Revenue Management - the Barcena Resort - Assignment Example

Student’s Name: Instructor’s Name: Course Code & Name: Date of Submission: CHAPTER 9: QUESTION 3 INCREASING REVPAR BY 8% The Barcena Resort wish to increase its revenue par by 8% in the next financial year. The best way to improve revenue base involves altering the prices to affect profit margin or occupancy index. The company has the following options to determine which factor to alter to meet the target; increasing rack rate, reducing discount offered or increasing the number of discounted rooms available for sale. The factor altered depends on variables that majorly affect the customer perception. According to Lovelock and Wirtz (2001), the consumer goes through three stages in service consumption that is pre-purchase, service encounter and post-service encounter. Altering the prices affects service encounter and post-service encounter stage since the consumer will relate the price and the value of services given. Therefore, the best factor to be adopted must maximize the profit and meet customer expectation. The reduction of the discount offered to customers proves to be the best option for achieving the target set by revenue manager compared to the other two options. First, discounts are a temporary initiative that stimulates demand in the market for the company services. Therefore, reducing discount will have little impact on the demand from customers who are cost cautious customers. Secondly, when the customer is looking for rooms online they are more concerned with room prices than discount offered. Thirdly, competitors are less likely to use the discount to attack Bercena resort since they keep changing depending on the demand in the market. Unlike increasing rack rates that have a direct impact on consumer perception prior consumption of the service. Also, rack rate can give competitors a common ground to engage the company in price wars thus causing consumers to shift. Consequently, increasing the discount will be unfavorable since the occupancy index is at highest 90’s. The increase in discount will result to decrease in profit margin thus reducing revenue par since the available capacity cannot achieve required target. In conclusion, the company cannot base its target on reducing discount alone but improve other variables to give consumer higher satisfaction level. These variables include improving the quality of services provided for example high cleanliness, quality food and improving employee public relation qualities. The variable will improve customer service encounter and post-service encounter since they will make plans to consume the product again or introduce new customers. Also, intensive marketing is required to induce potential customers to consume the service. Marketing will target pre-service encounter stage of the customer in consuming the product. CHAPTER 10: QUESTION 2 PRICING DECISION AND CUSTOMER CENTRICITY The pricing decision requires consideration from both management and consumers reaction to achieve the best price that favors all stakeholders. Management is more of profit-centric thus it might be tempted to increase prices to an extended that the price does not tally with the value of satisfaction derived from service (Zeithaml and Bitner, 2000). On the other hand, customer centricity can divert management attention from the sole reason of existence of business that is profit and wealth maximization. Therefore, it is important to balance the two motives to achieve the best price that suits both parties. The management approach in determining the price strategies is not appropriate since they are making a decision without obtaining an external guest reaction. The decision might not yield a result or lead to a decrease in revenue which is opposite of the management expectation. According to Bettman’s model motivation is part of consumption process of the consumer (Bourdon, 1992). Therefore, it is important to involve consumers in pricing decision since they are part of external quest who are affected directly by the changes in prices. The reduction of price for hot dogs and drinks might not reduce the demand for pizza if consumers are not involved. The consumption of pizza might not be price motivated but consumers internal drive such taste and preference. The management must interview pizza consumers to determine the exact motive that makes them wait for 20 minutes. The management will increase discount of hot dogs and drinks if the majority of the consumers consumes pizza because of its affordability to groups and families. The consumers will prefer consuming discounted hot dog and drinks which has short waiting time and affordable than pizza. Also, it will reduce the number of customers walking away to other resorts due lack of table space and conveniences (Bourdon, 1992). The proper engagement of external quest will provide assurance that the package will reduce the amount of customers waiting for pizza since resort will only remain with a customer who is more specific on what to consume and are rigid to changes in prices (Zeithaml and Bitner, 2000). The decision of revenue manager to introduce discounted package of hot dogs and drinks is customer centric since it ensures that food become affordable to a wide range of customers and improve convenience for those customers who are in a hurry (Gabor, 1979). Also, the package will reduce customer disappointment since they will be assured of space at any time they visit the resort. The decision might affect the profit margin if the motive of the high demand for pizza is not well determined. The demand for the discounted package might remain constant thus reducing the profit due to increase in discount. Sofia decision to increase prices is not customer centric decision. Therefore, the decision is more of customer centric than profit centric since it does reduce quality, quantity or increase price of the products (Liozu and Hinterhuber, 2013). In conclusion, we can note that it is important to engage all stakeholders in the pricing decision to balance between customer and profit centricity. CHAPTER 11: QUESTION 1 The Maximization of Checks Average or Optimization of Seat Utilization to Grow Profits According to Zeithaml and Bitner (2000), customer centricity in making pricing or promotion decision is important since both parties win at the end of the day. Also, customers value consistency in prices, and quality of services, unexpected changes in the prices might create negative perception thus ruining customer post-service encounter thus changing resort during future consumption. Therefore, considering Sam’s suggestion to increase prices of discounted hot dog and drinks might cause a shift in customers to other competitors due to lack of consistency (Vedulla, 2005). Consequently, concentrating on check average is not the best way of improving profit growth since it makes it expensive for the consumer. According to Cullen (1997), an increase in price reduces demand for the product. Therefore, results to decrease in revenue and profits despite an increase in average check. The optimization of seat utilization remains an ultimate solution to