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Marriott Revenue Management Case Study

Introduction

One of the most challenging and competitive businesses to operate is the hotel businesses. The most significant aspect of maintaining the market command of any given lies in a number of factors that surround the efficiency of the management as well as the competence and the organizational aspect of the business so that the hotel maintains the most efficient and upgrade market operational standards while maintaining a viable revenue management that will guarantee a reasonable cash flow and profits; which is the main essence of any given business. This paper will critically analyze the case of the Marriott Hotel Revenue management so as to identify the challenges the hotel is currently facing, their consequences as well as analyzing the prevailing solutions and their implications to the revenue status of the business. The paper will incorporate the literature review from the various specialties in the business field as well some significant case analysis advanced by some extensive research on the topic under discussion. The main goal of this research will be to carry out extensive research on the current revenue status as well as the factors affecting the rates with an aim of identifying the most viable solutions that best fit the operations of the hotel.

Problem Statement

One of the most significant areas that the Marriott Hotel has been facing is regarding the customer frequency and occupancy which consequently translates to lower profit margins as recorded by the business revenue management team. According to the statistics outlined in the case study, the hotel has encountered a decline in the house profit margins from 41.9& to 35.2%. (Glion, 2010). This was occasioned by the decrease in the occupancy levels from 60.7% to a lesser 45.3%. This is one of the most important issues that the management is addressing at the moment. The other strategic issue that the business is facing is regarding the local political unrest and pressures that have increasingly tarnished the reputation of the business. Most of these political unrests have been occasioned by the environmental issues and the welfare of the public in the hotel location. The politicians were worried about the effect of a health epidemic that occurred in the region and how the implications that the operations of the company would cause to the local residents. This has really compromised on the standards of the hotel as well as the reputation of the business all over the world. Due to this effect, the hotel has lost a significant number of clients who fear for their health and general welfare thus leading to lower house occupation thus the decreasing profit margins.

The possible scenarios that the hotel may face if the above measures are not carefully incorporated by the management would be worse off the revenue or the income and profits of the business. One of the worse scenarios is a situation where the business is forced to cut down the work force so as to manage the expenses of the hotel. This would really cost the hotel in terms of its reputation and the expansion plans that have been already incorporated in the hotel such as more houses and rooms for the customer bookings. The likely case that the business would otherwise face is the lower profits and lower quality services which would lead to loss of clients to other competing hotel businesses. As such, the Marriot management team cannot afford to underestimate the importance of the above-outlined issues and the appropriate measures that ought to be taken quickly to save the business that has proved to flourish and attain the market command in the hotel business world.

Possible Actions

The management of the Hotel ought to be more vigilant on the above issues, being careful to formulate effective management policies that would see that there is a union between the hotel and the residents. The strategies that can be advanced mainly on this issue are the formulation of a follow-up program that will involve a close correlation between the residents or the neighbors of the hotel. The company ought to institute a viable forum that will freely and efficiently discuss the issues facing the public that are occasioned by the hotel operations. The hotel management should be careful to note the issues and the ideas advanced by the public so that they may work out the most appropriate measures and policies to adopt so as to win the good will and a positive reputation from the public (Mine, 2005).

Another strategy that the hotel management ought to consider is in the advertising of the hotel’s operations including all the services that that it offers. It also needs to keep a track of the media so that it may inform its customers of their current business situation and events taking place. For instance, the case study presents a situation where the hotel had to close down the business due to an environmental hazard hence inconveniencing the customers from the various parts of the world. This would have easily been solved if the management had issued a notice to the media of the issue so that the customers and other clients could not be inconvenienced by such issues.

The other possible strategy that the hotel management can initiate to achieve revenue increases and proper management of the hotel transactions is regarding the dissemination of the financial report to the head managers. According to the financial records of Marriot Hotel, the financial reports are only forwarded to the senior management which should not be the case. The hotel should incorporate the new advanced information technology so that all the departments’ heads have access to the financial reports of the company progress (Irene, 2008). All the key departments’ heads should be able to access key information at any time they want, including the information on totals of the operational departments and occupancy figures and their corresponding revenues.

More over, the hotel management ought to incorporate a broad dynamic pricing policy as opposed the traditionally fixed pricing policy. This would a more flexible system for the hotel business based on the fact that the hotel has different clients and customers from different areas of the world who have different financial back grounds (Marco, 2006). In essence, a dynamic pricing system is whereby clients and the business reach a consensus of the price which is favorable for both parties. This is what is referred to as market segmentation. The adoption of this policy by the Marriot hotel would facilitate the management to incorporate group pricing in the financial revenue organization. This system would be significant in that the hotel has different clients who have different financial abilities. As such, the hotel is at a better place to maximize on its revenues and the profit margins while maintaining the customer loyalty and business reputation at the same time (Marco, 2006).

A more significant strategy of revenue management and profit marginalization that the Marriot hotel management can incorporate is the integration of the customer relationship management (CRM) and the hotel’s Revenue Management (RM). This union between the customers of the hotel and the policies of the Revenue management team of the business would be significant for the business to create new and more creative differentiation strategies (Silvia, 2007). This has been outlined as a viable policy to help the business focus more on the customer value and satisfaction and not just the aspect of making profits out of the hotel’s services.

