AVARI RAMADA: CASE STUDY

Presented by (SectionC):-• SAHIL BHAMBRI (12DCP-097)• SAKSHAM SHARMA (12DCP-098)• SANDEEP SINGH BEDI (12DCP-100)• SAWAN GUPTA (12DCP-104)• TANUJ ARORA (12DCP-117)• ABHISHEK BANSAL(12DCP-134)

The Avari Lahore

5 star Hotel

Affiliated with the Ramada Renaissance Hotel chain

Located at the Shahrah-e-Quaid-i-Azam road

The Avari Lahore

Managed by Hilton group (1978 - September 1987) Avari took over the management in October 1987 and

renamed “Avari Lahore Ramada Renaissance Hotel” In the vicinity of:

Provincial Assembly Pakistan Arts Council Commercial and Shopping zones

Problem Statement

Average room rate of Avari Hotel had fallen below its main competitor, Pearl Continental Hotel.

The assistant sales and marketing manager wants to re-evaluate the current pricing policy of Avari.

He wants to find out which is the best among the following alternatives: Increase the Price of all rooms by 10 percent. Increase all rates other than EBS and VEBS rates. Introduce another type of rate which bridged the vast

differential between the group rate and the least expensive individual rate.

SWOT Analysis

Strengths:-

Strategically Located

Good Quality Service

SWOT Analysis

Weaknesses:-

Rooms less spacious as compared to Pearl.

Brand image has not been formed in the minds of potential

customers.

SWOT Analysis

Opportunities:-

Formation of a tax free industrial zone in Chunnian

Flights from Europe and United States were expected to start

by the end of 1989

SWOT Analysis

Threats:-

Competition from Pearl

New entrants with good international image:

Sheraton Hotel

The Holiday Inn

5 C Analysis• Company

• Competition 1. Main Rival – Pearl Continental Hotel – spacious

rooms and lawns

2. Tax free zone in Chunnian – Hotel Sheraton and Hotel Inn

• Customers• Segmented customer base into

1. Business

2. Walk-ins

3. Tour Groups

4. Others

• Climate1. High level of industrialisation

2. Flights from USA and Europe expected to be started

3. Increase demand for hotel rooms in Lahore

• Collaboration1. Avari affiliated with Ramada Renaissance Hotel Chain

2. Quantity discounts to customers who held company accounts

3. Contracts with multinational and foreign enterprises/firms

4. New Client companies offered contracts

5. Tour Organisers offered whole sale rates

6. Agreement with IATA

7. Contracts with international airlines – 10 rooms per yr. Discount offered – 55 %

MARKET SEGMENTATION

Four Broad Categories Business Clients: EBS –Executive Business Service VEBS –Volume Executive Business Service Walk-in : FITs-Frequent Individual Travelers Tour Groups Others

TARGET MARKET

Avari Clientele

FIT-11%

EBS-30%

VEBS-31%

Tour-3%

special-9%

summer package-3%

Conventions-2%

Airline-7%

Other-4%

POSITIONING• Product Levels Core Benefit- Sleep Basic Product- Attached bathrooms Equipped with modern appliances Expected Product- Eating places A coffee shop(Kims) A snacks bar A regular restaurant(The Fort Grill)

POSITIONING

Augmented Product- Punjab Terrace ClubKohrshed MahalFunction RoomsExecutive Business Centre

PRICE

Pricing objectives:-

• Profit Maximization

• Market share leadership

Setting the price: Pricing method:-

• Going rate pricing: Avari Ramada operates in an oligopolistic

market & prices its rooms on the basis of competition and demand.

• It revises and adjusts its prices, twice a year according to the

inflation rate.

Room rates & Pricing Policies

Individual Rate:-

Rack Rate Commercial Rate Preferential Rate

Double room:Rs 1986 Double room:Rs 1821 Double room:Rs 1658

Single room: Rs 1806 Single room:Rs 1641 Single room:Rs 1478

Customer segment:-FITPurpose:-Automatically raise revenues & profits

Customer segment:-Business clientsPurpose:-Attract reputed customers from business: potential to increase occupancy rate in the long run.

Customer segment:-Special customersPurpose:-Retain loyal customers & attract new ones.

Room rates & Pricing Policies

Individual Rate:-

Key pricing strategy concepts:-

• Adapting the price: Differentiated pricing:-

Numerous types of rates are kept in place.

Policy of not turning away any guest that comes to the hotel.

Price discrimination occurs (Company sells a product or service at two or

more prices that do not reflect a proportional difference in costs).

• Third degree price discrimination: Seller charges different amounts to

different classes of buyers.

• Customer segment pricing: Different customer groups pay different

prices for the same product or service.

Room rates & Pricing Policies

Contract Rate:-

• An enterprise or firm could enter into a contract with the hotel, and

thereby negotiate room prices according to the number of room

nights that it was willing to provide the hotel within a given year.

• Usually, only the multinational and foreign companies entered this

category with good repute, size & past records.

