Strategic Management of Aber Gardens Hotel - Case Study Example

 1) Environmental Analysis A. PEST Analysis Political The UK has relatively high political stability. This is an opportunity for AG because it allows the business to operate in a good environment without unrests caused by politics. UK is also a member of World Trade Organization and the EU (CIA, 2013). This is an opportunity which allows the company to get a good access of markets for its services. However, the international terrorist threat level in UK ranked the second-highest level ‘severe’ which means attack is highly likely (GOV. UK, 2014) and this may become potential threat for hotel which is located in South-East of England because most travelers will consider their safety issue and obviate to travel or go to this place. Economic The growth of GDP in UK is negative but still can see they are increasing compare to last three years (tradingeconomic, 2014). (see appendix 1). The government also forecasts that the demand of Tourism may contribute 4.3% of GDP growth in UK (World Travel & Tourism Council, 2014) which is over the UK average GDP in 2014 and it indicates that UK have more mature growth in tourism industry. Moreover, England accounts for 34% of all inbound visitor spending, which rank the second compared with other place within UK which means the location of hotel may have a good reputation toward its primarily target market (Visit Britain, 2014). In order to control the inflation rate, the interest rate remains 0.5% since 2009 (Lamert, 2015). The low interest rate can be the opportunity for garden hotel to borrow money for investment in the land and to renovate the kitchen. However, one of the reasons for the inflation rate still declining to 0.5% (Lamert, 2015) which is lower than it target rate 2% (BBC, 2014) is the supermarket price war which means selling cheaper food for consumers (BBC, 2014). Cheaper food doesn't affect the customer to consume in our 2 Michelin restaurant because what they expect is the quality of food and the atmosphere in the restaurant, but may have a slight impact on the other two F&B outlets for the non-hotel guest because this segment may be more price-sensitive. Social factors The UK population is made up of mainly the ageing population (Burgan, 2013). This offers an opportunity for the luxurious hotel because the old people enjoy going to such places to spend their sunset years happily. The changing cultures in prevalence of luxuries and good quality services are also common in UK (Gitman & McDaniel, 2009). This is an opportunity for the company to attract customers. Technological factors “Internet of Things” is transformative development which is available in UK nowadays (Mcnamara, 2015). The devices which can connect the Internet are able to communicate with the web-enable gadget. For instance, Smart-homes system can allow the user to control air-conditioning, the light and window blinds by using the devices (Pustisek, Mali and Kos, 2014). This technology can reduce the operational expenditure while providing a quality experience for guests to have meetings in this high-tech and comfortable environment, and it may also attract guests to become loyal to this effective and convenient system. B. Porter’s Five Forces of Competition Competitive Rivalry Competitive rivalry is high when there are many similar companies offering similar products in the market (Porter, 2008). The Aber Gardens Hotel faces competitive rivalry from hotels such as Rowhill Grange Hotel and The London beach Hotel. The London Beach Hotel offers a beautiful setting that rivals AG’s beautiful manor. This rivalry offers a threat because each company attempts to become dominant. Nevertheless, the hotel develops differentiation strategies by investing in technology to improve its facilities and services as well as develop the future for investing the land. This may increase fixed costs and lower the company’s profits. Threats of New Entry The UK enjoys a competitive market environment whereby firms have an opportunity of free entry (CIA, 2014). However, it is not easy to enter UK’s and China’s luxury hotel industry because existing companies have raised barriers against entry by developing inimitable technologies and high economies of scale; hence there is a high cost of entry by potential competitors (Magretta, 2012). This is an opportunity for the company because the barriers reduces entry of new firms and enhances retention of customers (Porter, 2008). The government has also increased its capital expenditure on hotel industry through the National Trust in order to promote national heritage and culture. This reduces the barriers of new entry, and some firms such as Kimps Hotel Group and Turner Hotels have started talks with the government to open Boutique hotels. This is a threat of entry into the industry for AG. The Threat of Substitutes Except the golf club facilities, food, guest rooms, wedding events, and cafeteria offer in AG hotel. AG hotel tends to invest the Land for hunting to attract the buyers in different segment. This activity that the hotel offers rarely has substitutes. This low threat of substitutes is an opportunity for the hotel to serve a wide range of customers because customers do not have many alternatives to switch to. The Power of Buyers There are many hotels offering luxurious services and products for example the London Beach Hotel. Customers therefore have higher bargaining power (Porter, 2008). However, the switching costs for buyers are high because the hotel remains in high customer loyalty which shows in the occupancy for the room and fine dining restaurant are higher than 80% and 95% every day respectively. Therefore, they are not easily switch to a new supplier and negotiate for lower prices. Power of Suppliers The Law in UK allows the land to be used for hunting but only can hunt the certain type of wild mammal CPS (2004). Moreover, the estates manager targets specific people to purchase the land for hunting. This provides an opportunity for the property to buy the land for hunting purpose which can attract the high purchasing power customers and also differentiate the business in the market. Therefore, the main suppliers of hotels are concentrated and there are high switching costs between the suppliers. The summary of internal and external factor within SWOT analysis is shown in appendix. 2a) Pricing Strategy The marketing pricing strategy of Aber Gardens used by Amana is a flexible one which depends on various pricing variables, it can be considered as a skimming strategy. The company offers its prices lowly for as long as competition may allow. Furthermore, promotional strategy may also be applicable because some services e.g. block weddings are offered on discount. 