Occupancy Optimization of a Hotel

“Occupancy Optimization of a Hotel”

THE INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

PUNE

A PROJECT REPORT ON
Operations Research
“Occupancy Optimization of a Hotel ”
A Report submitted in partial fulfillment of the requirement for
the award of the degree of Master of Business Administration.
Under the Esteemed Guidance of
Prof. M.K Gandhi
Faculty IIPM, PUNE

Project Analyzed & Documented by

• DixitaPorwal, PGP/FW/10-12/ISBE-A
• Pratik Gandhi, UGP/FW/09-12/IIPM
• Rajwin Patel, UGP/FW/09-12/ISBE
• Sagar A. Agrawal, UGP/FW/09-12/IIPM
• Sneha Chandan, PGP/FW/10-12/ISBE-A


ACKNOWLEDGEMENT

We heartily thank our Project in-charge, Prof. M.K.Gandhi, Faculty IIPM, Pune,

whose encouragement, guidance and support from the initial to the final level

enabled us to develop an understanding of the subject. We are grateful for Sir’s

contribution towards the execution of our project.

Lastly, we offer our regards and blessings to all of those who supported us in any

respect during the completion of the Research.


EXECUTIVE SUMMARY

The Operation Research conducted, examines the congruence among hotel rooms

and occupancy rate/percentage, using 3 years of data from 13,184 guests in the

upper midscale hotel. The study concludes that holidays, festivals,

competitors, weather, seasons, processes and systems were significant predictors

of all components which impacted the occupancy of the hotel. All parameters were

graphically represented in a schematic diagram so as to find if there is a way to

optimize the occupancy of the Hotel for those parameters.


MANAGEMENT LETTER


Sr. No. Topic Page No.

1 Rajkot Introduction

2 Geographical Boundary

3 Hotel Introduction

4 Analysis

5 Observations

6 Recommendations

7 Conclusion

Index


RAJKOT INTRODUCTION
Rajkot is well placed in the Saurashtra Region of the Gujarat state. Rajkot is a
major industrial town in Gujarat.

Rajkot is the fourth largest city in the state of Gujarat, India, after Ahmedabad,
Surat and Vadodara. Rajkot is the 23rd urban agglomeration in India, with a
population more than 1.6 million as on 2012.Rajkot is ranked 22nd in The world's
fastest growing cities and urban areas from 2006 to 2020.

Rajkot is a city of Gujarat state in India and administrative headquarters of the
Rajkot District, 245 km from the state capital Gandhinagar. Rajkot was the capital
of the then Saurashtra state from 15 April 1948 to 31 October 1956 before merging
in bilingual Bombay State on 1 November 1956. Rajkot was merged into Gujarat
State from bilingual Bombay state on May 1, 1960.

The city contributes to the economy of the state with heavy and small-scale
industries under the patronage of Gujarat Industrial Development Corporation
(GIDC) and Gujarat State Financial Corporation (GSFC). The economy of Rajkot
got another shot in the arm with 28 crore World Bank aid for development of
infrastructure of the city. Many a renowned business houses made a beeline for
grabbing the property market in the city, before it skyrockets.

The city hosts several small-scale manufacturing industries. Some of the industrial
products for which Rajkot is known include bearings, diesel engines, kitchen
knives and other cutting appliances, watch parts (cases & bracelets), automotive
parts, forging industry, casting industry, machine tools, share market and software


development. The city is also home to one of the largest CNC machine
manufacturer in the country, Jyoti CNC Automation Pvt. Ltd. The Real Estate
sector is also booming in the city, as the land prices in the city are some of the
highest in India.

Rajkot is well known throughout the world for its casting and forging industries.
Over the last few years, it has started to play an increasingly important role in the
complex supply chains of many global engineering companies that make products
such as electric motors, automobiles, machine tools, bearings, etc.

In the near future, the government of Gujarat will allocate large land areas for the
development of Special Economic Zone, which will be parted in three different
areas and will include industries such as Software, Automobiles, etc. As per recent
market reviews, Rajkot is becoming Asia's biggest Auto-Mobile Zone.

