Case Study – Hotel Domicile

Contents

Executive Summary.....................................................................................................................................3
1. Issues Identification.............................................................................................................................4
2. Environmental and Root Cause Analysis.............................................................................................5
3. Alternatives and/or Options.................................................................................................................9
4. Recommendation and Implementation..............................................................................................10
5. Monitor and Control..........................................................................................................................14
References.................................................................................................................................................17

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 Case Study – Hotel Domicile

Executive Summary

Hotel Domicile Group is an established hospitality organization based in Quebec. Starting out as
a family-owned business operating in one area, soon became a bigger organization with four
different locations across Canada. Olivier, Pierre’s son who was the general manager of the third
location in Longueuil, took over the organization as CEO in the year 2000. Almost a decade
later, he oversaw their fourth location project at Trudeau International Airport. The general
managers of the four locations, along with the Group Sales VP worked with Olivier as the
Executive Team.

The organization has been facing significant challenges and difficulties with regards to
maintaining their profitability. Even though they have different locations that are considered
hubs for tourists, their occupancy rates at the hotels are significantly low despite having “below
the market” rates. Market segmentation limitations, channel mix challenges, and lack of
modernization are some of the issues that we have identified in this case study. After doing our
due diligence, we have proposed several recommendations and implementation techniques to
deal with these issues. Firstly, developing a revenue strategy that addresses both room and
ancillary revenue streams as well as addressing market segmentation techniques. Thereby
allowing for personalized marketing approaches. Second, assessing KPIs and conducting a
detailed analysis of their distribution channel performance. Moreover, embracing modern
technological solutions for optimizing their operations for the organization to stay afloat in a
competitive and fast-paced industry.

In this case study, we will be explaining each of the issues that the organization was facing.
Along with possible solutions, recommendations, and implementation techniques to go with it.

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1. Issues Identification

This is a list of issues that we identified in the Hotel Domicile case study. We have categorized
them as short-term & long-term.

1.1 Short-Term Issues:

1- Hotel Domicile is facing a decline in revenues due to low occupancy rates which are
affecting their bottom line. Three of the four locations have much lower occupancy rates than
they are expected to have. Despite having below the market rates and prime locations, they are
struggling to fill up their rooms. Addressing the low occupancy rates is essential for short-term
financial purposes that they need to move forward.

2- Hotel Domicile have not optimized their channel mix. Hotels do not simply rely on walk-
ins. A channel mix is based on selling the service on different platforms and through different
mediators. The organization has not optimized that process yet and they are facing the
consequences of not doing so. They are missing out on maximizing profitability.

1.2 Long-Term Issues:

1- Hotel domicile has a technological gap. The IT systems are outdated, and the
organization is slow in adopting modern processes to align ever-changing customer preferences.

2- Hotel domicile have not developed a revenue and yield management strategy that would
assist them in sustained growth over time. The organization is not making the right types of
investments that they should be making.

3- The organization is focused on a niche segment of the market. They are not targeting as
many potential customers as they could have. Focusing on traditional market segmentation
strategies can quickly become obsolete in a fast-paced industry.

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2. Environmental and Root Cause Analysis

Hotel Domicile Group, a family-owned and operated business founded in 1968 by Pierre, was
comprised of four hotels in Quebec. In 2000, Olivier assumed the role of CEO. This section of
report provides an overview of the operating environment of Hotel Domicile Group as of 2015,
focusing on industry, suppliers, competitive and customer analysis and as per pestle five forces
model

2.1 Environmental Analysis

2.1.1 Industry Analysis:

Hotel Domicile Group operated in the hospitality and lodging industry, which was influenced by
several factors:

 Market Growth: The Canadian lodging market had rebounded to pre-crisis levels in
2014, driven by favorable economic conditions, low interest rates, and increased tourism.
This indicated a positive industry outlook for Hotel Domicile Group.
 Technology Transformation: The industry had undergone significant technological
changes with the rise of online travel agencies (OTAs) and Global Distribution Systems
(GDS). This shift altered the way customers made reservations and impacted pricing
strategies.
 Competitive Landscape: The industry was highly competitive, with various hotels and
accommodation options in the Montreal area. Pricing and online presence played a
crucial role in gaining a competitive edge.

2.1.2 Suppliers Analysis:

Hotel Domicile Group relied on suppliers for various products and services, including:

 Hospitality Supplies: Suppliers provided items such as linens, toiletries, and cleaning
supplies crucial for the day-to-day operations of the hotels.
 Technology Solutions: Suppliers of technology solutions, including reservation systems
and software, were essential to modernize the booking process and enhance the online
presence.

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 Food and Beverage Suppliers: For hotels offering continental breakfast or other dining
options, suppliers of food and beverages played a vital role in delivering quality services
to customers.

