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15347

Student Name: Hansel Tsang

Dynamic Econometric Consulting Services (DECS)

Dynamic Econometric Consulting Services (DECS)

ECON1203

1. EXECUTIVE SUMMARY

This report provides an analysis on and addresses the customer type,


performance and profitability of the CPResorts Forster conducted by Dynamic
Econometric Consulting Services (DECS), with the focus being on two key
performance indicators (KPI) stated in the CPResorts business plan. The first was
considering if the majority of customers stayed for the duration of a week at the
resort, whilst the second KPI assessed whether customer expenditures per day
surpassed $260.
The analyses were conducted on a sample of 200 customers, a sample
size large enough for the sampled distribution to be normally distributed,
according to the Central Limit Theorem, with the information provided featuring
income details, booking party numbers, duration of stay, customer age and
expenditure over accommodation costs.
The statistical investigation into the facilities performance established key
features of the Forster branchs type of customer:
Middle-aged customers are attracted to the resort, with a mean age
of 46.5.
69% of customers earn an income of over $80,000, reflecting the
upmarket status of the resort.
34.5% of customers attend the resort as a group of 4, showing the
resorts family appeal.
Time spent at the resort was mainly 2 days or 7 days, with 51% of
customers staying the full week.
The most common daily expenditure was between $200 and $250,
below the second KPI as stated in the business plan.
It is worthy of noting that the first KPI was achieved as there was no
contrary evidence, proving more than 50% of customers stayed for seven nights.
However, the second KPI was not fulfilled, with the mean daily expenditure being
$238, with only 30% of customers spending over $260 daily.

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Dynamic Econometric Consulting Services (DECS)

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It is recommended that in order to improve daily expenditure and profit


revenue, the company should review its current promotional strategies and
facilities to better reflect its business plans and the customer market, with
particular consideration of higher income earning, middle aged customers
travelling with families to the resort.

2. ANALYSIS OF PERFORMANCE INDICATORS


2.1 INCOME
The annual family income is a crucial characteristic as it would influence
the number of people in the booking party, the length of stay and the
expenditure above accommodation costs. As shown in Fig. 1, the two income
brackets consisted of 31% below $80,000 and 69% above $80,000. The average
expenditure per family was approximately $532 in the lower bracket, and $1449
in the higher, reflecting the resorts advertising as an upmarket complex.
Furthermore, Fig. 2 shows the prevalence of high-income customers to stay the
full seven nights, maintaining the upmarket complex.

Family Income

Duration of stay, by Income


98
50
Less than 80,000
25
47 23

Family
Income
31%

More than 80,000


2

23

69%

Under
$80,000
Over
$80,000

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Dynamic Econometric Consulting Services (DECS)

ECON1203

Figure 1; Family Income based on a sample of 200 customers.


depicting the relationship

Figure 2; Column graph

between income and duration of stay.

2.2 NUMBER OF PEOPLE IN BOOKING PARTY


The number of people in each booking party identifies the type of
customer which has been attracted to CPResorts Forster. As seen in Table 1, the
largest frequency and modal class is occupied by bookings of four people,
represented by 34.5%. In addition, the table shows that 66.5% of customers
booked with 3 or more people, whilst only 33.5% booked as couples. This reflects
the business plan to position the resort as appealing to families, as the majority
of bookings with 3 or more people would be constituted by families.
Number of
Peopl
e
2

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Frequen
cy
67

Relative
Frequency
33.50%

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Dynamic Econometric Consulting Services (DECS)

3
4
5
6
Total

24
69
20
20
200

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12%
34.50%
10%
10%
100%

Table 1; A Relative Frequency table displaying the number of people per booking
party.

People in Each Booking Party


2 people
10%
10%

3 people
34%

4 people
5 people

35%

12%

6 people

Figure 3; A pie chart reflecting the frequency distribution table


for the number of people in each booking party.

2.3 AGE OF CUSTOMERS

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Dynamic Econometric Consulting Services (DECS)

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Customer Ages
40
35
30
25
20
Frequency 15
10
5
0

Bin Class

The booking age has a range


of 38 years, from 26 to 64, with a mean and mode of 46.5 and 49 respectively.
Alongside the median of 46.5, these figures suggest that the later middle aged
group is potentially more attracted to making bookings at CPResorts Forster, with
Figure 4 showing the modal class of 46-50. The middle-aged group are most
likely to holiday with entire families, reflected in the covariance of -0.16 between
age and group numbers, and shown in Figure 3 above. Thus CPResorts can
identify the middle-aged group as their main potential customers.
Figure 4; Frequency Histogram reflecting the ages of CPResorts Customers, showing a
slight negative skew.

3. KEY PERFORMANCE INDICATORS (KPI)


3.1 KEY PERFORMANCE INDICATOR 1 LENGTH OF STAY
The performance of CPResorts in the first KPI was assessed through the
customers length of stay. DECS analyzed this through a lower-tailed hypothesis
test to investigate whether 50% of the sample customers had stayed for seven
nights. With the sample size of 200, the Central Limit Theorem was applied,
establishing a normal distribution. Preliminary analysis reflected that 51% of
customers stayed the full week, as seen in Table 2, although further hypothesis
testing is required to reflect the population proportion.

