Avari Lahore Ramada Renaissance Hotel
Avari Lahore Ramada Renaissance Hotel Case Study
Being among the few 5-star hotels operating in Lahore, Avari Lahore Ramada Renaissance Hotel encountered a stiff and direct competition from Pearl Continental Hotel, which was located a kilometer away from Avari. Since Avari and Pearl has similar pricing policies, rate structure and reassessment policies, Avari needed to adopt a pricing strategy that sets it apart from competitors. The pricing strategy should complement the lack of a good brand image in customers’ mind. The best pricing strategy is one that enables an organization to determine at which point profits are going to be maximized on sales of services and products. While Avari customers won’t buy services that are priced too high, the firm will not succeed if it sets prices for its services too low to cover the costs of operation. The pricing strategies should also enhance Avari’s competitiveness against Pear Continental. For Avari Lahore Ramada Renaissance Hotel, rooms were priced on demand and competition basis and rates were adjusted or revised twice yearly in accordance with inflation rate. Avari Lahore Ramada Renaissance Hotel policy included not turning away any guests and hence, has different kinds of rates including rack rate for individuals who travelled frequently, commercial rate for customers with no account and preferential rate which was the lowest rate. Writers who offer marketing management assignment help at Edudorm essay writing service notes that given that Avari’s average rate of rooms was falling below that of its main competitor, Pearl, the pricing strategies adopted by Avari presented a problem. There was a need to review this pricing strategy and consider other available pricing alternatives that could ensure room occupancy rate remained high and the competition threat present by Pearl was dealt with. The division of rates by Avari Lahore Ramada Renaissance Hotel seemed not to ensure that Avari attained the intended level of room occupancy and the information of such division was not even available to the ordinary customers.
Implementation of the Right Pricing Strategy at Avari Lahore Ramada Renaissance Hotel
The implementation of the right pricing strategy would help Avari in dealing with looming challenges of rising competition, inadequate room occupancy and the various costs disruptions. One of the pricing strategies that Avari Lahore Ramada Renaissance Hotel should adopt is setting independent prices for all segments and channels. This approach of pricing should base all rates on a single Best Available Rate which will serve as a fixed-tier strategy (Duetto, n.d). It would establish one public rate that is best in relation to supply, while every other rate is based on this rate. As such the rates on contract, net rate of whole sale and Garbage rates could be determined on the basis of the best individual rate in the market. Another rate could be adopted after the base rate so as not to leave out individuals and price points between the static price rates. This approach would work best where demand across every channel at all moments is less dynamic. At times during busy days, it would important to adopt promotional rates, which should be based on the bases of the already determined Best Rate Available (Duetto, n.d). Offering such promotional rates helps to avoid a rigid approach which could leave a lot of untapped money from potential customers that would be attracted by the promotional rates.
Another strategy that could work well for Avari Lahore Ramada Renaissance Hotel involves keeping the channels open. Avari Lahore Ramada Renaissance Hotel management should monitor the demand and supply on real time, so as to close instead of accepting room bookings that will be less profitable (Choi & Kimes, 2002). If Avari Lahore Ramada Renaissance Hotel is nearing a weekend that is quite compressed with more customers and rooms are filling fast at the best set rate, the management should close channels that allow for discounted rates and accept booking of rooms for channels that have high rates. Experts who offer strategic management assignment help at Edudorm essay writing service indicates that where the Executive Business and special rates channels with higher room rates than individual rates are plenty in supply so that they are filling up the rooms, the management could reject bookings from low rates customers. This way Avari Lahore Ramada Renaissance Hotel will be able to maximize on the higher rates and then improve on profitability. However, this approach should not be applied in pricing bookings that will last for quite a long time since it may leave out the lower rates customers who frequently do the bookings. The advantage of using open pricing strategy is that it allows the management to shift discounts on room rates up and down independently, on the basis of demand and supply (Aziz, Saleh, Rasmy & ElShishiny, 2011). This pricing strategy important to maintain hold of high-end customers who could pay for higher room rates and thus prevent the loss of vital customers to competitors like Pearl Hotel. This approach in pricing could be shelved during days where customer traffic is low so that to accommodate other channels that offer lower room rates but in big supply.
Going back to include all the other channels will ensure that competitors like Pearl do not capture the lower classes of customers after the high peak periods are over. The strategy could also ensure that the average room rate that has been targeted is achieved by the Avari Lahore Ramada Renaissance Hotel both in low and peak supplies. The management of Avari Lahore Ramada Renaissance Hotel could also set modifier rate between the basic types of rooms like the ones with suites and large beds or double beds. This approach is quite simple and with application if new technology, it could be easier to have room rates that are independent of one another (Aziz, Saleh, Rasmy & ElShishiny, 2011). This could help in ensuring there are various rooms are set aside for guests according to the kind of space, beds or rooms they are looking for. This strategy will also ensure that the management will look come up with a booking curve, which in turn will be necessary in preventing the filling rooms that are less desired first and then having to place the other customers in rooms that are more expensive for free. This pricing by the type of room will enable the firm to increase occupancy level for the rooms with less demand, while ensuring rates are driven on rooms that are desired most.
