[Question 13]: Distribution channel allocation for weekday inventory

The second agenda point discusses the allocation of spare 100 Standard rooms on an average weekday during the high season (See table below).

The two alternative distribution channel options are as follows:

1. The FOM team believes that 80% of the spare standard rooms can be sold at $140.00 per room through the franchisor-operated property website and the loyalty program. While 85% of these reservations are by existing loyalty club members, who were identified to engage in additional spending of $90 per person per night.
2. The DSM team suggests a third-party merchant who promises to sell 90% of the spare standard rooms at a discounted room rate of $100.00 per room. However, the DSM team leader admits that these bookings also incur a commission fee of $15 per booking, which corresponds to 20% of the agreed sales price. Further, the guests attracted through the third-party merchant are known to be more price-sensitive and do not generate additional revenue through other hotel departments.

All members of the meeting are aware of the franchise agreement, related fees and hotel cost structures incurring with all reservations as follows:

• Base franchise fee: 8% of gross room-related revenues
• Marketing fee: 3% of gross room-related revenues
• Central reservation: 0.5% of booked revenue plus $3 per room booking
• Cost per occupied room (CPOR): $14/ night

High Season Average Room Sales

Room Type	Rack Rate	Available rooms	Average weekdays night bookings
Superior Parlour Suite	$240.00	50	5
City Skyline View Deluxe	$180.00	100	60
Standard	$160.00	200	100
Total Room Nights	350	165

To conduct a comparative financial analysis of each suggested distribution channel for the weekday's rooms sales:

1. Identify the most preferred distribution channel by considering the net total revenue and Net ADR yield for each distribution channel. (7 marks)
2. Identify the most preferred distribution channel when considering the GOPPAR engaging each distribution channel for the whole hotel. Assume a net ADR yield of 11.75% for all existing reservations. (7 marks)
3. Based on your prior analysis, provide a recommendation to which distribution channel the 90 spare Standard rooms should be allocated. [Ensure to address revenue optimisation, the appropriate measure and other non-financial considerations.] (6 marks)