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Hotel Unique Case Study for Business Year 2016

Prepared by: Mohamed Shawky

Prepared on: 28/09/2015

“Without change there is no innovation, creativity, or

incentive for improvement. Those who initiate change

will have a better opportunity to manage the change

that is inevitable”

William Pollard

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Executive Summary

The purpose of this study is to inscribe a pathway for Hotel Unique to achieve Rank 1 in RGI

amongst comp set through strategic planning to uplift HU pricing to market equilibrium price

whilst concurrently explore opportunities for growing higher rated leisure, MICE, and

business segments to compensate/ replace low rated segments.

This report will begin by identifying the shortfalls in 2015 RGI performance “Areas of

opportunity” and suggest 2 hypothesis for 2016 to restore fair market share, before suggesting

KPIs for 2016. SWOT analysis will be also conducted to identify HU critical success factors

in 2016 before moving into a detailed optimization action plan per market segment.

This report is to critique HU pricing strategy over 2015 and provide sound recommendations

on strategic considerations and planning; required changes; and investments.

The principal used in this report is “reengineering” with robust segments shifts in 2016 with

focus on transient high rated segments to replace low rated segments without compromising

hotel occupancy. This process which is also called constructive destruction has been often

used in situations where a 180 degrees change is required.

The goal of the study is to shed more light on HU performance, propose a plan of action to

achieve Rank 1 in RGI amid comp set, and propose an optimization plan per market segment.

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TABLE OF CONTENT

Introduction .............................................................................................................................. 4

1. Identifying shortfalls........................................................................................................... 5

2. Goal setting ......................................................................................................................... 7

3. SWOT analysis ................................................................................................................... 7

4. Critical Success Factors ...................................................................................................... 7

5. Strategy setting.................................................................................................................. 10

6. Business Mix Reingineering ............................................................................................. 10

7. Demand Calendar.............................................................................................................. 11

8. Action plan ........................................................................................................................ 11

8. Optimization plan.............................................................................................................. 15

9. Conclusion ......................................................................................................................... 17

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Introduction

“Hotel Unique” is an iconic landmark situated in TumBakTou and consists of 301 Rooms &

Suites overlooking a beautiful greenfield on the west wing and skyline of the city from east

wing. 85% of the rooms are located on west wing.

HU also consist of Lobby Café, ADD, Sushi Bar, Fine Dining and an Outdoor Lounge.

Guests staying in the hotel can enjoy Tennis, Mid-size Spa, Cycling, City Tours, Shopping

Tours, Excursions etc.

TumBakTou is a very dynamic city with world class attractions for both business and leisure.

City receives fairly a good number of tourists (Closer 11 M annually) and has approximately

105K keys in the city.

HU has been in the market for last 3 & ½ years and product is fairly new and luxury. HU has

a fair competitive set established and comp set is on par in terms of product, but at a preferred

location. The biggest challenges for HU have been;

- Establishing fair business mix with an objective to drive business segments.

- Attracting leisure segment.

- Not been primary / preferred location in the city.

- Highly competitive/dynamic pricing market

- Establishing MICE segment.

- Constant changes in the commercial team (Sales, Marketing, and Distribution)

HU has been achieving fairly good MPI (0.92), ARI (0.68) & RGI (0.61 to 0.63).

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A) Identifying shortfalls

Occupancy ADR RevPAR

Date This Year Index (MPI) This Year

Index (ARI) This Year

Index (RGI)

My Prop Comp Set My Prop Comp Set My Prop Comp Set

2015 80.0 87.0 0.92 500.00 740.00 0.68 400.00 643.80 0.62

Given the above information, HU performance low RGI is caused by low ARI which is

considerably below the market that clearly signals an unmistakable area of improvement. The

MPI performance at .92, indicates there are some missing opportunities with Occupancy.

This report will now use reverse engineering technique to set the KPI for 2016 in view of the

market dynamics information. 2 Hypothesis will drawn based on the market analysis:-

Hypothesis A:

Occupancy 2016

This Year % Chg Index (MPI)

My Prop Comp Set My Prop Comp Set

82.5 85.0 2.5 -2.0 0.97

ADR 2016

This Year % Chg Index (ARI)

My Prop Comp Set My Prop Comp Set

842.42 810.43 0.68 0.10 1.04

RevPAR 2016

This Year % Chg Index (RGI)

My Prop Comp Set My Prop Comp Set

695.00 688.87 0.74 0.07 1.01

Given the Comp set performance in 2015, it is realistic to rationalize that Comp set would

capitalize on 2015 performance and increase REV PAR by 7% (which is the average growth

year on year in the city) – this growth would mainly occur from ADR due to the already high

occupancy performance – resulted from eating from HU share from the leisure market.

