Dublin City
Dublin City provides a supportive environment for business, especially the start-ups, due to the availability of the workforce. The City has attracted huge levels of local and foreign investments due to the pro-business environment. Dublin city would be good for start-up entrepreneurs due to good business environment with low bureaucracies and low tax regimes that are favourable for entrepreneurs and wealth of opportunities because the City is open and globally connected. Dublin report focuses on four main areas, which includes the competitive environment, pricing, revenue management metrics, and distribution.
Competitive environment
The competitiveness of Dublin City economy and business within the City determines the export performance of Ireland, jobs availability, the wage rate, quality of service in the City, and the ability to improve the conditions of people living in the City. Despite being one of the fastest-growing City, the sustainability of Dublin City growth has been faced by various threats in the past. For instance, the City has faced potential disruptions due to global trading systems, frequent changes in the international tax system, Brexit that poses risks to the economic model of Ireland. Besides, currently, the Dublin city has faced a backdrop of the global pandemic of covid-19 over which Ireland has limited control. It remains critical for the Dublin city to address economic challenges that are within control to ensure that the City sustains a competitive environment for business.
The capacity of the Dublin City
The capacity of Dublin City is more than 1.9 million people. The City comprises three areas that include the central region, the inner section of the City and the inner suburbs. The conscious effort by the central government to release creative capacities to the local government in Dublin City has led to a friendly and competitive business environment in the City. In the evolving competitive environment, dynamic spirit of entrepreneurship was cultivated, which accelerated the economic prosperity of the City. Recently, Dublin City has become more focused on the competitiveness agenda that is driven by the central government of Ireland. Through operations with the limited remit and available resources, the City is obliged to expand the institutions and initiatives of the national government and enlarge the capacity for businesses.
Dublin has been the longstanding financial capital of Ireland and has housed main financial institutions and agencies that serve the domestic needs of the entire Ireland economy. As financial capital, Dublin city has had a great opportunity for growth, which has created capacity for international and local businesses to thrive. In the past, the Ireland government offered a range of tax incentives to business establishing their operations in Dublin City, which attracted many businesses in the region. The strategy of investment promotion led to the creation of world-class accommodation facilities, educational institutions, shopping facilities and restaurant services.
Dublin City has, however, been facing various challenges recently. For instance, in 2019, the Dublin Chamber raised concerns on the intention of the Dublin City Council to increase commercial rated by 1.5%. The chamber that represents more than 1,300 businesses in the region indicates that the move to increase the commercial rates would increase pressure on businesses, which will affect their competitiveness in the global market. Maintaining cost competitiveness in the Dublin City businesses is important in improving productivity growth and attractiveness of the City as an investment hub.
Impact of the Coronavirus in Dublin City
According to the Ireland health department, nearly half of the coronavirus cases that have been reported in Ireland are in Dublin City. The economy of Dublin city has suffered a blow, which risks worse devastation of the global financial crises that may result due to the coronavirus pandemic. Only a few months that the City was on the Brexit Bounce, the anticipated virus was reported in the Dublin City creating chaos in the economy, the public health sector, and the property market. The pandemic has been abrupt and severe to most businesses in Dublin City in the last two months. Many workers in the City depend on welfare money from the government, following a huge layoff.
Hundreds of thousands of workers in Dublin City are still recovering from the effects they experienced from the global financial crisis that was experienced in 2008. With the current social distancing measures of preventing the spread of coronavirus, the labor-intensive and services sector has been hit hard. Job losses in Dublin City have been increasing in speed, just as it is happening in other regions across the world. At the beginning of 2020, Dublin City was close to full employment with a rate of unemployment recorded at 4.8%, and an estimated 2.6 million people are working. However, due to covid-19, jobs have been lost due to the shutdown of economic activities in the City.
The labor market in Dublin City faces the largest shock in history within one quarter with the unemployment rate expected to shoot to 18% by June 2020. Job losses have been associated with the closure of bars, restaurants, schools, and the tourism sector. The hospitality sector in the City has seen cancellations of conferences and events due to the stoppage of international flights. Towards the beginning of April, Dublin Airport was only running flights transporting vital supplies such as food and medicine and other commodities. All passengers’ flights were condoned. The pandemic has led to the biggest repatriation in the history of Dublin City, which involved the rescue of citizens to other counties. The only businesses that have continued to thrive with few employees are businesses providing food supplies such as supermarkets. Besides, the sale of facemasks and hand sanitizers has increased. Majority of the Dublin city economic activities have been affected negatively by the coronavirus pandemic in the past quarter of 2020.
Pricing
Revenue management in hotels is a crucial process that involves various activities that revenue managers use in steering the value, profitability and performance of the hotel. The revenue manager establishes the pricing strategy and rate management, which helps to ensure that the hotel survives the global crisis. Hotel rates, pricing, approving the rates and changing the rate has been the top priority of revenue managers. Pricing is a key factor that is likely to influence the purchasing behavior of people and profitability in the current context of Dublin City. Revenue manager will be required to adopt favourable pricing due to hard economic times that the majority of customers are experiencing.
