IHG Revenue Management and HR Strategies: A Comprehensive Analysis

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TRAVEL AND
TOURISM
IHG
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Table of Contents
INTRODUCTION.........................................................................................................................4
TASK 1......................................................................................................................................... 5
P1 DISCUSSION ON THE RATIONALE AND PRINCIPLES OF REVENUE
MANAGEMENT FOR TRAVEL AND TOURISM INDUSTRY...........................................5
P2 INVESTIGATING HOW A SPECIFIC SECTOR OF TRAVEL AND TOURISM
INDUSTRY APPLIES REVENUE MANAGEMENT TOOLS TO GENERATE AND
MAXIMISE PROFIT................................................................................................................ 7
M1 ANALYSING THE IMPACT OF DIFFERENTIATED PRICING STRATEGIES ON
REVENUE MANAGEMENT IN A SPECIFIC SECTOR OF THE TRAVEL AND
TOURISM INDUSTRY............................................................................................................8
P7 EXPLORING THE DIFFERENT TYPES OF FINANCIAL STATEMENTS AND
OPERATING MECHANISM FOR TOURISM ORGANISATION.......................................9
P8 EXAMINING THE IMPORTANCE AND VALUE OF BUDGETS FOR
CONTROLLING BUSINESS PERFORMANCE AND IDENTIFYING VARIANCES.....13
M4 INTERPRETATION OF FINANCIAL STATEMENTS AND REPORTS FOR IHG
WITHIN THE TRAVEL AND TOURISM INDUSTRY........................................................14
TASK 2....................................................................................................................................... 15
P3 REVIEW THE DIFFERENT STAGES OF THE HR LIFE CYCLE APPLIED TO A
SPECIFIC TRAVEL AND TOURISM JOB ROLE, AND THEIR IMPORTANCE FOR
RETAINING AND DEVELOPING TALENT.......................................................................15
P4 DEVELOP A PERFORMANCE MANAGEMENT PLAN FOR A SPECIFIC TRAVEL
AND TOURISM JOB ROLE, APPLYING TECHNIQUES TO RESOLVE NEGATIVE
BEHAVIOUR AND TO OVERCOME ISSUES OF STAFF RETENTION......................17
M2 EVALUATE THE IMPORTANCE OF THE HR LIFE CYCLE IN RELATION TO
STRATEGIC TALENT MANAGEMENT AND OVERCOMING ISSUES OF STAFF
RETENTION.......................................................................................................................... 19
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TASK 3....................................................................................................................................... 21
P5 EXPLORE SPECIFIC LEGISLATION THAT ORGANISATIONS IN THE TRAVEL
AND TOURISM INDUSTRY HAVE TO ADHERE............................................................21
P6 USING SPECIFIC EXAMPLES, ILLUSTRATE HOW COMPANY, EMPLOYMENT
AND CONTRACT LAW HAS A POTENTIAL IMPACT ON BUSINESS DECISION-
MAKING IN THE TRAVEL AND TOURISM INDUSTRY.................................................24
M3 USING SPECIFIC EXAMPLES, EXAMINE THE POTENTIAL IMPLICATIONS OF
REGULATIONS, LEGISLATIONS AND STANDARDS ON DECISION-MAKING IN
THE TRAVEL AND TOURISM INDUSTRY.......................................................................25
CONCLUSION...........................................................................................................................26
REFERENCES.................................................................................................................................27
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INTRODUCTION
This assignment is based on the travel and tourism industry, including the study of all
the departments of finance, sales, human resource and management. The key
principles of revenue of the travel and tourism industry, assessment of how to manage
the human resources with the implementation of human resource strategies are
discussed in detail. Studying the possible impact of legal and ethical considerations on
travel and tourism business, the explanation of managing the budgets and maintaining
the financial and statistical records is included in this assignment. The chosen
organisation is IHG (Intercontinental Hotel Group) which is a UK based international
travel and Tourism Company from the past 73 years with a mission of enabling the
guests to live the good life. This company provide destinations in Europe and Britain,
North and Central America, South America, Africa and the Middle East, Asia, Australia
and New Zealand and around 100 countries. The main products of IHG are ranged from
solo travellers to last minute deals.
