Dogan Gursoy, Ph.D.

dgursoy@wsu.edu

HOTEL SIMULATIONhttp://www.hotelsimulation.com/

WHAT IS HOTEL SIMULATION GAME?

• Is a virtual management training game

– Participants are divided into teams

– Assigned the task of running 500-room hotels in a competitive virtual marketplace.

– Each 500-room hotel competes against other 500-room hotels located in the same destination that are managed by other participants.

• Just like in the real world, hotels compete against each other to attract customers from different market segments

– to maximize their revenue and profit

– to reach the financial and operational objectives set by the management team

WHAT IS HOTEL SIMULATION GAME?

WHAT IS HOTEL SIMULATION GAME?

• Demand and revenue for each hotel is determined by the operational decisions made by

– the management team for their hotel

– the management team of the competing hotels

– the demand level set by the instructor

– market conditions

WHAT IS HOTEL SIMULATION GAME?

• Operational decisions include:

– capital investments,

– operating expenditures,

– marketing expenditures

– pricing strategies.

• The external factors such as day of the week, demand patterns, etc. are also factored in the simulation.

MANAGERIAL ROLES AND RESPONSIBILITIES IN THE HOTEL

SIMULATION

Directors and their Responsibilities

• General Manager– Responsible for everything

• Director of Retail/Other operations– Spa– Fitness Center– Business Center– Golf Course– Other Recreation Facilities

- Pools, game rooms, tennis courts, ect

• Director of Marketing– All Marketing decisions

• Revenue Manager– All pricing decisions

• Director of Food and Beverage – Restaurants– Bars– Room Service– Banquet & Catering– Meeting Rooms– Entertainment– Courtesy

• Director of Rooms– Guest Rooms– Reservations– Guest Check in/Guest Check out– Concierge– Housekeeping– Maintenance and security– Building– Management/Sales Attention– Room allocation

PERFORMANCE MEASURES USED IN THIS SIMULATION

• Occupancy• Rooms Revenue• Total Revenue• Market Share based on Number of Rooms Sold • Market Share based on Revenues• Revenue Per Available Room (REVPAR)• Average Daily Rate (ADR) • Yield Management • Operating Efficiency Ratio • Profit Margin

Market Segments

• There are eight market segments– Business

– Small Business

– Corporate contract

– Families

– Affluent Mature Travelers

– International leisure travelers

– Corporate/Business Meetings

– Association Meetings

Market Segments

• Each of these segments has their own needs and wants

• Students are expected to establish a strategy of which segment(s) to target

– as primary, secondary or tertiary segments

– make a set of decisions to entice each of those specific target market.

Importance of Hotel Attributes and Amenities for International Travelers Segment

Importance of Hotel Attributes and Amenities for Association Meetings Segment

Hotel Simulation

• The challenge is to develop and implement a competitive business strategy that results in a competitive positioning in the marketplace and produces good financial performance as measured by market share, occupancy, RevPAR, ADR, total revenues, net operating earnings and net profits

HOTEL SIMULATION

• At the beginning of each month (round of simulation), each hotel management team must first

– determine their objectives

– determine specific strategies

• And then

– take actions to accomplish those objectives

HOTEL SIMULATION

• Each decision period, students will

– determine room allocations for each segment,

– determine their marketing budget

– establish room rates

– determine capital and operating expenditure budgets.

Hotel Attributes and Amenities Decisions

• Budgeting decisions on 20 attributes and amenities are made by

– Director of Rooms

– Director of Food and Beverage

– Director of Retail/Other operations

Hotel Attributes and Amenities Decisions

• Each manager makes the following decisions for the attributes and amenities they are responsible for – Capital investment decisions

• Long term investments

– Operating expenditure decisions• Allocation of the budget needed to operate the hotel in the

upcoming business period

• These decisions determines – Overall quality level of the hotel

– Quality perception in each segment

Marketing decisions

• Director of Marketing determines the labor and other operating expenditure budgets for

– Advertising

– Sales force

– Promotions

– Public relations

• These marketing decisions are made for each segment

Room Rate Decisions

• Revenue Manager sets the weekday and weekend room rates for each segment for each distribution channel

– Direct

– Travel Agent

– Online Travel Agent (OTA)

– Opaque

• Cost of distribution varies by channel

Results and Reports

• The decisions come back with results of – how pleased/ displeased each segment is

– quantified by • attribute scores,

• occupancy percentage,

• overall demand,

• REVPAR

• Profits, etc.

• Hotel simulation will generate a total of 18 reports

Income Statement

QUALITY PERCEPTIONS REPORT

Results and Reports

• Results and all reports are made available to all management teams

– so that they can see how their actions and their competitors’ actions impact the performance of their businesses.

Results and Reports

• Just like in the real world, each management team must analyze

– their previous months’ decisions and the outcomes of those decisions,

– competitors’ actions and strategies in the previous months,

– market and demand conditions for each segment

Results and Reports

• Students are expected to analyze the reports to:

– determine where their weaknesses as an operating team lie (identify performance gaps),

– identify why they have those weaknesses (causes of performance gaps), and

– establish action plans that will solve their biggest problems (Business Action Plans).

Results and Reports

• In order to be successful, decisions must be rational and logical based on thorough analysis of data from previous months and projections (forecast) for the future.

In other words…

• Students are expected to go through a three step process

1. Identification of performance gaps

2. Identification of causes of those performance gaps

3. Determining action steps.

– Managers develop solutions for the performance gaps utilizing the identified causes of those performance gaps.

Decisions for new round

• After determining their business action plans, students will make their decisions for the upcoming month– Room allocation decisions

– Capital and operating expenditure decisions

– Marketing expenditure decisions

– Pricing decisions

• Results will show them if their decisions were effective in solving their problems.

Hotel Simulation

• No limit on the number of groups• No limit on the number of cycles • No limit on the number of classes• Very flexible

– Instructor determines the demand (expected occupancy) levels

– Students are allowed to borrow additional funds for capital improvements

• Students compete against each other, not against the computer

• Very easy to run

Questions????

dgursoy@wsu.edu