Hospitality Operations and Revenue Management

This report discusses the financial contribution of hotel rooms, principles of pricing, benefits of valuable practices, methods to optimize profitability, industry code of conduct, and determining customer expectations in the hospitality industry. The case study focuses on Travelodge, the 2nd largest hotel chain in the UK.

Hospitality Operations
and Revenue
Management

Table of Contents
INTRODUCTION ..........................................................................................................................1
TASK ..............................................................................................................................................1
Financial contribution through room’s income generated areas to organisation unit..................1
Demonstration and implementation of pricing to the room’s product.........................................3
Approaches utilised to optimised profitability to a fixed capacity inventory with technological
advancement................................................................................................................................4
Code of conduct and legislations with best practices directly impact to accommodation
procedure......................................................................................................................................6
Expectations of customer form different market to fulfil the needs and requirement. ...............7
CONCLUSION ...............................................................................................................................8
REFERENCERS .............................................................................................................................9

INTRODUCTION
In present business environment, the hospitality sectors is widely increasing year by year
with the number of features such as hotel services, marketing with digital platform,
accommodation services etc. which makes customer to live the standard of living (Bodea and
Ferguson, 2014). The hospitality sector one of the leading industry in the meantime that support
in growth of an economy. It mainly depend on the availability of precious time, liquid income
and most crucial customer satisfaction. In order to get the best depth understanding of hospitality
sectors Travelodge have been selected. It is 2nd largest company that is operating within
hospitality and hotel sector across UK and have highest number of hotel and bedroom.
In this report, financial contribution to profit making areas, principles of pricing and
benefits of valuable practices to generate more profit are discussed. In addition, methods to
optimise profitability, industry code of conduct and determining of customer expectations are
elaborated in this report.
TASK
Financial contribution through room’s income generated areas to organisation unit
Hotel rooms play a significant contribution in the financial strength and profitability of
the overall business unit. As the hospitality environment is changing and guests are demanding a
good experience and this is a great opportunity for hotels as well to drive their profitability by
other revenue generating sources which will benefit the hotels as well as increase the customer
satisfaction. There are other revenue generating areas attached to the rooms as well like food and
beverage segment like cafes, restaurants, in-room dining, mini bars, spas, gym, recreational
activities, concierge etc. Even to enhance the overall guest experience as well as to make
contribution to the financials, hoteliers can try to up-sell for its other revenue sources also. For
example, if there is some event or concert which is going to happen near the hotel then the hotel
can sell their rooms with a free ticket of that show to increase their revenues per room. The other
revenue sources can increase the occupancy as well as average daily rate of a hotel and can
significantly contribute to maximize the profits. There are three important parameters which can
be looked upon to analyse the financial contribution that room's revenue producing areas make to
the business unit (Hormby and et. al. 2010).
Travelodge has unique kind of rooms in their portfolio with the people who are looking
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for budget rooms. They recently launched 395 room with the bar cafe hotel in London city
during 2018 which works upon new format called “Travelodge Plus”. It has also launched
“SuperRooms” and “Travelodge Plus in 47 and 6 hotels respectively which has done a lot of
contribution in the increase of profitability and financial goals of the company. These segments
has new and stylish bars and cafes which are very attractive to the customers. This has lead to
fast response from the customers as they are getting more choice at best prices. Travelodge's
saver rates and flexible rates also attract a lot to the customers. Their value proposition is very
clear in customers mind which has played a significant contribution in the revenue increment.
The best part is that majority of the rooms are sold even less than £50. So, their attractive prices
and offers especially made for the target segment has boosted their financials. In 2018, they were
declared as the best chain of 2018 in hotel industry by Trip Advisor (Weatherford and Kimes,
2013).
The major contribution in the revenue growth of Travelodge was the growth in Like for
like UK RevPAR by 3.2%, addition of 17 hotels in 2018, good growth in revenues from the
maturity of few hotels and huge growth in the food and beverage segment. The revenues were
increased by 8.8% that comes to £56.2m and EBITDA was increased from £9.6m amount to
£122.0m amount. Occupancy and average daily rate has also increased from 2017 to 2018.