Above poses an opportunity for HU to bring ADR to the market price, whilst strategically

gaining 2 points in Occupancy. The ADR growth level by 68% compared to LY would still

be in the realm of reality as HU rate has been below the market price. Growth in rate would

result from change of business mix and replacement of low rated business with high rated

business whilst gaining occupancy from untapped opportunities in MICE, Leisure, and

Corporate.

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Hypothesis B:

Occupancy 2016

This Year % Chg Index (MPI)

My Prop Comp Set My Prop Comp Set

80.0 87.0 0.0 0.0 0.92

ADR 2016

This Year % Chg Index (ARI)

My Prop Comp Set My Prop Comp Set

868.75 791.80 0.74 0.07 1.10

RevPAR 2016

This Year % Chg Index (RGI)

My Prop Comp Set My Prop Comp Set

695.00 688.87 0.74 0.07 1.01

This hypothesis suggests increasing the rate whilst keeping MPI flat, which is similarly

rationalized if some low rated accounts have been totally replaced with high rated accounts

without increasing occupancy.

P.s: equilibrium pricing is where demand and supply intersects and it refers to the right

market price.

Above figure indicates that HU sells well below the equilibrium pricing in the market which

signals a missing opportunity as hotels at this pricing are faced with a higher demand than

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supply and should HU increase the pricing to the market equilibrium price there will be still

be sufficient demand at this pricing category.

B) Goal Setting

To increase HU ADR whilst holding on MPI position to achieve RGI 1, through concurrent

replacement of low rated business by new high rated business from FIT, OTAs, MICE,

Leisure, and Corporate.

C) SWOT analysis Positive Negative

D) Critical success factors to achieve RGI 1

This part of planning is concerned with the factors that are vital for the strategy to be

successful

- Transportation: Invest in buying/ leasing buses to mitigate the location resistance

factor for Corporate, MICE, and Tour Operators business.

Inter

nal

Strength Iconic land mark

Luxury product

New product

255 units with Greenfield view

46 units with Skyline city view

Sushi Bar

Fine dining

Outdoor lounge

Tennis

Spa

Cycling

Weakness Distant Location Low ARI performance High turnover in sales and marketing

Business mix challenges leading to

wrong price positions

Poor Market Research and

Development

Extern

al

Opportunities Shopping mall Excursions Dynamic City with world class

attractions Business and Leisure segments

MICE segment Weddings Getaway and Escape destination

Threats Incoming hotel supply due to low

barriers to business Bargaining power of customers Availability of substitute products Competition rivalry leading to price wars

Increased government regulations

Domestic shortage of skilled labour

Rising costs of raw material

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- Brand Recognition:

o Escape Get Away Identity: to create/ reinforce the escape get away identity to

the HU brand via marketing material/ collaterals. Weekend getaway,

Romantic Getaways.

o Billboards still enjoy a strong impulse on City audience and should support

brand recognition. http://www.forbes.com/sites/dailymuse/2015/09/24/the-

secret-to-calling-your-boss-out-on-a-mistake-like-its-no-big-deal/

o Google per click campaign during the low season

o Social Media Campaign: Facebook, Instagram

o Loyalty program tied to hotel F&B and Rooms

o Metasearch engines deals such as trip advisor listing and hotels combined

o Corporate Social Responsibility events to improve recognition.

- Invest in hiring a skilled sales force and provide clear targets tied to both extrinsic

and intrinsic rewards system:

- New Room products: Such as

o Presidential suites, Executive floor rooms, 2 Bed rooms’ suites are often high

contributors to ADR. Increase supplement of Suites based on demand

o Create 2 new room types with a Greenfield view based on the high and low

floor with a supplement of 200 AED in between. Two products could be

differentiated by amenities.

- Invest in a Pricing shopping tool : According to the market and proper use of

pricing techniques:

o Skim: Selling above the market during given dates based on the demand, BOB

and backed with HU undifferentiated product

o Surround: use HU room types Skyline view and Greenfield view to come

between comp set pricing. It is about being competitive but at the same time

targeting niche markets who could buy at a premium supplement

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o Penetrate: Increase MPI during low demand season by penetrating pricing

strategy. Rate plans such as ADV purchase and Room only and BB could be

instrumental in that. Restrictions too could be used to fence rates Vs demand.

