Making Decisions for Strategic Advantage - Case Study Example

Marketing Report Name Name of Institution Executive Summary The Pullman Reef Hotel Casino operates in an external environment that has more opportunities than threats. The hotel operates in an environment that is politically stable. In addition, the economic situation is such that Australia is an attractive destination for both domestic and international tourists. The spread of some aspects of western culture, technological advancements, and reforms on immigration also provide opportunities for growth. While the hospitality sector faces a myriad of challenges from emerging competitors, the desire to stay in luxury hotels is still strong. The customer base for hotels like the Pullman Reef Hotel is expanding with the competitors taking some of the customers. This situation leads to the conclusion that Ansoff’s market development strategy will be appropriate for the Pullman Reef Hotel Casino. The establishment will retain the quality of its products and services, but it will target new consumer groups to retain and grow the current market share. The key recommendation is for the business to target a younger, technologically savvy generation to retain the position of market leadership. This will be accomplished through alterations to the current pricing, distribution, and promotion strategies. Table of Contents Executive Summary 2 Table of Contents 3 Marketing Report 4 Company Overview 4 Macro Analysis 5 Competitor Analysis 8 Current Customer Analysis 9 Strategic Formation and Objectives 10 Action Plan 11 Conclusion 12 Recommendation 12 References 14 Marketing Report Company Overview The Pullman Reef Hotel Casino is located in Cairns City in Northern Queensland. The city’s location gives its hospitality industry a competitive advantage given that it is considered to be the entry point to the Great Barrier Reef, one of the nation’s biggest attractions (Cairns Today 2015). Visitors to the city have a wide variety when it comes to accommodation, with available options including remote cabins, boutique hotels, bed and breakfast, serviced apartments, and five-star hotels. The Reef Hotel contributes to this variety by having the best 5-star hotel-casino in the city (Reef Casino Trust 2015, p. 7). The hotel is under the ownership of the Reef Casino Trust, a legal entity that is jointly owned by Accor Group and Casino Austria International Limited (The Reef Hotel Casino 2015). The hotel began operations in 1996 after the Queensland Government asked interested parties to operate a hotel-casino in Cairns in 1992 (The Reef Hotel Casino 2015). It has 128 rooms, several restaurants and bars, conference facilities, live performances, a wildlife dome, and the casino. The entire facility employs approximately 500 staff who are given access to training opportunities and competitive benefits (Reef Hotel Casino Careers 2015, p. 1). The performance of the hotel indicates that it holds a controlling share of the market for upscale 5-star hotels. Superb yield management was responsible for generating a 6.2% increase in revenue from the rooms. However, there was a 1.1% decline in revenues from food and beverage owing to reduced visits to the casino (Reef Casino Trust 2015, p. 6). The attempted takeover of the facility by Aquis confirms that the Reef Hotel Casino is a business with a positive outlook (Reef Casino Trust 2015, p. 7). Based on an evaluation of the Reef Hotel Casino, several strengths are evident. First, the location of the hotel is a major strength since the Great Barrier Reef is guaranteed to attract numerous visitors for the foreseeable future. Housing the only casino in Cairns is also a strength that distinguishes the facility from other hotels. The hotel also benefits from being associated with Accor Hotels, which is a reputable operator in the luxury and economy segments of the hospitality industry. The ownership structure gives the organisation access to a global talent base, expertise in handling all customer segments, and an efficient logistical system. As stated, the Pullman Reef Hotel attained an increase in revenue on the back of superb yield management (Reef Casino Trust 2015, p. 6). This decision to embrace forecasting technology can also be considered as a strength. On the other hand, the hotel also has some noticeable weaknesses. First, the food and beverage section experienced reduced revenues as a result of poor visits to the casino. This dependence on the casino to increase hotel sales is a weakness (Reef Casino Trust 2015, p. 6). Being part of a global hospitality organisation is also a weakness as the Pullman Reef Hotel Casino might lack the freedom to reposition itself according to prevailing market conditions. Macro Analysis All types of organisations are influenced by a myriad of factors some of which are internal and others external. These factors have to be evaluated in situations where organisations undertake strategic planning. In this case, strategic planning describes the process of matching a firm’s objectives, resources, and skills with changing market opportunities (Wilson & Gilligan 2012, p. 45). A macro analysis defines an examination of the external environment in which a firm operates (Kotler, Bowen, & Makens 2014, p. 64). It is evident that an organisation cannot control the external environment in the same way that it can control their internal environment. For instance, the Pullman Reef Hotel can utilise strategic human resource management policies to ensure that it acquires the best talent to offer the best service to clients. However, the hotel cannot control the global economy to make it favourable to the hospitality sector. The factors in the macro environment that will be of interest in the case of the Pullman Reef Hotel will include political, economic, socio/cultural, technological, environmental, and legal factors (Kotler, Bowen, & Makens 2014, p. 64). Australia benefits from having a stable political environment. However, the hospitality industry is still exposed to the political initiatives in Cairns. As stated, the Queensland Government played a major role in the development of the Pullman Reef Hotel in Cairns. The local governments also play a big role in promoting Cairns and its attractions to a local and international audience through agencies like Tourism and Events Queensland (TEQ 2015). This shows that the stable political environment creates enormous opportunities for the hospitality industry. When it comes to the economic environment, factors that will impact the success of industry include the performance of the global economy as well as income levels. The global financial crisis had far-reaching impacts on many sectors of the economy, with the global hospitality industry suffering considerably (Kapiki 2012, p. 19). However, the global economy recovery coupled with the weakening Australian dollar means that Australia’s hospitality sector as a whole can benefit from increased number of domestic and international travellers (The Australian Business Review 2015). When it comes to income levels, the Australian Bureau of Statistics found that average weekly disposable incomes for both low and medium income households were on the rise (ABS 2013). The recovery of the global economy will also mean that there will be more jobs, and, therefore, more people with disposable income. This will be beneficial to the hospitality industry as a whole. Variations in socio-cultural factors also impact the hospitality industry. Health and safety is one of the factors that has to be considered. An ongoing trend towards healthy foods and more active lifestyles affects food choices and, therefore, the choice of places to stay (Westcott 2014). Hotels and restaurants are therefore forced to ensure that they can cater to the health concerns of its clients. Changes in the population form part of the socio-cultural factors that have to be studied. In the case of the Reef Hotel, the target market is composed of business travellers who intend to have fun. Variations in the number of business travellers have direct implications for the hospitality industry. An increase in the number of female workers and an aging population are other factors that have to be considered (Jericho 2014). Finally, the hospitality sector relies on the adoption of Western cultures in the target markets. For instance, conservative cultures in some parts of the world might view gambling as reckless behaviour. The gradual adoption of western cultures in these areas will lead to a situation where more people try gambling. Such cultural changes would have direct implications on the attractiveness of Cairn’s hospitality industry that offers diverse attractions. Technological factors also have considerable impacts on the business. As stated, the hotel's ability to utilise forecasting tools led to higher revenues. Such technologies are available to other hotels in the industry, meaning that Pullman Reef Hotel Casino will need to find competitive advantages in other technologies. The widespread adoption of the Internet has facilitated the emergence of new business models, with a relevant example being Airbnb. This business model relies on technology to serve a target market that is also targeted by the Reef Hotel. Finally, the presence of the Casino is one of the major strengths of the Reef Hotel as it differentiates the establishment from other 5-star hotels in the region. Online gambling is increasingly popular among gamblers, showing that technology presents plenty of threats to the hospitality industry. It is an acceptable fact that the global climatic environment is undergoing change. Studies have shown that marine environments like the Great Barrier Reef are extremely vulnerable to climate change (Great Barrier Reef Marine Park Authority 2009). The destruction of this valuable resource will have direct consequences for the hospitality organisations in Cairns and Queensland as a whole. Environmental pollution and natural disasters also pose significant threats to the industry. The legal factors that affect Pullman Reef Hotel include changes in Queensland’s regulations that are related to the hospitality industry. In particular, changes to laws governing the casino will have a huge impact on the hotel as the casino provides many clients to the food and beverage section of the hotel. Consumer protection laws and immigration laws are other legal factors that have the potential to affect the business. Competitor Analysis The Pullman Reef Hotel faces competition from similar establishments in Cairns. These include the Hilton Cairns, Shangri-La Hotel Cairns, and the Double Tree by Hilton Hotel Cairns. Each of these hotels benefits from having a recognisable brand and pose a significant threat to the reef hotel. However, the most intense competition for the Reef Hotel comes from Pullman Cairns International. The presence of two hotels from the Pullman brand in Cairns is likely to create a strong rivalry. The presence of the Casino might turn out to be a weakness for the Reef Hotel, with some customers preferring the quieter Pullman Cairns International which has 321 rooms (Pullman Cairns International 2015). In addition to the competition from other five-star hotels, the Reef Hotel has to deal with a number of emerging competitors. HouseTrip and Airbnb are some the emerging competitors that offer attractive alternatives to hotels. HouseTrip manages over 300,000 facilities in 20,000 destinations with 95% of clients getting satisfied with the service (HouseTrip 2015). Airbnb uses a similar model with a search of Cairns showing over 700 listings of entire homes and private rooms (Airbnb 2015). It is evident that the variety and autonomy offered by these firms is very attractive to business travellers who might want to stay in real neighbourhoods. Based on this evaluation of traditional and emerging competitors, it is apparent that the Pullman Reef Hotel faces a tough future. In particular, the indirect competitors utilise technology to gain a sustainable competitive advantage. According to Sahaf (2008, p. 203), firms can take up one of four competitive positions – leader, follower, challenger, or niche player. Traditional hotel chains like the Accor Group are market leaders as they retain significant market share and affect the direction of the entire hospitality industry (Groucutt, Leadley, & Forsyth 2004, p. 238). The emerging firms like HouseTrip are innovative challengers who provide accommodation that can match some 5-star hotels. As such, Pullman Reef Hotel Casino is a leader in its market, but it needs to adopt strategies that will expand and protect its market share from worthy competitors (Sahaf 2008). Current Customer Analysis The Pullman Reef Hotel Casino targets business travellers and leisure travellers who come from the mid-range, upscale, and luxury segments of the economy. According to the Gold Coast Visitor Profile and Satisfaction Report (Tourism Research Australia 2013, p. 9), the majority of those visiting Queensland were domestic visitors with international visitors accounting for 17% of all visitors. 