Revenue Management in Lakeview Hotel, Ooty

28048 Sivakumar A 28074 Dinesh J

Contents

| Overview 2

Overview
Ooty is one of India's most i oni trave! destinations and home to an ama"in# array of si#hts$ a tivities and events% &ven first time visitors to Ooty wi!! 'ui k!y (e enthra!!ed (y how fun and fas inatin# Ooty rea!!y an (e% )hou#h Ooty attra ts *!enty of visitors$ it is far from (ein# ommer ia!!y s*oi!t and sti!! retains its uni'ue hi!! station A harm and *!easant natura! am(ien e% ommodation is *!entifu! (ut tastefu!!y desi#ned and arefu!!y *ositioned so as not

to im*in#e on the very as*e t of the town that attra ts visitors in !ar#e num(ers% Ooty is idea! as a weekend or short (reak destination as *art of a trave!!in# ho!iday$ offerin# the to% ,ith hos*ita!ity servi es su h as hote!s (ein# a *erisha(!e servi e$ the ri#ht fa i!ities at the ri#ht *ri e (e omes a su(-e t of *rime im*ortan e to (oth ustomers and$ from stri t!y (usiness *oint of view$ to the om*any% )hus the a**!i ation of .evenue mana#ement *ra ti e is a**ro*riate to ma+imi"e revenue for the hote!s/resorts in Ooty% 0ow that (ookin#s are done via the internet too$ the demand and su**!y has to (e riti a!!y monitored to suit a!! kinds of ustomers% 1nso!d f!i#ht ti kets on an air raft is revenue !ost after the f!i#ht is de*arted and simi!ar!y rooms !yin# va ant for a day is revenue !ost in the hote! industry% han e to s*end a re!a+in# few days and *resentin# a #enuine!y soothin# a!ternative to the he ti s*e ta !e that many !ar#e Indian ities are witness

| Overview 2

Background of the Hotel

)he Lakeview complex sits *retty on an 8 acre stret h of !and$ on the sensuous terra ed s!o*es of a hi!! offerin# a ma#nifi ent dou(!e s*e ta !e% &ven at an am(!in# *a e$ you minutes% )he om*!e+ has easy a ess to every *art of the town and (eyond% )he !ar#est and the most e+ !usive hi!! resort in Ooty$ 5akeview onsists of 123 specially designed, fully independent luxury cottages % 6ote! 5akeview is where you (e#in to e+*erien e Ooty% Some key facilities: 7rivate #arden in front of the otta#e O*en de k over!ookin# the !ake and the va!!ey 8edroom 5ivin#9 um dinin# room :ire *!a e ;ar *arkin# fa i!ity et % an rea h the (oathouse in 30 minutes f!at$ or the (us stand in 34

| Overview 4

Revenue Objective
)he mana#ement of the hote! de ides on the tariff (ased on the demand$ ost of servi e and !ast year *ri es% As the tota! num(er of rooms is ertain and the tariff fi+ed$ the revenue objective would be to obtain maximum occupancy rate at the fi+ed tariff% )he tariff is (ased on the servi e fa i!ities of the hote!$ the *ri es har#ed (y simi!ar hote!s in the Ooty and the ost of servi es% )he in rement va!ue is a**ed as the ustomers shou!d not *er eive a dis*ro*ortionate in rease in tariff without onsidera(!e in rease in servi es The revenue objective is to maximize their incremental revenue by getting to fill all their rooms during Season and Second Season (Off Season as well !

