Hospitality Operations and Revenue Management - Doc

Hospitality operations and
revenue management

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................1
INTRODUCTION...........................................................................................................................2
TASK...............................................................................................................................................2
1. Financial contribution of room's revenue...........................................................................2
2. Principles of pricing and evaluation of its benefits ...........................................................4
3. Methods used to optimise profitability at full capacity......................................................5
4. Various laws and legislations applied on hospitality industry...........................................6
5. Identification of various customer needs and methods to fulfil them................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

EXECUTIVE SUMMARY
This project is summarised to ascertain revenue generating capacity of a hotel against the
services provided by the guests. Crowne plaza is a multinational hotel chain which has its
headquarters in United Kingdom and operates in around 50 countries and has 400 hotels in total.
In this project report various pricing principles are evaluated in order to identify benefits of these
principles to earn high profitability.
Crowne plaza group of hotels has classified their sales into two categories and they are
peak period and valley period. At the time of peak period Crowne plaza faces the situation of full
occupancy and to increase their earned income in this situation, they exercise several
technological tools.
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INTRODUCTION
Hospitality sector is a broad industry which is engaged in hotel business, event planning,
tourism etc. which generates high revenue from the services provided to the customers. In this
project report, Crown plaza group of hotels is chosen to determine revenue generation and its
classification. Various legislations and technological factors applied on this sector are discussed
in this report. This project report includes various different aspect of hotel division, a room's
contribution in the overall profitability of hotel is discussed along with principles of pricing
which helps in allocating prices to various hotel rooms and services. Technological factors which
helps a hotel increase their income at the time of full occupancy and laws which which are
applied on hospitality industry like minimum wages act, disability act and many more.
TASK
1. Financial contribution of room's revenue
Crowne Plaza is a multinational chain of hotels which serve their clients which upscale
hotel room and other services. This hotel chain has several hotels spread over the world. They
facilitates their customers with ample of services such as gym, spa, entertainment area etc. Every
year this hotel chain generates total revenue of around 4 billion dollars from their 100000 rooms
and numerous utility services (Anderson, 2010).
Revenue generated from a room and its services are described below:
 Room facility – Crown plaza facilitates their visitors with numerous room options like
normal room, deluxe rooms, double or triple occupancy rooms, suites, honeymoon
personalised suites, villas and even individual rented bungalows. Cost of these rooms
varies from nature of the rooms and location of these rooms, revenue generated from
the hotels of United Kingdom and United states are relatively higher than the incomes
gained from the hotels of Asia. Average revenue of per room single occupancy is
amounted to be 5000 dollars per month. Room division generates around 15% of the
room's revenue.
 Breakfast and other meals – Crown plaza group comes under 5 star hotel category
which has primary objectives of profit maximisation and client satisfaction. Crown
plaza provides all meals options included and non included in room costs. Most of the
Crowne plaza hotels have restaurants and bars which are used by hotel's guests and
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other visitors. Crowne plaza offers several meal plans to their guests like MAP plan,
AP plan, CMP plan. MAP plan includes breakfast and one other meal, AP Plan incudes
only breakfast and CMP or continental meal plan includes breakfast and dinner meal.
Usually food and beverage unit generates highest revenue against total room revenue
and that is 30%.
 Wi-Fi facility – Wi-Fi facility enables a guest to user internet services inside the hotel
premises, against which hotel charges a reasonable amount. This service was started in
year 2005 in crown plaza hotel, Denmark, United states for the convenience and
satisfaction of visitors. Wi-Fi facility also contributes in total room's revenue and that is
5%.
 Room service – Room service is a housekeeping facility in which hotel allocates hotel
staff to maintain the room. This service includes several facilities like housekeeping,
gardening, room cleaning and other repairs. This service contributes 5% in total room's
revenue (Currie, 2010).
 Spa services – Most of the Crowne plaza hotels have services of spa, where guests can
visit and enjoy relaxing therapies such as messages and salon facilities. These services
contribute a reasonable percentage in per room's revenue and that is 15%.
 Sports area – Sports area is a separate field in hotel premises where various gym and
other sports equipments are present for the guests so that they will have the chance to
work out even when they are on vacation or business trips. Some of the services
provided in this area are gym field, yoga field and various outdoor and indoor sports
fields. Contribution of sports area is around 10%
 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 (Denizci Guillet, 2015).
 Swimming pool – Swimming pool facility is the most loved and used service of the
Crowne plaza hotels because of their effective services. Being a low cost service, this
facility contributes relatively generous percentage and that is 10%.
