Sea Paradise Hotel SWOT Analysis - Case Study Example

Rероrt of Нотs Simulаtiоn Student Name Instructor Course University Date Executive Summary The past five years have seen the Sea paradise hotel (Team 8) increase its market share and sales performance, which is mostly due to its effective marketing mix strategy. However, many unpredictable occurrences may emerge in the marketplace, which means that the hotel must be on the look out and be ready to adjust its strategies accordingly so as to move along with the real time market trends. As established in this report, high turnover rate was among the most serious problem in the hotel. Effective execution of the given recommendations would significantly help the hotel accomplish both its long term and short term goals. In specific, the hotel would ultimately reduce staff turnover rate, increase customer satisfaction, achieve lower overall costs than rivals, as well as increase public awareness through an integrated marketing communication strategy. Table of Content Introduction………………………………………………………………………………5 Environmental Analysis…………………………………………………………………5 Assessment of Industry Environment…………………………………………………….5 SWOT Analysis/Capability Assessment……………………………………………….7 Strategic Statements……………………………………………………………………..9 Intended Strategy………………………………………………………………………..9 Realized Strategy………………………………………………………………………..10 Marketing………………………………………………………………………………10 Positioning Strategy…………………………………………………………………….10 Pricing Tactics…………………………………………………………………………...10 Appropriate Advertising Expenditure…………………………………………………..11 Appropriate Promotional Campaigns…………………………………………………...11 Evidence of Future Promotions…………………………………………………………12 Operational Management……………………………………………………………..12 Staffing Levels………………………………………………………………………….12 Appropriate Staff Training Budget…………………………………………………….13 Refurbishment and Maintenance Program………………………………………………13 Interpretation of Operating Results……………………………………………………...14 Financial and Operating Results………………………………………………………14 Conclusions, Recommendations and Justifications…………………………………..17 Conclusion……………………………………………………………………………….17 Recommendations……………………………………………………………………….17 Justification………………………………………………………………………………18 List of References………………………………………………………………………..20 Rероrt of Нотs Simulаtiоn Introduction This is a hots simulation report of Sea paradise hotel (Team 8) that aims at carrying out a strategic analysis of the hotel. It includes an environmental analysis, as well as SWOT analysis and capability assessment. It will also cover the hotel’s current strategy, particularly in regard to marketing strategy and operational management strategy. More importantly, the recent financial and operational performances of the hotel have also been illustrated. Lastly, this report has offered a concrete conclusion, as well as possible recommendations that can enhance the hotel’s competitive advantage in the long run. Environmental Analysis Assessment of Industry Environment In the 1970's, increased affluence and the desire for regional and national travel produced a boom in this seaside town as it developed into a popular destination for coastal vacations and off-season breaks. This influx encouraged the establishment of annual tourism and recreational events, which, in turn attracted increased levels of tourism. Many hotels entered the market during this period offering traditional facilities in well-constructed buildings and conveniently situated for both the sea and the town. The town grew to a city of 200,000 residents and in the 1980's the city economy began to diversify into service and soft industry, which generated a small market for commercial room nights. The combination of regional tourist events and commercial growth prompted one of the established hotels to build an excellent conference centre. With a diversified economy, a seafront location, and good hotel facilities, the city seemed to be in a strong position. Unexpectedly, in the late 1980's the tourism market in the city began to soften as tourists looked for new venues and new types of tourist experiences. There was also public criticism of the city's hotel facilities, which had not kept up with the times. By 1995, only 50% of the previous levels of tourism remained and this was largely due to the annual tourist events which had become very well established. No longer a boomtown, and short on tax funds to maintain its infrastructure, the town was also losing its appeal for small industry relocation, as well. In the early 2000's, many companies were looking to relocate to areas that offered lower commercial costs, lower taxes, and a higher quality of life. The local authority decided to offer an exceptionally favorable economic relocation package for small and medium size firms. This plan has been very successful and many companies have relocated or have committed to relocate. The council has used tax income from these commercial developments to re-establish the seafront facilities to meet the highest expectations of modern tourists. Recently, the resort has become a popular location for conferences, both in and out of season. The following