Paper Example on Maximizing Room Occupancy at Guards Polo Club

Introduction

Guards Polo Club is located in the outstanding natural surroundings of Smith's lawn nearby Valley and Savill Gardens. The Club is set to become the most wonderful polo clubs internationally. With this respect, the club owns hotel rooms, which also steers the sector of revenue. Room occupancy, therefore, is a serious issue for the organisation. Room occupancy is the rate of sold rooms about the total available. There is always a fluctuation in the occupancy from time to time; high occupancy rate links to improved sales from outlets like a drink, food, laundry, phone etc. Therefore the room occupancy is a measure of the success of a hotel to a bigger extent. The Guards Polo Club being the most famous and biggest in the region still does not achieve a 100% occupancy rate. This full percentage is not a real problem, but the optimum occupancy management presents the real challenge. Optimum occupancy ensures maximum revenue for the hotel. This is a problem which the club is facing and has been striving to solve. It's, however, key to note that, in hotel operations, occupancy does not only measure the rate of room occupancy but also measures the seat occupancy rate at the hotel.

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Literature Review

Not making use of the full absorptive capacity of the hotel links to the hotel profit depletion because the ideal rate of profitability is achieved when absorptive capacity is equal to the rate of occupancy. The main challenge for the management is the little knowledge of the key variables which control the rates of occupancy. Some of the previous case studies highlight some of the factors inherent with this type of problem. To start off, John and Anna analysed the relationships that exists between guest satisfaction, occupancy percentage and hotel room prices. The discovered that price is an essential predictor of the total guest satisfaction but the percentage of occupancy is not a vital predictor of guest satisfaction (Mattila, 2003).

Examination of the characteristics of the hotel and its impact on the occupancy rate of the hotel room in the case study of super deluxe 1st class hotels in Seoul, Korea has been done. The study applied the hedonic method of pricing; the outcomes showed that the price of the room, casino facility and conglomerate connection influence occupancy rate negatively as opposed to location, which influences occupancy rate positively. Furthermore, the study also indicated that the size of the hotel also affects the rate of occupancy (Soon, 2010).

Analysis of actual rates of occupancy of 3699 hotels which started during the seven-year period of 2002 through 2008 had been realised. The stabilisation period of these hotels was based on hotel size, location, and type and service level. Certain hotel locations and types stabilise more quickly and slowly, whereas hotel service and size are not essential determinants of the period of stabilisation. The period of stabilisation those depend on several factors which translates directly to the occupancy rate of the hotel (O'Neill, 2011).

Direct online booking is a factor in hotel occupancy. The variation in bed-place occupancy between off-peak and peak periods is affected by direct online occupancy. The empirical analysis evaluated 18 nations between the periods of 1997 to 2007 based on the use of the internet by consumers during the seasonal variations in the rate of occupancy. Internet majorly affects the occupancy rate on the positive side (Boffa, 2012).

The occupancy rate is also determined by the internal factors of success in the hotel set up. The success of the hotel operation is based on how well the hotel fulfils the customers' satisfaction. The information on the hotel industry management is, therefore, inevitable to handle the issue of room occupancy and seat occupancy in a hotel (Abdullah, 2012).

Internship Organisation and Research for Solution

Each hotelier knows and is familiar that occupancy is calculated by the division of rooms sold by total available (Cetin, 2016). Occupancy is one of the primary indexes considered in the science of Revenue management; the other two are RevPAR and ADR.

There is complex but fundamental economics involved in the performance of the hotel. Demand elasticity for the price is also referred to as the responsiveness of the demanded quantity of a service or a room to change in its price; in other words, it is the measure of desirability. The fact is that the too high price will most likely displace demand (Mak, 1979). Therefore, the revenue manager must tinker with their policies of pricing and tactics to make sure that demand is captured at the highest attainable rate of room and demand is not displaced. The management of revenue should optimise the intricate relationship between average rate and occupancy.

Duration of stay and price are the two basic levers for revenue management (Kimes, 1998). Striking a balance successfully between the two by management of duration of stay takes one closer to full hotel room occupancy. Revenue and hotel managers use 'dynamic pricing' to change the price point of the rooms concerning the demand (pace of booking) for a given future date (Abrate, 2012). The problem with this strategy is that, there are varying rates existing across various channel or accounts and that last-year performance is a poor indicator for the current year. Other factors to consider for the same strategy are group bookings, competitor pricing, special events, seasonality and macro market. In short, there is a thin line flowed by mangers in real time, not fully aware of which side they need to be.

