08 Maruthi (2014) Role of Non-Room Revenue Sources in Hotel Revenue Optimisation

International Hospitality and Tourism Student Journal 6 (1) 2014 86-102
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An analysis of the role of non-room revenue sources in hotel revenue optimisation in the case of banquets and meetings in 5 star hotels in Chennai
Aanandh Maruthi
HTMi, Hotel & Tourism Management Institute, Srenberg, 6174 Luzern, Switzerland!
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Abstract Revenue management is a wide field which is very much essential for all companies for their effective performance in the market. The role played by a revenue manager is very crucial as it involves huge amount of skill and knowledge. This concept is primarily copied from the airline and cruise industry to the hotels. This helps the hotels to generate revenue using room through several pricing strategies. The hotels suffer revenue problems during the low seasons as they guest arrivals and room occupancy rates go low than normal. To avoid this problem, a new technique was introduced to produce revenue from guests. That is called the non-room revenue source. Everyone who visits a hotel cant be expected to book a room. He/she might come to bar, restaurant, spa, saloon, gift shop, booking banquet hall etc. These can act as revenue for several hotels during low seasons. Likewise package offers, fenced rates could also help in generating revenue through non room revenue source. By offering low prices to guests in low season, the hotels can attract guests and can regain the loss incurred in rooms through non room revenue sources. This research paper mainly focuses on the methods of revenue generation through non-room revenue sources focusing on banquet halls in 5 star hotels of Chennai, a city in south India. Qualitative analysis is used and the interviews are done face to face with the revenue managers in the hotels of Chennai. Purposive non-random probability is used as sampling and pilot tests are done with 3 people from different fields relating to revenue management.
Keywords: Pricing; Non-room revenue; Revenue management; Overbooking; Chennai Hotels; India
2013 International Hospitality Research Centre. All rights reserved.
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1. Introduction The primary research focus of the researcher will be on the 5 star hotels in Chennai, formerly known as Madras, a city in southern part of India. It is the capital of Tamil Nadu. It has more than 100 years of tradition. It is located on the Coromandel Coast in the south east India off the Bay of Bengal and it is the major commercial, cultural, economic and educational centre in India. Chennai is the fifth most populous city in India. The city is governed by the corporation of Chennai with a mayor and councillors (mapsofindia.com). Revenue management is a concept, which is borrowed from the airline industry to help hoteliers to make better decisions (Bardi, 2007). It is also concerned with the demand management decisions and the methodology and systems required making them (Talluri and Ryzin, 2005). It is a technique which is used to maximise revenue. It is the manoeuvre to price different types of rooms and to make effective decisions related to the market (Austin, Hayes, Ninemeier and Woods, 2007). It can also be considered as an effective tool that allows the front office manager to use
potential revenue as the standard against which actual revenue can be compared (Kasavana and Brooks 2005). It is embodied in the concept of the rational (profit maximising) firm and defining the mechanisms by which market equilibrium is efficaciously reached (Talluri and Ryzin, 2005). It is a renowned statement in hotels, that more than 60% of hotels revenue is generated through selling rooms (Tewari 2009). Revenue management is the hotels ability to effectively compete and financially prosper in todays lodging market is increasingly tied to the skill of its staff in pricing and selling the guest rooms (Austin, Hayes and Woods 2007). Many researchers (Kasavana, 2005); (Baker, Huyton and Bradley 2000) and articles relating to hotels convey the same. In addition to that, many researchers (Bardi 2007), (Hayes and Ninemeier, 2007) have also spoken a lot about maximising room sales to increase hotel revenue by developing various strategies using marketing mix, managing Rev PAR, ADR/ ARR management, various pricing strategies, packages and fenced offers and BAR (Best Available Rates). The major focus was given in developing hotels revenue only through room sales by various methods. Generating revenue through sources other than room is not mentioned
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deeply by those authors. As the competition increases amongst hotels, focusing only on the room revenue might create less revenue gain during low seasons and during less occupancy. This raises a question into the mind of the researcher that what steps will be taken by the hotels to increase their revenue when there are less bookings and lower occupancy rates. Though revenue management has several uncertainties, yet it is a very important field of research (Morales and Wang, 2010). Many forecasting methods and probability modes have been developed by revenue management researchers to minimise the uncertainty levels. However only little focus has been given towards revenue management based on pricing in the hotel industry by the researchers. The researches done by the researchers in this field were purely based on the room pricing methods (Sanchez and Stain, 2005; Tsai and Hung, 2009). The gap found here is that instead of focusing only on rooms for revenue, the hotels can focus on non-room revenue sources like spa, laundry, saloon, restaurant, bar, gift shops, banquet space, transport facilities, etc. Inclined with these challenges, this paper tries to bring out more effective, practical and pliant ways of optimising revenue through nonroom revenue sources in 5 star hotels. Currently TRM (Total Revenue Management) and DCM (Distribution Channel Management) are the key concepts in hotel, so the researcher feels that selecting Non-room revenue sources for increasing hotel revenue will have a great response in the upcoming years. As the competition increases between hotels in room selling, some hotels will definitely face less room sales and low occupancy rates which can be balanced through nonroom revenue and it can also work as a tool for generating high total revenue other than room sales in hotels with high occupancy. The aim of this research is to critically evaluate the advancement of revenue management in optimisation of hotel revenue through non room revenue sources in 5 star hotels in Chennai (a city in southern part of India in Tamil Nadu) and to answer the key research question, what is the role played by non-room revenue sources focusing mainly on the banquet halls and meeting rooms in hotel revenue optimisation? The objectives of the research are: to examine the different pricing strategies followed by the 5 star hotels in Chennai for the banquets or function halls and meeting rooms during high season and low season; to critically evaluate the results of revenue management practices on distribution channels and corporate companies which are on contract with the hotel in the case of 5 star hotels in Chennai; and to analyse the policies of cancellation and practices of overbooking to optimise the revenue in the 5 star hotels of Chennai. The qualitative research method is applied to this dissertation by the researcher and informations from the interviews are used to research the objectives. In this research, two interviews are taken from the same managers of 5 star hotels at two different periods in Chennai. The interviews are held during both the low and high season with the same questionnaire to collect necessary data. It is done during the low season and high season to compare and
contrast the efficiency of the revenue managers of different hotels. The pros and cons of several strategies and revenue metrics can also be evaluated. The major limitation is the lack of research literatures on non room revenue sources in hotels. Adding to this, another difficulty faced by the researcher during the research is the approachability to the hotel managers to collect all the required information. This dissertation is delivered with 6 chapters by the researcher: A brief overview of the important features of this dissertation, the rationale of this study and the fundamental aims and objectives of this research are covered under the heading introduction in chapter one. In the second chapter, several literatures on pricing, forecasting, distribution channels, overbooking and cancellations etc. and detailed background information are discussed. The methodology used in this research which consists of the approach, sampling method, data collection etc is discussed in chapter three. The chapter four contains a description of all the findings done in this research. The findings are discussed and the data is analysed based on literature review in the chapter five and finally the study is concluded with a conclusion and the suitable recommendations are given for future studies. 2. Literature review 2.1. Revenue management: theories, definitions and concepts The term revenue management is also known as yield management which is widely adopted and used by several hospitality industries such as airline, cruise line, hotels, restaurants etc from the second part of 1970s says Berman (2005). Adding to that, Optism (2002:1 cited in Darwish 2007,2) defines the term revenue management as a techniques which is economical and is used in calculating the pricing which is best suitable for generating more profit by selling a product or a service based on the real time needs and demands through forecasting. Contradicting to this statement, Nagle and Holden (1995) acclaims that the term revenue management is defined as pricing strategies based on discrimination where the various segments of the market are targeted and different prices are fixed for the different segments to optimise the total revenue (cited in Darwish 2007,2) but on the other hand the revenue management can be defined as a practical application of the pricing strategies and information systems to disseminate the right content of the right product at the right price and right place to the right person at the right time says Smith et al. (1992, cited in Darwish 2007,2). Further to the statement of Smith et al. (1992), the definition of revenue management is added with right channel as the channel through which the revenue is gained is very important (www.adhp.org accessed on 12/06/2013). Therefore the term revenue management is defined in several ways and it differs according to the sector it is used is evident from the above definitions given by different researchers. In the airline industry the price is kept floating and it deals with the type of seat and comfort to optimise the profit but on the
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other hand, in the hotel industry, the revenue management is effectively done by systematic approach of fixing room rates based on forecasting the demands during the peak season, mid-season and low season (Ingold et al., 2000). Adding to this, the revenue management strategy is not only applied on airline industry and hotel industry, but also applied in the theme park industry as it also works based on the seasonal pricing and the inventory which is perishable says Heo and Lee (2009). Hence to cover all the necessary costs which are incurred, it is essential to offer the right price at the right place at the right time to the right customer.
Pricing is a major tool used by hotels to maximise revenue (Kimes and Chase, 1988). Changing the construction of price according to the demand in hotels by offering discounts helps the hotels to gain revenue through various sources (Hanks et al., 1992). It is very important for the managers of hotels to know about the different pricing strategies as it is considered to be one of the major elements of the marketing mix which generates more revenue to the hotel (Kotler et al., 2010). By charging too much has many chances of losing the potential guests, but at the same time even charging very less to the guests might push the hotels without sufficient revenue for their daily operations.
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2.1.1. Pricing strategies in hotels
researcher then applies three theories to bring out the different strategies used by the hotels to optimise their revenue. Figure 1 by Choi and Cho (2009) shows that when the demand in the market is high i.e. during the high seasons, the company prices its rooms and other revenue sources like banquet halls, restaurants etc according to the competition in the market. The demand in the market is high due to several reasons like peak season, occurrence of events, etc. This opportunity is well utilised by the hotels to maximise their revenue. On the other hand, during the low seasons, still the competition will stay alive but the hotel has to sell rooms only on market rate which will be low (Pan, 2007). At that time, to out beat the competitions, the hotel has to focus towards the various other sources to generate revenue and equalise the revenue loss through selling rooms. The hotel uses strategies like package offers, corporate contracts, best available rates (BAR), fenced offers etc to attract guests by giving rooms at low prices (Kotler et al., 2010). The hotels can utilise the non room revenue (NRR) source at this season as it would be helpful in generating revenue. The NRR sources like spa, saloon, bar, restaurant, gift shop, transportation etc. would boost up the hotels revenue during low seasons.