information defines what would be considered the norms for 4-star, 3-star and 2-star hotels operating in this market. A 4 star hotel has 150 guest rooms, À la carte restaurant and coffee shop, two bars, health club, conference and business bureau, car parking to rear, as well as standard refurbishment. A 3 star hotel should have 200 guest rooms, restaurant, bar, small health club, conference facilities and business services, ample car parking, grounds, as well as standard refurbishment. A 2 star hotel should have 70 guest rooms, restaurant, bar, no health club, two conference rooms, no business services, car parking, as well as standard refurbishment. SWOT Analysis/Capability Assessment Strengths Essentially, one of the major strengths of Sea paradise hotel (Team 8) lies on its strategic location. This traditional hotel was opened when the resort area was growing in popularity for coastal vacations and off-season breaks. The growth of this and other resorts was due in part to the easy access provided by the new road and rail networks. Many hotels in the town offer traditional facilities in well-constructed buildings. The Sea paradise hotel (Team 8) is situated on the seafront, close to other hotels and a short distance from the main shopping center. In addition, the town is less than 30 minutes from the nearest airport, and there are good road, rail and bus links to major cities and other resorts. The town has a resident population of 145,000. More importantly, Sea paradise hotel (Team 8) had 250 guest rooms with large, comfortable and vary in decorative style and standard. The hotel also offers several leisure facilities, as well as 24 hour front desk and car parking. Weaknesses One of the main weaknesses affecting Sea paradise hotel (Team 8) is the lack of effective marketing strategies. Though the level of competition has skyrocketed due to many new market entrants, the hotel progresses to use traditional strategies without taking into account the threat of competition. For instance, Sea paradise hotel has significantly overlooked the use of digital marketing platforms, such as the social media marketing and the internet marketing. Essentially, these are the trending platforms for marketing strategies, which are becoming increasingly popular today. Continued use of the traditional marketing tools and overlooking the modern ones poses a great weakness to the company. The other weakness affecting the hotel is that it has no leisure facilities, business services, conference facilities, as well as meeting rooms, and also does not have a star rating or AA Diamond rating as opposed to its direct competitors. Opportunities Based on its strategic location, Sea paradise hotel (Team 8) has numerous business opportunities at its disposal. Essentially, this hotel is located on the seafront and a short distance from the main shopping center and the nearest airport, which offers it a huge market size. In addition, there were efficient modes of transport, which include road, rail and bus links to major cities and other resorts. Another opportunity for Sea paradise hotel (Team 8) regards market expansion. In this context, the hotel should consider exploring emerging, unexploited markets and consequently expand in order to enlarge its market size. Furthermore, the hotel should exploit the business opportunity created by the different kinds of popular festivals and well established tourist events that are often held in the town. Threats Although Sea paradise hotel (Team 8) is located on the seafront and a short distance from the main shopping center and the nearest airport, it is close to numerous other hotels that pose a significant threat of competition. This means that the competitors target the same market with the hotel, which makes it hard to build a substantial market share. Furthermore, this intense competition does not only affect the hotel’s marketing performance, but it is also a threat to its talent retention efforts. In the recent times, the hotel has been characterized by a high turnover rate. In this regard, competitors within the market, and even from abroad are increasingly competing for the best talents through offering better incentives and rewards, thereby causing a high turnover rate for those hotels that lag behind. Strategic Statements Sea paradise hotel (Team 8) has a key aim of maximizing profitability and achieving business success over the competition. The computer technology takes a prominent place in making strategic decisions in key management areas, including finance, sales and marketing, and human resources. In addition, such decision areas have been extended to include environmental considerations, revenue management and social media strategy, all with a focus of strengthening the competitive advantage of the hotel in the long run. Intended Strategy Owing to the fact that the marketing environment has become increasingly, the hotel intends to give priorities to strategies that can really strengthen its competitive advantage. In general, Sea paradise hotel (Team 8) intends to execute a combination of three strategies, which includes the focus