Figure 2 pricing based on BOB

- Invest in a Revenue management system: o Inventory management and Proper use of LOS, No Arrival

o Yield by room type per market segment

o Data collection reports :

Daily pick up report

Pace Report

Production by GOB

Production by room type

Production by account by segment

Production by rate plan and transaction code

- Reengineering Market segmentation staking “often called constructive

destruction”: Create a plan per market segment based on HU demand calendar with

focus on optimizing high rates segments to substitute low rated segments. This notion

of total replacement of segments is prudent to enhance ADR to such remarkable limit.

- Market Research: to understand what business is out there in comp set and this

could be done by sales team or a 3rd party. Regular visits to comp set will be

instrumental in driving existing business to HU and restore market share. All visit

reports should lead to a master “New Accounts list” and be tracked weekly for

production.

- Augment presence on Social Media and Improve Guest review scores across

OTAs and Metasearch engines.

- Sales and Marketing expenses will shift to Digital & Travel Roadshows.

DOW Events DATES BOB Occ% ADR BOB Al Maha ArjaanAl Maha Rate

ChangesAl Manzel Cristal Salam

Ramadan Abu

DhabiAl Manzel Cristal Salam

Ramadan Abu

Dhabi

Mon 0 28-Sep 91% 318 425 25 320 300 225 105 125 200

Tue 0 29-Sep 87% 316 415 15 323 300 225 92 115 190

Wed 0 30-Sep 75% 314 399 -1 330 300 225 69 99 174

Thu Bon Jovi 1-Oct 74% 306 399 -1 320 400 388 79 -1 11

Fri 0 2-Oct 72% 303 399 -1 340 400 388 59 -1 11

Sat 0 3-Oct 69% 320 415 15 325 400 417 90 15 -2

Sun 0 4-Oct 71% 332 415 15 320 400 417 95 15 -2

Mon 0 5-Oct 79% 337 415 15 325 400 417 90 15 -2

Tue 0 6-Oct 73% 336 415 15 330 400 417 85 15 -2

Wed 0 7-Oct 73% 336 415 15 330 400 417 85 15 -2

Thu Dave Matthews 8-Oct 72% 336 415 15 399 400 417 16 15 -2

Fri 0 9-Oct 57% 328 399 -1 399 400 417 0 -1 -18

Sat 0 10-Oct 64% 345 399 -1 399 400 417 0 -1 -18

Sun 0 11-Oct 65% 344 399 -1 475 400 417 -76 -1 -18

Mon 0 12-Oct 66% 344 399 -1 475 400 417 -76 -1 -18

Tue 0 13-Oct 64% 344 399 -1 475 400 417 -76 -1 -18

Wed 0 14-Oct 58% 350 399 -1 475 400 417 -76 -1 -18

Thu Islamic New Year 15-Oct 53% 352 415 15 475 400 417 -60 15 -2

Fri 0 16-Oct 40% 346 415 15 475 400 417 -60 15 -2

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- Investment in Technology:

o Free Wifi will be a strong competitive advantage for Corporate segment

o Business Centre

o Cutting edge audio visual equipment for MICE

E) Strategy setting

Figure 3

I. Business MIX Reengineering

2015 Hypothesis A 2016 Hypothesis B 2016

Bus Mix RNs ADR Revenue Bus Mix RNs ADR Revenue Bus Mix RNs ADR Revenue

FIT 10% 8789 667 5862396 FIT 15% 13596 990 13459835

FIT 20% 17578 1000 17578400

OTA 25% 21973 667 14655991 OTA 30% 27192 990 26919670

OTA 35% 30762 1000 30762200

Corporate 10% 8789 548 4816482 Corporate 20% 18128 800 14502179

Corporate 15% 13184 800 10547040

Leisure 5% 4395 475 2087435 Leisure 10% 9064 700 6344703

Leisure 10% 8789 700 6152440

MICE 5% 4395 530 2329138 MICE 15% 13596 750 10196845

MICE 10% 8789 750 6591900

Long

term 45% 39551

359 14198953

Long

term 10% 9064

545 4939805

Long

term 10% 8789

545 4790114

Total 80% 87892 500 43950395 Total 82.5% 90639 843 76363037

Total 80.0% 87892 870 76422094

REV PAR 400 REV PAR 695

REV PAR 695

Above is a simple presentation on the proposed business mix for 2016 to achieve RGI of 1

through 2 scenarios. Data collection including but not limited to pace Vs LY will be key in

understanding the progress of the strategy and what needs to be done to fine tune outcomes.

Above process will need to be done based on through understanding of low rated segments

and replacement with high rated segment. A risk assessment should envelope the entire

Create Action Plan Per Market

segmnet

Impelment Action Plan

Monitor & Review

Production

Evaluate & Make

Necessary Adjustments

Business Mix setting

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process based on severity and probability of losing MPI. Understanding of emerging

opportunities and having a plan to acquire new accounts will be critical in this process.

