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Sample Term Paper on Occupancy and Room Revenue Management

Introduction

The hospitality industry is currently undergoing several transformation that are aimed at providing quality services and maximising on proceeds. This paper analyse some of the changes that are effective for the hotel rooms and how the business manage and maximise the revenues. The aspect of ncome maximisation is based on customers perception and the facilities and quality of serivice that the customers expect from the hotels. The paper describe the business strategies that will see the business achieve its targets and efficiency to attract and retain clients (Coltman & Jagels, 2001, 44). The diversity proceedings for success is done through forecasting and managing customer’s conflicts that result from unsatisfactory service delivery and room charges.

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a)     Revenue/Yield Management (Ref. 4.1)

Yield management is the balance between the demand for the available rooms and the price that is allocated to the chambers. The management perception has a background on the theory of demand and supply. The intention of yield management is to maximise revenues through raising the price when the requirements for the rooms is high and lowering the price when the hotel is experiencing low number of guests.

Market segmentation is one effective approach that can be applied in the revenue management practices that can contribute towards the development of the hospitality business. The adoption of market segmentation, various services can be distributed using the same component of the faculty (Siguaw& Bojanic, 2004, 164). Market segmentation in the business is applicable to categorise clients in different rooms hence creating a different demand for some services. This means that some of the rooms can be set aside for special guest and be charged a different rate. The demand for room is directly proportional to the room rates.

Yield management requires the adoption of marketing strategy. Revenue management is relying on the skill of advertising or marketing various rooms to specific guests. The marketing strategy is applicable to the consideration of time and cost of the room and the perception of the price inquiry.  Revenue management is essential for the future success of the hotel business in terms of rate provision and provision of specific services. The demand model is, therefore,effective in forecasting the future success of the hospitality market segmentation.

Creating a brand image is the coherent external impression of the hotel that will attract and retain customers. The business has to maintain a positive image and develop a strategy for overcoming bad reputations that have been faced in the past. Positive brand image createsa high customer relation hence ensuring a continuous flow of revenue from the visiting clients (Wolosz, 1997, 342). A brand image will not only develop the existing paradigms, but the commitment of the business to offering services and the level of customer’s interactions.

Pricing strategy is also important in the management of the business revenues. The hotel can meet the expenses that are in line with meeting the customers’ demands and services if all the revenues are managed correctly. Most clients prefer rooms that are fair in pricing and at the same time meeting their expectation for service delivery. The hotel manager expectations in the business are to fill the rooms with guest that will bring profit to the business(Coltman & Jagels, 2001, 124). However, management may choose to admit a guest at lower rates to prevent rooms from remaining unoccupied.

Personal relationships and revenue management culture in the business is active in managing the room rates and accommodation services on offer. Discounts being offered to guests can be applied in low operating seasons and be uplifted during high seasons. A good relationship between the hotel and the customers can ensure financial security as guest will be looking forward to the hotel. Revenue management does not entail raising room rates or the average rate of occupancy as independent variables, the focus for revenue management is to get the product of increasing room rates and maximising occupancy to maintain a healthy relationship (Siguaw& Bojanic, 2004, 420). Revenue per available room (REVPAR) is the best way to quantify the room revenues that exclude taxes. The technique considers the income from the rooms only does not reflect the management ability to control cost and sales of other services.

b)     Sales Techniques that Promote and Maximise Returns (Ref. 4.2)

Corporate account holding is one sales technique the hotel business apply to retain customers throughout the seasons. The technique can be described as financial security for the hotel business. The registered customers will maintain a steady flow of finance to the enterprise, which is payable with or without receiving the services. The business will enjoy the revenue paid by the corporate members and gain more revenues from the short-term customers (Siguaw & Bojanic, 2004, 282).

Maintaining business customers is a sales technique that can be used to maximise revenues. A good customer relationship and service provision is what will keep the customers to prefer one hotel to another. Clients can be persuaded into buying the room services through the tree techniques. The method includes up-selling, cross-selling, top- down selling and bottom-up selling. Up-selling is a technique used by many hoteliers, which means selling more than the client expectations when making reservation (Pizam, 2010, 342). The strategy will make the customer maintain the partnership with the business and invite other potential customers.

Keeping of customer’s database is management techniques that can enable the business maintain the relationship with the customers. The business can also retain and provide rooms for every class of visiting guest; this will consider services that cover the four main rates categories. Promotional price for the hotel rooms can help attract the customers (Coltman & Jagels, 2001, 163). The business can compare prices from other competitors. Therefore, appropriate price for customers can be higher or lower but still maintain the quality of service on offer.

            Advanced booking is another sales technique that the business can apply in maximising the company revenues. The reward for advance booking is to assure the business that there are revenues that the company expects to receive. Booking in advance provides the much-needed information that the business can use to reach the customer and maintain a healthy relationship. The relationship makes the customer tell the experience of the hotel in terms of room service and other services that will attract more customers (Phillips, 2006, 241/247).

