External Situational Audit


Market Segment Analysis

After analyzing the internal audit which assesses all the aspects of PPKLIA, the strengths and weaknesses of the business were clearly identified and now is the time to proceed to the external audit. External environment of the hotel will be analyzed in order to identify any potential opportunities that might be exploited and any threats that might damage the business. In order to do this, market segment analysis will be carried out.

Market segmentation refers to subdivide a market based on some commonality, similarity, or kinship. The members of a market segment share something in common. The purpose of segmentation is the concentration of marketing energy and force on the subdivision (or the market segment) to gain a competitive advantage within the segment. It is analogous to the military principle of concentration of force to overwhelm an enemy. Concentration of marketing energy or force is the essence of all marketing strategy and market segmentation is the conceptual tool to help to achieve this focus (Thomas, 2007).

3.1 Current Potential Target Market

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According to Mr. Alex Chin (2009), the director of sales of PPKLIA hotel, the hotel's business to leisure split is 55-45. Due to its location, the current target market composed of business travelers, airline crew, tourists and transit passenger, while 80 percent of the hotel guests are foreigners with the largest group coming from the United Kingdom and Australia.

In PPKLIA, business market occupied more percentage than the leisure market. This is mainly because of its location and the different characteristic between business and leisure travelers. Vuthipongse (2001) stated that the business market is characterized by top- and mid-level managers travelling with the purpose of attending meetings, conferencing, visiting offices and production facilities in other countries or regions. They tend to stay fewer nights than leisure travelers. However, they traveled more miles than leisure travelers and stayed more frequently. They tend to stay in the hotels which are accessible from the public transport that near to their company or meeting place. This is why PPKLIA become one of the preferred business hotels as it is located adjacent and linked to KL International Airport which is connected by a covered sky bridge to the Main Terminal Building which houses the Arrival & Departure Halls and is just a 5-minute walk away. This offer a great convenience for business travelers who need to fly frequently in a short time due to their time is conserved to attend meetings, conference, or trade show (Cholewka, 1996).

Besides business travelers, airline crew is also one of the current target markets due to its location factors. Sharma (2004) stated that the job characteristics of airline crew needs 24-hour operations which create nonstandard and altered work schedules that can lead to cumulative sleep loss and circadian disruption. These factors can lead to fatigue and affect productivity and performance of the job. As the 'official' publicity managers of the airline, airline crews have the responsible to ensure the safety of the flight and by having a good night's rest is the best way to avoids stress, excitement or worry and fatigue (Judith, 2001). This is also why PPKLIA become the nearest choice for air line crew to rest and relax. In PPKLIA, the Airline Crew Floor located at the eighth floor in the hotel which is especially catered to this market group.

3.2 Future Potential Target Market

According to World Tourism Organization (WTO), it predicts that China will become the fourth-largest source of outbound tourists by year 2020 and it was expected to send 100 million visitors to other countries (Zhang et al., 2000). This is due to the government of China introduced it's Open Door Policy of economic reform and increased international trade (Weaver and Lawton, 2002). As a result of gradually easing of restrictions, China had now exceeded Japan and become the Asia's main source of outbound tourists (Weaver and Lawton, 2002). This could be one of the future target markets for PPKLIA.

In addition, the tourism minister of Malaysia, Datuk Seri Dr Ng Yen Yen also stated that Malaysia would concentrates on the big tourism potential from China in order to boost the economy in the current global economic downturn since China is an important market for Malaysia. During Visit Malaysia Year 2007, Chinese tourists reached the total of 783,788 people and this rose to 949,864 in last year. While in year 2009, it is a meaningful year for Malaysia and China where both countries is celebrating the 35th anniversary of diplomatic ties. As a result, she targeted for one million of tourist arrival from China. Shao Qiwei, the chairman of China's National Tourism Administration (CNTA) also said that the ties between both countries in politics, the economy, culture and other aspects are agreed to work closer especially in tourism industry to further strengthen cooperation for a win-win situation for all (Fong, 2009).

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Tourism Minister Datuk Seri Dr. Ng Yen Yen also aimed to woo sophisticated office ladies (SOL) and men from Japan who usually shopped in Europe and Western countries to visit and spend in Malaysia. The main attraction offered to SOL would be duty free shopping while golfing and diving packages would be sold to the men (Beh, 2009). Besides, students and pensioners from Japan are also targeted where students would be encouraged to experience the diversity of Malaysian culture through home stay programs. On the other hand, package for pensioners would focus on arts, music, culture and eco-tourism (Beh, 2009).

In order for PPKLIA to capture for this potential market from China and Japan, the hotel should recruit more employee especially front office employees who are able to communicate with the Chinese and Japanese guest fluently. Besides, all printing material should have multi-language including Chinese and Japanese.

3.3 PESTE Analysis

PESTE analysis is a scan of the external macro-environment in which the organization operates can be expressed in term of the factors of political, economic, socio-cultural, technological and environmental forces (Bowie and Buttle, 2007).

