CASE STUDY

- Price policy -
Title:
AVARI RAMADA HOTEL
Mentor: Student:
Prof. D-r. Kiril Savovski Isidora Jovanovska
Skopje, May - 2!"
CASE STUDY: AVARI RAMADA HOTEL
1. Introdction
T!e A"#ri L#!ore !otel $#%ic c!#r#cteri%tic%&
5 star Hotel
Affiliated with the Ramada Renaissance Hotel chain
Located at the Shahrah-e-Quaid-i-Azam road
Managed by Hilton group !"#$ - September !"$#%
A&ari too' o&er the management in (ctober !"$# and renamed )A&ari Lahore Ramada
Renaissance Hotel*
+n the &icinity of,
-ro&incial Assembly
-a'istan Arts .ouncil
.ommercial and Shopping zones
Pro$le' St#te'ent
A&erage room rate of A&ari Hotel had fallen below its main competitor/ -earl Hotel0
1he assistant sales and mar'eting manager wants to re-e&aluate the current pricing policy
of A&ari0
He wants to find out which is the best among the following alternati&es,
+ncrease the -rice of all rooms by !2 percent0
+ncrease all rates other than L3S lu4ury business ser&ices% and 5&olume%L3S
rates0
+ntroduce another type of rate which bridged the &ast differential between the
group rate and the least e4pensi&e indi&idual rate0
S(OT An#ly%i%
Stren)t!%&
Strategically Located
6ood Quality Ser&ice
(e#*ne%%e%&
Rooms less spacious as compared to -earl0
3rand image has not been formed in the minds of potential customers0
Opportnitie%&
7ormation of a ta4 free industrial zone in .hunnian
7lights from 8urope and 9nited States were e4pected to start by the end of !"$"
T!re#t%&
.ompetition from -earl
:ew entrants with good international image,
Sheraton Hotel
1he Holiday +nn
An#ly%i%
Co'p#nythrough images%,
Co'petition
!0 Main Ri&al ; -earl .ontinental Hotel ; spacious rooms and lawns
<0 1a4 free zone in .hunnian ; Hotel Sheraton and Hotel +nn
C%to'er%
Segmented customer base into,
o 3usiness
o =al'-ins
o 1our 6roups
o (thers
Cli'#te
!0 High le&el of industrialisation
<0 7lights from 9SA and 8urope e4pected to be started
>0 +ncrease demand for hotel rooms in Lahore
Coll#$or#tion
!0 A&ari affiliated with Ramada Renaissance Hotel .hain
<0 Quantity discounts to customers who held company accounts
>0 .ontracts with multinational and foreign enterprises?firms
@0 :ew .lient companies offered contracts
50 1our (rganisers offered whole sale rates
A0 Agreement with +A1A
#0 .ontracts with international airlines ; !2 rooms per yr0 Biscount offered ; 55 C
MAR+ET SE,ME-TATIO-
7our 3road .ategories
3usiness .lients,
L3S ;Lu4ury 3usiness Ser&ice
5L3S ;5olume Lu4ury 3usiness Ser&ice
=al'-in ,
7+1s-7reDuent +ndi&idual 1ra&elers
1our 6roups
(thers
TAR,ET MAR+ET
POSITIO-I-,
-roduct Le&els
Core .ene/it
Sleep
.#%ic Prodct
Attached bathrooms
8Duipped with modern appliances
E0pected Prodct
8ating places
A coffee shop
A snac's bar
A regular restaurant
A)'ented Prodct
-unEab 1errace .lub
Fohrshed Mahal
7unction Rooms
84ecuti&e 3usiness .entre
1. An#ly2e
PRICE
Pricin) o$3ecti"e%&
-rofit Ma4imization
Mar'et share leadership
Settin) t!e price& 4Pricin) 'et!od5
,oin) r#te pricin)& A&ari Ramada operates in an oligopolistic mar'et G prices its rooms
on the basis of competition and demand0
+t re&ises and adEusts its prices/ twice a year according to the inflation rate0
Roo' r#te% 6 Pricin) Policie%
Indi"id#l r#te
0
+ey pricin) %tr#te)y concept%&
Ad#ptin) t!e price& Di//erenti#ted pricin)
:umerous types of rates are 'ept in place0
-olicy of not turning away any guest that comes to the hotel0
-rice discrimination occurs .ompany sells a product or ser&ice at two or more prices
that do not reflect a proportional difference in costs%0
T!ird de)ree price di%cri'in#tion& Seller charges different amounts to different classes
of buyers0
C%to'er %e)'ent pricin)& Bifferent customer groups pay different prices for the same
