Revenue management Scenario Evaluation for Hyatt Hotel

Question

Task: Task Instructions Please refer to the data set handout provided to prepare your Revenue Management Scenario Evaluation. When analyzing and evaluating the data set, ensure to show how the data is positive, negative or with no impact to the scenario hotel. You must also provide recommendations for the scenario hotel on how to improve the data set provided, into generating further revenues. Refer to your handout to know how many recommendations are necessary and for which aspects of the data set.

Data Set
Consider you are the revenue manager for any 5?star hotel located in either Sydney, Melbourne or Adelaide. The past year and a half have certainly been difficult, to say to least, for the overall industry. There seem to be some rebound, especially from domestic tourism, but the continuous lockdowns are wearing down both hotels and hotel demand.

Your general manager has provided you with a trend report from STR and has asked you to analyse and evaluate the past 5 years for your city’s performance, focusing notably on the impact of COVID?19 on the overall industry performance in the city in the last 18 months (March 2020 onwards). You also have access to the below data:

Furthermore, you have to provide at least two (2) recommendations, based on STR data, to improve your hotel revenue generation.

Instructions:
• You must pick one 5?star hotel in Sydney, Melbourne or Adelaide. Hotels can only be used by one student. If a student has already selected your hotel, you will need to choose another one. Check with your lecturer to know which hotels have been selected already.

• You must calculate missing figures highlighted in yellow in the table above, to two decimal points. Calculations that are not accurately rounded will not receive full marks. Add the table in your report. You may show your calculations in an appendix.

• Analyse and evaluate your city’s overall performance for the past five years using the• STR Trend report.

Focus on occupancy, ADR, RevPAR and revenue as performance measures.

Provide a separate paragraph on the past year and a half (from March 2020 to now).

Propose two (2) revenue management recommendations for your hotel.

These must be grounded in your analysis and evaluation, and use data as support, explaining why the hotel should implement them.

These could be linked to segmentation, pricing, inventory management, product definition and development, competitor benchmarking, distribution management, etc.

Answer

Introduction:
The report is related torevenue management and evaluation of hotel business trend in Sydney based on the data. The data is based on the occupancy rate, ADR, RevPar and total revenue earned by the hotel industry in Sydney in the last 5 years and last 18 months. The recommendations are also provided in the report for future revenue generation for Hyatt Regency. Revenue management is all about the analysis of the dataset and provides the relevant analysis and recommendations on the management of the revenue of the hotel. The following report is being developed in four major parts the first parts provide the details related to the analysis of the data provided by the data set. The report is also provides evaluation of the data set as calculated for the Hyatt Regency. The recommendations provide in the report provides the way through which revenue management can take place effectively. The report is complete summary of hospitality industry of Sydney along with the revenue information of Hyatt Regency by shown analysis and evaluation of trend report. The report is divided as analysis and evaluation of trend report, analysis and evaluation of the data set and recommendations for creating higher revenue in the following years.

Analysis and evaluation of the trend report past 5 years:
The revenue of the hotel organization is dependent on the occupancy, average daily rate, revenue per customer, and total revenue income on the room. The occupancy is a major factor for comparing the performance of the business in the hotel industry. The analysis is based on the business trend of the Sydney hotel industry it is found that after the impact of COVID-19 there is a major decrease in the occupancy rate in the year 2021 as compared to previous years(Hao, Xiao, & Chon, 2020). From the last 5 years, it is found that the hotel market has high decline in the occupancy and revenue income.

The trend analysis of hotel market in Sydney shows that there is no major change in ADR and supply of hotel facilities while major decline in the RevPar, total revenue and demand. The changes take place due to impact of COVID-19 and reduction is tourism and visits to prevent spread of virus concerning the health securities.

The trend relation of occupancy, ADR, RevPar, Supply, Demand, revenue in the last 5 years is as follows:

The above graph shows that in the last four years from 2016 to 2019 there is no measure impact of ADR rate on occupancy, demand and revenue while in the year 2020, there is major fall in occupancy, revenue and demand which has no relation with supply and ADR as the people avoid to visit hotels for health securities.

Analysis and evaluation of the trend report past 18 months:
The change in the market trend in the last 18 months from the month in which the impact of COVID-19 is highest and has significant impact on hotel industry to the month of Aug 2021 are described in the below graph:

From the above data analysis, it is found that in the last 18 months, the revenue, demand, and occupancy has decreased frequently till March 2021 and after that period there is improvement in the occupancy, revenue and demand. The trend shows that the change in the interest of customers and also show the changes brought by the hotel industry to attract the customers such as health securities, medical facilities at hotel, social distancing, sanitization and other precautionary measures required for prevention of spread of infections(Egan, & Haynes, 2018). The trend of Sydney hotel business in the last 18 months has changed frequently and major impact levied on the revenue income. The decrease in the ADR also does not have impact on increase in the occupancy and demand of hotel facilities. Based on the above analysis, it is found that there is no major change in supply and ADR while there occupancy and revenue has decrease to 80% as impact of COVID-19 however after vaccination and increase in the health securities measures there is increase in the revenue after April 2021. However the hotel industry required long-time to overcome the problems created due to impact of COVID-19 and change the approach towards customers(Jiang,& Wen, 2020).

