Intercontinental Hotel: Revenue Management and Operations Analysis

This report examines hospitality operations and revenue management, focusing on the Intercontinental Hotel, Park Lane, London. It delves into the financial contributions of room revenue, analyzing various revenue centers such as room sales, conference sales, laundry services, and others. The report explores pricing principles, including accurate forecasting, customer understanding, and inventory management, along with strategies like dynamic pricing. Methods to optimize profitability, such as overbooking management, loyalty schemes, and upselling are discussed. The report also investigates the effects of industry codes of conduct, including guest legislation, data protection, and guest disabilities. Finally, it addresses customer expectations and quality management, focusing on accommodation quality, service factors, and overall guest satisfaction. The report aims to provide a comprehensive overview of revenue management within the hospitality sector, offering insights into best practices and challenges faced by hotels like the Intercontinental Hotel.

Running head: HOSPITALITY OPERATIONS AND REVENUE MANAGEMENT
Hospitality Operations and Revenue Management
Name of the Student:
Name of the University:
Author’s Note:

1HOSPITALITY OPERATIONS AND REVENUE MANAGEMENT
Table of Contents
Introduction:...............................................................................................................................2
Revenue centres.........................................................................................................................2
Principles of pricing and effective practices to profitability......................................................4
Methods used to optimize profitability......................................................................................5
Effects of industry codes of conduct and practices....................................................................7
Expectation of customers and quality management...................................................................9
Conclusion................................................................................................................................10
References and bibliography:...................................................................................................11

2HOSPITALITY OPERATIONS AND REVENUE MANAGEMENT
Introduction:
Hospitality management means the application of management techniques and
leadership in managing the hotels, accommodation and dining business. This paper aims to
discuss the revenue management being a part of hospitality management for the
Intercontinental Hotel, Park Lane, London. It focuses on increasing the revenue of the
organisation, thereby keeping the highest customer satisfaction. Intercontinental Hotel, Park
Lane, London is a luxurious and five star hotel providing accommodation, dining and guest
management services with a high customer satisfaction and service experience since a very
long time. The sustainability of the hotel business mostly depends on the revenue collection
and revenue growth. The paper discusses the financial contribution of the room’s revenue
producing areas, the pricing principle adopted, benefit practices of profitability and how to
optimize profitability. It also focuses on the codes of conduct along with the legislation
procedures to follow in the revenue management and the quality management to the
customers through pricing approach.
Revenue centres
The main source of revenue for the Intercontinental Hotel is the room division.
Revenue from room division can further be discussed with identifying various sources of
revenue related to the room and room services. Some of such important revenue sources of
the Intercontinental Hotel, Park Lane London, have been discussed in detailed as follows.
 Rooms sales: Room sales means the accommodation services or the room rentals
collected from customers. The room sales revenue is the main source of revenue for a
hotel business. It can be observed from the 2019 annual report of the Intercontinental

3HOSPITALITY OPERATIONS AND REVENUE MANAGEMENT
Hotel that, have a room signings of 98k rooms in the year 2019 with a significant increase
in new openings (Ihgplc.com. 2020).
 Conference sales: Another source of revenue which is included in the room division is
the rentals collected for the arranging conferences and meetings in the conference hall of
the hotel. Though the hotels mostly becomes seasonally highly occupied, the renting of
conference halls can be considered as a continuous source of revenue as it do not have
any seasonal effect.
 Laundry: Laundry is also a very important source of revenue associated with the room
division. With the increase in the room occupancy rate, the revenue collection from the
laundry division also increases. It mostly depends on the room occupancy. In case of
Intercontinental Hotel, London, the importance of the laundry service in the total revenue
of the room division can be well observed with the significant increase in the room
occupancy.
 Telephone or Wi-Fi: Hotels charges price for using the telephone and Wi-Fi facility in
the rooms. The prices are often included in the room rent or sometimes it is charged as an
additional service fees. Hence, the price charged for the telephone and internet services
can also be considered as an important contributor to the total revenue of the room
division.
 Room service: Another most important source of revenue included in the room division is
the room service. The room service revenue mainly includes food and drinks sold from
the reception and especially in the night.
 Other sources: Some other sources of revue which can be included in the room division
are collection of revenue from the entertainment and leisure tickets, baby sitting charges,
Foreign exchange service revenue, space rentals and business centre rentals.

