Revenue Management Strategy For Hotels In Sydney, Australia

Selected Hotels for Analysis

Sydney, Australia has been chosen as the city for the revenue management of hotel as the city is one of most attractive places for tourists. It is not only one of the most attractive cities of Australia but also loved by tourists from all across the globe. Specially the number of tourists visiting Sydney between the month of December and January increases significantly due to the attractive decoration of the whole city in December to usher in the New Year. The lighting and fireworks over the Sydney Harbour Bridge is a huge attraction for the tourists to visit the city during the end of the year. In addition Sydney Opera house, beautiful beaches, Sydney Cricket Ground and many other attractive places in the city have influenced the decision of selecting the city for revenue management in the Hotels (Baum, 2016).       

The Hyatt Regency Sydney, The Grace Hotel Sydney and Amora Hotel Jamison Sydney have been chosen for analysis as these hotels are all situated in Sydney and operate in 4 star and 5 star category hotels. Except Hyatt Regency which operate in 5 star hotel category both Amora Hotel Jamison Sydney and The Grace Hotel Sydney are 4 star hotels. Thus, comparison between the revenues of these hotels is possible and makes sense as these operate in hospitality industry and are in similar category.

As mentioned earlier that the above hotels are all in 4 star and 5 star categories similar to the concern hotel. Also the hotels are all situated in Sydney where the concern hotel is situated thus, there are number of elements that are in common between the concern hotel and the above three hotels (Frawley, Goh & Law, 2018). Hence, The Hyatt Regency Sydney, The Grace Hotel Sydney and Amora Hotel Jamison Sydney have been selected. In short the operating parameters of the selected hotels are very similar to the operating parameters of the concern hotel. The scale of operations that a hotel operates to a large extent determines the quantum of revenue and profit of such hotel. Hence, operating scale of hotels is the most important thing to be considered while comparing the room rates, gross revenue and profitability of different hotels. It would be extremely naïve and ineffective analysis if the room rates and other financial parameters of a 2 star hotel is compared with that of 5 star hotel (Breakey, Robinson & Brenner, 2014). Hence, The Hyatt Regency Sydney, The Grace Hotel Sydney and Amora Hotel Jamison Sydney have been chosen for the purpose of analysis to conduct an effective study on the room rates, revenue and other financial elements of the hotel (Ali, Sales, Barwick, Digirolamo, Australia, Officer & Khalid, 2017). 

Factors Considered While Determining Room Rates

The books figures and occupancy forecasts of the hotel have been determined by taking into consideration the impact of different seasons on Hospitality industry. It is expected that the hotels in Australia and especially in Sydney shall experience huge boost in occupancy of hotel rooms during the months of December and January of any year. Months such as June, July and November will have significant occupancy due to many reasons such as summer vacation and winter. Hence, books figures and occupancy forecasts have been made accordingly (Prebensen, Chen & Uysal, 2018).

A hotel operating in the market will have to use an effective operating strategy to earn maximum amount of profit from its operations. The importance of an effective strategy is especially crucial since the business to a large extent depend on the season. The strategy shall be formulated to maximize the amount of revenue of from business by using the seasonal effects on the Hospitality industry. Adjusting the room rates as per the expected demand and supply in the Hospitality industry is very important to the success of a Hotel (Domingo, Goh, Richardson & Hui, 2016).  

Accordingly, the book figures and occupancy forecasts of the concern hotel has been made keeping in mind the effects of seasonal changes on the Hospitality industry as well as the competitors in the industry.   

The hotels that have been taken to assess the revenue management (The Hyatt Regency Sydney, The Grace Hotel Sydney and Amora Hotel Jamison Sydney) are few of the many competitors in the market, i.e. in Sydney. The performance of the hotel thus to a large extent would depend on the ability of the hotel management to stay ahead of the competition (McPhail, Patiar, Herington, Creed & Davidson, 2015). In a competitive market the firms fight for the market share and in order to achieve bigger market share that the competitors the prices are slashed. Thus, as a result the profitability of the firms reduces significantly. In this case the competition in the Hospitality industry in Sydney especially in the 4 and 5 star category hotels are quite heavy (Hahn, Sparks, Wilkins & Jin, 2017). Hence, the management must properly determine the room rates of the hotels by considering the different elements in the market. One of the most important elements to be considered by the management while determining the room rates of different types of rooms in the hotel is the competition in the market. The competition in the market plays the most crucial role in determining the strategy of the management including pricing the room rates of the hotel (Langfield-Smith, Smith, Andon, Hilton & Thorne, 2017).

