APA Hospitality Analytics and Revenue Management interview paper

Kelly Hadad

Class HFT 4413

Professor Nathan Dodge

New York Lotte Palace

With its location at the Madison Avenue, New York, the place was named as one of the top hotels by the Conde Nast Traveller (2017). Located across St. Patrick Cathedral, the hotel offers 7000 square feet of spa and a fitness lounge. Open for weekend brunches and breakfast, the hotel Villard offers one of the top-notch hospitality areas in the city of New York. Additionally, the hotel offers an onsite bakery, inbound dining areas and two lounges for the visiting guests. For the room spacing, each room offers a marble bathroom offering a sightseeing view of the Cathedral and the Rockefeller Foundation. Other than the Cathedral, the building is surrounded by the Central Park which is 0.6 miles from the hotel.

In this essay, an analytical report of the Lotte New York Hotel General manager will be provided. Becky Hubbard, the General Manager for the hotel was interviewed over the position of the hotel in the business, competition as well as their revenue strategies. Using the STAR program, the General Manager explains how the company uses direct competition, pricing, average rack price, Average Daily rate, occupancy and market segmentation to affect the financial and revenue strategies.

Direct Competition

During doing business, Hubbard stated that despite Lotte New York Hotel is a five-star facility, there are several competing companies offering services at slightly cheaper prices. For instance, the General Manager mentioned the entry of the Hampton Inn Brooklyn into the New York hospitality business as the greatest competitor for the Lotte New York Hotel. With Lotte New York hotel charging $295 per night for the double lounges, Hampton Brooklyn Inn provides the same at $200 and therefore most of the long-term customers have shifted to the new hotel. However, the general manager made it clear that their services are top-notch and are incomparable to those offered by the competitors. To counter the competition, Hubbard said that Lotte New York Palace aims at maximizing the standards, quality and the customer satisfaction levels. Based on the operational costs, the manager indicated that they can’t lower their prices for the products and services. However, they were concentrated on utmost service delivery to attract more guests despite their higher prices relative to those offered by the competitors.

Another way of countering competition by the Hotel as argued by the General Manager is by increasing the awareness of the services offered by the company. For instance, the website has been upgraded to offer more information about the services offered, food, catering, accommodation, bookings, reservations and so on. Additionally, the GM indicated that the company has tendered a new organization to offer advert consultancy services to the company. The GM exposed that Tambourine has been used as the marketing partners for Lotte New York Palace for the last one year to perfect on their awareness strategies.

Pricing and Booking

With the 909 total rooms and suites, the company offers varying prices based on the size of the room, the events and the season of the year. For instance, the GM indicated that at Summer and Christmas holidays, the prices for their, rooms, wedding lobbies and restaurants are at peak. At these seasons, the hotel receives the highest number of local and foreign guests visiting the city of New York for Vacations and holidays. Therefore, the private spaces for the lavish wedding and dinners are only a reserve for a few during such seasons as the prices are highly bloated. The GM blamed the increasing prices on the natural forces of demand and supply.

During normal seasons, the manager indicated that the property charges normal price schedules. For instance, a double suite that will go for $400 during the peak season will go for $290 during the normal seasons. For the special occasions and events, the hotel also introduces discounts and offers which are highly publicised over the company’s website. The manager argues that over the years, the discounted prices for the rooms and suites have had the hotel attracting more customers a guests in the past. However, Hubbard indicates that the hotel does not entertain closeout in its policy even when the business is down. The prices can only rise during the peak seasons and standardize when the normal business reigns. Otherwise, the GM argued that closeouts would normally lower the standards of the hotel. According to Hubbard, closeouts are only possible for the four-star hotels which care less about competition and class.

On whether the hotel experiences overbooking, the GM indicated that during the peak seasons, it's normal to run out of space for the rooms and events due to high rates of reservation from clients. In such cases, Hubbard said that the hotel recommends the customers to their other chains or hotels in town. As a business community, the manager indicated that Lotte New York Palace enjoys a good relationship even with their competitors and they are always willing to share business in good times.

Customer Satisfaction

According to Hubbard, the primary aims of Lotte New York Palace is to maximize the utility customer derive from their property. Therefore, the pricing is determined by the quality of the rooms, the size and the needs of the clients. For instance, the specialty suites and lounges are quite expensive because they offer unique stuff to the clients. The Double suites are cheaper because they are standard rooms with luxury Bengali but not reaching the quality of the Lounges. Additionally, the hotel has 24 hours security offered by top-notch security firms in the New York to ensure that the clients in the rooms, suites, lounges, and restaurant are safe.

Therefore, the GM indicated that the average daily rates for the rooms are entirely based on the classified unit of the property. In other words, Hubbard said that the rooms with the highest ADR have the highest quality of goods and services such as the furniture, electronics and so on. For instance, for the specialty lounges and suites, the televisions screens are internet connected and therefore clients can surf from the comfort of their TV Screens. For Double Suites and lounges, the television screens are not connected to the internet and therefore the customers can only surf from their devices such as phones and laptops from the hotel WIFI. Looking at the ADR, the financial performance of rooms is highly determined by the quality of the services. As stated by Choi (2014) ADR cannot be used to determine the performance of the hotel rooms, an argument that is supported by Hubbard in relation to Lotte New York Lounge. For the average occupancy percentage, the GM indicated that the hotel has policies clearly explained to the clients when making reservations and hiring premises at the hotel. For instance, during the peak seasons, occupancy rates tend to be 100% with the same going as low as 50% and 60% during the normal business seasons. To increase the occupancy rate, the GM stated that the hotel offers rooms and suites for 12hours and 24 hours with varying prices. As stated by Law (2004), the room occupancy rate can be increased using the restrictions over the length of stay. Therefore, the clients are aware of the time restrictions for their stay in the hotel and this has a positive impact on the financial performance of the hotel.

For the market segmentation, Hubbard states that the prices for Lotte New York Palace are fixed although the company reserves the rights to change. However, in its branches in other states, the prices are slightly varied based on the city, locations and the government policies. For instance, Hubbard states that the prices of the hotel in Texas and New York may not be the same based on the economic conditions of the two states and the varying state regulations over the hotel business. The average rack rate similarly is determined by the quality of the suites and lounges.

Conclusion

In the report, the paper has highlighted various issues as explained by the General Manager, Lotte New York Palace over its financial strategies. The financial leveraging powers analysed include the average occupancy, average rack and direct competition. As the forms of STAR program, the manager explained how the facility used the techniques to maximise the profits attained from the property.

References

Choi, S., & Mattila, A. S. (2014). Hotel revenue management and its impact on customers' perceptions of fairness. Journal of Revenue and pricing Management, 2(4), 303-314.

Law, R. (2004). Initially testing an improved extrapolative hotel room occupancy rate forecasting technique. Journal of Travel & Tourism Marketing, 16(2-3), 71-77.