actors contributing to the Revenue

Occupancy rate is the im*ortant fa tor for the revenue to the hote!s% As the rooms are !imited$ revenue has to ome with the uti!i"ation !eve!s of the avai!a(!e rooms% )he hote! has tie9u*s with trave! o*erators in other ities and a ommission of 30< is #iven to the tour o*erators for the (ookin#s made throu#h them% ,hen the dis ount fa tor is minima!$ the fu!! *otentia! of the revenue an (e rea!i"ed% Other important factors are: ;han#e in *ri es ;om*etitors Seasona!ity )y*e of rooms =De!u+e$&+e utive$Suite>

| Overview 4

Revenue !ariable and Ca"acity Constraints

The hotel has got two main revenue variables 3% )he rooms 2% )he 6a!!s for events )he rooms are avai!a(!e in the ate#ories name!y$

eluxe !ottage Suite !ottage "xecutive !ottage

:rom !u+urious otta#e units to a host of modern day amenities$ you are taken #ood are of in 5akeview 6ote!% ;onsistin# of #$% fully&independent luxury cottages$ the hote! is onsidered the !ar#est and most e+ !usive hi!! resort in India% The room accommodation comes with facilities like' The Supper !lub servin# you a hoi e of ;ontinenta!$ ;hinese ? Indian uisine

(oom service from @A20 AB to 30 7B 2 se*arate !onference halls whi h an take onferen es from $) pax to $*) pax

| Overview @

#u$iliaries
Recreational acilities at ernhills %alace +or its guests' Ooty +ernhills ,alace offers 7rivate #ardens 8edroom 5ivin#9 um9Dinin# .oom ,a!! to ,a!! ar*etin# O*en De k over!ookin# the !ake and va!!ey Recreational acilities at Hotel Lakeview in Ooty

Atta hed 8aths 6ot/;o!d ,ater Su**!y )e!e*hone )C ? Cideo ;hanne! Busi

Dift Sho* arryin# (ooks$ *eriodi a!s$ -ourna!s$ souvenirs$ et % ;hi!drenEs 7!ay#round 6orse .idin# 8oatin# 8adminton

Other acilities at Hotel Lakeview

;ar 7arkin# )rave! ;ounter to arran#e si#htseein# tours Safe De*osit 5o kers 5aundry Servi e Do tor on ;a!!

| Overview 7

| Overview 8

orecasting
&he need to forecast and the level to forecast 7ri in# and demand are inter9re!ated and need to (e oordinated% In the hote! industry$ demand for a room is y !i in nature and fo!!ows a trend% .evenue mana#ement mode!s he!* *in*oint demand (y minimisin# un ertainty and *rodu in# the (est *ossi(!e fore ast% ,hen the !iente!e is su h that there an (e variations in their *atrona#e a ordin# to time of the week$ time of the month and time of the year$ fore astin# is essentia! to han#e strate#ies to induce demand during off season and in rease *ri es when the e+*e ted demand wi!! outnum(er the a*a ity of the fa i!ity i%e% durin# *eak season% ,hen the a tua! demand is !ess than the a*a ity$ promotional schemes an (e introdu ed% 7a ka#es an (e so!d at e onomi a! rates to trave! a#ents in the *!ains% )he fore ast wi!! (e at the room level within different categories % )he !eve! to fore ast for a hote! wi!! (e the number of rooms boo"ed and the number of event halls boo"ed% Seasonality and other factors that influence forecast Seasona!ity is an im*ortant onsideration for the hote!s in Ooty as it is used to *redi t the *eriodi seasona! inf!uen es in the demand and su**!y% Ooty is a destination that an (e visited a!! throu#h the year% Summers are 'uite *!easant$ winters are oo!$ and monsoons are (eautifu!% 6owever$ the (est time for visitin# Ooty is from October to -une%

.inters =0ovem(er to January> are very *!easant and oo! with minimum tou hin# 4F;% 0ovem(er is *eak tourist season and winters months are #ood for indu!#in# in a!! ty*es of tourist a tivities%

