Hospitality and Yield Management

This report provides a brief overview of the revenue and yield management in hospitality sector. The organization chosen for this report is ALH Group, which is an Australian hospitality firm, situated at Melbourne city of Victoria. The report gives a description of the company’s business in terms of its revenue and yield management. A critical analysis is also done in the report regarding its direct competitors, and their impact on elasticity of demand and revenue management strategies of the company. The report provides a brief description of different yield management strategies adopted by ALH group and strategies that are not used by company. It also includes market segmentation analysis of the hospitality sector along with identification of target market. Finally, report facilitates recommendations for the company that can prove to be success factors for company.

Description of the ALH Group’s Business

The Australian Leisure and Hospitality (ALH) Group is one of the well-known hospitality organizations of Melbourne. It provides various hospitality experiences such as electronic gaming, sports bars, restaurants, cafes, accommodation, night clubs and wagering. It offers employment to around 16,000 people across Australia in more than 500 retail liquor outlets (Dunn, 2011). The organisation has developed range of 330 leisure and entertainment venues beyond the geographical boundaries. It operates 83 iconic hotels and manages 6 clubs in Victoria. Also, the bars of this company are wide and diverse in size. They focus on serving local markets by offering local, national and international beer. ALH Group concentrates on providing best possible services and atmosphere to its large customer base. The hotels and gambling charter of ALH group demonstrates exhibit responsible gambling commitments.

An Extensive Review of Revenue and Yield Management of ALH

Yield management can be defined as the management of capacities of an organization in a way that generates profits for organization. Yield management helps in effective inventory in the organization. For example, yield management helps to sell right units of inventory to right person at right time and at right price. ALH Group incurs both direct and indirect expenses in its yield management operations. Direct expenses of company are those expenses which are related to hotel occupancy and business volume. They increase or decrease with the change in hotel occupancy and its business volume rates. For example supply of food and beverages, guest room facilities, flowers and decoration, laundry operations, telephone and fax. On the other hand, indirect expenses are not affected by the change in hotel occupancy or business volume rate (Carr, 2012). Example of indirect expenses involves building tax, wages to employees, advertising cost, auditing cost, and insurance and interest expenses.

During peak time, ALH Group plans its revenue and yield management activities in a way to boost up hotel occupancy and improve branding. It ensures that all the rooms of the hotels are sold at high prices at right place to right people to enhance sales revenue (Kinloch, 2016). In tough times of recession, due to unfavourable marketing conditions, ALH Group does better and deal with market variations in a positive way. It seeks opportunities to improve its bottom-line. The managers of ALH group are always ready to learn new techniques and apply them.

Revenue and yield management structure the ALH Group is complicated due to involvement of the company in diverse business types of business such as hotels, liquor, and gaming. But, there is scope for the organization for sustainable business growth, as the company may shift its focus on other products/services, when peak of a business season ends (Wilson, 2012). ALH electronic gaming machines contribute 16% of total company’s revenues. Remaining 84% is derived from provision of products and services. A large portion of ALH revenue comes from its diverse activities. These activities include sports bars, bistros, cafes, retail liquors, nightclubs and restaurants.

Competitive Analysis of ALH:

ALH Group is facing a highly intense competition from different hospitality organizations in Melbourne (Chhetri et al., 2013). Hilton Melbourne South Wharf is one of its major competitors of ALH group, which offers competitive services to customers without compromising with quality. Other rivals of the company are Atlantis hotel, Adelphi hotel and City Garden hotel (Williams, 2013). They are engaged in similar services and tend to attract customers by providing luxurious and trendy services (Hayes and Miller, 2011). However, ALH strives to gain competitive advantage over competitors by offering great meal, live entertainment, and wide range of other benefits including membership points, food and beverages discounts, bonus games, prize draws and birthday offers. ALH tends to expand its business across Perth, Adelaide, Sydney and Brisbane.

Effects of Competition on Elasticity of Demand and Revenue Management in ALH:

Competitors of ALH group significantly affect the elasticity of demand in market. ALH continually attempts to find new ways for acquiring, retaining and increasing business to improve its competitive position. Once demand is created, ALH manages this demand as well as its capacity to deliver products/services timely. During peak times, the demand from customers in the hotel exceeds the ability of the hotel to supply the required services (Del Mar Alonso-Almeida and Bremser, 2013). It leads to greater elasticity of demand of the hotel. On the other hand, when supply exceeds the demand, the hotel is left with unused resources (Mathies et al., 2013). ALH in such a situation balances its capacity of facilities and service personnel in an effective way.

