INSTITUTE OF HOTEL MANAGEMENT, CHENNAI

HOSPITALITY MANAGEMENT RESEARCH PAPER

TOPIC:

REVENUE MANAGEMENT IN FOOD AND BEVERAGE SERVICE

Submitted to: Mr. Jitendar Das

Submitted by: Arushi chadha

MSC 1st year

arushichadha@gmail.com

REVENUE MANAGEMENT IN FOOD AND BEVERAGE SERVICE

by

Arushi chadha,

Msc 1st year

ABSTRACTAlthough hotels and restaurants have expressed strong interest in implementing restaurant revenue management (RRM), data, change management and system integration issues have often stymied their efforts. The intent of this article is to present a framework for understanding the various aspects of RRM in a full-service restaurant and to identify fertile areas for future research. We present RRM as a building consisting of various pillars, and in this research we have focused coffee shop or all day dining restaurant of a hotel.

INTRODUCTION

What is revenue management?

Revenue management is technique to optimize the revenue earned from a fixed, perishable resource. The challenge is to sell the right resources to the right customer at the right time.

Revenue management plays a vital role in hotel industry. Hotels have always endeavored to maximize the entire asset. The difference today is the desire by hotels and resort to sophisticate their approach to

profit maximization. In essence, revenue management is simply about optimizing revenues and profit from all revenues and profit from all revenue streams (rooms, food & beverage, parking spa other activities). The major sales of any hotel deals with either room sales or food & beverage sale.

Role of revenue management in food & beverage service-

Revenue management in food and beverage service deals with pricing strategies, market segmentation, marketing techniques, and several other factors in simple words it is the criteria to maximize your revenue.

Revenue generating departments or outlets in food and beverage service of a five star hotel-

In room dining or room service Fine dining restaurant Bar Lounge All day dining restaurant or coffee shop

This research consist of revenue management in food and beverage service particularly in coffee shop of a hotels. A qualitative research has been done by the help of questionnaire, meeting objectives and several other sources.

OBJECTIVES:

Role of techniques used in revenue management. Promotional strategy Pricing strategy Marketing techniques

Market segmentation in revenue generation. How does market segmentation leads to profit

maximization. Factors to attract market segmentation.

Role of buffet in coffee shop in revenue maximization. Buffet profits over ala’ carte Management of buffet food cost

METHODOLOGY

Below are the certain basic sources referred for this research:

PRIMARY SOURCES: Managers and captains of coffee shop of hotels through questionnaire.

SECONDARY SOURCES: Various books and magazines.

TERCIARY SOURCES: Internet

TOOL USED FOR RSEARCH : The tool we used for our research is our questionnaire prepared on the basis of research objectives.We have listed ten objective based questions so it could be easy and less time consuming for the person who is filling it, objective questionnaire can be easily analyzed also. That’s how its relevant for both sides.

We have targeted ten hotels in total in Chennai. Each coffee shop have been surveyed in the hotel we have targeted.By the help of these questionnaire we can reach a specific level where we could know that how revenue is generated and managed food and beverage service of a restaurant.

Questionnaires have been attached in the end

SAMPLE SIZE : Sample size for this research are ten hotels that is, ten hotel’s have been surveyed and on the basis of this survey and the reference of certain books we have reached on a point. Hotels on the location of Chennai only have been targeted.

REVIEW OF LITERATURE

“ These five P’s- Product, Place, Promotion, Price and People, are in fact the critical elements which are used to influence demand according to market forces to improve the long term profitability of organizations.” Richard kotas & Chandana Jayawardena

Oct 1994

On the above mentioned statement marketing mix elements has been mentioned. These factors improves the profitability of an any organization. These factors works in following ways in food and beverage service-

PRODUCT- quality of food and beverage products and its service, how the product mentioned in the menu, portion size of the product , USP of the restaurants, these factors related to product leads maximization of profit.

PLACE-Place refers to location of hotel in which restaurant is, accessibility of the place and market segment of restaurant.

PROMOTION- Promotion is the vital factor in selling of any product. It deals with personal selling, advertising, merchandising, public relations, public events, mailing etc.

PRICE- Price is the most considerable term for revenue generation. It consists of variable pricing, credit facilities , volume discounting, or any

complimentary combos. In terms of revenue generation pricing can be molded in these mentioned factors.

PEOPLE- People here referred to staff of the organization. We should hire well trained sales staff, sales oriented staff like hostess, waiters, bar tenders etc.

“Customers will frequent a restaurant not only because of its food and service, but also because they feel the price they are paying represents value of money” BERNARD DAVIS, ANDREW LOCKWOOD& SALLY STONE

May 2012

There is a need for guest to be able to identify and associate themselves with a particular restaurant for a particular meal occasion. In other words at a level total cost of the meal is not such an important factor to the guest as perhaps are the other aspects of the operation, such as the standard and range of food and beverages, the level of service offered and degree of comfort, décor and atmosphere. However, there has been some emphasis over recent years on the set price menu in luxury restaurants, particularly for lunch, to attract business account meals where an idea of the cost can be ascertained beforehand.