Sponsorship and promotion of different departments is a strategy that the business can apply in promoting and maximising revenues. The success of the business to promote sales and maximise revenue depend on policies that help the company run its daily operations successfully. The company must have objectives and goals to be attained in the financial plans for sponsorship and promotion (O’fallon & Rutherford, 2011, 234/301). The sales technique is meant to attract and retain customers for the business and maximise on the revenues.

Various methods can be used by the business to persuade customers in buying the room services and other hotel products. The tree techniques include up-selling, cross-selling, top- down selling and bottom-up selling. Up-selling is a technique used by many hoteliers, which means selling more than the client expectations when making reservation. The strategy will make the customer maintain the partnership with the business and invite other potential clients (Seth & Bhat, 2005, 253).

c)     Application of Forecasting and Statistical Data in the Room Division (Ref 4.3)

Forecasting in room division is the eventual anticipation of the hotel rooms that are available for sale and the profit that will be realised from the sales.  Effective room Forecasting for room division is appropriate for room planning, departmental decision-making and the driving factor in pricing. Room arrivals are the guests that have made reservations and are expected to check into the rooms.  The manager can take the statistics of the number of guests who have not made reservations over the years and apply that number to prepare rooms for the walk-ins (Pizam, 2010, 32/85).

Forecasting and statistical data in the room division help the hotel manager to know the hotel occupancy, rooms available for sale and the duration of stay so that arrangements can be made for other guests. Forecasting is also an important approach to making decisions on the number of staff to be availed for room servicing. Measuring the performance of the lodging can increase predictability for the future performance of the hotel business and the number of guests the hotel can accommodate (Phillips, 2006, 245).

The tool of forecasting and statistical data collection can be used to make future predictions to correct the previous experiences. The practice takes into consideration the real demand for the rooms that have been achieved and forecasting method applied.

Forecasting and statistical data are important for making accurate decision in ashort term and long term plans for the lodging services. Customers are always dynamic, and sometimes they make hotel reservations but fail to show up or may show up and leave earlier than expected. Therefore, the rooms that have been left vacant can be made available for the walk in guest to maximise on the profit (O’fallon & Rutherford, 2011, 423).

d)     Performance Indicators for measuring the Success of Accommodation Sales (ref 4.4).

The economic health of the hotel industry depends on occupancy, which is the reflection of demand and supply business. Hotel room managers are always interested in knowing the number of rooms that are occupied and those available for sale as a way of monitoring the performance of the business (Sturman, Corgel & Verma, 2011, 247). Measuring the rate of occupancy determine the performance of room sales in a month or yearly. Occupancy rate is calculated as follows;

Number of rooms sold (180)

  • Occupancy Rate = X 100

Total number of rooms available for sale (215)

= 83, 72%

The occupancy rate for the accommodation services is 72% hence good sales for the hotel.

 

Sales per occupancy are performance indicators that determine the hotels market share. The performance of the business is measured by the number of number of guest sleeping in the rooms per day and the amount received from them (Pizam, 2010, 152). The information obtained is useful to the management to know the number of guests to be served.

  • Guest Occupancy Percentage

No. of guest in the room (260)

X 100

No. of rooms occupied (355)

 

= 73, 23%

 

Average daily room rates give the estimation of the room charges regardless of the type of room and the sales price. The balance between demand and price is bases on the revenue management.

  • Average Room Rate

Room revenue (11.9)

= £ 66, 11

No. of rooms sold (180)

 

Conclusion

Hotel owners and stakeholders have to work round the clock to carry out development in the hospitality industry in order to attract and retain customers. The business is competitive but with modern infrastructure and good survives the business revenue management is secure. The hotel business should have a good location and adopt new technologies to reach as many customers as possible. Good accommodation facilities will attract clients leading to good revenues for the business.

 

 

 

 

 

References

Coltman, M., & Jagels, M. (2001). Hospitality management accounting. New York, John Wiley.

O’fallon, M. J., & Rutherford, D. G. (2011). Hotel management and operations. Hoboken, N.J. : John Wiley & Sons, Inc.

Phillips, R. (2006). Pricing and Revenue Optimization. Palo Alto, Stanford University Press.

Pizam, A. (2010). International Encyclopaedia of Hospitality management. Amsterdam, Elsevier/Butterworth-Heinemann.

Seth, P. N., & Bhat, S. S. (2005). An introduction to travel and tourism. India, Sterling.

Siguaw, J., & Bojanic, D. C. (2004). Hospitality sales: smelling starter. Albany, N.Y., Delmar.

Sturman, M. C., Corgel, J. B., & Verma, R. (2011). The Cornell School of Hotel Administration on Hospitality cutting edge thinking and practice. Hoboken, N.J., John Wiley & Sons.

Wolosz, J. (1997). Hotel and Motel marketing, Sales, and Promotion: Strategies to Manage Revenue and Increase Occupancy. San Francisco, Infinite Corridor Pub.

 

 

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