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Regalodge Hotel is a 3 star rating hotel in Ipoh city which has its own strengths to compete with around 50 competitors in the market. The services and facilities that are provided by the hotel are superior so that it can compete with the 4 star and 5 star rating hotels. However, there are also several weaknesses which can be found in Regalodge Hotel where several alternatives are suggested to minimize the weaknesses in order to provide the better services to the customers and be competitive. In hotel industry, Regalodge Hotel faces a number of potential threats which might affect the hotel performance but there are also opportunities in the market which provide the chances for it to expand the business. In order to increase the ability to compete in the hotel industry, Regalodge Hotel has to analyze the external environment like PEST analysis and internal environment such as SWOT analysis and Portel Five Forces so that the hotel can understand the existed internal and external problems come out with alternatives to solve those problems faced by Regalodge Hotel.
Regalodge Hotel is a 3 star hotel in Ipoh, at the same time it is famous known as Ipoh finest dining paradise. It strategically located in the heart of Ipoh where the location is accessible to many business centers within walking distance where the business and leisure travelers can also access to the shopping malls with the easily accessible transportation from Regalodge Hotel. Regalodge Hotel has 86 guest rooms with a dining restaurant that is renovated with French nouveau style. For relaxation, Regalodge Hotel is equipped with Regal Spa room for men and a reflexology center as well. Therefore, Regalodge is not merely a hotel, but it also provides services such as fine dining restaurant, spa and reflexology.
Anyhow, there are many other hotels around Ipoh which ranked from 1 star to 5 stars such as Abby Hotel, Tune Hotel, Sun Inn Hotel, Ritz Garden Hotel, Lost World Hotel, Syuen Hotel, Paragon Hotel and so forth. However, there only few that are competitive enough to Regalodge Hotel, they are Kinta Riverfront Hotel, DWJ Hotel, Heritage Hotel and Impiana Hotel because facilities available in Regalodge Hotel also available in these hotels. Table below shows the comparison of facilities/services provided by these hotels:
No. of room
2.0 The Environment
2.1 State of economy
Malaysia is not doing well in its economy due to the downturn of both global manufacturing and services in June. Anyhow, researcher states that major economic sectors of Malaysia are expected to grow at slow pace in 2012. Malaysia service sector also got affected due to the downturn of global services. This can be proven by the data provided by JPMorgan Global Services Business Activity Index where the service output expansion was the weakest in the recent three year growth period (“Global Growth Remains Weak,” 2012). Nevertheless, service sector is expected to continue play a vital role in bringing up the economy of Malaysia (Suzy, 2012). Although, the economy is not very encouraging but as mentioned, service sector such as hotel industry is expected to bring up the economy since tourism industry has been developing. Tourists from other countries may still have the spending power to travel to Malaysia since our currency is lower and thus more affordable for foreign tourists to spend in our country.
Furthermore, Malaysian Government will subsidize those 4-5 star rating hotel by providing them some benefits such as tax exemption and allowances. This is because Malaysian Government wants to promote tourism which in the end will improve tourist arrivals and tourist receipts especially in business and medical tourism. The reason being is that these tourists are mostly high-yield visitors (Ng, 2012) and this will improve the businesses in the hotel industry.
2.2 Current trends
Technology plays roles in various industries which included tourism. Internet connecting people around the world and enhances the sharing of information. Online travel sites are providing people more ways to research for upcoming vacations. Online air-ticket booking offered by various airlines such as Air Asia, Malaysia Airline, Firefly and so on help travelers to book airline tickets 24/7. In addition, social networking sites like Facebook, Twitter and blogs allow visitors to share itineraries and trips information with family, friends and other travelers (Richard & Kelli, 2008).
Table 1: Tourist arrivals and receipts to Malaysia.
Source: Tourist arrivals and receipts to Malaysia. (n.d.). Research. Retrieved from http://corporate.tourism.gov.my/research.asp?page=facts_figures
From the statistic above, we can see that Malaysia is getting more and more tourist arrivals. It is a good sign where people around the world are getting familiar with Malaysia.
