Plagiarism declaration This assignment is written by me and in my own words Each contribution and quotation from published and unpublished sources has been explicitly citied and acknowledged I confirm I have carefully read and completely understood the Department and University regulations on plagiarism; I am highly aware that plagiarism (the use of someone else’s work without their permission and/or without acknowledging the original source) is wrong This paper has not previously has been submitted for assessment in any other university and has not yet been published in any sources Executive Summary This proposal examines the theoretical main concepts of hotel revenue management (RM) The hotel RM concepts presented in the paper covers hotel RM centres, data and information, hotel RM process, metrics, analysis, forecasting, segmentation and profiling, and ethical issues Additionally, special attention is paid to RM tools and techniques to optimize the hotel revenue management and maximize the profits The paper investigates the hotel RM practices of Sydney Harbor Marriott Hotel, a five- star hotel in Sydney, and proposes a number of effective RM strategies accompanied by the schedule and process of implementation for the improvements and revenue maximization Introduction Overview and Context Sydney Harbor Marriott Hotel is a brand belonging to Marriott International; it includes 595 rooms and other facilities Its centres include three divisions of room including: suite rooms, premium rooms and standard rooms; spa and fitness facilities with high-end equipment; a rooftop longue bar, three restaurants with different designs and styles and many other services… Luxurious rooms and top services are served with a new level at Sydney Harbor Marriott Despite these advantages, Marriott Sydney still faces high competition from five star hotels in Sydney In order to ensure revenue growth to maximize profits, this proposal is written to suggest strategies for Revenue Management Glossary of Terms ADR: Average Daily Rate GDS: Global Distribution System GOPPAR: Gross Operating Revenue Per Available Room CRM: Customer Relation Management OTA: Online Travel Agent RM: Revenue Management RevPAR: Revenue Per Available Room SEO: Search Engine Optimization Proposal Outline This proposal includes the following part: I Theoretical Framework Hotel Revenue Management Hotel revenue management system Hotel revenue management process II Recommended strategies for revenue management in Sydney Harbor Marriott Hotel Recommended strategies 1.1 Group pricing strategy 1.2 Pricing Strategies Suited to Demand 1.3 Overbooking Management Strategy 1.4 Direct Booking Strategy 1.5 CRM strategy Implementation Plan Conclusion I Theoretical Framework Hotel Revenue Management Revenue (yield) management is the business practice in which supply and demand are collaborated by segmenting customers based on their purchasing intentions and capacity are allocated to these different segments to optimize the firm revenue (El Haddad, Roper & Jones, 2008) Whereas according to Kimes (1989) and Kimes & Wirtz (2003) revenue management is defined as the implementation of pricing strategies and information systems to allocate the right capacity to the right customer at the right price at the right time Revenue management helps hotels to make predictions of consumer demands, based on which the hotels will implement tools and methods to manage inventory and determine price in order to ensure revenue growth Hotel revenue management system The figure below illustrates the hotel RM system: Figure 1: Hotel Revenue Management System Revenue centres Hotel revenue centres includes sources for the hotel (room division, food & beverage, spa & fitness, sauna, gambling facilities, casino and other additional services) and the capacity thanks to which pricing tools are applied as revenue growth tools (Ivanov, S & Zhechev, 2011) Data and information RM in hotels requires a lot of data including ADR, RevPAR, GOPPAR, occupancy, yield, profit per available room, etc (Barth, 2002; Lieberman, 2003; Hoogenboom, 2012) Information about future bookings, sales of services, competitors’ rates, demand and supply and financial results are also gathered in theRM system (Ivanov, S & Zhechev, 2011) RM tools Hotels use different RM tools to maximize the revenue from the customers Pricing, non-pricing and combined tools are three main categories of RM tools used in the hospitality industry (Ivanov, S & Zhechev, 2011) Other elements include RM team and RM sofwares Hotel revenue management process The revenue management process is the set and sequences of strategic actions implemented and managed by hotels in order to make an optimization for revenue management of the hotels It is identified by Tranter, Stuart-Hill & Parker (2008) that there are eight steps in the RM process includes eight steps: objective specifying, information analyzing, supply and demand analyzing, forecasting, demand forecasting, dynamic value-based pricing, implementation of revenue management strategies and monitoring and amending the revenue management strategy