Occupancy Optimization of a Hotel


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The Operation Research conducted, examines the congruence among hotel rooms and occupancy rate/percentage, using 3 years of data from 13,184 guests in the upper midscale hotel. The study concludes that holidays, festivals, competitors, weather, seasons, processes and systems were significant predictors of all components which impacted the occupancy of the hotel. All parameters were graphically represented in a schematic diagram so as to find if there is a way to optimize the occupancy of the Hotel for those parameters.

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Occupancy Optimization of a Hotel

  1. 1. “Occupancy Optimization of a Hotel”     THE INDIAN INSTITUTE OF PLANNING AND MANAGEMENT PUNE A PROJECT REPORT ON Operations Research “Occupancy Optimization of a Hotel ” A Report submitted in partial fulfillment of the requirement for the award of the degree of Master of Business Administration. Under the Esteemed Guidance of Prof. M.K Gandhi Faculty IIPM, PUNE Project Analyzed & Documented by • DixitaPorwal, PGP/FW/10-12/ISBE-A • Pratik Gandhi, UGP/FW/09-12/IIPM • Rajwin Patel, UGP/FW/09-12/ISBE • Sagar A. Agrawal, UGP/FW/09-12/IIPM • Sneha Chandan, PGP/FW/10-12/ISBE-A
  2. 2. “Occupancy Optimization of a Hotel”    
  3. 3. “Occupancy Optimization of a Hotel”     ACKNOWLEDGEMENTWe heartily thank our Project in-charge, Prof. M.K.Gandhi, Faculty IIPM, Pune,whose encouragement, guidance and support from the initial to the final levelenabled us to develop an understanding of the subject. We are grateful for Sir’scontribution towards the execution of our project.Lastly, we offer our regards and blessings to all of those who supported us in anyrespect during the completion of the Research.
  4. 4. “Occupancy Optimization of a Hotel”     EXECUTIVE SUMMARYThe Operation Research conducted, examines the congruence among hotel roomsand occupancy rate/percentage, using 3 years of data from 13,184 guests in theupper midscale hotel. The study concludes that holidays, festivals,competitors, weather, seasons, processes and systems were significant predictorsof all components which impacted the occupancy of the hotel. All parameters weregraphically represented in a schematic diagram so as to find if there is a way tooptimize the occupancy of the Hotel for those parameters.
  5. 5. “Occupancy Optimization of a Hotel”     MANAGEMENT LETTER
  6. 6. “Occupancy Optimization of a Hotel”    Sr. No. Topic Page No.1 Rajkot Introduction2 Geographical Boundary3 Hotel Introduction4 Analysis5 Observations6 Recommendations7 Conclusion Index
  7. 7. “Occupancy Optimization of a Hotel”    
  8. 8. “Occupancy Optimization of a Hotel”     RAJKOT INTRODUCTIONRajkot is well placed in the Saurashtra Region of the Gujarat state. Rajkot is amajor industrial town in Gujarat.Rajkot is the fourth largest city in the state of Gujarat, India, after Ahmedabad,Surat and Vadodara. Rajkot is the 23rd urban agglomeration in India, with apopulation more than 1.6 million as on 2012.Rajkot is ranked 22nd in The worldsfastest growing cities and urban areas from 2006 to 2020.Rajkot is a city of Gujarat state in India and administrative headquarters of theRajkot District, 245 km from the state capital Gandhinagar. Rajkot was the capitalof the then Saurashtra state from 15 April 1948 to 31 October 1956 before mergingin bilingual Bombay State on 1 November 1956. Rajkot was merged into GujaratState from bilingual Bombay state on May 1, 1960.The city contributes to the economy of the state with heavy and small-scaleindustries under the patronage of Gujarat Industrial Development Corporation(GIDC) and Gujarat State Financial Corporation (GSFC). The economy of Rajkotgot another shot in the arm with 28 crore World Bank aid for development ofinfrastructure of the city. Many a renowned business houses made a beeline forgrabbing the property market in the city, before it skyrockets.The city hosts several small-scale manufacturing industries. Some of the industrialproducts for which Rajkot is known include bearings, diesel engines, kitchenknives and other cutting appliances, watch parts (cases & bracelets), automotiveparts, forging industry, casting industry, machine tools, share market and software
  9. 9. “Occupancy Optimization of a Hotel”    development. The city is also home to one of the largest CNC machinemanufacturer in the country, Jyoti CNC Automation Pvt. Ltd. The Real Estatesector is also booming in the city, as the land prices in the city are some of thehighest in India.Rajkot is well known throughout the world for its casting and forging industries.Over the last few years, it has started to play an increasingly important role in thecomplex supply chains of many global engineering companies that make productssuch as electric motors, automobiles, machine tools, bearings, etc.In the near future, the government of Gujarat will allocate large land areas for thedevelopment of Special Economic Zone, which will be parted in three differentareas and will include industries such as Software, Automobiles, etc. As per recentmarket reviews, Rajkot is becoming Asias biggest Auto-Mobile Zone. Rajkot is hub of India in the field of Diesel engine and submersible Pumps. Still,Submersible pumps are manufactured in a lot and marketed throughout India andsome of the big manufacturers also export them.
