The Effect Of Revenue Management On The Lodging Industry

Customer profitability was a determinant used for segmenting and targeting, studies were done on customers’ likes, dislikes and types of products they would benefit from and models were developed to determine their propensity to buy.

Marriott is renowned for its elegant and comfortable hotels and resorts. The company caters to a targeted customer base, ranging from the frequent corporate business traveler to the family enjoying their occasional weekend get-away. Marriott has continued its rise in the lodging, contract services, and restaurant industries. The company continuously strives to meet the needs and wants of its customers while strategically maneuvering the rigors of today’s competitive and ever-evolving market of glamorous destinations and convenient services. In order to remain relevant in a highly-competitive environment, Marriott must strike that successful balance of minimizing costs, and gaining and effectively

As we discussed in class, every business is faced with these issues and they are important to managers making strategic decisions. One of the first things learned about business is that if there is no demand for a good or service, the firm that provides it will not continue to exist. Over time the hotel industry has continued to change with market conditions and make itself attractive to business

In terms of sales and marketing, we adapted our strategy based on how the products played in each segment. Our strategy was to spend efficiently in marketing & sales to keep the customer awareness and accessibility high for the premium products, while maintaining a decent level of awareness and accessibility in other segments.

The hotel chain, Astor Lodge and Suites, Inc., operates 250 properties in 10 western and Rocky Mountain states. The company’s customer base primarily comprises business travelers. In addition, the locations of the properties surround airports, large regional shopping centers, and major highways close to suburban industrial sites as well as office complexes. Projections of 2005 fiscal year forecast a fifth consecutive year of a gross loss for the firm. The estimates include an anticipated $422.6 million in company lodging revenues but a net loss of $15.7 million for 2005. As a result, Joseph James, president and CEO of Astor Lodge and Suites, Inc., initiated a challenging goal for executive management to devise a strategy achieving net profits in two years and sustaining positive growth in the future.

The hotel industry is a very hard industry to enter into, due to one of the biggest obstacles, which is brand recognition. Right now there are a few large hotel chains that make a large footprint in the market. It is hard for a new entrant to come into the industry and compete with these large hotel chains without bringing something new to the table. Many large chains in the industry dominate the industry due to economies of scale due to franchising.

Hilton Hotels is one of the biggest players in the US lodging industry. It contributes to about 9% of the total rooms in US lodging market. It has presence in over 78 countries with more than 2500 hotels. Lodging industry is highly capital intensive industry, so to reduce capital expenditure Hilton Hotels opted for self-owned Hotels as well as franchising model with the real estate owners. One of the key features of lodging industry is low switching costs for customers. There is very little margin to differentiate from the major competitors in the industry which include Marriott international, IHG, Accor etc.

Perhaps one of the most difficult managerial decisions in the 21st century is the decision to make a decision. Analysis paralysis, endless meetings, and corporate structure have made it painstakingly difficult to come to any real conclusions. So when the Chief Financial Officer, Bruce Berman, of Bloomindale’s was tasked with decision to implement ProfitLogic’s Pricing Optimization (PO) system, he called upon Daniel Gabbay, an analyst in the finance division, to make sense of the numbers and guide his decision making process. Berman was considering implementing a PO system to quantify the markdown

In vertical analysis, it is easier to see elements as a percentage of Revenue. Between 2011-12, the portion that cost of sales takes in revenue has increased however, there is a bigger deterioration in distribution cost. In 2011, 9.21% of revenue remains as profit but in 2012 this figure decreases to 8.14%. Despite reduction in costs is one of the strategies of Ted Baker(part 1.4), analysis illustrates that costs increase each year.

In the case of the Hamilton hotel, Snow needs to make a decision as to if 60 additional rooms reservations should be accepted which could lead to overbooking (Weatherford & Bodily,1990). It is a problem of capacity utilization that is being faced in this particular case where revenue maximization is aimed while minimizing customer dissatisfaction.

To remain profitable, hotels must operate with around 65-70% capacity . Due to seasonality, political and economic events, some hotels are finding it difficult to maintain profitable occupancy levels and have started to provide services along multiple levels within the industry's

As mentioned earlier in Chapter 1, China Lodging Group is a multi-brand hotel group which as per now manages seven hotels with each having a specific target of customers. These Hotels are Hi Inn, Han Ting Hotel, Elan Hotel, Star-way Hotel, JI Hotel, Manxin Hotel, and Joya Hotel. Its mission statement is to create great brands of hotels that guests love. The group predicts to be owning over a quarter of the hotel market share in the next five years to come. The two major objectives that the company has set for the next five years to ensure that they attain their goal is to build one large five-star hotel in the heart of China Capital’s serene outskirts and to ensure that they hire enough

With multiple hotels cost can be quite high due to expenses such as food and upkeep of the hotels.

REVENUE MANAGEMENT is the application of disciplined tactics that predict consumer behaviour at the micro market level and optimize product availability and price to maximize revenue growth. In even simpler terms, revenue management ensures that companies will sell right product to the right costumer at right time for the right price. On a practical level, revenue management is a micromanagement tool that enables companies to turn mountains of disparate marketing data into tactical intelligence, allowing them to take advantage of the fleeting opportunities of the market place. While this often involves setting up large-scale computer system to analyze and predict consumer behaviour, revenue management is not a computer system. Every seller of a product or services faces a number of fundamental decisions.

Research indicates that whilst a price reducing strategy, which is commonly used in response to strong competition, may see short term gains, rarely does it attract and retain new customers (Chan & Wong 2005). In Hong Kong many hotels have reduced their room rates to remain competitive, however the above implies that hoteliers would do better to understand how their services and facilities influence customer satisfaction rather than simply reducing