Carlson Rezidor Hotel Group Maximizes Revenue Through Improved Demand Management and Price Optimization

Assignment On Carlson Rezidor Hotel Group Maximizes Revenue Through Improved Demand Management and Price Optimization Submitted By Dated Value of the article in business community This article values a lot for the business community. This helps them to asses that what trends are currently going in the industry. It also helps them to assess the industrial practices and help them to learn from them. It also helps the competitors to take active action to reside in market. For investor it also provides good information when they learnt the current progress and future step of the organization they tend to stick them. It increases the company worth through high demand of their share in market due to due to their status and expected progress for ongoing and new projects. It helps the stakeholder of the company to take decision that if they should stay with the company or need to leave. CRHG showing significant progress in its inflow of $4 million, which is a large amount if the stakeholder will stay with him it, will be beneficial for the both parties it will increase value of the stakeholder and the firm. Firm will have more investor which will lead him toward its corporate strategy. Such action of CRHG m may lead the competitor to take responsive measure and change their business strategy. They have to set their prices accordingly and may choose to offensive or defensive strategy. In consumer perspective it also communicate them the message that to pay less fair visit other countries when there is less flow of people to that country it will decrease their fairs and traveling cost . Business meeting companies are usually held abroad. Therefore, if they will go in peak seasons it will increase their cost for accommodation. Seeing such projects all stakeholder including, suppliers. Shareholders, customers, distributers, creditors all concerned people will have a good opinion about the company and company will progress. It will also prove to be helpful for the economy as income from hospitality sector contribute major portion to GDP and the economic growth is assured as many of the country entirely based on hospitality industry due to truism based economy. Value of the article for the course This article covers most of the aspect of our course author have discussed demand concept, price fluctuation due to demand, forecasting demand and competitiveness of the business. He described that how we can use the demand and price to best fit in market and efficient pricing may help us for better positioning in market. He also covers that how the innovation and changes may lead to success. I learnt that demand forecasting is essential to save and efficiently use the resources. Carlson Rezidor Hotel Group (CRHG) led toward success just by minor changes in Prices and demand forecasting. They used it as a tool against the competitor and charged low fares in dip days and charged high rates in peak days. It benefit for both the parties consumer got low fair in low traffic period and the company earned high profit in high demand period. They follow the practice of airline industry. In all this JRD role was everywhere positive but it was CRHG who learnt the importance of research and collaborated with JRD. It also shows that the teamwork also lead to success. Demand forecasting is essential tool for cost saving. It helps to save the organization from wastage of resources and improve the service delivery through discounted prices. Demand and supply help the organization to set the prices at best level where they have to spend less and the revenue tend to be high. Demand and supply forces affect the prices of the market and if the organization follow it will result in their prosperity the forces represent the efficiency of the market as these forces change the price trends. I also learnt from the example of CRHG that corporate strategy lead all the projects of the organization and ensure its accomplishment through strategic projects. Summary Carlson (CRHG) is a large chain of hotel consisting1300 hotels in 80 countries and with a staff of 80000 employees. It operates in Russia India and Western Europe. Carlson Rezidor hotel group own 13 percent of their hotels 59 percent are working as franchises and 28 percent are in management contract with CRHG. They use SNAP model for fares. These derive from the airline industry in 1980. Airlines industries started revenue management based on the demand residual seat and then set the fare rate according to them. Hotels were facing similar problem in price management. Currently CRHG manages price optimization by vice president who details the president about it. The role of vice president is to stay in coordination with other regional branches of the CRHG in Asia, Africa and Europe. They firstly implemented revenue optimization in America and now their American division is developing technology and process to implement this in all other regions. Regarding revenue optimization, this thing is considerable that if the CRHG own manage or have contract in other regions as in owned hotel general manager hire the revenue mangers of the hotel independently and they are responsible to report him. General Manager is responsible to report the corporate operations. While in managed hotels, CRHG hire revenue manager at hotel, which have complexity in operation, or three or four hotels are assigned a single revenue manager. Franchise hotel general manger manages the operation of revenue management. Some large hotels outsource the revenue management to other hotels revenue managers and CRHG mange their revenue optimization. In 1990 revenue management system (RMS) of CRHG take over the control and introduces length of stay (LOS) fair charging. According to this fare system, each hotel for different products and suits will offer one to seven LOS and in this way over thousand RMS will open and close on daily basis in all hotels. This system was complicated enough to be understand by the franchisee and the contractors. CRHG observed that this process was time consuming but efficient enough for revenue management. They decided to serve more sophisticated and efficient revenue management tool. They take the thing into consideration that they need to work in collaboration and on schedules to work with the other franchises and contractors to have fresh data for efficiently manage the revenue. They found that the property RMS also requires too much interaction with the partners and the workload can be reduced by defining the easy workflow using customizable technology. To deliver considerable value to customer they used SNAP project. It was a long and multiphase project. They drive the project efficiently in collation with JDA technical and research staff to meet the required scope, vision and financial expectation of the CRHG. They lead the whole project and involve the stakeholder in it to achieve the vision of the project. This project was for demand forecasting and improve the revenue from brooking, postpone and cancellation of the reservation and all other associated revenues. The implementation of the project started in 2007 and they made the solution available to all the chain of CRHG in U.S. They reduce the burden by centralizing the command and made corporate wide team to manage the issue of revenue management. They used pricing solution to made hotel manager and analyst be able to assess the demand and price positioning in market to compete others. This enabled them to maximize the revenue by recovering downfalls in prices through other busy nights. This was an innovative idea. They developed a prototype to test the results of conceived pricing and tested it in JDA. They prepared a price report based on different characteristics and transmitted to operators and consumer to get their feedback regarding price. On October 2008, they implemented this prototype in different markets and brand including 23 hotels for 4 weeks to get feedback and make improvement in system. They used demand forecast model being used in 400 corporate and was successfully working there. They maintained a demand-forecasting unit (DFU) who used past trends to asses long and short term LOS, Which helped them to forecast successfully. They excluded the price negotiation from their price optimization. They also measure lose due to shortage of rooms and find the optimistic size of the hotel. Through constrained forecast evolution (CFE), they find if the high value customer arrive first o the low value customer. Market Reference Price computation (MRP) helped them to set the competitive price as compare to market by analysis. Heuristic elasticity estimation (HEE) helps them to assess the price elasticity of competitors. In implementation, phase Industry-neutral infrastructure for optimization (TPO) helped them to resolve pricing issue in service industry. Auto pilot recommendation made them able to find flaws in their price optimization and revenue management system through feedback. CRHG have considerable benefit of this demand forecast system. They used CR activities for customer emailing. They generate the revenue of four million in second quarters of 2010 while the program was not still fully implemented. This program also offered $250,000 discount to customer in low demand time. From full audit, they found that they received 16 million of profit because of this program. Currently CRHG have 1300 branches worldwide and he found through pilot testing that SNAP throughout all his hotels in world after its successful working in U.S. they have increased their corporation JDA implement SNAP worldwide in all his hotels. Their initiative to price optimization was an attractive offer for the customers. This is the part of their strategy to grow their hotels to 1500 up to 2015. They are assuming the option to increase the revenue to 4 %, which will increase their profits by $ 30 million. CRHG is currently also working with TPO for group evaluation module to test the over booking functionality of the industry. Reference BIBLIOGRAPHY \l 1033 Pelin Pekgün, R. P. (2013). Carlson Rezidor Hotel Group Maximizes Revenue Through Improved Demand Management and Price Optimization. Interfaces, 21-36.

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