Rajkot is hub of India in the field of Diesel engine and submersible Pumps. Still,
Submersible pumps are manufactured in a lot and marketed throughout India and
some of the big manufacturers also export them.


Geographical Boundary
Rajkot:- Known For Its Machineries, India’s No 1 City For Oil Engine,
Investment Casting ,Forgings, Hardware Products, Leading In S. S Kitchen
Wear(No.1 As Per N D T V Survey) , Silver Ornaments, Bearing, Pharmaceutical,
Chemical & C N C Machineries. More Than 65% Of Cities Population Is Upper
Middle Class & Richer Class.

Rajkot Is Surrounded By More Than 12 Small Cities, Which Have Their Own
Self-Economy. They Are As Follows:

• Morvi: - Known For Its Ceramic Tiles & Watch Industries.
• Jamnagar Dist.: - Reliance Industries, Onion & Groundnut And Brass Part
& Agricultural Industries Are Prominent Industries At Jamnagar.
• Junagadh Dist. : - Gondal, Jetpur, Upleta, Dhoraji - Chili, Cotton, Pulse,
Groundnut And Oil Mills Industries Are Situated In Junagadh District.
• Porbander, Veraval: - Is One Of The Main All Season Port Harbour, Also
Various Mining, Fisheries, Cement & Sugar Industries Are Located.
• Ranavav, Keshod, And Una: - Is Known For Its Mango Farming & Other
Farming Industries.
• The Region Of Saurashtra Is Also Gifted With Other Ports & Harbors Like
Salaya, Bedi Bandar At The Proximity Of Saurashtra.
• Bhavnagar: - Alang Ship Breaking Yard, Steel Production Industries, And
A Fast Developing Metro City Of Saurashtra
• Saurashtra Has Also Big Industries Like Reliance Perto Chemicals, Essar
Oil, Cement Factories Like Ambuja Cement, L&T, [Saurashtra Cement
Factories] Siddhi, Hathi Cement. Sanghi, Kamal, Tata, Acc.


The district also has various manufacturing units for machine tools, industrial
equipments, lathe machines, metallurgical industries, electronics, engineering
and auto ancillary sectorß Small and medium industries are dominated by
foundries, engineering & automobile works, textile related units gold & silver
jewellery, handicrafts, spices, medicines, and wall clocks


HOTEL INTRODUCTION
Situated in the midst of prominent business & commercial area of Rajkot city, just
5 Km from Airport & 3 Km from Railway Station. The Grand Regency Hotel in
Rajkot is the ideal destination for Corporate Gatherings, Strategic Planning
Sessions & Board Meetings.

Hotel The Grand Regency opened its doors on 15th July 2002. The concept & feel
of the hotel is to create an oasis of comfort and luxury in the hub of heightened
commercial activity. The accommodation options at the Grand Regency Hotel are
a plenty to offer a wide choice to the tourists. The comfort and the luxury at The
Grand Regency makes you feel at home even if you are away from your home. It
offers quality business services and facility including a business center, executive
lounge, health room and recreational room.

It has 48 elegant rooms with ample seating including the splendid Gardenia Floor
having a lush & rich garden with 19 rooms surrounding it, offers all the
requirements of a Modern Business Traveler. Rest is Executive Room, Elegance
Room and Suite Room. It has much more to offer than just accommodation, it has
2 Banquet and conferencehalls, and also used as Social gathering,

• The Swagat Hall: - Accommodating 150 persons
• Regent Room: - Accommodating 350 persons

It offers fine dining experience With 2 Restaurants,

• DholaMaru: - This elegantly appointed 100 covers Multi-Cuisine Restaurant
serving authentic cuisine ushers in slow concept in fine dining for a
delightful dining experience.


• Dosa Hut: - It offers south Indian Cuisine (simply south) , appointing 65-70
cover.

The restaurants are one of the leading restaurants in Rajkot according to FHRAI
survey. The hotel is also FHRAI registered member.