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Rooms of crown plaza contributes around 80% to the overall business revenue, remaining
contribution is generated by add on services provided by the hotels like pick up services,
transportation services etc.
2. Principles of pricing and evaluation of its benefits
Pricing is a process of allocating differential princes to certain products according to its
nature, size and cost involvement. The Crowne plaza hotel group has various kinds of rooms and
services which needed to be priced accordingly. This process is a crucial task to perform because
the amount of net profit or income is determined by these prices only. Crowne plaza hotels
allocate prices to their rooms according to the costs involvement, competitors' prices and
demand. Crowne plaza classifies their hotel rooms and services according to the nature and the
cost involvement in those services. Normal rooms are comparatively low rated than the deluxe
rooms, similarly villas and bungalows are way high priced. Various pricing principles used by
crown plaza are:
 Discriminatory pricing: Crowne plaza hotels use discriminatory pricing principles in
order to serve differential priced rooms to several guests according to their affordability.
They have set the prices from low to high according to the preference of the guests. For
example business travels prefers comfortable stay for which they book a luxurious room
whereas solo travellers who prefer low priced trips for which they book normal rooms. At
Crowne plaza, rate of a business class room is 650 euros excluding the 300 euros for Wi-
Fi and breakfast. Whereas rate for a normal room is 300 euros. Prices of suites and
bungalows vary from 2500 to 4000 excluding other hotels services amounting to around
1000 euros like crèches, restaurant etc.
 Demand based pricing: Demand of the hotel rooms vary from time to time. Crown
plaza has classified their sales in terms of demand as peak season and valley season.
During the peak season, hotels of Crowne plaza has high demands and 100% occupancy
due to which they increase the prices of their hotel rooms and during the valley period
they reduce the prices of their hotel rooms due to low demand (Forgacs, 2010).
 Competitive pricing: To maintain a positive image in the market it is important for
Crowne plaza hotel to fix the prices according to the prices of competitor's brand.
Competitive hotels of Crowne plaza are Hilton PLC and Marriott which reduces their
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prices in order to capture maximum market share and to overcome this problem, Crowne
plaza allocate the prices to their rooms and services according to the competitors.
These pricing policies are beneficial for the profitability of the organisation as they
allocate appropriate prices, few of these benefits are mentioned below:
 Pricing principles helps in allocating appropriate prices which are beneficial for both the
parties, here Crowne plaza uses these principles so that they increase their profit making
ability (Guadix, 2010).
 These pricing principles helps in considering prices of competitors so that informative
pricing strategy can be developed. These principles helps Crowne plaza in achieving
organisational goal of profitability by allocating competitive prices to their rooms and
services.
Particulars Formula Calculation
Room occupancy percentage
Room occupancy = rooms sold / total rooms
available * 100 80.7357746379
Sleeper occupancy percentage
Bed occupancy = number of beds / total
possible beds * 100 75
Double occupancy percentage
Double occupancy = double let to 2 person /
total no. of double room * 100 90
Average room rate
Average room rate = total room revenue on a
given day / total rooms sold 4000
Average sleeper rate
Average sleeper rate = total room revenue on
a given day / total possible beds 200
Crowne plaza has room occupancy of around 80% at the time of normal business period
and sleeper occupancy of 75%. This hotel also offers double and triple room occupancy which is
averaged to be 90% as double rooms are cost efficient. Average room rate and sleeper rate are
4000 and 200.
3. Methods used to optimise profitability at full capacity
Crowne plaza is a upscale 5 star hotel, which has full occupancy at the time of their peak
period. When hotel is facing situation of full occupancy the only way to increase their
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profitability is to satisfy their guests with attractive services so that they made their mind in order
to stay for a longer period (Guadix, 2011). Usually full occupancy is the highest point of
profitability, but with the help of some dynamic technological tools this profit can get even
higher than before and they are:
 Crowne plaza provides Wi-Fi services to their trusted and regular guests for free of cost,
so that they can get blissful experience from the free services provided to them and prefer
to stay at the same hotel every time of their visit. Wi-Fi facility enables a guests to surf
internet and connect to the world while relaxing in a hotel room. In today's scenario,
internet is the basic requirement of every individual and if this service is provided for free
by a hotel, it directly builds a positive image for the hotel like Crowne plaza(Heo, 2013).
 For a upmarket 5 star hotel like Crowne plaza, providing television to their guests is a
basic thing but at the time of full occupancy, Crowne plaza can provide assess to all
channels of the television for which they usually charge from the visitors. When crowne
plaza faces situation of full occupancy they can provide above facility in order to gain
satisfaction of customer which will ultimately result in maximising the profitability.