increase in profit growth for the resort. The strategy enables the customers to feel comfortable with space, affordability, and convenience. Also, resort benefit through high customer turnover that adequately compensate $1 difference in profit between pizza and hot dog package. In conclusion, we can note that a healthy way of improving growth is focusing on sales volume or occupancy utilization since both parties win in the process. CHAPTER 12: QUESTION 1 THE DOSM AND RM DEPARTMENT According to the case study, the work of DOSM and RM are related since both aims at increasing sales that result in improved company’s profits. There exists a conflict of interest between the two since DOSM is more concerned with promoting the company in different platforms while RM is more concerned with ensuring that company spends on productive initiatives. The DOSM wants to commit the advertisement campaign financial resource with aim of increasing the sales of the Bercan’s resort. On the other hand, Board wants to promote sales of all the hotels in the region without mentioning any specific hotel. The RM will need to assess the cost effectiveness of the campaign by comparing occupancy without advertisement and with advertisement. The benefit of the advertisement should be able to compensate amount spend towards board’s initiative (Hsu and Powers, 2002). The DOSM department is tasked with promoting the company through advertisements and promotions which stimulates sales growth and ensuring that they obtain customer post-service encounter response (Cullen, 1997). On the other hand, RM department is expected to develop, forecast and measure contribution of different strategies for improving the revenue of the company. Therefore, it can be noted that the two departments are related since DOSM will create a strategy or campaign and RM department is required to prepare budget, forecast benefit of campaign and prepare tools of measuring actual contribution of the campaign to the company sales. Failure of the two departments to merge their activities might cause the DOSM to incur unproductive expenditure. Pam puts forward her concern that they have been spending huge amount in regions advertisement, but she is not sure if the benefit is worth. Therefore, she is forced to engage RM to help in creating tools that will assist in measuring its effectiveness (Cullen, 1997). In conclusion, we can note that developing a clear organization structure is important in ensuring that all departments work towards a common goal. The organization structure enables employees to understand their roles and responsibilities in pursuing certain goals (Kroszner and Rajan, 1995). For example, Pam was able to note that at certain stage of the campaign, she was required to engage RM. On the other hand, RM was able to understand what is expected of him thus making engagement easy for both parties and eliminating conflict of interest. Also, DOSM was aware of what was going on in RM department that is a good sign of proper channel of communication within the organization. CHAPTER 13: QUESTION 4 COMPENSATION PROGRAM The determination of compensation program for employees in an organization is a tricky function that requires consideration of factors affecting employee and company revenue. According to Nuruzzaman (2012), a good compensation program is required to cut across employee service period, location, industry, skills or resourcefulness of the employee and labor demand and supply. Damario has proven himself to be skillful and great resource to Bercan’s Resort since he introduced new system to the company that helps in forecasting and tracking demand for company services. The company can easily mine historical data on customer location and what he/she consume. These will enable company to improve customer experience at a specific level or carry out promotions via direct marketing. Also, the targets for the year were met, and great improvement in customer satisfaction was felt too in Damario tenure. Therefore, Sofia should ensure that pay rise will be reasonable enough to make Damario feel that his effort is being valued (Nuruzzaman, 2012). Also, Sofia must design compensation program that will give room for future increase. The experience of Damario improves with some years he works in revenue management department thus to compensate for experience gained, Sofia must ensure that his pay will rise with the number of years he provides his service to the company (Nuruzzaman, 2012). For example, increase by 5% after every two years until his retirement. The location of the resort plays important role in ensuring that compensation program favors Damario since the cost of living vary with location (Nuruzzaman, 2012). Therefore, Sofia should remunerate Damario a reasonable amount that will be enough to cover his expenses and save. Sofia must take into consideration the industry pay for individuals in the same rank with Damario. The industry benchmark will eliminate employee poaching and labor turnover since one will not see any reason to shift to another employer when pay is the same or lower than what he/she is currently paid (Chingos, 2002). Also, labor demand and supply plays greater role in determining optimal compensation program. The industry with high labor demand will have to increase pay to attract skilled labor and pay less where supply is huge. Lastly, company performance remains the ultimate measure of designing compensation program. The company will not pay a huge amount to an extent that expenditure exceeds the revenue (Chingos, 2002). Therefore, Sofia will attach performance to remuneration of Damario to ensure that he works hard in meeting the target and get rewarded for the same. For example, Damario gets end year bonus of 2% of his basic salary if he meets or exceeds the target. In conclusion, we can note that employee compensation plays important role in ensuring that company reduces employee turnover and enhance their productivity. The ability to retain employees improves company performance due skills and experience retained which are useful in service delivery. Reference: Bourdon, E. (1992). Pricing Strategies in Highly Competitive Markets. Management Decision, 30(4). Chingos, P. (2002). Paying for performance. New York: Wiley. Cullen, P. (1997). Economics for hospitality management. London: International Thomson Business Press. Gabor, A. (1979). Customer Oriented Pricing. Management Decision, 17(8), pp.761-769. Hsu, C. and Powers, T. (2002). Marketing hospitality. New York: J. Wiley. Kroszner, R. and Rajan, R. (1995). Organization structure and credibility. Cambridge, MA: National Bureau of Economic Research. Liozu, S. and Hinterhuber, A. (2013). Pricing orientation, pricing capabilities, and firm performance. Management Decision, 51(3), pp.594-614. Lovelock, C. (2001). Services marketing. Upper Saddle River, NJ: Prentice Hall. Nuruzzaman, M. (2012). Employee service behaviour and human resources management practices. Saarbrucken, Germany: LAP LAMBERT Academic Publishing. Vedulla, V. (2005). Marketing services. Mumbai [India]: Jaico. Zeithaml, V. and Bitner, M. (2000). Services marketing. Boston: Irwin/McGraw-Hill. Read More