“If the prices establishment by management must strike a very fine balance between the consumers’s need for value and the owner’s need for maximum

return on investment, prices must be determined to induce new patronage” ROBERT D. REID

Feb 2009

Price should be established with the maximum long term profits of the restaurant in mind. Patronage here refers to our guest. In a restaurant it would be easy to set prices at a level that would produce very high rate of return for a brief period of time, but after few weeks, the guest would realize the perceived price-value was very low when this happens the total volume and profitability is likely to fail significantly. Therefore the wise manager decides to focus attention on long-term rather than short-term profits. Many managers are tempted to reduce prices in the hope that more patrons will purchase the item and the result will be increased gross sales figure. This is a trap for the unway manager. Simply instead, for the operation to enjoy increased gross revenue, many more patrons need to be served, and increased volume into itself no gurantee or increased gross sales.

“Market segmentation is an important aspect of market pricing. An organization cannot be all things to all people. To market its products cost effectively, it must clearly identify its customers and market segments they belong to” PAT LEVINGS

June 1974

Market segmentation is one of the most important factor for any sort of business. It’s a market strategy that involves during a board target

market into subsets of consumers who have common needs and priorities and then designing and implementing strategies to target them. let’s take an example, in an industrial area the restaurant with needs like free wifi, meeting tables and some stationary items run well, and on other hand a restaurant near some shopping places would prefer some bright lighting, live music band to have better business. Majorly of our business in food and beverage service depends on market segment, we have to design menu and other facilities according to our market segmentation. Most of coffee shop in India prefer Indian food in their buffet because it the guest demand. While market segmentation have a major link with pricing. The price of the product is likely to be higher than a competitive market and the price can be increased further if the market can segmented with different segments charging higher prices to those segments willing and able to pay more and charging less to those whose demand is price elastic like rates would be higher in an industrial area rather than any other simple area.

“Our focus group studies indicated customers wanted three things- they wanted a varied menu with plenty of choices, they wanted to control their time and they wanted unlimited portions. These requirements can only provided through the buffet format. This is particularly important in Indian dining locations serving with frequency market” HOUSTON MILES

MAY 2007

On the above said statement, the importance of buffet has been stated. Buffet is a significant part of the coffee shop, almost every coffee shop of a hotel has buffet and its most revenue generating item in whole coffee shop from hotel point of view it gets the bundled amount at once, it requires less of service, it doesn’t have order dispensing problem. This is how buffet is beneficial for the premises. Now from the guest point of view as it mentioned in this statement, its less time consuming, more of the variety, unlimited portions, all at a fixed price. That is why guest mostly prefer buffet over ala’ carte’ in a coffee shop. Its beneficial for both guest and hotel.

COLLECTION OF DATA

The data on the basis of questionnaire we have obtained from various hotels in Chennai only, are presented in tabular form as below-

In this mentioned table there is question number of the questionnaire and hotel name which has been surveyed, and their optional results respectively.

QUESTION NO.-

1 2 3 4 5 6 7 8 9 10

HOTEL’S NAME :

RADISSON BLUGarden cafe’

B B D D A (a) A (a) B A, D A B

HILTON HOTELEST

B A A A B B A A D D

THE LEELA PALACESpectra

A, B A A, B A A (b) A (a) A D A D

THE WESTINSeasonal tastes

B B C A A (b) A (a) A D A D

HYATT REGENCYSpice hatt

B A A B A (a) A (a) B A B A

ITC GRAND CHOLAMadras pavilion

B, C B C A, D A (a) A (a) A A,B,D D D

TRIDENT CHENNAICinnamon

B A A B A (b) A (a) A D A D

THE RAINTREEThe kitchen

B A A A A (b) A (a) A A, D D D

TAJ COROMANDELAnise

B A C D A (b) A (a) B D A C

LE ROYAL MERIDIENCilantro

B B D A A (b) A (a) A D D A

Our basic data is literature and questionnaire form. The data obtained from books has been collected by visiting various libraries like library of IHM Chennai and Anna library in Chennai. Questionnaires are made on the basis of objectives of the research and has evenly surveyed in various hotels in Chennai.

ANALYSIS OF DATA

Through surveying questionnaire we reached a level where our data could be analyzed through the prospectus of different hotels across the Chennai, that is certain coffee shops in different hotels. The analyzation has to be done to know the basic criteria hotel follows to manage their revenue in food and beverage operations particularly in coffee shop or all day dining restaurants of the hotel.

We have conducted survey in various hotels in Chennai through the questionnaire. We have asked this questionnaire to managers and captains of the outlet.

Analysis on the basis of questionnaire in form of statistical data is as follow-

Q.1- What promotional strategies do you use?

Personal selling Public relations

Advertising

Q.2-How do you increase your volume of sales?

Increasing the food and bev-erage prices

more physical business

0

1

2

3

4

5

6

7

Q.3-What are the different marketing tactics do you use?

Increasing overall quality

Hiring sales oriented staff

Publicity of the product

Discount or credit terms

00.5

11.5

22.5

33.5

44.5

5

Q.4-What pricing strategies do you follow?

