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Accra Beach Hotel Case Study Questions

Unformatted text preview: The Accra Beach Hotel: Block Booking of Capacity during a Peak Period CASE STUDY C AS E 9 Sheryl E. Kimes, Jochen Wirtz and Christopher H. Lovelock Cherita Howard, Sales Manager for the Accra Beach Hotel, a 141-room hotel on the Caribbean island of Barbados, was debating what to do about a request from the West Indies Cricket Board. The Board wanted to book a large block of rooms more than six months ahead during several of the hotel’s busiest times and was asking for a discount. In return, it promised to promote the Accra Beach in all advertising materials and television broadcasts as the host hotel for the upcoming West Indies Cricket Series, an important international sporting event. THE HOTEL Exhibit 1:  Beach view of the Accra Beach Hotel. T he Accra Beach Hotel and Resort had a prime beachfront location on the south coast of Barbados, just a short distance from the airport and the capital city of Bridgetown. Located on three and a half acres of tropical landscape and fronting one of the best beaches on Barbados, the hotel featured rooms offering panoramic views of the ocean, pool, or island. The centerpiece of its lush gardens was the large swimming pool, which had a shallow bank for lounging plus a swimup bar. In addition there was a squash court and a fully equipped gym. Guests could also play golf at the Barbados Golf Club, which was only 15 minutes away and with which the hotel was affiliated. The Accra Beach had two restaurants and two bars, as well as extensive banquet and conference facilities. It offered state-of-the-art conference facilities to local, regional, and international corporate clientele and had hosted a number of large summits in recent years. It had three conference rooms, which could be configured in a number of ways to be used for large corporate meetings, training seminars, product displays, dinners, and wedding receptions. A business center provided guests with Internet access, faxing capabilities, and photocopying services. The hotel’s 188 standard rooms were categorized into three groups—Island View, Pool View, and Ocean View—and © 2012 by Sheryl E. Kimes, Jochen Wirtz, and Christopher H. Lovelock. Note: Certain data have been disguised for confidentiality reasons. there were also 24 Ocean View Junior Suites, four twobedroom, and six Penthouse Suites, each decorated in tropical pastel prints and handcrafted furniture. All rooms were equipped with cable/satellite TV, air-conditioning, The Accra Beach Hotel: Block Booking of Capacity during a Peak Period 559 16 CS09 559-563.indd 559 8/5/12 4:28 PM Exhibit 2:  Pool view of the Accra Beach Hotel. Exhibit 3:  Accra Beach Hotel. Monthly Occupancy Rate Year Month Occupancy 2 Years Ago January 87.7% 2 Years Ago February 94.1% 2 Years Ago March 91.9% 2 Years Ago April 78.7% 2 Years Ago May 76.7% 2 Years Ago June 70.7% 2 Years Ago July 82.0% 2 Years Ago August 84.9% 2 Years Ago September 64.7% 2 Years Ago October 82.0% 2 Years Ago November 83.8% 2 Years Ago December 66.1% Last Year January 87.6% Last Year February 88.8% Last Year March 90.3% Last Year April 82.0% Last Year May 74.7% Last Year June 69.1% HOTEL PERFORMANCE Last Year July 76.7% The Accra Beach enjoyed a relatively high occupancy rate, with the highest occupancy rates achieved from January through March and the lowest generally during the summer (Exhibit 3). Their average room rate followed a similar pattern, with the highest room rates (US$150–170) being achieved from December through March but relatively low rates (US$120) during the summer months (Exhibit 4). The hotel’s revenue per available room (RevPAR), a product of the occupancy rate times the average room rate, showed even more variation, with RevPARs exceeding $140 from January to March but falling to less than $100 from June to October (Exhibit 5). The rates on the Penthouse Suites ranged from $310 to $395, while those on the Junior Suites ranged from $195 to $235. Guests had to pay Barbados’ Last Year August 70.5% Last Year September 64.7% Last Year October 71.3% Last Year November 81.7% Last Year December 72.1% ceiling fans, hairdryer, coffee percolator, direct-dial telephone, bathtub/shower, and a balcony. Standard rooms were configured with either a king-size bed or two twin beds in the Island and Ocean View categories, while the Pool View rooms had two double beds. The eight Penthouse Suites and four two-bedroom Suites all offered ocean views and contained all the features listed for the standard rooms plus added comforts. They were built on two levels, featuring a living room with a bar area on the third floor of the hotel, and a bedroom accessed by an internal stairway on the fourth floor. These suites also had a bathroom containing a Jacuzzi, shower stall, double vanity basin, and a skylight. The 24 Junior Suites were fitted with a double bed or two twin beds, plus a living room area with a sofa that can be converted into another bed. Value-Added Tax (VAT) of 8.75% on room charges and 15% on meals. Cherita Howard, the hotel’s sales manager, worked extensively with tour operators and corporate travel 560  Case Study 16 CS09 559-563.indd 560 8/5/12 4:28 PM Exhibit 5:  Accra Beach Hotel. Average Daily Room Rate Revenue per Available Room (RevPAR) Year Month Average Room Rate (in US$) Year Month Revenue per Available Room (in US$) 2 Years Ago January $159.05 2 Years Ago January $139.49 2 Years Ago February $153.73 2 Years Ago February $144.66 2 Years Ago March $157.00 2 Years Ago March $144.28 2 Years Ago April $153.70 2 Years Ago April $120.96 2 Years Ago May $144.00 2 Years Ago May $110.45 2 Years Ago June $136.69 2 Years Ago June $96.64 2 Years Ago July $122.13 2 Years Ago July $100.15 2 Years Ago August $121.03 2 Years Ago August $102.75 2 Years Ago September $123.45 2 Years Ago September $79.87 2 Years Ago October $129.03 2 Years Ago October $105.80 2 Years Ago November $141.03 2 Years Ago November $118.18 2 Years Ago December $152.87 2 Years Ago December $101.05 Last Year January $162.04 Last Year January $141.90 Last Year February $167.50 Last Year February $148.67 Last Year March $158.44 Last Year March $143.02 Last Year April $150.15 Last Year April $123.12 Last Year May $141.79 Last Year May $105.87 Last Year June $136.46 Last Year June $94.23 Last Year July $128.49 Last Year July $98.55 Last Year August $128.49 Last Year August $90.59 Last Year September $127.11 Last Year September $82.24 Last Year October $132.76 Last Year October $94.62 Last Year November $141.86 Last Year November $115.89 Last Year December $151.59 Last Year December CASE STUDY Exhibit 4:  Accra Beach Hotel. $109.24 Note: Average room rate is inclusive of VAT. Note: RevPAR refers to revenue per available room and is computed by multiplying the room occupancy rate (see Exhibit 3) with the average room rate (Exhibit 4). RevPAR is inclusive of VAT. The Accra Beach Hotel: Block Booking of Capacity during a Peak Period 561 16 CS09 559-563.indd 561 8/5/12 4:28 PM managers to promote