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Demonstration and implementation of pricing to the room’s product
The room rates of Travelodge are set depending on the demand of the hotel rooms. The
more the demand of the rooms, the higher the prices and the lesser the demand, the lesser the
prices. So, a customer will get more advantage if he/she books the hotel room well in advance.
As the stay date come closer for the traveller, he has to pay more for the same room. In few
instances, if the demand is reduced then the prices will also reduce with that. Travelodge also
give promotional discounts on frequent basis which gives best value to the customers (Pricing
strategy of Travelodge, 2019). So, basically there are two kind of pricing set by Travelodge:
Saver Rates: This rate is for the guests who want to save good on their stay. Customers
can save a fair amount and can gain a great value if a pre planned booking is done. The cost of a
room starts from the amount of £29. But this saver prices are non-refundable and cannot be
transferred to anybody else. It can just be altered by paying a fee of £5.
Flexible Rates: This is just the opposite of saver rates. In this case, the customer can
book a room till the arrival date and can also cancel their room booking till afternoon of their
arrival date. The rates and booking system is very flexible in this case and are especially meant
for business travellers and people travelling just for leisure (Ferguson and Smith, 2014).
Travelodge room prices are cheapest when compared to the competitors. Some of the best
deals they offer to their customers to create best value are the discounts as per the different
segment of the society like discounts for business travellers and discounts for students up[ to 5%,
they also offer the deals like mirror discounts especially for last moment deals and to save extra
and up to 30% saving if the customer book the room early. Like these offers, Travelodge keeps
on giving these kind of deals so that it can attract more customers and can create value for
money. Even Travelodge has partnered with IDeaS to shift towards dynamic pricing strategy by
launching best available prices technique and for also using the best price optimization strategy
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to maximize profits. Travelodge has also implemented IDeaS system of revenue management
and a package for the success of the new hotel i.e. NHSSP to do better forecasting and decision
making automation before a hotel is even launched.
Approaches utilised to optimised profitability to a fixed capacity inventory with technological
advancement
In resent time, it has been determined that Travelodge have attained a good image in
competitive environment by making excellent use of advance and improvised technology
(Kimes, 2016). The respective hotel is very active by using Big Data Analytics to extract
valuable knowledge from large actual-time customer datasets that further support in finding
better ways that create long-term consumer satisfaction and productivity. With this, the
organization is successfully controlling sales and maximizing costs for its rooms and other
quality-added products that directly affect its profit margin. Manager use to collect information
related with competitors available in market and new opportunities which could help to generate
more income in future time. In order to control and measure the total revenue within Travelodge
manager continuous make significant adjustment in order to get the profit margin. Such as:
Dynamic pricing strategy which support in determining the various patterns about
customer response regarding market trends and estimation of real demand of these customer
group. This approach allows businesses to use true-time data obtained from different locations
such as different reports, numerous different indicators such as ADR (average daily rate),
RevPAR (revenue per room available), hotel accommodation ratio, customer activity at the time
of purchase, and operating income received by each guest. With the help of this strategy manager
of Travelodge predict the customer rotation and their actual behaviour in context to different
situation of markets. This also support in analysing the total performance of their hotel chain
located at different location to their competitors so that needed modification are made within
prices of services. This strategy is also known as revenue optimisation method which deliver
enough information to the manager of company to fix the most beneficial price of good for
customer and generate enough sales to increase profit margin (Noone, 2016).
Artificial intelligence: In modern business environment, to make higher profit manager of
Travelodge implement Artificial intelligence by developing advance machine like robotic system
to make different work performed by staff. To make more transparency about the availability of
rooms and pricing company have developed mobile app which shows each and every detail in
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descriptive manner to desired customer. For reducing the burden of swipe card for entering
room Travelodge have put mobile scanner code that can be scanned by the person who have
make booking. Improving the room service services Travelodge have assigned robots to deliver
the food ordered by customer or to collect laundry product which make customer feel special.
Group prising strategy: This method of pricing has enabled Travelodge to boost sales
and earnings that ultimately lead to productivity. It approach is assisted by its sales department in
determining the room rates. For each targeted group, price elasticity strategies are being used to
achieve an optimum range of prices. It also reconstructs numerous other variables to help
marketing decisions and maximize consumers' approval of rates, evaluation of different dates
and timings, ready to use room stock, etc. like more information. This has continued to build
better customer experiences well as made Travelodge become a global leader in its business. All
of Travelodge tactics were highly focused on clients that are the primary concern because
without customer satisfaction they would start moving to other hotel in order to get better
services.