In addition, survey shows that Malaysia domestic tourism is mainly influenced by season such as school holidays, public holidays, festivals celebrations and so on. Therefore, end of the year is always the peak season for Malaysian to travel around. The time domestic visitor spend on a trip is average 2.45 days due to the high expenditure (“Domestic Tourism Survey,” n.d.). From the survey, we can see that visiting relatives and friends (75.6%) are the main purpose for most of the Malaysian to visit or travel to a place (“Tourist Arrivals,” n.d.).
2.3 Current political values and trends
Malaysia is a country that is consists of different types of races such as Malays, Chinese, Indians and others which aroused the curiosity of foreigners to come and visit Malaysia in order to understand the various cultures originated from different races (“Colours of 1Malaysia,” 2011). So, Ministry of Tourism has organized a lot of events such as Fabulous Food 1Malaysia, Sport Tourism, Colours of 1Malaysia, Student Tourism Programme and so forth. For example, Colours of 1Malaysia that is being launched since year 1999 and for Colors of 1Malaysia 2012, this event is expected to attract about 100,000 spectators which include both local and foreigners (“Colours of 1Malaysia 2012,” 2012). This event has brought 293 travel agents to participate and the aggressive development move for tourism industry done by Ministry of Tourism will also affect the hotel industry as the development of tourism industry can promote the related infrastructure like hotel and thus increase the profits for hotel when there are a lot of tourists visiting Malaysia which means the amount of customers for hotel companies will increase also (“About MITE 2012,” n.d.).
However, although efforts are being given to attract more tourists, there are also events that happened in Malaysia which give a pause for tourists to visit Malaysia. For example, Bersih rally that happened in Malaysia since year 2006 which having the objective to reform the electoral system in Malaysia as the political parties such as NGOs and civil society groups accused the electoral system which is under Prime Minister Department to be unfair and thus they held the rally that having a hope to have a clean and fair election. However, Bersih rally held will affect the tourism industry (“Rationally- Bersih 3.0 is a Failure,” 2012) as tourists will afraid of their safety, so during Bersih rally, there will be less tourists visiting Malaysia. For example, on April 28, Bersih 3.0 rally had created negative impact on tourism industry and this had resulted in a lot cancellation of tour packages. Furthermore, the tourism ministry also being informed that there are about RM 200,000 hotel reservations being cancelled last minute (“Bersih Rally Jeopardises Tourism Industry,” 2012). This rally has seriously affected the tourism industry in Malaysia and thus causes a severe impact on hotel industry when there a tremendous decrease in the amount of tourists.
On the other hand, Malaysia is implementing Lynas project where this rare refinery plant will be built in a peat swamp area that is located 3.5 km to the South China Sea and this will seriously affect the supply of seafood and the popular tourism spot (Boyle, 2012). This project is expected to have negative impact on the tourism industry as this plant will cause Malaysian to be living in a radiation contamination country and cause the earth pollution. This disadvantage cause will seriously affect the tourism industry as tourist will be afraid of the radiation in Malaysia and they will not pay visit to country that pollute the earth and this will cause negative word-of-mouth for Malaysia and the tourism industry will be negatively affected. Therefore, the hotels in Malaysia will be negatively affected too.
2.4 Potential Threats and Opportunities
No doubt, technologies nowadays ease people daily life. Business field definitely is one of the beneficial industries because some useful information that might help the business to go well can be obtained easily through the World Wide Web free-of-charge. However, this can be a threat to innovative business ventures at the same time because copyist can simply imitate their innovative ideas (Hong, 2009). It will be worse when more advance technologies such as hacking system is invented. The reason being is that data will be easier to get exposed to hacker in future with the help of advance technology system (Baker, 2011).
Besides, economy impacts the world greatly. The stability of the economy is critical factor for outbound tourism as it will affect tourists’ income (Becken, 2011). Unemployment rate definitely will increase and GDP will decrease due to economic crisis. Thus, economic crisis is a threat to all businesses because it is unexpected and leaves great negative impact in many industries (Leymon, 2012). In addition, it causes Malaysians overwhelmed by poor purchasing power. This is because our currency is getting weak as the side effect of the economic downturn (Lee, Yow & Chi, 2011).
