Accra Beach Hotel Case

Case 8

The Acua Beach Hotel Block Booking of Capacity During a Peak Period
SHenvl Knrlns, JocuBN Wtntz, eNp CuntsroPHER

Lovnlocr

The sales manager for a Caribbean hotel wonders whether to accept a large blockbooking at a discount rate ftom a Sroup participating in an international sporting eaent. Do the promised

broadcasts as the host hotel for the upcoming West Indies Cricket Series, an important international sporting event.

publicity benefits justifu the risk of turning higher -p ay

aTaay guests

ftom

ing

se gments ?

Tue Horel
The Accra Beach Hotel and Resort had a prime beach-front

Cherita Howard, sales manager

for the Accra Beach L41-room hotel on the Caribbean island of Hotel, a
Barbados, was debating what to do about a request from the West Indies Cricket Board. The Board wanted to book a large block of rooms more than six months ahead during several of the hotel's busiest times and was asking for a discount. In return, it promised to promote the

location on the south coast of Barbados, just a short distance from the airport and the capital city of Bridgetown. Located on31f, acres (1.4 ha) of tropical landscape and fronting one of the best beaches on Barbados, the hotel featured rooms offering panoramic views of the ocean, pool or island.

Accra Beach in all advertising materials and television

@ 2007 Sheryl Kimes, Jochen

Wirtz, and Christopher H. Lovelock Note: Certain data have been disguised.

540

The centerpiece of its lush gardens was the large swimming pool, which had a shallow bank for lounging plus a swim-up bar. In addition, there was a squash court and a fully equipped gym. Golf was also available only 15 minutes away at the Barbados Golf Club, with which the hotel was affiliated. The Accra Beach had two restaurants and two bars, as well as extensive banquet and conference facilities. It

offered state-of-the-art conference facilities to local, regional and international corporate clientele and had hosted a number of summits in recent years. Three conference rooms, which could be configured in a number of ways, served as the setting for large corporate meetings, training seminars, product displays, dinners, and wedding receptions. A business center provided guests with Internet access, faxing capabilities, and photocopying services. The hotel'sl22 standard rooms were categorized into three groups-Island View, Pool View, and Ocean Viewand there were also L3 Island View Junior Suites, and 6

categories, while the Pool Views had two double beds. The six Penthouse Suites, which all offered ocean views, contained all the features listed for the standard rooms plus added comforts. They were built on two levels, featuring a living room with a bar area on the third floor of the hotel and a bedroom accessed by * internal stairway on the fourth floor. These suites also had a bathroom containing alacuzzi, shower stall, double vanity basin and a skylight. The thirteen ]unior Suites were fitted with either a double bed or two twin beds, plus a living room area with a sofa that converted to another bed.

Horel

PenFoRMANcE

Penthouse Suites, each decorated in tropical pastel prints and handcrafted furniture. All rooms were equipped with

cable/satellite TV, air-conditioning, ceiling fans, hairdryer, coffee percolator, direct-dial telephone, bathtub/shower and a balcony. Standard rooms were configured with either a kingsize bed or two twin beds in the Island and Ocean View

The Accra Beach enjoyed a relatively high occupancy rate, with the highest occupancy achieved from ]anuary through March and the lowest generally during the summer (Exhibit L). The hotel's average room rates followed a similar pattern, with the highest rates (US$150-$170) being achieved from December through March but relatively low rates (US $120) during the summer months (Exhibit 2). The hotel's RevPAR (revenue per available room-a product of the occupancy rate times the average room rate) showed even more variation, with RevPARs exceeding $140 from ]anuary through March but falling
The Accra Beach

Hotel

541

EXHIBIT 1 Accra Beach Hotel: Monthly Occupancy Rate
YnRn
2 Years Ago 2 Years Ago 2 Years Ago 2 Years Ago 2 Years Ago 2 Years Ago 2 Years Ago 2 Years Ago 2 Years Ago 2 Years Ago 2 Years Ago 2 Years Ago

2 Accra Beach Hotel: Average Daily Room Rate (ADR)
EXHIBIT
Occuparucy
87.7"/"

MoNrn
January

Avnnacr Derry

February March

April
Muy
Iune

Iuly

94.1% 91.9% 78.7% 76.7% 70.7% 82.0%
84.9o/. 64.7"/" 82.0%
83.8o/"

Yrnn
2 Years Ago 2 Years Ago 2 Years Ago 2 Years Ago 2 Years Ago 2 Years Ago 2 Years Ago 2 Years Ago 2 Years Ago 2 Years Ago 2 Years Ago 2 Years Ago