2.1.2. Factors affecting price
The strategies of pricing are adaptable as the hotel managers use various strategies to determine the correct price of the correct products to increase revenue (Hung et al., 2010). According to Collins and Parsa (2006), the cost based, competition driven and customer driven pricing are the three approaches to pricing. The profit made to cover the expenses incurred in the construction of rooms is called as cost based pricing while the customer driven and competition driven are mainly based on the customers and demand which generates revenue from a contest among the hotels in that location. The
Figure 1: Market demand view (Choi and Cho, 2009)
Figure 2 by Lamb et al. (2009, 487) shows the various factors which affects the pricing decisions in a hotel. The major factors illustrated here are the competition in the market by other hotels, the distribution channels, internet, promotion strategies, and the demands of large customers, price quality relationship and finally the product life cycle (PLC). It explains more in detail when compared to the explanation of the pricing strategies by Kotler et al., (2010). Moreover, similar to Choi and Cho model, even this model shows the external factors on which the pricing strategies are based on. Other than this, even the past history of demand should be considered while applying pricing strategies in the
Figure 2: Factors affecting price (Lamb et al., 2009)
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future for rooms and other non-room revenue sources. It will enable the managers to keep an eye on the peak and low seasons and to reach higher profit levels.
2.1.3. Revenue forecasting
This model by Whitfield and Duffy (2011) shows the methods of revenue forecast followed in hotels based on the revenue from three major divisions like key clients, non-key clients and according to the tariff. Preserving the records of regular guests helps the revenue managers in forecasting the revenue easily (Bestwick, 1993). While Pels says that those guests who are more important and assist in the selling firms sales and turnover volume are called key clients (Pels, 1992). To project the revenue forecast, the WIP analysis is made in hotels based on the key guest history (Whitfield and Duffy, 2011). Similarly, the non-key client is an alternative approach to the forecast. In this section, the historical analysis is done for a specific period of time to analyse the guest flow and based on that, the managers forecast the revenue. The last part is the custom, which is nothing but the revenue will be forecasted based on the hotel tariff. The revenue was forecasted manually by the managers and it is based on the assessment of the project plan (Whitifield and Duffy, 2011). The disadvantage of the custom method is that, if tracking is not done properly, the entire forecasting will go wrong. Likewise in the key client forecast, proper and accurate guest history should be maintained to make the forecast effective and for non-key clients, looking the history for a particular time might go wrong due to the events occurred during that time. So the demand, season, events and exhibitions etc should be considered while doing the non-key client forecast.
Figure 3: Revenue forecasting (Whitfield and Duffy, 2011)
Distribution structure (Dent, 2008) projects the kinship between the supplier and the customer. Here the customer is referred to the various distribution channels which sell the rooms and several services of the hotel and the supplier is referred to the hotels. The perishability of the product, globalisation of the market, various methods and techniques of electronic distribution and finally the fierce competition are the major factors which makes the distribution channels very important.
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2.1.4. Distribution channels
In Figure 4 above, the relationship between the supplier and the customer are displayed in 3 different types which include direct, one-tier and two-tier. Selling the rooms and hotel services directly either by the hotels own website or by corporate business come under direct while the tour operators or tour agents who act as an intermediary fall under one-tier and the opaque model channels like hotwire, lastminute and online distribution channels like expedia and other booking engines come under the two-tier category (Kotler et al., 2010). The rapid growth of online distribution channels for booking hotels paved pay for the hotel revenue managers to develop better revenue management practices as they can calculate the return over the investment and can be pliable on the hotels direct website (Dhiman and Suri, 2010). On the other hand Christodoulidou et al. (2007) says that the distribution channels for bookings grab the attention on guests as they offer rooms at a lower price compared to hotels direct website and on addition to that the hotel also has to pay certain commission percentage to the distribution channels for selling the room. On these cases, the revenue managers should carefully decide the number of rooms and types of rooms to be allotted for the channels and the restrictions which should be applied and the frequency. During peak seasons, the revenue managers hold the rooms for the hotel itself for selling at premium prices to the walk-ins rather than giving it to the distribution channels and very less number of rooms is given for last minute online channels (Brewer et al., 2005 cited in Christodoulidou et al., 2007). The revenue managers can effectively manage the number of rooms given for the distribution channels based on certain periods of the year as it is not possible to totally withdraw the effect of distribution channels. The hotels allocate fewer rooms to distribution channels when the direct guest arrivals are fierce (Dent, 2008). Several hotels have allotted rooms for the distribution channels to sell their products and services for efficiently and effectively to the people (Middleton and Clarke, 2001 cited in Morosan and Jeong, 2008). Moreover the hotels should choose the right distribution channels which can keep up the brand name and reputation of the hotel to achieve the revenue target of the hotel (OConnor and Frew, 2004 cited
Figure 4: Distribution structures (Dent, 2008)
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in Morosan and Jeong, 2008). Morosan and Jeong (2008) also add that due to the third party mediators and powerful advertising, the hotels are still using different distribution channels to increase their revenue. Hence, the hotels consider the distribution channels as a great source of optimising the revenue. Hayes and Miller (2011) criticises that, though the distribution channels help the hotels in generating revenue by selling rooms, the cash flow and income statement of the hotel gets affected as the procedure for billing takes a long time for the hotel to receive the money from the bank. Finally, the revenue management practices of the hotels get highly affected because of the delay in final billing of the rooms despite of paying high commission and discounted rate to the distribution channels.
The aim of the revenue management is to optimise the revenue by fixing the prices based on the demand, whereas a premium price is fixed during high demand and the prices is lowered when the demand goes low, says Heo and Lee (2011). This type of pricing seems to be unfair to the eyes of the customers as the service offered remains the same despite of the increase and decrease in the price. The allocation of inventory sales to the third party intermediaries distribution are shut by the hotels during high demand season or the prices offered to the third party channels are increased is shown from a survey undertaken by OConnor and Murphy (2008). Just like the customers, even the distribution channels find this as a unfair practice from their point of view as the hotels give them more business during the seasons of low demand and low business or increased price during the high demand seasons. Furthermore, Gazzoli et al. (2008) states that the rates found online through the distribution channels are much cheaper than the prices found on the hotels own website while looking for the same room type in the same hotel which seems to be an unfair exercise of revenue management to the customers. The revenue management practices also affect the corporate companies as many corporate companies sign a contract with negotiated price with the hotels and the price offered by distribution channels vary from the negotiated contract rate while the restrictions acts as a clause on their contract. Regardless to this, when there is an increase in the quality of service and cost of selling the room, the customers are more to accept the increase and pay for the room. Opaque pricing in revenue management is considered as a fair practice by the consumers because when the booking is made through distribution channels, the consumer is provided with a chance to acquire best deals and delightful experience at 5 star hotels in unbelievable prices. (.turpade.org accessed on 19/06/2013). Kotler et al. (2010) says that the customer is not revealed about the name of the hotel until the booking is confirmed when the customer chooses to book through opaque rate but few primary informations like the star category of the hotels and the approximate location of the hotel is revealed. Unlike this, the same customer feels
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2.1.5. Fair sensing of revenue management
the revenue management to be unfair when the same hotel and same room category booking for a certain day is not offered on the same price they got the previous time or when the distribution channels doesnt have the room allocations. Hence the customers feel dis-appointed due to this, which in turn also affects the revenue of the distribution channels but the customer who book online are very intelligent and informative as they immediately look for another distribution channel online or another hotel which could offer them lesser price (Chen et al., 2011). Hwang and Wen (2009) argues that overbooking under revenue management is also highly considered as an unfair practice to the eyes of the customers as due to over booking by the hotel, many guests who arrive at the hotel are walked to some other hotel by just offering few some guest amenities and free transportation. Adding to this, Kimes (2002) says that the hotels run the maximum risk of reducing its long term profits by getting low period benefits through overbooking as a final result (cited in Hwang and Wen, 2009). However, the hotels always focus towards maintaining good relationships with the corporate clients by not walking their business travellers due to over booking as it might cause a huge revenue issue in the hotel.
2.1.6. Overbooking and cancellation procedures Since cancellations are very common for hotel room reservations, the hotels follow a method of selling more rooms than the actual capacity of the hotel besides all the distribution channels and the process is called as overbooking (Talluri and Ryzin, 2005). Not only the cancellations, but also the no-shows and early arrivals of guests is also a reason for over booking. On the other hand, Kasavana and Brooks (2009) criticize that extreme pre caution is very much important while taking over booking as turning away a guest who holds a confirmed reservation to another hotel might affect the business and might reduce the brand image of the property. Toh and Dekay (2002) supports this by saying that as a guarantee for reservation, the credit card number and details are collected from the guests during a booking but sometimes the credit card doesnt have enough cash limit or the number given by the guest during the booking is wrong. Since the informations obtained from the guest are limited, these types of errors occur during reservation in online distribution channels and in the direct website of the hotel. However through the invoice sent while booking, the no shows can be retrieved from the distribution channels. Therefore the hotels can overbook the reservations slightly to recover the revenue which is lost. The chances of no-shows and early departures are high in group reservations due to the growth of MICE market (Meetings Incentives, Conventions and Exhibitions) and in turn it also affects the overbooking (Toh and Dekay, 2002). More revenue can be obtained by allotting more rooms for business travellers who book directly to the hotel rather than leisure travellers who book through distribution channels thereby revenue managers can optimise the revenue of the