ANALYSIS


OBSERVATIONS
Methodology

1. Data Acquisition - Gathering Annual Sales Occupancy Reports

2. Data Analysis - Breaking it down further into quarters, weeks and days

3. Data Mining - Finding relevant trends, patterns and clusters

4. Data Study – Studying the mined data and converting it into useful charts

and schematic diagrams

5. Defining the problem area from the Data Studied

6. Data Application – Making relevant Recommendations and Conclusion

based on the problem areas found in the research


Guest Profile

As per the data and discussions with the hotel management staff, we have found

out that the profiling of the hotel guests fall in the following categories:

1. Business Travelers (Majority)

2. Tourists

3. Locals – Families and Functions (Mostly Weddings)


Trends and Patterns
Year-wise occupancy for the Hotel stands at 46% in the first year and goes up to
56% to the next year and eventually drops to 40% in the final year. In order to
understand the further trend we went in the depth by breaking the annual
occupancy records into 4 quarters and then compared it in two ways

i. Inter-Quarter
ii. Inter-Year (Quarter)

In doing so, we found out an interesting trend over the years that Q3 has been
outperforming the other quarters that means it had the best occupancy as compared
to the other quarters. It was followed by Quarter 4.

In order to understand this trend we went ahead and found a cluster of Week 27 to
Week 47 (Best Weekly Occupancy Cluster) which was interestingly having similar
trends for all three years.

To understand more, we found out that these quarters and weeks were falling under
months like October to February in which there are major festivals like Diwali,
Dusshera, Navratri, Christmas, New Years Eve, Weddings and Winter Vacations
and companies’ semi-annual meetings are also conducted.

In order to further understand customer’s check in and checkout rates in a week,
we analyzed and observed the occupancy records day-wise, over the period of
three years. We found that, THURSDAY has registered as the most number of
check-ins i.e highest occupied day in a week whereas, Weekends had the highest
number of check-out i.e. lowest occupied days in a week.


About Q1
Out of the four Quarters, Q3 & Q4 are having good results whereas the other
quarters are not having the optimum results. In order to understand the difference,
we went in depth to understand these quarters result in the similar way mentioned
above, i.e. dividing the annual occupancy quarterly, weekly and daily.

The findings were that the first quarter is scheduled for a regular maintenance work
which is right before the monsoon. Maintenance has to be done every year for that
period. Henceforth, it is resulting into high “Out of Order” rooms which is
impacting the available room slots and hence the occupancy of the hotel for that
period.

About Q2
According to the analysis Q2 falls under months – July to September which
happens to be the rainy season which impacts the occupancy directly as Rajkot
falls under a geographic area which gets ample amount of rain.

Since most of the marriages happen in the later quarters, Q2 gets affected with less
number of bookings with respect to the occupancy.

Even then, Q2 manages to have a considerable amount of occupancy which is 40%
on an average.


Booking Reservation Information

We have found out how guests actually go ahead and book the rooms for their stay.

Its shown in the charts that majority of the bookings are under the category of

advanced booking and significantly less number for walk-ins, reason being, that

the availability is less as majority of the bookings are made via agents, individuals

on a prior basis which are mainly for Corporate and regular clients. Therefore, the

available rooms for the guests who walking in are on a lesser side


RECOMMENDATIONS
With the observations and inferences that we have found out, we have come to a
point that we would recommend

1. Central Reservation System
2. E-CRM via Loyalty Program for the Hotel

Central Reservation System

Hotel needs to maintain the record of guests and reserve rooms beforehand.
Customers should be able to know the availability of the rooms on a particular
date. They should be able to reserve the available rooms according to their need
in advance. To make their stay comfortable, they are provided with food and
other services. The record of the food taken by each customer and the services
availed by the customer should be kept. These records help in generating bill.

The hotel reservation system should be able to satisfy the following requirements:

1. The system should be able to keep the records of the guests and the room
allotted to them.


2. Customers should be able to know the availability of the rooms on a particular
date.
3. Guests should be able to book the available rooms online.

