This paper discusses revenue management as practiced by the General Manager of The Atlantic Hotel & Spa. Andrew J., the manager for the Atlantic Hotel & Spa, stated that application of methods that uniquely deviate from the activities of the other hotels. Some of the strategies used by this hotel include maintaining a premium price so as to attract the customers that are willing to spend on its services; giving of loyalty cards to the customers and marketing to them directly; concerted efforts to remove third party distribution channels; partnering with nonprofit organizations for increased brand networking; advertising of the events taking place in the city as opposed to the services offered by the hotel; and market segmentation that ensures that most of the economic classes in America are covered. This approach has worked in ensuring that the occupancy rates at the hotel are high throughout the year, affording the hotel continued profitability.
In order for an establishment to make profits and survive in the hospitality industry, there is a need for the management of that firm to have the necessary strategies that guide the decisions made regarding the revenues of the hotel. For the purpose of learning about these strategies in action, the researcher interviewed Andrew J., the general manager for The Atlantic Hotel and Spa.
The first question for the interview was regarding the strategy employed by the hotel to maximize the revenue gained from the clients. The interviewee was very excited at this question and went at length explaining the various tactics used by the hotel to ensure that they get higher revenues on the property. The approach, as stated by Andrew J. was: “You have to first of all ensure that the occupancy rate is maximized before making other considerations regarding the returns on the property.” The general manager further stated that the hotel industry needs to treat the clients differently than the other retail industries, as the services provided are not tangible goods (Jones, 2016). Discounts are misused by the hoteliers, and this has costed them over time, and the value of their services is lowered by the clients after they check the rates of such establishments. It is important to have the clients at a property value the service they are getting from the hotel, and this is best reflected in offering premium rates compared to the competitors of a firm.
The challenges lie in having clients and potential clients aware of the services offered by the hotel, and have them talk about the hotel to their friends, colleagues and relatives. It has been proven several times that marketing by word of mouth or recommendations from past clients is more effective than any other form of advertising (Jones, 2016). This hotel had in the past embraced extended period discounts, only to discover that it is not an effective approach, as it comes to reflect the property as low value in the eyes of the clients. The management of the hotel has therefore come up with other ways of attracting the client, methods that are not restricted to the pricing of the services offered by the hotel.
Every hotel is interested in getting the maximum rate of occupancy possible, and there is a prevailing model used in the market. The problem with most hoteliers is that they use approaches that are similar to their competitors, and this leads them to having the same results as the rest of the hotels in the industry. In order to stand out, this hotel has had to apply methods that are not used by other hoteliers in the vicinity. Creativity and innovation has been a key feature in the revenue strategy that has been employed by this hotel, explained Andrew. The hotel has taken an approach where each of the rooms has been assigned a value, and there is no way that it can be priced lower than that assigned value (Morse & Smith, 2015). Discounts that would compromise the perceived value of the rooms by the clients are therefore actively avoided. The management of the hotel and the sales team have become aware that a client approaches the hotel as a result of having a need for accommodation, and quality accommodation with all the relevant services. Such a client that is in need is very likely to check in even if the rates are premium. Offering a discount to a client that has already approached the hotel might make them doubt the quality of the rooms or services offered by the hotel. It is also wrong on the part of the hotel staff and management to assume that the client would find a discount appealing. A discount is offered only when the client expressly asks for it.
Rewarding the clients for extended stays has been an effective method of ensuring that the occupancy rate of the hotel is attractive throughout the week. The customers are treated to a 12 percent discount on the rates when they stay for four continuous days in the hotel. Further, there is a 20 percent discount on the rates should the client stay for seven days in the hotel. This has made the hotel very popular with the business class clients whose stay in hotels is along the number of days for which the hotel offers the discounts. The hotel has a condition attached to these discounts, as the clients have to have loyalty cards of the hotel in order to qualify. The management understands that the value of hotel brand is commensurate with the number of people moving around with a loyalty card of that brand in their pockets (Morse & Smith, 2015). The management has done a lot to avoid the hotel booking companies that charge a commission on the clients that they direct to the hotel. These booking companies act as middlemen, and the hotelier has to pay them a percentage of the rate charged to the clients on the publicly available rate. If the customer has a loyalty card, then they do not have to use the hotel booking companies, this enables the hotel to charge them a rate that is lower than the publicly available rate, as there is no commission to be paid to the booking companies. This has proven to be advantageous for both the hotel and the customers.
The guests are given the freedom to decide whether they require housekeeping services or otherwise. The ones not needing housekeeping services are given a further discount on the service forgone. This enables the hotel to make savings on labor. The fact that most of the clients stay for a prolonged period ensures that there is less demand on the front desk, which enables the hotel to make savings on labor at the reception. Partnering with the nonprofit organizations is another way in which the hotel has managed to entice more guests. These organizations include the Wildlife Foundation Fl. And Coastal Conservation Association. A portion of the rates charged on the guests is donated to these organizations. The hotel accumulates the donations from individual guests and gives them to these conservation nonprofits at the end of each month. These organizations are very appreciative of the money received from the hotel, and they therefore tend to recommend the hotel to their associates, partners and visitors (Morse & Smith, 2015). This has proven to be a great way if utilizing the networks that have been established by the nonprofit groups, which are global in nature. As these groups require continued support, they are bound to mention the hotel in the summits and seminars that they attend and have a higher likelihood of using the facilities of this hotel when having events locally. The hotel is included in all their newsletters to the members, as they appreciated the gesture made by the hotel in the form of the regular donations.
