Value and Revenue Management - Example

Linking theory to practice Name: University: Date: Linking theory to practice Introduction According to Murphy (2008), the objectives of profit making; developing a competitive as well as attractive product; developing a workforce that is skilled and attentive; and operating sustainably can be met through further academic research. Therefore, the objective of this piece is to examine how models Value and Revenue Management, Environmental scanning, and Sustainable development can help resort management to realise the aforementioned objectives. Basically, simple management of employees can lead to improved service; therefore, these workers should be prepared, nurtured, as well as trusted to work effectively. Resort management objectives According to Murphy (2008, p. 31), the objectives of resort management includes; making profits. This objective is the financial basis for the majority of the businesses, which must be present for the other three objectives to be successful in the long run. The second objective is developing a product that is not only competitive but also attractive. Clearly, the resort market has become increasingly competitive; therefore, attracting customers needs the business to have a desirable core attraction and should be positioned in an attractive environment. The third objective is developing a skilled and attentive workforce so as to provide high-quality service that would enable the resort to build on the second objective. The last objective according to Murphy (2008, p. 31) is becoming a sustainable operation. Basically, sustainable development has turned out to be a crucial resort businesses’ principle because of the resort development enduring nature as well as the relationship that exist between the success of the business and the condition of surrounding communities as well as environments. Value and Revenue Management As mentioned by Murphy (2008, p. 34), the perceived value of the guest experience in any resort signifies the overall assessment of the customers of the product utility according to the observations of what is given and received. In this case, ‘what is given’ has been described as money and time that have been used in the experience, in addition to the isolated opportunity costs related to the option of alternatives. What is received, according to Murphy (2008, p. 34), is the experience benefits package that is contrasted to the projected returns from alternative the business rivals. There are three varying value concepts in the perceived value assessments that consumers must take into account: Functional value, emotional value, and social value. Turning the perceived value interests of the guests into tangible experiences is the responsibility of revenue management. Murphy (2008, p. 34) describe revenue management as an act of profit maximisation from selling perishable assets through control of inventory and price as well as enhancement of service. Traditionally, revenue management involved dividing the customers into segments, controlling capacities, and setting prices for maximisation of the generated revenue. According to Heo and Lee (2009, p. 448), revenue management is the process of market segmentation as well as price discrimination. In this regard, price discrimination enables the resorts to boost their revenues by charging discounted and premium prices to a price-sensitive market and the less price-sensitive market, respectively. Heo and Lee (2009, p. 448) posit that the customers’ revenue management perceptions must be taken into account in addition to the characteristics of the industries for value and revenue management to be implemented successfully. This is attributed to the fact that customers’ acceptance and perceptions result in their behaviours which directly impact on revenue management performance. A customer’s value perception of the product relies largely on disposable income amount, alternatives availability, and product or service demand. When the customers’ perceived value exceeds or matches the price, the purchase is executed. As pointed out by Kimes (2000, p. 121) revenue management normally involves setting prices based on the levels of predicted demand in order that both price-insensitive customers and price-sensitive customers can make a purchase during peak times and off-peak times, respectively. Revenue management, according to Kimes (2000, p. 121), has been applied effectively in operations having uncertain and variable demand, predictable demand, relatively fixed capacity, appropriate pricing and cost structure, as well as perishable inventory. Lee, Bai, and Murphy (2012, p. 570) assert that even scores of hotels are adopting revenue management and changing prices in reaction to customers’ varying willingness levels to pay and marketplace demand, some hotels are looking for a simple way of consumer segmentation, like in terms of demographic profiles. Without a doubt, value and revenue management can help management to achieve relevant objectives such as to meet the market demand that is relatively variable. As mentioned by Heo and Lee (2009, p. 448), applying revenue management successfully in the theme park industry needs modifications