Hospitality Operations and Revenue Management

This document discusses the financial contribution of room's income generated areas to the organization unit, the demonstration and implementation of pricing to the room's product, approaches utilized to optimize profitability with technological advancement, and the impact of code of conduct and legislations on the accommodation procedure in the hospitality industry. It also includes case studies and examples from Hilton Hotel group.

HOSPITALITY OPERATIONS
AND REVENUE MANAGEMENT

Contents
INTRODUCTION...........................................................................................................................1
TASKS.............................................................................................................................................1
1. Financial contribution through room’s income generated areas to organisation unit........1
2.Demonstration and implementation of pricing to the room’s product................................2
3. Approaches utilised to optimised profitability to a fixed capacity inventory with
technological advancement....................................................................................................3
4. Code of conduct and legislations with best practices directly impact to accommodation
procedure................................................................................................................................7
5. Expectations of customer form various market and use of quality management to meet
requirements of customers......................................................................................................8
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10
Revenue Management, 2019. [online]. Available through
<https://www.managementservices.hilton.com/en/support-services/revenue-management/>......10

INTRODUCTION
Hospitality industry is a wide-ranging sector engaged throughout providing hotel services,
digital marketing, leisure, etc. that produces high return through customers (Bertsimas and
Vayanos, 2017). Hilton Hotel group is selected in his research report to evaluate income
collection as well as categorization. This study discusses numerous laws and economic variables
introduced in sector. This document covers different aspects of the hotel region, the contribution
of a room services to the aggregate hotel profits is discussed including pricing concepts that
assist to allocate rates to various hotel rooms as well as facilities.
TASKS
1. Financial contribution through room’s income generated areas to organisation unit
Wi-Fi facility: throughout the resort grounds allows a visitor use online services, on which
the company pays a significant charge of sum (Mariani, 2016). The product is launched in 2005
for both the comfort and pleasure of guests in the Hotel Hilton, in Hamshire, United Kingdom. It
is also contributing to a total income of the space, which is 5%.
Swimming pool – Due to various its efficient programs, pool services are the Hilton
hotel most valued and then utilised product. As a lower cost operation, the service makes a
ludicrously low donation, that is 10%.
Sports area – Sports field is a special area in resort grounds that visitors are provided with
different fitness as well as other sports gear so that they have the privilege of working out when
on holiday or business vacations (Misiko, 2015). Several of the facilities in this region are
gymnasium, meditation area or different areas for both indoors and activities. The leisure field
contributes about 10%
Spa services – Many Hilton Hotels provide wellness facilities where visitors can enjoy
calming treatments such as messaging and spa facilities. Such facilities add a fair share of the
revenue per room, which is 15%. Hilton Hotel's room add approximately 80 percent to the
general business income, the remainder contribution is produced by adding to guest amenities
such as pull-up services, taxi services, etc.
Room service – Continental breakfast is a home maintenance facility where restaurant
staff are assigned to make the room. The service includes numerous services such as house-
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maintenance, planting, washing of rooms as well as other maintenance. This service comprises
5% of the total income from either the room.
Room facility – Room facilities–Hilton Hotel provides its guests various room choices
such as regular quarters, luxury rooms, double or triple accommodation rooms, suites,
customized wedding lounges, mansions and individually reserved cottages. The median income
per single bedroom occupation is $5,000 a month. Room division produces about 15 percent of
the profit from the space. The price of these hotels varies from either the size of the room and
their place, while the revenues generated from either the United Kingdom and Us hotel is
comparatively higher than that of the revenue earned from Asian tourists.
Entertainment area – Entertainment area is a separate area which is build and managed
for entertainment purposes. Facilities provided in this area are Television, music system, chat
room, indoor sports spacing etc. Similar to sports area, these services also contribute 10% in the
total revenue.
Breakfast and other meals – Breakfast and other meals–The Hilton Hotel brand is rated
as a 5-star hotel with main objectives of profit maximization and rewarding customers. Hilton
Hotel offers all food options that were recognized and don't include in hotel prices. it have shops
and restaurants used among guests and other tourists. Hilton provides its guests with many diet
plans such as MAP program, AP intend, CMP intend. The MAP plan involves lunch and another
meal, the AP Plan includes only lunch and lunch and dinner contains CMP and regional gym
membership. Generally, the fresh produce system produces the highest income compared to total
space profits, which is 30%.
