Price Cut or Service Fix at a Puri Homestay
Sea Breeze Homestay, 1.5 km from Puri beach, has eight rooms. Last year occupancy was 38%, average room rate ₹2,400, and 70% of bookings came from two OTAs charging 18% commission. Direct bookings were 12% and walk-ins 18%. Repeat guests were 8%. Reviews average 3.9/5: guests praise the location and family hosts but criticise breakfast arriving 45–60 minutes after ordering, street noise in front rooms, and unclear check-in instructions. The owner proposes cutting the rate to ₹1,800 and spending ₹50,000 on Instagram advertisements before the Rath Yatra season. The homestay has no customer database, no review-response process, and no package with local guides. The owner’s cousin runs a nearby café and can supply breakfast at ₹90 per head if ordered the previous night. The owner asks you, a tourism marketing student, for a plan.
1. Evaluate the owner’s price-cut proposal using the occupancy and rate figures. What is the likely revenue effect at 50% occupancy, and what costs are ignored?
Read the worked answer
Available room-nights = 8 rooms × 365 = 2,920. At 38% occupancy, rooms sold = 1,109.6; room revenue = 1,109.6 × ₹2,400 ≈ ₹26.63 lakh.
At the proposed ₹1,800 rate and an optimistic 50% occupancy, rooms sold = 1,460; room revenue = 1,460 × ₹1,800 = ₹26.28 lakh. Gross room revenue is slightly lower - about ₹35,000 less - even though the homestay sells 350 more room-nights.
More importantly, the extra room-nights bring extra variable costs: cleaning, linen, water, electricity, toiletries and breakfast. OTA commission also remains: 70% of bookings at 18% commission is roughly ₹3.3–3.4 lakh either way, and if the lower price attracts more OTA bookings the commission burden may rise. The price cut therefore does not solve the core problem: a 3.9 rating driven by breakfast delay, noise and check-in confusion.
A lower price may attract more price-sensitive guests and worsen the service strain, producing more poor reviews. The proposal is a volume gamble with no service fix. It should be rejected as the main strategy, or tested only as a limited off-season tactic.
2. Propose a 90-day marketing and service plan that uses the ₹50,000 better, including the café partnership and review recovery.
Read the worked answer
Weeks 1–2: fix the obvious service failures (₹12,000). Put clear check-in signage at the lane entrance and send a pre-arrival WhatsApp message with directions, check-in time and a contact number. Add door seals and earplugs for front rooms, and move light sleepers to rear rooms where possible.
Weeks 2–4: café breakfast partnership (₹12,000 setup). Give guests a pre-order sheet at check-in with three set breakfasts; the café supplies at ₹90 per head and the homestay sells at ₹150. Set a 20-minute service target and a free tea/coffee fallback if late. This directly addresses the most damaging review theme.
Weeks 3–6: review recovery (₹8,000). Respond to every review within 24 hours, apologise specifically, state the fix, and invite the guest back. Train the family hosts in a short script. Track rating weekly.
Weeks 4–8: direct-booking assets (₹10,000). Professional photos, a Google Business Profile, a simple WhatsApp booking link, and a ‘stay 2 nights, get a guided Puri heritage walk’ package with a local guide. Aim to raise direct bookings from 12% to 20%.
Weeks 6–12: targeted promotion (₹8,000). Use Instagram for retargeting past guests and local weekenders, not broad awareness. Offer a small repeat-guest discount and collect emails at check-in.
Indicators: review average from 3.9 to 4.2; breakfast complaints below two per month; direct bookings +5 percentage points; repeat guests from 8% to 12%.
3. Write a short reply to a public review that says: ‘Breakfast took one hour, the street was noisy, and nobody told us where to check in.’
Read the worked answer
“Thank you for telling us this - we are sorry. A one-hour breakfast, street noise and a confusing check-in are not the experience we want to give. Since your stay we have introduced a pre-order breakfast sheet with the café next door and a 20-minute service target; we have added clear check-in signage and send directions by WhatsApp before arrival; and we now offer earplugs and rear rooms to guests who are light sleepers. We would like to make this right. Please contact us directly on [number] and we will arrange a complimentary breakfast and a quiet room on your next visit. - The Sea Breeze family”
Why this works: it acknowledges each specific complaint, states concrete fixes rather than excuses, and offers a private recovery channel. It does not argue about whether the street was noisy or blame the guest. It also quietly moves the guest from a public OTA platform to direct contact, which supports the direct-booking goal.