BHO3312 - Revenue Management, STR Report
Added on 2020-03-07
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REVENUEMANAGEMENTReportSTUDENT ID:[Pick the date]
REVENUE MANAGEMENTIntroduction STR report is one of the critical tools to monitor the performance of the hotel in comparisonwith the competition using key performance metrics (Mauri, 2013). In the given case, a STRreport has been represented for a city hotel for a period of 28 days and the same has beenpresented in a weekly manner. The objective of the given report is to analyse the performanceof the hotel and suggest various yield maximization strategies. Further, the communicationplan with regards to the key stakeholders has also been analysed coupled with other areas.Definition of key termsa)Occupancy – Occupancy may be defined as the ratio of rooms that have been occupied tothe room available in percentage terms. This is calculated for a given time period usuallyon a monthly basis, seasonal basis or any other suitable classification basis (Hayes andMiler, 2010). The numerical formula of occupancy rate is highlighted below with the aidof a numerical example.Occupancy Rate = (Rented rooms / Available rooms in the period under consideration)*100For instance, if in a given hotel, there are 300 rooms and on an average 280 rooms areoccupied on a daily basis, then the occupancy rate = (280/300)*100 = 93.33%b)ADR or Average Daily Rate – This may be defined as average revenue per room that isrealised by the given hotel under consideration. This is measured for a given day so as tohighlight the demand as ADR would be higher in the peak season and lower in the leanseason. The numerical formula for ADR is indicated below (Verret, 2008).ADR or Average Daily Rate = (Total revenue from rooms/ Occupied rooms on a given day) For instance, if for a given day, the total revenue collected from rooms is $ 1 million andthere are 3,000 rooms available, then ADR = 1,000,000/3000 = $ 333.33 c)RevPar or Revenue per available room – This is a critical performance parameter in thehotel industry as it takes into consideration both the occupancy and also the ADR intoconsideration. This provides an estimate of the average daily revenue generated from eachroom which is available. The key difference between ADR and RevPar is that while theformer computes the revenue based on number of occupied rooms, the latter takes intoconsideration the number of available rooms. This makes RevPar a more holistic
REVENUE MANAGEMENTperformance metric in comparison to the other two metrics discussed above (Ivanov,2014). The numerical formula for ADR is indicated below (Talluri and Ryzin, 2006).RevPar = Occupancy Rate * ADRKey Trends in STRThe given STR presents the performance of the hotel against the competition set for a periodof 28 days. The three key observations based on the STR are indicated below.In terms of occupancy, the hotel has significantly outperformed the competition setwhich is apparent from a MPI or Market Penetration Index of 139.6. The fact that theMPI is greater than 100 implies that the hotel tends to have a higher occupancy incomparison to the competition set. A further positive aspect in this regard is that the% change in MPI is 30.1 which imply gain in market share in terms of occupancywhich is very positive for the hotel (Verret, 2008).However, in terms of ADR, the performance of the hotel has been quite dismal incomparison to the competition set. This is apparent from a ARI or Average RateIndex of 58.9. This figure is significantly lower than 100 which implies that therevenue generated per occupied room for the given property is significantly lower incomparison to the competition set. The more worrisome aspect is the negative rate ofchange for the ARI which clearly reflects that the differential between the revenuegenerated is on the rise which clearly is a problem area for the hotel that needs to bequickly addressed (Mauri, 2013).Even though the occupancy rate of the hotel is very high, but the ADR performance isso dismal that the overall performance indicated by RevPAR is a matter of concern.This is apparent from the below 100 value of the RGI or Revenue Generation Indexwhich stands at 82.2. The given number clearly reflects that the revenue generationhas been superior for the competition set in comparison with the property. However, apositive news for the hotel is that the rate of change of RGI is positive which impliesthat the hotel has actually caught up with the competition set in terms of revenuegeneration primarily on account of stellar occupancy rate which has managed toovershadow the dismal ADR performance (Ivanov, 2014).
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