  10. 10. “Occupancy Optimization of a Hotel”     Geographical BoundaryRajkot:- Known For Its Machineries, India’s No 1 City For Oil Engine,Investment Casting ,Forgings, Hardware Products, Leading In S. S KitchenWear(No.1 As Per N D T V Survey) , Silver Ornaments, Bearing, Pharmaceutical,Chemical & C N C Machineries. More Than 65% Of Cities Population Is UpperMiddle Class & Richer Class.Rajkot Is Surrounded By More Than 12 Small Cities, Which Have Their OwnSelf-Economy. They Are As Follows: • Morvi: - Known For Its Ceramic Tiles & Watch Industries. • Jamnagar Dist.: - Reliance Industries, Onion & Groundnut And Brass Part & Agricultural Industries Are Prominent Industries At Jamnagar. • Junagadh Dist. : - Gondal, Jetpur, Upleta, Dhoraji - Chili, Cotton, Pulse, Groundnut And Oil Mills Industries Are Situated In Junagadh District. • Porbander, Veraval: - Is One Of The Main All Season Port Harbour, Also Various Mining, Fisheries, Cement & Sugar Industries Are Located. • Ranavav, Keshod, And Una: - Is Known For Its Mango Farming & Other Farming Industries. • The Region Of Saurashtra Is Also Gifted With Other Ports & Harbors Like Salaya, Bedi Bandar At The Proximity Of Saurashtra. • Bhavnagar: - Alang Ship Breaking Yard, Steel Production Industries, And A Fast Developing Metro City Of Saurashtra • Saurashtra Has Also Big Industries Like Reliance Perto Chemicals, Essar Oil, Cement Factories Like Ambuja Cement, L&T, [Saurashtra Cement Factories] Siddhi, Hathi Cement. Sanghi, Kamal, Tata, Acc.
  11. 11. “Occupancy Optimization of a Hotel”     The district also has various manufacturing units for machine tools, industrial equipments, lathe machines, metallurgical industries, electronics, engineering and auto ancillary sectorß Small and medium industries are dominated by foundries, engineering & automobile works, textile related units gold & silver jewellery, handicrafts, spices, medicines, and wall clocks
  12. 12. “Occupancy Optimization of a Hotel”     HOTEL INTRODUCTIONSituated in the midst of prominent business & commercial area of Rajkot city, just5 Km from Airport & 3 Km from Railway Station. The Grand Regency Hotel inRajkot is the ideal destination for Corporate Gatherings, Strategic PlanningSessions & Board Meetings.Hotel The Grand Regency opened its doors on 15th July 2002. The concept & feelof the hotel is to create an oasis of comfort and luxury in the hub of heightenedcommercial activity. The accommodation options at the Grand Regency Hotel area plenty to offer a wide choice to the tourists. The comfort and the luxury at TheGrand Regency makes you feel at home even if you are away from your home. Itoffers quality business services and facility including a business center, executivelounge, health room and recreational room.It has 48 elegant rooms with ample seating including the splendid Gardenia Floorhaving a lush & rich garden with 19 rooms surrounding it, offers all therequirements of a Modern Business Traveler. Rest is Executive Room, EleganceRoom and Suite Room. It has much more to offer than just accommodation, it has2 Banquet and conferencehalls, and also used as Social gathering, • The Swagat Hall: - Accommodating 150 persons • Regent Room: - Accommodating 350 personsIt offers fine dining experience With 2 Restaurants, • DholaMaru: - This elegantly appointed 100 covers Multi-Cuisine Restaurant serving authentic cuisine ushers in slow concept in fine dining for a delightful dining experience.
  13. 13. “Occupancy Optimization of a Hotel”     • Dosa Hut: - It offers south Indian Cuisine (simply south) , appointing 65-70 cover.The restaurants are one of the leading restaurants in Rajkot according to FHRAIsurvey. The hotel is also FHRAI registered member.
  14. 14. “Occupancy Optimization of a Hotel”     ANALYSIS
  15. 15. “Occupancy Optimization of a Hotel”    OBSERVATIONS Methodology 1. Data Acquisition - Gathering Annual Sales Occupancy Reports 2. Data Analysis - Breaking it down further into quarters, weeks and days 3. Data Mining - Finding relevant trends, patterns and clusters 4. Data Study – Studying the mined data and converting it into useful charts and schematic diagrams 5. Defining the problem area from the Data Studied 6. Data Application – Making relevant Recommendations and Conclusion based on the problem areas found in the research
  16. 16. “Occupancy Optimization of a Hotel”     Guest ProfileAs per the data and discussions with the hotel management staff, we have foundout that the profiling of the hotel guests fall in the following categories: 1. Business Travelers (Majority) 2. Tourists 3. Locals – Families and Functions (Mostly Weddings)
  17. 17. “Occupancy Optimization of a Hotel”     Trends and PatternsYear-wise occupancy for the Hotel stands at 46% in the first year and goes up to56% to the next year and eventually drops to 40% in the final year. In order tounderstand the further trend we went in the depth by breaking the annualoccupancy records into 4 quarters and then compared it in two ways i. Inter-Quarter ii. Inter-Year (Quarter)In doing so, we found out an interesting trend over the years that Q3 has beenoutperforming the other quarters that means it had the best occupancy as comparedto the other quarters. It was followed by Quarter 4.In order to understand this trend we went ahead and found a cluster of Week 27 toWeek 47 (Best Weekly Occupancy Cluster) which was interestingly having similartrends for all three years.To understand more, we found out that these quarters and weeks were falling undermonths like October to February in which there are major festivals like Diwali,Dusshera, Navratri, Christmas, New Years Eve, Weddings and Winter Vacationsand companies’ semi-annual meetings are also conducted.In order to further understand customer’s check in and checkout rates in a week,we analyzed and observed the occupancy records day-wise, over the period ofthree years. We found that, THURSDAY has registered as the most number ofcheck-ins i.e highest occupied day in a week whereas, Weekends had the highestnumber of check-out i.e. lowest occupied days in a week.
  18. 18. “Occupancy Optimization of a Hotel”    About Q1Out of the four Quarters, Q3 & Q4 are having good results whereas the otherquarters are not having the optimum results. In order to understand the difference,we went in depth to understand these quarters result in the similar way mentionedabove, i.e. dividing the annual occupancy quarterly, weekly and daily.The findings were that the first quarter is scheduled for a regular maintenance workwhich is right before the monsoon. Maintenance has to be done every year for thatperiod. Henceforth, it is resulting into high “Out of Order” rooms which isimpacting the available room slots and hence the occupancy of the hotel for thatperiod.About Q2According to the analysis Q2 falls under months – July to September whichhappens to be the rainy season which impacts the occupancy directly as Rajkotfalls under a geographic area which gets ample amount of rain.Since most of the marriages happen in the later quarters, Q2 gets affected with lessnumber of bookings with respect to the occupancy.Even then, Q2 manages to have a considerable amount of occupancy which is 40%on an average.
  19. 19. “Occupancy Optimization of a Hotel”     Booking Reservation InformationWe have found out how guests actually go ahead and book the rooms for their stay.Its shown in the charts that majority of the bookings are under the category ofadvanced booking and significantly less number for walk-ins, reason being, thatthe availability is less as majority of the bookings are made via agents, individualson a prior basis which are mainly for Corporate and regular clients. Therefore, theavailable rooms for the guests who walking in are on a lesser side
  20. 20. “Occupancy Optimization of a Hotel”     RECOMMENDATIONSWith the observations and inferences that we have found out, we have come to apoint that we would recommend 1. Central Reservation System 2. E-CRM via Loyalty Program for the HotelCentral Reservation System Hotel needs to maintain the record of guests and reserve rooms beforehand. Customers should be able to know the availability of the rooms on a particular date. They should be able to reserve the available rooms according to their need in advance. To make their stay comfortable, they are provided with food and other services. The record of the food taken by each customer and the services availed by the customer should be kept. These records help in generating bill.The hotel reservation system should be able to satisfy the following requirements:1. The system should be able to keep the records of the guests and the roomallotted to them.
  21. 21. “Occupancy Optimization of a Hotel”    2. Customers should be able to know the availability of the rooms on a particulardate.3. Guests should be able to book the available rooms online.4. The record of food and services availed by the customer should be kept.5. The system should be able to generate the bill for a customer. Design Entities And Attributes1. GUEST can be of two types FAMILY and COMPANY2. FAMILY has attributes FamilyHeadName, Address, NoOfAdults, Children.3. COMPANY has attributes Name and Location.4. ROOM has attributes RoomNo Rate, Type and Status (vacant or occupied)5. FOOD has attributes ProductId Rate and Type.6. BILL has attributes BillNo , Date and Time.7. FACILITIES has attributes Facility Id, Type and Rate. Relations and their description1. GUEST are ALLOTED ROOM from CheckInDate to CheckOutDate. OneGuest(Family or Company)can be alloted more than one room.2. GUEST PAYS BILL. A GUEST must pay a BILL.3. GUEST may USES FACILITIES. One GUEST can use more than oneFACILITIES.
  22. 22. “Occupancy Optimization of a Hotel”    4. GUEST ORDERS FOOD at some Time on some Date. GUEST can order morethan one FOODitem and one FOOD item can be ordered by one GUEST.   Figure 1: Hotel Reservation Database Schema
  23. 23. “Occupancy Optimization of a Hotel”     Fig 2. Schema diagram for the Hotel Reservation Database schema FAMILYFamily Head Family_Head_Name Address Phone No No_Of_Adults No_Of_Children FAMILY MEMBERS Family Head Name Age COMPANY Name Location COMPANY MEMBERS Company Name Guest Age Designation NameNameNam eName GUEST ID – ALLOCATE 1 unique ID to a Company Guest_ID
  24. 24. “Occupancy Optimization of a Hotel”     ROOM Room_No Type Rate Status Guest_ID Checkin_Date CheckOut_Date FACILITIES Facility_ID Rate Type Guest_ID BILL Bill_No Amount Date Paying_Method Guest_ID FOOD Product_ID Rate Type ORDERS Guest_ID Product_ID Date Time Quantity
  25. 25. “Occupancy Optimization of a Hotel”     Output 1. Reservation Form: 2. Order Food:
  26. 26. “Occupancy Optimization of a Hotel”    
  27. 27. “Occupancy Optimization of a Hotel”     Benefits of CRS• Increase guests retention• Develop and enhance relationships with customers, suppliers and networks• Attract, retain and maintain a happy workforce and be an Employer of Choice• Save money on energy and operating costs and manage risk• Differentiate yourself from your competitors• Generate innovation and learning and enhance your influence• Having an IT based infrastructure in the Hotel to optimize efficiency
  28. 28. “Occupancy Optimization of a Hotel”     E-CRM via LOYALTY PROGRAMHotels get nearly half of their revenues from the small segment of travelers whospend about a month each year on the road: frequent visitors make up only 38%percent of all hotel guests but account for 62% percent of hotel nights.In the early 1980s, hotel chains began to recognize the value of such customers byintroducing loyalty programs patterned on the airlines frequent-flier model. Theseprograms have succeeded in maintaining the loyalty of people who travelmoderately often but are not as effective as they might be with other segments. To capture this opportunity, hotel executives must ask, "What do you get theperson who has everything or at least more points than he or she can use?"Part of the answer might involve changing the way points are redeemed. Even forelite-status members of a loyalty program, redeeming them for free hotel roomscan be cumbersome at popular times and destinations.E-CRM IN HOSPITALITYElectronic customer relationship management (e-CRM), in the context of theexploding Internet distribution and marketing in hospitality, is a business strategysupported by Web technologies, allowing hoteliers to engagecustomers in strong, personalized and mutually beneficial interactive relationships,increase conversions and sell more efficiently.