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hotel (Guadix et al., 2010). Hence the overbooking should be done based on the type of rooms and type of guests and not generally on all the rooms of the hotel. Opposing this, Christodoulidou et al. (2007) says that the revenue managers should keep in mind that the distribution channels are provided with a limited number of rooms only and out of that the customers who book through distribution channels are more limited and it is based on the season. The direct booking guests pay more to the hotel rather than the guests who book through distribution channels, therefore the revenue managers allows the overbooking of certain room categories thereby ignoring the distribution channels Kotler et al., 2010). Likewise Kasavana and Brooks (2009) say that an upgrade should be given for guests who pay more for the same room through direct booking than the distribution channel reservation guests. Dekay et al. (2004) says that the hotels maintain a policy that the reservation of rooms should be made guaranteed with the credit card number and information and if the guest doesnt turn up to the hotel or cancels the reservation on time, the guests can be charged the amount of a nights stay along with the taxes (Toh and Dekay, 2002 cited in Dekay et al., 2004). Hence the revenue can also be generated through cancellation as it has penalties which is a source of non-room revenue i.e the revenue us obtained without using the room (Talluri and Ryzin, 2005). The cancellation policies differ according to the hotels depending on the low and high seasons. Kasavana and Brooks (2009) state that 4pm or 6 pm local time on the same day is the standard cancellation policy while Chen et al. (2011) states that since the hotels are offering several new nonrefundable reservation methods, the cancellation policies are made much stricter. Therefore the revenue of the hotel can be optimised either by no-shows or by cancellations.
Wang in 2010. It was found that the room prices are highly influenced by the foreign tourists in hotels. In the year 2006, Collins and Parsa studied the pricing strategies in optimise income in the lodging industry. A direct relationship with pricing and rooms was presented. The average daily rate and REVpar calculations of hotels were analysed and finally found that effective pricing strategy would create great impacts on revenue generation for the hotels through rooms and restaurants. Following this Noone and Mattila (2009) explored the effects on hotels revenue by offering best available rate (BAR). Mixed and unmixed rates along with the willingness of the guests were determined. It was found that more revenue is generated through unmixed rates and it also boosts the eagerness of the guests.
The researcher decides to consider the existing studies in the important fields or revenue management like pricing, which focuses on dynamic model, room rates, BAR pricing and using quantile regression and on forecasting.
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2.2. Review of empirical studies
2.2.1. Pricing Abrate, Fraquelli and Viglia (2012) explored that the dynamic pricing strategies followed in hotels by finding the prices of single room from 1000 hotels and analysed the revenue that could be gained using dynamic pricing. Statistics, box plots and other data were used to perform the task. It was found that pricing is mainly based on the brand and star rating of the hotel and type of guests. Similar to that, Aziz et al. (2011) studied the problems relating to room pricing in which they projected the dynamic pricing model as an effective pricing tool for the managers in revenue maximisation. The research was performed under 3 different styles and an increase in the revenue was found when compared to the classic model. The various bases of pricing were analysed using quantile regression by Hung, Shang and
Weatherford and Kimes (2003) analysed in detail regarding the various forecasting method by applying them on Choice hotels and Marriott. A combinational of forecasting methods and booking curves were used and it was found that the most strong model which could be used are exponential and moving average models. Similar to that a combination of forecasting methods was used to develop the accuracy in forecasting by Andrawis, Atiya and Shishiny (2010). Several forecasting methods were used as a beneficial strategy to forecast for one year using one month data and results showed that combined methods are accurate than individual methods. In the year 2011, Whitfield and Duffy have described the development of a tool used for revenue forecasting in hotels in which the outcome of the tool is to extend the forecast duration with an error rate of less than +/- 10%. The final tool gave good results and it was welcomed in the hotels. Using forecasting, the revenue that can be gained through the cancellation of bookings was calculated by Morales and Wang (2009). The cancellation rates varied according to the hotels and even the rates of no-show increased everyday. This study on forecasting helped the revenue managers in better understanding of the drivers of cancellation. Adding to that, Deschamps (2000), explored the effectiveness of accurate forecasting upon the organisations. The findings said that a change in the organisations revenue can be seen through accurate forecasting and the study proved that forecasting frequently improves the accuracy of forecasting.
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2.2.2. Forecasting
In the 1970s due to the threat from the unstructured charter competitors, the domestic American airline industry came up with the idea of revenue management (adhp.org accessed on 17/06/2013). Several types of people are catered by the airline industry which include groups and individual travellers and while still going further, the travellers can be divided in to leisure travellers and business travellers where the leisure travellers are highly sensitive in the prices as they have to pay every penny from their pocket while the business travelers expenses are mostly paid by their company (Talluri
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2.2.3. Revenue management in airline industry
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and Van Ryzin, 2005). Due to several issues like economic downfall, contagious diseases, outbreak of SARS etc, the long travelling expenses are reduced by several companies and meetings are carried on through live video conferences as an alternative (Doganis, 2006). The eternal bonding between the companies and their customers are changed because of the change in the customer behaviour which is due to the evolution of the modern technology says Ramon Rodrigues et al. (2011). With the help of this new technology, customers can access internet and can gather all the required informations regarding their travel destinations and also get an opportunity to view the various travel choices. The connection between the travellers with the airline industry and the distributions channels have totally reduced due to the advancement in the technology which mainly affected the low cost carrier flight in terms of their difference in the cost, commission amount and managing the decisions of the customer. Contradicting to this, Zhang and Cooper (2009) says that the direct airline bookings through the company website have been provided by the airline industry and it also allows them to alter the rates according to the season. Adding to this statement, Yu and Zhang (2009) says that the experience in the airline market and the historical informations help them to alter the prices but the exact prices of the airlines cannot be predicted based on the seasons. By offering the right customer with the right seat, the airline industry is aiming at optimising their revenue. The airline industry not only offers the right seat to the right customers but also offers several strategies of business promotion during the low season to retain the existing customers and to attract new customers. Vlaar et al. (2005) says that due to the strategies of the no frill airline Easy jet, other airlines like Royal Dutch airlines, British airlines and Lufthansa airlines reduced the prices over the UK and Ireland. Adding to this, Zhang and Coopers (2009) says that based on the time of the airline departure, arrival, route and transit duration, the prices of the flight tickets are fixed. However, the flights which fly late in the evening and very early in the morning are said to be cheaper when compared with the flight rates during midday. Due to the influence of low cost carrier flights which offer flexible timings, the big airline companies are losing their potential customers and moreover 55% of the customers who travel by air are corporate travellers and they have corporate rate deals (Granados et al., 2005 cited in Pachon et al., 2007). Moreover due to the increase in the competitors who offer good deals and also to the rapid change in the travel patterns, making the proper pricing has become a tough task for the revenue managers in the airline industry. Furthermore, Iliescu et al. (2008) says that for the business travellers who are highly sensitive towards time have a flexibility on their airline travel when compared with the leisure travellers even though the cancellation policies in the airline industry are more strict and also the probability of paying 100% for making it and no show and to pay for each and every modification they do. The airline industry also make strategies to hold on the leisure travellers by offering reduced prices for the booking made few months in advance
and as the dates get closer to the departure, the prices are increased and bookings are made to be non-refundable says Mantin and Gillen (2011). However Hofer et al. (2008) argues that these policies of cancellation and several pricing strategies suit well for the low cost airlines as these airlines offer extra services at less rate and also land only in few selected airports. Moreover, the airline industry follow the practice of overbooking to reduce the risk of losing their revenue due to increased amount of cancellations and no shows says Lindenmeier and Tscheulin (2008). Adding to this, Feng and Xiao (2006) says that the money lost due to cancellations and no shows could be balanced with the effective practice of over booking. If there are no cancellations or no shows in that flight booking which is overbooked, the passengers who are denied due to over booking are adjusted by booking them in the next flight to the same destination without any additional charge. Therefore every passenger who is bumped produces a demand for the least demanded flights and in turn optimises the revenue of the airline (Suzuki, 2002). Unfortunately, this practice of overbooking done by the airline industry are considered to be unfair by the customers as they are not able to fly through the airline they choose and they move to different airline the next time which in turn affects the airline industry in losing their revenue and also a potential customer (Lindenmeier and Tscheulin, 2008). Thus the concept of revenue management in airline industry is seen to be less unfair as they have different routes when compared to the hotel industry.
Gibson (2006) says that a large amount of money is invested in the cruise liner business as all the fittings and fixtures have to be maintained well inside the ship and then all the equipments have to be serviced and maintained and finally the services which are offered on board to the travellers and the involvement of the salary or labor to the employees. Hence managing the revenue and optimising the revenue is very much essential for the cruise business and they have to maintain full house capacity always in ship to make up for all the costs incurred. The development of the cruise liner industry is huge only in the 21st century and the most renowned cruise ships are Royal Caribbean, Carnival cruise and Star cruise (Sun et al., 2011). A very important role is played by the travel agent in planning the tours and making the booking for the cruises and these 3 major cruise liners are mostly dependent only on the tour agents for getting their bookings (Toh et al., 2005 cited in Sun et al., 2011). However in the past few years, the cruise ships have developed their own website and made it easily accessible and customer friendly for the customers to make the bookings directly rather than going through a through a travel agent as earlier 90% of the cruise bookings were made by travel agents (Gauri et al., 2009). Hence, the commissions which are paid to the travel agencies by the cruise liners for the bookings are totally reduced. Opposing the statement, Toh et al. (2005) says that the travel agents are made as a vital part in bookings by the cruise liners as they
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2.2.4. Revenue management in cruise liner industry
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help them to increase the inventory of the cabin and maintaining the pricing strategy. The travel agents not only make bookings for the cruise ships, but also deal with the late arrivals, collect the deposit payments, collecting total payment and finally conduct auctions. Moreover Sun et al. (2011) says that the travel agents play a major role not only because they bring in more customers and maintain the cruise ships but also their expertise towards the customers in the cruise industry. However, the cruise ships are considered as hotels which are floating by the authors of the theory and practice revenue management says Talluri and Ryzin (2005). Nevertheless, it is opposed by Biehn (2006) by saying that the cruise ships cannot be considered just like the floating hotels and the revenue management followed in ships is more similar to the practice followed in hotels. Moreover the prices which are charged per person in cruise is based on the type of cabin and is not like the rates charged in hotels (Maddah et al., 2010). It is also said that more the number of people occupying a cabin, the lesser the rates per person in cruise ship. Regardless, cruise ships deal with several restrictions relating to the type of cabin and life boat when it is compared with the hotels and airline which deals with the type of room and seat preference. It is considered that the cruise ships can have revenue loss with huge families as the capacity of lifeboat is a major factor in cruise revenue management (Biehn, 2006). Accepting large family bookings reduces the opportunity for the other cabins to be filled because of life boat limitations as the cruise ships are permitted to accept 3 passengers in a cabin due to the lifeboat limitation and this reduces the chance of optimising the revenue. However, Sun et al. (2011) says that the present cruise ships are focusing towards the total revenue management concept to optimise their revenue by offering restaurants, casinos, gift shops and many other facilities on board to the passengers and also to attract many new customers. The cruise ship companies should be aware that due to the development in the technology, the passengers are not anymore price takers and it is important to know the characteristics of consumers in the present world to apply effective revenue management (Toh et al., 2005). Furthermore, the bookings in cruise are totally different when compared with the bookings done for hotels where in Caribbean cruises, a minimum of 2 to 6 months prior booking is made and they are mainly during the months of January and march during when the most inexpensive to the most expensive rooms are booked. The groups require 18 months of prior bookings and will also have a contract to be signed. Along with this, an advance amount is paid and the full amount is paid before 60 days to departure. It allows an optional booking for a maximum period of 7 days (Maddah et al., 2010). The cancellation policies in cruise ships vary from the hotels where cancellations before 71 days of departure is refunded 100% while cancellation between 70 to 30 days, the deposit amount is charged as the penalty and cancellations between 29 to 08 days, 50% of the total amount is charged and cancellation within 7 days of departure, 100% is charged. According to Maddah et al. (2010) and Sun et al. (2011),
another major difference is the entry of walk in passengers at the ports is not accepted by the cruise ships mainly due to the safety and security concerns while the hotels can accept a walk in at any time. The cruise ships also follow the practice of over booking and during no no-shows, the potential guests are offered a postponed trip and to retain the guests, the cruise compensates by offering a free trip, offering discount on the on board service or by offering discounted deposit amount (Toh et al., 2005). The probability of last minute cancellation and no-shows are very less in cruise ships before the departure so they do not have to worry about them argues Ji and Mazzarella (2007). The season doesnt have much impact on the revenue management in cruise line but the focus should be more towards the passengers like likes and dis likes on board to gain more revenue.
2.3. Background information of the primary research The gateway of southern India is Chennai. It is a luxurious city with several five star hotels. Chennai experiences local and international visitors to see the several tourist attractions including the worlds second longest beach marina. The five star hotels of Chennai mainly focus on providing extraordinary service to its guests to make them feel comfortable like home. They are well equipped with the latest technology and modern equipments (mapsofindia.com). Chennai has several 5 star hotels around the city which include, hotel ITC Park Shereton, hotel Le Royal Meridian Chennai, Hotel Taj Coramandel Chennai, Hotel The Park Chennai, Radisson, Fisherman Cove, Vivantha by Taj Connemera, Taj Club house, Trident Hilton, Courtyard Marriott etc. (Mapsofindia.com). In addition to that, Hyatt, Hilton and ITC Grand Chola have opened their new properties just few months back in Chennai. This increases the competition between the hotels as the new properties try to grab the guests. This may reduce the revenue of the existing hotels. In such a point of time, the hotel can implement the non room revenue sources to generate revenue. The revenue obtained through non room revenue sources will be helpful in equalising the loss occurred in room sales. The non room revenue sources which are mainly focused in the current trend are banquets (MICE market), restaurant and bars, spa and saloon. The concepts like GOPPAR, ADR, and REVPAR are not widely used as they are replaced by new metrics which derived to calculate the revenue generated through these sources. New metrics like REVPASH (Revenue per available seat per hour) is used to calculate the revenue which could be generated per cover in the restaurant, REVPATH (Revenue per available treatment hour) is used to calculate the revenue which could be generated through spa and REVPSF (Revenue per square foot) is used to calculate the total banquet space and number of guests can occupy at a time through which more revenue can be generated (HotelierIndia.com).
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3. Methodology 3.1.
Rajasekar et al. (2006) defines the term research methodology by stating that it is a systematic process which assists the researched to gather information and to detect the answer for the query. The experiments which are based on the informations and observations during the research are presented as results (Ibid). The quantitative approach, qualitative approach and mixed research approach are the three different methods of research stated by Newby (2010). The relation among the research and theory is displayed by a group of numerical records is defined as quantitative research by Bryman and Bell (2007). Moreover Veal (2006) states that the statistical information is analysed using quantitative analysis. Bein (2009); Bryman and bell (2007); Vanderstoep and Johnson (2009); Veal (2006) points out that deriving conclusions or testing the hypothesis and the ability to generalise the findings outside the research are the key role of quantitative research. Contradicting to that, to describe and analyse more in detail till the maximum depth of the data and the words are used as a medium for communication in qualitative analysis (Bryman and Bell, 2007; Newby, 2010; Saunders et al., 2009). Adding to this, the qualitative research method explains the position by directly getting the feeling of the respondent (Rajasekar et al., 2006). Finally the last approach called mixed method is the combined method of both qualitative approach and quantitative approach methods and the research is considered to be a very complicated in this method (Vanderstoep and Johnson, 2009). This research focus will be done to critically evaluate the advancement of the revenue management in optimising hotel revenue through non-room revenue sources in the 5 star hotels of Chennai. Formulating and clarifying the research topic is the starting point of your research project (Ghauri and Gronhaug; Smith and Dainty, 1991). The formulating and clarifying process is time consuming and it will take you up blind alleys (Saunders and Lewis, 1997), so following from the literature review, the research will immediately look for a systematic approach in each hotel as an evidence of effective revenue management. There are several effective things about managing nonroom revenue sources in revenue management as mentioned in the literature review. Having a deep discussion about each of those topics to determine research subject views would take a long time but the information gathered will be very useful for the researcher to make the data analysis. Moreover the questions asked will be same for all the managers of the hotels who are going to be interviewed. Since the subject deals with the real time situations in each hotel, opinions and ideas of different managers might change and it can even be little sensitive. As this being the case, following quantitative analysis by distributing questionnaires will not be effective. Selecting the correct research method is based upon the nature of the research which paves way to accomplish
Approach
accurate set of data between respondents and researcher (Berg 2004). Hence the researcher adjudicates not to conduct quantitative methods and decides to go with qualitative interviews with managers and 5 star hotels in the selected city of the research. The qualitative interviews are beneficial, inductive and are explanatory (Bell and Bryman, 2007). An interview is a purposeful discussion between two or more people. (Kahn and Cannell 1957). A face to face, in-depth, semi structured qualitative interview will be done. Even in an in-depth interview, being a semi structured one, permitting the interviewee to talk freely throughout the in depth interview will not to lead to a clearly focused discussion on issues relevant to the research topics. (Easterby-Smith et al, 2008; Robson 2002). Similar to this, Silverman (2006) lends a strong supporting hand to the decision of the researcher by adopting the qualitative method of study to perform his research. His support is expressed through his statement that to investigate the various perspectives and knowledge of different people and also for forecasting the future industry trends, qualitative study is more appropriate. Many authors agree to the point stated by Silverman and they come up with their own definition of qualitative research. They all say that, since it searches for reliable information and knowledge regarding the matters of society within its surroundings, it can be said as a natural form of enquiry (Bryman, 2008; Marshall and Rossmann, 2006; Newby, 2010; Saunders et al., 2009). Adding to this statement, Bryman (2008) says that the qualitative method of study can also be related to emotions which clearly convey the way the person is watched keenly and then taken in to consideration. Finally Marshall and Rossman (2006) also states that studies which are vague in the present literature can be researched using the qualitative method as it is the best way of approach.
3.2. Sampling Sampling is a method which enables to reduce the quantity of data required to be collected by considering data from sub group rather than all the possible cases and elements. (Saunders, Lewis and Thornhill 2009). The sampling method chosen for this research is purposive or judgemental nonprobability sampling. This sampling method will be helpful when the research is targeted on a specific data in a specific location (Neuman, 2005). A deep understanding is provided in purposive sampling and to collect data it is the best option (Burns and Grove, 2005). The task in sampling is to targeting the right person for the qualitative interview as it is a big task, whether the front office manager or revenue manager or general manager as the managers of 5 star hotels in Chennai play different role in the hotels. As this research is based upon revenue management, the researcher should identify the right person who has deep knowledge about this subject, up-to-date with the hotels operation and who will be able to answer the questions asked during the interview. The interviewee might differ according to the hotel. Earlier to that, the research will be conducting 3 pilot test interviews from people relating to revenue
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management. Conducting pilot studies enhance the qualities of conducting qualitative interviews (Glock, 1988). It would be helpful for the researcher to decide whether the interviewee is comfortable and clear with the questions asked. Knowing well about the reactions and feeling of the interviewees the researcher can modify the question. This will give a great confidence to the researcher during the interview.
property to optimise their revenue and to enhance their service standard.