II. Demand Calendar

Above sample presents simple staking of segments based on demand per month and would be

developed also per Day of the week to ensure optimal optimization of ADR and MPI.

City high events which are considered peak would be identified and priced according to

RACK with suitable to demand restrictions such as LOS, No Arrival, and Room Type

III. Action Plan

FIT & OTAs

Follow a Skim pricing strategy during high demand season and surround strategy

during shoulder season, and penetration during low demand season.

Create Get away escape packages tied with suites and executive floor targeting

families and couples inclusive of transportation. Create a promotion during low

demand stay 3 nights and get 15% discount on F&B.

Create a package for honey mooners and Romantic couples inclusive of Spa

Develop a discount scheme tied with Loyalty program during low and shoulder

seasons based on 10% discount of BAR.

Increase Suites supplements by 60% Vs 2015 and add a MLOS during Weekends.

Incentivizing Res/FO/sales team for selling presidential suites by 7%.during

Weekdays

Launch Google Per Click campaign to optimize bookings of Brand website using key

words such as Getaway and Escape. Summer optimization

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

High Shoulder High High High

FIT & OTAs

Corporate Corporate

FIT & OTAs FIT & OTAs FIT & OTAs

Leisure

MICE

FIT & OTAs

Corporate

Leisure

MICE

Long term

Long term

Shoulder High Low

Jan

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Strike partnership deal with met search engines hotels combined.com to list brand

website.

Launch Radio Campaign to maximize selling Get away packages tied with

Presidential suites packages

Use threshold pricing technique shown below during city high events

Control No shows and Cancellation through a daily automated report

Create a shopping mania package tied with the mall inclusive of transportation

Ensure basic room type is available most of the time to improve ranking on OTAs

Partner with preferred commission programs on OTAs selectively

Maintain presence in weekly, monthly advertorials such as time out.

Corporate

Space for Corporate will be available due reduced long term

Conduct a daily competition check aiming to produce a list of companies that work in

the comp set.

Create a rate structure including a dynamic 10% off BAR corporate rates. Figure 4

Review through BCG matrix low rates accounts under DOG category. Identify

through BCG matrix Question mark accounts to optimize and move into stars. Retain

cash cow accounts. Figure 5

Summer rates to be offered from 15/05/2015 till 31/08/2015 only. All VS and CP

rates to be kept the same during the summer

Prompt selling higher room categories (Premium and Club) for VS and CP accounts

to enhance ADR. This is happening as of Q4 to prepare accounts for next year

strategy.

Maximize our market share from Government segment through targeted sales calls

and promoting loyalty scheme

Offer All VS Corporate rates to be inclusive of transportation

Divide the market based on industries such as pharma, oil and gas as opposed to

location. This proves to be worthy for the business due to different industries being

impacted by diverse economic factors

Partner with top Consortia partners such as AMEX, Travel port, Sabre Holdings,

Capita travel, BCD travel, CWT.

Join preferred listing in Galileo to optimize GDS bookings

Invest in getting Out bound sales offices in Europe to reinforce hotel position from

international RFPs

Organize sales blitz to the City and organize fam trips to the hotel by the new buses to

show the distance issue has not been recovered.

Regular visits + Tele Sales for the production dropping Accounts Compare to last

Year

Figure 4

2015

2016

Rooms NGHTS Req. 500 1000 1300  1500 

541 491

<50 50 100 200 300

990 891 841 791 741 691 641 591

450 400 350 300 250 200667 600 550 500

COR5 VS1 VS2 VS3 VS4BAR COR1 COR2 COR3 COR4

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Figure 5

MICE

Providing availability for MICE will be feasible due to lesser long term and pricing

positioning will be similar to Corporate

Focus on International RFPs through C.event preferred listing

Conduct market research and compile a list of MICE groups using comp set. A master

list to be created and updated for production weekly.

Target the companies that produced LY

Target market by industry as opposed to location and develop a plan to attract each

industry i.e Pharma segment

Revamp MICE DDP packages and collaterals to depict an attractive product for

MICE bookers. i.e Coffee break in the spa, wellness coffee break, 15 minutes neck

massage

Attend IBTM and other main MICE exhibitions

Create an attractive wedding brochure and maintain presence on wedding fairs,

magazines

Invest in getting Out bound sales offices in Europe to reinforce hotel position from

international RFPs

Attract sport groups given hotel sports facilities through wellness and sports forums,

magazines and DMCs.

Leisure

Develop a plan per market including Special offers, seasonality, Early bird, allotments

and release period.