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TASK 1
P1 DISCUSSION ON THE RATIONALE AND PRINCIPLES OF REVENUE
MANAGEMENT FOR TRAVEL AND TOURISM INDUSTRY
RATIONALE FOR REVENUE MANAGEMENT
Revenue management is maximising the income of the company and minimising the
cost at the same time by optimising the resources to meet the demand of the
consumers. In the travel and tourism industry, the revenue management is mainly
associated with the suppliers for travel products like managing airlines, hotels, cruises,
transportation convinces etc. The core reasons for using revenue management in IHG
are –
Demand forecasting- Demand forecasting means predicting the number of guests that
will be availing the services of IHG, revenue management hence helps in predicting the
demand for travelling guests in a particular period of time. The demand not always
remain the same, its rises and fall and then accordingly the prices of tour packages will
be set, these prices depend on the prices of airlines, cruises, hotels etc.( Legohérel, et
al.,2013)
Seasonality- The changes in season results in rise and fall in the prices like in the
season of summer most people plan for holidays, at that time price rises and also at the
time of festivals and winter holidays people plan to travel to the places which are less
cold so that time also price rises for the hotter destinations, so revenue management
helps in planning according to the season and help in managing the occupancy of the
hotels, there cannot be overbooking of the guests ( Legohérel, et al.,2013).
Supply forecasting –Revenue management helps in maintaining a balance between
the demand and capacity of the guests for the travel company.
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PRINCIPLES OF REVENUE MANAGEMENT
Market segmentation – Dividing or categorising the people according to demographics
is called market segmenting,
Hotel demand and booking partners - the suppliers of airlines, cruises and
transportation are to be managed to fulfil their supply as well as maintaining the hotel's
occupancy rate above 80 % is inclusive in revenue management (Hayes and Miller,
2013).
Demand forecasting and displacement analysis- to meet and predict the future
demand is done through revenue management and making availabilities for all the
guests according to the time preferences (Hayes and Miller, 2013).
Overbooking control- There are overbookings in the festive season and holiday
seasons this decreases the customer trust and mismanagement so for this revenue
management needs to be done to control overbooking and management of guests
(Hayes and Miller, 2013).
Information systems- the technology has helped very much in maintaining the
information regarding the guests and every detail are managed and visible to the
management and the guests which makes it easy in operating and facilitating the guests
(Hayes and Miller, 2013).
Pricing and inventory management- the prices are different each time and to plan
prices according to the demand-supply of the guests is done through revenue
management. Prices are to be set accordingly with taking time, place, emergency,
quantity factors into account (Hayes and Miller, 2013).
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P2 INVESTIGATING HOW A SPECIFIC SECTOR OF TRAVEL AND TOURISM
INDUSTRY APPLIES REVENUE MANAGEMENT TOOLS TO GENERATE AND
MAXIMISE PROFIT
There different Revenue management tools that can be used by IHG to maximise the
revenue, profit and minimizing the overall cost.
Reports- Reports include spreadsheets, charts, plans, flowcharts and strategic charts
that define the revenue and cost of the company. The charts of sales trend, future
forecasting of room occupancy rate, this will make the process of deciding the price
strategy for revenue management will be easy ( Legohérel, et al.,2013).
Technology- Technology has created a huge impact on the bright side as the
technology has made the work easier, faster and convenient. To manage the revenue
the company can use the revenue management software that are available in the
market for the prediction or forecasting of future occupancy rates, demand for guests,
future and seasonal trends of occupancy, demand and resource requirement etc. there
is a business intelligence system, revenue management dashboards that can help in
managing the revenues of the company ( Legohérel, et al.,2013).
Expert advice – To depict the demand or to forecast the number of guests in the near
future the use of reports on market trends by the experts like PKF hotel experts can be
used, so that the revenue can be managed accordingly ( Legohérel, et al.,2013).
Other techniques of revenue management include allowing the discounts on rooms in
the times when demand is less, giving the rooms who are there for staying multiple
nights, planning for the time demand and supply, balancing between under booking and
overbooking is the main tool for revenue management ( Legohérel, et al.,2013).