3.3. Data collection Since there are very less number of 5 star category hotels in Chennai (less than 15), some managers might not spend time in filling questionnaires for a quantitative analysis and moreover the researcher might need to explain some of the terms and concepts used in the literature review. For all these reasons, the researcher opts for self-structured face to face interview through Computer assisted personal interviewing and computer assisted telephone interviewing. The researcher will obtain prior appointment from the managers who are to be interviewed but if some managers are very busy with their schedule and if they are not in a position to grant appointment, an e-mail containing all the questions, which are to be asked during the interview session will be mailed to them. Direct telephonic interviews will not be used to interview. The total duration of an interview conducted through telephone might not go beyond 20-25 minutes, while the length of face to face interviews could extend longer (Frey, 2004). Moreover there is a general belief that the interviews conducted through telephone mostly achieve fewer facts and data when compared to personal interviews (Frey and Oishi, 1995; Shuy, 2002; Frey 2004). An interview provides them with an opportunity to reflect on events without needing to write down anything while other researchers report similar conclusions where participants prefer to be interviewed rather than fill in a questionnaire. (North et al, 1983 cited in Healey, 1991). Klenke (2008) supports the qualitative in depth interviews, though they take a long time it permits each and every individual person to express their ideas freely using their own words and perspectives rather than being limited to certain things. He also suggests the use of focus groups as an alternative for qualitative in depth interview method as that includes a limited number of participants gathered together to talk about the issue brought up by the researcher under the guidance of the researcher. Considering the position, the staffs of reservation and front office cannot be chosen for focus group as it is not possible to gather all of them together at the same time. So Klenke prefers in depth interviews as they are more beneficial when compared with the focus groups. In addition to this, staffs in the front office and the reservation department will only be able to provide an overview about the non room revenue sources and hotel optimisation but the revenue or yield manager, general manager and rooms division director would be able to give more information in detail regarding the various non room revenue practices followed in their
The interviews should be held in such a way that it clearly brings out the identity of the interviewee as it is the main aim of credibility (Lincon and Guba, 1985). The process of research done should be accountable to the quality presented in the topic and the data should be gathered in a proper manner and analyses should be done (Yin, 2011). Henderson (1991) says that the personal and interpersonal skills are the two categories under which the credibility of qualitative research falls (Henderson, 1991). In this research paper, the credibility lies in the dimensions of thinking of revenue managers in hotels in reality to the readings of the researcher. Unfortunately Beins (2008) says that few unpredicted errors can occur during the interview process (Beins, 2008). Therefore, open ended questions would be preferred by the researcher and the informations gathered would be kept confidential. The credibility of this research paper in this study pertains to the capability to match with the hotel employees perceptions regarding the role of non room revenue sources in the hotel in reality with the renditions of the researcher based on the research subject. Beins (2008) states that some unexpected errors might occur sometimes during in depth interviews which might restrict the researcher to make logical judgments. Due to the promulgation by Beins, close ended questions would be given consideration as it has a risk of getting unsuitable replies if the questions are misunderstood by the interviewees. The conversation between the researcher and the interviewee should be safely secured and preserved with confidentiality and anonymity so as to maintain the genuineness of the research findings. On the other hand, the researcher should have a keen observation during the entire interview process. The researcher should also be aware of the negatives that might occur during the interview as it provides assistance for the view point of the researcher. The major advantage is that the researcher could gain immense selfconfidence and guaranteed responses from interviewees rather than his own ideas. Every researcher in a qualitative study will have his own approach to classify his subjects and therefore using confirmability the validation can be done to the maximum depth through the findings (Trochim, 2006). Confirmability in this research will be done by checking the evidence of his findings from the managers of the hotel.
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3.4. Data credibility and confirmability
The factor dependability goes parallel along with reliability in quantitative research (Bryman and Bell, 2007). The coherence of the internal process and on the way the researcher accounts for changing conditions in the phenomena is the definition given by Bradley for dependability (Bradley, 1993, 437). The researcher is planning to use a technological device which can save all the
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3.5. Data dependability and transferability
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informations from the managers during the interview. So that the dependability of this research will be increased with the informations saved according to the date and time. To find the reliability of the data which respect to the quantitative study, the analytical researchers possess the tendency to give theoretical beliefs thereby by introducing true core theory. Meanwhile the logical researchers, report to the changes that occur in the surrounding and also detect that in what ways those changes can affect the motivation of the researcher when drawing close to his findings (Trochim, 2006). Auditing method could be adopted by the researcher at this stage to keep up the trustworthiness says Guba and Lincoln (1989). To ensure the dependability in the finding, two main sources are used by the researcher, which includes the respondent and researcher himself. Despite of performing the action of transcription in large number of papers, the researcher prefers an alternative way of providing each interviewee with a template. The reason behind proving the template is to group the wide amount of raw details under particular headings or theme given in the template. Therefore by having an apprehensible way of analysing the data, the dependability of the study would be increased. On the other hand, a coding method is used to further enhance the dependability of this study. Though a new method is applied, it also has some dis advantages as the coding process is not simple. The method of coding might be vague and can mislead the words causing higher level of threat to the dependability but it can be easily rectified by using the same pattern of coding by all the respondents to code the findings. The reliability of the study can be preserved by using the two major elements like training and experience (Neuendorf, 2002). After the coding, the researcher himself will analyse the data with the help of the coding to increase the reliability of the study. The opinions of the researcher can be expressed to all the other researchers using transferability is a widely accepted fact (Lincon and Guba, 1989; Trochim, 2006). Bryman (2008) says that the external validity which explain about the level of generalising the results over other circumstances is equivalent to transferability. The external validity exhausts the process of methodology says Marshall and Rossman (2006) and moreover prefers transferability as more suitable in qualitative study rather than generalisability. This research results can be utilised by other researchers for evaluation, background information and studies. The results of transferability can also criticised by the other researchers. If this research is carried out in a entirely different location like resort or boutique hotels, the result would not be the same as the type of guest differ in these types of hotels.
will personally inform all the informations to the interviewees before conducting the interview. Another major issue which could be influenced by the researcher is the confidentiality of the information shared by the hotel managers. Moreover, when using interviews it is difficult to know the level of honesty and frankness of the interviewees to questions asked in the interview. (Veal, 2006). To manage this situation, an example will be asked for few questions from the interviewee to check the frankness during the interview session. This method of answering with an example will be more helpful and can give a clear picture to the researcher. Awareness should always be kept on the way of interaction with the interviewees and the impact the questions might create (Silverman, 2007). As expected by the researcher, he faced several critical issues and challenges during the interviews. The researcher had to take high level of efforts bearing great pain to overcome all the obstacles which came in the way. Firstly identifying the right person was the biggest challenge to the researcher as discussed above. Secondly getting the appointments with those managers for interview was very tough as the researcher had to travel to every hotel and get appointment. Some hotels took long time to grant appointment as they were not ready to accept the researchers request. The researcher managed finally with the appointments from all the hotels after assuring the interview informations would be highly confidential and all the interviews were done. The researcher explained all the questions to the managers before the interview session. The managers were very helpful in providing all the necessary informations for the researcher as per the questionnaire. The entire interview session was permitted to record by some managers while few had problems in recording and they requested the researcher not to use their name and hotel name. Hence the researcher refers to those managers as anonymous. The interview permission was rejected in 2 hotels as they were very busy with their daily operations. The researcher managed to get the interviews done from those two hotels by sending the questionnaire to the concerned managers through e-mail and the managers were requested to reply. The questions were explained in detail to those managers and the questions were answered. As the researcher discussed above, the telephone interviews were totally avoided considering its drawbacks. 4. Findings The act and thought of one person varies from another person. The way a manager handles a situation is entirely different from another manager. Some managers might be very calm in settling things while some might get highly annoyed. Considering the hotel front desk, the manager meets several types of guests everyday out of which some come for vacation while some come for business purposes. Their wants and needs may vary. A business guest might
3.6. Ethical issues and limitations Ethical issues should be considered during a data collection process (Saunders et al., 2003). The privacy and the rights of an interviewee might be the major ethical issues which could be faced during the qualitative research (Saunders et al., 2003). To manage this issue, the researcher