the hotel. The hotel had traditionally promoted itself as a resort destination, but, in the last few years, it had shifted its focus to promoting its convenient location and attracted many business customers. The Accra Beach Hotel was named Hotel of the Year by the Barbados Hotel Association in 2002 and 2005. The composition of hotel guests had changed drastically over the past few years. Traditionally, the hotel’s clientele had been dominated by tourists from the UK and Canada, but recently, the percentage of corporate customers had increased dramatically. Now, the majority of hotel guests were corporate clients from companies such as Barbados Cable & Wireless and the Caribbean International Banking Corporation (Exhibit 6) who came for business meetings with local companies. Sometimes, guests who were on vacation (particularly during the winter months) felt uncomfortable finding themselves surrounded by business people. As one vacationer put it, “There’s just something weird about being on vacation and going to the beach and then seeing suit-clad business people chatting on their cell phones.” However, the hotel achieved a higher average room rate from business guests than vacationers and had found the volume of corporate business to be much more stable than that of tour operators and individual guests. Exhibit 6:  Accra Beach Hotel: Market segments. 3500 3000 Rooms Sold 2500 2000 1500 1000 500 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Individual Travelers THE WEST INDIES CRICKET BOARD Cherita had been approached by the West Indies Cricket Board (WICB) about the possibility of the Accra Beach Hotel serving as the host hotel for next spring’s West Indies Cricket Home Series, an important international sporting event among cricket-loving nations. The location of this event rotated among several different Caribbean nations, and Barbados would be hosting the next one, which would feature visiting teams from India and New Zealand. Cherita and Jon Martineau, General Manager of the hotel, both thought that the marketing exposure associated with hosting the teams would be very beneficial for the hotel. However, they were concerned about accepting the business because they knew from past experience that many of the desired dates were usually very busy days for the hotel. They were sure that the rate that the WICB was willing to pay would be lower than the average rate of US$140–150 they normally achieved during these times. And in contrast to regular guests, who could usually be counted on to have a number of meals at the hotel, team members and officials would probably be less likely to dine at the hotel because they would be on a per diem. On average, both corporate customers and vacationers spend about $8 per person for breakfast and about $25 per person for dinner (per person including VAT). The contribution margin on food and beverage is approximately 30%. About 80% of all guests have breakfast at the hotel and approximately 30% of all guests would dine at the hotel (there are many other attractive restaurant options nearby). Mr. Martineau thought that only about 25% of the cricket group would have breakfast at the hotel and maybe only about 10% would dine at the hotel. Also, they worried about how the hotel’s other guests might react to the presence of the cricket teams. Still, the marketing potential for the hotel was substantial. The WICB had promised to list the Accra Beach as the host hotel in all promotional materials and during the televised matches. The West Indies Home Series was divided into three parts, and each would require bookings at the Accra Beach Hotel. The first part pitted the West Indies team against the Indian team and would run from April 24 to May 7. The second part featured the same two teams and would run from May 27 to 30. The final part showcased the West Indies team against the New Zealand team and would run from June 17 to 26. Corporate Tour Operators 562  Case Study 16 CS09 559-563.indd 562 8/5/12 4:28 PM Exhibit 7:  Room sales and average daily room rates for same periods in previous year. Cherita shook her head and wondered, “What should I do?” STUDY QUESTIONS 1. What factors lead to variations in demand for rooms at a hotel such as the Accra Beach? 2. Identify the various market segments currently served by the hotel. What are the pros and cons of seeking to serve customers from several segments? 3. What are the key considerations facing the hotel as it reviews the booking requests from the West Indies Cricket Board?1 Average Daily Room Rate (ADR) in US$ April 24 141 $129 April 25 138 $120 April 26 135 $128 April 27 134 $135 April 28 123 $133 April 29 128 $124 April 30 141 $119 May 1 141 $124 May 2 141 $121 May 3 139 $122 May 4 112 $118 May 5 78 $126 May 6 95 $130 May 7 113 $138 May 27 99 $131 May 28 114 $132 May 29 114 $136 May 30 125 $136 June 17 124 $125 119 $122 June 19 Soon after Cherita returned to her office to analyze Ferne’s data, she was interrupted by a phone call from the head of the WICB wanting to know the status of his request. She promised to have an answer for him before the end of the day. As soon as she hung up, Jon Martineau called and chatted about the huge marketing potential of being the host hotel. Rooms Sold Last Year during the Same Period June 18 Cherita called Ferne Armstrong, the hotel’s reservations manager, and asked her what she thought. Like Cherita, Ferne was concerned about the possible displacement of higher-paying customers but offered to do further investigation into the expected room sales and associated room rates for the desired dates. Since the dates were over six months in the future, Ferne had not yet developed forecasts. But she was able to provide data on room sales and average room rates from the same periods during the previous year (Exhibit 7). Date of WICB Home Series 112 $126 June 20 119 $111 June 21 125 $110 June 22 116 $105 June 23 130 $106 June 24 141 $101 June 25 141 $110 June 26 125 CASE STUDY The WICB wanted 50 rooms (including two suites at no additional cost) for the duration of each part and was willing to pay US$130 per night per room. Both breakfast and VAT were to be included, and each team had to be housed on a single floor of the hotel. In addition, the WICB insisted that laundry service for team uniforms (cricket teams typically wear all-white clothing) and practice gear be provided at no additional charge for all team members. Cherita estimated that it would cost the hotel about $20 per day if they can do the laundry in-house, but about $200 per day if they had to send it to an outside source. $115 Part 1 Part II Part III Note: ADR excludes VAT. 4. What action should Cherita take and why? 1 For simplification of calculations, assume that each room will hold only one occupant, that is, 50 rooms equate to 50 cricket players. The Accra Beach Hotel: Block Booking of Capacity during a Peak Period 563 16 CS09 559-563.indd 563 8/5/12 4:28 PM ...
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Case 8
The Accra Beach Hotel:
Block Booking of Capacity during a Peak Period