•  It would register for either an

– EBS (executive business service)

– VEBS (volume executive business service) rate.

Room rates & Pricing Policies

Contract Rate:-

Key pricing strategy concepts:-

• Second degree price discrimination: Seller charges less to buyers of larger

volumes.

EBS and Group Rate VEBS SPECIALITY RATES

75 to 100 room-nights per year

at least 200 room-nights per year

large companies and organizations, such as (USAID)

single room : Rs 1165 double room :Rs 1345. 

single room : Rs 1020 double room :Rs 1200.

 45-60 percent off the rack rate

250 to 300 such accounts

10 to 20 special rate and VEBS accounts

10 to 20 special rate and VEBS accounts

Room rates & Pricing Policies

Garbage rates:-

It refers to a category of miscellaneous rates that forms a low

percentage of the hotel’s total revenue.

Room rates & Pricing Policies

Garbage rates:-Govt Officials Net Wholesale

RateJournalists Rate:

Airline Rate IATA Rate:

Pakistani Govt officials and European diplomats

tour organizers and agents

foreign and local journalists

for the crews of international airlines that flew-in from Middle Eastern countries

transit passengers of any airline

50% of Rack Rate

Lower than EBS higher than VEBS

80% of Rack Rate

45% of Rack Rate

50% of Rack Rate

the hotel did not encourage such clients

Room rates & Pricing Policies

Garbage rates:-

Key pricing strategy concept:-

• Promotional pricing: Special customer pricing: Sellers offer

special prices exclusively to certain customers.

Room rates & Pricing Policies

Suites:-

All the suites had different rates:-

– Rs 3300 for the junior suite,

– Rs 5500 for the executive suite,

– Rs 7150 for the presidential suite.

– Bridal Suite was complementary if the wedding or reception was held

at the hotel, otherwise it was charged at its normal price of a double

room at the rack rate.

– Floral decorations could also be provided with an additional payment

of Rs 500. For an extra person in any suite, the charge was Rs 180.

Room rates & Pricing Policies

Suites:-

Key pricing strategy concept:-

• Optional product pricing: It will attempt to increase the

amount customer spends, once they start to buy. Optional

'extras' increase the overall price of the product or service.

• Complementary bridal suite: Sales promotion incentive

PROMOTION

Discount pricing

• Primary promotional tool to increase the hotel’s occupancy

rate.

Summer package

• It happens only in lean season (May to September).

• Single rooms are available at Rs 930 and double rooms at Rs 1050.

• For every nine guests in a group, two rooms are given for free.

• Breakfast is complimentary and 10 percent discounts on every meal

consumed by hotel guests is given.

• Purpose: Raise occupancy levels during lean months.

PROMOTION

Other promotional activities:-

Relationship marketing:

• To enhance goodwill & build long term relationships.

• Free bed tea to the EBS & VEBS guests.

• Inviting EBS & VEBS account holders to hotel for free meals.

• Upgrading: Offered EBS account holder Junior Suite at the same rate

of the EBS double or single room.

Promotional literature (Direct Marketing): Promotional literature such

as leaflets and newsletters were sent to list of clients to keep them

informed about the monthly activities at the hotel.

• Every year, the target for the average room rate was

increased by 10 percent.

• In 1988, the target for the average room rate was Rs

1200 per month and it would be Rs 1320 per month in

1989.

• For 1988, the targeted average occupancy rate was 82

%. In 1989, this target would increase to 85 %

• Variable costs were 15 percent of the room revenues

alone.

Current Situation

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Pearl

930 1009 991 955 896 899 889 873 893 902 1065 NaN

Av-ari

1020 1015 1051 1011 983 973 992 983 1007 1003 1000 NaN

100

300

500

700

900

1100

ROO

M R

ATES

Average Room Rate (Rs)

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Avari 72 94 93 71 50 65 62 63 70 79 70 NaN

Pearl 80 94 92 73 52 70 50 75 68 78 80 NaN

5

15

25

35

45

55

65

75

85

95

OCC

UPAN

CY R

ATES

(%)

Occupancy Rates (%)

Option 1

Option 2

• ARR for option 1 Rs 1100 and option 2 in Rs 1070.• But EBS and VEBS are major source of income.

Hence not advisable to increase price.• With tax free zone, there will be high demand for

EBS and VEBS contracts.

Analysis

Recommendations

• Summer Package: The difference in the average room rates of Avari and Pearl is as high as Rs 114 in September 1988, with Avari being on the higher side. During lean season, a small decrease in rate will increase occupancy significantly.

Recommendations

• By bundling food and room rates, we can encourage more guests to have their food in Avari, thereby increasing the revenue significantly.

• Customer Loyalty Program: Increasing the loyalty amongst the most profitable group (EBS and VEBS) by providing them further discounts on room rents, small mementos, free pickup and complimentary food

Recommendations

• Hire chefs specializing in different cuisines

• International Standards for training of staff

THANK YOU