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Project on Reviving Revenue Management Hotel: Hearthstone…
Project on Reviving Revenue Management
Hotel: Hearthstone Suites Hotel- Fairmount Hotel Property
Room: 250
Staff Size: 180
Location: Kitchener, Ontario
The purpose of this case study is to apply hotel revenue making decision and plan to a real hotel industry situation.
The assignment should accomplish the following learning outcomes:
apply in-class theory to connect with industry Revenue generating practices and analysis
analyze Hotel Revenue Management team address the problems of low ARD, Justify your opinions how that effect on client and service
adapt knowledge of various road maps in order to maximize a hotel’s profitability
Identify how revenue based training focus to increase the guest feedback, may impact hotel profitability or loss.
Reviving Revenue Management
The Hearthstone Suites Hotel is an all-suite property with 250 rooms. A new property, the Fairmont Hotel, opened near Hearthstone Suites three months ago. Several months before the opening of the Fairmont, Laurie, the general manager at the Hearthstone Suites, pushed all her front office and reservations staff to sell as many rooms as possible. As she put it, “Whatever it takes, to stay competitive.” The director of sales, Pat, supported the plan from day one, but Jodie, the front office manager, had misgivings from the start. Jodie was concerned that the revenue management program managers implemented a year and a half earlier would be totally useless because of the push for occupancy.
The most recent profit and loss statement indicates that Jodie’s fears were realized. Though the occupancy is at budget year-to-date, the average daily rate (ADR) is down by $6. Also, the mix of commercial business is lower than planned40 percent of guest mix instead of 50 percent. Also, the SMERF segment is higher than it should be15 percent of guest mix instead of 5 percent. SMERF is a catch-all term for group business at substantially low ratesSocial, Military, Educational, Religious, and Fraternal groups.
Jodie, Pat, and Laurie are in a meeting to discuss these latest figures. Laurie, the general manager, opens the meeting by saying, “Well, we’ve weathered the storm caused by the opening of the Fairmont. We managed to hold on to our occupancy level. But it looks like we have some regrouping to do. I trust you’ve each received the profit and loss statement I sent you. I’m concerned about the fact that we’ve lost so much of our share of the commercial business. And our ADR is much too low.”
“I agree,” says Jodie, “but I was just following orders when I had my staff focus on selling rooms. Our good occupancy rate has come at the cost of both revenue management and revenue. It will take quite a while to regain our former position.”
“We all sat down and agreed months before the Fairmont opened that we should do our best to keep our occupancy numbers, and that’s what we’ve done,” says Pat. “You and your staff have worked hard and are to be commended, Jodie.”
“Hear, hear,” says Laurie, “and now we have some time to re-evaluate our position and start targeting that corporate segment again.”
“I just hope it’s not too late to win it back from Fairmont,” sighs Jodie.
Later that day, Jodie gathers her front desk and reservations team to brief them about re-implementing the revenue management program. “I know you’ve all been putting a lot of extra effort into filling rooms over the past several months. I’m proud of you; the whole management team is. We’ve met our occupancy goals. The down side is that our guest mix is off. We’ve lost some of our commercial segment and gained too much of the SMERF segment. And our ADR is down a full $6. It’s time we reviewed the revenue management program we use.”
“The revenue what?” blurts Jack, a fairly new front desk agent. “You never told us about that.”
“Now hold on a minute,” counters Jodie, “some of you are so new that you haven’t been fully trained in this program, but I know I’ve talked about it to some extent with all of you.”
“Sure, you told me a little about it,” offers Tracey, a reservationist. “I never have been comfortable with it, to tell the truth. One day I quote a guest $85 and he books a suite. A month later he calls back to book another and I quote $105. Then the guest asks why the rate went upwhat am I supposed to say?”
“Well, there are things you can tell guests who ask that, but we’re not going to get into that right now,” says Jodie.
Bill, the most experienced front desk agent, speaks up. “I’ve been using the revenue management program all along, just like you showed me.” He turns to his co-workers. “It’s really not unreasonable when you look at the big picture of the hotel’s revenue. I just tell inquisitive callers that our rates depend on their arrival dates. Some periods are busier for us than others, and that affects rates.”
“Bill, it’s good to hear that you continued using the revenue management program,” Jodie says. “We can get into more detail on applying it in formal training. We’ve had a lot of changes since the push for volume beganchanges in personnel, and even changes in the revenue management program itself. It’s clearly time I evaluated the training needs in our department in the area of revenue management program execution. You can be confident, Traceyand all of youwhen you quote rates that they are competitive for what we offer. That reminds me,” and here Jodie pauses a moment, “how many of you have actually been inside some of our suites?”
Three of the six employees raise their hands. “How many have seen rooms at the Fairmont or at any of our other competitors?” continues Jodie. Only Bill raises his hand. “So almost none of you have seen the difference between our suites and the single rooms other properties are offering?”
“There hasn’t been time to look at what we’re selling,” protests Jack.
“Much less to look at what anyone else is selling,” adds Linda, another reservationist.
“That’s what I was afraid of,” says Jodie. “In the next two weeks or so, as I’m re-evaluating training needs, I’m going to have each of you spend time gaining an appreciation of the value we offerespecially in comparison with the value of Fairmont’s offerings and those of our other competition.”
“Are we still going to be offering the $84 supersaver rate?” asks Tracey. “We’ve had a lot of repeat business because of that rate.”
“I’ve had callers tell me we’re the best deal in town,” Linda says.
But Bill cautions, “We won’t need to use it next week. The Home Builders convention is in and every room in town will be booked. We can afford to charge more next week.”
“That’s good thinking, Bill,” says Jodie. “I know it’s nice to be popular with guests and it’s easy to use that discount whenever a potential guest shies away from a quoted rate, but the supersaver rate is intended to be used only as a last resort or in other special cases. We shouldn’t be offering it too frequently. We also need to adjust our selling strategies when special events come along like this convention.”
“Speaking of selling strategies, when are we going to get to go through that training module on selling skills you were talking about?” inquires Linda. “I’ve heard about it but I haven’t gone through it yet.”
Discussion Questions:
How can the management team address the problem of low ADR? Evaluate how ADR growth impact on organization financial growth.
Justify some ways Jodie could make employees like Jack and Tracey more familiar and comfortable with the revenue management program? Creating a revenue management project plan.
Proposing a solution what selling skills should training focus on for the Hearthstone Suites Hotel staff.
Offering peer feedback how can the Hearthstone Suites Hotel regain some of the commercial business it has lost.