The RM process is demonstrated in the following figure: Source: Adapted and expended from Ivanov, S & Zhechev, V., 2011 Figure 2: Hotel revenue management process II Recommended strategies for revenue management in Sydney Harbor Marriott Hotel Recommended strategies Depending on structural and organizational conditions of the Hotel presented in the Introduction of this proposal, it is recommended that the Hotel implements the following strategies to maximize the revenue: - Group Pricing Strategy Pricing Strategies Suited to Demand - Overbooking Management Strategy Direct Booking Strategy CRM strategy 3.1 Group pricing strategy It is highly suggested that the group pricing strategy should be implemented in Marriot Hotel because group business makes great contributions to revenue of Marriott Marriott is a full service brand; therefore, revenue from group business can account for more than half of the hotel’s revenue it the Hotel utilizes the right strategies (Emeksiz, M., Gursoy, D & Icoz, O., 2006) According to the Marriott annual report 2016, Marriott Sydney projected the growth of occupancy between 2.3% to 2.8% and forecasted the ADR growth between 3.6 % to 4.0% In fact, the occupancy growth for both transient and group business are more than expected and it was officially recorded that in May 2014 Marriot Sydney saw a new record RevPAR growth with 10 % It is identified that the revenue increase was mainly driven by the transient segment; however, the Hotel also saw a growth in hotel group demand Illustrated in the following table, the group occupancy growth outnumbered that of transient occupancy; however, it is a vice versa in which the ADR transient growth is over twice more than group ADR growth Segment Transient Group Marriott 2016 Year over Year Growth in customer segments YOY GROWTH Occupancy ADR 3.2 % 4.6 % 3.9 % 2.1 % Table 1: Marriott 2016 Year over Year Growth in customer segments From the table, we can give a conclusion that the market segmentation is very potential for Marriot Sydney Marriott Sydney is a suitable hotel with great group travel rates and hotel special offers for the groups when planning events Group Pricing Optimizer (GPO) is planned to be applied to promote both occupancy and ADR of group business GPO is a system which helps the Hotel improve its sales to group customers In this GPO system, price-elasticity strategy is used for group segment to recommend an optimal rate and negotiating range GPO provides the sales teams with data including evaluation of alternate dates, sleeping-room inventory availability, probability of the customer accepting the rate and potential displacement of more valuable business to support rate negotiation In the first year, the objectives of GPO implementation in Marriott are improving the revenue from group business and enhancing the sales process for sales team and group customers Group customers are contracted with the Hotel differently from transient customers in target, budget, or forecasted rates Group rates also vary depending on the group’s requirements of services For example, the rates of group customers using guest rooms, meeting convention, spa service are different from those of group customers who only use guest rooms (Schwartz, Z & Cohen, E., 2003) 3.2 Pricing Strategies Suited to Demand In previous days, Marriott employs two main strategies for room pricing The first one is the “weekday versus weekend” strategy; that means room rates from Sunday to Thursday differ from those from Friday to Saturday The second strategy is the “dynamic” pricing strategy which helps the Hotel to maximize the revenue during the highest levels of occupancy In order to maximize the revenue as well as to gain customer satisfaction, Pricing Strategies Suited to Demand are generated and implemented for specific segmentations with specific demand including government, leisure, commercial and extended stay Examples of pricing strategies specific to these segments are listed below Commercial: Commercial guests are people who are travelling on business The main characteristics of guest type are short period booking and the larger budget for travel Marriott Sydney is recommended to offer special rates for larger companies who create the high level of business for the hotel Leisure: Guests with leisure demand are people who use the hotel services for the following objectives: vacation travelling friends and family visiting, and other objectives not related to corporate This group of customers is quite sensitive to price and always search for the best deal of price and value Marriott Sydney designs special packages to add more value for leisure guests Free amenities are included in these packages; i.e free breakfast, free airport pick-up, and free tickets to local attractions Another pricing tool for the leisure package is “advanced purchase rate.” This strategy is designed to make a special discount if guests make a nonrefundable deposit reservation This package adds more value compared with other package for leisure Contract: The package is designed for organizations or companies who are usually