2.1.3 Competitors Analysis:

Hotel Domicile Group faced competition from various sources:

 Other Hotels: Competing hotels in the Montreal area, offering similar services and
amenities, posed a direct threat to occupancy rates and pricing strategies.
 Online Travel Agencies (OTAs): Major OTAs like Expedia, Priceline, and TripAdvisor
were competitors, as they could divert potential guests away from the hotel's own
website.
 Local Accommodations: Beyond traditional hotels, alternative accommodations like
Airbnb provided additional competition for travelers seeking lodging options.

2.1.4 Customer Analysis:

Understanding customer behavior and preferences was crucial for Hotel Domicile Group:

 Loyal Customers: The hotel had a base of loyal customers who had been patronizing the
establishment for years. Maintaining their loyalty was essential for repeat business.
 Online-Savvy Customers: A growing segment of customers preferred to book
accommodations online. Their expectations for a seamless and user-friendly booking
process needed to be met.
 Price-Sensitive Customers: Some customers were price-sensitive and sought the best
deals. Competing effectively in terms of pricing was crucial to attracting and retaining
this segment.

2.1.5 PESTLE model analysis:

1. Political:

• The political stability in Canada provides a conducive environment for the hotel industry.

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• Regulations related to the hospitality industry in Quebec and Canada would also impact
the operations of the hotel group.

2. Economic:

• The recovery of the Canadian lodging market and strong projections for RevPAR in 2015
and 2016 indicate favorable economic conditions for the hotel industry.

• The performance of the local and national economy can impact consumer spending on
travel and hospitality.

3. Sociocultural:

• The hotels are located in Quebec, a region known for its unique culture and history,
which could attract tourists.

• Customer expectations and preferences, such as desire for modern booking experiences
or loyalty programs, can influence the hotel’s offerings.

Technological:

• The emergence of GDS and OTAs has transformed how customers book hotels. Adapting
to these changes is crucial for the hotel group.

• The need to modernize the company’s website and online booking system is evident.
Technology can also play a role in improving revenue and yield management processes.

Legal:

• Laws and regulations related to employment, health and safety, and consumer rights
would be relevant to the hotel group.

• Contractual obligations with OTAs and other partners would also have legal implications.

Environmental:

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• Environmental factors could include the company’s impact on the environment and its
efforts towards sustainable practices.

• Consumer trends towards eco-friendly businesses could also influence the hotel group’s
operations.

In conclusion, while there are several opportunities for Hotel Domicile Group in the current
PESTLE landscape, there are also challenges that need to be addressed. Adapting to
technological changes, meeting customer expectations, and navigating the competitive landscape
while complying with relevant laws and regulations will be crucial for their success.

2.2 Root cause analysis

The declining revenues and profitability in the hotel profit could be attributed to several root
causes:

1. Outdated Technology: The hotel's outdated website and slow booking process deterred
potential guests from making online reservations. This resulted in lost revenue opportunities, as
many visitors resorted to calling the hotel instead.

2. Limited Online Presence: The reluctance to embrace online travel agencies (OTAs) and
modern online booking methods limited the hotel's visibility in a competitive market, potentially
causing a decline in bookings.

3. Pricing Strategy: Olivier's pricing strategy, although competitive, may not have been
adjusted frequently enough to respond to changing market dynamics. Competitors who adjusted
prices more frequently could have gained an edge.

4. Customer Engagement: While Pierre had successfully built customer loyalty over the
years, the changing landscape demanded a more active approach in engaging loyal customers
and adapting to their preferences.

5. Marketing and Image: The outdated design of the hotel's website and limited online
content (photos, videos) affected its image and ability to attract tech-savvy customers.

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6. Market Competition: Intense competition from major OTAs like Expedia, Priceline, and
TripAdvisor, along with numerous smaller OTAs, required a strategic approach to balance OTA
exposure with direct bookings.

In conclusion, the hotel faced challenges related to its online presence, pricing strategies, and
adaptation to changing customer preferences. These challenges were exacerbated by competition
from OTAs and the need for a more modernized approach. Addressing these root causes would
be essential for improving revenues and profitability in the evolving hospitality industry.

3. Alternatives and/or Options

3.1 Option 1: Capitalizing on Location Amenities to Increase Profits

With the vast description of the various hotels, after careful analysis with the marketing and sales
team should revamp their properties to attract certain customers to augment their profits. For
instance, Hotel Domicile Longueil which had amenities that attract students particularly.
Therefore, we suggest that partnering with institutions that welcome students at a larger rates.
This would ensure be of benefit to both the institution and the hotel as well. Since, the
institutions can be compensated a certain commission for the amount of students bought whereas
the hotel enjoys the short-term profits from it. Similarly, we would advise for Hotel Domicile
Montreal Latin Quarter to transform their building to housing temporary residents like students
or work permit holders. Another key aspect of amenities can be used to increase their profits as
well. If amenities like meeting spaces were lent for other occasions such as marriages, festivities
or even annual functions.

