TOUR2031: Room Division Analysis for Diamond Peak Hotel Report

This report analyzes the projected bookings for the first week of October at the Diamond Peak Hotel, which has 575 rooms. The hotel is considering bookings for a corporate group and a revival group, and the report aims to determine the optimal allocation of rooms based on financial analysis of projected room and non-room revenue. The analysis concludes that the revival group should be selected due to higher revenue contribution, considering both room and non-room revenue, potential for shoulder bookings, and long-term business potential. The corporate group will be offered an alternative booking date with incentives. The general manager is responsible for the final decision, considering the hotel's long-term strategic perspective. Financial projections, revenue contribution, and other variables are considered in the decision-making process.

ROOM DIVISION
STUDENT ID:
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Introduction
The key objective of this report is to analyse the projected bookings for the first week of
October next year for “The Diamond Peak Hotel”. The hotel has 575 rooms. As per the
information provided, besides, the transient guests, the hotel is contemplating to book room
for a corporate group and a revival group. However, considering that both groups expect the
rooms on overlapping dates, the hotel management needs to decide on how to allocate the
rooms between the given groups. In order to resolve this aspect, financial analysis has been
carried out based on the projected room and non-room revenue for the first week of October
next year.
Analysis
1) The requisite revenue projections with different groups has been completed in the excel
sheet attached.
2) Based on the financial analysis carried out, the group to be selected is the revival group.
Selection of the revival group implies that corporate group would be asked to shift their
booking to last week of September. In case the corporate group disagrees, then no booking
for this group would be done. The key reason for choosing the revival group is that it leads
to higher revenue contribution in comparison to the corporate group. The projects revenue
contribution with the revival group for Sunday to Friday is estimated at $256,700 in
comparison to $240,410 with the corporate group as shown below.
It is noteworthy that if the F&B revenue and contribution margin is considered, then this gap
will be narrowed and revival group only has a small edge in terms of contribution margin.
This is highlighted as follows.

Difference in F&B revenues is equal to (82990-37152.50) = $ 45,837.5
Taking into consideration, CMRw of 0.35, incremental contribution margin with corporate
group on account of F&B = 0.35*$ 45,837.5 = $16,043
Incremental contribution margin with revival group = (256700-240410) -16,043= $247
3) From the above explanation, it is apparent that the revenue contribution (including room
and non-room) does not tend to differ significantly. A number of other variables have been
considered in choosing the revival group over the corporate group. One of the factors is
that the revival group is looking for a permanent home which can assure a steady stream
of future revenues. Also, the revival group presents potential for shoulder bookings on
Sunday and Friday when the occupancy rates are traditionally low. Besides, from this
year, invitations were even extended to foreign ministers from Europe and Asia which
could imply incremental revenues going forward for the hotel.
4) The hotel would not prefer to lose business from the corporate group. As a result, it would
be told to the corporate group that bookings have been made during the first week of
October and potentially you can shift the three day strategy meeting to September last
week. The hotel in order to sweeten the deal could state that incidentally during that week,
we are offering 25% discount on the food and beverages. Additional offers may be floated
to provide incentive to the customer to shift the reservation to last week of September.
5) The general manager is the concerned person who should make the business call with
regards to selecting the appropriate group. This is because this decision does not pertain to
sales but is essentially a strategic step considering the sticky revenue flow that each of the
two groups are capable of providing in the long run. As a result, these strategic decisions
ought to be made by the head of business who is the general manager in this case with
inputs and assistance from the other heads of various aspects.

Conclusion
Based on the above analysis, it is fair to conclude that in the given case, booking for October
first week would be provided to the revival group. One of the basis for this decision is higher
revenue contribution considering both room and non-room revenue. However, other factors
such as permanent business in the long term, incremental business potential and shoulder
bookings on traditionally non-peak days are also pivotal. Further, attempts should be made to
incentivise the shifting of the strategy meeting for the corporate to September last week.
Also, the general manager should have the final call with regards to selecting the group which
is preferable from hotel’s long term strategic perspective.