66% of the visitors were female, with 62% of all visitors falling in the 25-54 age group. The majority of the visitors were drawn from the middle class, with 25% of all visitors opting to stay in luxury hotels and resorts. When it comes to behavioural characteristics, 47% of tourists had visited the state in the previous 12%, with 54% booking their accommodation online (TRA 2013, p. 8). The top reasons for visiting the territory included the beaches, specific events, the variety of attractions in the territory, and Queensland’s suitability for family holidays (TRA 2013, p. 4). These statistics show that the Pullman Reef Hotel Casino can target broad customer segments. The profile of the visitors to Queensland shows that the customer base for luxury hotels is expanding. 86% of all visitors were returning visitors, indicating that the territory satisfies the different needs of its visitors (TRA 2013, p. 8). While the emerging competitors are taking a share of the market, 25% of all visitors still opt for luxury hotels, meaning that the Pullman Reef Hotel is likely to retain high occupancy rates. The recovery of the global economy, changes in the culture in Asia, and the relaxation of immigration laws are factors that are likely to increase the customer base. Pullman Reef Hotel Casino does not need to chase after new groups owing to the positive outlook for the hospitality industry in Queensland. Strategic Formation and Objectives The key issue that the Pullman Reef Hotel Casino will face in the next five years is competition from companies like Airbnb and HouseTrip. The performance of the global economy will also create enormous challenges as the hotel needs international visitors to improve on its margins. As stated, the presence of the casino differentiates the hotel from other establishments in the industry. However, online technology threatens to eliminate this advantage through the ease with which individuals can access online gambling. An evaluation of these key issues shows that the organisation needs to pursue one of Ansoff’s strategic choices. According to Kotler, Makens, & Bowen (2014, p. 104), there are situations where firms can grow with the same product in the same market or a new market. In the case of the Pullman Reef Hotel, the analysis of the macro environment, evaluation of the competition, and description of the current customers shows that there is considerable growth potential. Therefore, the appropriate long-term strategy would be market development, where the Pullman Reef Hotel will take the current products to fresh markets to take advantage of the available opportunities (Cole 2003, p. 71). The fresh markets will be composed of the increasing number of females who are getting into the workforce. Special emphasis will also be placed in the 20-25 age group, as this generation will begin undertaking business travel in the next five years. The hotel will retain its growing older clientele, with the younger generation forming the basis of future growth. Action Plan The Pullman Brand is associated with high quality. This emphasis on high-quality services will remain even as the hotel targets a younger demographic that might have lower income levels. The objective for the next five years will be to make the up-scale hotel attractive to a younger demographic. This will help to retain the current market share while fighting off the competition from emerging threats. The proposed changes to the marketing mix will include scheduling more events at the hotel to attract a younger crowd. The pricing should be altered during these events to create a relationship between the hotel and its customers. These changes to pricing will be informed by research from Tourism Research Australia, which indicates that most visitors to the region are extremely loyal (TRA 2013, p. 8). When it comes to distribution, the emphasis will be on online booking through apps and websites that are easily accessible on mobile devices. Finally, promotion will target a new group that will tend to be younger, female, and international tourists who want to experience staying in a 5-star hotel. The casino will play a major role in promotional activities as it differentiates the Pullman Reef Hotel from other traditional hotels in Cairns. Conclusion The Pullman Reef Hotel Casino is in a relatively strong competitive position. It can be considered as a market leader because it is owned by one of the foremost hotel groups in the world. The findings of the hotel’s annual report show that the establishment has a positive outlook. This has been confirmed in this paper. The hospitality organisation will continue to benefit from favourable factors in the political, economic, socio-cultural, and technological environments. The threats to the Great Barrier Reef and competition from emerging firms like Airbnb are the challenges that need attention. However, these issues can be resolved in the next five years, to leave the organisation in a stronger competitive position. Recommendation The global financial crisis had far-reaching impacts on the travel and hospitality industry with many players opting to cut costs to survive. The ongoing recovery means that firms need to adopt strategic policies that will allow them to retain their market share and grow. The key point in the report is that the Pullman Reef Hotel operates in a favourable business environment. However, the firm risks losing considerable market share to innovative challengers. It is recommended that the firm adopt Ansoff’s market development strategy which will involve introducing the existing products to new target groups. The behavioural and demographic characteristics of the new markets will also mean that the Pullman Reef Hotel Casino will have to be an innovative user of emerging technologies to remain relevant in a fast-changing market. 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