3.2 Option 2: Integration of Advance Technologies to support bookings

It is essential for any hotel to highlight their uniqueness. As a hotelier, showcasing the most
distinct and best aspects of a property at the forefront of a website and social media urges
potential clients to imagine their experience before they arrive. In this case, Olivier should
consider, that their management should aim to provide a hassle free booking process. Designing
a highly interactive but user-friendly website for guests, where they are able to view their

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bookings, manage payments and have customer support which can be directly linked to the hotel
CSR’s in case there is any emergency or changes required.

4. Recommendation and Implementation

4.1 Recommendation
Based on the case study of Hotel Domicile, these are some recommendations and potential
implementations

1. Channel Management Strategy:

• Segmentation Strategy: Hotel Domicile should review and revise its market segmentation
strategy. Instead of focusing solely on traditional segments like leisure, business, and groups,
they should consider additional segmentation criteria such as purchase occasion, geographic,
demographic, lifestyle, and benefits. This will allow them to tailor their marketing and pricing
strategies to specific customer groups more effectively.

• Channel Mix Optimization: Analyze the performance of different distribution channels,

including Hotel Direct (website and voice/walk-ins), GDS, and OTAs. Identify which channels
are driving the most profitable bookings and allocate resources accordingly. Consider shifting
focus from high-commission OTAs to channels that offer higher profitability, like direct
bookings through the hotel's website.

• Price Elasticity Analysis: This needs to be done to understand how different customer
segments respond to price changes. Adjust pricing strategies to capture the maximum revenue
without compromising occupancy rates. Implement dynamic pricing strategies that consider
demand fluctuations.

2. Technology and Website Enhancement:

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• Website Upgrade: Invest in a website upgrade that offers an improved user experience, a
fast booking process, high-quality visuals, and responsive design for mobile devices also ensure
that the website is user-friendly and optimized for search engines (SEO) to increase organic
traffic.

• Data Mining and Personalization: Leverage customer data collected through the website
to personalize marketing efforts. Analyze customer demographics, preferences, and behaviors to
tailor promotions and offers, increasing conversion rates and loyalty.

3. Ancillary Revenue Optimization:

• Ancillary Services: Promotion of ancillary revenue streams such as food and beverage
(F&B), spa, and recreational activities to enhance the overall guest experience. Identify
opportunities to upsell these services to guests during the booking process or their stay.

4. Rate Fencing and Distribution Costs:

• Rate Fencing: Implement rate fencing strategies to offer discounts or special rates to
specific customer groups while protecting higher-paying customers. This can be done through
advance purchase requirements, minimum stay lengths, or non-refundable rates.

• Distribution Cost Management: Carefully manage distribution costs, especially the high
commissions associated with OTAs. Negotiate with OTAs for better terms, and consider
reallocating the budget from high-cost channels to more cost-effective ones.

5. Profitability Analysis:

• Gross Operating Profit per Available Room (GOPPAR): Implement a GOPPAR analysis
to assess the profitability of each booking. Determine the break-even occupancy level and focus
on driving bookings that contribute positively to GOP.

By implementing these recommendations and aligning their distribution channel management,

pricing strategies, and revenue management processes with a focus on profitability, Hotel
Domicile Group can improve its occupancy rates, ADR, and overall financial performance. This

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holistic approach will help them navigate the competitive hospitality industry more effectively
and achieve greater profitability.

4.2 Implementation.
Implementing strategies to address the challenges faced by Hotel Domicile Group requires
careful planning and execution. Here are key implementations to consider:

1. Website Redesign and Optimization:

• Engage a professional web designer to revamp the hotel's website, making it user-
friendly, responsive, and visually appealing.

• Ensure that the website provides detailed information about the properties, amenities, and
local attractions.

• Implement an easy and secure booking process to encourage direct bookings.

• Optimize the website for search engines (SEO) to improve visibility in online search
results.

2. Dynamic Pricing and Revenue Management:

• Invest in revenue management systems (RMS) and pricing algorithms to optimize room
rates based on demand fluctuations.

• Train staff in the use of RMS and pricing strategies to maximize ADR and RevPAR.

• Establish a cross-functional revenue management team to monitor and adjust pricing in

real-time.

3. Ancillary Revenue Enhancement:

• Improve the quality and promotion of on-site amenities such as restaurants, spa services,
and recreational activities.

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• Create attractive packages and promotions that bundle room bookings with ancillary
services.

• Train staff to upsell ancillary services to guests during their stay.

4. Guest Segmentation and Personalization:

• Implement a customer relationship management (CRM) system to collect and analyze

guest data.