strategy, cost leadership strategy, as well as differentiation strategy. The focus strategy will allow the hotel segment its market and thereby focus on the most viable niche target markets. The cost leadership strategy will allow the hotel enjoy the least cost of operations in the industry, and thereby offer its services at appealing prices to customers in this competitive market environment. Lastly, the intended differentiation strategy will ultimately enable the hotel offer differentiated or rather unique quality services to customers as compared to those of competitors, which would be a major source of competitive advantage in terms of better brand positioning (Siguaw & Enz 1999, p. 49). Realized Strategy The hotel has relatively realized its marketing mix strategy that it had planned years ago, whose results can be evidenced by its remarkable growth it has actualized. This marketing mix strategy comprised of the product strategy, which entailed expanding the hotel’s product and services offer, as well as promoting delivery of better services to customers; pricing strategy, which entailed offering products and services at suitable prices taking into account factors like competition, economic growth, demand and supply, among other factors; promotion strategy, which entailed increasing advertising and sales promotion activities; as well as the place strategy, which entailed refurbishing the hotel facility to make it a better place for customers’ comfort. Marketing Positioning Strategy In the hotel, year round trade is available for a mix of business, including conference, and leisure. During the week, the targeted clients are mostly 30-50 age group and middle to upper management. At weekends, the clientele is mainly the 30-50+ age group, middle to upper management with their families. Essentially, these groups form the target market for the hotel, and through marketing campaigns, the hotel positions its products and services in the minds of these groups as of excellent quality and fairly priced as compared to those of competitors. Pricing Tactics Sea paradise hotel (Team 8) uses fair, but competitive pricing tactics. While setting the prices of its products and services, the hotel considered many factors that affect the customer’s ability to buy, as well as the competitors pricing tactics. Those factors that affect the customer’s ability to buy include the level of disposable income among consumers, the rate of national economic growth, inflation rate, as well as the general demand and supply of hotel services in the marketplace. The hotel also evaluates the pricing tactics of its competitors with a focus to set prices that will look attractive among customers. Appropriate Advertising Expenditure In the past five years, the hotel has significantly increased the budget of advertising expenditure. Essentially, advertising expenditure has increased from $200,000 in 2010 to $1.4 million in 2013. It is anticipated that the commitment of the hotel management towards advertising and marketing communication will increase in the coming years. This will be very strategic towards enlarging the hotel’s customer base, as well as promoting customer loyalty (Torres & Kline 2013, p. 654). Appropriate Promotional Campaigns It is not enough for the hotel to have good products sold at attractive prices. In order to generate sales and profits, the advantages of products had to be communicated to customers through the use of marketing campaigns. This hotel properly implemented promotional mix, which significantly increased the market share and improved organizational growth in the face of strong competition. The promotional mix included the use of various promotional elements, such as advertising, public relations, sales promotion, as well as direct selling. In addition, this hotel acknowledged that the promotional mixes had a stage at which it would be most effective; however, advertising and publicity were usually suitable for all stages. Therefore, considering customer requirement in different quarters, advertising and publicity strategies were usually adopted. Furthermore, through effective market research, the information regarding seasonal demand and advertising effectiveness were obtained. Furthermore, the promotional campaigns were often changed based on the circumstances in the marketing environment. Evidence of Future Promotions Over the years, Sea paradise hotel (Team 8) has progressively used the conventional tools of promotion, including electronic media, print media, as well as the outdoor media. However, during this era where digital marketing has gained unprecedented popularity, not only by businesses, but also by customers around the world, the future promotion initiatives of the hotel will be done through the digital platform (UKEssays.com). This will include the social media networks, such as Facebook, Twitter, and blogs; the internet, including the hotel’s website and advertising avenues like google ads. Operational Management Staffing Levels Sea paradise hotel (Team 8) has sufficient staffing levels in respect to its organizational structure, as well as its