3.3.1 Political

According to Ministry of Health Malaysia, hotel lobbies have been declared as the latest smoke-free zone recently in an effort to ban more smoking areas (Bernama, 2009). In 2006, a same regulation was implemented in Thailand and a cross-sectional survey had been conducted at the same time to examine the attitudes of tourists toward the ban (Viriyachaiyo and Lim, 2009). Some hospitality industry might worried about the smoke-free laws will alienate tourists and cause them to avoid holiday destinations where smoking is restricted, however the survey of over 5000 hotel guests in Thailand showed that majority of tourists supported the ban of smoking in hotel lobbies while many of these tourists are from nations where the same restrictions on smoking applied (Viriyachaiyo and Lim, 2009).

Hotel lobbies used to be the place where guests wait for the room to be prepared at the front desk. That is the reason why many hotels are making an effort to improve on their lobbies outlooks in order to deliver a better impression to their guests. After all, first impressions mean everything. This is especially true since nowadays, guests experience toward hotel lobbies have been turned into whole lifestyle where it is the place where it creates first and the last impression to the guests with its stunning interior design and cleanliness for the determination of stay in the hotel. This is also why hotel lobbies should always maintain at a clean and neat condition. With this declaration, it could restrict the guests to smoke at the lobby and manage to maintain the air quality while at the same time can avoid those non-smokers to inhale secondhand smoke that could lead to uncomfortable.

3.3.2 Economic

Business Travel News (2009) stated that a study conducted by Smith Travel Research illustrated the global nature of the economic downturn for hotel performance from four major regions-the Americas, Europe, Asia Pacific, Middle East and Africa. The results show that double-digit percentage decreases in occupancy and revenue per available room (RevPar). Furthermore, RevPar in many markets plummeting by 30 percent or more.

In the Asia Pacific region, occupancy was decreased from 73.5 percent to 59.2 percent; average daily rate was down 20.1 percent and RevPar down 31.5 percent (Business Travel News, 2009). According to Deloitte, the business advisory firm in Damansara, the RevPar of the hotels in Kuala Lumpur fall almost 20 percent during the first quarter of the year due to the impact of the global economic crisis (The Edge Financial Daily, 2009). On the other hand, Winsnes, the general manager of PPKLIA (2009), stated that the world air travel is expected to decline too in this year and Malaysia is anticipating a 9 percent drop in arrivals to some 20 million coming through the 260 entry points in Malaysia. PPKLIA is expecting the average occupancy to decline from 65.7 percent in year 2008 to 60 percent in year 2009. This does not include short-stayers who stay less than one night (Ganesan, 2009).

3.3.3 Socio-Cultural

Palmer and Hartley (2007) pointed out that some studies indicated a number of trends in lifestyles which have a great impacts on hotel such as individuals who have more secure in financial that motivate them to buy products typically changes from a need for necessities (price, location and cleanliness of the hotel) to a desire for the unusual and challenging (design, star-category of the hotel). Jones (2002) also suggested that design was replacing location as the most important aspects of hotel management. Location was previously seen as the most important factor in attracting customers. However, hotels and restaurants were now paying more attention and money to create unique environments. This is because the design of hotel is no longer viewed as a luxury, but a trend to be honored (Levine, 2007).

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PPKLIA, being part of the main gateway into Malaysia, it is crucial in creating a lasting first impressions. It probably has more foreigners walking through its doors daily compared to any other hotels in the country. Also, the hotel with the live up of various accolades that have been awarded upon it ranging from Asia's Best Airport Hotel to World's Leading Airport Hotel, it has the task to maintain its allure (Ganesan, 2009). PPKLIA features a U-shaped twin tower atrium concept without a luxury exterior design compared to the other hotels; while the interior design is contemporary, yet reflecting the traditional Malay culture in the woodwork design. However, the design of the hotel was designed in 1990s and it is no longer suitable for now (Ganesan, 2009).

3.3.4 Technology

Technology plays an important role in an effort to improve the efficiency and effectiveness of a hotel's services. Recently, Pan Pacific Hotels and Resorts have launched a new central reservations and distribution system named PANTHER. This new distribution platform had been designed to allow vast amounts of data flow with substantial improvements to efficiency and productivity. Providing a single point of inventory control across hotel properties, PANTHER prevents transaction duplication across all reservations channels and ensures rate and inventory parity whilst improving transactional capabilities.

According to Mr. A. Patrick Imbardelli (2009), the President and CEO for both Pan Pacific and Parkroyal brands, the launch of PANTHER has shown the positive results of 26% growth in revenue and 23% increase in total room nights as compared against last year's performance. PANTHER provides an ever higher level of personalized service for the customers and travel industry partners by ensuring single image room and rate availability across all distribution channels on a 24/7 basis.

