Analyzing STAR Report
Submitted on
May 5 , 2019
Word Count: 1261
by:
Andy Wu 735884
Rakan Awliaalsayed 736336
Submitted to: Ms. Zhe Ouyang
Operational Analysis
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HBM 491 (1)
Analyzing STAR - Competitive Set Assignment
Objective:
The objective of this assignment is to challenge your analytical thinking in assessing a
hotel’s position in its market. You will also be evaluated on your competency in
using excel spreadsheet for calculation and drawing charts/diagrams.
Assignment:
Using the Smith Travel Research (STAR) Reports, you are to determine the hotel’s
performance in comparison with its competitors, and make suggestions to improve
hotel’s performance. Please answer the following questions and support your
answers with necessary evidence (diagram/charts if necessary). For your
charts/diagrams, please check for ​chart title, vertical & horizontal axis title, vertical
axis values, horizontal axis labels, data labels, and legend​.
Submission:
This is a group assignment. Please submit one copy per group.
Total points: 30
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Competitive Set Questions
1. Give your overall assessment of Springhill Town Hotel’s market: what market
segment Springhill is in (economy, midscale, upscale, etc.) and who is their target
customer market (leisure/business travelers, group, etc.)? Note: Please provide
supporting evidence for your assessment, e.g. its average room rate; and a daily
occupancy chart for Oct. 2004 of Springhill Town Hotel (​line chart is preferred make sure to include all labels necessary)​ , and discuss your findings based on the
evidence.
Average Room Rate for Oct. 2004
Occupancy Rate for Oct. 2004
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Market Segment
According to the STAR report, mid price hotel segments have an average room rate
of 74.27. As for Spring Hill Town Hotel, they are averaging their room rate at 75.64
which is really similar to STAR report’s criteria. Therefore, Spring Hill Town Hotel
is a mid price hotel.
Target Customer Market
According to the occupancy chart above, we can see that in October 2004, Spring Hill
Town Hotel has higher occupancy rate during the weekdays. During the weekends,
the occupancy drops significantly. Therefore, we can see that their target customer
market is mainly businessmen who come during the weekdays for meetings, and
conferences.
2. Give your overall assessment of Springhill Town Hotel‘s 12-month performance in
terms of Occupancy, ADR and RevPAR. Also compare Springhill’s performance
with its competitive set. Be sure to include the absolute and relative difference of
performances between Springhill and its competitive set. Discuss the results. Note:
Please provide supporting evidence using charts/diagrams. ​(Occupancy/ADR/RevPAR
of Springhill and Competitive Set - ​bar chart is preferred - make sure to include all
labels necessary).
Springhill
Occupancy
ADR
RevPar
61.8%
$73.76
$45.55
Competitive Set
65.5%
$74.41
$48.75
Absolute
Difference
-3.7%
$-0.65
$-3.2
Relative
Difference
-5.65%
-0.87%
-6.56%
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From the 2 charts above we can clearly see that the competitors were doing better in
all three areas including occupancy rate, ADR and RevPAR.
Occupancy Rate
The absolute difference in occupancy rate between Spring Hill Town Hotel and the
competitors is -3.7% meaning that they are slightly less occupied than their
competitors. As for relative difference, it provides more of an overall overview of the
difference. It takes it into consideration that the size is different from hotels and
represents the difference in the form of a ratio. Therefore Spring Hill Town Hotel is
5.65 percent less occupied compared to the competitors. In order to improve its
occupancy rate, they can start advertising towards leisure guests to attract them to
increase the occupancy rate during weekends.
ADR
Springhill’s rates were lower compared to their competitors, but that didn’t give them
a competitive advantage since the occupancy rates of the competitors were higher. for
the absolute difference, there was a -0.65$ difference between Springhill, and their
competitors which isn’t a big number, but when we look at the relative difference, we
can see that the difference is -0.87% which is nearly 1%, and although Springhill had
a less ADR percentage than their competitors, they still did not manage to get a
higher occupancy rate.
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RevPAR
Looking at the -$3.7 in absolute difference in RevPAR may not be much, the relative
difference shows that Spring Hill Town Hotel is actually 6.56% lower than their
competitors. It results in the lower figures in occupancy rate and ADR. They should
pay more attention to this area because it has the largest relative difference out of the
three figures.
