Revenue Management and Evaluate the Strategies

Revenue Management Strategy: Meaning & Role

The Revenue Management Strategy refers to the strategy of managing revenue for growth of the organization. This strategy comes from the techniques of revenue management, which are known as yield management. The purpose of using this strategy is to predict consumer demand with regulating inventory and price availability in order to enhance the yield growth. It is planning and deciding on the things in advance rather than stipulated time limit. This approach keeps the management proactive than non- reactive. This helps the management and manager in collecting the information’s about the resources and market resources which keeps them proactive rather than non- reactive. The strategy serves the need of organization by deciding in advance, what should be the price during low or high periods. This concept is basically divided into three approaches Market Segmentation, Procedure and Forecasting. It includes further factors which are taken into due-consideration while making the revenue management strategy is shown in the below figure.

Nowadays, it is used by every industry and organizations in evaluating their current strategies with their goal. This strategy is examined with relevance to hotel management that for what purposes and where it is used. In hotel management, revenue management strategies are made by evaluating:

• Customers
• Pricing
• History or background
• Competition
• Channel Analysis
• Events

These factors are considered in making any kind of revenue management strategy. Any strategy starts with the role of handling all the strategies or in other words person who took charge from initiative to achieve an aim. The manager is essentially required for setting revenue management strategy that is going to place. With the help of the manger, different strategies will carry discussions with another group of people in management on different techniques of revenue management that are:

Market Segmentation

This part of hotel revenue management help in deciding the particular market or it helps in the target market. This segmentation divides the purpose for what to be used that is leisure or official. After finalizing the purpose, the way of choosing a customer visit as a vacation or business decided via room booking. If room booked for individual in the middle of the week than it is for the business or if in the weekend for a double room, then it’s for leisure. This segmentation is served in identifying:

• Total revenue per room per client,
• Booking cancellation percentage,
• Number of days stay,
• Advance booking duration.

With the help of the above identification ways, there are smaller ways of knowing customer preferences of booking or coming into the hotel. (INc., 2016).

Historical Booking

Historical booking refers to booking of hotel yearly in different seasons. The historical booking helps in knowing the customers coming in different weathers that is in summer or winter. The reasons of not approachable by the customers should be made clear by gathering the data. The data represent what is affecting the sales of hotel that can price or any other reasons. This helps in deciding resources required or things need to be taken care of, so that any negative effect can be avoided.

Unrestricted Demand

Unrestricted demand refers to the situation when demand exceeds the supply of customers. In other words, demand of hotel is at such rate that exceeds the availability of the hotel. This situation occurs at peak time when tourists are on vacations at a higher level than normal. This constrained help manger know the rate at which the last room was given on the recorded date with the number of stay. From the competitors, it can know when they are fully reserved or selling at rates that can affect the hotel occupancy (Weaver, 2007). This helps in evaluation of occupancy rate when it is under or beyond 100%.

Self Comparing

The hotel should self-compare itself with what are they providing with the cost allocated. There should not be any difference between cost and quality of goods provided by the hotel. Any negative differentiation can affect the image of hotel by comparing with the other hotels.

Segmentation Strategies

The Segmentation strategies refer to strategies that are made by dividing the market into different heads or segments. The segments contain different approaches by creating sub-divisions of the market or population that are:         

These heads are for considering sub-divisions of market targeted for hotel revenue strategy. As explained further, Firstly, the Geographic Segment refers to the segment what considers the location of the hotel or its surroundings that act as advantage by providing location nearby preferred. As the Sydney Harbour Marriott hotel is at circular quay that is surrounded with most famous tourist destinations known worldwide that are Harbour Bridge, Sydney Opera House, Harbour Beach or Pitt Street and more (Lorette, 2015). There is walking distance between this places and hotel that add bonus point for preference of hotel.

