An Analysis of Revenue Management in the Hobart Hotel Industry

This report delves into the revenue management practices of hotels, focusing on the Best Western Hobart Hotel and its competitors in the Hobart, Australia, market. The analysis encompasses competitor identification (Lbis Style Hobart, Hadleys Orient Hotel, and Wrest Point), occupancy forecasting based on factors like room rates, service benefits, and booking patterns, and target consumer segments. The report evaluates the hotel's performance, comparing it to competitors and highlighting the importance of average daily rate (ADR) and occupancy rates. It further explores revenue management strategies for both slower-than-anticipated and higher-than-anticipated demand scenarios, including yield management, discount allocation, and rate adjustments. The study emphasizes the significance of adapting strategies based on demand fluctuations to maximize revenue and profitability within the dynamic hotel industry.

Running head: REVENUE MANAGEMENT OF HOTELS
Revenue Management of Selected Hotels
Name of the University:
Name of the Student:
Authors Note:

1REVENUE MANAGEMENT OF HOTELS
Table of Contents
Question 1............................................................................................................................2
Question 2............................................................................................................................2
Question 3............................................................................................................................3
Question 4............................................................................................................................4
Question 5............................................................................................................................5
Question 6............................................................................................................................6
6.1. Revenue Management Measure in Slower Demand than Anticipated.....................6
6.2. Revenue Management Measure in Higher Demand than Anticipated.....................6
References............................................................................................................................8

2REVENUE MANAGEMENT OF HOTELS
Question 1
The city Hobart is selected for selected in this paper of revenue management due to
several reasons. Hobart city has experienced 70% growth in number of nights stayed by the
visitors. This is equal to 32% of the visitors night resided within the state by the international and
national visitors (Abrate and Viglia 2016). Moreover, revenue management of the selected hotels
in Hobart is considered for the reason that it also experienced 72% growth in visitor’s nights.
Moreover, the hotels also experienced growth in accommodation supply and growth in demand.
Over the past few years, number of rooms and available and accommodation stock has increased
by 20%. In addition, this city is also deemed to be suitable for evaluation as due to the seasonal
nature of the hotel industry, Hobart city is attaining increased capacity with yearly average
occupancy rate of 76%. In addition, at the time of economic uncertainty, Hobart city served as
only capital city to indicate growth in revenue from hotels recording 3.4% growth in comparison
to -8.2% national averages (Akan, Ata and Dana 2015). Hobart city is deemed to follow
appropriate revenue management as the city has grown at an average of 70 rooms each year for
over the past seven years.
Question 2
Lbis Style Hobart, Hadleys Orient Hotel and Wrest Point hotels are considered as the
competitor set of the selected Best Western Hobart Hotel for numerous reasons. Numerous
categories of hotels are observed to be present in the Hobart region in Australia (Arenoe, van der
Rest and Kattuman 2015). These hotels are quite different from one another considering the
areas of services and quality provided by them. Conversely, there are some aspects that remain
common between the selected hotel and the competitor hotels due to which these are selected in

3REVENUE MANAGEMENT OF HOTELS
the current paper. The hotel that is selected in this paper belongs to a five star category. This is
the reason; the selected hotel is put into comparison with its rivals that falls within the category
of either four or five star hotels. There are many other criteria relied on which the competitive set
is chosen that includes location, type, brand and ADR (Bayoumi et al. 2013). All among the
selected competitor hotels belong to full-service category that has attached restaurants, lounge
services and meeting spaces which offers them a competitive edge in comparison to other hotels
in the region. In consideration to these aspects the hotels those are chosen as competitors within
the region include Lbis Style Hobart, Hadleys Orient Hotel, Wrest Point hotels and Best Western
Hobart.
Question 3
Book figures and the occupancy forecast of the hotel are carried out through analyzing its
selected competitor’s room rates along with their service benefits. “On the book (OTB)” rate of
the hotels are selected based on analyzing the group trends and patterns that is quite distinct from
the regular demand. These OTB figures are gathered from analyzing number of reservations and
pick-ups. Forecasting of occupancy rate is conducted through analyzing previous forecast for
that period (Board and Skrzypacz 2016). The major factor that was focused on while carrying out
occupancy forecast is through setting rate strategies for each day within the booking window
along with allowing tactical decisions in departmental level.
OTB figures are derived based on the consideration that, it along with forecast can
provide a group rate along with ceiling with respect to room capacity. Forecasting was conducted
on daily basis in order to decide the occupancy forecast figures as every day indicates a new
situation for optimization. Occupancy forecast for all the selected hotels was conducted based on

4REVENUE MANAGEMENT OF HOTELS
the number of anticipated room arrivals, number of estimated room stopovers and number of
anticipated room no-shows (Crossan 2014). Occupancy forecast of the selected hotels is
calculated based on anticipated room arrivals and anticipated room overstays. The forecast is a
vital driver of revenue management optimization initiative. The hotels forecast at a detailed
manner in case actual benefits are available from revenue optimization.
Question 4
Taking into consideration the competitor hotels namely Lbis Style Hobart, Hadleys
Orient Hotel and Wrest Point in the market, Best Western Hobart Hotel is deemed to perform in
a better manner (Ferguson and Smith 2014). This is for the reason that Best Western Hobart
Hotel has set the highest sell rate for each day in comparison to its competitors with high
occupancy rate as per the forecast. Such forecast indicates that because of high sell and
occupancy rate, the hotel is deemed to contribute on the highest revenue in comparison to other
competitor hotels.
Moreover, the hotel is forecasted to perform well enough to provide tough competition to
its selected hotels based on instant revenue status overview, everyday based budget comparison
along with daily performance index (Ivanov 2014). Best Western Hobart Hotel is also observed
to have high occupancy rate and increased number of rooms that provides it with high
competitive advantages over other hotels. In addition, it is observed from the revenue
management forecast that the food and beverages section focuses on optimizing the profits and
revenue. Room revenues are deemed to be the major aspect of attaining increased total revenues.
Considering the ADR (Average daily rate) it is gathered that productivity of the hotels is