Roorvl RarE (ADR)

MoNrH ]anuary February March

(tu US$)
$159.05 $153.73 $1s7.00 $153.70 $144.00 $136.69
$122.1.3

April
Muy
Iune July

August

September October

November
December

August
September October

Last Year Last Year Last Year Last Year Last Year Last Year Last Year Last Year Last Year Last Year Last Year
Last Year

|anuary February March

April
Muy Iune

66.7% 87.6% 88.8% 90.3% 82.0%
74.70/"

November
December January

69.1%

Iuly
August
September October

76.7%
70.5Y" 64.7%

71,3%
87.7o/.

November
December

72.1%

Last Year Last Year Last Year Last Year Last Year Last Year Last Year Last Year Last Year Last Year Last Year Last Year

February March

April
Muy
Iune July

$121.03 $123.45 $129.03 $141.03 fi152.87 $162.04 $167.50 $158.44 $150.15
$141,.79

August
September October

$736.46 $128.49
9128.49 $127.11

November
December

$132.75 $141.86 $151.59

to less than 9100 from |une through october (Exhibit 3). The rates on the Penthouse suites ranged from $310 to $395, while those on the junior suites ranged from g195 to
$235. Guests had to pay Barbados value-added tax (VAT) of 7.5 percent on room charges and 15 percent on meals. The Accra Beach had traditionally promoted itself as a resort destination, but in the last few years, it had been

Note: Average daily room rate (ADR) is inclusive of VAT.

EXHIBIT 3 Accra Beach Hotel: Revenue per Available Room (RevpAR)
Rsvrxur
Ysan
2 Years Ago 2 Years Ago 2 Years Ago 2 Years Ago 2 Years Ago 2 Years Ago 2 Years Ago 2 Years Ago 2 Years Ago 2 Years Ago 2 Years Ago 2 Years Ago pun

MoNrs
January

Avlnlnrs Roou
(tN US$) 9139.49 $744.66 $144.28 $720.96
$110.45

promoting its convenient location and had attracted many business customers. Cherita worked extensively with tour operators and corporate travel managers. The majority of hotel guests were corporate clients from companies such as Barbados Cable & Wireless, and the Caribbean International Banking Corporation (Exhibit 4).

February March

April
May
Iune

Iuly
August
September October

had been dominated by tourists from the UK and

The composition of hotel guests had changed drastically over the past few years. Traditionally, the hotel's clientele

$96.64 $100.15 fi102.75 fi79.87 $105.80
$118.18

November
December January

Canada, but during the past few years, the percentage of corporate customers had increased dramatically. The majority of corporate customers come for business meetings with local companies. Sometimes, guests who were on vacation (particularly

during the winter months) felt uncomfortable finding themselves surrounded by business people. As one vacationer put it, "There's just something weird about being on vacation and going to the beach and then seeing suit-clad business people chatting on their cell phones.,, However, the hotel achieved a higher average room rate from business guests than vacationers and management had found the volume of corporate business to be much more stable than that from tour operators and individual guests.

Last Year Last Year Last Year Last Year Last Year Last Year Last Year
Last Year Last Year Last Year Last Year Last Year

February March

April
Muy
Iune

Iuly
August
September October

$101.05 $141.90 $148.67 $143.02 fi123.12 $10s.87 $94.23 $98.55 $90.59 $82.24 fi94.62
$115.89

November
December

fi109.24

Note: RevPAR refers to revenue per available room and is computed by multiplying the room occupancy rate (see Exhibit 1) with the average room rate (Exhibit 2). Revenue per available room is inclusive of vAr.

542

The Accra Beach Hotel

EXHIBIT
4,000 3,500 3,000

4

Accra Beach Hotel: Market Segments 2002

rE

2.s00 2,ooo
1,500 1,000 500 0

o o

A o
&
o

*C odsc" S $f sr" ..4 ""e-o"ei"oioorf"""rr*
Tne Wesr lruotEs CnrcKET Boeno
Cherita Howard, the hotel's sales manager, had been approached by the West Indies Cricket Board (WICB) about the possibility of the Accra Beach Hotel serving as the host hotel for the following spring's West Indies Cricket Home Series, an important international sporting event among cricket-loving nations. The location of this event rotated among several different Caribbean nations and Barbados would behosting the next one, which would feature visiting teams from India and New Zealartd. Cherita and Jon Martineau, general manager of the hotel, both thought that ttre marketing exposure associated

cricket group would have breakfast at the hotel and maybe only aboutl}Y" would dine at the hotel. Also, they worried about how the hotel's other guests might react to the presence of the cricket teams. Still the marketing potential for thehotelwas substantial. TheWICB had promised to list the Accra Beach as the host hotel in all promotional materials and during the televised matches. The West Indies Home Series was divided into three

with hosting the teams would be very beneficial for the hotel but were concerned about accepting the business because they knew from past experience that many of the

