215LON Financial Planning & Revenue Management for Hospitality & Tourism

Coursework 2 Case Study

The Woods is a 150-room resort hotel just 25 miles from Central London.  Facilities include an 18-hole golf course, spa with 12 treatment rooms, 2 restaurants and 2 bars, and extensive meeting and event space.

The hotel is currently owned & operated by the Woods family which began the property’s development 6 years ago and opened the business in 2017.  The hotel attracts a mix of local members, business and leisure customers.

 

The hotels budgeted average room rate is £312 with an average spend per day from hotel guests of £75 and £90 for spa and golf per person

The hotel’s current organization structure is shown below

Historically the Executive Committee above have collaborated in the setting of room rates, but Brenda is now considering hiring in a revenue manager.

Your task

Answer the following questions making sure to reference academic journal articles and current trade journals. Include a reference list at the end.

There are calculations required in this assessment. Where required please show calculations and formulae in appendices and results in the main body of work

WORD COUNT: 2000

Question 1

Discuss the roles, responsibilities and reporting line of the Revenue Manager.  Evaluate how the Revenue Manager might determine a competitive set for this property. (450 words)

Question 2

Discuss how the scope of the Revenue Manager’s role is likely to extend past the Rooms Department in this property.  (350 words)

Question 3

The hotel’s owners think that there are opportunities to join a brand or consortium.  Discuss the benefits and challenges of the hotel working with a global brand or consortium. (450 words)

Question 4

Among the concerns the owners have is in maintaining ethical practices in setting prices and revenue management.  Assess the areas where ethics in revenue management may arise. (250 words)

Question 5

Historically the property has not worked much with OTA’s preferring to work closely with direct bookings and specialist travel agents.

There are gaps in mid-week (Tuesdays & Wednesdays) in February and March 2020. (8 weeks)

As of October 2019, there are 50 rooms on the books each Tuesday & Wednesday during this period @ £310 per night with 50% double occupancy.  Fixed costs are £40 per night. For these full rated customers variable costs are £20 per guest.  These guests are expected to spend the additional £70 on f&b and £90 on sports & spa per person.  Estimate a 5% commission on these rooms.

There are 2 options to push the occupancy up

  1. A series of corporate meetings with 80 rooms at £220 single occupancy (net of commission), with £100 on f&b and £20 on sports & spa spend per person
  2. Opening the business up to OTA’s with an attractive mid-week room rate of £290 based on double occupancy. Expected f&b spend is £50 on f&b and £75 on sports & spa per person.  The commission on OTA booked rooms is 20%

Create a table outlining the options and their profitability.  You will need to estimate the number of rooms coming through OTA’s for this option to be realistic.

Explain the benefits and challenges of working with OTA’s.  (350 words) 

Question 6

Both the brand and consortium that the Woods is considering joining has recommended some additional investment in the property’s rooms.

The Woods family is looking at the refurbishment in the following detail.

Capital investment £18,000,000

Profit required after tax 30%

Tax rate 25%

The interest payable on the loan taken to pay for the work will be £2,000,000

Other non-operating expenses will be £500,000

Fixed costs will be £1,750,000

Variable costs per occupied room will be £50 per room

Operating income from F&B is expected to be £1,000,000 and from no-rooms departments £1,500,000

What will the additional room rate that we need to charge do we need to charge to achieve the required return on investment for a year with occupancy of 75%?  Use the Hubbart room rate formula and show calculations.  What if occupancy were 90%?

Explain why the Hubbart formula works well here.  (150 words)

Assignment Guideline

Structure

You have been asked to produce a report.  It should contain the following:

  • Title Page, including the given title in full.
  • Contents Page
  • Introduction
  • Main body, which should also be organised under appropriate headings.
  • Conclusion
  • Appendices, which should be numbered.
    • Make sure you refer your reader to them as required.

Layout

Your work should be word processed in accordance with the following:

  • Font style, Arial, font size 12
  • 1.5 line spacing.
  • The page orientation should be ‘portrait’
  • Margins on both sides of the page should be no less than 2.5 cm
  • Pages should be numbered