AVARI RAMADA: CASE STUDY

Presented by (SectionC):

SAHIL BHAMBRI (12DCP-097) SAKSHAM SHARMA (12DCP-098) SANDEEP SINGH BEDI (12DCP-100) SAWAN GUPTA (12DCP-104)
1/14/13 ARORA (12DCP-117) TANUJ

The Avari Lahore

5 star Hotel Affiliated with the Ramada Renaissance Hotel chain Located at the Shahrah-e-Quaid-i-Azam road

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The Avari Lahore

Managed by Hilton group (1978 - September 1987) Avari took over the management in October 1987 and renamed Avari Lahore Ramada Renaissance Hotel In the vicinity of:

Provincial Assembly Pakistan Arts Council Commercial and Shopping zones

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Problem Statement

Average room rate of Avari Hotel had fallen below its main competitor, Pearl Continental Hotel. The assistant sales and marketing manager wants to re-evaluate the current pricing policy of Avari. He wants to find out which is the best among the following alternatives:

Increase the Price of all rooms by 10 percent. Increase all rates other than EBS and VEBS rates. Introduce another type of rate which bridged the vast differential between the group rate and the least expensive individual rate.

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SWOT Analysis
Strengths:

Strategically Located Good Quality Service

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SWOT Analysis
Weaknesses:

Rooms less spacious as compared to Pearl. Brand image has not been formed in the minds of potential customers.

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SWOT Analysis
Opportunities:

Formation of a tax free industrial zone in Chunnian Flights from Europe and United States were expected to start by the end of 1989

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SWOT Analysis
Threats:

Competition from Pearl New entrants with good international image:

Sheraton Hotel The Holiday Inn

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5 C Analysis
Company

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Competition
1.

Main Rival Pearl Continental Hotel spacious rooms and lawns

1.

Tax free zone in Chunnian Hotel Sheraton and Hotel Inn

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Customers

Segmented customer base into

1.

Business Walk-ins Tour Groups Others

1.

1.

1.

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Climate
1. 2.

High level of industrialisation Flights from USA and Europe expected to be started Increase demand for hotel rooms in Lahore

3.

Collaboration
1.

Avari affiliated with Ramada Renaissance Hotel Chain Quantity discounts to customers who held company accounts with multinational and foreign

2.

3. 1/14/13Contracts

MARKET SEGMENTATION
Four Broad Categories
v

Business Clients: EBS Executive Business Service VEBS Volume Executive Business Service

Walk-in : FITs-Frequent Individual Travelers

Tour Groups 1/14/13

TARGET MARKET
Avari Clientele

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POSITIONING
v v v

Product Levels Core BenefitSleep Basic ProductAttached bathrooms Equipped with modern appliances Expected Product-

Eating places 1/14/13

POSITIONING
v

Augmented ProductPunjab Terrace Club Kohrshed Mahal Function Rooms Executive Business Centre

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PRICE
Pricing objectives:

Profit Maximization Market share leadership

Setting the price: Pricing method:

Going rate pricing: Avari Ramada operates in an oligopolistic market & prices its rooms on the basis of competition and demand.

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and adjusts its prices, twice a year according to the

Room rates & Pricing Policies

Individual Rate:Rack Rate Commercial Rate Preferential Rate

Double room:Rs 1986 Double room:Rs 1821 Double room:Rs 1658

Single room: Rs 1806

Single room:Rs 1641

Single room:Rs 1478

Customer segment:FIT Purpose:Automatically raise revenues & profits 1/14/13

Customer segment:Business clients Purpose:Attract reputed customers from business: potential to increase occupancy rate in the long run.

Customer segment:Special customers Purpose:Retain loyal customers & attract new ones.

Room rates & Pricing Policies

Individual Rate:Key pricing strategy concepts:

Adapting the price: Differentiated pricing:Numerous types of rates are kept in place. Policy of not turning away any guest that comes to the hotel.

Price discrimination occurs (Company sells a product or service at two or more prices that do not reflect a difference in costs).