that take into account the characteristics of both theme parks and traditional revenue management industries in addition to its distinctiveness. The ability of golf-course managers to capitalise on revenue management, as indicated by Kimes (2000, p. 127), depends on their ability to manage and market all obtainable golf course moment as a unique product. In consequence, the managers should treat the round’s length and time as a variable which must be managed carefully as the service process. Value and revenue management can help managers’ use market-based pricing in the place of cost-based pricing so as to create market segments as well as discriminate on price. To avoid customers migrating from high priced products to low priced ones, Lee, Bai, and Murphy (2012, p. 572) posit that price fences must be introduced so as to enable the customers to self-segment based on their consumption characteristics and readiness to pay. Environmental Scanning Environmental scanning, according to Murphy (2008, p. 44), is the process of examining the external and internal environments of the demand opportunities prior to deciding about the business. Environmental scanning normally includes three levels of operation as well as investigation; the operations of the organisation are considered as the internal environment and connote the level through which the management controls organisation-related affairs. The other level is the task environment, which is the surrounding environment where the local labour and supplies are sources. In the task environment, Murphy (2008, p. 44) posits that there exists competitors as well as collaborators that have to be taken into account for the resort to become good-looking destination package. According to Jogaratnam and Law (2006, p.174), the contingencies related to task environment include that which are more close to the operator; therefore, accessing opportunities and threats information become easier. The last level is the societal/global environment, which is the external layer that represents the external effects of societal trends, the major global market as well as national policies. In Lee-Ross and Lashley (2009, p. 99) study, they observed that opportunities identification for developing ideas is an important skill or ability that entrepreneurs have to possess. They emphasise that the entrepreneurs have to observe and scan the environmental trends continually to be able to find out the upcoming opportunities. This can be achieved through PEST analysis, and although it is time-consuming, applying it rigorously allows the entrepreneurs to become successful. Costa and Teare (2000, p.157) concurs with this argument citing that environmental opportunities identification and management are central to the companies’ competitive positioning. They argue that identifying trends in the business environmental could be realised through environmental scanning, which involves examining information regarding relationships and events in the firm’s outside environment. Citing a number of empirical studies, Costa and Teare (2000, p.157) posit that environmental scanning can be successful if connected to the formal planning process. Costa (1995, p.5) outlined the environmental scanning main functions as learning about external environment trends and events, establishing their relationship, and making sense of the data. Environments scanning can help the management to achieve relevant objectives through the formulation of intended strategy and realised strategy. According to Costa and Teare (2000, p.166), environment scanning plays an important role when the companies grow in complexity as well as size. Furthermore, environmental scanning offers insightful and quality information and assists in solving a number of structural problems. Jogaratnam (2002, p.261) mentioned that environment scanning results in improved performance. Costa (1995, p.5) observed that strategic planning effectiveness is associated directly with the environmental scanning capacity. Environmental scanning enables managers to examine the environmental trends impact on the organisation by constantly reviewing the corporate strategy. Furthermore, it enables the organisations to profit from opportunities and provides an early signal of imminent challenges. As pointed out by Jogaratnam and Law (2006, p.173), environmental scanning drives the process of strategic planning and facilitate managers to make effective decisions. Sustainable development Sustainable development, according to Murphy (2008, p.47) involves the attempts for bottom line auditing with the objective of becoming committed to the creation of a long-serving system that is stable and could meet the current, and future generations’ needs equitably. As pointed out by Murphy (2008, p.48), sustainable tourism can become a tangible, sustainable development expression. Tourism as a viable tool for the economy has led to substantial and positive economic benefits to both visitors as well as hosts. Tourism development according to Jayawardena, Patterson, Choi, and Brain (2008, p. 265) has shifted away toward more sustainable development considering that it focused more on economics-oriented development. Therefore, sustainable