4. The record of food and services availed by the customer should be kept.

5. The system should be able to generate the bill for a customer.

Design
Entities And Attributes
1. GUEST can be of two types FAMILY and COMPANY

2. FAMILY has attributes FamilyHeadName, Address, NoOfAdults, Children.

3. COMPANY has attributes Name and Location.

4. ROOM has attributes RoomNo Rate, Type and Status (vacant or occupied)

5. FOOD has attributes ProductId Rate and Type.

6. BILL has attributes BillNo , Date and Time.

7. FACILITIES has attributes Facility Id, Type and Rate.

Relations and their description
1. GUEST are ALLOTED ROOM from CheckInDate to CheckOutDate. One

Guest(Family or Company)

can be alloted more than one room.

2. GUEST PAYS BILL. A GUEST must pay a BILL.

3. GUEST may USES FACILITIES. One GUEST can use more than one
FACILITIES.


4. GUEST ORDERS FOOD at some Time on some Date. GUEST can order more
than one FOOD

item and one FOOD item can be ordered by one GUEST.

Figure 1: Hotel Reservation Database Schema


Fig 2. Schema diagram for the Hotel Reservation Database schema

FAMILY
Family Head Family_Head_Name Address Phone No No_Of_Adults No_Of_Children

FAMILY MEMBERS

Family Head Name Age

COMPANY

Name Location

COMPANY MEMBERS

Company Name Guest Age Designation
NameNameNam
eName

GUEST ID – ALLOCATE 1 unique ID to a Company

Guest_ID


ROOM

Room_No Type Rate Status Guest_ID Checkin_Date CheckOut_Date

FACILITIES

Facility_ID Rate Type Guest_ID

BILL

Bill_No Amount Date Paying_Method Guest_ID

FOOD

Product_ID Rate Type

ORDERS

Guest_ID Product_ID Date Time Quantity


Output

1. Reservation Form:

2. Order Food:


Benefits of CRS

• Increase guests retention

• Develop and enhance relationships with customers, suppliers and networks

• Attract, retain and maintain a happy workforce and be an Employer of Choice

• Save money on energy and operating costs and manage risk

• Differentiate yourself from your competitors

• Generate innovation and learning and enhance your influence

• Having an IT based infrastructure in the Hotel to optimize efficiency


E-CRM via LOYALTY PROGRAM

Hotels get nearly half of their revenues from the small segment of travelers who
spend about a month each year on the road: frequent visitors make up only 38%
percent of all hotel guests but account for 62% percent of hotel nights.

In the early 1980s, hotel chains began to recognize the value of such customers by
introducing loyalty programs patterned on the airlines' frequent-flier model. These
programs have succeeded in maintaining the loyalty of people who travel
moderately often but are not as effective as they might be with other segments.

To capture this opportunity, hotel executives must ask, "What do you get the
person who has everything or at least more points than he or she can use?"
Part of the answer might involve changing the way points are redeemed. Even for
elite-status members of a loyalty program, redeeming them for free hotel rooms
can be cumbersome at popular times and destinations.

E-CRM IN HOSPITALITY

Electronic customer relationship management (e-CRM), in the context of the
exploding Internet distribution and marketing in hospitality, is a business strategy
supported by Web technologies, allowing hoteliers to engage
customers in strong, personalized and mutually beneficial interactive relationships,
increase conversions and sell more efficiently.


E-CRM cannot exist in isolation

Today's multi-channel marketing model requires a single brand image to be
communicated across all channels. In the same time it requires interactive
customer relationships to be established and maintained across all channels.

Anytime an Internet user lands on a hotel website, a branding interaction occurs.
This branding interaction can be positive or negative . Unfortunately for some
hoteliers on many occasions a visit to the hotel website turns out to be the last
point of contact with this particular customer.

Two key questions are facing hoteliers today

• Who owns the customer in this new online environment?
• Which made the booking, or the hotel where the guest stayed?