2.Demonstration and implementation of pricing to the room’s product
Choosing the best prices which benefits both companies and customers is very crucial as
the profitability is very much dependent on what kind of pricing a hotel has set on their rooms.
The largest revenues in a hotel comes through its room division segment as the first reason for
anybody to stay in a hotel is getting the accommodation (Scholz and Voracek, 2016). So,
selecting the best pricing strategies for the rooms and evaluating their actual benefits for the
organization's financial health is must.
Charging very less prices and charging extremely high is not the solution, hotels has to balance
the continuum of the prices. There are three basic strategies which are usually used in the hotel
industry:
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a) Cost-based pricing strategy: This is a very basic approach to price the rooms. The
hotels focus to cover the costs and depends on how much profit the hotel wants to make; it can
put additional mark-up to individual rooms. So, both fixed and variable costs are taken into
consideration to calculate costs. After reaching to a price by calculating costs and adding the
mark-up, this number can be divided with the number of rooms available with the hotel or the list
of guests and can alter the price on that basis.
b) Customer-based pricing strategy: This pricing depends upon the perceived value and
benefits the hotel is offering (Waweru, 2016). A customer is ready to pay extra if he/she is
getting the value and for the best customer experience your hotel is offering. This kind of pricing
has benefits like it increases the profitability chances of the hotel as higher profits can be
achieved, higher prices can be charged depending on the demand and customer satisfaction will
enhance.
c) Competitive-based Pricing Strategy: This kind of pricing is solely done based on
competition insights and the data available. So, the hotels look at the similar kind of hotel, what
they are charging for each category of room, do they charge for extra amenities like mini bar,
spa, breakfast, WIFI, etc. Considering each and every thing about the competition, prices are set
and this pricing is beneficial in highly competitive scenario.
Hilton uses Customer centric approach for pricing its rooms. It will give flexibility to
the customers and provides more choice to them as it will target to both the customers who are
ready to pay more as well as guests who want to save (Williams, 2014). This technique will set
prices on the basis of late check-out or early check-in, last moment cancellation, etc. This will
decrease the last moment cancellation to a great extent and will provide chance to the customers
to even give 2-3 days’ prior notice if they are not coming to stay at the hotel and this goes
beyond to their current policy of cancellation. This new kind of pricing is better than the earlier
and will allow to manage their inventories better while improving their average daily rates and
revenue per available room.
3. Approaches utilised to optimised profitability to a fixed capacity inventory with technological
advancement
There are different methods used by the international hotel chains to optimize its profitability
and making their revenue management more effective and efficient. Hilton Group has also
created a tool called “PEAK” which helps them in optimization of their profitability. This tool
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helps them in better forecasting, supports better pricing decisions and aids in planning aspect of
revenue management. This tool is the core of Hilton's superb revenue management.
 PEAK help them to edit their budgets rather than creating one on their own. They have an
automatic budget creation tool which takes into consideration past trends.
 PEAK also helps them in providing the quick review on the gaps in performance. This
tool helps in identify the gaps of short term and makes a complete outline that how the
hotel can fulfil those gaps by using different strategies.
 Another method used is the GRO i.e. Global Revenue Optimization which helps Hilton in
optimizing its prices, bookings and inventory level using advanced technologies and
analytics. It helps in implementing optimal techniques to enhance profitability and
maximizing revenues.
Example: For fulfilling the initiative of GRO, Hilton has partnered with SAS and IDeaS and
has come up with a technology called “G3 RMS (Revenue Management System). The system
was implemented across Hilton group hotels so that they can design pricing in an efficient
manner which help in profit optimization. It also helps in managing the occupancy and
availability of rooms in a hotel. This G3 system will even help the group in making their
operations smooth and will analyse the past trends and performance of the hotels to enhance
future performance as well as to create valuable insights from the data to optimize the revenues.
Overall, this technology has been a great success for the company as it makes revenue and
pricing decisions easier for the owners and is expected to give higher chances of success in terms
of financials and optimization. It will also take their innovation level to the next level as this
technology is known to be a advanced generation system which will completely change the
pricing and revenue management in hospitality sector.
 The group uses Optimal Mix which helps them to analyse past performance and make
future strategies and goals. They set realistic targets and what they expect from each hotel
they own. There is also a Engine called “Hilton Engine/' which provides customization
and strategies for execution to get the optimal mix they want.