Secondly, the Demographic Segment is the segment that divides market into different parts are gender, age, income, family status that is single or married, society groups that can be activists or university group. With the help of historical data, manager check what age group or family been to hotel at what amount of stay with their purpose of visit. This can help them decide promotions for further improvements in encouraging tourists to people. It can also help in deciding their resources for dining that can serve as extra point (WIT Team, 2016). Thirdly, the Behavioral Segment is segment which concentrates on the behaviour of customers who been to the hotel or outside by asking their preferences. This can help in understanding needs of client by knowing their behaviour regarding products they used. Manager should decide in advance what products to provide at cost or freebies by gathering information about satisfaction they get. For example, in the chains of Marriott hotel as hair dryer is free to use. In the same way same some additional eatables like either biscuits, two cup of tea or breakfast is provided free of cost. These segment serve as the customer based understanding and pro-active strategy by collecting information of outside and previous in-house hotel experiences(Hanlon, 2013). These can be attained by the way of questionarrie and feedback during post tourists/guests stay.

Competitor Analysis

Competitor Analysis refers to the understanding and assessment by comparing in-house with competitor’s client base and services of  the hotel. The purpose of this comparison is to know the difference where hotel is lacking in providing services to the customers and where does the hotel stand in the market. This can be improved with the help of strategies mentioned above. There should be consideration of comparison between the promotional offers, pricing strategy, marketing activities and customer feedback on social networking sites as well. These can help in competing with other hotels by making things better and strategies accordingly.

Demand Forecasting

Demand forecasting is the forecasting of demand of existing sales of the organization. Forecasting refers to the prediction of the future, based on the information related to historical data and growing/declining demand of the organization. It helps in hotel business by planning expected occupancy rate as compared to the past records or the information gathered. This is very useful for hotel business as they are sensitive to the situations and any unexpected circumstance can led to reduce in demand. There are different approaches as per author Joel Dean for forecasting of demand for hotel, which is:

Growth Curve Approach

Under this, the rate of growth and capable demand for the hotel is forecasted with the information of past records. With the help of this, occupancy rate can be expected from the past information which may help in settling the price of room according to purposes (Nitisha, 2015).

Opinion Poll Approach

This approach helps in forecasting by knowing the opinion of customers directly through their previous feedbacks taken or through other sources.

Vicarious Approach

With this approach, the experiences of customers with the services of hotel can be depicted in informal way through specialized person survey who deals in judging consumer needs, their preferences and tastes (Chand, 2015).

Channel Analysis

The purpose of channel analysis is to find suitable channels for promotion of the services of the hotel. The analysis helps in gathering knowledge about the impact of services provided by hotel on its growth and revenue. This analysis is helpful in gathering knowledge about the hotel that is:

• Consumer Preferences
• Analysis of associated direct and indirect cost (Sites Path, 2016).
• Advertising and promotional budget within hospitality
• Review of current techniques in setting the strategy such as pricing strategy, right inventory management and effective revenue management.

There are different types of channel which may be used in assessing the promotion and encouraging them for using their services. For an instance, it can be done through social networking sites by creating page on facebook, a separate website for Sydney Harbor Marriott Hotel at Circular Quay and promotion can also be done through customers with the help of recording their number and sending emails for updating them on various gala events, linked with dealers of tourism sector or can be directly or indirectly contacted online (Fontelera, 2016).

Conclusion

To conclude every possible step which is possible, has been taken for managing the revenue and growth of the hotel. In this, mainly every factor which basically contributes in deciding the strategy and competitor role have been taken under consideration to cover up the areas in which hotel is operating so far. This is helpful only with the initiative of manager and with the support of management in deciding strategies with the help of informations gathered.              

Recommendations

After gathering all the above information and analysis, the hotel is required to work for enhancing their revenue with each passing day by covering attributes mentioned above. For this, the hotel has to use some tactics which are written below:

Draw/Lottery Scheme

This scheme can help clients in knowing better about the  hotel by taking participation. These schemes can be of different types with different considerations. For example, a lucky draw for newly married couple by providing something like 1 day & night stay free which normally costs around $285, some free dining during festive season can be offered which helps in inviting new customers (Resorts, 2014).