Data set:
In this case, the analysis of the business of Hyatt regency is conducted by comparing the data set with the Sydney trend report.

In this part of the report, the analysis of the hotel's performance is being discussed, based on the above data which is as follows:

The above analysis shows, ADR of Hyatt regency is higher as compared to trend report. The hotel has decreased the ADR in July 2021 and August 2021 based on the market trend and attracts more customers.

The comparison of occupancy data set of Hyatt regency and occupancy as per STR is as follows:

The above chart describes the occupancy of the STR data and the Hyatt Regency, the Chart clearly shows that in January the occupancy of the Hyatt regency is lower than the occupancy of the STR but from February to April, it can be seen that the Occupancy of the Hyatt regency is outperformed from the STR report but in the last months of the July to September the performance of the occupancy of the Hyatt regency is Detroiter from the level of STR reports.

The above chart shows that in the middle months the outperformance from the STR report is very high the difference between the occupancy of the STR and Hyatt regency is quite high.

Recommendations:
For increase the revenue in the future years by the Hyatt regency as compared to market trend based on increase in the occupancy rate. The recommendations which can be implementing by the Hyatt Regency are defined as follows:

The first recommendations for effective revenue management is pricing or ADR for the customers. The hotel should define the pricing of rooms for seasonal and non-seasonal basis for enhance the occupancy and revenue in the future years(Dimitrios, Christos, Ioannis, &Vasiliadis, 2020). The ADR is the important factor which attracts customers through comparison with other competitors. The strategies of pricing or ADR are based on the SMART goals acronym which as follows:

Specific: The pricing strategies of hotel should be simple, significant and sensible as the pricing should be based on per room per night and per customer. The ADR is set specifically considering the rate of competitors and market trends(Gallagher, &Corgel, 2018). The primary factor of comparison of hotels by customers is price at which services offered by restaurant at same facility level.

Measurable: The ADR are measurable and evaluated based on the cost incurred by the management. The management should measure the change in the price of rooms effect on the occupancy and total revenue earned.

Achievable: the target as decided by the management and the committee of the revenue management of the hotel should be achievable any random number and any random target cannot be helpful in the desired outcome after analysis of the required revenue and other factors the organization required to set up a target which is achievable as per the market trend and research(Aydin, &Birbil, 2018). The revenue management should be conducted based on the research and market analysis and demand and supply of the market

Relevant: The price set by the management and strategies for change in the price over the period should be relevant based on different factors such as variable and fixed cost, geographical area, competition and attraction of customers towards hotel.

Timely: The target should be set based on the time such as season and non-season rate. The hotel industry is based on the season and non-season demand and setting the revenue target should be based on the seasonal demand. For revenue management, it is recommended to understand the demand during the seasons as at that time the hotel management can increase the room rent and earn high revenue income to meet a major portion of fixed cost and minimize the average daily rate during the non-season period to maintain the occupancy.

The second recommendations for increase occupancy and revenue for the hotel is digitalization. After the impact of COVID-19 it is highly recommended to change the hotel working in digitalizing form as online booking, online checking, online checkout, and online payment system and reduce manual interface with providing security to customers concerning the health(Alrawadieh, Alrawadieh, & Cetin, 2021). The online system development cost for the company as one time cost may results in effective increase in the revenue income in the following years.

Conclusion:
Based on the above analysis, it can conclude that the revenue management system is an important part of the hotel industry. During the year 2021, after the impact of COVID-19 there is a major decrease in the occupancy rate and also a decrease in the ADR which results in a decrease in revenue income. At that time effective revenue management must meet the variable and fixed cost and understand whether the hotel is performing less than the trend or higher than the trend along with an understanding of major areas in which actions are required to take.

References:
Alrawadieh, Z., Alrawadieh, Z., & Cetin, G. (2021). Digital transformation and revenue management: Evidence from the hotel industry. Tourism Economics, 27(2), 328-345.

Aydin, N., &Birbil, S. I. (2018).Decomposition methods for dynamic room allocation in hotel revenue management. European journal of operational research, 271(1), 179-192.

Dimitrios, B., Christos, P., Ioannis, R., &Vasiliadis, L. (2020). Strategic Management in the Hotel Industry: Proposed Strategic Practices to Recover from COVID-19 Global Crisis. Academic Journal of Interdisciplinary Studies, 9(6), 130-130.

Egan, D., & Haynes, N. C. (2018). Manager perceptions of big data reliability in hotel revenue management decision making. International Journal of Quality & Reliability Management.

Gallagher, B., &Corgel, J. (2018). Natural occupancy shifts in hotel markets. Cornell Hospitality Quarterly, 59(4), 352-363.

Hao, F., Xiao, Q., & Chon, K. (2020). COVID-19 and China’s hotel industry: Impacts, a disaster management framework, and post-pandemic agenda. International journal of hospitality management, 90, 102636.

Jiang, Y., & Wen, J. (2020). Effects of COVID-19 on hotel marketing and management: a perspective article. International Journal of Contemporary Hospitality Management.

Nhamo, G., Dube, K., &Chikodzi, D. (2020).Impacts and implications of COVID-19 on the global hotel industry and Airbnb.In Counting the Cost of COVID-19 on the global tourism industry (pp. 183-204).Springer, Cham.

Appendices: