The Monterey Beach Club Hotel - Case Study Example

The Monterey Beach Club Hotel Introduction The Monterey Beach Club Hotel is a 3 stars hotel located on the seafront of Monterey Bay, California, USA. The current economic situation has really hampered the growth of this hotel too as US economy as a whole is passing through a critical period where demand is really suppressed as consumers are preferring to avoid consuming on products and services which may be considered as necessities. In order to over the suppressed demand conditions and improve the overall image and marketability of the hotel, our team has been assigned the task of managing the hotel for the fixed period of two years. The aim of this report therefore will be to outline the different strategic alternatives for the firm to successful make a turnaround. Hotel is located in the city of Monterey California which is also one of the fast growing areas in US in terms of population growth. The demographic characteristics of California also indicate that its larger portion of population has reached 36 that also mean that there will be more family outings on weekends. Further, California is also one of the leading places in US where tourists often come for visiting purposes. (California Tourism Industry Website; 2009). This fact alone gives it a greater advantage in terms of attracting more consumers therefore our Hotel has a real chance to make a turnaround by prioritizing strategies in such a manner which maximize their impact for the hotel. The existing weakness of the hotel includes the non-optimized use of funds of the organization in activities which were potentially not profitable or lucrative in nature. Further the wrong and impossible marketing targets set by the hotel can also be counted as one of the weakness of the firm as the hotel has spent a lot of money on mis-directed marketing efforts. Hotel has undertaken a renovation plan which will further increase the capacity of the hotel to host large number of customers as well as offer its space for different other activities. Thus our aim will be to make strategic changes in such a manner that it improves overall service standards of the hotel as well as improve its brand image. It is however, critical to understand that the given the inherent stagnation in the market, the change in the brand image as well as service quality may be slow and gradual. We aim to achieve a better strategic fit between the hotel’s values and actions by using different strategic analysis tools to prescribe policy initiatives which can help hotel to make a great revival of its old glory. Market Area Analysis Hotel industry is really different from other service industries because it largely depends upon certain factors which can really contribute towards its success. Such factors can be unique and different however, tourism is one of the determining factors of the visitation to the hotels in any part of the world. Thus demand for hotel services is really derived demand and depends on both qualitative as well as quantitative factors which combined together to contribute towards the success of any firm in the hotel industry. A PEST analysis of the California will indicate that the California has relatively stable political environment with Arnold Schwarzenegger heading it as its Governor. The political initiative further indicates that the State has a strong stance in favor of immigration policies therefore most of the politics also revolves around the politics of Visa. This factor therefore can reduce the potential for new customers to visit California as new visitors may not feel themselves welcomed in the State. This fact also may reduce the chances for customers from Muslim countries to visit California more enjoyably considering the fact that post 9/11 era has been relatively more volatile. Economic factors indicate that the US is really passing one of the bad periods of its economic history. Since tourism largely depends upon the overall condition of the air industry however, given the existing condition of the US airlines, it may become relatively more expensive for the new customers to fly into US at relatively cheaper costs. The following graph will further reveal that major traffic of customers comes from Canada which has land links with US and customers can reach US by road rather than by air. This fact therefore further reflects that there will be gradual reduction in the tourists to the State. An analysis of the social factors would further reveal that the era after 9/11 has been really tough for US and especially for its hospitality sector because people are really scared to travel to places where overall risk to their lives is greater. The backlash of 9/11 also made it difficult for Muslims especially to frequently and freely visit the country thus narrowing down the market space further for existing businesses. A closer look at the visitation to California from tourists of different countries reveal following patterns. These patterns indicate that the major flow of visitors traffic come from Canada and UK/Ireland. Visitors from Japan also form a major portion of the total number of visitors coming to visit California. These trends also indicate that the hotel needs to take into account the major characteristics of the visitors coming from Canada and UK. A deeper analysis of the traits and habits of these customers will therefore further reveal some new strategic insights for the firm to look into in order to better its services. This marketing analysis also reveals that the hotel needs to design its offering in a manner which caters the largest niche of the market i.e. locals as well as visitors from Canada and UK. Since, we assume that the firm has the knowledge and expertise to handle the local consumers therefore more focus on the international customers from Canada and UK will provide hotel more market share to capture. The results of PEST analysis also indicate that the hotel, at least in the short run has to focus on two groups of customers i.e. visitors from Canada and Locals. Hotel occupancy as well as renting of rooms therefore will largely depend upon how the firm is going to take into account the changes that are taking place in the market. In order to take