in need for a constant supply of rooms With the location and the huge supply of room availability, sales teams of Marriott are assigned to make contracts with airline crews and cruise ships crews This will be a very effective pricing strategy because these contract agreements can provide constant occupancy 3.3 Overbooking Management Strategy Overbooking is considered as a great strategy for hotel revenue management Although the initial objective of overbooking control is to ensure that no customers are denied to be served, it brings a decrease in no-show rate of the Hotel (Morales, D.R & Wang, J., 2010) Overbooking management is a set of practices in which the hotel sells rooms exceeding the maximum available number of rooms to compensate for no shows and cancellations According to Vinod (1992), successful implementation of overbooking control can bring a growth of 20% in the total revenues Due to high competition in the hospitality, Marriott has constantly experienced and applied different approaches and strategies to allocate the resource in the optimal way It is recognized that overbooking practices play an important role in operational hotel success and revenue management Overbooking management strategy is implemented in Marriott Sydney with two main types of activities performed hotel operations Regarding the first group of activities, depending on the changes of the market segmentation, specific demands, specific room availability and booking patterns, the number of overbookings should be defined and modified constantly every day Additionally, the managers should play much attention in managing decisions and operational activities in relation with walking guests with overbookings In this regard, it is proposed that elements such as rooms rates , length of stay, rooms rates and client status should be pressed on by Marriott managers while applying measures for guest walking and overbooking (Ivanov, 2006) Successful implementation of overbooking control requires careful planning and training Staffs should be trained about customer behaviors, characteristics of overbooking and process to manage overbooking 3.4 Direct Booking Direct bookings through brand-managed websites have become the trend in the hospitality industries with special rates offering and conveniences to direct booking customers Marriott should implement change changes in business plan to drive direct bookings (Myung, E., Li, L & Bai, B., 2009) Some offers should be included to add value for direct booking customers are a percentage discount, complimentary wireless Internet, a complimentary room upgrade, airport pick up, late checkout… Except increasing the revenue for the Hotel, direct booking will help promote brand engagement as well as preventing the Hotel from paying commissions for the third parties In addition, direct booking is really cost effective It is noted that compared with OTA channel it is 10 to 15 times cheaper and to 10 times cheaper than that of the GDS channel The implementation of direct booking through the Marriott Sydney website requires some following actions The first fundamental bottom Marriott should have is a strong presence online The brand of Marriott Sydney needs to become easy and available to be searched The searching shouldn’t take customers much time The staffs in charge of this have to ensure that the right keywords and SEO are created in the searching engine In addition, for the success of direct booking, a mobile friendly website is necessary because a large number of customers use mobiles to online booking Together with these above activities, using social media networks as the marketing method will assist in promoting the brand of Marriott; the number of customers knowing the brand will absolutely increase Furthermore, the rates require to be properly priced and correlated with the demand Lastly, values need to be added to make direct booking become competitive and different from other distribution channels Marriott Sydney should uses incentives and rewards to encourage customers to book in the brand website instead of booking via the third parties 3.5 CRM strategy RM has a strong relationship with customer relationship management (CRM) because RM places much stress on pricing tools and inventory management Marriott should create incentives and methods to strongly manage the long-term relationships between the hotel and its customers (Noone, B.M., Kimes, S.E & Renaghan, L.M., 2003) Marriot should launch a program for loyal members It can offer these customers with free night at the hotel, a full option of services in the hotel, presents or some other incentives This not only improves brand engagement but also increases revenue in total The hotel manager should engage CRM strategy with RM tools to maintain the profitable relationship between customers and the Hotel Implementation Plan These strategies require 5% in the total revenue of Marriott Sydney to be implemented This budget is used for improving the website, training staff and advertising for the Hotel The plan of implementation includes five main steps In the initial