• Develop personalized marketing campaigns and offers tailored to specific guest

segments.

• Use guest data to anticipate needs and preferences, enhancing the overall guest
experience.

5. Distribution Cost Management:

• Negotiate with online travel agencies (OTAs) to secure more favorable contract terms,
including lower commission rates.

• Encourage guests to book directly through the hotel's website by offering exclusive deals
and incentives.

• Monitor the performance of distribution channels and adjust allocations accordingly.

6. Competitive Analysis and Collaboration:

• Conduct ongoing competitive analysis to stay informed about market trends and
competitor practices.

• Collaborate with local businesses, event organizers, and travel agencies to attract group
bookings and events to the hotel properties.

7. Staff Training and Development:

• Provide training and development opportunities for revenue management and sales staff.

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• Ensure that staff members are proficient in implementing revenue optimization strategies.

8. Guest Review Management:

• Establish a system for monitoring and responding to guest reviews promptly.

• Address negative feedback and take corrective actions to improve guest satisfaction.

9. Technology Infrastructure Upgrade:

• Upgrade the hotel's technology infrastructure, including booking engines and property
management systems.

• Implement reliable and secure payment processing systems to facilitate online bookings.

10. Budget Optimization:

• Review and optimize marketing budgets, reallocating resources to strategies that provide
the best return on investment.

• Continuously track and analyze the performance of marketing campaigns.

11. Monitoring and Reporting:

• Implement a system for tracking key performance indicators (KPIs) such as occupancy,
ADR, RevPAR, and GOPPAR.

• Generate regular reports to assess the effectiveness of implemented strategies.

12. Flexibility and Adaptation:

• Remain flexible and adaptable to changing market conditions and guest preferences.

• Continuously evaluate and adjust strategies to maximize revenue and profitability.

Successful implementation of these strategies will require a collaborative effort among various
departments within Hotel Domicile Group, ongoing monitoring, and a commitment to providing
an exceptional guest experience.

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5. Monitor and Control

5.1 Financial.
The goal is to increase profits by investing in Revenue Management Systems (RMS) and
optimize room rates based on demand fluctuations by analyzing the following:

KPI’s:

 RevPAR. Revenue Per Available Room. To forecast how effectively the average rate
fills vacant rooms, giving a useful assessment of how each hotel is doing.
 GOPPAR. Gross Operating Profit Per Available Room. To calculate the hotel's gross
profit based on the number of rooms that are available for purchase each night.
 NOI. Net Operating Income. To determine the profitability of an income-producing asset
before deducting any financing or tax expenditures.
 Budget. To determine if the projected income and expenses for a specific period have
been reached.

We should increase profits with at least 12% of the profit margin annually.

5.2 Customer Related.

The objective is to offer quality of service, customer relationship management and customer
profiling. To verify compliance with these goals, the following indicators will be reviewed
quarterly:

KPI’s:

 Occupancy Rate. To know the percentage of rooms occupied at a specific moment.

 ADR. Average Daily Room Rate. To determine the typical rental income per occupied
room at a specific moment.
 ALOS. Average Length of Stay. To determine how many nights on average each visitor
stays at the hotel.

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 Online reviews. To know the areas where the strength lies. Additionally, it aids in your
comprehension of the problems that your users are experiencing and what needs to be
altered.
 Customer satisfaction surveys. To confirm with the clients if the measures being taken
for Revenue Management are correct (product, service, time, place, and price). In
addition, to knowing the chain distribution used by each client.

It will be verified that all clients are satisfied with the entire range of products offered by the
hotel chain on a monthly basis.

5.3 Internal Business Process.

The objective is to have a clear strategy to reach the goals, invest in staff and be productive.

KPI’s:

 Meeting financial target. It is important to monitor the effectiveness of the actions

being taken aimed at meeting the objectives of the financial strategy.
 Internal auditing. It is necessary to achieve the success of the strategy since with this,
we can evaluate the risks, examine and evaluate the efficiency of the processes and
systems, carry out specific verifications of unidentified problems, and maintain the
alignment of the four hotels.
 Staff satisfaction surveys. To have a better understanding of how management can
improve the use of the website, as well as the processes that are being implemented to
achieve compliance with the strategy.

It should be noted that new processes will be implemented, and each employee must know them,
so they will be measured every day during the first month of implementation.

5.4 Innovation and Learning.

It is necessary to verify that the employees of the four hotels receive training in the use of the
web, in addition to the processes and structure of the business, raising awareness of the
company's organizational culture. To do this, the following will be verified:

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KPI’s:

 Online reviews. A useful tool that enables organizations to gather data directly from
website visitors.
 Staff evaluations.

This is intended to ensure that the integration of technology and employee training are linked to
the company's strategy.

References.

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