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JW MARIOTT REVENUE MANAGEMENT

Plagiarism declaration
This assignment is written by me and in my own words. Each contribution and quotation from
published and unpublished sources has been explicitly citied and acknowledged. I confirm I have
carefully read and completely understood the Department and University regulations on
plagiarism; I am highly aware that plagiarism (the use of someone else’s work without their
permission and/or without acknowledging the original source) is wrong. This paper has not
previously has been submitted for assessment in any other university and has not yet been
published in any sources.
Executive Summary
This proposal examines the theoretical main concepts of hotel revenue management (RM). The
hotel RM concepts presented in the paper covers hotel RM centres, data and information, hotel
RM process, metrics, analysis, forecasting, segmentation and profiling, and ethical issues.
Additionally, special attention is paid to RM tools and techniques to optimize the hotel revenue
management and maximize the profits. The paper investigates the hotel RM practices of Sydney
Harbor Marriott Hotel, a five- star hotel in Sydney, and proposes a number of effective RM
strategies accompanied by the schedule and process of implementation for the improvements and
revenue maximization.
Introduction
Overview and Context
Sydney Harbor Marriott Hotel is a brand belonging to Marriott International; it includes 595
rooms and other facilities. Its centres include three divisions of room including: suite rooms,

premium rooms and standard rooms; spa and fitness facilities with high-end equipment; a
rooftop longue bar, three restaurants with different designs and styles and many other services…
Luxurious rooms and top services are served with a new level at Sydney Harbor Marriott.
Despite these advantages, Marriott Sydney still faces high competition from five star hotels in
Sydney. In order to ensure revenue growth to maximize profits, this proposal is written to
suggest strategies for Revenue Management.


Glossary of Terms
ADR: Average Daily Rate
GDS: Global Distribution System
GOPPAR: Gross Operating Revenue Per Available Room
CRM: Customer Relation Management
OTA: Online Travel Agent
RM: Revenue Management
RevPAR: Revenue Per Available Room
SEO: Search Engine Optimization
Proposal Outline
This proposal includes the following part:
I.
Theoretical Framework
1. Hotel Revenue Management
2. Hotel revenue management system
3. Hotel revenue management process

II.

Recommended strategies for revenue management in Sydney Harbor Marriott Hotel

1. Recommended strategies
1.1. Group pricing strategy
1.2. Pricing Strategies Suited to Demand
1.3. Overbooking Management Strategy
1.4. Direct Booking Strategy
1.5. CRM strategy
2. Implementation Plan

Conclusion
I.


Theoretical Framework


1. Hotel Revenue Management

Revenue (yield) management is the business practice in which supply and demand are
collaborated by segmenting customers based on their purchasing intentions and capacity are
allocated to these different segments to optimize the firm revenue (El Haddad, Roper & Jones,
2008). Whereas according to Kimes (1989) and Kimes & Wirtz (2003) revenue management is
defined as the implementation of pricing strategies and information systems to allocate the right
capacity to the right customer at the right price at the right time.
Revenue management helps hotels to make predictions of consumer demands, based on which
the hotels will implement tools and methods to manage inventory and determine price in order to
ensure revenue growth.
2. Hotel revenue management system

The figure below illustrates the hotel RM system:


Figure 1: Hotel Revenue Management System
Revenue centres
Hotel revenue centres includes sources for the hotel (room division, food & beverage, spa &
fitness, sauna, gambling facilities, casino and other additional services) and the capacity thanks
to which pricing tools are applied as revenue growth tools (Ivanov, S. & Zhechev, 2011)
Data and information
RM in hotels requires a lot of data including ADR, RevPAR, GOPPAR, occupancy, yield, profit
per available room, etc. (Barth, 2002; Lieberman, 2003; Hoogenboom, 2012). Information about
future bookings, sales of services, competitors’ rates, demand and supply and financial results are
also gathered in theRM system (Ivanov, S. & Zhechev, 2011).
RM tools
Hotels use different RM tools to maximize the revenue from the customers. Pricing, non-pricing


and combined tools are three main categories of RM tools used in the hospitality industry (Ivanov,
S. & Zhechev, 2011).

Other elements include RM team and RM sofwares.
3. Hotel revenue management process
The revenue management process is the set and sequences of strategic actions implemented and
managed by hotels in order to make an optimization for revenue management of the hotels.
It is identified by Tranter, Stuart-Hill & Parker (2008) that there are eight steps in
the RM process includes eight steps: objective specifying, information analyzing, supply and
demand analyzing, forecasting, demand forecasting, dynamic value-based pricing,
implementation of revenue management strategies and monitoring and amending the revenue
management strategy.
The RM process is demonstrated in the following figure:


Source: Adapted and expended from Ivanov, S. & Zhechev, V., 2011
Figure 2: Hotel revenue management process
II.

