The Sofitel Gold Coast Broadbeach hotel is an ACCOR-franchised full-service hotel with 300 rooms and suites across three room categories in the heart of Gold Coast, Broadbeach.

Analysing the short-term cancellation reports of the revenue management and property management system (RMS &PMS) from the last 3 months, the revenue manager (RM) noticed that the prevailing staff shortage plaguing the hotel's operations also started affecting its sales for peak weekends. The assessment indicated that on peak demand weekends, a large number of short-term cancellations coincided with Jetstar cancelling GC inbound flights from Melbourne and Sydney. Summary reports identified an average no-show of 30% for Classic rooms. Still recovering post-Covid and post-quarantine hotel, the owner would not be satisfied to see that the property may not meet budgetary revenue expectations. Given that the situation is not expected to change any time soon, a solution must be found for the next long weekend in November. As the high unconstrained demand is expected to exceed capacity once again for the lowest room category, the revenue manager is confident to engage in intentional overbooking by smaller margins. Hence, adopting the conservation approach, the FOM, DSM and RM team decided to overbook 10% of the Classic rooms.

To assess the impact on the weekend's busiest night bookings, the revenue manager attached an extract of the current PMS (see below) for the next meeting.

In line with best practice, contingency allows for walking all guests of the overbooked rooms to Peppers Broadbeach. Despite the pre-arrangement with the neighbouring hotel to pay $180 per night for accepting walked guests, so as to not alienate potential customers, the revenue manager seeks approval for an additional payment of $150/per room to be spent in the food precinct. However, the revenue manager has precautionarily started up-sell training for the staff rostered that weekend, which has proven to be very successful.

Note: The cost per occupied room is $50/ room night.

Post long weekend, the team conducts a comprehensive financial analysis of the overbooking scenario:

1. Using the up-sell success numbers as follows, compare the room-related revenue, ADR, occupancy rate, and RevPar for the Sofitel Gold Coast Broadbeach under the two scenarios

Scenario 1: Without overbooking in place, if there are no flight cancellations and every reservation shows.

Scenario 2: With overbooking and flight cancellation, the team was able to upsell 15 classic rooms to Luxury rooms

2. What is the percentage change in the total revenue?

3. Under consideration of the additional costs and benefits in each scenario, without calculations, explain how the GOPPAR would be affected and how many guests are walked in each scenario

4. Comment on the effectiveness of the overbooking initiative with respect to the goal of revenue maximization and optimization and discuss other non-financial factors which need to be considered. [ Ensure the address the measures relevant to support your conclusion each]

5. The RM is genuinely concerned about overbooking and wants you to briefly discuss the notion that "the only person harmed when overbooking goes wrong, is the customer."

SHOW your workings and 2 decimals in all calculations.