Hotel Marketing Strategy
■ Problem
o Hotel Co. owns two resorts in Southern Florida (Miami & Fort Lauderdale) with 1200 total rooms. o A study has shown that customers are prone to avoid vacation destinations if they perceive the possibly of consistent rain during their vacation
■ Strategy
o Increase advanced booking rates for south Florida destinations versus other vacation destinations o Offer customers a refund for days when it rains for three days consecutively
New Markets. New Solutions.
Precipitation Event Hedge
o o o o o o o Weather Index: Location: Term: Strike: Limit: Tick: Premium: Precipitation 50% Miami & 50% For Lauderdale Nov ’02 – Mar ‘03 1/10” of rain for 3 consecutive days 10 occurrences $1,200,000 $2 million (or $4.50/rm)
New Markets. New Solutions.
Precipitation Payout Chart
$12.0 $10.0 $8.0
Payout ('000,000)
$6.0 $4.0 $2.0 $0.0 -$2.0 -$4.0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 Number of Occurences
New Markets. New Solutions.