 At the time of full occupancy, Crown plaza can provide few free add on technological
services like networking devices such as iPads. These devices help those guests who
requires to communicate but does not have any communicating device like mobile, laptop
etc., this service will leave a strong positive impression of hotel service and make them
visit regularly and for longer periods.
 Crowne plaza provides mini refrigerators in the business class rooms of their hotels for
their guests but at the time of full occupancy, they also provides refrigerators in their
normal rooms too in order to satisfy customers so that visitors can extend their trip
duration.
 Another method of increasing the profitability at the time of full occupancy is providing
music equipments to their guests. Crowne plaza group of hotels have a promotional
policy of providing music equipments like iPods and music systems which can increase
the satisfaction of guests. This facility is provided in order to convince guests to stay for a
longer period (Kessman, 2011).
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4. Various laws and legislations applied on hospitality industry
Several countries has different laws and legislations about hospitality industry which
effect the profitability of the organisation. Crowne plaza is a group of hotels which operates in
around 52 countries which has distinct laws about hospitality, due to which they have hired a
team of professionals which look over the legal issues. According to United Kingdom laws,
Crowne plaza has to follow various laws which are mentioned below:
Data protection act 1999: It is an important act which is followed by the Crowne plaza
in order to holed and apply personal data of individual is presently. This act is follow by
company in order to record entire data about employees performance. Such act has more aspects
on business operations and activities of hotel in a negative as well as positive way. Under this,
duties and responsibility of administrator is to collects entire data about employees needs. So
further they can provide accurate training and development programmes to the workforce, they
easily increase profitability or productivity of hotel effectively.
Working time regulations, 1998: This act gives the rights to holidays, taking break from
the activity and monitor the working hours. It impacts Crowne plaza when there is a maximum
workload and due to this law managers cannot force the workforce to stay and perform for long
time period. Also, it is important for managers in order to renders breaks to employees in
between of the activity and functions so that they can comfortable and reduce their tension level
in an effective and efficient manner (Lorna Wang, 2012).
Minimum Wages act, 1998: It is another kind of act which is follow Crowne Plaza in
order to give fair salary to the entire workforce as per its work performance. It is important for
the hotel to decrease employees turnover as well as maximise their sales within predetermined
period of time. This act also have more outcome on business performance and its profitability
(Minimum Wage, 2018).
Disability act: Such act states that the disables person are having all rights to get equal
opportunities and should not be discriminated on their basis of their disability. Therefore,
Crowne Plaza should required to take care of them through proving them all facilities which
includes rooms due to which no difficulties are faced by them. Providing transportations
facilities, better room services and other amenities are required to provided according to their
needs and preferences. This will help Crowne hotel to attain strong brand image in hospitality
industry as well as generating huge income (Pegg, 2012).
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Crowne plaza is a multinational hotel group chain which operates in 52 countries due to
which they have follow laws and legislations of several countries. According to the United
Kingdom laws, there are few acts which are applied on Crowne plaza. Minimum wages act and
disability act are developed in order to benefit the employees of this hotel, staff of this hotel
receives reasonable amount of wages and salaries.
5. Identification of various customer needs and methods to fulfil them
The quality of services provided by Hotel Industry is mainly the representation of
consumer expectation. Customers are known as the King of market and thus it is chiefly essential
for every industry to provide such goods or services that fulfils customer needs and expectation
in an effective manner. In context of hotel industry, requirement of consumer can be satisfied by
rendering high quality services. It has been figured out that great relationship exist between
pricing and quality. The significance of service quality in hotel sector comes out as a key
determinant of competitiveness (W. O’Neill, 2014). Pool of customers are attracted and retained
only when they get effective services that gives them higher level of satisfaction. Crowne Plaza
is UK based multinational chain of hotel that provide large number of services to pool of target
audience. Presently, the hotel is operating in more than 52 countries with over 400 hotels which
signifies that services render by positively fulfils the desire of customers. Now a days people are
little concerned about the services that they are getting. Thus, majority of them prefer to avail
such services that satisfy its diverse needs and wants. Services offered mainly by hospitality
industry must include four key aspects i.e. heterogeneity, operability, intangibility and
inseparability (Wang, 2014).
