Faculty of Creative Industries and ICT
Unit Name: Yield and Revenue Management
Unit Code: HM301
Assessment 02: PART A Competitive Analysis and Positioning strategy
PART B Group Displacement Analysis
Marks: 40 marks
Words: 2000 [not including reference]
Upload both Word document as well as Excel workbook calculation on StudentWe
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
XXXXXXXXXX13,500
XXXXXXXXXX18,000
XXXXXXXXXX22,500
XXXXXXXXXX16,200
XXXXXXXXXX10,800
Room Revenue
$1,800,000.00
Â
$2,700,000.00
Â
$1,750,000.00
Rooms Sold
XXXXXXXXXX9,900
XXXXXXXXXX10,800
XXXXXXXXXX16,200
XXXXXXXXXX9,000
XXXXXXXXXX9,180
Occupancy percentage
Â
60.0%
Â
55.6%
Â
ADR
Â
$187.50
Â
Â
Â
RevPAR
Â
Â
Â
$100.00
Â
MPI
Â
Â
Â
Â
Â
RGI
Â
Â
Â
Â
Â
ARI
Â
Â
Â
Â
Â
QUESTION 2. STRATEGIC PLANNING IN REVENUE MANAGEMENT
(16 MARKS)
Assignment Introduction
Noone, Canina, & Enz XXXXXXXXXXhave 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
and X’) or more subjective statements (for example, ‘we will always be the lowest priced
and 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, XXXXXXXXXXThe 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 XXXXXXXXXX)
· 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
eakfast 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 (
eakfast, 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 XXXXXXXXXXEmerging 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 XXXXXXXXXXRevenue 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, XXXXXXXXXX.
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), XXXXXXXXXX.
Tranter, K. A., Stuart-Hill, T., & Parker, J XXXXXXXXXXAn 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), XXXXXXXXXX.
PRICE VALUE MAP
ALPHA
BACKWATERS
CITADEL
DOWNTOWN
EXCELLENCE
2 4 -2 0 3 2 -1 -1 1 4 PRICE
VALUE
Box Hill Institute Group: Box Hill, Lakeside Lilydale, CAE XXXXXXXXXXCI&ICT
Phone XXXXXXXXXX
XXXXXXXXXX
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
undling 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