product or ser&ice0
Contr#ct R#te&
An enterprise or firm could enter into a contract with the hotel/ and thereby negotiate
room prices according to the number of room nights that it was willing to pro&ide the
hotel within a gi&en year0
9sually/ only the multinational and foreign companies entered this category with
good repute/ size G past records0
+t would register for either an
L3S lu4ury business ser&ice%
5L3S &olume lu4ury business ser&ice% rate0
,#r$#)e r#te%&
+t refers to a category of miscellaneous rates that forms a low percentage of the
hotelHs total re&enue0
+ey pricin) %tr#te)y concept&
Pro'otion#l pricin)& Speci#l c%to'er pricin)
Sellers offer special prices e4clusi&ely to certain customers0
Site%&
All the suites had different rates,
Rs >>22 for the Eunior suite/
Rs 5522 for the e4ecuti&e suite/
Rs #!52 for the presidential suite0
3ridal Suite was complementary if the wedding or reception was held at the hotel/
otherwise it was charged at its normal price of a double room at the rac' rate0
7loral decorations could also be pro&ided with an additional payment of Rs 5220
7or an e4tra person in any suite/ the charge was Rs !$20
+ey pricin) %tr#te)y concept&
Option#l prodct pricin)& +t will attempt to increase the amount customer spends/ once
they start to buy0 (ptional Ie4trasI increase the o&erall price of the product or ser&ice0
.omplementary bridal suite, Sales promotion incenti&e
PROMOTIO-
Di%cont pricin)
-rimary promotional tool to increase the hotelHs occupancy rate0
S''er p#c*#)e
+t happens only in lean season May to September%0
Single rooms are a&ailable at Rs ">2 and double rooms at Rs !2520
7or e&ery nine guests in a group/ two rooms are gi&en for free0
3rea'fast is complimentary and !2 percent discounts on e&ery meal consumed by hotel
guests is gi&en0
Prpo%e& Raise occupancy le&els during lean months0
Ot!er pro'otion#l #cti"itie%&
Rel#tion%!ip '#r*etin)&
1o enhance goodwill G build long term relationships0
7ree bed tea to the L3S G 5L3S guests0
+n&iting L3S G 5L3S account holders to hotel for free meals0
9pgrading, (ffered L3S account holder Junior Suite at the same rate of the L3S double
or single room0
Pro'otion#l liter#tre 4Direct M#r*etin)5& -romotional literature such as leaflets and
newsletters were sent to list of clients to 'eep them informed about the monthly acti&ities
at the hotel0
7. Concl%ion #nd %oltion%
Crrent Sit#tion
8&ery year/ the target for the a&erage room rate was increased by !2 percent0
+n !"$$/ the target for the a&erage room rate was Rs !<22 per month and it would be Rs
!><2 per month in !"$"0
7or !"$$/ the targeted a&erage occupancy rate was $< C0 +n !"$"/ this target would
increase to $5 C
5ariable costs were !5 percent of the room re&enues alone0
A"er#)e Roo' R#te 4R%5
Occp#ncy R#te% 485
Option 1
Option 1
An#ly%i%
ARR for option ! Rs !!22 and option < in Rs !2#20
3ut L3S and 5L3S are maEor source of income0 Hence not ad&isable to
increase price0
=ith ta4 free zone/ there will be high demand for L3S and 5L3S contracts0
Reco''end#tion%
S''er P#c*#)e, 1he difference in the a&erage room rates of A&ari and
-earl is as high as Rs !!@ in September !"$$/ with A&ari being on the higher
side0 Buring lean season/ a small decrease in rate will increase occupancy
significantly0
3y bundling food and room rates/ we can encourage more guests to ha&e
their food in A&ari/ thereby increasing the re&enue significantly0
C%to'er Loy#lty Pro)r#', +ncreasing the loyalty amongst the most
profitable group L3S and 5L3S% by pro&iding them further discounts on
room rents/ small mementos/ free pic'up and complimentary food
Hire chefs specializing in different cuisines
+nternational Standards for training of staff