Financial Contribution and Pricing Principles in Premier Inn

This report analyzes the financial contribution made by room's revenue, application of pricing principles, and evaluation of methods used to optimize profitability in Premier Inn. It also explains the impact of codes of conduct, legislation, and best practices on accommodation procedures.

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Explanation of financial contribution that room's revenue producing areas make to the
business unit.................................................................................................................................1
2. Demonstration and application of principles of pricing to the room's product and evaluation
of potential benefits of effective practices to profitability...........................................................2
3. Evaluation of methods which are used to optimise profitability as applied to a fixed capacity
inventory, recognizing dynamic growth in related technological developments........................4
4. Explanation of the way in which codes of conduct, legislation and best practice directly
affect accommodation procedures...............................................................................................5
5. Identification of expectations of customers from diverse markets and explanation of the way
in which providers of accommodation meet their needs through effective use of quality
management processes.................................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
Revenue management can be defined as the process which is focused by business entities
for the purpose of using distribution and pricing tactics to sell their inventory (rooms) to the right
guests at right time in strategic manner. With the help of it all the resources are managed by them
in more effective way (Camilleri, 2018). Main aim of this report is to analyse the way in which
hotels are managing their room strategically. The organisation which is selected for this report is
Premier Inn which is a British hotel chain and currently it is operating business in various
locations all around the world. It was founded in year 1987 and its headquarter is in Dunstable,
UK. This assignment covers various topics which are financial contribution made by room's
revenue, application of principles of pricing, evaluation of methods used to optimise
profitability. Additionally, explanation codes of conduct, legislation and best practices along
with expectations of customers from diverse markets are also covered in this project.
MAIN BODY
1. Explanation of financial contribution that room's revenue producing areas make to the
business unit
Premier Inn is considered as one of the biggest hotel chain which is rendering its services
world wide in different locations. Currently it has 800 hotels in various nations including United
Kingdom, Ireland, Germany, United Arab Emirates, India and many more. It was founded by
Whitbread in year 1987 and it is mainly established in Dunstable, UK. There are various rooms
revenue producing areas which are making contribution in the business unit. All of them are
described below:
 Room rentals: It is one of the main source of generating revenues in hotels. Premier Inn
also generates income by renting rooms to different guests which are visiting from
different locations all around the world. The rental rate of the organisation fluctuates
according to the demand in the market (El Haddad, Hallak and Assaker, 2015). Guests
visit the hotel at reception and then room is allocated to them according to their
preferences which helps to enhance their satisfaction level of result in higher revenues of
the organisation. Currently the annual revenues of the organisation are 3295 million
pounds for year ending 2018 (Financial contribution of room rental, 2018). The direct
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booking percentage for room rentals is around 97% which is 1317.1 it means it makes the
highest financial contribution in the revenues of the organisation.
 Food and beverage sales: All the hotels provide best food and beverage items to all the
guests according to their preferences. Management in Premier Inn makes sure that
customers get best eating and drinking products so that higher revenues could be
generated by the organisation. Food and beverage revenues growth for year 2017 of the
entity was 4.6% which is increased in 2018 up to 5.4% which means in this financial
period this areas has contributed a large amount in income as compare to previous year
(Financial contribution of food and beverage sales, 2018). The contribution for year
2018 is 1275.5 of total income.
 Meeting room rentals: Most of the large hotels provide facility of meeting rooms to
their clients in order to acquire higher profits. Premier Inn also provide this service to its
customers to conduct official get together. All the rooms which are made for this purpose
are air conditioned and have free wifi services. The hotel provide two choices to the
clients for the place for meeting in which first one if room only and second is day
delegate. It also make financial contribution in the revenues of the whole group (Meeting
rooms in Premier Inn, 2018).
2. Demonstration and application of principles of pricing to the room's product and evaluation of
potential benefits of effective practices to profitability
Pricing principles: In all the organisations different types of values are used for the
purpose of setting appropriate price for all the products and services which are rendered to the
customers these are known as pricing principles. With the help of them management decide the
appropriate and best suitable rates for all the items that are sold to clients. In Premier Inn these
are also utilised by top level executives. Description of all of them is as follows:
 Cost plus principle: Under this principle the pricing of the services are driven by the
organisations them selves according to the cost structure. It may be heavy on the
unwarranted overheads of the entity. It could be applied by the managers of Premier Inn
to set the prices of rooms according to their predetermined cost structure (Evans, 2015).
