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:

ParticularsJuly AugustSeptemberOctoberNovemberDecember
O/r of

Luxury Penthouse Suits

404252608090

 

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
ParticularsJuly AugustSeptUp to  15th of OctNovUp to 15th of DecemberTotal
Units (a)200200200200200200
Occupancy Ratio in % (b)404252608090
Standard Average Tarrif Plan600600600600800800
No of Room Sold (a*b) Per Day8084104120160180728
No of days in Month313130153015
Total Rooms sold24802604312018004800270017504
Revenue14880001562400187200010800003840000216000012002400
Less: Expenditure
Toiletries expense Per Room Sold is: $15.00372003906046800270007200040500262560
Laundry expenses per Room Sold is: $10.00248002604031200180004800027000175040
Cleaning material per Room Sold is: $15.00372003906046800270007200040500262560
Labour cost per Room Sold is projected to be: $36.0089280937441123206480017280097200630144
Total Variable Expenditure1884801979042371201368003648002052001330304
Net Income1299520136449616348809432003475200195480010672096
Less: Fixed Expenditure9850009850009850009850009850009850005910000
Net Income / (Loss)314520379496649880-4180024902009698004762096

 

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:

ParticularsJuly AugSepOctNovDec
O/r of

Luxury Penthouse Suits

5060688595100

 

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
ParticularsJuly AugustSeptOctoberNovDecTotal
Units (a)200200200200200200
Occupancy Ratio in % (b)5060688595100
Standard Average Tarrif Plan450450450450700700
No of Room Sold (a*b)100120136170190200916
No of days in Month313130313031
Total Rooms sold31003720408052705700620028070
Revenue13950001674000183600023715003990000434000015606500
Less: Expenditure
Toiletries expense Per Room Sold is: $15.00465005580061200790508550093000421050
Laundry expenses per Room Sold is: $10.00310003720040800527005700062000280700
Cleaning material per Room Sold is: $15.00465005580061200790508550093000421050
Labour cost per Room Sold is projected to be: $36.001116001339201468801897202052002232001010520
Total Variable Expenditure2356002827203100804005204332004712002133320
Net Income11594001391280152592019709803556800386880013473180
Less: Fixed Expenditure9850009850009850009850009850009850005910000
Net Income / (Loss)174400406280540920985980257180028838007563180

 

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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