5REVENUE MANAGEMENT OF HOTELS
assessed relied on occupancy rate of the hotels and ADR is quite high for Best Western Hobart
Hotel.
Question 5
Target consumer segment for Lbis Style Hobart, Hadleys Orient Hotel and Wrest Point
hotels are selected considering certain attributes like age, gender, education level, residential area
and household income (Kimes and Ho 2017). Target market of these hotels includes
ambassadors of architecture along with gallery and gourmet blazers. The target market of
ambassadors of architecture includes young, newly married, university graduates and the
honeymoon travelers. These target consumers seek luxury services and entertainment within
their budget. Travel plans of these target consumers encompass spending time together, getting
involved in quality walking sightseeing tours along with following passion of visiting places in
Hobart.
Target consumer segment that falls under gallery and gourmet blazers are the ones those
are greatly interested in visiting art galleries in Hobart and are particularly fond of museums
(Kimes 2016). Moreover, the target market segment of the selected hotels belongs to the age
group of 25 to 60 years and is focused on feeling entitled to luxurious experiences. Most of these
consumers have a professional career with income over $100,000. As the target consumers
greatly enjoy regional foods, they tend to be very interested in globally renowned restaurants
within the city. Moreover, the target market segment for the selected hotels includes couples
belonging to the profile of upper-middle age; they decide to avoid waling long distances or
climbing stairs. This target market prefers taxicabs or any other public transport for travelling to

6REVENUE MANAGEMENT OF HOTELS
touring spots in Hobart. These people also tend to consider certain guided tours to the
destinations all through Tasmania.
Question 6
6.1. Revenue Management Measure in Slower Demand than Anticipated
Revenue management measures that can be taken by the selected hotel in a scenario that
the demand happens to be slower than the anticipated are described below:
 Yield management can turn out to be a technique that can be used in order to increase the
room revenues. This revenue management process can turn out to be an efficient
performance measure. This is for the reason that this includes occupancy percentage
along with average everyday rate in a specific statistic which is yield statistic (Masiero,
Pan and Heo 2016).
 Discount allocation can serve as another measure of revenue maximization in case of
slow demand. In account to such measure, increasing the available product mix at
discounted or lower rates and extending time can increase revenue over the time. In
addition, increasing discounts revealed on room features might increase revenue for the
hotel. The price sensitive group of consumers needs to be displaced and appropriate mix
of target market must be estimated in low demand for offering maximum room rates.
6.2. Revenue Management Measure in Higher Demand than Anticipated
Revenue management measures that can be taken by the selected hotel if the demand is
higher than anticipated are explained under:

7REVENUE MANAGEMENT OF HOTELS
 To deal with increasing demand, most appropriate revenue management activity is to
reduce room bookings through selling hotel rooms at high rates. This strategy of revenue
management can facilitate in enhancing profitability of the selected hotel. Room rates
must be increased in order to elevate the rate in high demand in case the demand is high
than supply (Vulcano and Weil 2014).
 In high demand, the hotel can stop selling rooms at discounted rates and should also
ensure decreased length of stay of consumers. In addition, the hotel must also consider
that whether a drastic increase in room rates can act as an effective business practice.
Discounted packages must not be provided to consumers those have agreed to pay more.
 In high demand, staffing levels must be checked including front desk, ancillary venues
and the outlets. The front desk must be today staffed that will be able to address the needs
of high demand and increasing average room rate that can increase revenue.

8REVENUE MANAGEMENT OF HOTELS
References
Abrate, G. and Viglia, G., 2016. Strategic and tactical price decisions in hotel revenue
management. Tourism Management, 55, pp.123-132.
Akan, M., Ata, B. and Dana, J.D., 2015. Revenue management by sequential screening. Journal
of Economic Theory, 159, pp.728-774.
Arenoe, B., van der Rest, J.P.I. and Kattuman, P., 2015. Game theoretic pricing models in hotel
revenue management: An equilibrium choice-based conjoint analysis approach. Tourism
Management, 51, pp.96-102.
Bayoumi, A.E.M., Saleh, M., Atiya, A.F. and Aziz, H.A., 2013. Dynamic pricing for hotel
revenue management using price multipliers. Journal of Revenue and Pricing
Management, 12(3), pp.271-285.
Board, S. and Skrzypacz, A., 2016. Revenue management with forward-looking buyers. Journal
of Political Economy, 124(4), pp.1046-1087.
Crossan, M., 2014. Hotel revenue management: Principles and practices.
Ferguson, M. and Smith, S., 2014. The changing landscape of hotel revenue management and the
role of the hotel revenue manager. Journal of Revenue and Pricing Management, 13(3), pp.224-
232.
Ivanov, S.H., 2014. Hotel revenue management: From theory to practice. Browser Download
This Paper.

9REVENUE MANAGEMENT OF HOTELS
Kimes, S.E. and Ho, J., 2017. Revenue management in luxury hotels. Journal of Revenue and
Pricing Management, pp.1-5.
Kimes, S.E., 2016. The evolution of hotel revenue management. Journal of Revenue and Pricing
Management, 15(3-4), pp.247-251.
Masiero, L., Pan, B. and Heo, C.Y., 2016. Asymmetric preference in hotel room choice and
implications on revenue management. International Journal of Hospitality Management, 56,
pp.18-27.
Vulcano, G. and Weil, A., 2014. Joint optimization of virtual capacities and bid-prices for
revenue management. Working Paper.