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expect a fast and quick service in a restaurant while a holiday guest expects a slow and happy dining in the same restaurant. Likewise the hotel has to understand the needs of each and every type of guest and serve them with a smile. The managers have their own perceptions. They say that guests need to come to hotel just for rooms. He/she has several things in a hotel other than rooms like bar, coffee shop, restaurant, gymnasium, spa, saloon, bakery, gift shop etc. thereby providing effective advertisement in these sources could increase the revenue of the hotel. These are the general ways a hotel can gain revenue other than rooms. The thoughts of managers are highly diversified and they think in several ways of optimising the non-room revenue. I cant say that all of our guests will come only to stay. Why not, some can come for lunch or dinner here, few for a massage or a swim; families come for some weddings in our banquets. So like this each one comes to our hotel with different preferences and I can never tell only for rooms that should come. They consider the money saved is the money earned. The money which is obtained through the retention charge of cancellation is also a source of non-room revenue as it is obtained without lending the room and this tends the managers to go for overbooking. It is not guaranteed that all the guests would use all the facilities of hotel and its the hotel which has to pull them out by proving free coupons for the first time. The guest is impressed during the first attempt by excelling in service by exceeding the guests expectation. Therefore the guest is ready next time to spend for it. The hotels reduce the price of the rooms and gain the reduced revenue from the guests through all these sources. We should provide what a guest likes before he asks, that is the real luxury service. Just imagine, we have a gentle man here for the first time stay with us and we provide a service which is beyond his dreams. So in his next visit to this city, his first choice will be our hotel. Likewise some hotels are creating a golf course mainly to gain revenue. The revenue managers also target a specific segment of the market as they well know that the segment which can make use of all the facilities. A foreign guest who comes on a vacation tend to be busy with his works going out and wont have much time to enjoy the facilities in the hotel. Hence the managers target the local crowd, i.e. the people who stay nearby that hotel or in that same city. The revenue managers target several segments of the local crowd like young couples, families, friends, housewives, kids etc. A special theme based bar or pub is designed to attract the youth crowd. We always target people who are ready to spend for the luxury. We cant make a gold course here because we are located in the heart of the state and people are busy though gold course is a way to get revenue. Instead of that we can target people with our restaurants, bar, spa etc. Since the Chennai is a capital city, a special theme based pub or club attracts the youngsters. Hence by designing a specialty pub like Irish pub brings in more young couples who can spend their weekend releasing all their everyday
stress. Through this the hotel gains revenue by charging for the dance floor and revenue by selling alcohol. A specialty restaurant which is liked by most of the people having a local south Indian and some unique features could be set up which can attract lots of local people as well as foreign guests who can enrich their taste buds with the real taste of south India. Housewives can relish themselves in the saloon and spas while the kids are entertained with the help of a play area. Only something specific will make people like it. Example if we have a specialty restaurant here serving specific cuisine foods with specific theme and ambience, we can attract more people. They come just to see it and enjoy the food and feel that as if they are living in that place which the theme is. The greater advantage in this is it gets a good advertising from the mouths of all the people and soon gets popular. This idea is criticised by saying that most of the star hotels in Chennai has south Indian specialty restaurant and it would be used only by foreigners and in house guests as local people can have the cuisine at their home itself and they wont like spending more for their routine diet. When few managers concentrate on this, some concentrate on generating revenue through tourism. The hotels offer tour packages to guests like city tour, important places, etc to generate revenue. Yes we have south Indian restaurant and still we get lot of revenue through that. It is not because we are in south India and we cannot run south Indian restaurants. In our restaurant we provide authentic south Indian foods which have slowly vanished out of the minds of the new generation and some have never tasted these old traditional south Indian foods. (This was the answer when the researcher asked why you are focusing on south Indian cuisine being in south India.) The next thought revenue manager brings forth is the use of hotel laundry for outside guests as gives a feeling of safety, satisfaction and pride for the people to get their clothes laundered from a 5 star hotel. The hotels can use this way to generate revenue by offering laundry service. Many guests take a look around the lobby and wait in the lobby during check in and check-out, so by setting up a small gift shop and a bakery might attract a guest. The guests might stay to attend some functions or might visit their friends and relatives, and in turn they visit the gift shop in hotel to buy gifts rather travelling around in search of gift shop. I agree with you but have you even been to McDonalds or KFC? Have you even observed their menu card? You can notice that they have different prices and packs. Example, for a kid they have kid pack. If you go as a family, you can spend more so they have big packs. So they target every segment of the market for their revenue. Same like that here we know who to target based on our location, brand name and loyalty programs. (Was answered when researcher asked KFC and McDonalds have same theme and ambience all over the world to make revenue, why not hotels?) The act of taking special and personalised care of pets brought by guests could generate some revenue while many
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oppose this as they say that in Chennai, only very few people have pets and mostly they dont take their pets to hotel and the foreigners who come here very rarely bring their pets. So the maintenance and set up cost of this would be more than the revenue which would be gained. Beyond all these diversified thoughts of the hotel revenue managers, few are so strong in saying that a hotel can gain enough revenue without concentrating much on the nonroom revenue sources. They support their statement by saying that the hotel has to spend a lot if they want to set up a theme bar or golf course and it is not guaranteed that the guest who come knows to play golf or time and money to spend in bar. Moreover if anything in these like accidents in bar etc, walking away a guest due to over booking, high retention charge for cancellation, goes wrong, there are high chances for the hotel to lose its brand name and reputation. We do overbookings, but we carefully forecast the number of no-shows and cancellations that might occur because we dont want to lose any of our guests because each guest is worth a million. If we walk a guest to other hotel, we not only lose our money but also a guest. He might go and tell his friends about this, so finally we will get a big group of people moving away from us. Using several ways like this, the hotel generates revenue. The non-room revenue sources play a very important role in optimising the revenue of the hotel. The revenue managers make a market research to find out the likes and dislikes of the guests and also take comments from the guests who visit the hotel to know about the changes that could be made. There are several advantages and dis advantages in generating revenue through non room sources. The advantages which were found are that the revenue generated by the hotel through these sources helps the hotel to increase its yearly turn over, profit percentage etc. It makes the hotel look unique and stand one step ahead of all other hotels as it provides lots of other guest entertainment zones. It attracts guests and makes them utilise the facilities offers and in turn also generates some amount of revenue. The managers say that, the revenue of the room for a particular day is lost if the room is kept closed, so the hotel needs some source to equalise the revenue lost. Using these non-room revenue sources, the hotel is able to manage the revenue loss that occurs in room. On the other hand it also acts as a dis advantage to the hotel as the managers have to effectively plan the strategies and implement them. The entire process would go waste incurring a huge amount of revenue loss to the hotel even if a single idea goes wrong during planning. Every guest when he/she makes a reservation with us, they imagine something about our property. As a manager I would say that we should hit every point in their mind somehow to create that WOW factor. I will tell you in simple words now, imagine we have a newly married couple from London and they both have come here for their honeymoon and they love cookie-nut cake. Upon their arrival if we wish them with their name and offer them a candle light dinner in
one of our restaurants at a discounted price, the couple will feel so personalised because we addressed their name and we offered them a romantic dinner knowing their purpose of visit. So from next time, whenever they think about India, we come in to their minds first and they come back to us and also tell everyone about this. The revenue managers also have to plan the strategies based on the low and high seasons of the hotel. During low season, the hotel concentrates more towards offers and discounts promoting the non room revenue sources to the in house guests to gain revenue while during the high seasons, the hotels concentrate more on room and less on non-room revenue sources compared to low season. Introducing several ways like sending free invitation and entry pass for a cocktail party at the hotel bar to the in house guest, inviting chefs from other countries who have specialised in international cuisines to promote their restaurant sales, introducing new techniques in spa, offering discounts of certain percentage on gift shop, specialty restaurant, bar, saloon, etc are some of the current trends used by the hotels to optimise and promote their non-room revenue sources. The revenue manager feels that it is better to gain some revenue from these non-room revenue sources rather than just having them without use by the guests. Even after the discounts the hotel can generate profit from these non-room revenue sources. During low seasons, the hotels can offer room at very less prices and gain compensate the revenue loss through room using a spa, restaurant or bar. In Chennai we have summer and winter seasons but I would say we have summer only all the year (laughing) but for hotels we have high and low season here. Our occupancy percentage will be less during the low season. We cant sell rooms that time but we can get the revenue through our banquet halls and meeting rooms and can make the money of 10 rooms with one banquet room. We all know our country people spend a lot on weddings and other functions. So we target them and optimise our revenue. The introduction of new metrics in the hotels to generate revenue through these non-room revenue sources is highly valuable. The hotels revenue managers can use these new metrics to evaluate the usage of their non-room revenue source and can also calculate the maximum revenue that could be earned from it. The managers feel that the newly introduced metrics like the REVPASH (revenue per available square foot per hour) helps the revenue manager to calculate the revenue that could be earned per every square foot per hour in banquet, bar etc., while REVPATH (revenue per available treatment hour) helps the revenue managers to calculate the revenue that could be generated by the spa with the treatment. It helps them to calculate the number of beds required, staff requirement and the time duration for every session so that more number of guests could be served thereby generating more revenue. Several managers say that introduction of more metrics is under progress and that could help them in optimising the revenue of their hotel.
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Some managers also say that having several sources of generating revenue like bar, restaurant, golf area, pet corner, gift shop, lobby bakery, transport, spa, saloon etc might require more man power i.e. staff requirement and the hotel has to recruit more number of employees which will add to the turn over expenses and moreover if the guests doesnt prefer to use everything, certain sources would be left un used and it becomes a loss to the hotel. Therefore the hotels should concentrate on very minimum sources like food and beverage sector (Bar and restaurant) and recreational sector (spa and saloon) and should give more concentration towards these to generate high revenue rather than having many sources. They also added by saying that based on the guest likes and dislikes, one or more non room revenue source can be added in the future as adding it after the guest preference would be profitable rather than removing an existing one. Ok, as you say that having all the additional features might create more expense for the hotel but we cant say which guest will like what. One will like swimming pool while other will like the sauna and gym. So only we have to have all for our guests as we dont want to disappoint them when they ask. Sometimes guests will sit in their rooms and just travel outside; in these cases we get only room revenue. We dont recruit more employees for this and your perception is wrong here. We have something called cross training in hotels. A person in back office is trained to do check in and out. An in room dining waiter is trained to work in a restaurant in banquet. If we have more pax for a banquet event, we take waiters from restaurants if the restaurant is not fully packed. Also we never know how many people will come and where. Suddenly all the in house guests can go for spa. Sometimes none will go but we should be ready all the time. (Was answered when the researcher asked why do you spend more money by recruiting more employees when it is low season) A brief discussion on low and high seasons in hotels revealed the wide thought of the revenue managers regarding revenue optimisation. Deeply reducing the room rate during low season and bringing the prices back to normal rack during high season would look weird to the eyes of guest as a guest always expects a lower price and if a guest sees a sudden raise in the price (to the rack rate during high season) he/she might think the hotel is over pricing though it is brought back to the normal rate only. Therefore the hotels can give discounts of rooms only up to certain levels during low season but the rooms would be vacant due to lack of guests. In the area of research, Chennai, the peak season is during the month of April and May as it is a summer vacation time all over India while the low season is February and March (based on the research study duration). During February and March, the Chennai hotels wont be having many sales in their restaurant as all the children would be busy with examinations and parents wont prefer going out for food, likewise spa, bakery, etc would be used less since all the local people would be busy with their works.
