Analyzing Hospitality Operations and Revenue for Cairn Hotel Group

This report provides a comprehensive analysis of hospitality operations and revenue management, focusing on the Cairn Hotel Group. It explores the financial contributions of room revenue, pricing principles, and the benefits of effective practices on profitability. The report evaluates methods f...Read More

Hospitality Operations and Revenue

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN CONTENT...........................................................................................................................3
1) Explain the financial contribution that room’s revenue producing areas make to the business
unit...................................................................................................................................................3
2) Demonstrate and apply principles of pricing to the room’s product and evaluate the
potential benefits of effective practices to profitability.............................................................5
3) Evaluate methods used to optimize profitability as applied to a fixed capacity inventory.....6
4) How hotel sector legislation and best practice directly affect accommodation procedures...7
5) Identify the expectations of customers from diverse markets and explain how providers of
accommodation meet their needs................................................................................................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Hospitality business is one of the fastest growing sector in every nation, the common
reason behind is the increased tourism or people engagement to visit or see any specific places or
location (Hanelt and et. al., 2015). Hotel industry is one of the diverse industry with its
contribution on nation economy and generation of employment. Selling rooms or events are
major revenue of hotel industry, as there is no specific funding by any business entity or support
of governments. On this basis, hotel decides their pricing of the room products and its
components. This report will be carry on Cairn groups of hotel which is the leading chain of
premium hotel in an entire with almost higher customer loyalty and acquisition. This chain of
hotel has approx 34 branches in both domestic and different part of the world.
Apart from this, report will cover financial contribution that room revenue's producing
area makes to the business units, principles of pricing to the room's product and its potential
benefits to effective business practices to profitability. This report will also reveals about the
code of conduct, legislation & best practice such as business sustainability which directly affects
the accommodation procedures. Lastly, this report will identify an expectation of customer's
from diverse market and providers can meet demand of quality management procedures.
MAIN CONTENT
1) Explain the financial contribution that room’s revenue producing areas make to the business
unit
In the United Kingdom, hotel industry is much enriched, because of increased tourism
into the country as well as rise of people engagement such as business meetings, seminar's,
cultural functions etc., are some of an area of revenue generation in the hotel industry (McCann
and Barlow, 2015). Cairn Group which is the leading international group of hotel chain with
approx. 34 large hotel in both UK and other part of the world. This hotel chain has been
considered as premium hotel groups with almost 50 years of business era. There major success
path is serving customer's beyond their expectation or knowledge. In last stanza, it was discussed
that selling room is the core business function of every hotel and also their revenue generation
depends on that. Apart from this, others are complimentary generation. Revenue is used to be
come from per room charge basis on every section of the hotel, whether standard, deluxe and

premium (Li and Stacks, 2015). As, this is a major source of income, Cairn hotel group has
taken collective revenue management system to manage their revenue. They have total of 34
large hotels and each of them has 250 rooms. The above given table will be helpful to show
revenue per room and its contribution to financial status of the business. The revenue for the
Cairn hotel group varies from different countries, as per their currency, economic rates or
business estimates. In the given table of revenue per room will be discussed by taking 5 hotel
branches in an entire UK:
Cairn hotel branches Revenue per room Contribution to financial position
Room 600 pounds/room for premium
400 pounds/room for deluxe
250 pounds/room for standards
This would contributes into profit
making capacity of the Cairn hotel
and its entire contribution will be
30 percent of a total revenues.
Laundry 75/pounds till 5 pairs
85 pounds till 9 pairs
90 pounds till 10 pairs
This contributes to 9 percent of the
financial capacity of the business.
This is considered as extra income
for the Cairn groups of the hotel.
Front house There is no as charge of the front
as this cover under services and
customer care offered by the hotel,
but it helps to creates revenue for
business firms.
This department contributes about
2.1 percent of financial by initial
check in of the customer till the last
check out and bill payment & final
approval to leave.
2) Demonstrate and apply principles of pricing to the room’s product and evaluate the potential
benefits of effective practices to profitability
In every hotel, manager are focused towards pricing of their room and application of
various charges for ascertaining cost per room. While calculating pricing of hotel room, Cairn
hotel group used to considers various principles for calculating price of room products
(Kasemsap, 2019). During the calculation of the pricing, various components such as surcharge,
GST, bills & other expense used to be carried. Various principles such as cost based, customer
based and competitor based pricing has to be considers:

The discussion of each and every principles are as follows:
Cost based pricing: This pricing principle is the simplest approach. For every hotel,
cover the cost is not an agenda, but making profit out of it. To run hotel business, expenses such
as admin, cleaning, maintenance, security, wages, advertising, telephone etc., will be considered
to estimate final pricing of the room products (Jones, Borgman and Ulusoy, 2015). This
principle or approach is simple, but the list for calculation of cost can be extensive. In this,
variable and fixed cost is used to be applicable to estimate actual cost from the hotel revenue. In
this principle, mortgage payments, taxes, wages, insurance, utilities, telephone bills and web
hosting bills will be taken care to estimate pricing of the room products. These are some of the
fixed expenses. On other hand, variable cost such as food and beverages, cleaning,
entertainment, sales & marketing, flower and decoration, printing supplies etc. (Grizzle and
Jurgelane, 2017). It is necessary to ascertain profit for all such expenses either with exact margin
or nominal figures. There are various benefits of this pricing principle are as: simple and way to
understand way to price the room product's, flexible, in case cost will increase and also it is easy
to adjust the pricing. If cost will increase, in response, profit will also be rise.
Customer based pricing: This pricing is about structuring of rooms in accordance with
perceived value. As one can see, customers have different perceptions from hotel on what kind
of room they actually want and hotel needs to decide the pricing in accordance with this. This
principle says that of demand of the hotel is high and reputation would be high. Pricing will be
decides in accordance to this factors. In this, customers perceive value through the connection,
what they feel to the business along with the social proof (Georgescu, 2015). When customers
see rating reviews, enticing pictures of the hotel and want desirable experience to get. For
example: if Cairn hotel charges 400 pounds, a wonderful pictures in the mind creates and
willingness to experience luxuriousness of an offering. In context with Cairn hotel group can
considered this as effective strategy to grow revenue share along with suitability to get business
of this leading hotel. The major benefit of this principle of this getting higher customer loyalty
and perfect choice, while deciding which hotel to visit. This will ultimately facilitates hotel to
rise their pricing in a response to rise in demand of the hotel. In context with Cairn groups of
hotel, focusing onto the customer's perception is required to be pin-point in the hotel industry,
because customer first impression is the last one to continue & revenue for the longer of time.

3) Evaluate methods used to optimize profitability as applied to a fixed capacity inventory
In the hospitality industry, where profit making is the major concern, it is important for
hotel based firms to control their inventory flow as well as taking measures to increase the profit
making. Inventory control is necessary to have proper co-ordination and supervision of supply,
storage, distribution and recording of materials to maintain quantity for their customer's without
any kind of excessive loss (Campbell, 2018). In context with Cairn hotel groups, inventory
control will undertake to enhance profitability by control over outflow of funds to purchase
accessories for room to deliver the customer actual expectation and grab their attention on the
higher level. In this, revenue assessment involves pricing, inventory, and demand and channels
to optimise revenue growth over the longer term. In context with Cairn groups of hotel, methods
for optimization of the revenue will be done through:
Pricing: When it comes a matter to optimising revenue, pricing optimization techniques
has been stated as one of the possible growth strategies for cairn hotels to retain their profit
generation to continue hotel business for the longer period of time. By help of pricing strategy,
Cairn can allocates their resources in accordance with deciding the prices of their room products.
It has been believed that successful pricing strategy will assist customers to be backed by their
actual desires or wants.
Inventory: Inventory regulation is important to rule out any barrier for generating higher
profitability in the hospitality industry. In this industry, if inventory prices will rise, it will lead to
rise in the prices of room products and here, chances are higher that customer would not be long
lasting with the Cairn hotel (Broekemier, 2015). For optimising the profitability, it is necessary
to have proper check-list which will contain, what and how much inventory has been flow into
the hotel to enhance productivity and profitability for longer period of time.
Marketing: For the purpose of profit optimisation, this leading hotel chain needs to be
considers the most effective levers to pull. This is required to build platform through Cairn hotel
can enrich their operational process and enhance the suitability to build platform where customer
expectation will be measure in accordance with their they like, when doing visits in the hotel and
what are their impression about the room products offered to them or services availed.
All these are given methods with help of which Cairn hotel optimises their profit in such
a way that inventory of the business will also be utilises and right towards the direction to gather
business objectives into the given period of time. Using pricing, chances of surpass of existing

inventory will be fulfilled and using marketing, proper customer base will be got into the
knowledge to accomplishes and utilises fixed capacity inventor into the effective manner.
4) How hotel sector legislation and best practice directly affect accommodation procedures
Hotel industry has been defined as a commercial establishment, which provides guest
services like lodging meals, food, drinks etc., when customer is away from their house. Main
purpose of the hospitality industry to provides food, accommodation, refreshments and similar
services to its customers, when they are on journey and stay away from their home. There are
certain factors that affect the hotel industries accommodation procedures,some of them are:
codes of conduct, legislation and best practices which directly and in directly affect the
accommodation procedures of hotel industry.
Code of conduct: The term defines code of conduct as a set of rules and regulations
about how to behave and do business trading with other people. Company should use the policy
of code of conduct to run hotel industry firmly and smoothly in a market (Ananda, 2016). Cairn
Hotel group should follow the defined code of conduct, norms, policies, moral values and
religious laws to create organization's reputation in the market, it is elevated by companies
honesty, loyalty and ethical action. When code of conduct is followed, it directly help the
customers to create blind faith of the brand or company.
Legislation: The term legislation means law promulgated by a government or a
legislature or by other governing bodies or the process of making it. Cairn hotel follows all the
legislation enacted by the government like, health and safety laws, labour laws, environmental
laws, hygiene laws, alcohol licensing regulations so, that the trust and faith of the customers can
be achieved. By following the laws of the government brand image can be formed in the eyes on
the customers, which directly or in-directly helps in growth and expansion of the cairn hotel
groups. Food safety laws plays a vital role in hotel industry. Industry should have the knowledge
about how to store and clean food, so that customers health is safe and secure which help cairn
industry away from lawsuits and fines.
Best practices: The word best practices means that a set of working tricks or methods
which is officially accepted to use in a industry or business. Cairn industry is more focusing on
eco- friendly practices as eco friendly are becoming the norms as well as legislation are also
enacting in the laws to run business based on renewable energy in near future. The natural
resources are depleting day by day by the mis- use of the resources at a large scale, company are