Recommended strategies for revenue management in Sydney Harbor Marriott
Hotel

3. Recommended strategies
Depending on structural and organizational conditions of the Hotel presented in the Introduction
of this proposal, it is recommended that the Hotel implements the following strategies to
maximize the revenue:
-

Group Pricing Strategy
Pricing Strategies Suited to Demand


-

Overbooking Management Strategy
Direct Booking Strategy
CRM strategy
3.1. Group pricing strategy

It is highly suggested that the group pricing strategy should be implemented in Marriot Hotel
because group business makes great contributions to revenue of Marriott. Marriott is a full
service brand; therefore, revenue from group business can account for more than half of the
hotel’s revenue it the Hotel utilizes the right strategies (Emeksiz, M., Gursoy, D. & Icoz, O.,
2006).

According to the Marriott annual report 2016, Marriott Sydney projected the growth of
occupancy between 2.3% to 2.8% and forecasted the ADR growth between 3.6 % to 4.0%. In
fact, the occupancy growth for both transient and group business are more than expected and it
was officially recorded that in May 2014 Marriot Sydney saw a new record RevPAR growth with
10 %. It is identified that the revenue increase was mainly driven by the transient segment;
however, the Hotel also saw a growth in hotel group demand. Illustrated in the following table,
the group occupancy growth outnumbered that of transient occupancy; however, it is a vice versa
in which the ADR transient growth is over twice more than group ADR growth.

Segment
Transient
Group

Marriott 2016 Year over Year Growth in customer segments
YOY GROWTH
Occupancy
ADR
3.2 %
4.6 %
3.9 %
2.1 %
Table 1: Marriott 2016 Year over Year Growth in customer segments

From the table, we can give a conclusion that the market segmentation is very potential for
Marriot Sydney. Marriott Sydney is a suitable hotel with great group travel rates and hotel
special offers for the groups when planning events. Group Pricing Optimizer (GPO) is planned to
be applied to promote both occupancy and ADR of group business. GPO is a system which helps
the Hotel improve its sales to group customers. In this GPO system, price-elasticity strategy is
used for group segment to recommend an optimal rate and negotiating range. GPO provides the
sales teams with data including evaluation of alternate dates, sleeping-room inventory


availability, probability of the customer accepting the rate and potential displacement of more
valuable business to support rate negotiation. In the first year, the objectives of GPO
implementation in Marriott are improving the revenue from group business and enhancing the
sales process for sales team and group customers.
Group customers are contracted with the Hotel differently from transient customers in target,
budget, or forecasted rates. Group rates also vary depending on the group’s requirements of
services. For example, the rates of group customers using guest rooms, meeting convention, spa
service are different from those of group customers who only use guest rooms (Schwartz, Z. &
Cohen, E., 2003).

3.2.

Pricing Strategies Suited to Demand

In previous days, Marriott employs two main strategies for room pricing. The first one is the
“weekday versus weekend” strategy; that means room rates from Sunday to Thursday differ from
those from Friday to Saturday. The second strategy is the “dynamic” pricing strategy which
helps the Hotel to maximize the revenue during the highest levels of occupancy.
In order to maximize the revenue as well as to gain customer satisfaction, Pricing Strategies
Suited to Demand are generated and implemented for specific segmentations with specific
demand including government, leisure, commercial and extended stay. Examples of pricing
strategies specific to these segments are listed below.
Commercial: Commercial guests are people who are travelling on business. The main
characteristics of guest type are short period booking and the larger budget for travel. Marriott
Sydney is recommended to offer special rates for larger companies who create the high level of
business for the hotel.
Leisure: Guests with leisure demand are people who use the hotel services for the following
objectives: vacation travelling friends and family visiting, and other objectives not related to
corporate. This group of customers is quite sensitive to price and always search for the best deal
of price and value. Marriott Sydney designs special packages to add more value for leisure
guests. Free amenities are included in these packages; i.e. free breakfast, free airport pick-up, and


free tickets to local attractions. Another pricing tool for the leisure package is “advanced
purchase rate.” This strategy is designed to make a special discount if guests make a nonrefundable deposit reservation. This package adds more value compared with other package for
leisure.
Contract: The package is designed for organizations or companies who are usually in need for a
constant supply of rooms. With the location and the huge supply of room availability, sales teams
of Marriott are assigned to make contracts with airline crews and cruise ships crews. This will be
a very effective pricing strategy because these contract agreements can provide constant
occupancy.
3.3.

