Good The Clonlara Hotel Case Study Case Study Example

Introduction

The Clonlara Hotel is a large upscale hotel located in the heart of London. It is currently being managed by Elizabeth Crawley. The present hotel manager seems to be very eager about applying revenue management techniques to increase the revenue generated by the hotel. One particular strategy that she thought of initially was taking advantage of the above average vacancy rates of the rooms at the hotel during Saturday nights. The objective of this paper is to discuss the current situation that the hotel faces using SWOT (Strengths, Weaknesses, Opportunities, and Threats) Analysis and then obtain a plausible recommendation based on the findings that can be obtained from the analysis.
The main challenge that the hotel faces is that its room inventory is not even half-filled during weekends and as a result, its profitability at least during those periods suffer. The management wants to identify some ways how this situation can be turned over and make weekends still profitable for the hotel. This is a concern because the hotel’s facilities are largely underutilized. These facilities have to be paid for and maintained regardless whether there are visitors paying for their upkeep or not and so the management has to look for ways how they can increase room occupancy rates during weekends.

SWOT Analysis

Strengths
One of the major strengths of Clonlara Hotel that Crawley may be able to use at their advantage would be the large upscale status that it has. There are many cases where hotel patrons and visitors visit a particular hotel not just because of its services and the hospitality of the staff but also because of the status of the hotel. For example, the impact of staying in a three star hotel that offers a reasonable quality of service at reasonable room rates would be different from staying in a five star upscale hotel that also offers a reasonable quality of service at reasonable room rates. In general, however, room rates and the level of service would be considerably higher in more upscale hotels than those in lower scale ones, such as the three star hotels used in the example. For most hotels, however, the turnover of rooms during weekends is typically slow.
This often leaves the hotel being rarely filled with visitors and patrons on a Saturday night, for example. Naturally, a hotel that is rarely filled would eventually turn out to be a not so profitable hotel because the more often it gets filled, the more profitable the business becomes. This is so not the case in Clonlara Hotel especially during Saturday nights. However, it can definitely use its large upscale status to lure visitors and patrons inside and get them to check in. The question is how. If they can give reasonable discounts to their clients, the clients would think the idea of staying in a large prestigious hotel at a discounted price as a limited opportunity. In that case, they would bite in the promotion and the room turnover rates at the Clonlara Hotel would be accelerating, even on a Saturday night.

Weaknesses

The weakness that the Clonlara would inevitable face at this point would be the fact that hotel room turnover rates are naturally slow during weekends especially Saturdays and as a result, no matter what strategy the management use to improve their financial gains during such conditions, it would always turn out to be an uphill battle. For example, because of the discounted room rates during Saturdays, the hotel’s overall profitability during weekdays and other times where room turnover rates are weak, the potential profitability of the hotel would be lower than the potential profitability of the hotel during high seasons or times when it is fully booked. This is assuming that the hotel, as a result of its discounted room rates promotion, would be able to fill all its discount rooms during weekends. This weakness would become more prominent, especially financially, if the hotel, even after discounting the room rates during weekends, still becomes unable to fill in a significant percentage of their room inventories with visitors.

Opportunities

One opportunity that Crawley might want to look for would be assessing the discounted price of the hotel and comparing it with the average prices that their competitors offer. If she can make the overall price and value of their service comparable to that of their competitors, at least during the weekends, then her goal of increasing the revenue generated by the hotel during such points may be accomplished.

Threats

The greatest threat that Clonlara Hotel faces are the number of guests being turned away either as a result of the high price relative to other hotels or the low quality of service being offered. Either way, this threat would eventually lead to a scenario where the hotel loses a significant percentage of its customers. Additionally, if the manager continues to rely on the discount promotions just to lure visitors in, the hotel would eventually lose its luxury and upscale status.

Recommendations

What the Clonlara Hotel faces at this point is a tradeoff point. This means that they have two things to choose from: increase the revenue by offering discounts or just leave the situation as is in order to preserve the hotel’s luxury status. In order to do that, we just have to compute for the profitability when the hotel rooms are full during weekends using the discounted rate that would match that of the competitors and compare that with the normal level of profitability during weekends using the base rate.
Let us just assume that the number of rooms is 1,000 (based on the case) and the base price is at $800; that the breakeven price for the hotel to attract customers of other hotels is set at $300; that during Saturday nights, the booked rooms at base price are only 250; and the booked rooms at the discounted breakeven price (i.e. $300) is 900. That would lead to this equation:
Profitability using discounted price = Discount Breakeven Price x number of rooms occupied
= $300 x 900 = $270,000
Profitability using the base price = Base Price x number of rooms occupied
= 800 x 250 = $200,000
The equation above shows that the recommended strategy is to lower the discounted price rate for every room even further—to the point where other competitors are lowering their prices during weekends so that the revenue can be maximized by over thirty percent (i.e. 270,000 vs. 200,000).