4HOSPITALITY OPERATIONS AND REVENUE MANAGEMENT
Principles of pricing and effective practices to profitability
For the Intercontinental Hotel, London, also the pricing strategies helped them
significantly to compete in the market and to become the market leader.
Some the influencing aspects of pricing have been discussed in details (Baker, Eziz and
Harrington 2019).
 Accurate forecasting: Forecasting of market environment, the demand of product and
services along with the competitor’s strategies help the company to secure its position in
the market. The forecasting with experts of the company will help in making the top
management take the appropriate decisions through the internal as well as the external
organizational analysis. The forecasting like through Delphi technique, regression
technique will make the organizational finance team get an overview of the estimated
budget, sales, and the necessary revenue required to meet the certain goals and strategies.
 Customer understanding: Understanding the wants and demands of the customers is also
an important success factor behind effective pricing strategy. Implementation of various
customer management and customer relationship management strategies helped the
Intercontinental Hotel, London, to understand the customer perception which in turn
helped them to serve their customer with more quality services and products and to
maintain a good relationship with their customers.
 Inventory and Demand: The inventory management of a company is necessary in the
sense that the buffer stock, safety stock and the overall costs associated with the inventory
of company will help in planning the lead times of production as well as distribution. The
inventory of hospitality industry should always be available on the crucial emergency
lead times with just-in-time delivery. The demand of the customers related to inventory
may change at any time. The demand should be managed as per the inventory line up.

5HOSPITALITY OPERATIONS AND REVENUE MANAGEMENT
The pricing for profitability strategies are:
There are various pricing methods which are applied in business organisations for
determination of the price for their products or services. The traditional method of pricing
mainly includes the cost plus pricing method. For the hotel business the cost plus pricing
method cannot be applied effectively. Hence, competition pricing, market based pricing or
the dynamic pricing can be applied effectively for helping in an effective price determination
of the products or services (Xu et al. 2019). On the other hand, applying the dynamic pricing
strategy can be most effective for the hotel business. It determines the price of the products or
services based on the time, usage and the customers’ perception about the value for the
service or product. Intercontinental Hotel, London uses the dynamic pricing strategy to quote
the price for the luxurious rooms and conference halls and they also price their room service
products and service based on the competition and customer perception about the value for
the service or the product. Such and effective pricing strategy helped them to serve their
customers with the high quality services and products at an effective and competitive price.
Methods used to optimize profitability
As the main business of a hotel is to sell rooms and serve with foods and beverages,
the inventories to sell for the hotels are fixed. Hence, they have to build efficient optimization
strategies to maximise their revenue and profitability. Following factors must be considered
for optimisation of the profitability for a hotel.
 Overbooking: Overbooking of rooms leads to customer dissatisfaction and refund of
revenue. Therefore, overbooking of rooms must be avoided to serve the customer with
loyalty (Xu et al. 2019).

6HOSPITALITY OPERATIONS AND REVENUE MANAGEMENT
 Cancellation: Cancellation of rooms by the customers must be charged extra, as it leads
to vacation of the room for a certain period which could have been sold profitably.
Therefore, cancellation of room must be taken care of.
 Loyalty scheme: Loyalty scheme can help the Intercontinental Hotel to boost their
revenue and to increase their profitability. The Intercontinental Hotel is already having
such loyalty schemes which helped them to increase their customer retention rate and
customer engagement.
 Outstanding service: Providing quality and outstanding service increase the customer
satisfaction which in turn helps in increasing the revenue and profitability of the hotel
business.
 Length of stay management: Managing the length of stay in a hotel is an important tool
to increase the room revenue and profitability.
 Pricing or Tariff structure: Pricing or tariff structure increases the transparency in
pricing and billing the customers. Hence, it also aims at increasing the customer
satisfaction and revenue growth of the business.
 Referrals: It is important for the hotels to gain a loyal guest, so that it help them in
gaining more consumers which is good for business. There are also sales personnel and
marketing team, which they do work upon this area but there are expenses for this. So, it
is important to get some loyal consumer who can refer that particular hotel.
 Booking horizons: The booking horizon is being dynamically adjusted, which can be
done upon the early observations, it will reduce the problem and historical proportion
methods. This approach is being tested in the real hotel reservation data that so have an
improvement in the forecast accuracy.