development is what companies in tourism industry should endeavour to accomplish. Although there are ongoing conceptual debates regarding sustainable development and the sustainability of the hospitality industry, Prudhomme and Raymond (2016, p.6) posit that the sustainable development concept involves three aspects that are different yet interconnected; economic, social, and environmental aspects. This tri-dimensional observation of sustainable development demonstrates that the hotel establishments’ sustainability orientation of will have a significant impact on their “triple bottom ill enormously influence the ‘triple bottom line’. Specifically, sustainable development has implication not just on the hotel establishments’ environmental performance but also on their economic as well as social performance. Sustainable development can assist management to achieve relevant objectives by overcoming negative impacts like the biosphere degradation, the mountain and coastal areas destruction by constructing entertainment sites, parking and hotel. According to Prudhomme and Raymond (2013, p.116), a sustainable development orientation can allow the management to reduce the negative effects associated with their activities on social, cultural and natural environments. Prudhomme and Raymond (2016, p.5) maintain that sustainable development orientation can be realised by first improving the life quality of host populations. Having such a strategic orientation offers organisations with a sustainable competitive advantage since they can differentiate their offerings from those of the competitors. Melissen, Ginneken, and Wood (2016, p. 39) argue that sustainable development enables organisations to improve their environmental performance. Conclusion In conclusion, it has been argued that value and revenue management are a crucial tool for matching demand and supply through by segmenting the customers according to the intentions of their purchase as well as capacity allocation to the various customer segments in a manner which allows for maximisation of the firm’s revenues. More importantly, they play a crucial role in the creation of demand as well as consumer behaviour management. On the other hand, environment scanning results in improved performance while adopting sustainable development practices help reduce the negative effects associated with activities in the hospitality industry, particularly on social and natural environments. Furthermore, sustainable development is considered as a major concern globally concentrating on issues like resources’ harvesting and use and renewal as well as the pollutants and waste release effects into the environment, and worldwide wealth distribution between generations. References Costa, J. (1995). An empirically-based review of the concept of environmental scanning. International Journal of Contemporary Hospitality Management, 7(7), 4 - 9. Costa, J., & Teare, R. (2000). Developing an environmental scanning process in the hotel sector. International Journal of Contemporary Hospitality Management, 12(3), 156-169. Heo, C. Y., & Lee, S. (2009). Application of revenue management practices to the theme park industry. International Journal of Hospitality Management, 28, 446–453. Jayawardena, C., Patterson, D. J., Choi, C., & Brain, R. (2008). Sustainable tourism development in Niagara Discussions, theories, projects and insights. International Journal of Contemporary Hospitality Management, 20(3), 258-277. Jogaratnam, G. (2002). Entrepreneurial Orientation and Environmental Hostility: An Assessment of Small, Independent Restaurant Businesses. Journal of Hospitality & Tourism Research, 26, 258-277. Jogaratnam, G., & Law, R. (2006). Environmental Scanning and Information Source Utilization: Exploring the Behavior of Hong Kong Hotel and Tourism Executives. Journal of Hospitality & Tourism Research, 30(2), 170-190. Kimes, S. E. (2000). Revenue Management on the Links: Applying Yield Management to the Golf-course Industry. Cornell Hotel and Restaurant Administration Quarterly, 41(1), 120-127. Lee, S. H., Bai, B., & Murphy, K. (2012). The Role Demographics Have on Customer Involvement in Obtaining a Hotel Discount and Implications for Hotel Revenue Management Strategy. Journal of Hospitality Marketing & Management, 21(5), 569–588. Lee-Ross, D., & Lashley, C. (2009). Entrepreneurship and Small Business Management in the Hospitality Industry. Oxford, UK: Elsevier Ltd. Melissen, F., Ginneken, R. v., & Wood, R. C. (2016). Sustainability challenges and opportunities arising from theowner-operator split in hotels. International Journal of Hospitality Management, 54, 35–42. Murphy, P. (2008). The Business of Resort Management. Jordan Hill, Oxford: Elsevier Ltd. Prudhomme, B., & Raymond, L. (2013). Sustainable development practices in the hospitality industry: An empirical study of their impact on customer satisfaction and intentions. International Journal of Hospitality Management, 34, 116– 126. Prudhomme, B., & Raymond, L. (2016). mplementation of sustainable development practices in the hospitality industry: a case study of five Canadian hotels. International Journal of Contemporary Hospitality Management, 28(3), 1-59. Read More