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Dynamic Econometric Consulting Services (DECS)

Lengt
h
2
days
3
days
4
days
5
days
6
days
7
days
Total

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Frequen Relative
cy
Frequency %
75
37.50%
11

5.50%

2.50%

1%

2.50%

102

51%

200

100.00%

Table 2; Frequency Distribution of Length of Stay

3.1.1 - HYPOTHESIS TEST


H0 : p = 0.5 (Null Hypothesis)
H1 : p < 0.5 (Alternative Hypothesis)
Let the significance level be 5%; = 0.05
Therefore, the Rejection Region is:
Z < -Z = -Z0.05 = -1.645

The sample proportion of success is given by:

X 102
^p= = =0.51
n 200
^p p

With the standardized test statistic being: Z =

Student ID: z3415347

p ( 1p )
n

0.510.5

0.5 0.5
200

=0.283

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Dynamic Econometric Consulting Services (DECS)

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However, 0.283 > -1.645, and therefore does not lie in the rejection region.
Considering the P-Value, P (Z < 0.283) = 0.5 + P (0 < Z < 0.283)
= 0.5 + 0.1103 = 0.6103
Therefore, the null hypothesis is not rejected, as the test statistic is not
contained in the rejection region, reflected in Fig 5. Furthermore, since the Pvalue is greater than 0.10, it is not statistically significant and suggests there is
no evidence to infer that the alternative hypothesis is true. As such, DECS
supports the statement that CPResorts Forster has more than 50% of customers
staying for a full week.

Figure 5; Standardized Normal Distribution for


the customer's duration of stay

3.2 KEY PERFORMANCE INDICATOR 2 EXPENDITURE PER DAY


The second key performance indicator stated in the CPResorts business
plan is to have the average customer spending more than $260 per day in
excess of accommodation costs. Accordingly, a one-tailed hypothesis test was
undertaken in order to establish whether the second KPI was met. As the
population variance is unknown, the test could be conducted through tdistributions. However, the large sample size of 200 will result in miniscule
differences between Z and t-distributions, and thus a Z-distribution was applied.
Preliminary analysis of expenditure per day, presented the findings in
Table 3, whilst Fig. 6 shows the daily expenditure, with a modal class of 200-250,
suggesting that CPResorts has not met their KPI in a sample study.

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Dynamic Econometric Consulting Services (DECS)

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Expenditure Per Day


Sample Mean (

Sample Variance (s2)


Sample Standard Deviation (s)

238.484
7
2521.64
50.2159
3

Table 3; Preliminary analysis on the expenditure per day in excess of


accommodation costs.

Expenditure per day


100
80
60
Number of Customers

40
20
0

Amount ($)

Figure 6; A negatively skewed histogram showing the expenditure per day in excess
of accommodation costs, with a modal class of 201-250, and an outlier at 533. 1

1 The bin classes marked are the maximum values of each bin.

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Dynamic Econometric Consulting Services (DECS)

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3.2.1 - HYPOTHESIS TEST


H0 : = $260
H1 : < $260
Let the significance level be 5%; = 0.05
Therefore, the Rejection Region is:
Z < - 1.645

The standardized test statistic for

238.48260
=
50.22
200

is given by: Z =

x
s
n

-6.06

Since -6.06 < -1.645, the standardized test statistic lies in the rejection region,
as illustrated in Fig. 8.

The P-Value, P(Z < -6.06)

0, proves that there is overwhelming evidence to

infer that H1 is correct.

Figure 7; Unstandardized Normal Distribution of the hypothesis

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Dynamic Econometric Consulting Services (DECS)

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test, with a critical value of 254

Figure 8; Standardized normal distribution of the hypothesis


test, with a critical value of -1.645

DECS therefore concludes that there is enough statistical evidence to


reject the null hypothesis in favour of the alternative hypothesis being true.
Thus, CPResorts Forster has not met its second KPI; the average customer is
spending less than $260 per day in excess of accommodation costs.

4. CONCLUSION
The statistical analysis conducted by DECS, observed in this report,
establishes that CPResorts Forster is not operating at the target level stated in
the CPResorts business plan. The provided sample data has suggested that the
higher-bracket income group are a central part of the current type of customers,
along with families of 4 and middle-aged consumers. The resort did meet the
first KPI of having more than 50% of customers staying for seven nights.
However, the report illustrates that the resort has been unsuccessful in their
second KPI of customers daily expenditure being over $260. Ultimately, the
resort attracts upmarket customers, as per its business plan position, although
DECS recommends CPResorts to consider reviewing the current promotional
strategies and facilities to better reflect the established customer market.

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Dynamic Econometric Consulting Services (DECS)

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