7HOSPITALITY OPERATIONS AND REVENUE MANAGEMENT
 Up selling/cross selling: The up selling does involve a consumer to spend more upon the
current product consideration. In case of the cross selling, it does involve the ancillary
products which does includes some things related to entertainment.
 Repeat Business: It does means the repeat guests in which, it is being considered as an
investment for the hotels that will provide with a good return in future(Abrate and Viglia
2016). It is important to mainly focus on the keeping the existing guests and at the same
time to gain the new ones.
 Distribution Channel management: It is the practice in which it helps in the managing of
the distribution channels. This does involve the managing rates and in booking
restrictions, also ensuring in updating the different channels.
Effects of industry codes of conduct and practices
 Guest legislation: It is considered as the recording information of the guests, for the
official purpose. It is being done at the time of registration, the front office staffs do ask
the guest to tell the details on the GRC (Brunato and Battiti 2020). This activity is
mandatory for both the individuals, those who have the reserved accommodation and with
the walk in guests.
 Data Protection: The data protection is done with the implementation of General Data
Protection Regulation (GDPR). It is the duty to follow all the rules as per the data
protection act for using the personal data (Kimes 2017). The processing of personal data
can be done as per the collection, shared or it will be processed within the territory of that
state.
 Booking: The process has been done by the police department registers and there is
entering of charges against the person which has been believed through the violation of

8HOSPITALITY OPERATIONS AND REVENUE MANAGEMENT
law. The process does include the recording of personal information, photograph,
fingerprint and Department of Justice.
 Guests with Disabilities: There are several rules and regulations related to the Guests
with Disabilities (Pimentel, Aizezikali and Baker 2019). The US department of Justice do
have implemented the revised regulations, which has severely impacted the hospital
industry and there are new elements which are added for betterment of them.
 Discrimination: Through this act, it can be applicable to someone, those who will
discriminate against the characteristic which another one possess(Aydin and Birbil 2018).
It is applicable to the areas of public which includes the employment, education,
provision of goods and services and accommodation.
 Occupiers’ Liability: It is considered as the field of the Tort law in which there is
concerns, the duty of care for them who does have own real property, through ownership
or lease. It also deals with some activities which may arise from accidents which can be
caused through the dangerous condition.
 Public Liability Insurance: In this act, there is an immediate relief which is been given
by the persons those who has affected by accidents, and occurring the hazard substance.
 Safety Management: Through the safety management, it does able to cover the
management system of organization which does includes health and safety work
organization and policy in a company.
Expectation of customers and quality management
The eight chosen factors to concentrate upon on the quality of services to the customers are:
 Accommodation style and quality: It is one of the essential factors that the tourists do see
at the time of travelling. It is coming under the hospitality services in which it is inclusive
of food and beverage services.

9HOSPITALITY OPERATIONS AND REVENUE MANAGEMENT
 Hotel facilities and amenities: The hotel sector is one of the large and significant sector,
in which many tourists do have a focus on (Noone, Enz and Glassmire 2017). There is
various types of ownership structures and operational considerations that does help in
providing the facilities.
 Location: There is a key difference of the location specialization and do have a key
difference compared to the other types of information. With the geographical data, it is
easy for the tourists to visit the places.
 Value for money: The money that the tourist and travellers are investing, so that they get
the best view of that place (Kimes 2016). From their side, they will want the full
utilization of the money which they are investing for travelling.
 Cleanliness and comfort: The hotels and accommodation which they will get from the
hotels or at the time of travelling should be hygienic and should be comfortable. It is very
essential for them to get a comfortable journey and for hotels so that they can get a good
review from the consumers.
 Security/safety or privacy: At the time of travelling both by the train or airways, one of
the most important factor which does play a main role at the time of travelling and staying
in an unknown place is the security (Baker, Eziz and Harrington 2019). So, it is the duty
of the travel agency to focus on these matters so that the travelers can get their comfort
zone.
 Relaxation, pleasure and entertainment: For the purpose of relaxation and
entertainment, there are several places which the local guide does help them in visiting
that places (Pereira 2016). For the purpose of relaxation there are several things that can
be seen by the travelers depending upon their preferences.
 Prestige and fashion: The tourists do want that they should get a warm welcome at the
time of visiting any unknown places (Xu et al. 2019). The fashion does differ from place