Summers =Bar h to Bay> have an avera#e tem*erature in the ran#e 34F; to 20F;% )his time is idea! for si#htseein# and other tourist a tivities% /onsoons =June to Se*tem(er> offers #ood rainfa!!G es*e ia!!y the months of Ju!y and Au#ust$ interru*tin# outdoor a tivities (ut s eni !overs an en-oy the #reen fresh !ook and the more *i tures'ue side of the *!a e in monsoon season%

| Overview H

Ju! .ainy Au# .ainy Se* Boderate!y ;o!d

8e ause of 6eavy .ains durin# this *eriod$ the *!a e attra ts fewer rowds and the hote! offers discounted prices to attra t more ustomers% Bonsoon month with the hi#hest amount of rainfa!! in the year% Bany *eo*!e *refer this month and take advanta#e of the off&season rates of the hotel% Bonsoon !asts ti!! this monthG )his month is ta##ed as not the (est time for tourist visits% )he hotel rate is !ower in om*arison to *eak/tourist season

Current forecasting methods )he hote! mana#ement understands the seasona!ity and fa tors inf!uen in# (usiness we!!% 8ased on their e+*erien e$ seasons of hi#h demand (ased on s hoo! va ation$ marria#e season et % are fore asted% Durin# *eriods of hi#h demand$ o rates are o !ose to their u*an y is understood% )he to* mana#ement u*an y a*a ity and durin# 'uieter *eriods$ the usua! !eve! of onsiders these fa tors whi!e

determinin# the tariff for the year% )hou#h the mana#ement does not maintain any histori a! data systemati a!!y$ heuristi ski!!s are used to arrive at the tariff% 3% )he hote! em*!oys a mi+ of 0ualitative fore astin# methods% 2% :rom the 'ua!itative side$ the *redominant te hni'ue is 1-udgmental +orecasting2 where in they em*!oy #x$ert o$inion$ #x$erience of hand!in# *revious (ookin#s (ased on season$ (usiness y !es et % %ro"osed forecasting methods .ooms Division Bana#ers fore ast main!y .oom Demand for a future *eriod of time measured either inA 0um(er of .ooms 0um(er of .oom 0i#hts 0um(er of Duest 0i#hts

Room Nights = Occupancy Rate * Hotel Rooms * Average Length of Stay Guest Nights = Occupancy Rate * Hotel Rooms * Average Guest per Room | Overview 30

:ore astin# demand in room ni#hts and/or #uest ni#hts is a (etter measurement om*ared to num(er of rooms% 5akeview 6ote!Es 6istori a! .oom 0i#hts for the *ast 4 years are de*i ted (e!owA =Assum*tions> Iear 2007 2008 200H 2030 2033 .oom 0i#hts 3')44 3'#$* 8'$5% 3'%$5 #)'438

&ime 'eries #nalysis

)he )ime Series Bethod tries throu#h .e#ression Ana!ysis to ome u* with a 5ine that minimi"es the distan e (etween any A tua! 7oint on the ;urve and its ;orres*ondin# 7oint on the 5ine =5east S'uare Bethod>% )his )e hni'ue is referred to as the .e#ression Ana!ysis% After findin# the &'uation of the 5ine =i%e% f =+> J y J a K + L (>$ we try to fore ast the inde*endent Caria(!e As far as 5akeview 6ote!Es *ro(!em is on erned$ *ost to runnin# a re#ression ana!ysis$ the e'uation of the !ine that (est fits the data =si#nifi ant at a H4< interva! !eve!M> turned out to (eA

(oom 6ights 7 %548% 9 :ear ; 4845$4 )herefore the 2032 fore asted room ni#hts J 24@%2 K 2032 N @8@42@ #)'%%) (oom 6ights Bana#ers sha!! use fore astin# methods with e+treme *re autions$ and sha!! onsider first the assum*tions under!yin# ea h :ore astin# Bethod to (e a(!e to find a #ood fore ast%

| Overview 33

After runnin# a statisti a! fore ast$ mana#ers sha!! ad-ust it to trends$ e+*e tations$ and o*inion surveysO =I%e% sha!! fore astin#M> onsider -ud#menta!

