INFA Capacity Management

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INFA - Capacity Management
Managing capacity refers to the concept of
matching supply and demand at the operating unit
level.
Or in other words getting bums in the beds.
Problems for the hotel industry Perishability -a
room that is not sold on one night is revenue
lost for ever - product cannot be
stored Intangibility - difficult to pinpoint the
benefits of one hotel over another Heterogeneity
- service given to one customer may differ from
that of another Contact dependency -physical
interaction of the product and the
purchaser Ownership - customers only hireour
facilites for a period of time
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• The marketing mix
• The four Ps ( Mccarthy)
• Product -range, quality, brand name,
• Place - location, channels of distribution,
  coverage( Travel Inn 25miles)
• Price - levels, discounts , terms ,
  differentiation
• Promotion - advertising, selling, sales
  promotion,
• People (Booms and Bitner) -staff, training,
  social skills, attitude
• Physical evidence - environment,
• Process - policies, procedures, mechanisation,

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Understanding the nature of demand
In an ideal situation the front of house manager
would be able to match supply with demand for the
accommodation so that every room was occupied
every night. And the reality is!

• The level of demand fluctuates over time - known
  as the demand cycle

• Duration of the demand cycle - daily, weekly,
  monthly etc

• Underlying causes of cyclical variations in demand

• Demand varies with market segment

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There are two circumstances where we may need to
take action
1. Supply exceeds demand -

• Increase demand

Modify product, change room use Alter
distribution channels, new market segments Offer
pricing discounts Special promotions
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• Supply exceeds demand
• Reduce supply

Close of rooms, floors, wings to save on
costs Close during off season Sell off
unprofitable units Lease out areas Staff
holidays, refurb programmes
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• Supply exceeds demand
• Redistribute supply

Changing type of room available to suit demand
pattern, eg Grand Hotel and Savoy Hotel
decreased overall number of rooms to improve the
size.
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2. Demand exceeds supply - not enough bedrooms
for the amount of business

• Reduce demand

Increase rack rates, do not offer discounts,
upgrade services, change market segment

• Increase supply

Modifying product to increase bed space, sofa
beds, selling the same space twice ( air crew).

• Redistribute demand

Move bookings from one day to another, from one
unit to another
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Capacity management examples
What are the underlying determinants of demand
for

• A city centre hotel in Manchester?
• An all inclusive resort hotel in Montego Bay?
• A hotel in St.Moritz?
• The Grand Hotel Eastbourne?

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volume, the total demand for the product
/service variability, the extent to which
volume fluctuates over time, sometimes called
seasonality variety, the extent of the
product/service range on offer and
variation, the change in demand for the
different items of the product/service range
over time.1 Jones and Lockwood - The
Management of Hotel Operations