Expectation of different customer groups are different and it is required by every hotel
group to cater their needs in appropriate way. Customers expects good value, authentic service,
sustainability, mobile check in and check out etc. It is the responsibility of hotel group to meet
all the requirements of customers in an effective and efficient manner. Hotel Crowne Plaza do
various efforts for fulfilling expectations of customers. They hire skilled and experienced
employees and provide them proper training on regular basis so that they are able to deliver high
quality services to their guests. The above said technological methods are used to optimise the
profit making ability of the Crowne plaza hotel when the face the situation of full occupancy,
this condition occurs when all the hotel rooms are booked due to peak season (Yeoman, 2012).
Crowne plaza is a multinational hotel which focuses their energy and staff at achieving
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their overall goals that are client satisfaction and profit maximisation. In order to satisfy the
needs of their guests, Crowne plaza uses methods of quality management process in which they
make sure that all their guests should get all the facilities they desire in a hotel. To satisfy the
needs of visitors, Crowne plaza first need to identify them, for which they use various surveys
and research work which helps them determining all the needs. Crown plaza prepares a design
which helps in quality management process (Zhang, 2012). They provide training to employees
and obliged them to behave with customers in more better manner. They restrict them to behave
properly and if employees misbehave with any guest, hotel takes strict actions against them.
They maintain good relationship with customers so that a loyal customer base can be create.
They perform various activities for guests as well as employees so that both gets motivated.
Hotel majorly emphasize on providing unforgettable experience to customers by providing them
high quality services and various facilities like well spacious and clean rooms, hygienic food,
good facilities, Wi-Fi facility etc. All these facilities provided by hotel helps customers in
attracting more towards the hotel and they wish to visit again and take benefits of their facilities.
CONCLUSION
From the above project report, it can be concluded that hospitality industry is the most
growing and developing industry and hotel Crowne plaza is the leading hotel unit in this
industry. There are several pricing principles which helps Crowne plaza to efficiently allocate the
prices to their rooms and other services. Room occupancy and earning rate are calculated using
various formulae, which helps in estimating guests needs and how these needs can be fulfilled by
the hotel. Several countries has different laws and legislations relating to hospitality industry
which affect the revenue generation. At the time of full occupancy Crowne plaza uses various
technological tools like iPads, iPods, Television, WI-Fi and others to satisfy customers so that
the can extend their stay duration and hotel can earn more profit.
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REFERENCES
Books and Journal:
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revenue management. Cornell Hospitality Quarterly, 51(1). pp.53-67.
Currie, C. S. and Rowley, I. T., 2010. Consumer behaviour and sales forecast accuracy: What's
going on and how should revenue managers respond?. Journal of Revenue and Pricing
Management, 9(4). pp.374-376.
Denizci Guillet, B. and Mohammed, I., 2015. Revenue management research in hospitality and
tourism: A critical review of current literature and suggestions for future
research. International Journal of Contemporary Hospitality Management, 27(4).
pp.526-560.
Forgacs, G., 2010. Revenue management: Maximizing revenue in hospitality operations.
Orlando, FL: American Hotel & Lodging Educational Institute.
Guadix, J.,and et. al., 2010. Technology revenue management system for customer groups in
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Guadix, J., and et. al., 2011. An overview of revenue management in service industries: an
application to car parks. The Service Industries Journal, 31(1). pp.91-105.
Heo, C. Y., and et. al., 2013. Restaurant revenue management: Do perceived capacity scarcity
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pp.316-326.
Kessman, M. D. and McCauley, S. P., AMERANTH Inc, 2011. Products and processes for
operations management of casino, leisure and hospitality industry. U.S. Patent
7.878.909.
Lorna Wang, X., 2012. The impact of revenue management on hotel key account relationship
development. International Journal of Contemporary Hospitality Management, 24(3).
pp.358-380.
Pegg, S., Patterson, I. and Gariddo, P. V., 2012. The impact of seasonality on tourism and
hospitality operations in the alpine region of New South Wales, Australia. International
Journal of Hospitality Management, 31(3). pp.659-666.
W. O’Neill, J. and McGinley, S., 2014. Operations research from 1913 to 2013: The Ford
assembly line to hospitality industry innovation. International Journal of Contemporary
Hospitality Management, 26(5). pp.663-678.
Wang, X. L. and Brennan, R., 2014. A framework for key account management and revenue
management integration. Industrial Marketing Management, 43(7). pp.1172-1181.
Yeoman, I., and et. al., 2012. Festival and events management. Routledge.
Zhang, J. J.,and et. al., 2012. Pushing the frontier of sustainable service operations management:
Evidence from US hospitality industry. Journal of Service Management, 23(3), pp.377-
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Online
Minimum Wage. 2018.[Online]. Available through: <https://www.gov.uk/national-minimum-
wage-rates>
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