One of the important practices of ALH Group is to tackle competitors’ prices. It makes more money in direct competition, when it charges higher prices. It does not offer discounts like competitors do to fill their rooms. ALH alters its revenue management strategies under certain competitive conditions (Mei and Zhan, 2013). It employs revenue management strategies in a way, in which there is strong positive association between occupancy rate and overall hotel pricing in comparison to direct competitors. Also during low demand periods, ALH adjusts its rate/price to downwards. In the same way, during peak times, rates are raised upwards.

Revenue Management in ALH Group:

ALH group tries to generate more revenues by setting low room rates than that of rivalries. It makes strategies to understand hotel’s target customers, how they book and historical demand patterns. ALH group follows a holistic and integrated talent management and development system (Collectif et al., 2013). ALH group has a sound R&D system, which enables it to make accurate forecasts and strong pricing decisions. This strategy ultimately affects hotel’s revenue and profits in a significant way. ALH adopts mixed use developments, combining a hotel with commercial, retail and residential components.

Beside this, ALH group also makes use of technology and online pricing models to make the operations more transparent and make hotel rooms a web- based commodity (Arenoe et al., 2015). Dynamic pricing models have enabled hotel operators to respond quickly to changing demand patterns.

Analysis of Market Segmentation of ALH:

Market segmentation allows hospitality firms to identify target audiences with different behaviours. ALH is mainly concerned with provision of those goods and services, which meet the needs and budget level of customers. Market segmentation helps ALH Group to identify right market segments for its business on basis of different factors such as market size, demand patterns etc (Dredge et al., 2014). For example length of stay, total revenue per room per customer, and booking lead time. ALH market segmentation focuses mainly on product, pricing and distribution. It is necessary for the organisation due to rapid changes in customer needs wide number of product offerings.

One of the vital aspects of market segmentation in ALH hotel is its unique consumer segment, which yields significant results. Identifying the target customers is necessary to operate successfully. By doing so, the organization can focus on and penetrate a non-traditional market. It can make the targeted marketing and revenue management to prosper. ALH establishes unique consumer market by using geographic factors like region, size population and climate (Law et al., 2013). In terms of geography, hotels located in Melbourne, appeal to a different segment than those located in the central business districts of large cities. Demographic targets of the organization are based on income, age, or sex, among others. Psychographic differences include gambling in Melbourne versus sightseeing in Sydney. Product usage varies for the businessman as opposed to the vacationer, each having distinct concerns and requirements in mind. On the other hand, behavioural factors of ALH include benefits, usage, loyalty, and occasion.

Further, there are other major segmentations of ALH which are sleeping, eating, meeting and entertaining. These have been designed according to travellers’ need. ALH ensures that the specific targeted audience that it is serving is closely matched with organization’s specific offerings (Díaz and Koutra, 2013). It helps in maximizing profitability and customer loyalty. The organisation also applies the elements of marketing mix to enhance the consumption of its products and services.

The organization also has price as it’s another major aspect of market segmentation. Price is the controlling factor that classifies hotels in customer’s minds as being luxury, economic and somewhere in between. ALH has gone luxurious with their newly designed hotels, and upscale business market. Its resorts aim at independent business and pleasure groups. It also facilitates Residence Inns for those customers, who need extended stay. Special weekend’s rates are also offered by ALH to attract local travellers as well as residents (Rogerson, 2013). Also, safe and healthy environment is ensured by providing non-smoking rooms, exercising facilities and hot tubs.  Beyond these amenities, ALH also provide dinning, beaches, spas, weddings and banquets. Thus, by diversifying its services, ALH is able to appeal to multiple segments.

Yield Management Analysis of ALH in terms of strategies

Strategies Currently Used:

ALH Group adopts various strategies to earn more revenue and customer base. Its strategies involve development of effective workforce through training, development and appraisals. It conducts both on-the-job and off-the-job training programs for its employees to transform them into an effective workforce (Becerra et al., 2013). This training program includes classrooms, self-directed and computer-based training. It consists of responsible service of Alcohol and Gambling, Fire safety, and many more. The organization mainly focuses on how to approach and interact with customers and the ways to comply with self-exclusion programs.

Additionally, Corporate Social Responsibility is also incorporated as an integral part of ALH Group’s strategies. ALH tends to provide a safe and friendly environment, which promotes responsible behaviour and supports local communities in various ways (Kimes, 2016). It works with charities to raise money, pertains to key elements of an integrated Corporate Social Responsibility (CSR) practice.