Malaysia is a country that comprises of many different races citizens such as Malays, Chinese, Indians, Kadazans, Ibans and so on. This can be the reason why tourists visit our country because they wanted to learn about our culture. So, Malaysia government spends millions ringgit to bring up the Malaysia tourism industry. Programs brought by Tourism Malaysia such as Magic of Night Boat Parade Putrajaya 2012 had attracted many foreign tourists to pay a visit to Malaysia (David, 2012). The increasing arrival of tourist to Malaysia is a good sign for various businesses in Malaysia because tourists’ spending provides the locals with more businesses and incomes. This may stimulate entrepreneurial opportunities for Malaysia such as selling local handicrafts as one type of businesses that can be developed in the tourism industry. Besides, hotel industry also benefits from his because tourists will have the need for accommodations. In short, tourism industry stimulates the economy of a country (Harcombe, 1999). This then becomes an opportunity to a country’s economy as well as businesses.
3.0 The Industry
Regalodge Hotel is certainly involved in the hotel industry. In this industry, service is essential and not to say about the facilities and comfy condition of the rooms in the hotel itself. Cozy environment is mostly what customers seek for when they want to find a place to stay especially during vacations. There are few types of accommodations in this industry such budget hotels, hotel and apartments, hotels and resorts and so on. The few examples of them are Excelsior Hotel, Heritage Hotel, DWJ Hotel, Impiana Hotels and Resorts, French Hotel, Tower Regency Hotel and Apartments and Kinta Riverfront Hotel and Suites. So, it is not an easy task for a hotel to compete and survive since there are numerous strong competitors in this industry even though it is only in a small city, Ipoh.
The competitors can be divided into direct and indirect competitors. The direct competitors are the hotels that provide similar type of accommodations and facilities as what Regalodge Hotel provides to its customers. The few direct competitors of Regalodge Hotel are French Hotel, Heritage Hotel and Lost World Hotel. On the other hand, the indirect competitors may be those hotels that provide quite different types of accommodations and facilities such as budget hotels, hotels that have apartments and resorts and so on. Few examples of indirect competitors of Regalodge Hotel would be Tower Regency Hotel and Apartments, Impiana Hotels and Resorts and Kinta Riverfront Hotel and Suites.
Recently, there are quite a number of new entrants or new competitors in the hotel industry in Ipoh city itself. Due to the rising number of tourists and events or occasions held in Ipoh, there are a lot of new hotels built to meet the demand of the potential customers. Few new competitors of Regalodge Hotel are Mh Hotel, Tune Hotel and Kinta Riverfront Hotel and Suites.
4.0 Porter’s Five Forces
4.1 Rivalry among existing firms
Number of competitors
The number of competitors in hotel industry is high because Malaysia is expanding tourism industry and the delicious food in Ipoh are able to attract a lot of tourists to visit Ipoh. The examples of competitors are Tower Regency, Tune Hotel, D Eastern Hotel, Hotel Excelsior, Lost World Hotel and many more. Therefore, number of competitors rises due to accommodations demand and this lead to the intense rivalry in hotel industry and the attractiveness of hotel industry will also increase.
Besides, hotel industry also has high fixed cost as generating a hotel business need a lot of capital in order to make it successful (“Operating Leverage,” n.d.). According to Pavlatos and Paggios (2007) a hotel has about three quarters of total costs that is fixed and cannot be controlled. High fixed cost will reduce the attractiveness of an industry (“Industry Attractiveness,” n.d.). As the fixed cost is high, this will cause the cost of exit barrier in the hotel industry to be high. The cost of exit barriers is high because a businessman or entrepreneur will have to give up the high investment invested into the hotel if they wanted to exit the industry (Enz, 2009). So, it is difficult for a hotel to withdraw from the industry due to the high fixed cost and a businessman will not want to bear with the losses caused by fixed cost when the hotel exit from the industry.
Therefore, we can conclude that large amount of competitors, high fixed costs and high cost of exiting barrier cause a high degree of rivalry.
4.2 Threat of new entrants
Hotels need high fixed costs especially for decoration and restaurant wages; whereas high variable costs are needed for food and beverages (Pavlotos & Paggios, 2007). The high fixed costs and variable costs will put a pause for new entrants to enter hotel industry, so Regalodge Hotel will be less threaten by new entrants.
Economies of scale
In addition, high economies of scale are needed in this industry. In order to enter the hotel industry, new entrants need to ensure that they have high economies of scale so that they will have the ability to compete with those established hotels. The new entrants have to compete with the major competitors in terms of quality and price. High economies of scales decrease the attractiveness of the industry and lower the threat of new entrants.
If a new entrant wishes to enter the industry, product differentiation is also another crucial factor so that they can compete with the established company. For example, Regalodge Hotel has differentiated itself by having a good reputation and excellent service for the customers. As service is an important criterion in the hotel industry, new entrant must make sure that they will be able to provide good services to be competitive.
So, it can be seen that high capital requirement, high need of economies of scale and need for product differentiation cause low threat of new entrants.
4.3 Threat of substitute products
Number of substitutes available
There are a lot of close substitute’s products for hotel such as motel, homestay, homes of relatives, friends and acquaintances.
Substitute’s price value
Besides, the price value of staying in hotel is much higher compare to staying in relatives’ or friends’ house. So, this will cause hotel to be a less considered accommodation option.
The switching costs of buyer is also low since there are a lot of close substitutes which may have lower price compared to other substitute in the hotel industry. The substitute products have threatened hotel industry, thus, reduce the industry’s attractiveness.
Based on the numerous substitutes that are available, lower price value of the substitutes and low switching costs of buyers, the threat of substitute is slightly high.
4.4 Bargaining power of suppliers
Number of suppliers
There are quite numerous amounts of suppliers for hotel industry. Hotel industry needs a lot of suppliers in terms of training services, food and beverages and many more. These suppliers can be easily found in the market especially for food and beverages. Thus, the bargaining power of supplier is lower.
In addition, the switching cost in the hotel industry is low as the hotels can easily switch to the suppliers they want without incurring much costs, so the hotels will have higher bargaining power than suppliers.
Based on the large numbers of suppliers and low supplier switching cost, the bargaining power of the suppliers is lower than the hotel’s.
4.5 Bargaining power of buyers
Number of buyers
There are a lot of buyers in hotel industry. Although, the buyers are small in size, there will be a significant influence if a hotel loses a customer because regular customers of hotel industry are usually small in size. So, the buyers would have a little higher bargaining power than the hotel.
Moreover, the switching cost of the buyers is low as there are a lot of competitors in the market and customers can switch to the competitors very easily. So, the industry will be less attractive for the reason being.
Contribution to quality
Additional facilities usually added in hotel industry in order to increase the quality of services provided to customers. For example, restaurant, spa, karaoke centre and reflexology centre are additional facilities provided for customers. Therefore, the contribution of quality turns to be high with those added facilities. So, customers will tend not to switch to competitor’s hotel.
The smaller amount of buyers, lower switching costs and high contribution to quality will cause the bargaining power of buyers to be moderate.
In the nutshell, it can be seen that through the Porter Five forces analysis, there are high rivalry among existing firms and moderate threat of substitutes and bargaining of buyer but there are low threat of new entrants and also low bargaining power of suppliers. These made the hotel industry moderately attractive.
Regalodge Hotel is a 3 star rating hotel which is conveniently located in the heart of the Ipoh city. It was established since year 1996. The hotel has a total of 86 rooms which 8 of them are suite rooms. Below is the organization structure of the hotel.
The hotel has around 35 employees including the management team. The target market of the hotel is businessmen and tourists since most of the reason why people stay in a hotel in Ipoh is either for the reason of travelling or doing business. The hotel able to gain a total of RM100, 000 to RM120,000 revenue per month.
The most significant reason why the hotel is doing quite well as a 3 star hotel is because the facilities and services that they provided to their customers. Regalodge Hotel is known as a 3 star hotel with 5 star services. With all the good services and friendly employees, customers feel that they are being valued and appreciated.
The hotel has six types of rooms which include standard, superior, deluxe, executive, Regal suite and Regal family suite rooms. The rooms ranged from RM100 to RM300, which is the price range of a 3 star hotel.
Besides, the hotel has a few attractive facilities such as the Limestone fine dining restaurant, Regal spa and reflexology centre. Overall, comparing to the same standard and star rating hotels in Ipoh city, Regalodge Hotel can be considered the best choice of a reasonable priced-hotel with high standard of service which comes together with excellent facilities.
6.0 The Marketing Strategy
6.1 Objective of Marketing Strategy
There are a few of marketing strategies that had been used by Regalodge Hotel where the two main strategies are to have the right target market and implement suitable promotions. The marketing strategy for Regalodge Hotel is to target on the right market. The objective of this marketing strategy is to meet and satisfy customers’ needs and wants by using their strengths and capabilities. The location of Regalodge Hotel is at the heart of Ipoh city, so, they claim that they are the indulge heaven in a bougainvillea city by offering several kinds of products and services to meet different customer’s needs and wants. On the other hand, the purpose of Regalodge Hotel executing a few promotion packages as their marketing strategy is to attract more customers, increase their brand name and also to stay survive in the highly competitive industry.
6.2 Target Market
The target market for Regalodge Hotel is businessmen and leisure travelers. This is because Regalodge Hotel has a strategic location which is near to numbers of business centre, shopping centre, and tourism locations. It is more convenient for the businessmen to reach the business centre while the leisure travelers can visit shopping centre and places with cultural attraction easily. The target market can even reach their desire destination via public transports that are available near to the hotel. Besides, fine dining restaurant, spa and reflexology centre are available in the hotel to provide better facilities to the target market. These additional facilities enable them to release their working stress and have a comfortable environment while spending their time in Regalodge Hotel.
6.3 Competitive Advantage
The services provided by Regalodge Hotel are superior compare to other competitors. The staffs in the hotel provide a good quality service to customers in order to delight and satisfy the customers in order to be more competitive in this highly competitive industry. For example, umbrellas will be provided to customers during rainy days and customers will be accompanied by particular staff to the car park to get their cars. The management in Regalodge Hotel believes that good services and warmness that people feel in their family can be done by the hotel through the small details in daily life. Another example can be seen through the subsidy of parking coupon for the customers as they park their cars near the hotel compound. The customers need not worry about the insufficient car park problem and use their own money to pay for the car park.
Besides that, the snacks and drinks such as drinking water, coffee, can drinks, tidbits, cup noodles and chips are all free of charge for customers. Only Regalodge Hotel is offering these free snacks and drinks to their customers and by just this little complimentary goods offered, it may be one of the reason why people prefer staying this hotel comparing to others.
6.4 Products / Services
Hotel industry is the industry that provides product and services. The product of Regalodge Hotel is their hotel rooms which are divided into 6 types. There are standard rooms, superior rooms, deluxe rooms, executive suite, Regal suite, and Regal family suite. The hotel has a total of 86 guest rooms. Besides, they also provides added-value product such like French nouveau cuisine fine dining restaurant, Regal Spa, and Relaxation Reflexology centre to attract more customer with more added services.
As mentioned earlier, hotel also provides services besides providing accommodation for customers. When customers step into the hotel, they will be welcomed warmly by the friendly front-line employees that will provide check-in services, answering inquiries and other services to them. Besides, cleaning rooms and satisfying customer’s need in a short period is also type of service that a hotel should have to serve its customers right. Laundry service, room-service and other basic services also will be provided. Other than that, added-value services such as well-trained Chinese masseur is hired to provide services for Chinese medical foot bath and healing therapy is also provided. For the fine dining restaurant in the hotel, Chef Erwin vande Ve gte, a qualified and certified Culinary Master Chef from Europe is hired to provide customers with high quality food. Adding to the added-value services, hot Jacuzzi pool accompanied by a cool refreshing pool, fitness equipments, steam and sauna, and many more are also available for the hotel’s customers.
6.5 Promotion Mix
Regalodge Hotel had launched 3 types of special promotion which valid from 1st January 2012 to 31st December 2012 to attract more customers. These 3 special promotions are Regal Sunday @ RM124.00 nett, Regal Early Bird Special, and Regal 3 Days 2 Nights Lost World of Tambun Package.
