Varies policy Is not turning away any guest so they have set different types of rates such as: Individual rates – Include rack rate (for frequent Individual travelers), commercial rate (for those having no account but good reputed) and preferential rate (lowest rate). Ordinary guests were not aware of this division of rates. Contract rates – include Executive business class rate (30% below rack rater volume executive business class rate (40% below rack rate) and special rates (45% to 65% below rack rate) which had a bad impact on the hotel contribution margin.
Garbage rates – include diplomats rate 50% discount of rack rate), net wholesale rate (below than EBBS but higher than VIBES journalist rate (20% discount), airline rate (55% of and DATA rate (50% discount). CLIENTELE Business clients – 61% of the hotel’s business, most profitable customers to serve. Constantly growing client segment. Individual walking guests (frequent Individual travelers) – seasonal client segment, decreasing significantly during the summer. Tour groups – seasonal vaults during the winter and spring due to extreme temperatures in the summer.
Other clients – non seasonal guests, including airline SUITES Junior suite – 3300 Rupees. Executive suite – 5500 Rupees. Presidential suite – 71 50 Rupees. Bridal suite – complementary if wedding is held at the hotel. PROMOTION & ADVERTISING Discount pricing Primary promotional tool used by Bavaria to increase the hotel’s occupancy rate. Summer package Special discount program offered every year by the hotel during its period of low occupancy (45 – 50 % occupancy rate).
Other promotional activities Other forms of promotion used at Bavaria included free bed tea and meals, and customer relationship management. Management at Bavaria developed a mailing list which included the names of all previous clients. Leaflets and newsletters were sent o this list of clients to keep them informed and updated with the hotel’s activities and offers. MARKET ENVIRONMENT Competition At that time their competitor was “Pearl Continental”, the only other five-star hotel in Lahore.
The rooms at Pearl were more spacious than those at Bavaria, and their lawns were also larger. Pearl had pricing policies similar to those of Bavaria. The rate structure was the same, and the review and re-assessment of contracted room rates took place twice a year. Rooms at Pearl were priced at 100 to 200 Rupees below the prices of Bavaria. Bavaria maintained a higher average room rate than Pearl (the preference was been between 120 and 130 Rupees). Management believed that this higher average room rate was achieved because of Varies superior service, which attracted more customers.
Market Trends In 1992 it was expected that Sheraton and Holiday Inn would be completed and both hotels were an imminent threat to the existing five star hotels in Lahore because of their good image in the minds of the consumers in Pakistan. CURRENT SITUATION Every year the target for the average room rate was increased by 10%. Room rates were increased twice a year – in January and June. Bavaria placed great emphasis on eating business accounts from Pearl. Occupancy target rate: 82% in 1988, and 85% in 1989. Average room rate: RSI 1200 per month in 1988, and RSI 1320 in 1989.
PROBLEMS Since mid-November, Varies average room rate was falling below Pearl’s. This was a needed to be considered. The problem faced by management of Bavaria occurred in December 1988 when Varies average room rate (RSI 1000) was lower than Pearl’s (RSI 1065). This was a challenging task for marketing managers because their performance was evaluated on the basis of target average room rate and occupancy level which was 70% in Bavaria and 80% in Pearl. Another challenge was that Varies image, unlike the image of Pearl or former Hilton, had not been yet fully formed in the minds of customers.
Threats: entry of Sheraton and Holiday Inn hotels. Proposed solutions Increase the price of all rooms by 10%. Increase all rates other than EBBS and EVES. Introduce another type of rate which could bridge the vast differential between the group rate and the individual rate. RECOMMENDATIONS Bavaria should focus on creating a brand image in the minds of the customers, so when a potential customer thinks of staying in Lahore, the first hotel that comes to mind would be Bavaria. Bavaria should use a profit oriented approach and its focus should be to increase the average occupancy rate and the average room rate.
Bavaria can use a bundling strategy. This can be done by combining two services. For example, a vacation package with two hotel room nights and a flight ticket at one price, or room + car rental at one price. It is also very important that Bavaria focuses on improving their summer package services which are lagging behind Pearl’s. Occupancy rate is the lowest during the summer period and Bavaria needs to introduce the best offers and discounts to improve their current 50% rate. Bavaria needs to learn the lesson and take the example of Pearl.
Having a strong competitor like Pearl is beneficial to Bavaria because they can learn a lot of lessons from their way of doing business, so they can improve their pricing strategies and promotional activities, and ultimately attract more customers and increase hotel occupancy rate. To respond to the threat of new entrants such as Sheraton and Holiday Inn, Bavaria needs to offer high-quality and variety of differentiated and unique services. These are very strong competitors with established brand images, but on the other hand Bavaria has the first-mover advantage in the Lahore area.