Furthermore, company have also implemented some highly technical devices within
rooms such as Alexa that make customer to special and experience the best in the world. With
the support of Alexa customer can easily make orders, control lights and AC, provide command
to operate different electronic devices. This also help to give detail information about the special
features or discount offer made by company within specific period so that more and more
customer can make better use these offers. Travelodge is 2nd largest hotel chain in the industry
as it is well known for the use of innovative and emerging technology as well as use of a
centralized database that help to get the additional advantages within competitive companies.
These mention strategies are now being applied in almost every branch of Travelodge assets and
numerous sales measurement and management strategies have even been combined with this this
method.In addition, Travelodge also implement key metric like ADR, revenue per room
available, occupancy rate as well as TrevPAR that help to maintain systematic record of
revenues. The combination of these key metric are beneficial to extract the detail information
about the income from various operation such ad spa, conference rooms, restaurant and bars
which makes easier for company to figure out the total profitability in competitor environment
(Zhang and et. al., 2015).
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Code of conduct and legislations with best practices directly impact to accommodation procedure
In modern business era, each country have various laws and principles in the context of
hospitality sectors that directly make respective hotel to perform business operation in well
defined manner and enhance profitability. Travelodge is a 2nd leading hotel chain that operate in
different region and have to follow various crucial laws and regulation. In UK some of the most
common laws related with Hotel and hospitality sectors that is needed to be followed by
respective hotel:
Data protection act 1999: This is consider to be an valuable act that is needed to be
implemented by Travelodge that help in preserving the overall crucial data of customer. Manager
also use this standard to record the performance of every employee so that any kind of
differences can be removed. Under this regulation manager use to analyse the collected and
organise data and develop different type of program and training session so that employees are
able to perform certain task in more desired and profitable manner.
Tax Cuts and Jobs Act 2017: This actually makes fewer personal deductions, but more
organizations deductions. Travelodge also has to obey the tax cuts and employment measures
and faces difficulties due to the complex calculations this requires. The act requires considerable
planning, substantial legislation to be implemented, and a lot of depth analysis and evaluation of
data that was not applicable before and this may impact their financial statements in the time due
to changes.
Health, Security and Safety: Provides all customers with a clean, stable and hygienic
atmosphere for the excellent customer service and prevents their staff from whatever harm.
Manager support their workers to provide affordable Care Act and Family and Medical Leave
Act which make them highly motivated to perform the desired task in more profitable manner.
Disability act: In this respective act, the individual having disabilities have equal right
and freedom to get the best possible opportunities and jobs and there is no discrimination on any
bases. In Travelodge the manager are required to make recruitment of employees on the basis of
knowledge and professional approach of candidates. Each and every employee must be given fair
chance for providing their viewpoints within company so that best suitable plans are made to
increase the overall profitability of Hotel (Guha Thakurta, 2016).
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Expectations of customer form different market to fulfil the needs and requirement.
In hospitality industry, it has been determined that services provided by the various hotel
is primarily because of customer expectation. In every sectors customer are treated as the main
elements so that company produces best and suitable services and good for their respective
customer base. The more satisfy customer and services or goods that satisfy the essential
requirement help company to make profit (Mauri, 2016). In respect of hospitality sector the
needs of customer can be only fulfilled by providing high and suitable services and goods. The
importance of quality services in hotel industry is mainly due to main determinant of competitive
environment. It is stated that more and more number of visitors are attracted to a respective hotel
when they get highly satisfied quality services at decent price which raise their living standard.
Travelodge is leading independent hotel group in UK that have 40000 rooms with almost 560
hotels in different part of Spain and Ireland. Customer do not have to search for the hotel as
around 80% Travelodge hotels are locate in the centre of city, famous holiday destination. They
company provide privilege offer and leisure services to customer such as beautiful technical and
improvised bedroom and king size beds to make customer feel and special and satisfy.
Consumers now have a few to worry about the hotel services they are receiving Therefore, most
of them tend to use programs that meet and want to serve their diverse needs. Services provided
primarily by the hospitality industry should cover four key aspects, i.e. diversity, operability,
inseparability and intangibility.