Social Media Engagement

This can help in promoting the hotel services by updating about the hotel and services provided by them which  can act as awareness for the customers. The social media engagement tool can help the hotel in staying among the customers which can help to identify about their changing demand. For example, leisure activities can be shown via pictures through facebook or instagram or dedicated page of hotel service providers, i.e expedia or tripadvisor. With the help of these, social media feedback can be depicted easily regarding their wishes and their experiences during stay(Expedia, 2016).

Targeted Ad

The ad is one of the oldest ways of spreading the information about the hotel which may differentiate from others. The target ad can play an important role by helping them know what hotel can serve for them and how they are different from other hotel. For example, Beautiful hall of hotel can be shown for different purposes such as a creative and attracted one for wedding and a sophisticated one for business purpose.

Promotional offers

These kind of offers help the hotel in covering their expenditure at the low time or at the time of fall in occupancy rate due to change in the season. The promotional offers helps in bringing more client by offering things at below their cost.

Bibliography

Chand, S. (2015). Demand Forecasting: It’s Meaning, Types, Techniques and Method | Economics. Demand Forecasting: It’s Meaning, Types, Techniques and Method | Economics. Retrieved from https://www.yourarticlelibrary.com/economics/demand-forecasting-its-meaning-types-techniques-and-method-economics/28607/

Expedia, I. (2016). Sydney Harbour Marriott Hotel at Circular Quay. Retrieved from https://www.expedia.com.au: https://www.expedia.com.au/Sydney-Hotels-Sydney-Harbour-Marriott-Hotel-At-Circular-Quay.h18811.Hotel-Information?rfrr=Redirect.From.www.expedia.com%2FSydney-Hotels-Sydney-Harbour-Marriott-Hotel-At-Circular-Quay.h18811.Hotel-Information

Fontelera, J. (2016). Distribution Channels and Marketing Analysis. Distribution Channels and Marketing Analysis. Retrieved from https://smallbusiness.chron.com/distribution-channels-marketing-analysis-60985.html

Hanlon, A. (2013, December 17). The Segmentation, Targeting and Positioning model. The Segmentation, Targeting and Positioning model. Retrieved from https://www.smartinsights.com/digital-marketing-strategy/customer-segmentation-targeting/segmentation-targeting-and-positioning/

INc., M. I. (2016). Enjoy Sydney's top attractions from our Circular Quay hotel. Retrieved from https://www.marriott.com: https://www.marriott.com/hotels/local-things-to-do/sydmc-sydney-harbour-marriott-hotel-at-circular-quay/

Lorette, K. (2015). Customer Segmentation Strategies. Customer Segmentation Strategies. Retrieved from https://smallbusiness.chron.com/customer-segmentation-strategies-4007.html

Nitisha. (2015). Demand Forecasting: Concept, Significance, Objectives and Factors. Demand Forecasting: Concept, Significance, Objectives and Factors. Retrieved from https://www.economicsdiscussion.net/demand-forecasting/demand-forecasting-concept-significance-objectives-and-factors/3557

Resorts, M. H. (2014). Sydney Harbour Marriott Hotel at Circular Quay. Retrieved from https://www.bestvenues.com.au/Venues/FunctionMenu/841_3.pdf

Sites Path. (2016). Channel analysis. Channel analysis. Retrieved from https://sites.path.org/commercializationtoolkit/ct/landscape/market-research/channel-analysis/

Weaver, J. (2007). Segmentation strategies. Segmentation strategies. Retrieved from https://media3.bournemouth.ac.uk/marketing/07segmentation/04strategies.html

WIT Team. (2016, February 22). Predictions and challanges for the hotel industry. Predictions and challanges for the hotel industry. Retrieved from https://www.webintravel.com/predictions-and-challenges-for-the-hotel-industry-an-analysis-from-booklogic/