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Room rates & Pricing Policies

Contract Rate:

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 provide the hotel within a given year.

Usually, only the multinational and foreign companies entered this category with good repute, size & past records.
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Room rates & Pricing Policies

Contract Rate:EBS and Group Rate VEBS SPECIALITY RATES 75 to 100 room-nights perat least 200 room-nights large companies and year per year organizations, such as (USAID) single room : Rs 1165 double room :Rs 1345. single room : Rs 1020 double room :Rs 1200. 45-60 percent off the rack rate

250 to 300 such accounts 10 to 20 special rate and 10 to 20 special rate VEBS accounts and VEBS accounts

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Room rates & Pricing Policies

Garbage rates:It refers to a category of miscellaneous rates that forms a low percentage of the hotels total revenue.

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Room rates & Pricing Policies

Garbage rates:Govt Officials Net Wholesale Rate Pakistani Govt tour officials and organizers European and agents diplomats Journalists Rate: foreign and local journalists Airline Rate IATA Rate:

forthe crews transit of passengers of international anyairline airlines that flew-in from Middle Eastern countries 45% of Rack Rate 50% of Rack Rate

50% of Rack Rate the hotel did not encourage 1/14/13 such clients

Lower than EBS higher than VEBS

80% of Rack Rate

Room rates & Pricing Policies

Garbage rates:Key pricing strategy concept:

Promotional pricing: Special customer pricing: Sellers offer special prices exclusively to certain customers.

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Room rates & Pricing Policies

Suites:All the suites had different rates:

Rs 3300 for the junior suite, Rs 5500 for the executive suite, Rs 7150 for the presidential suite. Bridal 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 rack rate.

Floral decorations could also be provided with an additional payment of Rs 500. For an extra person in any suite, the charge was Rs 180.

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Room rates & Pricing Policies

Suites:Key pricing strategy concept:

Optional product pricing: It will attempt to increase the amount customer spends, once they start to buy. Optional 'extras' increase the overall price of the product or service.

Complementary bridal suite: Sales promotion incentive

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PROMOTION
Discount pricing

Primary promotional tool to increase the hotels occupancy rate.

Summer package

It happens only in lean season (May to September). Single rooms are available at Rs 930 and double rooms at Rs 1050.

For every nine guests in a group, two rooms are given for free. Breakfast 1/14/13 is complimentary and 10 percent discounts on every

PROMOTION
Other promotional activities:Relationship marketing:

To enhance goodwill & build long term relationships. Free bed tea to the EBS & VEBS guests. Inviting EBS & VEBS account holders to hotel for free meals.

Upgrading: Offered EBS account holder Junior Suite at the same rate of the EBS double or single room.

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Current Situation

Every year, the target for the average room rate was increased by 10 percent.

In 1988, the target for the average room rate was Rs 1200 per month and it would be Rs 1320 per month in 1989.

For 1988, the targeted average occupancy rate was 82 %. In 1989, this target would increase to 85 %

Variable costs were 15 percent of the room revenues

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alone.

Average Room Rate (Rs)

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Occupancy Rates (%)

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Option 1

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Option 2

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Analysis

ARR for option 1 Rs 1100 and option 2 in Rs 1070. But EBS and VEBS are major source of income. Hence not advisable to increase price. With tax free zone, there will be high demand for EBS and VEBS contracts.

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Recommendations

Summer Package: The difference in the average room rates of Avari and Pearl is as high as Rs 114 in September 1988, with Avari being on the higher side. During lean season, a small decrease in rate will increase occupancy significantly.

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Recommendations

By bundling food and room rates, we can encourage more guests to have their food in Avari, thereby increasing the revenue significantly. Customer Loyalty Program: Increasing the loyalty amongst the most profitable group (EBS and VEBS) by providing them further 1/14/13 discounts on room rents, small

Recommendations

Hire chefs specializing in different cuisines International Standards for training of staff

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THANK YOU

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