In the current context, the revenue manager in the hotel is using a pricing strategy based on forecasting. Through forecasting, revenue managers in the hotel set prices based on the anticipated demand. Essentially the rates of rooms in the hotel have greatly changed due to the coronavirus pandemic. The demand for rooms is very low due to reduced international and local travelling; thus, revenue managers are giving low rates for the rooms and other services. Forecast pricing lies on accurate records with historical data that proves that the rates given are particularly useful. For instance, hotels have been experiencing low demand during the global crisis such as coronavirus; therefore, the revenue manager must consider lowering prices of products and services to build the hotel demand. Besides, the revenue manager has adopted the price per segment pricing strategy, whereby, the same product is offered to different customers at different price. Price per segment strategy is offered to customers who have high orders of products and services of the hotel as a discount to the package. The revenue manager uses rate management to distribute rates and controls in ensuring that the pricing of the hotel’s products and services is in line with the demand in the current market context.
In the current context, dividing the market into some identifiable segments is important. In market segmentation, the revenue manager divides customers based on criteria that will meet their needs in the best way possible. In the current context of covid-19, the market demand for hotels is low; therefore, market segmentation will help the hotels to focus on certain groups of customers instead of the entire market. Market segmentation will help revenue managers to be more efficient in the allocation of resources. Besides, it will be simple for revenue managers to tailor the products and services of the company to the segment of the customers that are in high demand. For instance, in the current context of a covid-19 pandemic, the hotel will be able to reach customers who want to take away services and accommodation rooms for isolation and quarantine purposes.
The appropriate rate strategy that the revenue manager of the hotel can adopt in the current economic scenario is the length of stay strategy (LOS). This rating strategy is mainly asked on adjusting pricing models in the company based on the length the customer stays in the accommodation facilities. The current situation in Dublin City has led to shutting down of businesses; thus, the demand in the hotel is very low. It is beneficial to charge rates that are low to attract available guests in the hotel, especially those looking for self-quarantine services. In the events of low demand, the revenue manager can potentially encourage guests to stay longer in their rooms by offering them low rates, which results to low unused rooms in the hotel that will give the hotel some revenue.
Revenue managers have been using an automated revenue management system to get a clear vision of relevant data to increase accuracy and consistency in rate management and pricing to achieve set goals and targets. The implementation of an automated revenue management system was not simply a process of changing pricing and ate management algorithms; its core purposes was to increase accuracy and consistency in revenue management. The automated management system has been useful in pushing targeted segments that are experiencing a fall in demand in the current economic scenario, which enables the business to adapt quickly and remain competitive in Dublin city. Besides, the automated revenue management systems are important because they help in reducing business turnover and increases the effectiveness of revenue managers in resource management and demand forecasting in the current context. The hotel revenue manager has used the automated revenue management system to reduce their workload, anticipate and understand consumers’ behavior in the current situation where demand for hotel services have greatly dropped.
Key Revenue Management Metrics
In the hotel industry, revenue management involves selling the best product and services, attracting the right customers, selling at the right prices through the right distribution channels, with the most efficient cost. Revenue management metrics relate to the sales and pricing in the hotel by the revenue manages. Though measuring all aspects of revenue streams, revenue management metrics can help in revealing information about the health of the business and enable revenue managers in making better decisions on how to improve the profitability of the hotel.
The current revenue metrics for Dublin as outlined by STR
The current revenue metrics for the 5-star Dublin city Centre hotel include occupancy, the average daily rate, revenue per available room, and market penetration index. The occupancy revenue metric shows the number of rooms available in the hotel that have been issued to guests, the rooms that are not occupied. The metric can be applied to any specific period of time that the revenue manager wants to analyze the hotel guest rooms such as daily, weekly months or yearly.
The available daily rate metric of revenue management represents the average of all rates that are paid by guests’ for every night they spend in the hotel rooms. In the wake of covid-19, different guests who spend in 5-star Dublin city Centre hotel pay different rates; hence, the Average Daily Rate metric provides the sum of all payments made by guests and blends them in a single average rate. The revenue manager obtains the ADR rate by dividing the revenue from rooms every night by the number of rooms that have been sold. The calculation is usually applied to the specific period provided in the revenue management system. The average length of stay metric identifies the length of stay of guests in the hotel, and it is calculated by dividing the total number of the rooms occupied by the guests for the specific period by the number of bookings. If the number is high, the better for the 5-star Dublin city Centre hotel because when the value of LOS is low, it means that profitability is declining due to high cost of operations. For instance, in the 5-star Dublin city Centre hotel, 7 one-night guests require the hotel to use more labor costs than serving a single guest in a whole week.
Finally, the 5-star Dublin city Centre hotel uses the Market Penetration Index, which is also known as occupancy index. Market Penetration Index is a comparison metric from the essential repots in the hotel industry known as the Smith Travel Accommodations Report (STR report).
