Case 4.

The LoveWallabies Hotel in Perth has 200 rooms and it is specialized in hosting visitors that are attending rugby events (or sports in general) at the nearby stadium. The Revenue Manager of the hotel has just received a request from a tour operator client who is indicating that he would be interested in booking 50 rooms for two consecutive nights in four months time, proposing a rate of 100$ per room night so that each room would be paid 200$ (100$ per night for two nights).

The hotels revenue management platform predicts that the hotel will reach an 88% occupancy rate for those two nights if the 50- room group booking is not accepted. This occupancy would be reached by selling rooms to guests who would be paying a room rate of $150.

Knowing that the high occupancy is due to an upcoming rugby match between England and Australia taking place in Perth during those two days and that many rugby fans would be willing to sharing a room if rates are discounted, the Revenue Manager wants to examine two options to offer to the tour operator:

1. Nightly room rates discounted to $95 if the tour operator can consolidate the group booking down to 40 rooms

2. Nightly room rates discounted to $90 if the tour operator can consolidate the group booking down to 25 rooms

Based on the information above, discuss the following:

1. (a) Prepare financial analysis to demonstrate whether the two proposals would be justified from the point of view of the hotel (i.e.: show if they increase revenue compared to the alternatives of either rejecting the tour operator request or accepting the request as it was originally made)

2. (b) Which is the best solution for the hotel?

3. (c) How much would each guest save if the tour operator accepts the offer of 40 rooms at 95$?

4. (d) How much would each guest save if the tour operator accepts the offer of 25 rooms at 90$?