Perform a displacement analysis for the Hotel Fernando. Include a brief discussion explaining how the different revenue management tactics are applied in your scenario.
If you do so by creating a displacement analysis spreadsheet, the spread sheet should consist of a workbook with four worksheets:
Net room revenue differential calculation
Net food and beverage revenue differential calculation
Other net revenue calculation
Summary, where all the subtotals are linked and tallied up for decision-making
Indicate if they should or should not take the group and why?
solli analysis, or it ma and the ho muy Choose to accept the group after this it may consider other potential options based on the market conditions he hotel's strategic objectives. For ex For example, can the hotel persuade the group cept alternative dates that will n vill not displace transient business? The displace- lysis results do not dictate a simple answer, but they give management formation it will need to make an informed decision. to accept alte ment analysis te critical informati Case Study: Displacement at the Hotel Fernando The 450-room Hotel Fernando is a fou nando is a four-star full-service hotel in San Petresco. It is bly regarded among both locals and tourists. Its service standards and am ries complement its exquisite rooms. In addition, the hotel boasts an impressive amount of meeting and conference function space to cater to events and groups. Due to a steady increase in group bookings, management is proposing to imple ment new revenue management tactics to expedite its process of deciding which groups to accept. Certain techniques, such as displacement analysis, would prove very helpful, especially during the main season when the hotel operates at high- occupancy levels. By using a displacement analysis spreadsheet, management would be able to more effectively select the booking opportunities with the high- est net revenue potential. The hotel forecasts its occupancy levels for the upcoming Easter weekend, April 14-16, as follows: Apr 14 Apr 15 Apr 16 405 420 355 daily transient rate for those days has been posted at $175 per room. The variable cost for cleaning any occupied room, regardless of whether it has r group guest, averages $20. A franchise fee of 8 per- been assigned to a transient or group guest, averages $20. A franchise od of 4 percent for a marketing fees assessment and another cent, which is composed of 4 percent for a marketing fees es must be allocated to the room cost; the fees are calculated The following table explains these transient room costs: 4 percent for royalty fees, must be allocated to the based on the room rate. The following table explo ent room revenue room rate. There n rooms, but, if they 104 Chapter 7 Total Transient Room Cost: $34.00 $20.00 Variable Cost: Franchise Fee: 8% (ADR: $175 $14.00 After all room costs have been established, the net transient room may be calculated by subtracting the total room costs from the room rate fore in this scenario, the net room revenue (also called contribution maria - $34, or $141. Hotels make a significant portion of their net revenue from rooms.hu have the facilities to support other revenue opportunities, such as food and age facilities and meeting and banquet halls, total revenue will increase historical data, the Hotel Fernando's capture rate of transient guests purchas meal in its food and beverage facilities is as follows: Average Food Food Net T ranslent Meal Check Cost % Cost Revenue Capture % Breakfast $12.00 30% $3.60 $8.40 7096 Lunch $25.00 35% $8.75 $16.251 25% Dinner $45.00 32% $14.40 $30.60 40% The information in the preceding chart is based on the Hotel Fernando's purchase ratio history. Since the hotel's capture rate is higher during breakfast, it receives more business from transient guests during that time period. It is important to point out that the average check at breakfast is $12, which is lower than the aver- age check at either lunch or dinner. The breakfast food cost percentage is the low- est of the three meals, but breakfast also brings in the lowest net revenue per meal. Dinner, on the other hand, has a slightly higher food cost percentage, but this meal period generates a substantially higher net revenue value due to the significantly higher average check. The Hotel Fernando's capture rate of transient guests purchasing a beverage in its food and beverage facilities is as follows: Average Beverage Price Average Beverage Cost Direct Variable Beverage Cost Transient Capture Rate $5.00 20% $1.00 50% The 50 percent capture rate means that, on average, half of the transient guests staying in the hotel will purchase one beverage a day. The average beverage price is $5 and the direct variable cost associated with that one beverage is $1; therefore, the hotel would make $4 net