Strategies Not Used:

ALH Group is not using appropriate strategies for addressing the problems of labour turnover in organization. Even after getting hired by the organization, the employees feel insecurity in terms of wages and salary systems, compensations, and benefits. The organization is not focusing on reducing its high employee turnover rate that it is experiencing (Leonidou et al., 2013). It tends to emphasize more on tangible benefits only but does not pay attention to intangibles such as work-life balances, a trust-based work environment and a healthy corporate culture.

Conclusion

On the basis of above discussions, it can be concluded that ALH Group is going good in its operations in hospitality industry. Its marketing strategies involve satisfying customer needs and wants by offering wide variety products and services at competitive prices. The above analysis depicts that ALH Group adopts multi-segmentation strategy that includes customer segmentation, demographic segmentation and psychological segmentation. The company has been embracing marketing in an enthusiastic way, not only in Melbourne but also across the entire Australia. Also, it provides better working climate for its employees along with training sessions, so that they can contribute more towards fulfilment of organizational goals and objectives. 

References

Arenoe, B., van der Rest, J.P.I. and Kattuman, P., (2015). Game theoretic pricing models in hotel revenue management: An equilibrium choice-based conjoint analysis approach. Tourism Management, 51, pp.96-102.

Becerra, M., Santaló, J. and Silva, R., (2013). Being better vs. being different: Differentiation, competition, and pricing strategies in the Spanish hotel industry.Tourism Management, 34, pp.71-79.

Carr, J. (2012). Major Companies of The Far East and Australasia 1992/93: Volume 3: Australia and New Zealand. Germany: Springer Science & Business Media.

Chhetri, A., Arrowsmith, C., Chhetri, P. and Corcoran, J., (2013). Mapping spatial tourism and hospitality employment clusters: An application of spatial autocorrelation. Tourism Analysis, 18(5), pp.559-573.

Collectif, Auzias, D. and Labourdette, J. (2013). Australie du Sud 2013 Petit Futé (avec cartes, photos + avis des lecteurs). France: Petit Futé.

Del Mar Alonso-Almeida, M. and Bremser, K., (2013). Strategic responses of the Spanish hospitality sector to the financial crisis. International Journal of Hospitality Management, 32, pp.141-148.

Díaz, E. and Koutra, C., (2013). Evaluation of the persuasive features of hotel chains websites: A latent class segmentation analysis. International Journal of Hospitality Management, 34, pp.338-347.

Dredge, D., Airey, D. and Gross, M. (2014). The Routledge Handbook of Tourism and Hospitality Education. UK: Routledge.

Dunn, J. (2011). Share Investing For Dummies. US: John Wiley & Sons.

Hayes, D. and Miller, A. (2011). Revenue Management for the Hospitality Industry. US: John Wiley & Sons.

Kimes, S.E., (2016). The evolution of hotel revenue management. Journal of Revenue and Pricing Management, 15(3-4), pp.247-251.

Kinloch, T. (2016). Devils on Horses: In the Words of the Anzacs in the Middle East 1916-19. Australia: Exisle Publishing.

Law, R., Leung, D. and Au, N., (2013). Progress and development of information technology in the hospitality industry evidence from Cornell Hospitality Quarterly. Cornell Hospitality Quarterly, 54(1), pp.10-24.

Leonidou, L.C., Leonidou, C.N., Fotiadis, (2013). Resources and capabilities as drivers of hotel environmental marketing strategy: Implications for competitive advantage and performance. Tourism Management,35, pp.94-110.

Mathies, C., Gudergan, S.P. and Wang, P.Z., (2013). The effects of customer-centric marketing and revenue management on travelers’ choices. Journal of Travel Research, 52(4), pp.479-493.

Mei, H. and Zhan, Z., (2013). An analysis of customer room choice model and revenue management practices in the hotel industry. International Journal of Hospitality Management, 33, pp.178-183.

Rogerson, J.M., (2013). Market segmentation and the changing budget hotel industry in urban South Africa. Urbani Izziv, (24 (2)), pp.112-123.

Williams, K.M., (2013). A Profile of Cellar Door Personnel: An Exploratory Case Study Analysis of Two Australian Wine Regions. Journal of Human Resources in Hospitality & Tourism, 12(1), pp.91-108.

Wilson, G. (2012). Bully Beef & Balderdash: Some Myths of the AIF Examined and Debunked. Australia.: Big Sky Publishing. 

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