Flexible pricingPrice buildingComplementary pricingGuest loyality discount

Q.5-Do you have buffet?

How do you manage the food cost of buffet?

Number of c

overs

Variati

on in ite

ms

By portion co

ntrol

Any other

0123456

Yes No0

2

4

6

8

10

Q.6-Do you serve buffet and ala’ carte both for certain meals?

Yes No

0123456789

What is more revenue generating?

Buffet Ala' carte'0

2

4

6

8

10

12

Q.7- Does market segmentation helps you in increament of revenue?

Yes No0

1

2

3

4

5

6

7

Q.8-What additional efforts you do to magnetize your market segmentation?

Free w

ifi

Speci

al mee

ting seati

ng

Live m

usic ban

d

Creating a

mbience

Any other

02468

Q.9- What up selling techniques do you focus to improve your profits?

Cross

sell m

ore profitab

le ite

ms

Sugge

sting s

easonab

le speci

als

Offer sp

ecific it

em

Understan

ding guest

psychology

012345

Q.10-How do you define your restaurant in terms of “value of money”?

Greater degree of service

Pleasant ambience

Tempting food

Meeting gues't need

0 1 2 3 4 5 6 7

CONCLUSION

This research basically revolves around different techniques and methods to improve and manage revenue in a coffee shop of the hotel. By referring so many books I would like to conclude that revenue consists different pricing strategies, selling product on a low price doesn’t work always, generally not in hotels.

Buffet in coffee shop plays a significant role in coffee shop as it explained by Mr. Houston Miles in Indian gaming magazine. It generates most of the revenue of the restaurant this came to sure by the questionnaire we surveyed, 100% hotels buffet leads more revenue over ala’ carte’.

Another factor which leads revenue generation is market segmentation , for example Raintree hotel in Chennai is a business hotel so they provides that sort of facility only which helps them in magnetizing their market segmentation. In simple words, revenue can be easily managed by knowing market segmentation around you and making arrangements accordingly.

Focusing on guest’s need, understanding their psychology can lead us meeting our volume of sales. Quality speaks louder than price, so we

should focus on our quality of service and product to have greater revenue rather decreasing its price. Most of the hotels, according to the survey hotel provide discounts also to get guest loyalty.

These are basis of revenue management in coffee shop of the hotel.

BIBLOGRAPHY

Profitable food and beverage managementBy Richard kotas & Chandna Jayawadena Year- Oct 1994, Pg no- 40

Food and beverage managementBy Benard Davis, Andrew Lockwood & SallystoneYear- May 2012, Pg no- 30

Hospitality marketing managementBy Robert D. ReidYear- Feb 2009, Pg no- 379

Profit from food service A Q and A approachBy Pat LevingsYear- June 1974, Pg no- 151

Indian gaming megazineHoustin Miles (VP F&B, Harrah’s entrainment inc)Year-May 2007, Pg no-24

REVENUE MANAGEMENT IN FOOD & BEVERAGE QUESTIONNAIRE

NAME OF THE HOTEL- ______________________________________NAME OF THE COFFEE SHOP- ________________________________

1. What promotional strategies do you use ?A. Personal sellingB. Public relationsC. AdvertisingD. If any other, please specify-

__________________________________________________________________________________________________________________________________________________

2. How do you increase your volume of sales?A. By increasing the level of food and beverage pricesB. By doing more physical business, e.g.- selling more food & beverages

1. What are the different marketing tactics do you use?A. Increasing overall qualityB. Hiring sales oriented staff, i.e. hostess, restaurant managers etcC. Publicity of the productD. Discount or credit terms

3. What pricing strategies do you follow?A. Flexible pricing (e.g., keep changing the price with shorter time duration)B. Price building (e.g., to bundle several items together ex- combos)C. Complementary pricing (e.g., compensate one item’s price while raising others one)D. Guest loyalty discount (e.g., offering something for free or a discount to get repeated

business)

4. Do you have buffet?A. Yes B. No

If yes- How do you manage the food cost of buffet price?

a. Number of coversb. Variation in items

c. By portion controld. If any other, please specify-

______________________________________________________________________________________________________________________________________

5. Do you serve buffet and al’a carte’ at your restaurant both for certain meals?A. YesB. No

If yes- What is more revenue generating?

a. Buffetb. Ala’ carte’

6. Does market segmentation helps you in increment of revenue?A. Yes, how please specify-

__________________________________________________________________________________________________________________________________________

B. No, how please specify-____________________________________________________________________________________________________________________________________________

7. What additional efforts you do to magnetize your market segmentation?A. Free wifiB. Special meeting seatingC. Live music bandD. Creating ambienceE. If any other, please specify-

______________________________________________________________________________________________________________________________________________

8. What up selling techniques do you focus to improve yours profits?A. Cross sell more profitable itemsB. Suggesting seasonable specials (i.e., chef’s special)C. Offer specific itemD. Understanding guest’s psychology

9. How do you define your restaurant in terms of “value of money”?A. Greater degree of serviceB. Pleasant ambienceC. Tempting foodD. Meeting guest’s need