  29. 29. “Occupancy Optimization of a Hotel”     E-CRM cannot exist in isolationTodays multi-channel marketing model requires a single brand image to becommunicated across all channels. In the same time it requires interactivecustomer relationships to be established and maintained across all channels.Anytime an Internet user lands on a hotel website, a branding interaction occurs.This branding interaction can be positive or negative . Unfortunately for somehoteliers on many occasions a visit to the hotel website turns out to be the lastpoint of contact with this particular customer.Two key questions are facing hoteliers today • Who owns the customer in this new online environment? • Which made the booking, or the hotel where the guest stayed? How can hoteliers establish mutually beneficial interactive relationships with the customers? 1. Know Your Customer 2. Customer Service 3. Personalization 4. More Efficient Marketing 5. Building Customer Loyalty in order to increase repeat business
  30. 30. “Occupancy Optimization of a Hotel”     Here are the main aspects in e-CRM in hospitality1. KNOW YOUR CUSTOMERKnowing your website visitors is an extremely important consideration whenconceptualizing and designing your hotel website and your e-CRM strategy. Afterall, addressing your key audiences and providing them with relevant information isone of the key aspects of any hospitality site. Different customer segments shouldeasily identify areas on the site that speak to them. Internet users visit a hotelwebsite not as John Smith or Jane Smith, but as a Business Traveler, MeetingPlanner, Special Event Planner, Family Traveler, Spa Services Seeker, Golf OutingSeeker, Vacation Planner, Convention Attendee, Wedding Planner, etc.The benefits are obvious: • Identify your most valuable customers with best lifetime value perspective • Allows guest-centric data mining: guest history, guest profiles, past bookings, preferences, etc. • Enables informed decisions in real time • Allows fast response times • Real-time Guest Lifetime Value • Deliver business insight to executives, marketers, sales unit 2. PERSONALIZATION Personalization is more than providing the right information to the right person at the right time. Personalizing the customer experience on the hotel website is a powerful conversion and retention tool. Customizing your interaction with your most valuable customers will provide significant long-term rewards. Adopt a policy on how to address your guests via email Addressing the customer segmentation issues on the property website is a logical next step.
  31. 31. “Occupancy Optimization of a Hotel”     Creating a targeted email marketing campaign is another good step. For the major hotel brands, the personalization efforts are much more complex and expensive. Customization tools used by some major brands and airlines allow website users to actively personalize their website experiences using over 250 criteria. Here are some of the efforts by the major travel and hospitality companies to make the user experience more personable: Personalization agents using a variety of customization applications, capable of creating Behavioral Profiles and a Real-time profile for each customer Collaborative filtering Using preference matrix and artificial intelligence to capture and predict customer interests Decision-support applications utilizing various applications for Behavioral Profiling, Predictive Modeling, Collaborative Filtering and Click-Stream Analysis, capable to sense the purchasing behavior and patterns of the user. By providing a customized booking experience these applications can boost the conversion rates. 3. CUSTOMER SUPPORT It is important to understand that customer service is only one aspect of e-CRM and is primarily a reactive function aiming to improve performance and efficiency, while e-CRM as a whole is a proactive long-term strategy. On the Internet the customer support aspect of e-CRM is an extremely important trust building and customer retention tool. A well positioned Contact Us or Help button or Push-to-talk feature speaks volumes about the hotel brand and builds trust. 57% of online shoppers actively seek sites with good customer service Different customer segments perceive the hotel website differently. While not dramatically different, Business Travelers appeared slightly more critical than other user groups. Even when they felt satisfied, Business Travelers appeared more critical: 54.57% found the site to be Very good or excellent compared to 55.14% for Leisure Travelers.
  32. 32. “Occupancy Optimization of a Hotel”     Conclusion: e-CRM is an integral part of online distribution and marketingin hospitality. The Internet provides the best direct means to reach existing andpotential customers. Establishing interactive relationships with yourcustomers, which is the essence of e-CRM, will help you retain your customers,increase revenues, and build brand loyalty.
  33. 33. “Occupancy Optimization of a Hotel”     CONCLUSIONAs per the Operations Research over the Hotel, we need to have an occupancy of40% and above to reach the breakeven for a particular year. Due to the fluctuationsin the occupancy during the year, the Hotel has just managed to reach its breakevenpoint and has not made any sufficient profit margins as per the Management’sexpectations. Therefore, we aim to have an uniform occupancy rate throughoutthe year which will not only help the hotel achieve the breakeven but also it willalso make sure that certain percentage of profits are achieved.All this can be envisaged by implementing the two of the recommended programsfor the hotel. This will help enhance Hotel’s efficiency, occupancy and willsmoothen down the systems and processes in the future to come.