The metric compares the share of the hotel in the market to competitors, which gives the revenue managers a picture of hotel’s share in the overall occupancy rate in the market. The revenue manager obtains the market penetration index by dividing the hotel’s rate of occupancy by the comp set and then multiplying the result by 100. If the result is below 100, it means that the hotel is not getting the right share of the market demand, and when the value is above 100, it means that the hotel is performing well in the market, and taking businesses for other competitors in the market. The Market penetration index metric will help the revenue manager of the 5-star Dublin city Centre hotel establish how the hotel is doing in the current market that has been affected by the coronavirus pandemic; thus affecting the demand for guest rooms and other services.
The current strategy of the 5-star Dublin city Centre hotel should be rate driven and not occupancy. Although revenue managers have in the past used occupancy, in the current situation where the hotel is focusing on revenue maximization, occupancy may not work well. The use of occupancy comes with a cost for every room that is occupied. When revenue managers base their decisions on occupancy without considering the cost for every occupied room, they make the wrong decisions. The best metric that revenue managers in the 5-star Dublin city Centre hotel to focus on to maximize revenue and profitability is the average daily rate and demand. The rate-driven metric that is considered in the current strategy is the gross operating profit per available room (GOPPAR) because it focuses on the gross operating profit of all rooms in the hotel, irrespective whether the rooms are occupied or not. The hotel revenue manager can calculate the rate of GOPPAR by dividing the gross operating profit of the guest rooms in the hotel by the number of available rooms and indicates overall business performance across all streams of revenue in the hotel.
Distribution
The revenue manager understands that the cost of distribution by market segments is an invaluable resource in the 5-star Dublin City Centre hotel. The easy option of the hotel is to give OTAs unlimited access to their inventory and allow them to sell their guest rooms without considering the costs. The main factors that are considered by the revenue manager in the distribution include the Cost per Acquisition and Book Direct focus, and the third party/ OTA relationship.
The cost per acquisition is a revenue metric in the hotel industry that is used by the revenue manager to establish how much revenue has been spent in generating the booking of guest rooms. The cost per acquisition is used to determine the hotel’s spending on the booking of the guest rooms. Having a good understanding of the new hotel bookings from the point of view of cost per acquisitions is important for the 5-star Dublin city Centre hotel in maximizing their profit. Besides, the CPA increases the understanding of customers journey, experience and exactly where the bookings of the hotel come from, and the commission that is charged by different OTSs/ indirect sites for booking because they are important in maximizing profit.
The revenue manager of the hotel obtains the cost per acquisition through the budget that is allocated in acquiring new guest to the hotel. In determining the budget, the revenue managers need to establish the customer lifetime value, which is the average of money that customers bring in the hotel in a specific period. After determining the customer lifetime value, the revenue manager finds out how much of the value can be re-allocated to the marketing. In this case, the revenue manager needs to establish the cost of the operations in the guest rooms allocations. The non-marketing fixed costs then determine the cost per acquisition. When the fixed costs are high, the revenue manager lowers the cost per acquisition to maximize the profit, and when the fixed costs are low, the cost per acquisition can be high.
Research shows that most of the international hotels are paying more to acquire more customers. Half of the costs that are paid usually go to the third parties and the other cost go to direct expenses. OTAs have been controlling more than half of the 5-star Dublin city Centre hotel online bookings. Indirect bookings in Dublin hotels come along with a high cost of acquisition compared to the direct bookings. Revenue manages in the 5-star Dublin city Centre hotel has been focusing on diving guests to book directly in the current situation. Last year, before the coronavirus pandemic affected economic activities in Dublin, the demand in the hotel was high with large numbers of bookings. The revenue manager established that there was a high average daily rate and the revenue per available room was also high, which maximized the profitability of the hotel.
Recommendations and conclusion
In the wake of coronavirus pandemic, revenue manager in the 5-star Dublin city Centre hotel is recommended to have a pickup repot that monitors the data on-demand in every market segment of the hotel. The revenue managers need to take action based on the demand data to maximize the revenue of the hotel. Secondly, the 5-star Dublin city Centre hotel should consider the cancellation forecasting, which is high due to the current global pandemic. Revenue managers need to allow cancellations, which is expected to be high from OTAs and create other strategies that the hotel can adopt to maximize revenue.
The 5-star Dublin city Centre hotel must remain focused on the demand data and revenue management system to keep the hotel running in the current situation of a global pandemic. The revenue manager must be updated with the comp set to help in forecasting the demand in the market and take advantage of the available opportunities. Besides, the hotel can employ advanced revenue management systems to predict the occupancy and maximize the profit and revenue during the current global pandemic. The system will be important in helping the revenue manager make the right decisions in forecasting demand and interpreting the market conditions. The 5-star Dublin city Centre hotel needs to collect the internal data diligently, analyze external factors and monitor the demand, set pricing, and rate management strategy that will allow the hotel to maximize revenue in all marketing segments.