Harvard Hotels – Case Study 2005
by Kathya Portal, Director of Revenue
“Producing a case study highlighting the financial results of a Revenue Management system implementation is both complex and intense due to the multiple factors that need to be taken into consideration. I, along with my analysts have conducted much research into this Study and can provide detailed backup information and testimonial to the summaries I have given below.
We went live with the EzRMS™ application on the 2nd June 2005 and you will see below the statistics relating to both pre and post implementation of our chosen Revenue Management solution.
During the first five months of the year from January 1st until May 31st, prior to installing EzRMS™, the Average Room Rate for all segments was up, however for the two largest segments (Groups and Leisure) the number of Occupied Rooms compared to the previous year were severely down – this due to an aggressive rate strategy during the early part of this year. As a result, the numbers of Occupied Rooms were down by 9% during this period compared to the same period in 2004 and the Room Revenue was down by 0.06% - representing a revenue loss of $18,000 USD, even though the Average Room Rate had increased.
Situation Prior to EzRMS™ Implementation
| Business | Leisure | Groups | Total | |||
|---|---|---|---|---|---|---|
| Jan to May | Average Rate | 0.1% | 13.5% | 4.5% | 11.5% | |
| Occupied Rooms | xxx | xxx | xxx | -9% | ||
| Room Revenue | xxx | xxx | xxx | -0.06% | - $18K USD | |
Following the live implementation date of the EzRMS™ application at the beginning of June 2005, most of our segment performance improved instantly, both in terms of Occupied Rooms, Average Room Rate and Total Room Revenue – this resulting in a Room Revenue growth of 11% in the first month of use of the system compared to the same period in 2004, an increased Average Room Rate of $9.42 USD and an additional 363 Occupied Rooms achieved.
Results of 1st Month of EzRMS™ Usage - Following Live Implementation
| Business | Leisure | Groups | Total | |||
|---|---|---|---|---|---|---|
| June | Average Rate | 2.5% | 2.0% | 12.8% | 5.5% | + $9.42 USD |
| Occupied Rooms | xxx | xxx | xxx | 4.2% | + 363 Rooms | |
| Room Revenue | xxx | xxx | xxx | 11% | ||
Further to these exceptional results in Month 1 of utilising the system we then compared the effects of the Revenue Management implementation from June 1st until October 31st 2005. When comparing against the same period in 2004 we found that EzRMS™ had helped the hotel to improve the Average Room Rates once again for all segments. The Business segment showed the highest growth amongst the Transient demand of the hotel with a growth of 2.7% in Average Room Rate over the same period in 2004. The Group segment grew a staggering 4.7% in Average Room Rate which resulted in an overall growth of 2.8% for the hotel as a whole.
These improved Average Room Rates (representing a total growth of $5.20 USD per room) were mainly achieved at the cost of increased Occupancy performance, hence the Occupied Rooms did not show growth over the same period in to 2004 – we retained the same levels of Occupancy whilst increasing the Average Room Rate, thus resulting in a Room Revenue gain of $215,000 USD in this 5 month period.
Situation Post EzRMS™ Implementation
| Business | Leisure | Groups | Total | |||
|---|---|---|---|---|---|---|
| Jun to Oct | Average Rate | xxx | xxx | xxx | 2.8% | + $5.20 USD |
| Occupied Rooms | xxx | xxx | xxx | 0.0% | ||
| Room Revenue | -3.5% | 3.1% | 3.2% | 2.7% | + $215K USD | |
General Conclusions:
As we previously saw in the period prior to the EzRMS™ implementation, the Occupied Rooms were down by 9% in the first half of 2005 and we lost $18,000 USD due to this position. EzRMS™ has undoubtedly helped the hotel to halt this negative trend in our business and to stabilize the number of Occupied Rooms, whilst allowing us to increase our Average Room Rates and Total Room Revenues – this resulting in a Total Revenue gain due directly to EzRMS™ of $215,000 USD. This increase of Room Revenue alone within the first 5 months of utilising the system has paid for the system licence fees for more than 20 years – there is no better ROI than that!
We have also seen EzRMS™ help us to improve the Leisure demand by providing the hotel with daily sales and rate recommendations which have controlled not only the rates but also enabled us to increase the Average Length of Stay within this segment - resulting in an overall improvement of 3.1% in Room Revenue of our Leisure business.
To conclude: EzRMS™ has been an amazing decision support tool and has assisted the hotel in balancing both Rate and Occupancy within our property. We can be certain in our conclusions that should we have implemented EzRMS™ on the 1st January 2005 we would not have lost the $18,000 USD indicated – not allowing any increase of the Revenues during that period if using the EzRMS™ system, but taking only a neutral Revenue position (which would have without doubt been the case) we can clearly state that this unique Revenue Management application has made the property a Total Revenue Gain of $233,000 USD to-date – we are delighted with these increases and financial results!”