Question 1
What factors lead to variations in demand for rooms at a hotel such as the Accra Beach?

There are 3 factors that will lead to variations in demand for rooms at a hotel, which are seasonal cycle, economic cycle and days of the week.

Seasonal cycle - Hotel such as Accra Beach will depends highly on seasonal cycle, hotel will be in low demand on September (64.7%) as it is in peak hurricane season. High demand on January through March (87% to 92%), when Caribbean is in nice weather and people need to get away from the horrid season in North America and Northern Europe.

Economic cycle - Business travelers, which are one of the main…show more content…

By accepting the deal, they will approximately obtain gross profit of $12,349 per day, which is approximately $152 more than rejecting.

- Marketing impact
Accepting the West Indies Cricket Board (WICB) request will drive positive market image. Moreover, the publicity given in return for the ABH will be beneficial. It will bring awareness to cricket loving country, such as UK. Traditionally, tourist from UK has dominated the ABH’s clientele; thus it will bring back the awareness and will encourage them to choose Accra Beach Hotel as their holiday designation. In addition, as the Spring West Indies Cricket Series is an international sport event, Cherita Howard might be able to use hotel bar as a place to watch or even organize a conference meeting with their favorite players.

- Guest experience impact
By accepting the request, it will affect business travelers as usually they have the needs of quietness and convenience. However, it will enhance vacationers’ experience, as sport events will make their holiday more memorable.

- Guest relations impact
It has a relatively small impact on customer relationship as it is in low season for vacationers and business travelers will not easily switch to other alternatives, since ABH location provides great convenience.

Question 4
What action should

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