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M1 ANALYSING THE IMPACT OF DIFFERENTIATED PRICING STRATEGIES ON
REVENUE MANAGEMENT IN A SPECIFIC SECTOR OF THE TRAVEL AND
TOURISM INDUSTRY
The differentiation in pricing strategy makes the IHG change its pricing according to the
demand or the situation. The revenue can be managed in such a way so that the hotel
can earn maximum in the peak season by increasing the prices of the tour packages,
hotel fairs etc. because people in the peak season are highly demanding and there are
so many people who want the services even at the highest prices. In the offseason,
there will be no occupancy in the hotels and hence to attract the customers the prices
will be brought down so that the company can earn some revenues and this is adding to
the revenue management in order to survive in the offseason.
The capacity of the hotels is limited, but the demand can be unlimited in the season of
festivals and holidays, so to manage the vacancy before the demand exceeds the limit.
By differentiation in pricing, a strategy company can stop the overbooking and not
dissatisfying the customers of room shortage at the end time.
Advantages of differentiated pricing strategies -
It helps in fluffing the occupancy in the seasons other than peak and holiday season,
maintaining the income source and revenue generation.
It helps in creating a brand image by providing discounts in the non-seasonal times and
thus creating loyal customers.
In the travel and tourism sector to manage the suppliers is also important, if the
suppliers of the products like cruise, transportation etc. are providing their timely
services with appropriate price, they will also earn in the season so to prevent
overbooking and setting up prices the suppliers need to be managed to manage the
revenue of IHG.
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P7 EXPLORING THE DIFFERENT TYPES OF FINANCIAL STATEMENTS AND
OPERATING MECHANISM FOR TOURISM ORGANISATION
Financial statements include balance sheets, profit and loss statements, cash flow
statements, income statements.
BALANCE SHEET- This is the overall financial statement of a company that defines the
company’s assets, liabilities, shareholders capital and annual profit or loss.
Shareholders capital is termed as owner’s capital that the business owes to its
shareholders and is the difference between assets and liabilities of the company. The
balance sheet is the most commonly and widely used tool for measuring the financial
health of the company. Assets in this service company IHG is mostly goodwill and non-
tangible assets (Sheldon and Dwyer, 2010).
Income statement- income statement depicts the annual profit of the company which is
revenue after deducting various cost and expenditures including tax as an expenditure.
The income statement is made to determine the actual profit of the company that can be
used as a reserve or can be distributed to the shareholders. In the income statement,
the annual expenditures including interest payments, operating expenditures, payments
made to the creditors, payments made for purchasing materials for the functioning of
the company are to be deducted from the revenues earned by the company. After all
these expenditures have been deducted the company have to pay taxes to the
government, inclusive of service and entertainment and income taxes, these are also to
be deducted from the revenue of the company and at last the remaining amount is
called annual profit of the company (Nunkoo and Ramkissoon, 2010).
CASH FLOW STATEMENTS – cash flow statement depicts the inflow and outflow of
cash through 3 activities of operating, financing and investing activities. Changes in the
cash and cash equivalents are recorded in cash flow statement i.e. cash, cash at bank,
highly liquid short term investments and bank overdrafts. The objective of preparing
cash flow statement is to know the outflow through expenditures, purchasing of assets
or through a payment made to creditors or loan repayment and the inflow is through
taking loans and debts, through sales or operating revenues, or receiving payments
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from debtors or through other investing options. Through cash flow statement the check
on company’s ability to pay interest on loans and pay off to its creditors and ability to
work or working capital is evaluated which depicts the financial soundness of the
company for its day to day work activities (Plaza, 2010).
Particulars Notes £million
Figure: Balance sheet of IHG
(Source: https://www.ihgplc.com/investors/annual-report)
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INCOME STATEMENT
Particulars Notes £million
Figure- Income Statement
Source: https://www.ihgplc.com/investors/annual-report
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CASH FLOW STATEMENTS
Particulars Notes £million
Figure: CFS OF IHG
Source: https://www.ihgplc.com/investors/annual-report
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