3. Having compared Springhill’s performance indicators with its competitive set, please
compute their index numbers. Please provide details on the calculations and discuss
results.
Occupancy
ADR
RevPar
Springhill
Competitive Set
61.8%
$73.76
$45.55
65.5%
$74.41
$48.75
Springhill
Performance Index
94.35
99.13
93.44
Occupancy Index = Springhill Town Hotel / Competitive Set Occupancy*100
= 61.8 / 65.5 * 100
= 94.35
ADR Index = Springhill Town Hotel / Competitive Set ADR*100
= 73.76 / 74.41 * 100
= 99.13
RevPAR Index = Springhill Town Hotel / Competitive Set RevPAR*100
= 45.55 / 48.75 * 100
= 93.44
As the calculation above we know that all three index including the occupancy, ADR
and RevPAR are all below 100, meaning that Spring Hill Town Hotel is doing worse
comparing to its competitors. The index is essentially showing the result in
percentage form from the last questions.
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4. Based on the information in question 3, if Springhill plans to increase its RevPAR
index to 100 but does not want to increase their ADR, what would Springhill’s new
occupancy need to be? And by what percentage is the increase/decrease (relative
dif.)? Discuss the objectivity of this plan. Is it achievable or not, and why?
In order to increase Springhill’s RevPAR Index to 100, we assume
RevPAR Index = (Springhill Town Hotel RevPAR / Competitive Set RevPAR) * 100
= 100
Therefore we plug RevPAR Index = 100 into the formula,
Springhill Town Hotel RevPAR = (RevPAR Index * Competitive Set RevPAR) / 100
= (100 * 48.75) / 100
= $48.75
Result shows that Springhill Town Hotel RevPAR has to reach $48.75
Since we know RevPAR = ADR * Occupancy %
Therefore, Occupancy % = RevPAR / ADR
Then we plug in the results we have from the previous calculation
New Occupancy​ % = (48.75 / 73.76) * 100% = 66.1%
Current Occupancy % = 61.8%
Relative Difference​ = (66.1%-61.8%) / 61.8% = 6.94%
As the calculation above has shown, in order for Springhill Town Hotel to increase its
RevPAR Index to 100 without increasing the ADR, their occupancy rate has to reach
66.1%. Comparing to its current occupancy which is 61.8%, they have to increase
6.94% as we can see from the relative difference calculation. To reach this goal, we
suggest Springhill Town Hotel to promote and advertise more towards leisure or
family segments. They are currently only able to sustain their occupancy through
business purpose travellers during the weekdays. By promoting and advertising
towards leisure and family segments, they will be able to increase the occupancy
during weekends which is the part that they are not performing well.
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5. Please compute Springhill Town Hotel market share percentage in comparison to its
competitors (FMS, AMS, & market share in $ revenue on a ​running 12-month
performance basis) and present the finding in diagram ​(p​ ie chart is preferred - make
sure to include all labels necessary). Also discuss some suggestions on how
Springhill could increase its overall market share / performance. Note: The ‘market’
here is narrowly defined and includes only the comp set and the subject hotel.
Fair Market Share
= Rooms Available for Springhill Town Hotel / Total Rooms Available for Comp Set
Market *100%
= 106 * 365 / 745 * 365
= 14.23%
Actual Market Share
= Rooms Sold for Springhill Town Hotel / (Rooms Sold for Springhill Town Hotel +
Rooms Sold for Comp Set Market)
= 61.8% * 106 * 365 / [(61.8% * 106 * 365) + (65.5% * 639 * 365)]
= 13.53%
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Market Share in Revenue
= Rooms Revenue for Springhill Town Hotel / (Rooms Revenue for Springhill Town
Hotel + Rooms Revenue for Comp Set Market)
= 61.8% * 73.76 * 106 * 365 / (61.8% * 73.76 * 106 * 365 + 65.5% * 74.41 * 639 * 365)
= 13.43%
To improve Springhill Town Hotel’s overall market share, we suggest them not only to
accomodate more leisure guests but also try to improve its service towards business
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guests. For example they can provide free transportation from hotel to convention center
for businessmen who stay in house with them. Or they can look for partnership with
certain companies and provide discount when they stay in the hotel. Last but not least,
create loyalty program for business guests to capture their loyalty.
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