Taj group

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HIT THE

SUITE SPOTGROUP MEMBERSMAYANK MAINDOLARADHA SHEKHER

TAJ GROUP

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INTRODUCTION

Conventional wisdom has it that a hotel should optimize its revenue by increasing room occupancy.

The Taj group of hotels was on top of this game But conventional wisdom isn't always right. Their revenue optimisation software implementation came to the rescue.

A part of the Tata Group, Taj Hotels Resort and Palaces has its business spread across 12 countries.

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CONTENTS

Case study Highlights Focusing on the bottom line Guesswork out of Revenue

Optimization How Shukla convince RO is

Important The growth of Taj Group in Financial

terms Importance Of RO Conclusion

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CASE STUDY HIGHLIGHTS

The TAJ Palace is only Indian Hotel to be awarded with the Best Business Hotel in Asia in 1998

The gross revenue of Taj shot up from Rs. 6,99.16 crore in 2003-2004 to Rs. 873.24 crore in 2004-2005.

TAJ plans to invest in the range of Rs. 225 crore to 4500 crore to take the TAJ brand to new markets overseas.

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FOCUSING ON BOTTOM LINE Revenue optimization, as the name suggests, uses optimization techniques to enable CIOs turn their IT prowess to do what every CFO wants them to do— make more money and have an impact on the bottom line. Some companies tend to treat IT like a stick to beat back untamed costs. But revenue optimization defies this cost-cutting role and enables companies to use IT to earn more revenue and make a positive difference to the bottom line.

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Contd…

This is the sort of logic that convinced the Taj to try out revenue optimization software. Initially, a pilot project was rolled out at the Taj Mahal Palace in Mumbai.

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Guesswork out of RO

Forecasting, however, is always a tricky business, and you can never be sure about how accurate your predictions will be. It is a double-edged sword. Wrong assessments have the ability to reduce the earning potential of the Taj group.

This is exactly what the Taj was doing in the pre-RO era-in those days, managers used Excel spread sheets in order to do the calculations but the need for a dedicated revenue optimization system, which was more closely aligned with the property management system.

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How Shukla convince RO is Important

The board understands the importance of technology, and once he showed them the cost benefits, they readily agreed.

Results are showing up on Taj’s balance sheet—as expected. The gross revenue of the Taj shot up from Rs 699.16 crore in 2003- 2004 to Rs 873.24 crore in 2004-2005, a respectable leap of around 25 percent. Correspondingly, the net worth of the group went up by over 27 percent, from 887.73 crorein 2003-2004 to Rs 1,130.39 crore in 2004-2005.

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The growth of Taj group in Financial Term

Profit before tax at Rs 141.68 crore and profit after tax at Rs. 105.86 crore were also significantly higher by 77 percent and 74 percent respectively for the same period.

Room income in 2004-2005 was higher than the previous year by 34 percent and the average room rate (ARR) also increased by 24 percent over the previous year, contributing 75 percent of the total increase in room income.

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Importance of RO

RO works well in an industry where demand outstrips supply.

Revenue optimization also helps service customers better in an indirect manner because the money that it helps to earn can be ploughed back into the business to provide better services to customers.

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Contd…

The Taj has introduced a variety of services for its guests, like personalized butler service, enhanced concierge services, and door associate program. Such initiatives are strengthened by revenue optimization because the company will be able to use it to know exactly who will appreciate or require such customized service.

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Conclusion

Revenue optimization for the Taj gains greater importance in light of the fact that it is planning to expand outside India at an accelerated pace.

Taj unveiled plans to acquire five-star properties in China, Australia, United States, Europe, West Asia and Africa.

In March 2006, the company said that it plans to invest Rs 100 crore in the next fiscal to setup budget hotels in various locations across the country.

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Contd….

IT’s swift march, its only a matter of time before the two are rolled together. One day, revenue optimization linked with purchasing costs and loyalty programs, just might enable the Taj to come up with perfect personalized holiday offer that will live up to the name of the Taj.

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