Hotel Domicile Group Quebec

EXECUTIVE SUMMARY

Hotel Domicile Group owned and operated four hotels in Quebec. Oliver is the CEO of the hotel group. Each property had a General Manager who reported to Olivier. These four GM and the VP of sales served with Olivier as the Executive Team. The team is facing declining revenues and profitability, as normally during peak of summer, the Hotel Domicile had an occupancy rate higher than the average, however in year 2015 its lower than average daily rates. Last two years, three of the four hotels have empty rooms and out of those three two of them were in Montreal which is a busiest tourism place in Quebec.

The challenge is to determine when, where and how much to lower prices to stimulate demand without losing higher-paying guests who could no longer book because room capacity had been taken by lower-paying guests. On the other extreme, the challenge is to avoid keeping prices too high for too long without attracting higher-paying customers. The result should be a greater gross operating profit per available room (GOPPAR) and ultimately Net Operating Income (NOI). The goal is to maximize total expected revenue and profits given uncertain demand by allocating rooms among rate segments.

After exploring and evaluating all possible alternatives, my recommendation to Oliver is to implement the (A3), which is “Revenue and Yield Management System” as it is the best fit to meet the objectives and goal of the Hotel Domicile. It will cost approximately $50,000 for the implementation including licencing for the first year. The system will increase the revenue and profitability by allocating the right type of capacity to the right kind of customer at the right price so as to maximize revenue or yield. In the first year, the system will generate approximately $100,000 profit and if the cost of the new system deducted from the profit, the net profit would be approximately $50,000. In the subsequent years, the revenue growth would about 15%. The pros and cons and implementation plan are discussed in detail in the report presented.

Four perspectives (Financials, Customer, Internal Processes, Learning & Growth) are taken into account to measure the performance of the Hotel Domicile and to align with the strategic perspective. % Revenue per room growth, % of Flow through index, # Guest satisfaction score, # of internal process audit index, and % of associate turnover KPIs are established and targets are set to measure against the KPIs.

ISSUES IDENTIFICATION

Short Term Issues: Tactical & Strategic

• Declining revenues and profitability, as normally during peak of summer, the Hotel Domicile had an occupancy rate higher than the average, however in year 2015 its lower than average daily rates.

• During the holiday season, every room in every hotel should have been booked however for the last two years, three of the four hotels has empty rooms and out of those three two of them were in Montreal which is a busiest tourism place in Quebec.

• The challenge is to determine when, where and how much to lower prices to stimulate demand without losing higher-paying guests who could no longer book because room capacity had been taken by lower-paying guests. On the other extreme, the challenge is to avoid keeping prices too high for too long without attracting higher-paying customers.

Long Term Issues: Strategic

• Requirement to develop a distribution channel management strategy aligned with a total revenue management approach that include not only room revenue but also supplementary revenue streams including function space, food and beverage (F&B) and recreational activities.

• Overall service strategy to include a new approach to manage yield or revenue per available room (RevPAR)

• The result should be a greater gross operating profit per available room (GOPPAR) and ultimately Net Operating Income (NOI).

• The goal is to maximize total expected revenue and profits given uncertain demand by allocating rooms among rate segments.

OPERATING ENVIRONMENT

Hotel Domicile Group owned and operated four hotels in Quebec. Oliver is the CEO of the hotel group. Each property had a General Manager who reported to Olivier. These four GM and the VP of sales served with Olivier as the Executive Team. The team is facing declining revenues and profitability. The causes of these effect will be discussed in detail in the “Root Cause Analysis” section of this report.

Property Location Capacity Service Offering

Hotel Domicile Montreal Centreville Downtown Near the Convention Centre 100 Rooms out which

79 with two queen beds and could be sold as a single, double, triple or quad

21 junior suites with a king bed and a sofa bed Continental breakfast,

Conference rooms for small meetings, seminars and events.

Hotel Domicile Montreal Latin Quarter 15-minute walk from the Old Montreal district and two blocks from a metro station 85 Rooms Free Wi-Fi

Keurig coffeemaker in each room.

Hotel Domicile Montreal Longueuil 4-minute walk away from the Longueuil metro station 100 Rooms

Same configurations as the Centreville property On-site parking

Free Wi-Fi

Continental breakfast

Hotel Domicile Montreal Airport 5-minutes drive from the airport 85 Rooms and suites Free Wi-Fi

Hot breakfast buffet

Non-suites rooms with microwave, mini-fridge and coffeemaker

Conference rooms for small meetings, seminars and events.

Canadian and Montreal Lodging Market

It reported that in 2014 the Canadian lodging market returned to pre-debt-crisis performance levels. Record levels of revenue per available room (RevPAR) were projected for 2015 and 2016 based on stronger economic conditions in Canada and the US, low interest rates, the weaker Canadian dollar and a projected increase in tourism.

The hotel market in Quebec and other non-oil-producing provinces was better than previously anticipated. Nationwide, both supply growth and demand for rooms were projected to increase, with