CASE ANALYSIS

AVARI RAMADA - HOTEL PRICING

SUBMITTED TO DR. ABDUL WAHEED - MARKETING MANAGEMENT MKT611

WEDNESDAY, MARCH 15, 2017

DONE BY

GROUP 4 - MBA 2016

AASHISH SHARMA (MBA16001) | ISHA PARIDA (MBA16016) |
KARTIKEYA TIWARI (MBA16060) | NICHOLAS WEBER (TRM171003) | SARGAM ARORA (MBA16039) |
SHIVANI GATTANI (MBA16044) | VIVEK RAMADAS IYER (MBA16054)
 SECTION 1

SUMMARY
Mr. Byram Avari, the owner of Avari Lahore Hotel had been in hotel business for a considerable number of years. He had
his first hotel build in Karachi in year 1944. In year 1978 he constructed a hotel in Lahore and went into contract for
twenty years with Hilton hotels but this didnt work well for a longer time so in 1984 he decided to regain the control from
Hilton group. Though he managed to win the long court battle in year 1987.

In year 1988 Mr. Tahir Raza Mian, was the Assistant sales and marketing manager of the property. His area of concern
was the constant falling average prices of rooms. This gradual fall in the prices due to certain activities, was for the very
first time since hotels operations initiated in Lahore.

Meanwhile, some other brands were also planning to start their operations in the city. That was also a threat to the
existing five-star hotel industry.

Now, Mian had to draw out something new to bring the situation back on track.

SECTION 2

BACKGROUND
Place

Avari Lahore Ramada Renaissance Hotel, was one of the two five star hotels of Lahore during year 1988. The property was
located on Mall road which was the heart of the city as well as the commercial hub. It was surrounded by zoological garden
and The Alhamra Arts council and WAPDA house.

Product

The property consists of 190 rooms in all with 15 suits, 12 junior suits as well as executive, bridal and presidential suits
with attached bathroom that were loaded with modern appliances.

Additionally, the facility has the following five eating places on floor:
Punjab Terrace Club
Kims Coffee shop
Samover Lounge
Barbeque restaurant
The Fort Grill

Kohrshed Mahal is a multi-functional room for events like business conversations, large dinners, special occasions and
weddings as well.

The facilities such as sauna, massage parlor, gymnasium and certain special services for business executives were also
provided.

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 SECTION 3

CLIENTELE
The business travelers count to be the highest customers and were the one how had a great bunch of discounts. Whereas
the individual customers know as walk-in were the least in number so they were the one who were given least discounts.
But the 28% of the customers were those who were Pakistani govt. officials, Airliners (Saudia Airlines only), tours &
packages etc.

SECTION 4

PRICING
Pricing Policy

This was only based on demand and competition.

Prices were slightly higher then competitors (Pearl Continental Hotel, Lahore)
They were revised twice a year (as per inflation rate)
Pricing was structured based on various slab rates
Do not turn guests away policy
Garbage Rates

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 SECTION 5

PRICING SLABS & ANALYSIS

1 . Individual Rates 2. Commercial Rates

3. Preferential Rates 4. Special Rates

Pricing Analysis

Avari Ramada used a policy of not turning away any guests that came into the hotel. Therefore, they used the concept of
differentiated pricing. Using this, Avari Ramada could practice price discrimination by offering different rates to different
classes of customers. The individual rates used the concept of third degree price discrimination and customer segment
pricing.

In the case of business customers, companies could sign a contract with Avari Ramada and thereby negotiate room prices
based on the number of rooms nights that the company was willing to rent over the course of a year. The companies were
mostly multinationals with good repute, size and credible payment history. They registered for either a Luxury Business
Service Rate or Volume Luxury Business Service Rate. The second degree price discrimination was used here as the
volumes of bookings attracted lower prices.

Special customer pricing was offered as preferential rates to customers such as government officials, journalists, airlines
and tourists. These garbage prices contributed to a small part of the hotels revenue. The suites followed the optional
product pricing strategy where they could increase the customer spending with every add-on service.

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 SECTION 6

PROMOTIONS

Discount Offers - Major promotional tool, to help improve the rate of occupancy
Summer Packages - Almost 50% off , complimentary breakfast and 10% off on all other meals consumed at the hotel.
Other Promotional Activities - free bed tea for EBS and VEBS, Invitation for complimentary meals at the hotel, Room
upgrades.
Promotional newsletters to its regular clientele.

SECTION 7

SWOT ANALYSIS

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 SECTION 8

COMPETITORS

The main rival was Pearl Continental Hotel, located close by, with lush gardens and ambience. Additionally, there was also
the threat of new entrants with good international repute, such as the Sheraton Group.

SECTION 9

RECOMMENDATIONS & CONCLUSION

Increasing Profitable Occupancy Rate

Although the demand pricing approach is the right way, Avari Ramada should compliment it by increasing the occupancy
rates of the more profitable rooms.

Decreasing the number of rooms given out at Special Rates

Special rates adversely affect the revenue of the hotel as seen on November, where about 45% of the hotels occupancy was
with customers who get 45%-60% discount according to the special rates.
This however, can be countered by limiting the number of rooms given for special rates. Efforts must be directed towards
increasing the influx of Executive Business service clients in order to help increase the revenue of the hotel.

Implementing Bundling Pricing Strategy

Bundling pricing strategy can be used to attract Frequent Individual Travellers and Executive Business Service clients.
The hotel can package two or more products together to gain a pricing and competitive advantage.

Competitive Pricing Strategy

The outdated infrastructural constraints of the hotel such as small rooms and lack of extensive lawns can be countered by
competitive pricing strategies, in order to gain market share.

Room Differentiation

The hotel must try to adopt various pricing strategies for different clientele. the rooms can be differentiated on the basis of
different amenities which can be made available to the guest based on the room type. for example - the contract and
garbage rates can be charged for the most basic rooms with basic necessary facilities. the guest however, has the option of
upgrading to a room with more amenities by paying a little higher price for the upgrade.

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Utilising Other Revenue Sources

the hotels major revenue source is from the sales other than that of the rooms such as the Food and Beverage segment,
Spa, Gymnasium etc. The hotel must thus take cue from this and spend on relevant advertising in order to attract more
customers and to build a loyal customer base. The success rate of these amenities can also be used to attract potential
guests who can be exposed to these services during the course of their stay with the hotel.

Summer Packages

Summer, being the ideal holiday season for Pakistan sees a lot of tourists in the country every year. flights from Europe
and United States are expected to start in 1989 which will boost the tourism influx in the country. Avari Ramada must
make use of this opportunity to attract more customers by providing special summer packages, which can be designed to
outdo that of their competitors.