The requirements of separate groups of customers are totally different and every hotels
are expected to adequately serve their customers. Customers are expecting quality services,
genuine product, reliability, phone check-in and check-out etc. It is the duty of the hotel team to
respond effectively and efficiently to all customer needs (Chen and Schwartz, 2013). In
Travelodge, there are number of effective attempts are made to fulfil the needs of customer like
hiring of professional and skill-full staff member so that they are able to give best customer
journey experience. Innovative techniques and modern technology are beneficial in delivering
best services that support in making profit in circumstance when Travelodge faces the situation
of over crowded. The respective Hotel is global hotel chain that are concerned to motivate their
entire workforce which support in attaining the main objective of business that is to make
customer satisfied and maximise profit. To fulfil the visitors' expectations, Travelodge employs
quality assurance system approaches wherein they ensure that almost all of their guests are
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provided with all the services they want in a hotel. In order to determine the needs of customer
by conducting survey and analyse of market which support in developing best suitable services
and goods for customer. Manager of hotel prepare an effective management quality program that
focuses to give entire workforce valuable training which will provide visitors to feel they are
right place. With the support of this plan manager in different areas of hotel track and record the
performance of employee and in case of any variation proper steps are made to improve these
gaps. Manager of Travelodge also develop good consumer relationships in order to build a loyal
customer base (Ng and et. al., 2013). We take different events for both clients and workers in
order to motivate them all. The main emphasis of the hotel is on delivering outstanding customer
satisfaction by offering facilities such as excellently-spacious and safe accommodation, good
hygiene food, great facilities, Wi-Fi.
CONCLUSION
The above description is objectively examined and it explicitly states that primary
providers of fiscal contribution to running hotel groups are efficient hospitality and
accommodation facilities. As a consequence, pricing approaches and values lead to the
assessment of goods and services offered by room facilities. It is observed that various methods
optimized for benefit and technological progress assist corporate structures as well as offer
organization development. Review of the code of practice and various authorities aims to
preserve an ethical atmosphere in the hospitality sector and has a positive effect on hospitality
practices.
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REFERENCERS
Books and Journals:
Bodea, T. and Ferguson, M., 2014. Segmentation, revenue management and pricing analytics.
Routledge.
Hormby, S. and et. al. 2010. Marriott International increases revenue by implementing a group
pricing optimizer. Interfaces. 40(1), pp.47-57.
Weatherford, L. R. and Kimes, S. E., 2013. A comparison of forecasting methods for hotel
revenue management. International journal of forecasting, 19(3), pp.401-415.
Ferguson, M. and Smith, S., 2014. The changing landscape of hotel revenue management and the
role of the hotel revenue manager. Journal of Revenue and Pricing Management, 13(3).
pp.224-232.
Kimes, S. E., 2016. The evolution of hotel revenue management. Journal of Revenue and Pricing
Management. 15(3-4). pp.247-251.
Noone, B. M., 2016. Pricing for hotel revenue management: Evolution in an era of price
transparency. Journal of Revenue and Pricing Management. 15(3-4), pp.264-269.
Zhang, Y. and et. al., 2015, March. A study of the commercial application of big data of the
international hotel group in China: Based on the case study of Marriott International. In
2015 IEEE First International Conference on Big Data Computing Service and
Applications. (pp. 412-417). IEEE.
Guha Thakurta, P., 2016. Revenue management: the ever changing landscape and the need to
innovate. Worldwide Hospitality and Tourism Themes. 8(4). pp.461-468.
Mauri, A. G., 2016. Pricing and revenue management in hotel chains. The Routledge Handbook
of Hotel Chain Management. pp.262-273.
Chen, C. C. and Schwartz, Z., 2013. On revenue management and last minute booking dynamics.
International Journal of Contemporary Hospitality Management. 25(1). pp.7-22.
Ng, F. and et. al., 2013. A revenue management perspective of management accounting practice
in small businesses. Meditari Accountancy Research. 21(2), pp.92-116.
Online
Pricing strategy of Travelodge. 2019. [online]. Available through:
<https://www.travelodge.co.uk/press-centre/press-releases/TRAVELODGE-
ANNOUNCES-%C2%A320-MILLION-PRICE-CUTS-AGGRESSIVE-NEW-
PRICING>.
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