to grow hotel revenue. International Journal of Hospitality Management, 56, pp.119-125.