trying to renew energy for at-most utilization. Hotel industry are installing are solar panels to
produce electricity and also updating systems like, lights, fans, air conditioners can automatically
switch off when guests check out the room. As in many cases customers leave the lights, AC on
for long duration when not in use. The step of sustainability development will help to raise
business globally.
Brief summary: Hotel industry should follow all the norms like code of conduct,
legislation and best practices for the upliftment of the business at global level. For smooth
running of the business company must implement all the terms and conditions to avoid fines or
charges. Using of renewable energy is beneficial to the hotel industry as in near future
government will allow those business to run who can renew energy and use less natural
resources (Hernández-García, 2017).
5) Identify the expectations of customers from diverse markets and explain how providers of
accommodation meet their needs
Hospitality industry is diverse and big sector, which is focused towards fulfilling people
needs of accommodation or premium room and getting best experiences or responses out of it. In
this sector, customer's expectation has been raised along with their focus on almost super service
which they are most likely to experience, irrespective of what price to be paid and also what will
be outcomes. This has been raised in response of increased income level of the customer's. In
UK, there are various renowned hotel chain, out of which Cairn group of hotel is most popular
foe their premium services and pricing offered by them. There are various expectation for hotel
chain such as effective services or value being generated towards the price charged or super
service experiences. In response, it needs lots of work by the Cairn hotel by focusing on pricing
and revenue strategy to go beyond the customer needs and wants. It is necessary to identify
customer expectation in specific manner: good connectivity, good service values, mobile check-
in and check-out, Authentic service, sustainability and an emotional connection to get in
response to what price has been paid. Here, the role of revenue and pricing strategy comes under
major role. These strategies needs to be specific and strategically planned (Lamberti, 2017).
Cairn groups of hotel can fulfil these needs through doing brief research over on factors
revenue and pricing strategy will be setup. This hotel chain can fulfil such expectation through
proper quality management and allowing various techniques empower positive changes in an
operation of the Cairn hotel groups. In response to expectation of the customer's, redesign of the

accommodation facilities can be entertained to check out the scope for making the services and
room product more efficient through use of quality management process which involves using
the product analysis and use of innovation to enrich desired expectation of the customer's.
Quality management will be helpful to set rooms or accommodation, which needs to be improve,
define how quality of expectation of customer will be measured and action planning taken to
measure or implement the changes into a hotel system to acquire the customer attention or the
matter of interest. In context of the Cairn group, quality tools will be used are as follows:
Six Sigma: This technique is used to reduce probability, in situation if decision taken by
the management would mislead the working of the Cairn group. Here, Sigma is the symbol of
risk and this approach is used to take decision along with risk of failure. In context of cairn
group, this approach will assist this leading hotel business to enhance an ability to take decision
making after measuring level of risk associated with functioning of this leading hotel firm. In
short, this approach will assist Cairn group of hotel to take suitable decision making to overcome
risk or limitation.
Total quality management (TQM): The core definition of the Total quality management
basically describes as a management approach to long term success through level of the customer
satisfaction. In a TQM, all member of an organisation generally participates in an improvement
process, product or services in condition of the working. With help of this approach, Cairn
groups of hotel have major opportunities to rise their services quality of their organisation
performance and also level of how they works. This will in retaining customer at a greater point
of time or direction.
Just in time: This approach is an inventory strategy, in which Cairn group is required to
have a check on quality of product or services ordered by the customer, in this case, customers
are in actual need of it. This approach can be used as techniques to reduce occurrence of a
wastage to overcome major impact to cost and productivity to remove straight impact on
products or services. The main purpose of this JIT is to reduce cost service or product wastage or
will ensure ensure profitability for the Cairn group for its growth & sustainability for a longer
period of time.
Brief summary: Cairn hotel must focus on continuous evaluation of their offerings which
are responsible in fulfilling of customer expectation. Quality measurement must be follow to
attempt positive changes into the room products or services.

CONCLUSION
From the above report, it has been concluded that hospitality business has been declared
as an emerging industry with increased business reforms & growth expectation. In every hotel
branch, room's product has become necessary to uphold revenue of the business to maintain the
financial position at the larger extent. This products contributes highly to growth and business
generation in the hospitality industry as well as bringing the customer base at the larger context.
Along with this, code of conduct is necessary to maintain the decorum into the hotel sector and
also the best practice such as business sustainability is required to manage fair work and practice
into the hotel branch or business. Customer's expectation has been increased from hotel industry
and it is the duty of hotel chains to identify those needs and work in accordance to that.

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What is Revenue Optimization, 2018. [Online]. Available through:
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