advantage of this situation, it is therefore critical that the hotel must devise bundled products for the locals and offer extra services to the visitors from Canada. Offering bundled services will include offering dinning services, hosting of parties, gym services- all to be availed through a membership or loyalty scheme. Whereas the catering of foreign visitors will require the firm to further improve its image by offering services such as online bookings, discount packages, airport pick up services etc. Competitive Analysis Market analysis indicate that there is a enough room to cater to the needs of the local customers and firm shall focus more on offering bundled services to the local consumers. However, in order to attract more customers, it is really important that a comprehensive review and analysis of the competitors shall be undertaken to fully understand the market dynamics. Following snapshot of the hotels operating in the area will reveal their relative strengths and weakness besides indicating different services they are offering to various classes of customers. The Palace Hotel The Park Hotel The Mariner Hotel X Hotel Y Traditional 4 stars hotel Modern 3 stars hotel Traditional 2 stars hotel ? ? 150 guests Rooms 200 Guest Rooms 70 Guest Rooms 250 Guest Rooms 250 Guest Rooms Restaurant “a la carte” & coffee shop Restaurant Restaurant Restaurant Restaurant 2 Bars Bar Bar Bar & Lobby Lounge Bar & Lobby lounge Health Club Small Health Club NO Swimming Pool Conference & Business Center Conference & Business Center 2 conference Rooms ? ? Car Parking Car Parking Car Parking Car Parking Car Parking NO Grounds NO Garden Garden Standard of Refurbishment Good Standard of Refurbishment Good Standard of Refurbishment Good Standards Refurbishment Good Standards of Refurbishment Good The above table indicates that there is one four star hotel, one 3 star hotel and one 2 star hotel against which we can compete in the market. The description of the different characteristics indicates that these hotels have different relative strengths and weaknesses of their own. By exploiting the weaknesses of these hotels, we aim to offer better services to our customers. The above analysis of the competitors indicate that there is one hotel which can be considered as Modern in its true sense and all other hotels are relatively more traditional in nature. This fact therefore indicates that there is a need for more modern hotel which can offer relatively better services at affordable cost to the customers. Thus our hotel, through its proposed renovation plan, will undertake to modernize itself and include new facilities which can allow it fulfill the demands of its customers. An strategic insight will further indicate that the existing hotels in the city are lacking the more modern facilities and given the fact that California is one of the trading hubs of the US with large organizations having their offices in California, there is a better prospect if our hotel also targets corporate customers to offer them bundled services for arranging and hosting official dinners, conferences as well as other formal as well as informal gatherings. For this purpose, a direct marketing effort will further improve the chances for the firm to bring in new corporate customers into its fold. It is also however important to note that the for initiating a successful direct marketing would require the hotel either to outsource its marketing activities or hire and train staff which can initiate direct marketing for the firm. However, a decision in this regard can only be made after making a cost and benefit analysis of whether the direct marketing on behalf of the firm should be outsourced or an in-house team of experts is developed to provide further competitive edge to the firm. We intend to derive our competitive advantage from our newly refurbished rooms and addition of extra services. This will really distinguish us from the competitors because they are either lacking the offering of these services or offer them in more traditional way. Our business center as well as rooms will be designed and refurbished in such a manner that they will allow easy integration of technology. Conference calls, high speed broadband internet, video conferencing as well as other facilities will really provide us a good competitive advantage over competitors in long run. We further aim to position ourselves in the market as low cost and affordable hotel offering quality service. This will also generate further competitive advantage for our firm especially we will be able to target our local customers through this strength of our. Since our main focus will be on the development of our existing markets i.e. attracting local customers by offering them bundled services therefore low cost and high quality will further serve our purpose in re-creating a different image for the hotel. Product and Service Evaluation Any kind of marketing effort will only yield results if it is duly supported by excellent product or service offered by the firm. All promotional activities therefore depend upon the quality and acceptability of the products or services sold by the firm. Our hotel is located near Airport and Sea offering convenience as well as ease for our international as well as for local customers too. International customers can really easily find us and can even save on the charges of airport pick and drop services while at the same time finding a convenient and affordable hotel nearest to the Airport. The proximity of the hotel with the sea also means that the ratio of local visitors will be relatively high especially during summer season when more and more people will hit the beaches Hotel is currently offering following services: 1. Business Center 2. Quick Check In/Out 3. Mini bars 4. Terminal connection in rooms 5. A Shop Souvenir 6. Mini bars in rooms It is important to note that currently the overall condition of these facilities are not entirely up to the mark and hotel needs a refurbishment of its entire facilities. Since services are often considered as perishable therefore it is important that the overall experience that we offer to our customers creates permanent brand recognition for our hotel in order to retain our existing