Villas In Florida Market Analysis - Term Paper Example

VILLA’S IN FLORIDA – MARKET ANALYSIS College February 28, 2008 Introduction Broadly, the strategies can be ifiedinto three major types: Cost leadership, Differentiation and Focus. In Hospitality industry, Cost leadership strategy is not considered to a great extent because it is a luxurious sector. The main focus of the hospitality sector is to adopt the differentiation strategy and technology focus to achieve competitive advantage. A lot of innovative practices are introduced and customer service and value added service play a major role in the hospitality industry. This paper will discuss the differentiation and technology focus strategies adopted in the hospitality enterprises. Some of the strategies used by hospitality enterprises to achieve competitive advantage include Strategic Planning, Market Research. Business Planning, Retail Growth Strategy, Meal Plan Strategy, Sourcing and Procurement Strategy, Concept Development, Health and Well-Being Strategy, Information Systems Strategy, Food Facilities Planning and Design. Vital Statistics about Hospitality Industry Accommodation and food services makes up about 8.1 percent of all employment. (U.S. Bureau of Labor Statistics). Employment in the accommodation and food services industries is predicted to grow 18% between 2002 and 2012, adding more than 1.6 million new jobs. (U.S. Bureau of Labor Statistics). Of the 8,740,000 total workers employed in the accommodation and food services industry in 2003, 5,343,000 works full-time (61%), while 3,397,000 work part-time (39%). (Annual average for 2003, according to the Current Population Survey, a joint project of the U.S. Bureau of Labor Statistics and Census Bureau). The Total Industry Investment is $1,765,000 and the total leveraged resources are $5,900,000. - U.S. Bureau of Labor Statistics, 2004-05 Career Guide to Industries and Occupational Outlook Profit and average room rate at the UK’s chain hotels continued to increase in November, according to the latest HotStats survey from TRI Hospitality Consulting. Across the total UK sample of 462 hotels, income before fixed charges (IBFC) – also known as gross operating profit – rose by 5.6 per cent to £52.81 per available room. Average room rate increased by 7.4 per cent to £95.03 in November, a similar rate of growth to the 7.2 per cent achieved during the year so far. In London, profit grew by 7.9 per cent to £82.19 per available room. London’s hoteliers continued to achieve rate growth at near annual levels with an 8.9 per cent increase taking average room rate to a new high of £125.85. - Jonathan Langston, UK Chain Hotels Market Review November 2007 | TRI Hospitality, www.trihc.com Villa’s Market in Florida Florida property values vary greatly depending on where you are buying. A four-bedroom, three-bathroom Florida villa in Tallahassee will cost around $275,000 whereas a similar property in Key West will cost nearer to $4 million. The Florida villa rental market is thriving because of the popularity of the sunshine state with tourists and also the growth of commerce-based localities such as Miami. Zoning restrictions on the Gulf and Atlantic coasts have pushed up the price of Florida villa rental in those regions. The average weekly rent in West Palm Beach is $1587 and $1431 in Miami. The lower costs in Orlando, a ready-made tenant base, means it may offer the best investment opportunities in the market for Florida villa rental. Florida has a number of the fastest growing property markets in the US with price rises of 36% in Naples and 28% in Orlando in recent years. The growth of the Florida property market has meant there has been a shortage of properties in some areas. This has been met by developers seemingly building a Florida villa on every spare piece of land they can find. The Florida property market now appears to be experiencing an overall slow-down with less developments being planned and prices growing at a slower rate. Mortgage rates are expected to rise in the future, pushing up the cost of borrowing. Florida’s popularity amongst tourists and retirees ensures it will retain its investment potential and Florida villa rental still offers some fantastic returns. However, the sky-rocketing prices of Florida property in recent years may be finished and a new era of steady growth arriving. http://usa.overseas-homes-direct.com/florida/property-market-report.html Michael Porters Five Force Analysis Threat of New entrants: The Entry barriers include Capital The capital outlay needed for starting up the operation in this industry is huge ($60 – $70 million), since the leasing expenses and the taxes are high. The capital includes land and building, infrastructure etc. Huge capital is needed to procure land. The land rates in Florida as stated above are so huge. Then after procuring the land, building the villa’s is another major task. All this will take around 2 to 5 years to complete. Labor: In this industry the retention rate is high when compared to the others because of the demand for the experienced chefs in the industry. Finding and retaining skilled labor is a major issue for a new entrant. The salary aspect is one of the highest in the industry. So this also adds up to the cost. Tax Structure: Hoteliers have to bear huge taxes levied on them by the government for property, water, electricity etc. As a result, serious players with huge capital investments can enter into this industry. This villa market is highly unsuitable