Another approach is pricing on the basis of customer value, which could allow the Avari Lahore Ramada Renaissance Hotel management to merge loyalty strategies with pricing. Rather than using the common points- based incentives, the Avari Lahore Ramada Renaissance Hotel management could explore various ways of driving direct bookings and then fill the rooms with guests that are most valuable. To do this, the management should first consider the value attached to its guest. Avari Lahore Ramada Renaissance Hotel management should consider whether to offer prices on the basis of how often a guest books the room, finding average on per-stay spend, or on how much time the guests have been spending on hotel rooms throughout their visits (Chung, Oh, Kim, Han, 2004). This consideration is important since these valuable guests could have brought in more supplementary income through foods, beverages, meetings, spa or other such amenities. The valuation of customers would help in segmenting them on the basis of value and rates will then be yielded according to such values (Chung, Oh, Kim, Han, 2004). In addition, to beat competition from competitors like Pearl Continental whose pricing rates were better, Avari management has to focus on offering loyal customers who are also most profitable, discounts through discreet offer and which would lead to violation of any agreement on rate parity and this will ensure there is more booking.
The Avari Lahore Ramada Renaissance Hotel should also consider optimizing on group demand while selecting the pricing strategy. This includes looking into the additional spend across the various segments of Avari Lahore Ramada Renaissance Hotel. A comparison of guest coming in a group with guest not in a group and from that the appropriate pricing can be calculated accordingly. The management should determine the profit margin obtained from non-group guest in relation to room and non-room spends. From this, the number of customers expected with certain group can be plugged in and their needs such as space are factored in. Through this, Avari Lahore Ramada Renaissance Hotel can predict and compare total revenue from group customers to revenue from non-group customers. Tutors who offer operations management assignment help at Edudorm essay writing service acknowledges that having this difference in mind will enable the management to carry out an analysis on profit displacement on both room and non-room spends and come up with the appropriate rates to provide (Chung, Oh, Kim, Han, 2004). This could be possible through using the available technology which enables proper group displacement, where the demand of a certain group is deemed to be lower than other groups. Optimizing on demand of group is important in maintain the consistency of rates or increasing them in accordance to market rates. To be in tandem with fluctuating demand in Avari Lahore Ramada Renaissance Hotel industry, the pricing strategy to be adopted must involve boosting occupancy through discounting wisely (Hanks, Cross & Noland, 2002). Capturing demand should be a priority for Avari since information on costs of acquisition of customers has been growing in the industry. The best pricing strategy should be able drive room occupancy and hence revenue during the times of reduced demand in the industry.
Optimizing on uncertain demand trends require hotels to adopt a very intricate approach. If Avari Lahore Ramada Renaissance Hotel offers discreet discounted prices, it can prevent the dilution of it brand by maintaining public rates at par with prevailing market average and at the same time driving more bookings (Chung, Oh, Kim, Han, 2004). However, this would require the hotel to avoid too much of deep discounting more so for the rooms whose operational costs are quite high. To maintain or increase occupancy level when room demand is low, the hotel should consider packaging its rates or adding value without decreasing the rates. For instance, the hotel could include breakfast to the room rate or include some low cost but valuable aspects into this rate. By doing this, Avari Lahore Ramada Renaissance Hotel will be offering value to the customers or guests while not diluting its rate and therefore, ensuring more direct but profitable operations.
At times, Avari Lahore Ramada Renaissance Hotel could be required to evaluate rates that are pre-negotiated more often. The rates include those rates that the hotel have set though contracts with corporate or government clients. As the changes in the industry and economy are bound to occur, the hotel should avoid its rates from being static to the point of making losses when market rates increase due to factors such as increased costs of materials and operations (Hanks, Cross & Noland, 2002). Avari Lahore Ramada Renaissance Hotel management should thus revisit these contracts on determined period like quarterly or monthly so that more flexibility on room rates is attained, and such rates can be raised where necessary. Authors who offer corporate strategy assignment help at Edudorm essay writing service points that this would also require declining in a respective way businesses that attracts low rates and replacing them with those that are highly rated. In addition, Avari Lahore Ramada Renaissance Hotel could shorten rate agreements period so as to provide for more flexibility and pricing points (Duetto, n.d). These evaluations will ensure that the Avari Lahore Ramada Renaissance Hotel brand is not diluted due to lower than market prices and at the same time ensure that it maintains a competitive edge against Pearl Continental and other upcoming hotels.
Conclusion
The pricing approaches discussed fall under two strategic levers which include duration and rate control. The control on rates is used to settle on optimal pricing and determining on which room rates to be paid by whom, which is accomplished by developing the appropriate fences on rates. Segmenting is an important aspect of the adopted pricing strategies where guest grouping plays an important role. To ensure that Avari Lahore Ramada Renaissance Hotel rates do not fall below the market rates and the rates charged by immediate competitors. Monitoring the supply and demand of guest will allow the firm to determine the pricing model that will allow for flexibility and high room occupancy level and therefore, maximize profits. To avoid the dilution of the brand the hotel should avoid low rates that do not reflect customer value.
References
Aziz, H. A., Saleh, M., Rasmy, M. H., & ElShishiny, H. (2011). Dynamic room pricing model for hotel revenue management systems. Egyptian Informatics Journal, 12(3), 177-183.
Hanks, R. D., Cross, R. G., & Noland, R. P. (2002). Discounting in the hotel industry: A new approach. The Cornell Hotel and Restaurant Administration Quarterly, 43(4), 94-103.
Chung, K. Y., Oh, S. Y., Kim, S. S., & Han, S. Y. (2004). Three representative market segmentation methodologies for hotel guest room customers. Tourism Management, 25(4), 429-441.
Duetto, (n.d). Tips for an Effective Room Pricing Strategy.
Choi, S., & Kimes, S. E. (2002). Electronic distribution channels’ effect on hotel revenue management. The Cornell hotel and restaurant administration quarterly, 43(3), 23-31.