 Competitive principle: While using this principle companies set prices for their products
and services according to the situations of competitive market place and competitors
which are carrying out operations in same sector. If it is selected by organisations then
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the factors such as ability and willingness of clients to pay rarely play a role in the price
setting policy. It is mainly used by such organisations which are having high level of
competition in the market. It could be applied by management of Premier Inn in order to
set price for their rooms according to the cost structure of its competitors such as
Marriott, Hilton etc.
 Value based principle: It is a pricing principle which is highly focused with different
factors which should be focused by organisations while setting prices for their products
and services. The decision making under it take pricing level of competitors, own cost
structure and current price level of enterprise and customer's ability and willingness to
pay in consideration. It could be adopted by managers in Premier Inn as it is considered
as one of the best principle that can help to attain long term sustainability in the market.
Currently management in Premier Inn are applying dynamic pricing policy under which
value based principle is applied (Pricing in Premier Inn, 2019). Main reason behind its
application is that the hotel wants that it should meet expectations of its clients and deal with the
competition appropriately. With the help of it room's product of the hotel are prices effectively.
When a customer request for a reservation then details regarding total cost and number of nights
is provided.
In the actual price of room VAT is included at the applicable rate at the time of
reservation. If it gets changes in the staying period of client then it is adjusted by the hotel unless
the whole amount is paid in advance. Meals which are provided by the organisation are included
in the price but if customer do not want to add it then they can ask the hotel to remove them.
While setting prices for rooms management analyse market situations in order to assess that
other organisations which are running business under hospitality sector are having lower or
higher prices as compare to them (Islam, 2018). This analysis is also used for the purpose of
figuring out the best suitable cost for each room. In order to meet expectation level of customers
managers also conduct market research to analyse willingness and ability of clients to pay. All
these activities are performed according to value added principle of pricing that guides managers
to assess all the relevant elements. There are various potential benefits of all the effective
practices to profitability of Premier Inn. Al of them could be understood with the help of
following discussion:
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 With the help of effective practices in the pricing procedures the Premier Inn hotel can e
enhance profits because all of them can guide it to set competitive price for its rooms that
will help to deal with high level of competition available in the market.
 By setting appropriate price for rooms the hotel will be able to attract large number of
customers which may result in higher revenues and profits for the company.
3. Evaluation of methods which are used to optimise profitability as applied to a fixed capacity
inventory, recognizing dynamic growth in related technological developments
For all the organisations it is one of the main goal to optimise profitability so that long
term growth could be acquired for the development of business. There are various methods
which could be used for the same purpose so that fix capacity of inventory could be kept and
dynamic growth opportunity could be recognised for the enterprise (Lee, Lee and Neilson, 2018).
Description of all of them is as follows:
Using self storage creativity and effective inventory management system: For all the
organisations it is very important to manage the goods properly which are used for the purpose of
conducting operational activities. It can help to increase profits because when inventory will be
manager properly then organisation can reduce the possibility of overspending of budgets that
can increase profitability. Now a days different systems for fixed capacity inventory are also
used by hotels. These are LIFO, FIFO and AVCO, that helps to keep the right amount in the
warehouses so that requirements of clients could be fulfilled. Currently managers are using their
own storage creativity to keep the material for food items in store room so that all that operations
could be performed smoothly and profit could be optimised (M Rajasgeran, 2018).
Outsourcing smartly: It is one of the main profit optimisation method which is focused
by all the business entities to be digitally connected with the world. With the help of it Premier
Inn try to reduce its employment cost by tapping in to the global pool of talent so that the
dynamic growth could be identified and attained with the help of knowledgeable staff. It is one
of the main method which helps the organisation to increase its profits by recruiting such staff
members who are having experience of working in the same field. With the help of it profits in
long run could be enhanced by formulating highly efficient teams to attain the goals that are
formed for future. There are various digital platforms which could be used for the purpose of
hiring skilled staff all around the world. One of them is job portals where organisations can
select best suitable candidates for multiple jobs that are vacant (Wood, 2015).
