Miami Local Business - Imperia Gardens and Lounge Corporation - Case Study Example

Proposal For Miami Local Business Introduction Imperia Gardens and Lounge Corporation is a private equity firm in the US with several subsidiaries abroad. The company employs the four principles of marketing a factor that has attracted a number of people to the business. The location of the hotel in Miami is strategic and can be accessed by most of the customers that need services from the place. Accessibility of the business is critical in the sense that when there are difficulties in accessing the premises the clients are turned away. Imperia gardens and lounge adopt a promotion strategy where the company uses the mainstream media and the online platform to market itself (Imperia Gardens & Lounge 1). Advertisement has become one of the areas where the company has thrived to a greater extent. The essence of advertisement is to make the company and its activities known to a wider audience. The pricing strategy employed by the company places the hotel above the competitors in the entire Miami region. The prices of food and services at the hotel are relatively favorable and are attractive and more appealing to the consumers. The entry of another business in Miami threatens the viability of the business. In the recent past, a number of hotels have emerged and sought perfect entry strategies that will ensure that competition is enhanced. To this extent, a company must come up with strategies that will ensure that it remains relevant in the Miami market. The proposed solution in the face of growing competition is that the company has to review the pricing strategy used at the hotel. There is a need to have a pricing strategy that is more competitive and attractive to the customers. The new entrants are likely to introduce prices that are likely to bear more favorable to customers. It is against this background that the document proposes a discounted pricing strategy for basic products to ensure that the business stays afloat in the market. Body Though the Imperia gardens and lounge has been in impressive in the Miami market, new entrants in the industry, especially in the hotel are likely to elbow the business from the market. The proposal is to have a business review its prices by offering discounts on basic products regularly sought for by the customers. The threats posed by other competitors are real and have to be dealt with as appropriate to ensure the company stays afloat in the market. Revenue maximization is one of the primary goals of any business set up. With the entry of new competitors Imperia Gardens faced problem with revenue management. The revenue managers have to maximize both room revenues and overall hotel revenues now. Managers can reduce room rates so as to attract additional guests in the hotel. As a result the demand for other revenue centers will increase. The revenue centre for Imperia Gardens include spa & fitness facilities, the casino facility, golf courses and other functional rooms. These revenue centers will generate profit for the hotel only when guests are already accommodated in the rooms of the hotel. Therefore low pricing for the room is required. This revenue maximization can be done by both pricing and non pricing tools. Scholars have identified that the best pricing tools in hotel industry are that of price discrimination, dynamic pricing and the lowest price guarantee. The manager can charge different prices from customers for the same rooms depending on the price sensitiveness of the different customers. For example it can always charge higher prices from the business travelers who being less price sensitive will pay higher prices than leisure travelers. This is the way price discrimination can be applied. Again to avoid migration from high priced products or offers to lower ones, the concept of price fences should be introduced in Imperia Gardens. Price fences set the conditions under which certain products are being offered like day of the week, duration of stay by travelers. And these conditions should be informed to the customers on a prior basis so as to avoid any future claims from the later. Maximizing the revenue can also be done via dynamic pricing by which Imperia can set its room price based on current demand and occupancy rate but this method will shove off the customers. Another method which is of importance is that of lowest price guarantee in which Imperia can guarantee its customers that if they can find any hotel charging lower price than Imperia within 24 hours of booking then Imperia itself will offer that price to the customer. But research shows that customers are not much benefited from this lowest price as because there is a lag between booking date and arrival date. Therefore from the pricing strategy I would recommend Imperia to follow the way of price discrimination to maximize its revenue and profit and also to compete with its competitors. There are certain non pricing tools also for Imperia. Imperia should improve its capacity management that is expanding the number of rooms and capacity flexibility where the hotel is able to respond to the fluctuation in demand. Imperia can expand its capacity by offering day let rooms along with the number of overnights it serves. Imperia can also follow the principle of overbooking. Although overbooking is criticized on the basis of legal and ethical terms, but many hotel follows it to protect itself form losses by last minute cancellations and amendments in booking by the customers. But Imperia have to be careful in planning the optimal level of over bookings. Imperia can also control the length of stay of any customer by setting maximum number of nights one can stay in a room. It will help Imperia in times of special events when the demands for rooms are high but some customers book the rooms for short time period. For Imperia my suggestion will be to increase the capacity by allocating some rooms for day let out and night let out and the other rooms being allocated to customers who stay for a certain period of time. Overbooking policy is required so that Imperia can shield itself from any future loss (Ivanov & Zhechev, 2012). Conclusion and Recommendations We have to analyze the external environment which affects the Imperia business. These external influences can be given the acronym PEST i.e political, economic, socio cultural and technological events. Imperia will enjoy competitive edge over the rivals only if it offers something which the rivals are unable to offer like Imperia can arrange for frequent loyalty guest program like Imperia Preferred Guest or diversification of brands, sources of revenue, geographical location etc. As per Porter, firms create superior valued service or product at higher price for customers or they produce the basic products at lowest possible cost. So he suggested two strategies of product differentiation focus and low cost focus. One way to gain advantage is to become low cost providers of goods or services. Having lowest cost does not mean charging lowest prices. The hotel will be able to enjoy higher profit if the cost is low but the price being charged is same to that of competitor. High capacity utilization, economies of scale, advancement in technology are some factors which lead to lower costs of any business set up. Imperia should either focus on being the low cost leader or shall provide its customers with differentiated products or it will be stuck in middle. Product differentiation can be gained by providing varied services like special offers on luxurious stays, gay & lesbian stays, providing supplier relationships to customers, creative advertising etc. But to apply this Imperia should assess its customer’s lifestyle and aspirations and it has to levy higher prices to cover up for the extra costs. One of the key for this strategy to succeed is that customers are willing to pay more than the cost to create it. Therefore Imperia has to keep the cost low in the areas which are not directly associated with the areas of differentiation. As a suggestion Imperia can keep the staffing costs low. It can take upon the blue ocean strategy i.e to seek for the least crowded competitive position. Imperia should borrow the traditional hotel concept of low cost and create entirely new design elements in the hotel and raise the offering of amenities like personal showers, private rooms etc. To compete on price, service, quality with the other hotels it should strip out the costs permanently by reducing overstaffing which add no values. Some superior resources are difficult to imitate and then the hotel can sustain its competitive advantage but generally most of the innovations in hospitality sector are easy to replicate and thus the hotel loses its competitive advantage (Enz, 2011). References Enz, C.A.(2011). Competing Successfully with Other Hotels: The Role of Strategy.The Cornell School of Hotel Administration on hospitality: Cutting edge thinking and practice (pp. 207-226) Ivanov, S. & Zhechev, V. (2012).Hotel revenue management –a critical literature review. Tourism Review, Vol.- 60,No. 2,pp-175-197 Read More