10HOSPITALITY OPERATIONS AND REVENUE MANAGEMENT
to place; it will be one of the interesting factors at the time of travelling to see the
different cultures and fashion of different nations.
The ways to quality management are:
Step 1- Consider the type of guest
The type of guest with the demographic characteristics like age, income level,
education, geographic region should be studied. The type of guest is a major element in
the quality provision. If the required quality is not as per the guest the company wants to
deliver the mismatch of demand and supply can lead to service dissatisfaction and hamper
the goodwill of the company.
Step 2- Determine the guest needs
The guest’s needs in terms of the quality should be clearly noted with the amount
of time required for delivery and the added quality services if they require. The need
analysis of the guests in a hotel is to be done as soon as possible. The delay in knowing
the needs and the delivery of needs will decrease the tolerance level of the customers.
Step 3- Establish procedures for service delivery
The procedures of how the service delivery will be met, how many service personnel will
be required, the service strategy and the service principles as per the SERVQUAL model
are to be followed on each step through creation of a service blueprint.
Step 4- Implement
The service should be implemented as per the service blueprint levels.
Step 5- Evaluate and modify
The evaluation of the service is to be conducted through perceived service quality
Gap model and the various other principles checking the quality management.

11HOSPITALITY OPERATIONS AND REVENUE MANAGEMENT
Conclusion
In conclusion, the main sources of high revenue for the hotel is the room
accommodation, laundry, conference room. The pricing is influenced by accurate forecasting,
customer understanding and inventory management following the cost-plus pricing and
dynamic pricing model. The hotel in the hospitality industry should optimize the profitability
through using loyalty schemes, making a dynamic distribution structure of services and cross-
selling of the in-demands services. Certain ethical considerations and legal regulations are to
be followed by the hotel in terms of disable customer service, service and quality standard,
data protection and legislations of guests. The primary areas of quality service preferred the
guests in a hotel are the security, ambience, relaxation, food and lodging.

12HOSPITALITY OPERATIONS AND REVENUE MANAGEMENT
References and bibliography:
Abrate, G. and Viglia, G., 2016. Strategic and tactical price decisions in hotel revenue
management. Tourism Management, 55, pp.123-132.
Aydin, N. and Birbil, S.I., 2018. Decomposition methods for dynamic room allocation in
hotel revenue management. European journal of operational research, 271(1), pp.179-192.
Baker, T., Eziz, A. and Harrington, R.J., 2019. Hotel revenue management for the transient
segment: taxonomy-based research. International Journal of Contemporary Hospitality
Management.
Brunato, M. and Battiti, R., 2020. Combining intelligent heuristics with simulators in hotel
revenue management. Annals of Mathematics and Artificial Intelligence, 88(1-3), pp.71-90.
Ihgplc.com. 2020. [online] Available at:
https://www.ihgplc.com/-/media/ihg/annualreports/2019/pdf/ar-report-2019/ihg_2019ar.pdf?
la=en&hash=9F491366E66A68491D6C545E1692F43F [Accessed 2 Apr. 2020].
Kimes, S.E., 2016. The evolution of hotel revenue management. Journal of Revenue and
Pricing Management, 15(3-4), pp.247-251.
Kimes, S.E., 2017. The future of hotel revenue management.
Noone, B.M., Enz, C.A. and Glassmire, J., 2017. Total hotel revenue management: A
strategic profit perspective.
Pereira, L.N., 2016. An introduction to helpful forecasting methods for hotel revenue
management. International Journal of Hospitality Management, 58, pp.13-23.

13HOSPITALITY OPERATIONS AND REVENUE MANAGEMENT
Pimentel, V., Aizezikali, A. and Baker, T., 2019. Hotel revenue management: Benefits of
simultaneous overbooking and allocation problem formulation in price
optimization. Computers & Industrial Engineering, 137, p.106073.
Xu, X., Zhang, L., Baker, T., Harrington, R.J. and Marlowe, B., 2019. Drivers of degree of
sophistication in hotel revenue management decision support systems. International Journal
of Hospitality Management, 79, pp.123-139.