for business personnel expecting profits early. This market will take nearly 10 to 15 years to break even. Besides the high entry barriers, new entrants in this industry are high in recent days. Threat of substitutes: The growth of Home business restricts travel to a certain extent. So people consider their homes as substitutes for hotels and villa’s. Rivalry: There is a fierce price war going between existing players. The growing popularity of resorts can be a huge challenge to Hoteliers and other players in the hospitality industry. Bargaining Power of Suppliers The bargaining power of suppliers can be crucial. The suppliers are whole sale dealers of grocery and the like. The suppliers have undergone a drastic change over the years and with it their bargaining power also has increased. The following diagram shows the transition in the grocery market from 2000 to present. In 2000, there were a number of players in the field, subsequently, it got narrowed down and a consolidation is seen in this market. This increases the bargaining power of the suppliers. Here the customer is the hospitality enterprises. Bargaining Power of Customers The bargaining power of customers has grown drastically in this internet era. The customer is well informed in all aspects including price, service etc. and their decision making is very rational. A lot of online services provide a comparison of hotels and customers can bargain more considering these aspects. The customers include Corporate, Individual households etc. As suggested by Michael Porter, stronger the forces, difficult it is to enter and survive in the industry. For Hospitality industry, all forces are very strong indicating the level of competition and fierceness of the industry. To combat these challenges, the following strategies are adopted by the hospitality enterprise. Table 1: Competitive Analysis Factor Marbella Indian wells Solano Products Residential villa’s, Rental rooms, Restaurant Villa’s, Restaurants Luxurious villa’s, Rented rooms Value addition Golf Courses, Restaurants Swimming pool, Shopping Malls, Shows. Theme Parks, Waterparks. Expertise Customer Service Quality Luxury Location Florida Florida Florida Sales Method Toll free Numbers, Internet, Direct Selling. Advertisements, Internet, Direct Selling. Tie-ups, Internet, Direct selling, On Analyzing the above competitors, it is understood only a few portion is outsourced. So location of the villa is the most important thing in this business. My villa will be located very near to swimming pools, beaches, malls, restaurants etc. All these will be outsourced and my focus will be only on villas, renting them and customer satisfaction. My Product My product is going to be a luxurious place and a fun place. It will be catering to the needs of various target market. We offer a promotion package wherein the customer has to pay monthly and the customer is left free of charge spending the vacation along with the family. My business is going to be an internet based market; this is because most people would normally check online to see if they can book an holiday, they have to check the internet for companies who can give them the best deal and my potential customer for my business are family based people who would like to have a weekend out having fun with their children. This Positioning will also earn the company a goodwill eliminating all sorts of malpractices that are occurring in villas nowadays. We provide free catering services for repeat customers. This activity is appealing to families with young children as they would like to avail of this offer. It’s a wonderful opportunity to engage in family activities. My Value Addition My value addition is that the company will make the customer satisfy in both monetary terms as well as in qualitative terms. The customer will get more than the expectation. My villa is going to be fully self service based. This will ensure the customers from giving tips. The customer will be the boss. My Expertise My expertise will be to provide only rental rooms and in this service I will be the best. Once a room is booked, the room will be customized catering to the taste of the customer as the rooms are built like that. i.e. Fiber interior ceilings, can be altered at any time. I provide high end technical products and high end infrastructure in rooms and make them available at affordable prices. My Sales Method Direct selling is the motto. Internet to customer is the route that we follow to reach the customer. We also use intermediaries like the travel agents and have a special incentive program for all the intermediaries. The main emphasis lies on eliminating the intermediaries to the core. Reference: Charles W.L.Hill, Gareth R.Jones, STRATEGIC MANAGEMENT THEORY, Houghton Mufflin publications. Harvey M. (2000) Innovation and competition in UK supermarkets, Supply Chain Management, Vol 5 No 1, pp15-21 (via Emerald) Flavian C, Haberberg A, Polo Y. (2002) Food Retailing Strategies in the European Union. A comparative analysis in the UK and Spain, Journal of Retailing and Consumer Services, 9, pp. 125-138 (via Science Direct) U.S. Department of Labor, Employment & Training Administration, www.doleta.gov U.S. Bureau of Labor Statistics, 2004-05 Career Guide to Industries and 2004-05 Occupational Outlook Handbook Jonathan Langston, UK Chain Hotels Market Review November 2007 | TRI Hospitality, http://www.trihc.com/ Hotelier’s 2008 Top Ten Internet Marketing Resolutions | By Max Starkov and Jason Price Read More