Target Market for the Hotel

The seasonal effects, i.e. peak, average and lean seasons shall also be considered to formulate an effective management strategy. Only by considering different elements of Hospitality industry specific to Sydney the management shall take necessary decisions to manage the affairs of the hotel. The room rates to a large extent also dependent on the expected impact of seasons on the demand of services provided by the hotels in Hospitality industry. Hence, it can be generally seen that during peak season such November, December and January the availability of rooms in different hotels is quite less and the room tariffs are also significantly higher compared to the moderate and lean season. This is simple demand and supply rule in play here. A brief look in the following table containing the room tariffs of two hotels on different dates will be helpful in understanding the impact of demand on the room rates of the hotels (Erdem & Jiang, 2016).

Deluxe king room rates in Amora Hotel are  mentioned in the official website of the Hotel on two completely different dates as well as quoted by two online sites are provided:  

	20 Sept	27 Sept	4 Oct
	11/10	1/11	11/10	1/11	11/10	1/11
Hotel website	$285	$418	$250	$418	270	418
O: 1	$275	$418	$255	$418	290	428
O: 2	$290	$417.50	$255	$417.50	290	427.5

The Deluxe king room rates on those two dates in The Grace Hotel as per its official website and two online sites are mentioned in the table below:

	20 Sept	27 Sept	4 Oct
	11/10	1/11	11/10	1/11	11/10	1/11
Hotel website	$274	$402	$248	$360	262	384
O: 1	$284	$412	$244	$355	262	346/384
O: 2	$286.50	$416.50	$247	$358.50	265	349.5

Note: O1 and O2 stand for online website 1 and online website 2.  

It is clear from the above that there is significant difference between the room rates on two different dates. In 11^th October the room (Deluxe king) rates in Amora is $285 per night and $274 per night in Grace Hotel. Same rooms were commanding tariffs of $418 and $402 per night on 1^st of November. This is because the demand has changed. In November there is significant increase in demand for room services in hotels as compared to October hence, the room rates are significantly different in these two dates. This is the management strategy to achieve expected financial performance in the future. The hotel management must forecast the possible demand and accordingly shall determine its room rates and other aspects of business strategy to improve its performance in the market.    

The target market for the hotel is the professionals, business men and women, business executives, wealthy people and corporates.  

The forecasts shall be changed based on the expected future variables. Generally the demand increase in peak season and declines in lean season. Finding a proper balance between the peak and lean season to determine room rates and accordingly the forecast shall be changed (Baum, 2016).  

Sub part 5.1:

In case demand is lower than anticipated then the management must firstly reduce the room rates in addition should advertise such reduction in room rates to attract new guests.

Sub part 5.2:

If demand is higher than anticipated then the management shall firstly ensure that the occupancy is 100% in the hotel. Once occupancy is full the management can contemplate increasing room tariffs to earn higher revenue.

References:

Ali, M., Sales, A. B. I. C. L., Barwick, J., Digirolamo, L., Australia, C. R., Officer, D. R., … & Khalid, A. (2017). School of Business.

Baum, T. (Ed.). (2016). Human resource issues in international tourism. Elsevier.

Breakey, N. M., Robinson, R. N., & Brenner, M. L. (2014). Approaches in the design and delivery of hotel/hospitality management undergraduate degree programmes within Australia. The Routledge Handbook of Tourism and Hospitality Education, 305.

Domingo, K., Goh, E., Richardson, S., & Hui, L. K. (2016). A career in the hospitality industry: An exploratory study of female postgraduates’ attitudes and perceived difficulties. CAUTHE 2016: The Changing Landscape of Tourism and Hospitality: The Impact of Emerging Markets and Emerging Destinations, 988.

Erdem, M., & Jiang, L. (2016). An overview of hotel revenue management research and emerging key patterns in the third millennium. Journal of Hospitality and Tourism Technology, 7(3), 300-312.

Frawley, T., Goh, E., & Law, R. (2018). Quality Assurance at Hotel Management Tertiary Institutions in Australia: An Insight Into Factors Behind Domestic and International Student Satisfaction. Journal of Hospitality & Tourism Education, 1-9.

Hahn, S. E., Sparks, B., Wilkins, H., & Jin, X. (2017). E-service quality management of a hotel website: A scale and implications for management. Journal of Hospitality Marketing & Management, 26(7), 694-716.

Langfield-Smith, K., Smith, D., Andon, P., Hilton, R., & Thorne, H. (2017). Management accounting: Information for creating and managing value. McGraw-Hill Education Australia.

McPhail, R., Patiar, A., Herington, C., Creed, P., & Davidson, M. (2015). Development and initial validation of a hospitality employees’ job satisfaction index: Evidence from Australia. International Journal of Contemporary Hospitality Management, 27(8), 1814-1838.

Prebensen, N. K., Chen, J. S., & Uysal, M. (Eds.). (2018). Creating experience value in tourism. Cabi.