Hotel Pricing Strategies

Hotel Pricing Strategies

Introduction

In this current report we will analyse the pricing strategies of various hotels. The project report has been divided in to two parts i.e. First SCENARIO: PART 01A & Second SCENARIO: PART 02B. The first part i.e. Part 01A is based on Non- Discounting pattern and the second part i.e. Part 02B is based on discounting pattern.

First SCENARIO: PART 01A

Under this part discounting policy has not been considered. Occupancy ratio as projected by the CRM which has been used for the computation of the profit is as under:

Particulars July August September October November December
O/r of

Luxury Penthouse Suits

40 42 52 60 80 90

 

Operational Expenses as projected by the CFO.

1) Toiletries expense Per Room Sold is: $15.00

2) Laundry expenses per Room Sold is: $10.00

3) Cleaning material per Room Sold is: $15.00

4) Labour cost per Room Sold is projected to be: $36.00

5) Fixed Expenses related to the Rooms Division Department per month: $985,000

 

From the above assumptions the revenue projection has been prepared which is as under:

 

Amount in $
Months
Particulars July August Sept Up to  15th of Oct Nov Up to 15th of December Total
Units (a) 200 200 200 200 200 200
Occupancy Ratio in % (b) 40 42 52 60 80 90
Standard Average Tarrif Plan 600 600 600 600 800 800
No of Room Sold (a*b) Per Day 80 84 104 120 160 180 728
No of days in Month 31 31 30 15 30 15
Total Rooms sold 2480 2604 3120 1800 4800 2700 17504
Revenue 1488000 1562400 1872000 1080000 3840000 2160000 12002400
Less: Expenditure
Toiletries expense Per Room Sold is: $15.00 37200 39060 46800 27000 72000 40500 262560
Laundry expenses per Room Sold is: $10.00 24800 26040 31200 18000 48000 27000 175040
Cleaning material per Room Sold is: $15.00 37200 39060 46800 27000 72000 40500 262560
Labour cost per Room Sold is projected to be: $36.00 89280 93744 112320 64800 172800 97200 630144
Total Variable Expenditure 188480 197904 237120 136800 364800 205200 1330304
Net Income 1299520 1364496 1634880 943200 3475200 1954800 10672096
Less: Fixed Expenditure 985000 985000 985000 985000 985000 985000 5910000
Net Income / (Loss) 314520 379496 649880 -41800 2490200 969800 4762096

 

Results of the above projection are as under:

  • Room revenue per month is $1488000 July, $1562400 August, $1872000 September, $1080000 October, $3840000 November, $2160000 December and Total Revenue is $12002400.
  • Variable Operation Expenses per month is $188400 July, $197904 August, $237120 September, $136800 October, $364800 November, $ 205000 December and Total Variable Expenditure is $1330304.
  • Total expenditure including fixed cost per month is $1173480 July, $ 1182904 August, $1222120 September, $1121800 October, $1349800 November, $1190200 December and Total Variable and Fixed Expenditure is $7240304.Fixed cost per months is $985000 and Total Fixed cost for six months is $ 5910000.
  • Net revenue after deducting all expenses per month is $314520 July, $379496 August, $649880 September, $(41800) October, $2490200 November, $ 969800 December and total net revenue per month is $4762096.

 

Second SCENARIO: PART 02B

Under this part discounting policy has been considered. Occupancy ratio as projected by the CRM which has been used for the computation of the profit is as under:

Particulars July Aug Sep Oct Nov Dec
O/r of

Luxury Penthouse Suits

50 60 68 85 95 100

 

Operational Expenses as projected by the CFO.

1) Toiletries expense Per Room Sold is: $15.00

2) Laundry expenses per Room Sold is: $10.00

3) Cleaning material per Room Sold is: $15.00

4) Labour cost per Room Sold is projected to be: $36.00

5) Fixed Expenses related to the Rooms Division Department per month: $985,000

 

From the above assumptions the revenue projection has been prepared which is as under:

 

Amount in $
Months
Particulars July August Sept October Nov Dec Total
Units (a) 200 200 200 200 200 200
Occupancy Ratio in % (b) 50 60 68 85 95 100
Standard Average Tarrif Plan 450 450 450 450 700 700
No of Room Sold (a*b) 100 120 136 170 190 200 916
No of days in Month 31 31 30 31 30 31
Total Rooms sold 3100 3720 4080 5270 5700 6200 28070
Revenue 1395000 1674000 1836000 2371500 3990000 4340000 15606500
Less: Expenditure
Toiletries expense Per Room Sold is: $15.00 46500 55800 61200 79050 85500 93000 421050
Laundry expenses per Room Sold is: $10.00 31000 37200 40800 52700 57000 62000 280700
Cleaning material per Room Sold is: $15.00 46500 55800 61200 79050 85500 93000 421050
Labour cost per Room Sold is projected to be: $36.00 111600 133920 146880 189720 205200 223200 1010520
Total Variable Expenditure 235600 282720 310080 400520 433200 471200 2133320
Net Income 1159400 1391280 1525920 1970980 3556800 3868800 13473180
Less: Fixed Expenditure 985000 985000 985000 985000 985000 985000 5910000
Net Income / (Loss) 174400 406280 540920 985980 2571800 2883800 7563180

 

Results of the above projection are as under:

  • Room revenue per month is $1395000 July, $1674000 August, $1836000 September, $2371500 October, $3990000 November, $4340000 December and Total Revenue is $15606500.
  • Variable Operation Expenses per month is $235600 July, $282720 August, $310080 September, $400520 October, $433200 November, $471200 December and Total Variable Expenditure is $2133320.
  • Total expenditure including fixed cost per month is $1220600 July, $1267720 August, $1295080 September, $1385520 October, $1418200 November, $1456200 December and Total Variable and Fixed Expenditure is $8043320.Fixed cost per months is $985000 and Total Fixed cost for six months is $5910000.
  • Net revenue after deducting all expenses per month is $174400 July, $ 406280 August, $540920 September, $985980 October, $2571800 November, $2833800 December and total net revenue per month is $7563180.

Summary Analysis

According to the above assumptions and revenue projections Part 02B is better than Part 01A. The net income is approximately 58% more in Part 02B as compared to Part 01A. Part 02B has enjoys a overall occupancy ration  of  78% (app) as compared to Part 01A which has 49% (app) as overall occupancy ratio. More the occupancy ratio more the fixed cost per room will decrease and result in higher profits.

 

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