Hotel room is an area of concern because it is a revenue center. The rooms generate some revenue which is an essential component for business growth and development. Despite the fact that there is monthly revenue management meeting, they have yielded little revenue for the business. The revenue manager and his team ought to carry out a survey on prices charged by their competitors. In addition, they could carry out cost analysis. For instance, the electricity or water expenses vary with the usages. This should be done so as to determine the best rate for the rooms in certain months of the year.
The business traveler is an area of concern because it is a profit center. The interviews revealed that it is the most profitable business. The business has been carrying out promotions through offering discounts but their profitability has not increased. The general manager ought to review the discount rates because they are attracting more clients at the expense of profits. ( Raymond, pg 25, 2012). The profit margin on business traveller is being taken away by the very huge discounts of 25% and 20% on traveler rate and banquet functions respectively. The general manager should only offer huge discounts if they got economies of scale that would make the business profitable.
The Italian cuisine is an area of concern because it may lead to price wars in the market. The Ima’s strategy to increase prices by $ 2 is not feasible. The market survey carried out already indicates that the hotel is set be involved in high end pricing war. There are five restaurants offering the same products and any slight increase in price may reduce student hotel market share. The business ought to come up with promotional campaigns such as “buy one get one free” to maintain its market share after increasing the prices.
The spa is an area of concern because the business seems to have a full service spa in the region. In addition, the manager is knowledgeable about the spa industry. The reduction in prices by 15% to increase volume by 20% may not necessarily translate to profitability. For instance, price reduction for a commodity so as to sale large quantities may make it difficult for a business to break-even. Therefore, there is need for adequate research on the best price reduction strategy which could translate into increased contribution for the business.
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