 To forecast its REVPAR i.e. revenue per available room, Hilton is using technology
called “Demand 360” which helps them to plan as per insights they receive from the
market and forecasts. “Hotelligence 360” is also used for this aspect.
Some of the important metrics used to analyse the performance of any hotel are:
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 Occupancy
 ADR
 RevPAR
Occupancy is calculated as: (Total No. of Rooms Sold/ Total No. of Rooms Available) *100. We
can observe from the graph that the occupancy rate of Hilton Group has shown an increasing
trend which is a good indication for the Group as as whole (Bay, 2014). From 2012 till 2018, the
occupancy rate has increased by 5% which is reflecting the success of Hilton Group. This rate
shows the demand of the rooms available in Hilton Group. This is the most important metric and
if the hotel is successful in optimizing in fixed inventory i.e. its rooms in an efficient manner
then it can maximize its profitability and revenues (Revenue Management, 2019.). So,
Occupancy rate is the most important method which need to be evaluated to optimize the
profitability of hotels.
Source: Hilton Annual Reports
Next metric which is necessary to evaluate a hotel chain is its ADR rate i.e. Average
Daily Rate. This reflects the average price of a hotel room on a daily basis. It can be calculated
by using the formula: Room Revenue/ No. of rooms sold. ADR shows the overall profitability of
the hotels and how much revenues it is earning. The Average Daily Rate of Hilton Group has
shown an increasing trend year on year, i.e. in year 2012 the rate was: £131.35 and till year 2018
it reached to: £147.22. Again, a good indication for the company as the ADR has increased by
12% in 5 years.
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(Source: Hilton Annual Reports)
Third most important metric is RevPAR i.e. Revenue per available room and it is
calculated using the formula: Room Revenue of Hotel/ Available rooms Or ADR X Occupancy
Rate. For 2018, RevPAR of Hilton Group has increased by 2.9% in 2018 to £110.57. This was
due to simultaneous increase in two other measures, i.e. ADR and Occupancy Rate.
Source: Hilton Annual Report, 2017-18
Hilton can optimize its profitability by focussing on these three factors as well as it can create
value by making valuable investments only with least capital investment. It can also focus on its
franchises to optimize its profitability and by using more advanced technologies. This all will not
only improve its operations and revenues but at the same time will enhance customer
satisfaction.
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4. Code of conduct and legislations with best practices directly impact to accommodation
procedure
Laws and legislations remain different in different regions and continents that not only
affect the management entity (Pizam, 2012). Laws and legislations are formed in order to
maintain the ethical and effective business environment for employees as well as managers. It is
reckoned that a well-structured and meticulous organisational structure leads entity towards
sustainable success. In order to understand the aspects of effective code of conduct in hospitality
industry the laws and legislations are defined as follows:
Working Time Regulations, 1998: The law grants holiday privileges, splits the operation
but supervises the hours worked (Ortega, 2016). It effects Hilton's time management when it
has high demand. Due to this law, administrators are unable to pressure the employees to remain
and operate for a additional period. therefore, it is necessary for management to make splits
between both the tasks as well as roles of workers so they can safely and efficiently minimize the
stress levels.
Data Protection Act 1999: This is a significant act that is actually being practiced by
Hilton hotel group to breach and administer people's personal information. Organization uses
such action to document of staff member’s performance and retaining personal information. This
act has both positively and negatively dimensions of hospitality industry practices and events. In
this, the manager's duty or obligation is to obtain comprehensive information on the
requirements of workers. In addition to providing the staff with appropriate professional
resources plans, it can potentially enhance the efficiency and productivity of staff members
indulging in hospitality services.
Disability act: this law provides that somehow the disabled person has a entitled to
reasonable rights and shouldn't be offended against on grounds of the impairment. It is important
to provide transporting facilities, good hotel facilities and other amenities in keeping with the
preferences. Hilton hotel should therefore be obliged to gain advantage of them by showing them
both services that also include room owing to which they are not facing any problems. It will
help Hilton hotel build a strong market identity in the hotel industry to generate revenue (Hilton
Worldwide Partners with IDeaS on Global Revenue Initiative, 2013).
