Primula Parkroyal Hotel

Primula Parkroyal Hotel

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CASE 16 TEACHING NOTES Primula Parkroyal Hotel Louis et Paul 1. What should PPR’s positioning be to differentiate it from its competitors? An assessment of the service offerings of competing hotels in Terengganu (Table 1) would reveal the following advantages PPR has compared to its competitors:   

PPR is the only hotel that is both close to the town centre as well as has a beachfront. While the other hotels have either chalets or regular hotel rooms, PPR has not only suites, but also deluxe and family rooms, the latter being directly accessible to the beach. A comparison of physical facilities and services provided among the six hotels would show that PPR provides the widest and most comprehensive range of services and facilities at the most competitive rates among the six.

Based on the above analysis, it is apparent that PPR could easily establish itself as a hotel where one could relax and have fun, but at the same time, deal with business matters when the need arises. This is what none of the other six competitors could promise. While Sutra Beach Resort may be able to match PPR in terms of luxury, it is located far (38km to be exact) from the town centre. Although Glenmarie Kenyir boosts just as much facilities and services as PPR does, its room rates are the most expensive among all the hotels and it is also situated furthest away from the town area. As for the other four competing hotels, though situated in/close to town, they could not provide the luxury and the facilities sought by the business class. PPR is thus the only hotel in Terengganu that allows customers the best of both worlds, proximity to town and the luxury of a business class hotel, as well as the fun of a beach resort. PPR should thus capitalise on this and promote itself as the only holiday resort cum business hotel in the region, selling itself on the promise of both business and leisure. Even for leisure travellers, the proximity to the town could be exploited, allowing guests to go for shopping, sightseeing and eating-out trips. 2. What should be its target markets for the coming year(s)? Should they be the same for peak and off-peak seasons? Given Terengganu’s main attractions of unspoilt natural landscape (beaches, virgin tropical jungle, waterfalls) and fishing villages, which may have little competition regionally but not internationally, it may be easier to attract regional

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tourists than international tourists. This is because tourists may not be willing to travel too far for Terengganu’s non-unique attractions, which may also be available nearer to such tourists’ homes, and/or may be more easily accessible than Terengganu. Moreover, the location is rather inaccessible, the local airport being off the routes covered by major international airlines. Hence, PPR should concentrate on attracting regional tourists instead of spending precious advertising dollars to reach out to potential but geographically dispersed customers. PPR’s strategic location puts it in a favourable position to cater to both the business and leisure segments. To be more cost effective and efficient in reaching out to these travellers, PPR could focus on corporate accounts and travel agents respectively. For business travellers, it should focus on corporate accounts rather than individual business travellers since the former tend to make room bookings in bulk. Moreover, individual business travellers may not visit the same place frequently. This makes marketing to them more expensive. To reach the leisure segment, especially families and groups, and even individuals travelling alone on short trips, PPR could liase with travel agents, which also make bulk bookings. By setting up incentive schemes such discounted hotel stays during peak seasons or even free hotel stays during off peak seasons for such travel agents, PPR could develop goodwill and forms long lasting relationships with them. This would thus encourage the travel agents to promote PPR more aggressively to travel groups or individual travellers. Alternatively, PPR could market directly to these tourists. This option would be more viable for the local segments. PPR could sell on ‘free and easy’ packages, comprising hotel stay and transport, which can be easily arranged. PPR should also promote more aggressively, hotel packages bundled with attractive one-day tours (e.g. boating/sightseeing to Kenyir Lake or Kapas Island off Marang, a river cruise to visit the local museum or fishing villages such as in Marang) or even two to four-day-tours (e.g., a snorkeling at Redang/Perhentian Islands to enjoy the coral reefs/fishes in the South China Sea off Terengganu, or fishing and jungle trekking at Lake Kenyir, to Taman Negara, Malaysia’s National Park with virgin jungle, mountains, waterfalls and lakes). As regular holidaymakers tend to be less price-conscious than budget travellers during peak seasons, marketing efforts should be primarily targeted at regular tourists. Some efforts should also be directed at corporate accounts that send employees on regular leisure trips annually. In the off peak seasons where demand is low, PPR could then turn its attention to budget travellers with promises of a luxurious stay at affordable discounted prices. PPR should also promote convention packages to corporations whose reason for travelling is mainly business and would thus be less concerned with seasonal variations in weather than holidaymakers.

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3. How could PPR improve room revenue during all seasons? In general, PPR could use the following five strategies to improve room revenues: i. encourage current guests to prolong their stay; ii. encourage current guests to visit Terengganu and hence patronise the hotel more often; iii. encourage more visitors to Terengganu, and try to get them to stay at PPR; iv. get a higher market share of current arrivals to Terengganu, persuading them to stay with PPR instead of other competing hotels. v. in combination with any of the above: develop and promote attractive discount packages to boost room sales during off-peak/monsoon months between December and March. To encourage current guests to prolong their stay, PPR could introduce progressive discounted room rates. PPR should first analyse the average length of stay per trip. Then, progressive discounts on additional room nights over and above the average length of stay could be given to entice guests to stay longer. For example, guests get the first three nights at regular prices, and the fourth night at 25% discount, and every further night at 35% discount. However, this should only be implemented during off peak seasons where there is excess room capacity to minimise opportunity loss. To attract tourists to the hotel more often, loyalty programmes could be introduced. Besides the Pacific Privilege cards given to individual travellers, guests who chalk up a certain number of room nights, or who spent over a certain amount at the hotel could be awarded with a special VIP card that entitled them to priority booking, a slight discount, and/or some freebies such as a free breakfast and/or dinner, and a welcome drink during peak seasons, and heavy discounts in addition to any other current promotions during off peak seasons. This could not only encourage tourists to frequent the hotel, but may also shift some demand to off peak seasons. PPR could also make use of Bass’s existing Reward Partner program to encourage its customers to earn reward points for stays in exchange for gifts or discounts on air flights. Alternatively, PPR could offer cardholders a free night of stay with every three room-nights booked in lieu of discounts (for off peak seasons). This may even prove more effective than discounts as cardholders may be tempted to redeem the ‘free’ stay (equivalent to a 25% discount) and return more often. PPR could also leverage on the resources of Bass’s chain of hotels and award VIP cards to even the corporate and government segment, such as the Corporate Bonus Card, a rate program for companies that provide 20 or more rooms nights per year; and the Government Bonus Card, a similar rate program that is targeted at the government departments. To further attract the corporate segment during off peak seasons,