| Overview 32

%ricing
'trategies )he *ri in# me hanism for this hote! is *redominant!y (ased on re!ative standards of simi!ar!y rated 6ote!s in Ooty% A!! the fixed $rices of these hote!s are *ri ed more or !ess simi!ar!y% )he variable $rices arises from the au+i!iaries or su**ort servi es that ea h offers% %rice bundling is a!so done for or*orate or (usinesses wherein there omes fre'uent o**ortunities to *rovide (oth room a event ha!!s (ookin#% &ynamic $ricing is em*!oyed for re#u!ar ustomers who have ta it tie9 u*s for hostin# events annua!!y% 'ead Time %ricing 9 )he &ar!y 8ird sti!! works% )hey shou!d fi#ure out the avera#e (ookin# window% (lexible )or$orate and )onsortia %ricing )*+ %ricing N 6ote! offers !eisure #uests that have (ooked throu#h 2rd *arties a dis ount on (ookin# dire t!y% )he hote! an e!iminate a#en y fees of 30< and #et them to (ook dire t!y at a sma!! dis ount% ommodation and

| Overview 32

&y"es of "rices
)ost,based $ricing- A nancially driven approach to pricing in which products are priced to yield an equitable prot above and beyond all costs associated with the production of the product. )ustomer,driven $ricing- A market-driven approach to pricing in which prices are determined by the amount that customers are willing to pay for the product. )om$etition,driven $ricing- A market-driven approach to pricing in which prices are determined by the pricing level at which a targeted market-share level is attained by the rm. Season based $ricing . This strategy is employed by the hotel to attract more customers even during off season. T<(=++S S"!O6 S"<SO6 >+(O/ #ST O!T TO #3T? "!@ eluxe !ottage (s8#'4))A& Suite !ottage (s8#'B))A& "xecutive !ottage (s8#'3))A& "xtra ,erson (s8%*)A& S"<SO6 >+(O/ #ST <,(=L TO #*T? -C6" D $)T? "! TO *T? -<6&$)#%@ eluxe !ottage (s8#'3))A& Suite !ottage (s8$')))A& "xecutive Suite (s8$'$))A& "xtra ,erson (s8%*)A& O++ S"<SO6 > +(O/ 4T? -<6 TO %#ST /<(!? D #4T? -C6" TO %)T? S",@ eluxe !ottage (s8#'*))A& Suite !ottage (s8#'4))A& "xecutive Suite (s8#'8))A& "xtra ,erson (s8%*)A&

| Overview 34

%rice revision methods and fre(uencies

%ricing review is done on a yearly basis for this hotel! )he revision of the *ri e shou!d (e on so!id #rounds so that there is a si#nifi ant in rease in the revenue% 7ri e revision must (e (ased on market and e onomi trends% 7ri e revision must a!ways (e !inked to an a**ro*riate ause% )here is no *oint in in reasin# *ri es durin# a downturn%

%rice )lasticity and its im"act

)he 7ri e e!asti ity remains on!y when the ustomer *er eives va!ue in the revised *ri e and dynami *ri in# strate#ies% )he hote! industry is not a fu!!y *ri e e!asti $ (ut (y strate#i ontro! of the !evers it an (e made *ri e e!asti %

| Overview 34

Revenue Class *efinition of Revenue Class

The hotel can have revenue classes based on: 3% .e#u!ar ustomers 2% &ar!y 8ookin#s 2% 0um(er of days to (e (ooked at a time 4% Drou* 8ookin#s 4% 6oneymoon *a ka#es @% :estive seasons =24< e+tra on the tariff wi!! (e har#ed for ;hristmas and 0ew year> 7% 8ookin# ;hanne! 8% 7ayment Bodes H% )ourists= In !anders/:orei#ners> 30% S*e ia! &vents a% open eep ungle ride (% fishing % discovery to a tea estate d% horse-riding across the hills

Market 'egments

| Overview 3@

How ma$imum revenue can be achieved by o"timi+ation

8ookin#s wi!! (e onfirmed a#ainst fu!! advan e *ayment for the tota! he k9in date annot (e

num(er of room ni#hts% .eservations made *rior to 30 days of the an e!!ed% In ase of an e!!ation the amount wi!! (e forfeited% In ase of an e!!ation 34 days in advan e retention for one ni#ht wi!! (e !evied% Advan e to (e *aid in fu!! for the tota! num(er of room ni#hts onfirmed% In ase of the #uest he kin# out *rior to the date of de*arture$ no amount sha!! (e refunded 5o a! ta+es e+tra as a**!i a(!e A(ove rates are on twin sharin# (asis !heck&inAcheck&out timeA 32A00 0oon and 33A00 AB