beginning, the proposal is created depending on the current conditions of the Hotel It is also based on the demands and objectives of Marriott for revenue management strategies The proposal is submitted to the Manager to get the approval After the proposal is approved by the manager, it comes to the second step: planning A detailed plan (with information about the plan, budget, resources required, processes…) is generated to implement strategies into practice The complete plan is the basic for the third step: preparing the team For the effective implementation of the strategies and long-term prospects, a specific and separate team is required to be established to conduct these strategies This team is trained with full knowledge and skills related to revenue management to have the ability to adopt all these strategies After conducting preparations steps, the strategies are put into practice on the plan and actual situations of the Hotel Lastly, the implementation team should monitor and control the implementing process to evaluate the impacts of strategies on revenue growth and take adjustments if needed During the implementation procedures, the team can face disagreements from others because some strategies not belong to traditional RM; effective results are required to blur these disagreements and opposition Conclusion Effective revenue-management strategies have become more complicated in the competitive and crowded industry The hotels in the luxury category face more challenges than the hotels in other categories Sydney Harbor Marriott Hotel is a five star hotel in Sydney which would like to implement effective revenue management strategies to improve the revenue and broaden the customer pool In this proposal, five strategies including Group pricing strategy, Pricing Strategies Suited to Demand, Overbooking Management Strategy, Direct Booking Strategy and CRM strategy are suggested to for Sydney Harbor Marriott Hotel to achieve its goals and objectives in increasing the revenue and the overall profits The plan is also designed and included for more effective implementation of these strategies in the Hotel REFERENCES Emeksiz, M., Gursoy, D & Icoz, O (2006) A yield management model for five-star hotels: Computerized and non-computerized implementation International Journal of Hospitality Management, 25(4), 536-551 El Haddad, R., Roper, A & Jones, P (2008) The impact of revenue management decisions on customers’ attitudes and behaviours: A case study of a leading UK budget hotel chain EuroCHRIE 2008 Congress, Emirates Hotel School, Dubai, UAE Viewed 31st July 2017, http://pc.parnu.ee/~htooman/EuroChrie/Welcome%20to%20EuroCHRIE%20Dubai %202008/papers/The%20Impact%20of%20Revenue%20Management/ Emeksiz, M., Gursoy, D & Icoz, O (2006) A yield management model for five-star hotels: Computerized and non-computerized implementation International Journal of Hospitality Management, 25(4), 536-551 Ivanov, S & Zhechev, V (2011) Hotel marketing (in Bulgarian) Varna: Zangador Kimes, S.E (1989) Yield management: a tool for capacity-constrained service frms Journal of Operations Management, 8(4), 348–363 Kimes, S.E (2003) Revenue management: A retrospective Cornell Hotel and Restaurant Administration Quarterly, 44(5/6), 131-138 Lieberman, W.H (2011) Practical pricing for the hotel industry In I.Yeoman & U.McMahonBeattie (eds.), Revenue Management A Practical Pricing Perspective (pp 180-191) Palgrave Macmillan Marriott annual report (2016) Viewed 31st July 2017, http://investor.shareholder.com/mar/marriottAR16/index.html Morales, D.R & Wang, J (2010) Forecasting cancellation rates for services booking revenue management using data mining European Journal of Operational Research, 202(2), 554-562 Myung, E., Li, L & Bai, B (2009) Managing the distribution channel relationship with ewholesalers: Hotel operators’ perspective Journal of Hospitality Marketing & Management, 18(8), 811-828 Noone, B.M., Kimes, S.E & Renaghan, L.M (2003) Integrating customer relationship management with revenue management: A hotel perspective Journal of Revenue and Pricing Management, 2(1), 7-21 Schwartz, Z & Cohen, E (2003) Hotel revenue management with group discount room rates Journal of Hospitality & Tourism Research, 27(1), 24-47 Tranter, K.A., Stuart-Hill, T & Parker, J (2008) Introduction to revenue management for the hospitality industry Harlow: Pearson Prentice Hall Vinod, B (1992) Arrival Date (Departure) Overbooking Revisited, Internal Technical Report, American Airlines Decision Technologies  ... part: I Theoretical Framework Hotel Revenue Management Hotel revenue management system Hotel revenue management process II Recommended strategies for revenue management in Sydney Harbor Marriott... order to ensure revenue growth Hotel revenue management system The figure below illustrates the hotel RM system: Figure 1: Hotel Revenue Management System Revenue centres Hotel revenue centres... Hotel revenue management process The revenue management process is the set and sequences of strategic actions implemented and managed by hotels in order to make an optimization for revenue management