On the other hand, during the months of April and May, the summer vacation begins and all the children would like to spend their vacation by going out with their family for lunch or dinner, spending a relaxing day at the spa, gals would like to enrich their beauty with the saloon etc. Therefore during this high season, the hotel can gain more revenue through these sources. They can also bring in more people by offering them high quality service by exceeding the guest expectations and remembering the golden words word of mouth to the world of mouth communication. Hence by making the consumer as your customer, would help to generate revenue even during the low season. 5. Discussions 5.1. To examine the different pricing strategies followed by the 5 star hotels in Chennai for the banquets or function halls and meeting rooms during high season and low season. The different approaches of the pricing strategies to sell the perishable product based on the seasons are discussed in this paper by Kotler et al., 2010 and by Choi and Cho (2000) clearly explains the various factors which determine the demand of the market that eventually affects the pricing strategies. According to this context of the 5 star hotels in Chennai, the high seasons are the meetings and exhibition period and low seasons are the non-meetings and nonexhibitions period which determines the demand of the market. Hung et al. (2010) adds to this statement by saying that the market demand permits the hotel to set the right rate at the right time. Moreover, Pan (2007) states that due to the high demand and the willingness of the people to pay high rates, the 5 star hotels in Chennai can follow the competition driven pricing during the high exhibition and meeting season. However, to handle the distributions channels and corporate companies which are contracted, certain restrictions are applied (Dent, 2008). Contradicting to that, Collins and Parsa (2006) and Kotler et al. (2010) says that the 5 star hotels of Chennai can follow the strategy of product bundling pricing and customer driven pricing to meet all the demands and also to optimise the revenue of the hotel during the everyday operations during the during the non-exhibition and nonmeeting season. In addition to this, the corporate companies which are contracted and the distribution channels will have less restrictions. However, the total revenue along with the performance of the hotel would get affected if the pricing strategies which are planned are not implemented correctly. Moreover, charging the guests too much with the prices has more chances to lose potential guests to the competitors but on the other hand, charging too less to the guests also tends to lose the valuable customers and it also pushes the 5 star hotels of Chennai to manage the risk of not having sufficient money to effective run the daily operations. Therefore, to optimise the revenue of the hotel, the revenue managers of 5 star hotels in Chennai have to review the demands in the previous seasons
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to effectively forecast the strategies of pricing to meet the future demands. 5.2. To critically evaluate the results of revenue management practices on distribution channels and corporate companies which are on contract with the hotel in the case of 5 star hotels in Chennai. The corporate companies which are contracted and the distribution channels are affected even though the revenue management practices are highly beneficial to all the 5 star hotels in Chennai. OConnor and Murphy (2008) says that the distribution of third party intermediaries are closed by the revenue managers during the periods of meetings and exhibitions or increase the price in the distribution channels so prevent the loss of revenue and also to optimise the revenue. However during the non-meetings and nonexhibition periods of the year, more volume of businesses are given to the distribution channels which is considered as not fair by the distribution channels. The negotiated contracts which are signed with the corporate companies are took care by the director of sales and marketing. Gazzoli et al., (2008) says the corporate companies which are contracted have the limitation during the meeting and exhibition periods as a clause in their contract similar to the one of the distribution channels. Therefore this creates a feeling of unjust in the minds of the contractors. Though these types of practices are beneficial for the hotel revenue optimisation, it has more chances to affect the good business bonding between the 5 star hotels with the distribution channels and corporate companies which are contracted. Hence, to maintain good business relationship with the distribution channels and corporate companies and to create the fairness perceptions, it is very important for the revenue manager and marketing and sales manager to manage all the revenue management practices effectively. 5.3. To analyse the policies of cancellation and practices of overbooking to optimise the revenue in the 5 star hotels of Chennai. The revenue gain of a 5 star hotel is affected due to last minute cancellations. There are also several chances for a guest not coming to the hotel in the last minute which is referred as no show in hotel terminology. Hence these practices from the guests moves the revenue managers to create fencing for the cancellations by applying cancellation policies like non refundable bookings and cancellation prior to one week of arrival in the cases of big events, meetings and exhibitions when compared with the standard policy of cancellation i.e. 4 to 6 pm local time on the arrival day (Kasavana and Brooks, 2009). During the non meetings, events and exhibition periods, the normal cancellation policies are applied. Adding to this, Talluri and Ryzin (2005) explains that the overbookings are done by the revenue managers to adjust the revenue loss which occurs during the last minute cancellations and no shows. Furthermore, the hotels can generate revenue from the last minute cancellations by
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charging them with the cancellation charges using the credit card guarantee which is a major factor to generate revenue apart from the bookings. Hence it is essential for the revenue managers to be wise when they are overbooking the hotels mainly during the peak seasons of events, meetings and exhibitions as turning the guest to another hotels who is holding a guaranteed reservation will discourage the guest and might end up in losing the business as well as the hotels reputation (Kasavana and Brooks, 2009). 6. Conclusion and recommendations To conclude, the theories were very informative in understanding the pricing strategies based on demand and also about the different ways of forecasting revenue. The studies based on the forecasting and pricing clearly narrated the various studies which have been done by several researchers earlier in this field which are very much related to revenue management. Then the background information about the research creates an idea in the readers mind about the benefits and changes that could happen by implementing and generating revenue through non-room revenue sources. Due to the rapid development in the meetings and exhibitions industry, hotels have to face several challenges to practice revenue management in order to generate more profit. During the meeting and exhibition seasons, the demand for rooms is high. The 5 star hotels of Chennai are chosen for this research because the city is Chennai is busy throughout the calendar year due to spending ability of the people for the meetings and exhibitions. To optimise the revenue, the researcher took measures to analyse the different pricing strategies used by the 5 star hotels of Chennai in this research. Moreover, in this research, the researcher as covered an extensive secondary study about the revenue management and also based on the market demands, the cancellation policies and the practices of overbooking by the hotels are discussed. Furthermore, the competition driven pricing and customer driver pricing are considered as the common pricing strategies during the high seasons and low seasons of meetings and exhibitions. Moreover rooms in a hotel are considered as perishable product, so this research shows the importance of the policies of overbooking and cancellation which are essential for optimising the hotel revenue. Hence, the 5 star hotels of Chennai can generate more revenue with the effective use of room revenue management practices during the meetings and exhibitions period. To get an idea about how the meetings and exhibitions industry can influence the revenue management practices, the key theories from the secondary research are applied partially to the 5 star hotels of Chennai. Thus, the primary research should be carried out to get the exact idea regarding the functioning of the 5 star hotels of Chennai during the meetings and exhibition period. Moreover, the findings of the primary research are considered very important as it helps to know whether the room revenue management is affecting the
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business relationship. Finally, it is concluded by achieving the aim. This research can itself be forecasted as a key which can unlock several locks in hotel revenue generation. Relying too much on forecasts and technological devices is not advisable as revenue is purely based on the guest arrivals. Moreover from the theories it was observed that the hotels focus towards the rooms for revenue generation so focusing on other sources which can gain revenue other than rooms will add more revenue to the hotels. For deep analysis in the revenue management practices, this research provides more opportunities. It is recommended to carry out more detailed research in the hotels other than 5 star which includes 4 star and 3 star hotels of Chennai which are also highly influenced by meetings and exhibitions. All these researches will provide a clear view of the growth of the 5 star hotels through the meetings and exhibitions sector. Moreover, a future research can be conducted to correct the weaknesses of the researcher in this research. The most important factor to be discussed is that the researcher is a native to the research area and the interviews are conducted fully in English and not in Tamil (local language of Chennai) which might affect the researchs reliability. However, if the research is carried out in Tamil, the managers would have been easier in expressing their views as it might be limited in English. A pilot test in the native language can be more helpful in knowing the ability of the manager in expressing their thoughts. Since this being a qualitative study, the perceptions of the distribution channels and the companies which are contracted are not obtained from this study as it can be only done in a quantitative study. Hence the hotels need to be convinced by promising to maintain the information from their competitors to get the contact details of the distribution channels and corporate companies. Henceforth, this research conducted on the 5 star hotels of Chennai can assist in better understanding the distribution channels and corporate companies by the revenue manager and the director of sales and can help them in building relationships. Therefore, the revenue management practices during the meetings and exhibitions period should be conducted very carefully to obtain maximum revenue. Finally, performing a detailed research on the effects of meetings and exhibitions in all the star hotels of the entire city of Chennai will act as a biggest golden opportunity for all the hotels to optimise the revenue. References
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International Hospitality and Tourism Student Journal 6 (1) 2014 86-102