Overbooking Management Strategy

Overbooking is considered as a great strategy for hotel revenue management. Although the initial
objective of overbooking control is to ensure that no customers are denied to be served, it brings
a decrease in no-show rate of the Hotel (Morales, D.R. & Wang, J., 2010). Overbooking
management is a set of practices in which the hotel sells rooms exceeding the maximum
available number of rooms to compensate for no shows and cancellations. According to Vinod
(1992), successful implementation of overbooking control can bring a growth of 20% in the total
revenues.
Due to high competition in the hospitality, Marriott has constantly experienced and applied
different approaches and strategies to allocate the resource in the optimal way. It is recognized
that overbooking practices play an important role in operational hotel success and revenue
management. Overbooking management strategy is implemented in Marriott Sydney with two
main types of activities performed hotel operations. Regarding the first group of activities,
depending on the changes of the market segmentation, specific demands, specific room
availability and booking patterns, the number of overbookings should be defined and modified
constantly every day. Additionally, the managers should play much attention in managing
decisions and operational activities in relation with walking guests with overbookings. In this
regard, it is proposed that elements such as rooms rates , length of stay, rooms rates and client
status should be pressed on by Marriott managers while applying measures for guest walking


and overbooking (Ivanov, 2006). Successful implementation of overbooking control requires
careful planning and training. Staffs should be trained about customer behaviors, characteristics
of overbooking and process to manage overbooking.
3.4.

Direct Booking

Direct bookings through brand-managed websites have become the trend in the hospitality
industries with special rates offering and conveniences to direct booking customers. Marriott
should implement change changes in business plan to drive direct bookings (Myung, E., Li, L. &
Bai, B., 2009). Some offers should be included to add value for direct booking customers are a
percentage discount, complimentary wireless Internet, a complimentary room upgrade, airport
pick up, late checkout… Except increasing the revenue for the Hotel, direct booking will help
promote brand engagement as well as preventing the Hotel from paying commissions for the
third parties. In addition, direct booking is really cost effective. It is noted that compared with
OTA channel it is 10 to 15 times cheaper and 4 to 10 times cheaper than that of the GDS channel.
The implementation of direct booking through the Marriott Sydney website requires some
following actions. The first fundamental bottom Marriott should have is a strong presence online.
The brand of Marriott Sydney needs to become easy and available to be searched. The searching
shouldn’t take customers much time. The staffs in charge of this have to ensure that the right
keywords and SEO are created in the searching engine. In addition, for the success of direct
booking, a mobile friendly website is necessary because a large number of customers use
mobiles to do online booking. Together with these above activities, using social media networks
as the marketing method will assist in promoting the brand of Marriott; the number of customers
knowing the brand will absolutely increase. Furthermore, the rates require to be properly priced
and correlated with the demand. Lastly, values need to be added to make direct booking become
competitive and different from other distribution channels. Marriott Sydney should uses
incentives and rewards to encourage customers to book in the brand website instead of booking
via the third parties
3.5.

CRM strategy


RM has a strong relationship with customer relationship management (CRM) because RM places
much stress on pricing tools and inventory management. Marriott should create incentives and
methods to strongly manage the long-term relationships between the hotel and its customers
(Noone, B.M., Kimes, S.E. & Renaghan, L.M., 2003).
Marriot should launch a program for loyal members. It can offer these customers with free night
at the hotel, a full option of services in the hotel, presents or some other incentives. This not only
improves brand engagement but also increases revenue in total. The hotel manager should
engage CRM strategy with RM tools to maintain the profitable relationship between customers
and the Hotel.
4. Implementation Plan

These strategies require 5% in the total revenue of Marriott Sydney to be implemented. This
budget is used for improving the website, training staff and advertising for the Hotel.
The plan of implementation includes five main steps. In the initial beginning, the proposal is
created depending on the current conditions of the Hotel. It is also based on the demands and
objectives of Marriott for revenue management strategies. The proposal is submitted to the
Manager to get the approval. After the proposal is approved by the manager, it comes to the
second step: planning. A detailed plan (with information about the plan, budget, resources
required, processes…) is generated to implement strategies into practice. The complete plan is
the basic for the third step: preparing the team. For the effective implementation of the strategies
and long-term prospects, a specific and separate team is required to be established to conduct
these strategies. This team is trained with full knowledge and skills related to revenue
management to have the ability to adopt all these strategies. After conducting preparations steps,
the strategies are put into practice on the plan and actual situations of the Hotel. Lastly, the
implementation team should monitor and control the implementing process to evaluate the
impacts of strategies on revenue growth and take adjustments if needed.
During the implementation procedures, the team can face disagreements from others because
some strategies do not belong to traditional RM; effective results are required to blur these
disagreements and opposition.


Conclusion
Effective revenue-management strategies have become more complicated in the competitive and
crowded industry. The hotels in the luxury category face more challenges than the hotels in other
categories. Sydney Harbor Marriott Hotel is a five star hotel in Sydney which would like to
implement effective revenue management strategies to improve the revenue and broaden the
customer pool. In this proposal, five strategies including Group pricing strategy, Pricing
Strategies Suited to Demand, Overbooking Management Strategy, Direct Booking Strategy and
CRM strategy are suggested to for Sydney Harbor Marriott Hotel to achieve its goals and
objectives in increasing the revenue and the overall profits. The plan is also designed and
included for more effective implementation of these strategies in the Hotel.

REFERENCES


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Noone, B.M., Kimes, S.E. & Renaghan, L.M. (2003). Integrating customer relationship
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