It has (een o(served that suite cottage in this 6ote! #et fi!!ed (y u*#rades from deluxe cottage% )his shows that the *ri e of the A; rooms needs to (e raised (e ause their demand is mu h hi#her than su**!y% )his wou!d !ead to (etter returns on the de!u+e otta#e% )he suite otta#e an (e offered as an u*#rade if need (e on!y to !oya! ustomers% 7rote tions an (e #iven on de!u+e otta#e so that the ustomers an (e onverted to suite otta#e with some sa!es effort% )his wi!! !ead to (etter va!ue for the suite otta#e and minimi"in# the u*#rades%

| Overview 37

O"timi+ation
)he different tariffs avai!a(!e have (een s*!it into two !asses% )hese !asses de*i t easy mode of *ayment$ *ayment on he k9in$ ash refund o*tions$ et % )he *ayments made in ;!ass A wou!d (e devoid of *ayment on he k in and

*ayment has to (e made at the time of (ookin#$ whi!e those *ayin# in ;!ass 8 wou!d have the o*tion for *ayment on he k9in and a!so an e!!in# with fu!! money refund%

"xecutive Suite: 8uffet mea!s =2 8reakfast$ 2 5un h ? 2 Dinner>% 20< Dis ount on :ood ? 8evera#es ? S*a :a i!ities% ;om*!imentary use of swimmin# *oo! and o*en air Ja u""i% One hi!d (e!ow @ years #ets a free stay with mea!s in the *arentEs room =without e+tra (ed>% 6eaters *rovided in room%

Suite !ottage: 8uffet mea!s =2 8reakfast$ 2 5un h ? 2 Dinner>% 30< Dis ount on :ood ? 8evera#es ? S*a :a i!ities% 6eaters an (e *rovided for .s% 340 *er day%

| Overview 38

eluxe !ottage: 8uffet mea!s =2 8reakfast ? 2 5un h or 2 Dinner>% &+tra 5un h ? Dinner an (e avai!ed e+tra% 4< Dis ount on :ood ? 8evera#es ? S*a :a i!ities% 6eaters an (e *rovided for .s% 340 *er day% :i+ed De*osit to (e made at the time of (ookin#% an (e avai!ed for at

:or Suite ;otta#es ? De!u+e ;otta#es e+tra fa i!ities reasona(!e rates% !ancellation !harges for those booking under !lass < 20 days (efore date of onfirmed (ookin# 9 34< 34 days (efore date of onfirmed (ookin# 9 24< 7 days (efore date of onfirmed (ookin# 9 24< 2 Days (efore date of onfirmed (ookin# 9 40< 3 day (efore date of onfirmed (ookin# 9 74<

A!! rates are su(-e t to han#e without *rior noti e% 30< dis ount on (ookin# of who!e otta#e%

:estive seasons =24< e+tra on the tariff wi!! (e har#ed for ;hristmas and 0ew Iear>%

An &+tra (ed *er hi!d *er room wou!d (e avai!a(!e at .s% 240%

| Overview 3H

T<(=++
S"<SO6
>+(O/ #ST <,(=L TO #*T? -C6" D $)T? !lass < eluxe !ottage Suite !ottage "xecutive Suite (s8#'3))A& (s8$'#))A& (s8$'%))A& "! TO *T? -<6&$)#%@ !lass E (s8 $)))A& (s8 $'$))A& (s8 $'*))A&