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From the above discussion it has been analysed that the methods which are used for the
purpose of optimising profitability could be used for multiple purposes. These are maintaining
fixed capacity inventory and recognising dynamic growth. In order to execute all the operational
activities properly it is vital for all the managers to make sure that they are using appropriate
methods for optimising the profits generated for the year.
4. Explanation of the way in which codes of conduct, legislation and best practice directly affect
accommodation procedures
In Hospitality industry it is very important for all the organisations which are running
business under it to pay attention towards all the relevant codes of conduct, legislations and best
practices as it can directly affect the accommodation procedures. For Premier Inn it is also
essential to analyse and comply with all of them so that operations could be executed in
systematic manner (Wang, 2016). Description of all of them is as follows:
Codes of conduct: It is the set of rules and regulations which are used by organisations
to outline all the norms, responsibilities and practices of all the individuals who are working in it.
With the help of it management guides all the employees to meet all their day to day tasks
appropriately by following core values and ethics of enterprise. The different codes of conduct
which are followed by Premier Inn are growing the brand by making innovations but ignoring
the negative impact of it on the society. Another code which is focused by the company is
creating a culture that reflect the highest standard of behaviour which is based upon its core
values. All of them are formulated by the management for the purpose of carrying out
operational activities in systematic manner and ignoring the negative situations such as
unfavourable effects of operations on environment etc. which may take place in future. Codes of
conduct of it affect accommodation procedures because due to all of them employees have to
make sure that they are working according to it or not (Premier Inn Code of Conduct, 2019).
Legislation: All the governmental rules and regulations which are imposed by legal
authorities are known as legislations. There are several acts that are mainly made for hospitality
sector organisations such as Premier Inn. It is very important for the management to make sure
that all of them are complied by the organisation because if these are ignored by managers then it
may affect the accommodation operations by resulting in legal actions. One of the main
legislation is fire safety act under which the hotel is required to make sure that all the equipments
which are used as fire extinguisher are available within the organisation. If the entity is not able
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to run business according to it then it may affect its accommodation processes because due to
this customers may have to suffer from risks. Health and safety act is also required to be
followed by Premier Inn in order to provide best and healthy food to all its guests. If it is not
focused by the organisation then it will leave unfavourable impact upon functionality of business
by affecting accommodation processes by resulting in bad health of visitors (Menon and Goyal,
2017).
Best practices: In order to carry out all the operational activities properly it is very
important for hotels to make sure that they are focusing on best practices such as keeping staff
happy, fulfilling demand of customers, time management etc. Premier Inn also consider them
while performing all its accommodation processes because these might get affected due to them.
If the hotel is not able to meet expectation of clients or not able to meet their needs on time or the
employees are not happy with their work then it will affect business procedures by resulting in
decreased profits and revenues.
5. Identification of expectations of customers from diverse markets and explanation of the way in
which providers of accommodation meet their needs through effective use of quality
management processes
When an organisation operates in multiple destinations then it results in different needs of
customers from diverse markets. For all the organisations such as Premier Inn to analyse them
and try to meet them. There are various expectations of customers of hotel from diverse markets
which are fulfilled by the managers of the organisation with the help of quality management
processes and design (Pattajoshi, 2018). Description of all of them is as follows:
 One of the main expectation of guests in the hotels is mobile check in or digital keys as
they do not want to wait at the reception for a long period.
 Clients expects from the hotel that they should get ease of communication when they
visit to their room so that they can spend their time without any issue.
 Proper hygiene is also a major expectation of visitors which is required to be fulfilled by
hotels such as Premier Inn so that satisfaction level of them could be increased.
In Premier Inn managers are using following quality management process in order to
make sure that all the expectations of clients get fulfilled:
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 Quality planning: Under this procedure managers make plan to make sure that they
meet all the expectations of visitors in Premier Inn. For this purpose, they analyse the
possible needs of customers and then make arrangements according to them.
 Quality assurance: It is another procedure of quality management which is focused by
managers of Premier Inn in order to make sure that they are having sufficient resources to
meet expectations of all the clients. By using this process they try to arrange all the tools
which could be used to fulfil needs of customers (Rony, 2015).