Work on replacement of CIS market with GCC market opportunity

Be part of international markers brochures

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Host FAM trips in the summer to build awareness about the HU

Participate in all international travel exhibitions i.e in Dubai, Moscow, Berlin..

Develop collaterals and hotel content with a unique leisure identity in different

languages

Develop F&B concepts that match the leisure market

Penetrate the GCC market strategically during holidays with Suites product and

through Arabic targeted online / offline campaigns

Contract wholesales such as GTA, DOTW, Hotel beds, Hotel4u to penetrate GCC

market. Certain restrictions can apply during public holidays not to dilute business

Below are examples of strategy setting per market:

Figure 6

Figure 7

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Figure 8

Long term Review low rated accounts from this segment and prepare a list of accounts to be

replaced by end of the year. Letter to be sent to these accounts by Q4.

Keep higher rated business

Target this segment during the summer strategically to support MPI performance

during the low season

IV. Optimization Plan

Optimization by LOS

This technique is concerned with identifying LOS opportunities per segment and

apply when suitable based on season, DOTW, and segment. i.e set on the basic room

type a MLOS of 2 nights every Thu on OTAs hence leaving higher room categories

only available for 1 night.

Application of this technique is vital to improve ADR whilst keeping balanced

occupancy without spikes.

Optimization by Lead time

This technique is concerned with identifying lead time opportunities hence amending

advance purchase strategies to reap incremental business only rather than dilute

existing business. This could be ideal for FIT and leisure markets to enter new

markets that book earlier at preferred rates which will stimulate BOB and allow

yielding for later and last minute booking.

This supports a progressive price as opposed to regressive pricing

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Optimization by Rate plan

This technique is concerned with identification of higher ADR packages that will be

open on the account of other low rated ADR rate plans such as restricted rates plans

that will need to be limited.

Practice on this is instrumental in rate plans staking based on profitability, LOS, and

cancellation policy

Special offers and promotions will need to be monitored closely in high demand

periods and closed once allocations for such rates have expired

Opaque rates and secret deals are often resourceful in low demand dates and tied with

a LOS they become very useful

Optimization by Room Type

Popular optimization technique and is meant to open and close room types based on

demand fluctuations. i.e closing classic room and opening greenfield room or even

suites to tacticfully surround comp set offerings

Creating new rooms types are key to reaping incremental revenues and prove very

successful in many situations.

This is meant to exploit all the hotel inventory and correspond with demand

Optimization by Channel

Focus marketing strategy to support brand.com performance

o Invest in a guest journey CRM

o Regular engagement with database through offers via HTML, SMS, Radio

o Invest in quality content – copyright, pictures and videos

o Regular Flash sales on brand.com

o Streamline efforts across social media, trip advisor with brand.com

o Improve overall reputation management and guest review scores

o Implement motives why book direct! Such as upgrades, late checkout,

recognition and ensure immediate gratifications

Using technology to target niche markets with different pricing strategy using

channels without causing disparity in the market. Using Expedia market with IP

address to target UK market

Using language barrier to offer special rates to Chinese market online and targeting

incremental business without diluting existing business. Offer special GCC market

rates to KSA and Kuwait market through Arabic media channels prove to be also

resourceful at times.

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Conclusion

Today’s business world is evolving faster than ever before. Amplified by technology that is

enabling the world to become smaller by means of the internet. Nowadays business

approaches are forced to adapt, be more efficient, receptive, and innovative.

This report has investigated thoroughly the root causing problem in RGI index and ARI has

been identified as an immediate area of improvement. Despite the high expected jump in

ADR Vs LY, the report has proven through market dynamics theories that this is achievable

since HU has been selling below market equilibrium price all along. The report provided a

vantage goal of RGI of 1 and the 2 scenarios to achieve it before SWOT analysing HU. Such

position could be secured through targeted reengineering approach of segmentation

Critical success factors to make 180 degrees change have been identified with focus on

product and technology enhancement to create competitive advantage amid comp set. Shift of

sales and marketing expense into Digital and Travel Road Shows. Transportation will be key

in driving corporate segment whilst creation of new room types will be instrumental to

change ADR. Leisure market acquisition will be reaped through penetrating new markets.

Business mix has been proposed in 2 hypothesises to allow HU to manoeuvre with the new

strategy in boosting ARI to the desired level. A plan per market segment has been developed

after analysing the hotel SWOT, and Critical success factors.

This report assumes that growth of Comp set will be at 7% hence reaping RGI of 1 will be at

hand. This assumption has been based on historical and economical out look of the city.

“Planning is bringing the future into the present so

that you can do something about it now”

Alan Lakein