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5. Expectations of customer form various market and use of quality management to meet
requirements of customers
Hospitality business's quality is essentially an expression of customer expectations. Within
the hospitality industry, the client's demand could be fulfilled by delivering heavy-quality
facilities. Buyers also regarded key element of the marketplace, thus delivering certain products
or services which meet consumer expectations in an efficient way is primarily important for each
and every hospitality entity. It has also been discovered that there is a good bond among price
and quality. The importance of both the quality of care throughout the hotel enterprise is a key
determining factor of competition.
User pool will only be motivated or maintained if they provide successful products which
offer a greater degree of comfort (Lee, 2016.). Hotel Hilton is the United Kingdom-based
international retail chain that provides the target market with a wide variety of facilities. Its
units currently operate in further than 85 countries with 215,623 rooms, that means it
is providing facilities fulfils which client's demand favourably. Citizens now have a few days of
worry in terms of support. Therefore, most of their staff tends to use programs which meet and
would like to serve their varied requirements. Services primarily provided by the hospitality
sector should cover four aspects, i.e. phenotypic variation, intangibility, inseparability and
functionality.
Hilton Hotel is a global hospitality which spends its efforts and resources towards pursuing
its goals and objectives of consumer services and increasing income. To fulfill the visitors '
wishes, Hilton uses quality assurance system approaches wherein they ensure that the patrons are
provided with all of the services they want in a room. To address tourists ' requires, hotel
firstly, needs to analyse the visitor’s requirement, using different assessments including analysis
volunteer to support them recognize most the requirements. Hilton hotel plans a project that
helps to control performance.
CONCLUSION
In the above project study, it could be inferred that perhaps the hotel business is the fastest
emerging and evolving sector, and also the Hilton hotel sector's leading hotel group. There are
many marketing criteria that allow Hilton hotel to assign rates accurately to the accommodations
or other facilities. Room utilization and level of earnings are calculated by utilizing different
equations, that allows to predict customer expectations as well as the required sources for
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hospitality industry. Diverse rules, norms and policies impact upon earning capacity of
Hospitality business of Hilton Group at the period in maximum operation, Hilton hotel uses
various technical devices such as iPhone, tv, WI-Fi, iPods to attract consumers so they can
prolong the waiting times and gain further revenue from the property.
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REFERENCES
Books and Journals:
Bertsimas, D. and Vayanos, P., 2017. Data-driven learning in dynamic pricing using adaptive
optimization. Optimization Online.
Mariani, M. M., 2016. Coordination in inter-network co-opetitition: Evidence from the tourism
sector. Industrial Marketing Management. 53. pp.103-123.
Misiko, A. J., 2015. Impacts of Development Process on Mawanga Cave’s Tourism
Sustainability: Lessons for Future Improvement.
Scholz, P. and Voracek, J., 2016. Organizational culture and green management: innovative way
ahead in hotel industry. Measuring Business Excellence. 20(1). pp.41-52.
Waweru, R. N., 2016. An Assessment of Customer Perspectives on Factors that have Influenced
the Success of a MNC in the Kenyan Fast Food Industry: A case Study of KFC Vis-à-Vis
Galito’s (Doctoral dissertation, United States International University-Africa).
Williams, J.D., 2014. THE PROWESS OF DR. PHILIP KOTLER: ARE HIS MARKETING
MANAGEMENT TEACHINGS STILL WORTHWHILE?. Review of Higher Education
& Self-Learning. 7(24).
Bay, M. A., 2014. Adobe Fabric and the Future of Heritage Tourism: A Case Study Analysis of
the OldHistorical City Of Alula, Saudi Arabia. University of Colorado at Denver.
Pizam, A., 2012. International Encyclopedia of Hospitality Management 2nd edition. Routledge.
Ortega, B., 2016. Revenue management systems and hotel performance in the economic
downturn. International Journal of Contemporary Hospitality Management. 28(4).
pp.658-680.
Lee, S. H., 2016. How hotel managers decide to discount room rates: A conjoint
analysis. International Journal of Hospitality Management. 52. pp.68-77.
Online
Hilton Worldwide Partners with IDeaS on Global Revenue Initiative, 2013. [online]. Available
through <https://www.marketwatch.com/press-release/hilton-worldwide-partners-with-
ideas-on-global-revenue-initiative-2013-06-24>
Revenue Management, 2019. [online]. Available through
<https://www.managementservices.hilton.com/en/support-services/revenue-
management/>
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