revenue from each beverage sold. Furthermore, if 85 transient guests staying in the hotel have a capture rate of 50 percent, approx mately 43 people (calculation rounded up) would purchase drinks. Consequently, the hotel would generate $170 net revenue from selling beverages to these tran sient guests. The Group Request. One of the most prestigious community groups in the state is the Rotary Club, whose members are known as Rotarians. The Rotary Club mecm every month to host its annu The event coor fer weekend. Displacement Analysis 105 Post month in one of the Hotel Fernando's conference halls. Since the hotel has Itself as a leader in conference facilities, the Rotary Club has decided the win annual Easter event at the Hotel Fernando, Rotarians from around the Saster stay in the hotel to attend the conference that is being held on-site over ispril en coordinator for the Rotary Club requested a three-night stay, arrival ter M. Staying the night on Good Friday, and departure on April 17, which day. The coordinator also inquired about receiving special group 0, breakfast coupons for $10, lunch for $22, and dinner for $41. wishes to rent a conference room and audiovisual equipment for room rates of $70, bre "The group also wish two days. Normally, this situat forecasted high-occupancy to displace a number of its that a displacement analysis understand whether it is advantage Occupancies. The occupancy forecasts to block guests are as follows: situation would not pose a problem, but since the hotel has upancy levels during that weekend, it would probably have er of its transient guests. Therefore, management has proposed analysis spreadsheet be created so management can fully is advantageous to accept the group booking. ncy forecasts for the transient guests and for the group- Apr 16 Apr 14 405 Apr 15 420 Fernando rents conference rooms for $250 per day and 355 Forecasted Occupancy | 90 Group Rooms Request 75 75 85 Other Revenue. The Hotel Fernando rents conferencer audiovisual equipment for $80 per day. Costs to the hotel uipment for $80 per day. Costs to the hotel for these items are $60 erence room setup and $30 per day for the audiovisual equipment. Assignment Perform a displacement analysis for the Hotel Fernando. Include a brief discus- sion explaining how the different revenue management tactics are applied in your scenario. If you do so by creating a displacement analysis spreadsheet, the spreadsheet should consist of a workbook with four worksheets: Net room revenue differential calculation Net food and beverage revenue differential calculation Other net revenue calculation Summary, where all the subtotals are linked and tallied up for decision-making solli analysis, or it ma and the ho muy Choose to accept the group after this it may consider other potential options based on the market conditions he hotel's strategic objectives. For ex For example, can the hotel persuade the group cept alternative dates that will n vill not displace transient business? The displace- lysis results do not dictate a simple answer, but they give management formation it will need to make an informed decision. to accept alte ment analysis te critical informati Case Study: Displacement at the Hotel Fernando The 450-room Hotel Fernando is a fou nando is a four-star full-service hotel in San Petresco. It is bly regarded among both locals and tourists. Its service standards and am ries complement its exquisite rooms. In addition, the hotel boasts an impressive amount of meeting and conference function space to cater to events and groups. Due to a steady increase in group bookings, management is proposing to imple ment new revenue management tactics to expedite its process of deciding which groups to accept. Certain techniques, such as displacement analysis, would prove very helpful, especially during the main season when the hotel operates at high- occupancy levels. By using a displacement analysis spreadsheet, management would be able to more effectively select the booking opportunities with the high- est net revenue potential. The hotel forecasts its occupancy levels for the upcoming Easter weekend, April 14-16, as follows: Apr 14 Apr 15 Apr 16 405 420 355 daily transient rate for those days has been posted at $175 per room. The variable cost for cleaning any occupied room, regardless of whether it has r group guest, averages $20. A franchise fee of 8 per- been assigned to a transient or group guest, averages $20. A franchise od of 4 percent for a marketing fees assessment and another cent, which is composed of 4 percent for a marketing fees es must be allocated to the room cost; the fees are calculated The following table explains these transient room costs: 4 percent for royalty fees, must be allocated to the based on the room rate. The following table explo ent room