Case Study Of Revenue Management At Harrah's Entertainment
Kaz/Colin – Thoughts/Bullet points on - Is Harrah’s current method for managing room inventory adequate?
The Harrah’s current pricing method is well designed to maximize their revenue based on the games as their core offering. It, however, has areas of improvement in terms of room inventory management mostly for the following reasons, and it is increasingly important to address the issues as their business diversifies after the recent mergers.
• The current system negates the fact that there are different room types within the property. Any customers would get any room type depending on availability and likely discretion of the front staff who processes the checking-in. Harrah’s might be giving …show more content…
Each tier of customers have different price sensitivity and the cut-off points should, therefore, be distinctive. It is unknown how the system arrives at a decision but it should analyze price elasticity of demand by each customer segment to optimize the cut-off point. This is further complicated when we consider the types of hotel rooms as it alters customers sensitivity to price and …show more content…
Seasonality, demographics, and especially visits for nongame entertainment would be the key variable that the current system ignores. The underlying issue is that the ADT/gaming is no longer the sole proxy measure for Harrah’s revenue performance. This will tie back to their realization of the problem of discrepancy between the ADT and the TR benefits; VIP customers who spend small amounts frequently may not be registered in a high tier with the ADT (this implies our potential suggestion to adjust the ADT tier values or reconsider “per day” threshold, or provide additional points based on the TR status, etc).
• Nongaming activities are a significant source of revenue and therefore Harrahs needs to better understand the revenues from these activities and how those should be accounted for when determining hotel RM as the current ADT pricing does not take this into account.
• Harrah’s owns multiple properties in certain geographic areas (Las Vegas, AC) but their current method for managing room inventory does not seem to be benefiting from these multiple locations and does not provide value to all their