S"!O6
eluxe !ottage Suite !ottage "xecutive !ottage

S"<SO6
"! !lass E (s8#'B))A& (s8#'3))A& (s8$'#))A&

+(O/ #ST O!T TO #3T? !lass < (s8#'4))A& (s8#'8))A& (s8$')))A&

O++ S"<SO6
+(O/ 4T? -<6 TO %#ST /<(!? D #4T? -C6" TO %)T? S",@ !lass < !lass E eluxe !ottage Suite !ottage "xecutive !ottage (s8#'*))A& (s8#'B))A& (s8#'3))A& (s8#'4))A& (s8#'8))A& (s8$')))A&

| Overview 20

Rewards , 'acrifice Matri$

"xecutive Suite
,roduct
,ayment on check&in +amilyAGroup iscount +ree Stay for child below 4 yrs +ree /erchandise ,rivate Guide +ree +ood D Eeverages coupons ,arty ,lace Special ,asses +ixed eposits !ancelling with full refund ,ayment at Time of Eooking .aiting Time Online Eooking /aximum Stay

!lass < Lower ,riced

!lass E ?igher ,riced F F

F F F F

(eward s

F F F F F F

F F F F F F

Sacrific es

F F

| Overview 23

Suite !ottage
,roduct
,ayment on check&in +amilyAGroup iscount +ree Stay for child below 4 yrs +ree /erchandise ,rivate Guide +ree +ood D Eeverages coupons ,arty ,lace Special ,asses +ixed eposits !ancelling with full refund ,ayment at Time of Eooking .aiting Time Online Eooking /aximum Stay

!lass < Lower ,riced

!lass E ?igher ,riced F F F F F F F

(eward s

F F F F F

Sacrific es

F F

| Overview 22

eluxe !ottage
,roduct
,ayment on check&in +amilyAGroup iscount +ree Stay for child below 4 yrs +ree /erchandise ,rivate Guide +ree +ood D Eeverages coupons ,arty ,lace Special ,asses +ixed eposits !ancelling with full refund ,ayment at Time of Eooking .aiting Time Online Eooking /aximum Stay

!lass < Lower ,riced

!lass E ?igher ,riced F

F F F F F F F F

(eward s

Sacrific es

| Overview 22

-m"act of O"timi+ation

(ev,ar7 (ooms (evenue A (ooms <vailable

.ev7A. is revenue *er avai!a(!e room .ooms .evenue is the revenue #enerated (y rooms sa!es .ooms Avai!a(!e is the num(er of rooms avai!a(!e for sa!e in the time *eriod An often used short ut to estimate .ev7A. is to mu!ti*!y O u*an y < times Avera#e Dai!y .ate =AD.> So$ .ev*ar =estimated> J O < K AD.P3Q

Season

Capacity #* 5$ 44

Avg Price 2200 2000 !00 Avg Price 800 600 "00 Avg Price !00 700 600

Avg Occupancy Rate 80% !"% 00% Avg Occupancy Rate 33% $8% 68% Avg Occupancy Rate "3% 72% 00%

Total Room Revenue 2376000 7 82000 286000 Total Room Revenue 80 !00 2!030$0 60"8800 Total Room Revenue 3"!$"0 $626720 !"0$000

RevPA R 760 !00 !00 RevPA R "!$ 768 020 RevPA R 007 22$ 600 | Overview

"xecutiv e Suite eluxe

O## Season

Capacity #* 5$ 44 Capacity #* 5$ 44

"xecutiv e Suite eluxe

Secon% Season

"xecutiv e Suite eluxe

24

| Overview 24

Conclusion
)he effe tiveness of the revenue mana#ement *ro ess an (e found out (y

om*arin# the revenue #enerated after im*!ementation with the revenue #enerated (efore the im*!ementation of revenue mana#ement% )he measure of revenue is the revenue #enerated *er revenue *er avai!a(!e room% )hrou#h effe tive revenue mana#ement$ it is *ossi(!e to #enerate su(stantia! revenue for the 5ake Ciew .esort a!! throu#h the year$ su h that there is no !oss #enerated durin# any *eriod as it is a!! a(out settin# the ri#ht *ri es for the ri#ht time%

| Overview 2@