2013 International Hospitality Research Centre. All rights reserved.

International Hospitality and Tourism Student Journal 6 (1) 2014 86-102

International Hospitality and Tourism Student Journal 6 (1) 2014 86-102

2.1.1. Pricing strategies in hotels

2.1.2. Factors affecting price

Figure 1: Market demand view (Choi and Cho, 2009)

Figure 2: Factors affecting price (Lamb et al., 2009)

International Hospitality and Tourism Student Journal 6 (1) 2014 86-102

2.1.3. Revenue forecasting

Figure 3: Revenue forecasting (Whitfield and Duffy, 2011)

2.1.4. Distribution channels

Figure 4: Distribution structures (Dent, 2008)

International Hospitality and Tourism Student Journal 6 (1) 2014 86-102

2.1.5. Fair sensing of revenue management

International Hospitality and Tourism Student Journal 6 (1) 2014 86-102

2.2. Review of empirical studies

2.2.3. Revenue management in airline industry

International Hospitality and Tourism Student Journal 6 (1) 2014 86-102

2.2.4. Revenue management in cruise liner industry

International Hospitality and Tourism Student Journal 6 (1) 2014 86-102

International Hospitality and Tourism Student Journal 6 (1) 2014 86-102

International Hospitality and Tourism Student Journal 6 (1) 2014 86-102

property to optimise their revenue and to enhance their service standard.

3.4. Data credibility and confirmability

3.5. Data dependability and transferability

International Hospitality and Tourism Student Journal 6 (1) 2014 86-102

International Hospitality and Tourism Student Journal 6 (1) 2014 86-102

International Hospitality and Tourism Student Journal 6 (1) 2014 86-102

International Hospitality and Tourism Student Journal 6 (1) 2014 86-102

International Hospitality and Tourism Student Journal 6 (1) 2014 86-102

International Hospitality and Tourism Student Journal 6 (1) 2014 86-102

International Hospitality and Tourism Student Journal 6 (1) 2014 86-102

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