Achieving optimum occupancy is the best solution for the problem. High occupancy is encouraged. However, high occupancy also increases the variable expenses. The structure of cost varies with market and hotel; hence, the level of optimum occupancy varies it will not be near or at 100% (O'Neill, 2004). Very low levels of occupancy say 50-60% do not enable the management to elevate the average rates since properties must attain their minimum levels of occupancy. Corporate accounts with a high profile are the highest-paying guests in restaurants in which rates of rooms can be discounted to generate occupancy.

Conclusion

With the industrial and academic opinions identified so far, the potential solution to achieve maximum attainable and optimum occupancy rate in hotel rooms revolve about identifying the factors affecting hotel occupancy and using the applicable strategic management to handle the situation. For instance, pricing by the revenue management greatly affects the rate of hotel room occupancy, therefore as highlighted above, the hotel and revenue managers must play safe with their pricing policies to avoid displacing the demands, the higher the demand, the higher the occupancy rate. Despite the price being the major factor in handling hotel occupancy rate, other strategies such as dynamic pricing, online booking and length of stay management also translate into improved occupancy rate. The management, however, must be smart in handling the customers while using these strategies. Considering the case of dynamic pricing, the problem with this strategy is that, there are varying rates existing across various channel or accounts and that last-year performance is a poor indicator for the current year. The use of the internet, on the other hand, has a more positive effect on the hotel occupancy for a simple case of online booking. The booking by the internet makes it easier to manage the level of occupancy based on time of stay type of occupancy, e.g. group or special events, hence online booking is a good application to improve optimum occupancy in hotel rooms.

References

Abdullah, A. A., & Haan, M. H., (2012).The internal success factor of the hotel occupancy rate. International Journal of Business and Social Science, 3(22). Retrieved from http://www.ijbssnet.com/journals/Vol_3_No_22_Special_Issue_November_2012/18.pdf

Abrate, G., Fraquelli, G., & Viglia, G. (2012). Dynamic pricing strategies: Evidence from European hotels. International Journal of Hospitality Management, 31(1), 160-168. Retrieved from https://www.sciencedirect.com/science/article/pii/S0278431911000958

Boffa, F., & Succurro, M., (2012). The impact of search cost reduction on seasonality. Annals of Tourism Research, 39(2), 1176-1198. Retrieved from https://www.sciencedirect.com/science/article/abs/pii/S0160738312000072

Cetin, G., Demirciftci, T., & Bilgihan, A. (2016). Meeting revenue management challenges: Knowledge, skills and abilities. International Journal of Hospitality Management, 57, 132-142. Retrieved from https://www.sciencedirect.com/science/article/pii/S0278431916300810

Kimes, S. E., & Chase, R. B. (1998). The strategic levers of yield management. Journal of service research, 1(2), 156-166. Retrieved from https://journals.sagepub.com/doi/abs/10.1177/109467059800100205

Mak, J., & Nishimura, E., (1979). The economics of a hotel room tax. Journal of Travel Research, 17(4), 2-6. Retrieved from https://journals.sagepub.com/doi/abs/10.1177/004728757901700401

Mattila, A. S., & O'Neill, J. W. (2003). Relationships between hotel room pricing, occupancy, and guest satisfaction: A longitudinal case of a midscale hotel in the United States. Journal of Hospitality & Tourism Research, 27(3), 328-341. Retrieved from https://journals.sagepub.com/doi/abs/10.1177/1096348003252361

O'Neill, J. W., & Mattila, A. S. (2004). Hotel branding strategy: Its relationship to guest satisfaction and room revenue. Journal of Hospitality & Tourism Research, 28(2), 156-165. Retrieved from https://journals.sagepub.com/doi/abs/10.1177/1096348004264081

O'Neill, J. W., (2011). Hotel occupancy: Is the three-year stabilisation assumption justified?. Cornell Hospitality Quarterly, 52(2), 176-180. Retrieved from https://journals.sagepub.com/doi/abs/10.1177/1938965510393733

Soon K, H. (2010). Hotel property characteristics and occupancy rate: examining super deluxe 1st class hotels in Seoul, Korea. International Journal of Tourism Sciences, 10(3), 25-47. Retrieved from https://www.tandfonline.com/doi/abs/10.1080/15980634.2010.11434630