This hotel takes the details given by a customer upon registration with the hotel as very important. This includes the company that the guests work for and its address. These are then used as prospect items by the sales team of the property. The hotel can then reach the customers later on at their places of work or even approach the companies they work for and seek further interactions with them. Reaching out to former guests for appreciation and informing them of new offers in the hotel is another way of keeping them loyal to the hotel whenever they are around and in need of accommodation. Instead of just marketing itself, this hotel is interested in marketing the events that take place in Fort Lauderdale area. These are events that are often personal to the persons that are attending them, and it creates goodwill in them such that they are willing to spend their time in this hotel as they attend the various events and activities. The mentioned approaches are components of the strategies used by Andrew J. to get maximum revenue on the Atlantic Hotel & Spa property.
The next question that was posed to the general manager was with regards to the hotel’s competitors. Fort Lauderdale is a tourist and recreation destination. There are more than 130 hotels in this area, all of them offering excellent services. Competition among the hotels for the visitors is highest during the low season when then number of the visitors drops. This is the period at which the hotel with the best practices continues to make profits while the rest stagnate. The Atlantic Hotel and Spa management has ensured that the strategies used to woo customers are innovative and different from the tactics used by its competitors. This has made it have a healthy number of guests at all times of the year and sometimes even get overbooked by clients that are eager to experience its services. The competitors therefore, do not present a problem to the management of the hotel. Examples of the prominent competitors in Fort Lauderdale area include Premiere Hotel, The Pillars Hotel Fort Lauderdale, The Victoria Park Hotel, Snooze among others.
The pricing of the rooms in this hotel is placed above the value placed on the room that the guest is interested in by the management of the hotel. This keeps the rates at a premium level and makes it possible for the hotel to remain profitable. No discounts are offered, unless the customer requests for one. The hotel is able to keep the prices up due to the popularity it has garnered among the past and repeat guests. The rates quoted by the hotel communicates good value to the clients, and the incidences where the customers have requested for discounts are few. In order to deal with instances of overbooking, the hotel offers the interested guests a lead time of 2 days (Bosworth, 2014). There are a number of emergency rooms for the guests that show up physically to the hotel or the ones whose expected occupants have cancelled at the last minute. The management of the hotel has put measures to prevent such inconveniences, however. As most of the guests tend to extend their stay in the hotel, it experiences closeouts lasting one or two days regularly. During the closeout, it is not possible to book online or through the booking agencies. The customers are usually informed of the closeout after they indicate their interest to be accommodated in this hotel.
This hotel has suites that are extremely spacious for the comfort of the guests. There are various types of rooms, whose price vary depending on the size and the amenities made available to the customers. There are one bedroom king suites and two bedroom penthouses. The one bedroom king suites have varying prices dependent on whether they have an ocean view or sky view. The space covered by the king suites also plays a part in determination of the rates charged on them. King suites are equipped with oversized bathrooms, fully equipped kitchen or kitchenette and high speed internet (Gu, 2002). The penthouses are more spacious compared to the king suites each having two master bedrooms, fully equipped kitchen, multiple balconies and oversized bathrooms. The penthouses are either oceanfront or sky view and that is a determinant for their pricing. The ocean front penthouses and king suites with ocean view have higher charges than the ones having sky view. Demand for ocean view and oceanfront facilities is much higher than the sky view ones, which makes it possible to charge higher.
In addition to the suites and penthouses, there are studios which are in three categories. These include the partial ocean view king studio that has a private balcony and large marble bathroom. The second category is ocean front king studio that has similar properties to partial ocean view except for the orientation towards the ocean. The third category is the ocean front two queen studios that has an additional bed with similar properties to the ocean front king studio. These different types of studio, suites and penthouses are designed to fit the varying needs of the customers in this hotel. In addition to the accommodation facilities, there are other services offered in the hotel that have to do with entertainment, leisure and fitness. There is also a resident doctor in the hotel in case of any emergency medical needs among the residents in the hotel. Further, the hotel has special packages offered for guests at an attractive rate (Gu, 2002). These packages include spa couples package; beauty and the feast breakfast package and the suite life package. Spa couples package entails a one couples massage and deluxe accommodation. The beauty and breakfast challenge includes the deluxe guest accommodation and a full American breakfast for two where taxes and additional costs for leisure services and recreational activities are not included. The suite life package is interesting, as the guest is transported in a limousine or any other car of their choice from their door step to the hotel premises. The transport is provided at an additional to and from the Atlantic Hotel & Spa.
The average daily rate for the property is $239. In the estimations of the general manager the average occupancy rate for the property is at 75% for the past one year, and this is made possible by the large number of visitors coming to Fort Lauderdale every year (Rajan, 2016). The hotel has tried a lot to not be dependent on third party distribution channels, in order to make it possible to maximize the revenues made. The major third party distribution channel is Booking.com. the hotel has also a strong presence online and on the social media. It is possible and cheaper for the guests to book reservations on the website of the hotel as opposed to making use of another distribution channel (Rajan, 2016). The market segmentation made for by the hotel is dependent of the types of accommodation available to them. The studios are for the lower and middle income. The king suites have been designed for the well off, while the penthouses are for the extremely affluent customers. The segment of the customers therefore, is based on their financial abilities. The average rack rate for this property is $255 and the customers that request for a discount can receive one up to 20% off the price. When it is during the low season, the rate can drop by as much as 50%.
In conclusion, The Atlantic Hotel & Spa has adopted measures that are markedly different from the one that are conventionally taken by other players in the hospitality industry. These unique measures include: maintaining of premium prices such that the services of the hotel are deemed to be of value in the eyes of the clients; giving of loyalty cards to the customers and marketing directly to them; removal of the third parties from the distribution network, enabling savings on the part of the client; partnering with nonprofit organizations in the vicinity for expanded networking; and the advertising of events taking place in the city as opposed to advertising the services offered by the hotel. These measures have helped the hotel to have an edge over the competitors and maintain an impressive occupancy rate throughout the year.
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