 Quality control: This process of quality management is used by manage of Premier Inn
for the purpose of controlling the activities which are performed to meet expectations of
customers so that possibility of mistakes could be reduced. It is beneficial for the
organisation to fulfil all the requirements of clients according to their specifications.
 Continual improvement: It is the last procedure of quality management in which
continuous improvements are made in the services of Premier Inn according to demand
of customers. For example, if they are willing to use mobile or digital keys then
organisation make sure to implement the new technology in the hotel (Turner and
Hesford, 2019).
CONCLUSION
From the above project report it has been concluded that revenue management is one of
the common activity which should be performed by all the organisations which are operating
business under different industries such as manufacturing, hospitality etc. There are various
revenues generating areas in a hotel that make financial contributions in the business unit. These
are room rentals, meeting rooms, food and beverage sales etc. There are various pricing
principles such as value based, competitive etc. which are applied by the management of entities
for the purpose of setting appropriate prices for room's product. There are various method of
profit optimisation such as using self creativity for storage and outsourcing smartly which are
used by managers of hotels to attain benefits such as fixed capacity inventory etc. For all the
hotels it is very important to comply with codes of conduct, legislation etc. so that the negative
impact of them on accommodation procedures could be decreased. For large as well as small
enterprises of hospitality industry it is very important to meet expectations of customers so that
predetermined objectives such as profit maximisation and customer satisfaction could be
achieved.
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REFERENCES
Books and Journals:
Camilleri, M. A., 2018. Travel marketing, tourism economics and the airline product. An
introduction to theory and practice. Springer.
El Haddad, R., Hallak, R. and Assaker, G., 2015. Price fairness perceptions and hotel customers’
behavioral intentions. Journal of Vacation Marketing. 21(3). pp.262-276.
Evans, N., 2015. Strategic management for tourism, hospitality and events. Routledge.
Islam, M., 2018. Service Excellence of Front Office Operations in Ocean Paradise Hotel, Cox’s
Bazar.
Lee, S. H., Lee, J. and Neilson, S. M., 2018. Exploring guest preferences of breakfast menu:
conjoint analysis. Journal of culinary science & technology. 16(2). pp.149-164.
M Rajasgeran, S., 2018. Operational Risk and Its Determinants’: A Study on Hotel and Catering
Industry in United Kingdom. Available at SSRN 3181629.
Menon, S. and Goyal, S., 2017. LOOKING INTO VALUE AND RETURNS FOR A HOTEL
INVESTMENT IN THE INDIAN CONTEXT. Journal of Services Research. 17(2).
pp.55-73.
Pattajoshi, B., 2018. Entrepreneurship in the Hospitality, Tourism and Leisure Industries:
Maverick Minds. Educreation Publishing.
Rony, K., 2015. An operational overview of front office department in four points by Sheraton
Dhaka.
Turner, M. J. and Hesford, J. W., 2019. The impact of renovation capital expenditure on hotel
property performance. Cornell Hospitality Quarterly. 60(1). pp.25-39.
Wang, Y., 2016. Hotel Management in the Digital Age: Empirical Studies of Reputation
Management and Dynamic Pricing (Doctoral dissertation).
Wood, R.C. ed., 2015. Hospitality management: A brief introduction. Sage.
Online
Financial contribution of room rental. 2018. [Online]. Available through:
<https://www.whitbread.co.uk/~/media/Files/W/Whitbread/press-releases/press-release-
25-04-2018.pdf>
Meeting rooms in Premier Inn. 2018. [Online]. Available through:
<https://secure.premierinn.com/en/faq/business_help/meeting_rooms.html>
Financial contribution of food and beverage sales. 2018. [Online]. Available through:
<https://www.statista.com/statistics/739891/revenue-whitbread-united-kingdom-uk-by-
segment/>
Pricing in Premier Inn. 2019. [Online]. Available through:
<https://www.premierinn.com/gb/en/terms/booking-terms-and-conditions.html>
Premier Inn Code of Conduct. 2019. [Online]. Available through:
<https://www.whitbread.co.uk/~/media/Files/W/Whitbread/documents/code-of-
conduct-2018.pdf>
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