Formal Action Recommendation

Many specialties have advanced their arguments on the advantages and the disadvantages of the various actions that can be incorporated into a hotel revenue management setting. However, the Marriott hotel has its unique setting and its own issues at hand which calls for the most viable action or measures so that the level of revenues and the rate of room occupancy are sustained and so is the hotel’s growth and development.

Of all the alternatives actions listed above, I would recommend that the Marriott management group incorporate the integration of the CRM and the RM. My choice for this alternative is mainly based on the prospects that the customers are the main sources of the business revenue and that their satisfaction in the hotel’s service delivery is what translates to the profit margins of the business. The main objective of this approach would be to achieve the analysis of customers’ buying patterns based on their life cycles, which is very important for the future of the hotel’s Revenue Management (Sharon, 2010). This policy also aims at enabling the hotel to differentiate both their products and the pricing of their products and services with other competitors in the market.

The achievement and the practicability of this policy would be very significant for the Marriot hotel to create new and more creative differentiation strategies that will see the business record the highest rates of profits margins. The success of the adoption of this policy would be the increase in the number of room bookings and the number of customers served in the hotel per day. For instance, according to the Smith Research of the market share analysis obtained from the Marriot revenue case study, the hotel recorded an occupation index of 116 in the last year which shows that the demand and customer visiting the hotel is considered fair given the stiff competition in the hotel market. However, the integration of customer relations management and the revenue management would steer forward the customer turn out since the reputation of the business based on the customer satisfaction would be significantly high above that of its competitors. The incorporation of this system will enable the Revenue Management of the hotel to analyze the customer’s buying patterns mainly based on their life cycles; an aspect that is very important in creating a positive environment for the future of the Revenue management (Mine, 2005). This is particularly important for this hotel business in that it needs to focus on the long-term relationship with the customers and another client to ensure that it is continued or sustained customer turn out and loyalty.

The major cost of implementing this system is the fact that the hotel will have to acquire some new sophisticated software to facilitate the integration process. The hotel will need to establish further collaboration with software vendors so as to acquire the most efficient and up dated data management software (Sharon, 2010).

Action Plan

The hotel will now have to strategize on the implementation of the formulated strategy so as to attain the goals and aspirations put forth by the management. The journey to implementing organizational changes requires the pulling together of efforts from all the hotel departments, geared by the hotel management. The different segments or departments of the hotel including the booking department, the accounting department, the Marriott Reservations Data Warehouse, the Travel research department, as well as the casual workers of the hotel, will have to work together in order to achieve the goal of the business.

The first step towards the implementation of the integrated of the CRM and the RM is in the management of the Hotel to strategize on how the resources of the business will be diversified so that there are resources that will allow the incorporation of some new technical staff. There is also need for proper planning and budgeting of the business finances that other departments of the hotel are not compromised by the incorporation of the new procedures.

The next step after setting up the necessary finances and resources is to plan and establish the possible outcome of the investment to the business. This entails the analysis of the expected changes and development of the hotel so as to determine whether the business will operate at a profit or a loss. The hotel management can successfully use the SWOT analysis procedure which entails the examination of the strengths, weaknesses, opportunities and the threats the business is likely to face due to the integration of the new system (Silvia, 2007). The other significant factor that the management cannot overlook is the impact that the integration of the new system will have on the existing clients as well as the public reputation. The hotel management should be careful in planning the take off of the project o that the existing customers are maintained and the reputation of the business to the public is also on point.

The consideration that the hotel might want to take into account is regarding the need for expansion of the hotel facilities so as to efficiently cover the expanding customer base of the business. It would be very unprofessional to incorporate development procedures which have led to the winning of more clients to the business and then not be at a place to fully serve and manage the customers. That would be a business failure and the management of Marriot hotel should be vigilant and plan for such actions such as the expansion of the hotel so that there rooms available for booking and more qualified employees to serve the clients while maintaining the international professional standards of the hotel business.

With the above issues and policies incorporated by the hotel management within the business, then the business is ready to pick up the new system that will ensure the achievement of the business goals and aspirations which are basically growth and the generation of more revenue for the business sustainability.

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Financial Analysis

The financial status of the hotel has not been at its best over the past few years. This has been occasioned by how the hotel breaks down its performance especially due to the seasonal and other challenges such as environmental hazards that the hotel suffered from. This is clearly shown by the revenue per available room (RevPAR) records of the hotel. The value level sensitivity measures illustrated by the financial balance sheets indicate that the level of revenue per available room went down by 1.8 % over the past one year, i.e. from 16.4% to 14.6% recorded in the last one year. The records further indicate that the records the value ratio sensitivity had been significantly high some two years ago. This was a time when the hotel was recording high customer turn out and the room booking rate was high so was the table occupation in the hotel per day. The spreadsheet indicates that the value ratio sensitivity was at 24% at that time, a rate that was very favorable for the growth and the profits margin of the hotel.

The inference that we draw from this statistics and data is that the financial basis of the Marriot hotel is not yet stable and favorable as the standards of the hotel used to be some years ago. As such, there is a need for the management to carefully strategize on the investment opportunities available in the market as well as initiate other significant measures such as quality customer serve and advertising in order to get the hotel back to its favorable financial track.