How can hoteliers establish mutually beneficial interactive relationships with
the customers?

1. Know Your Customer
2. Customer Service
3. Personalization
4. More Efficient Marketing
5. Building Customer Loyalty in order to increase repeat business


Here are the main aspects in e-CRM in hospitality

1. KNOW YOUR CUSTOMER

Knowing your website visitors is an extremely important consideration when
conceptualizing and designing your hotel website and your e-CRM strategy. After
all, addressing your key audiences and providing them with relevant information is
one of the key aspects of any hospitality site. Different customer segments should
easily identify areas on the site that speak to them. Internet users visit a hotel
website not as John Smith or Jane Smith, but as a Business Traveler, Meeting
Planner, Special Event Planner, Family Traveler, Spa Services Seeker, Golf Outing
Seeker, Vacation Planner, Convention Attendee, Wedding Planner, etc.

The benefits are obvious:

• Identify your most valuable customers with best lifetime value perspective
• Allows guest-centric data mining: guest history, guest profiles, past
bookings, preferences, etc.
• Enables informed decisions in real time
• Allows fast response times
• Real-time Guest Lifetime Value
• Deliver business insight to executives, marketers, sales unit

2. PERSONALIZATION

Personalization is more than providing the right information to the right person
at the right time. Personalizing the customer experience on the hotel website is
a powerful conversion and retention tool. Customizing your interaction with
your most valuable customers will provide significant long-term rewards.
Adopt a policy on how to address your guests via email Addressing the
customer segmentation issues on the property website is a logical next step.


Creating a targeted email marketing campaign is another good step.

For the major hotel brands, the personalization efforts are much more complex
and expensive. Customization tools used by some major brands and airlines
allow website users to actively personalize their website experiences using over
250 criteria. Here are some of the efforts by the major travel and hospitality
companies to make the user experience more personable:
Personalization agents using a variety of customization applications, capable of
creating Behavioral Profiles and a Real-time profile for each customer
Collaborative filtering

Using preference matrix and artificial intelligence to capture and predict
customer interests

Decision-support applications utilizing various applications for Behavioral
Profiling, Predictive Modeling, Collaborative Filtering and Click-Stream
Analysis, capable to sense the purchasing behavior and patterns of the user.

By providing a customized booking experience these applications can boost the
conversion rates.

3. CUSTOMER SUPPORT

It is important to understand that customer service is only one aspect of e-CRM
and is primarily a reactive function aiming to improve performance and
efficiency, while e-CRM as a whole is a proactive long-term strategy. On the
Internet the customer support aspect of e-CRM is an extremely important trust
building and customer retention tool. A well positioned Contact Us or Help button
or Push-to-talk feature speaks volumes about the hotel brand and builds trust. 57%
of online shoppers actively seek sites with good customer service

Different customer segments perceive the hotel website differently. While not
dramatically different, Business Travelers appeared slightly more critical than
other user groups. Even when they felt satisfied, Business Travelers appeared
more critical: 54.57% found the site to be Very good or excellent compared to
55.14% for Leisure Travelers.


Conclusion: e-CRM is an integral part of online distribution and marketing
in hospitality. The Internet provides the best direct means to reach existing and
potential customers. Establishing interactive relationships with your
customers, which is the essence of e-CRM, will help you retain your customers,
increase revenues, and build brand loyalty.


CONCLUSION
As per the Operations Research over the Hotel, we need to have an occupancy of

40% and above to reach the breakeven for a particular year. Due to the fluctuations

in the occupancy during the year, the Hotel has just managed to reach its breakeven

point and has not made any sufficient profit margins as per the Management’s

expectations. Therefore, we aim to have an uniform occupancy rate throughout

the year which will not only help the hotel achieve the breakeven but also it will

also make sure that certain percentage of profits are achieved.

All this can be envisaged by implementing the two of the recommended programs

for the hotel. This will help enhance Hotel’s efficiency, occupancy and will

smoothen down the systems and processes in the future to come.

Occupancy Optimization of a Hotel

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