SWISS HOTEL MANAGEMENT SCHOOL

Master of Arts in International Hotel Business Management

Strategic Revenue & Financial Management

7HO504

Gesualdo Martial
743043

Words count: 1393

Mr. Robin Reid

Switzerland
Caux, 2019
 Châteaux de Caux

Critical Reflective Essay

Châteaux de Caux is a wonderful hotel that has several services focused on

leisure and business market. The hotel has two hundred and fifty rooms, fifty
premium rooms and two hundred standard rooms. Furthermore, it is rated as a
three-star hotel, located in the city center. At the time of acquisition, the property was
valued at 40 million Swiss francs. Entering into the financial context, we can see how
throughout the cycles there was a great performance, as we started with a debt of
1,537,371 Swiss francs and ended the year with a net profit of 1,332,327 Swiss
francs, but then we started with a cash capital to invest of 325,000 Swiss francs.
With a good management of capital and resources it was possible to perform better
economically. In the following essay we will observe how Chateaux de Caux has
evolved based on revenue management principles.

At the time of setting prices, we must have a broader vision, which not only
includes numbers, but factors that directly influence. In these factors we can mention
the importance of calculating profit, optimizing revenue, setting price parameters,
price elasticity, supply and demand, but the most important is the season in which
prices are implemented (Bayoumi et al., 2012).

After analyzing the current market, we understood that by the time we took
over the management of the hotel, it would be in low season. Therefore, we decided
to choose the market strategy called "Maximize Occupation Strategy". In this set up
we had room rates that would go from 120 to 253 Swiss francs.

Market segmentation is a key element in revenue management, because it

allows to target different groups and realize which ones match better what
represents our core values and the best ways to approach them (Landman, 2014).
As mentioned before, our key market is composed by leisure and business, for the
main reason that we are located in the center of the city. Even though, as well we
received guests from other markets, such as corporate contracts, tour, package,
qualified, large and small groups.

Taking into consideration all these markets where hard to manage only by the
direct channel, we decided to approach different distribution channels which
benefited from diverse discounts depending on their efficiency, e.g. travel agents
would have 5% and OTA 7%.

Correspondingly, revenue management principles include dynamic pricing,

which was definitely taking into consideration the previous mentioned elements as
market, channel and season. On the week days we focused more on taking higher
the rates for the business market, while taking the down on the weekends. In the
contrary, for leisure rates would be higher on week-end than week-day.

Something else that would definitely impact on the rates presented were
location and quantity. For the aspect of location, it was a good advantage to attract
business market because we were in the city center, meaning we could charge more
just for the fact of convenient location and facilities around the hotel. Regarding
quantity, prices would shift depending it they were large or small groups, applying
the economies of scale theory concerning the volume purchase discounts.

The first investments applied to hotel were focused in the services and
facilities, to boost the added value. Our management decisions were always focused
with a futuristic mindset, meaning that we developed on building and refurbishments
not to make the greatest profit right away but build up a space that would run by itself
later on and be more profitable on the nearest future. Within these improvements we
added the business centers, retail shops, travel & tour desk and lobby kiosk. As well
services were improved by adding valet parking, guestroom internet, foreign
exchange, mini bar, concierge, express check in/out, transport van, turndown
service, and music & entertainment. Along with the services and facilities, we
invested as well in the cleaning of common areas we considered as busiest.

As time passed by, the environment shifted to a high season, which having
this in mind and the investments enforced, have us enough reasons to move out
rates the higher prices following the other pricing strategy suggested by the
simulation, which is called “Maximized Rated Strategy”. As we did this, we were able
to play with the price elasticity, shifting prices from 175 to 349 Swiss francs.

Even though developing the building would enhance the customer satisfaction
and overall added value, it has the drawback of needing to hire more staff which
impacts on the profit margin listed by including the new venues.
 At the beginning of the simulation we kept low staffing levels, trying to not fall
out on a burnout, significantly making an effect on the net profit. But as the high
season came through, we had to reassure the hotel counted with enough staff to
provide the best services, which in some occasions led us to overstaff.

We wanted to maintain the high services in order to create a customer loyalty,

considering that service is one of the pillars of our management focuses. And
knowing that learning and growth is important for the consistency in performance
from our staff, we invested 3% of their gross salaries for training, which we
considered more than just a simple cost, would be a tool to develop a positive impact
on our customer perception.

Leading on with the important of service we really focused on it considering

that there is an inseparability from the product provided and the service received.
Meaning that as much as we invested and cared in the refurbishments, we would
have to balance with the staff development.

In the scope of promotion, we could mention we appropriated an 9%

investment in marketing in order to generate a good advertising. Moreover,
scrutinizing the feedback from the customers we realized we dropped some points in
our marketing effectiveness, not being able to capture all markets attention. Later on,
we understood that marketing and advertising were in different budgets and that we
should have approached them differently. From where we learned is very important
to analyse the data collected through guest satisfaction surveys to understand better
the guest profile, its needs and wants and from there improve the marketing efficacy
(Stuart-Hill, et al., 2016).

Moving on to the limitations, since the cycles are every three months, we
cannot adjust in real time all that entails with staff, rates and refurbishment, and we
consider it doesn’t assemble with real life because revenue managers don’t take
decisions once by quarters. This limits us to have a more precise experience and
decision making, and to realize how the dynamic pricing can be something that
changes every day.

Furthermore, it limits our creative thinking when we are not able invest in
ideas we develop and we are limited to what the simulation has available, for
example we wanted to add a new building or decide which kind of furniture to use in
the refurbishments, it is not possible because we can do only what the simulation
indicates, which means it’s even impossible to differentiate from the competition
within our class because every can only reach to a certain and specific amount and
type of improvements and appliances.

Considering bundling, we only had the option of the package rate which
included the room, breakfast, dinner and a bottle of wine. It represented an 8.04% in
the revenues through the year, mostly sold on weekdays. The implementation of this
packages is more attractive if they are customized, but this detail was not possible
within this simulation, meaning there is room for improvement in this area.

I would recommend, in order to make it more detailed and offer more options
to the student to take better decisions, to work month by month instead of quarters,
and then make the overall study approach in quarters and annually.

Moving into another direction, facilitate the options to the student to be more
with where invest the more and work on the hotel differentiation.

In conclusion, Châteaux de Caux has been a very useful experience to apply

in detail all the theory reviewed in class, regarding the revenue management in a
hotel environment, and I found very interesting how the decisions taking by this
department can define the direction the operation flows. In the end, the management
developed by this grouped presented effective results for what dynamic pricing
compiles but definitely we need some more improvement within the marketing
decisions.
 References

Bayoumi, A.E.-M., Saleh, M., Atiya, A.F. and Aziz, H.A. (2012). Dynamic pricing for
hotel revenue management using price multipliers. Journal of Revenue and Pricing
Management, 12(3), pp.271–285.

Stuart-Hill, T., Young M., Resurgent, R. (2016). Revenue Management Technology

in the Age of Big Data Sponsored by HSMAI. (n.d.). HITEC. [PowerPoint
presentation] Available at:
https://www.hftp.org/hitec/i/downloads/H16RevMgmtTech.pdf. [Accessed 18 Nov.
2019]

Landman, P. (2014). Leadership in Revenue Management. Xotels. [online] Available

at: https://www.xotels.com/images/Revenue-Management-Manual-Xotels.pdf
[Accessed 18 May 2019].