2b) Pricing and Non-pricing methods Cost-based Pricing Method One of the pricing methods is the Cost-based pricing method. This method involves adding a fixed amount to the cost of production (Eliashberg & Lilien, 1993). The advantage of this method is that the owner of the business will certainly know the gross profit margin of each sale and ensures that the business always makes profit. Furthermore, the business is assured that the costs incurred will obviously be covered by the prices of the products because the company does not compete with prices but with quality of its products. Another advantage of using this method is that it is easy to calculate prices because it just entails determining the mark-up and adding it to the unit cost of production. It is also easy to determine the overall profit margin because the mark-up percentage is applied consistently in all product ranges (Mullins, & Walker, 2013). The mark-up of the company is 4%. One of the disadvantages of this pricing method is that it leads to uncompetitive pricing of products, leading to lower competitive advantage (Kew and Stredwick, 2005). The second disadvantage is that the quality of products may be compromised due to non-competitive pricing. However, the company offers good quality of products and high prices. Competitor-based Pricing Method In a competitive market, customers choose from sellers who offer reasonable prices and good customer service (Johnson et al, 2008). Firms in this market do not have the power to set their own prices. AG does not use this strategy because it uses the quality of its services to compete rather than the prices. One of the advantages of the competition-based pricing method is that it enables firms to set prices in line with competitors; hence competing fairly and equally with other firms in the market (Kozak & Andreu, 2006). AG could gain more competitive advantage by offering competitive prices because it already has quality. People in the tourism and hospitality industry do not care about prices, but they value quality. The primary disadvantage of the competition-based method is that it encourages the need to use other methods to attract customers. AG already has good reputation and good quality which can be used to attract customers. Branding non-pricing method Branding a business refers to the process of developing an identity and good look in the market in order to establish the business in the market (Dess, 2012). It increases the value of a company’s products and improves overall profitability. One of its advantages to AG is that it creates awareness of the company in order to attract new customers (Wendell, 2011). The brand is characterized by good luxury and quality of services. One of the disadvantages of branding is that it may become commonplace; hence each firm strives to develop the leading brand (Eadie, 1989). As more hotels in UK enter the market, they also develop their own brands. The Best Way to Achieve Revenue Implications Based on the pricing and non-pricing methods, AG may achieve revenue implications of 90% by developing the competitor-based pricing method because it ensures that the company achieves its 90% occupancy. In this case, the company sets prices at the rates that other competitors offer in the luxurious boutique hotel industry. The company already provides unrivalled quality and customer services. Its products are differentiated from those of other hotels in order to attract customers. Given this uniqueness of the company, competitive prices will ensure that the company attracts customers who prefer superior products and services at the same prices (Gračan et al, 2010). Branding is also important for the company. The company should develop a logo, a slogan and an appropriate design associated with each product range (Mulcaster, 2009). This will improve the identity of the business and encourage customer loyalty and retention. Branding will ensure that the company offers accommodation and entertainment services that are consistent and relevant to the objectives of the brand. 2c) Revenue for Aber Gardens – rooms division 2014 Based on the appendix 4, we received the room occupancy from each month and concerning the room price in different types of the room in low season and high season; the calculation of the room revenue on AG hotel in 2014 is as shown below: The sum of all type of room in high season with full occupancy: 31200*30=£936000 The sum of all type of room in low season in with occupancy: 21000*30=£630000 Jan (low season) 80%: 630000*80%=£504000 Feb: close Mar (high season) 80%: 936000*80%=£748800 Apr-June (high season) 96%: 936000*96%*3=£2695680 July-Sept (high season) 100%: 936000*3=£2808000 Oct (high season) 75%: 936000*75%=£702000 Nov and Dec (low season) 75%: 630000*75%*2=£945000 Total Room Revenue in 2014: 504000+748800+2695680+2808000+702000+945000=£8403480 The total room revenue the AG hotel received is £8403480 within 11 months of operation in 2014. 3) Stakeholders The main stakeholders with special interest in the activities of the company include customers, clients, employees and local communities. Customers require services including the access of the Golf club facilities. Full membership golf course offered by the hotel costs £2000 per year and junior course costs £350 per year. Some customers or guests of the hotel are also suite and conference users as well as room occupants. The company offers several rooms for guests which when fully occupied earn a lot of revenue for the company. The main interest of these customers in the company is to enjoy services such as golf training, meals, accommodation, family holidays, conferences and seminars. Customers are the strongest and with the highest interest in the company. The government is also interested in the company because it develops policies that guide the operations of the business (Miller, 2009). For example, the government sets policies on acquisition of land; hence affecting the intentions of the business to acquire land needed for growth. The government is also a strong stakeholder because it determines the suitability of the environment for the business to conduct its businesses successfully. Employees also have special interest in the company because they earn salary and wages from the company. This means that the company incurs costs of paying them for their services. The perspectives of these stakeholders may differ in terms of the classification of AG as a successful business. In terms of quality and beauty, the hotel may be considered successful by the same customers. The local communities may consider the company successful in terms of its brand and size of occupancy which is 95% during high season. The financial performance also shows that the company is successful (Aver & Čadež, 2009). For instance, the net profit margin of 4% means that the government sees the company to be successful because it may earn enough income to be taxed. 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