operations. However, due to poor initiatives of talent retention, the hotel has been characterized by high turnover rate. This increased turnover rate is very disadvantageous to the hotel since it increases its costs of operations in terms of the cost of continuous recruitment, the cost of training and orienting the new candidates, as well as the loss of the organizational knowledge through consistent exit by employees. To this end, other than focusing on progressive recruitment, the hotel should develop strategies for talent retention, such as internal marketing (Jeffrey 2002, p. 85). Appropriate Staff Training Budget Training and development of employees is a core part of the hotel’s activities. The average training spend per employee per annum has been $400. The training and development programs are done with a focus on updating the employees with the new trends emerging within the industry and the marketplace, as well as to enhance their competence so as to deliver better quality services. Refurbishment and Maintenance Program Sea paradise hotel (Team 8) has 125 air-conditioned guest rooms, all with private bathrooms. All rooms are able to accommodate singles, couples or families. The rooms are large, comfortable and vary in decorative style and standard. In addition, the hotel does not currently have a star rating. The Front Desk is open 24 hours, and there is a lobby lounge, a Pub bar with snack service, as well as a full service restaurant. There is an enclosed garden, and some outbuildings are used as office space/storage. The car parking is available for 120 cars, and additional parking is available in a nearby multi-storey car park, although this is expensive. However, there are no leisure facilities, business services, conference facilities or meeting rooms. The exterior of the hotel was painted last year and all signs were replaced, which makes the general condition look good. In addition, there was a recent redecoration program in the guest rooms, which means that the overall standard is excellent. Lastly, the front desk, restaurant, and bar were redecorated and refurbished early last year, which makes them have an excellent condition. Interpretation of Operating Results Essentially, Sea paradise hotel (Team 8) has sufficient staffing levels to facilitate all service operations in the hotel, including customer attendance, general maintenance, and kitchen work, among other operations. Nevertheless, the hotel is having the problem of high employee turnover, which is causing increased loss of organizational knowledge, talents, as well as increased recruitment and training cost. Therefore, it is important for the hotel to embrace effective talent retention strategies so as to enhance productivity in all its operations. In addition, the training programs in the hotel have been very effective, and they contribute a lot in increasing employee performance. Furthermore, the refurbishment and maintenance activities carried out in the hotel have facilitated smooth operations, and ultimately increased performance. Financial and Operating Results Graph A. Total Revenue & Net Income Overall Graph B. Rooms Department Total Revenue & Net Income Graph C. F&B Department Total Revenue & Net Income Graph D. Other Department Total Revenue & Net Income As shown in the above graphs, the hotel’s annual net income and total revenue as been on the rise for the past 5 years. However, the rate of the increase is way too behind the projected growth rate, which is partially due to high employee turnover, as well as lack of market expansion strategies. Graph E. ADR & REVPAR As shown in the above graph, the average room rate has been increasing gradually within the past five years, even with the presence of high competition. This is an indication that the market is still not yet mature. In addition, REVPAR has also increased gradually from $15 to $17, and the main reason is the effect of the competitive environment. Graph F. Occupancy Rate & ADR As shown in the graph, occupancy rate has increased steadily within the past five years. Conclusions, Recommendations and Justifications Conclusion The past five years have seen the Sea paradise hotel (Team 8) increase its market share and sales performance, which is mostly due to its effective marketing mix strategy. However, many unpredictable occurrences may emerge in the marketplace, which means that the hotel must be on the look out and be ready to adjust its strategies accordingly so as to move along with the real time market trends (Dominici & Guzzo 2010, p. 9). Thus, the management must illustrate flexible and swift response to the upcoming challenges. In addition, the management team attempted to solve the issue of employee turnover through increasing the training expense and salary, thereby overlooking the importance of internal marketing and motivational incentives. Recommendations As established in this report, high turnover rate was among the most serious problem in the hotel. In this regard, it is recommendable for the hotel to adopt the internal marketing strategy. The value of internal marketing strategy includes low employee