For Regal Sunday @ RM124.00 nett promotion package, it is available on Sunday which is used to attract customer to spend their weekends staying in hotel in order to solve the problem of fewer business or customer arrival on Sundays. It is because based on the information obtained from the interview done; the target market for Regalodge Hotel is businessmen. So, they face poor sales performance in weekends since salesmen do not work on weekends. This promotion package includes one night accommodation in superior or standard room and one spa voucher, which can be used to enjoy the services in Regalodge Reflexology and Regal Spa.
Besides, Regalodge Hotel also offered Regal Early Bird Special promotion package to reward those customers who make early booking for the hotel rooms. As long as room booking is made one month in advance, customer can enjoy further discount regardless there is weekends or public holidays.
Next, Regal 3 days 2 nights Lost World of Tambun package is another promotion package offered by Regalodge Hotel. The hotel had cooperated with Lost World of Tambun, which is the largest water theme park in Ipoh to offer this valuable package for their target market which is leisure travelers. By purchasing this promotion package, customer can enjoy 2 nights’ accommodation in standard room, superior room, or Regal family suite, transport to and fro the hotel to The Lost World of Tambun and this package also includes the entrance ticket for The Lost World of Tambun. Regalodge Hotel has been using this promotion to target those family travelers in order to boost their sales.
6.6 Pricing Strategy
Regalodge Hotel is using product line pricing as its pricing strategy. There are several types of accommodation in the hotel such as Superior Room- RM139, Standard Room- RM139, Deluxe Room- RM186, Executive Suite- RM238, Regal Suite- RM276, Regal Family Suite- RM308. These different prices of accommodations allow Regalodge Hotel to target on different segments. Consumers can select the rooms based on their budget or requirement for accommodations.
7.0 Problems and Alternatives to Solve Problems
Problem 1: Lack of parking lots
1) Build more parking lots to provide convenience to customers
2) Provide subsidies for parking to customers
1) High cost and time consuming
2) Bear with the parking coupon costs
â- Best alternative:
-Provide subsidies for parking
Problem 2: Lesser customers on Sunday
1) Give promotions
2) Collaborate with tourism agency
1) Reduce profit margin
2) Give commissions for tourism agency
â- Best alternative:
-Collaborate with tourism agency
Problem 3: Lack of employees
1) Increase employee’s benefits
2) Require overtime
3) Involve in socially responsible activities
1) Reduce revenue
2) Overtime is an disadvantage for long term
3) High cost
Problem 4: Weak brand name
1) Use advertising and sms marketing
2) Provide good services and facilities
3) Involve in socially responsible activities
1) Reduce profit margin
2) Lack of space to build additional facilities
3) High cost
8.0 SWOT Analysis
Superior customer services provided
Only hotel in Ipoh provide Reflexology centre facility
First hotel in Ipoh have fine dining- Limestone’s fine dining
Soft drink, tidbits for hotel guests are free-of-charge
One of the strength of Regalodge Hotel is that they always provide superior quality services to their customers. It is because they believe that, a service industry like hotel industry, services are important to enhance their business. These good services will be value-added, when it comes along with good product, such as hotel rooms and facilities. In the hotel industry, they are the first hotel that provides reflexology centre services and fine dining restaurants in Ipoh. So, it can be considered the strength for Regalodge Hotel. In addition, it has provided complimentary snacks and drinks for their customers which their competitors are not providing. Soft drinks and tidbits for guests are free-of-charge where these will be charged in other hotels. It will be one of the factors that increase the loyalty of the customers.
Lack of parking slots
Low brand awareness
Lack of employees
The space in Regalodge Hotel is not as big as other competitors in Ipoh, so, Regalodge Hotel has lack of place to serve as parking slots for their customers, which may cause inconvenience for them. Besides, Regalodge Hotel has low brand awareness in Ipoh and not to say in other states or countries when compared to other competitors such as Heritage hotel, Tower Regency Hotel and others. So, tourists might not know about Regalodge Hotel as there are numbers of compe
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