, -nz mdad@r L42 lVenagdz az,badzzllezeqfe tnt rqpurfurahly ff/". About g0% of all guests had breaMast at and Fld (tr€re approximately 30% of all guests dined at the H were many other attractive restaurant options dy). fon Martineau thought that only about 2So/. of the

desired dates were usually very busy days for the hotel. They were sure that the rate that the WICB was willing to pay would be lower than the average rate of US$140-$150 (including VAT) they normally achieved during these times. In contrast to reguTar guests, who could usuaTTybe counted upon to have a number of meals at the hotel, team members and officials would probably be less likely to dine at the hotelbecause they wouldbe on apet diembudget. On average, both corporate customers and vacationers spent $8 pet person forbreaWast and $2|perperson Ior dinnet (petpet-

parts, and each would require bookings at the Accra Beach Hotel. The first part pitted the West Indies team against the Indian team and would run from April 24 to May 7. The second part featured the same two teams and would run from May 27 to May 30. The final part showcased the West Indies against New Zealand and would run from June17 tolune26. The WICB wanted 50 rooms (including two suites at no additional cost) for the duration of each part and was willing to pay US$130 per night per room. Both breakfast and VAT (value-added tax) were included in this price and each team had to be housed on a single floor of the hotel. In additioru the \MCB insisted that laundry service for feam uniforms (cricket teams typically wear all-white clothing) and practice geat be provided at no additional charge for all team members. Cherita estimated that it would cost the hotel about $20 per day if they could do the laundry in-house, but about $200 per day if they had to send azbzZ/ZzzrZ.%ZZ//%

it to an outside soutce.

Manager of the hotel, and asked her what she thought. Like cherita, Ferne was concerned about the possible displacement of higher-paying customers, but offered to do

further investigation into the expected room sares and
The Accra Beach

Hotel

S4g

for same Room sales and Average Daily Room Rates Year Periods in Previous Avtnnct DnnY Roovr Raru Roous Soro w Lesr Yre'n D,crs or WICB (AD$ rN US$ Prmoo Duruuc rns SaN'IE Hout Ssntss

EXHIBIT

5

Part

I

4/24 4/25 4/26 4/27 4/28 4/2e 4/30 5/L

t4L
138 135

134
L23 128
1.4L

$138.68 $129.00 $L37.60 $145.13

$t42.98
$133.30 $L27.93 $133.30 $103.08 $131.15 $126.85 $135.45

141

5/2 5/3 5/4 5/5 5/6 5/7
Part

t4L
139 112
78

95
L13

$r39.75
$148.35 $140.83 $141.90

II
99 LL4

5/27 5/28 5/2e 5/30
Part

114 125

$t46.20
9146.20

III
L24
LL9

6/17 6/18 6/19 6/20
6/2L

112

$134.38 $131.15 $135.45
$119.33 $118.25 $112.88 $113.95

t19
L25
t1.6 130

6/22 6/23 6/24 6/25 6/26
Note: ADR includes VAT of 7'5 percent'

t41
1.41.

$108.58
$118.25

L25

$123.63

associated'roomratesforthedesireddates.Sincethedates not yet were over six months in the future' Ferne had data on developed forecasts. But she was able to provide same days of room sales and average room rates from the the previous Year (Exhibit 5)' to analyze Soon after Cherita returned to her office from the the data, she was interrupted by a phone call

of his head of the WICB wanting to know the status to have an answer for him before request. She promised

Martineau the end of the day. As soon as she hung up' Jon the huge marketing potential of called and chatted about being the host hotel. Lherita shook her head and wondered' "What should

I

do?"

Sruov OuEsrloNS rooms at L. What factors lead to aariations in demand for hotel iuch as the Accra Beach? a a.s,it. What are the key considerations facing the h.otel Cricket reaiews the booking requests from the West lndies

serued by 2. Identtfu the aarious market segments currently

Board?

to seroe the hoiet. What are the ptos and cons of seeking customers from seaeral segments?

4. What action should Cherita Howard talce and whY?

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The Accra Beach Hotel