turnover rate, increased service quality, as well as high levels of employee satisfaction (Martínez-Ros & Orfila-Sintes 2009, p. 639). Essentially, the reduction in employee turnover could reduce the cost of recruiting and training, as well as increase their level of job satisfaction. In addition, it could increase employment satisfaction and motivate staff to be more engaged and, as a result, they would be more likely to take actions that result in improved hotel profitability and customer satisfaction (Barsky & Nash 2002, p. 44). The other recommendation regards employee training. Effective employee training and development should be adopted so as to improve the hotel’s competitive advantage. Essentially, training has been linked to improving self-esteem, reducing turnover, enhancing better product and service consistency, higher customer satisfaction, reducing cost of business, as well as enhancing greater job satisfaction (Brotherton 1999, p. 171). Through effective employee training programs, the hotel could not only build customer satisfaction and loyalty, but also increase the impact on profitability and growth, which is created by satisfied, loyal, and productive employees (Tajeddini & Trueman 2012, p. 1124). Lastly, it is important for Sea paradise hotel (Team 8) to adopt the use of an integrated marketing campaign, with a focus on attracting and maintaining a larger market share (Ariffin & Maghzi 2012, p. 195). For future actions, it is recommendable for the hotel to expand its facilities further, since the town is becoming a popular location for conferences and leisure. This strategy could increase the hotel’s competitiveness in the market. Justification Essentially, effective execution of these recommendations would significantly help the hotel accomplish both its long term and short term goals. In specific, the hotel would ultimately reduce staff turnover rate, increase customer satisfaction, achieve lower overall costs than rivals, as well as increase public awareness through an integrated marketing communication strategy (Zakhary 2011, p. 361). More importantly, the use of an integrated marketing campaign would significantly help the hotel to adjust its marketing strategies according to the environmental changes. In addition, the Sea paradise hotel (Team 8) would be able to achieve its long term goals, which includes achieving a bigger market share, achieving lower costs relative to competitors, achieving a stronger reputation with customers than rivals, increasing hotel operating margins, improving the quality of hotel facilities by doing refurbishments, as well as improving the quality of staff services by providing training programs (Sainaghi, Phillips & Corti 2013, p. 156). List of References Ariffin, AAM & Maghzi, A 2012, “A preliminary study on customer expectations of hotel hospitality: Influences of personal and hotel factors.” International Journal of Hospitality Management, Vol. 31, No. 1, p. 191-198. Barsky, J & Nash, L 2002. “Evoking emotion: Affective keys to hotel loyalty,” Cornell Hotel and Restaurant Administration Quarterly, vol. 43, no. 1, p. 39-46. Brotherton, B 1999, “Towards a definitive view of the nature of hospitality and hospitality management,” International Journal of Contemporary Hospitality Management, vol. 11, no. 4, p. 165-173. Dominici, G & Guzzo, R 2010, “Customer satisfaction in the hotel industry: a case study from Sicily,” International Journal of Marketing Studies, vol. 2, p. 3-12.  Guzzo, R & Dominici, G 2010, “Customer Satisfaction in the Hotel Industry : A Case Study from Sicily,” International Journal of Marketing Studies, vol. 2, no. 2, p. 3-12. Jeffrey, D 2002, “What Makes for a Successful Hotel? Insights on Hotel Management Following 15 Years of Hotel Occupancy Analysis in England,” The Service Industries Journal, vol. 22, no. 2, p. 73-88. Martínez-Ros, E & Orfila-Sintes, F 2009, “Innovation activity in the hotel industry,” Technovation, vol. 29, no. 9, p. 632-641. Sainaghi, R, Phillips P & Corti, V 2013, “Measuring hotel performance: Using a balanced scorecard perspectivesʼ approach”, International Journal of Hospitality Management, Vol. 34, no. 1, p. 150-159. Siguaw, JA & Enz, CA 1999, “Best Practices in Hotel Operations”, Cornell Hotel and Restaurant Administration Quarterly, vol. 40, no. 6, p. 42-53. Tajeddini, K & Trueman, M 2012, “Managing Swiss Hospitality: How cultural antecedents of innovation and customer-oriented value systems can influence performance in the hotel industry,” International Journal of Hospitality Management, vol. 31, no. 4, p. 1119-1129. Torres, EN & Kline, S 2013, “From customer satisfaction to customer delight: Creating a new standard of service for the hotel industry,” International Journal of Contemporary Hospitality Management, vol. 25, no. 5, p. 642-659. UK Essays.com n.d, The Report Of Hots Simulation, Available at http://www.ukessays.com/essays/tourism/the-report-of-hots-simulation-tourism-essay.php Zakhary, A 2011, “Forecasting hotel arrivals and occupancy using Monte Carlo simulation,” Journal of Revenue and Pricing Management, vol. 10, no. 4, p. 344-366. Read More