revenue room rate. There n rooms, but, if they 104 Chapter 7 Total Transient Room Cost: $34.00 $20.00 Variable Cost: Franchise Fee: 8% (ADR: $175 $14.00 After all room costs have been established, the net transient room may be calculated by subtracting the total room costs from the room rate fore in this scenario, the net room revenue (also called contribution maria - $34, or $141. Hotels make a significant portion of their net revenue from rooms.hu have the facilities to support other revenue opportunities, such as food and age facilities and meeting and banquet halls, total revenue will increase historical data, the Hotel Fernando's capture rate of transient guests purchas meal in its food and beverage facilities is as follows: Average Food Food Net T ranslent Meal Check Cost % Cost Revenue Capture % Breakfast $12.00 30% $3.60 $8.40 7096 Lunch $25.00 35% $8.75 $16.251 25% Dinner $45.00 32% $14.40 $30.60 40% The information in the preceding chart is based on the Hotel Fernando's purchase ratio history. Since the hotel's capture rate is higher during breakfast, it receives more business from transient guests during that time period. It is important to point out that the average check at breakfast is $12, which is lower than the aver- age check at either lunch or dinner. The breakfast food cost percentage is the low- est of the three meals, but breakfast also brings in the lowest net revenue per meal. Dinner, on the other hand, has a slightly higher food cost percentage, but this meal period generates a substantially higher net revenue value due to the significantly higher average check. The Hotel Fernando's capture rate of transient guests purchasing a beverage in its food and beverage facilities is as follows: Average Beverage Price Average Beverage Cost Direct Variable Beverage Cost Transient Capture Rate $5.00 20% $1.00 50% The 50 percent capture rate means that, on average, half of the transient guests staying in the hotel will purchase one beverage a day. The average beverage price is $5 and the direct variable cost associated with that one beverage is $1; therefore, the hotel would make $4 net revenue from each beverage sold. Furthermore, if 85 transient guests staying in the hotel have a capture rate of 50 percent, approx mately 43 people (calculation rounded up) would purchase drinks. Consequently, the hotel would generate $170 net revenue from selling beverages to these tran sient guests. The Group Request. One of the most prestigious community groups in the state is the Rotary Club, whose members are known as Rotarians. The Rotary Club mecm every month to host its annu The event coor fer weekend. Displacement Analysis 105 Post month in one of the Hotel Fernando's conference halls. Since the hotel has Itself as a leader in conference facilities, the Rotary Club has decided the win annual Easter event at the Hotel Fernando, Rotarians from around the Saster stay in the hotel to attend the conference that is being held on-site over ispril en coordinator for the Rotary Club requested a three-night stay, arrival ter M. Staying the night on Good Friday, and departure on April 17, which day. The coordinator also inquired about receiving special group 0, breakfast coupons for $10, lunch for $22, and dinner for $41. wishes to rent a conference room and audiovisual equipment for room rates of $70, bre "The group also wish two days. Normally, this situat forecasted high-occupancy to displace a number of its that a displacement analysis understand whether it is advantage Occupancies. The occupancy forecasts to block guests are as follows: situation would not pose a problem, but since the hotel has upancy levels during that weekend, it would probably have er of its transient guests. Therefore, management has proposed analysis spreadsheet be created so management can fully is advantageous to accept the group booking. ncy forecasts for the transient guests and for the group- Apr 16 Apr 14 405 Apr 15 420 Fernando rents conference rooms for $250 per day and 355 Forecasted Occupancy | 90 Group Rooms Request 75 75 85 Other Revenue. The Hotel Fernando rents conferencer audiovisual equipment for $80 per day. Costs to the hotel uipment for $80 per day. Costs to the hotel for these items are $60 erence room setup and $30 per day for the audiovisual equipment. Assignment Perform a displacement analysis for the Hotel Fernando. Include a brief discus- sion explaining how the different revenue management tactics are applied in your scenario. If you do so by creating a displacement analysis spreadsheet, the spreadsheet should consist of a workbook with four worksheets: Net room revenue differential calculation Net food and beverage revenue differential calculation Other net revenue calculation Summary, where all the subtotals are linked and tallied up for decision-making