base of customers. Since we are aiming to initiate direct and other marketing efforts therefore our focus will be to develop our services in a manner which not only support our existing mission and values but also offer a unique experience to our customers. With 250 rooms and other facilities, the refurbishment plan will really increase the capacity of the hotel to retain and attract more customers. Our focus will therefore be on developing a business unit strategy where we will be focusing on each and every service as a separate business unit. The refurbishment plan therefore shall support this strategy and all the subsequent development of services units shall be done in a manner which corroborate the existing strategic objectives of the firm. As discussed above that the firm will be focusing more on offering bundled services to local customers therefore our new offerings will be bundled in following manner: Package Services Prices Silver Gym, discounted food $300 p.a. for membership Gold Gym, food, bar, souvenir $700 p.a.for membership Platinum All services $1500 p.a. for membership Our platinum package will be specially designed for our local corporate customers through whom we will offer them discounted and priority services such as priority bookings for official dinners, booking of business center, priority bookings for rooms etc. In order to cater the future needs of our customers, we also aim to offer more spacious rooms with larger covered areas as well as we also aim to expand our existing services. Since our focus will be on local as well as foreign customers therefore our future product development will be largely influenced by these two demographical facts about our customers. In future, in order to sustain our competitive advantage, we will further curtail our prices and improve the quality. We aim to achieve this through drastic cost cuttings and bringing in new administrative reforms to reorganize the existing corporate structure in a manner that our costs remain within our control while at the same time consistently maintaining our quality. Performance evaluation In order to continue to enjoy our competitive advantage and maintain our strong quality, it is critical that we must first understand the dynamics behind our existing performance. An analysis of the 24 month pricing of the performance1 will indicate that pricing will remain variable during these 24 months. This is also due to the fact that the hotel business is seasonal in nature and as such almost all the players in the market face this cyclical demand. It is however, important to note that we anticipate a higher increase in the prices as our proposed refurbishment plan is fully executed and facilities are upgraded. Volume analysis also shows cyclical patterns however, volume will tend to increase in year 2. This increase in the overall volume can also be attributed to the successful refurbishment of the hotel facilities and the improve brand image of the hotel. Further analysis will reveal that the weekday corporate activity will dominate the most in terms of volume as well as price therefore give our strategy of offering bundled package services, we believe we will be able to attract and retain more corporate customers. A closer comparative analysis2 will further reveal that that the hotel will be number two in terms of comparison with the industry. The overall performance comparison will reveal that The Pendulum Hotel will perform better than our hotel in terms of different criteria set out however, to be number no.2 in the industry still indicates that the overall performance of the hotel has considerably improved after the refurbishment plan and a new strategic change that is going to take place after the hiring of our team. Though the forecasts and actual results differ in some sense however, they still predict that the overall performance of our team is relatively better and there are some visible changes that will take place after our team take over the challenge of managing the hotel Strategic recommendation Based on the discussion, the three strategic recommendations are: 1. Hotel is experiencing high turnover ratio indicating that the employees may be less empowered. Employee empowerment therefore shall be considered as one strategic alternative in order to achieve the desired performance level. 2. Market development is another important strategic alternative which can be undertaken because after the refurbishment we aim to attract more corporate customers. 3. Differentiation especially focus shall be the leading strategy for the hotel to cater its future customers. Focus on customers and differentiation through services will really lead to the creation of sustainable competitive advantage for the firm to achieve consistent growth in long run. Financial Review and Conclusion An analysis of the cash flow of the firm will indicate that the cash flows from operations are consistently increasing. Since a better measure of the liquidity of the operations of the firm is its ability to generate consistent cash flow streams from its operations. All there strategic alternatives that have been discussed above can only be considered as viable if they enable the firm to achieve the consistent increase in the cash flows from its operations. The results for 24 months indicate that the firm is increasingly earning more and more cash that will ultimately lead it to finance its future expansion through the generation of its own internal funds. Though return on asset will decrease in year 2 however, the overall return on equity will increase in year 2 indicating that the new strategy will generate enough profitability for the shareholders of the firm. As discussed above that there is a general increase in the cash flows from the operations which is also evident from the fact that the firm’s current ratio will increase from 4.12:1 to 8.42:1. This indicates a tremendous improvement in the liquidity position of the firm as well as further allows the firm to better manage its resources. On the whole, if above strategies are applied, the firm will be able to generate enough revenue and cash flows to not only provide consistent returns to its shareholders but will also improve its own financial position. Read More