3.3.5 Environment

In March and early April 2009, Mexico, the first country experienced outbreaks of a new strain of influenza A virus subtype H1N1, and commonly referred to as swine flu, which was transmitted between humans. After the outbreak of this incident, it affected the global economies and a lot of industries including hospitality and tourism industry. According to Datuk Seri Dr. Ng Yen Yen, the tourism industry in Malaysia, like the rest of the world.

Malaysia had been affected by the influenza A (H1N1) outbreak with the international aviation association had reported a 10 percent dropped in the number of air passengers worldwide (The Star, 2009). This will definitely affects the PPKLIA business since its main target market is the foreigners especially for those coming from the UK and Australia which is now also the countries with serious cases of influenza A (H1N1).

3.4 Competitor Set Analysis

Each business will have one or more customer segments toward which it targets the majority of its marketing efforts. Other businesses in competition for these customers are generally considered to be primary competitors. In PPKLIA, its primary competitors are all from the Malaysia's Federal Administrative Centre called Putrajaya and which is theme as the country's first Intelligent Garden City. It is a model township that had been constructed with detailed planning, innovative urban design and unique bridge complemented with beautiful landscaped roads and parks.

A total of three competitors have been identified for Pan Pacific KLIA, namely Putrajaya Marriott Hotel, Pullman Putrajaya Lakeside Hotel and Putrajaya Shangri-La Hotel. These three competitors and PPKLIA are all rated as luxury 5-star hotel, the hotels have at least two target markets in common and location proximity to each other is close and this lead to direct competiton to PPKLIA.

The shared target markets of these four hotels are motorsports event patrons and transit air travelers. All three competitors are located in Federal Territory of Putrajaya which is a territory surrounded by Sepang district. Thus, the competitors are near to two mega landmarks in Sepang district that are Sepang International Circuit (SIC) and Kuala Lumpur International Airport (KLIA).

Putrajaya Marriott Hotel situated at the renowned IOI Resort nestled between serene surroundings of a 27 holes championship golf course and strategically located just 25 minutes from Kuala Lumpur and Petaling Jaya.

Pullman Putrajaya Lakeside Hotel, the newest elegant addition to Putrajaya is a luxury lakeside hotel with one of the largest signature spa facilities in Malaysia. The hotel is only 20 minutes drive to SIC and KLIA, and 25 minutes to Kuala Lumpur city centre.

Putrajaya Shangri-La, a 5-star luxury hotel designed to complement its magnificent hilltop location; the hotel is situated in the heart of Putrajaya, where it is just 30 minutes from KLIA. Positioning maps which is also called perceptual maps is the tools used by marketers to plot consumer evaluations of competing hospitality products using two or more attributes. The attributes used to map competitors are variables that are important to consumers and can include price, quality, location, reputation, value for money, quality of food and service, conference and banqueting facilities and availability of car parking (Dev et al., 1995). It helps to identify the strengths and weaknesses of the hotel and their competitors over a series of measures.

Figure 3.4 from Appendix 3 provides an illustration of a positioning map compiled based on two criteria that are price and location. Both of these variables are chosen is due to the location represents a second dimension over which the business can compete and the result of competition on both the location (quality) and price dimensions is surprisingly equilibrium where the products are virtually indistinguishable (Carruthers, 1981). This can be seeing from PPKLIA and its competitors that locate at the centre of the linear market and charge similar prices. The prices are compared using the lowest available price obtained by booking an online reservation from the four hotels. The reservations are based on the same criteria in the aspect of date, length of stay and number of adults. Meanwhile for the location will consider the nature of the target markets that are the motorsport events patron, transit air traveler and airline crew, so the distance between SIC and KLIA and the hotels is the main concern. From the target markets' perspective, shorter distance means easier accessibility and takes lesser time to travel between hotel and their main destinations.

The positioning map indicates apparent that the PPKLIA has the best location when compared to its competitors. However, it also has the highest room rate for one night stay at a Deluxe King room that worth RM 504.00 among these four hotels. For the Putrajaya Marriott Hotel, it is approximate 39 minutes driving distance from the KLIA and the SIC which is the farthest hotel from the key two spots in Sepang with second highest price amongst the competitor set. Meanwhile, the Pullman Putrajaya Lakeside Hotel offers lowest room rate that worth RM 278.00 for one night stay at a Deluxe King room among these four hotels and is just 20 minutes away from the two significant locations in Sepang. The level of accessibility of the hotel is just behind the PPKLIA. Another hotel in the competitor set, the Putrajaya Shangri-la, although it located 30 minutes away from KLIA and SIC, however, the price offered is inexpensive compare to PPKLIA and Putrajaya Marriott Hotel. In conclusion, the subject hotel, PPKLIA, possesses the most convenience location in the eyes of its target markets albeit the expensive price.

4.0 SWOT Analysis

4.0 SWOT Analysis SWOT analysis is a process by which SWOT factors are derived to review the internal analysis for strengths and weaknesses, and the environmental analysis for opportunities and threats. Every factor has a reasonable possibility of affecting the short- and long- term future of the firm (Reich, 1997).