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PPR could introduce the Parkroyal Conference Planner, a program that is already in place in other Bass’s chains of Parkroyal hotels, which provides corporations with seamless assistance in their business conferences that are held regularly in the hotel. To increase the number of visitors to Terengganu, PPR would have to work with the local government to promote the place as a tourist attraction. As low tourist arrival rates could be attributed mainly to inaccessibility and a lack of tourist attractions, PPR should work on these two areas. For example, PPR could arrange tour buses to pick up visitors from the international airport in Kuala Lumpur to Terengganu, and to PPR directly. To cater to local visitors, PPR could similarly arrange tour buses to pick them up at various points in town. PPR could also target their marketing efforts at Singaporeans, whose stressful lifestyles would make them welcome frequent short breaks. The hotel could either work with travel agents or plan their own ‘free and easy’ tour packages, and market them to Singaporeans. Tour buses could be arranged to ferry visitors to and from Terengganu directly from Singapore. More promotion could be done to promote Terengganu’s myriad “back to nature” wonders in terms of its tranquil inland lake (Tasik Kenyir), waterfalls, pristine beaches and islands, river-side communities, fruit orchards, ethnic culture and other unique attractions that would warrant tourists from afar to make a special stop at the state. Marang Resort and Safaris, located off the main coastal road between Kemaman and Marang village, is a case in point that manages to do just this, in carving its own market niche. This resort managed to be ranked among the world’s top three most “unique resorts”. With both beachfront and riverine chalets, this unique resort offers custom-tailored packages for specialist groups and vacationers seeking activity, rest and relaxation among tropical nature. In general, to attract tourists to stay at PPR year round, the hotel should plan promotional activities corresponding to the various festive occasions around the year. They could organise food and cultural festivals, day/night tours around the state to fishing villages, etc., and offer these free of charge to tourists who stay over at PPR for over a certain number of nights. Discounts on room rates should be given only in off peak seasons, when there are unfilled rooms to minimise opportunity costs. During the off peak seasons, PPR could also organise trade shows, exhibitions, Family Days or Dinner & Dance functions for corporations or the government departments. PPR could also hold periodical Internet promotions to appeal to Internet users who surf the Web to look for bargain getaways or link PPR’s website to local tourism board’s web pages to generate wider publicity and exposure. In addition, PPR could tie in with the tourism board and set up tourists’ information booths at airports or ferry terminals that heavily promote PPR as the hotel to stay in when travelling to Kuala Terengganu. PPR could also participate actively in

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government-sponsored tourism campaigns such as the ‘Visit Malaysia’ campaign to further attract tourists to stay. 4. What are PPR’s key challenges to achieve its target positioning and improve room revenues? To achieve its target positioning, PPR’s key challenge lies in the training of its staff to provide world-class quality services. Before the management take-over in 1996, the hotel’s service standards were poor despite having the facilities and amenities appropriate of a four-star hotel. This was mostly due to the work culture inherited from the previous management, which gave rise to poor staff attitudes, low morale and a lack of motivation to serve. PPR’s less than ideal service standards in the past could also be attributed to its inefficient recruitment process that resulted in high turnover rates. However, it should be recognised that the mainly Muslim labour supply makes it difficult to recruit appropriate servers, who may have to serve alcohol and other foods, which is against the Muslim religion. However this has changed with the increased emphasis on educating and training the staffs to provide top-notch services. Due in part to the need to reduce operating costs to boost hotel revenue; PPR faced the issue of freezing of all new employments unless absolutely necessary. In order to balance up the existing workforce, PPR has to face the challenge of constantly cross training its staffs and carrying out job rotations. Besides having to design a proper recruitment and training system, PPR too needs to encourage and instil a customer-oriented culture among the staffs. This is in line with its aim to provide world-class service delivery to all its guests. Problems with room revenues is the direct result of highly fluctuating and generally low demand for rooms, which leaves PPR with huge excess room capacity, especially during off peak seasons. Low demand for rooms is probably caused by Terengganu being highly inaccessible to tourists, and a generally low awareness of Terengganu’s tourist attractions and unspoilt nature among international travellers. This low demand is further worsened by seasonal variations in weather, which exaggerated demand fluctuations between peak and off peak periods. PPR would have to work out plans to reduce accessibility problems, and increase promotional efforts and plan more activities during off peak seasons to encourage tourist arrivals. 5. What actions would you recommend PPR to take over the next 12 months? PPR should continue to stress on quality service delivery from its staff. This can be achieved by first, being more selective in the recruitment process by hiring applicants with a passion to serve, and who are service-oriented and ideally

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already proficient in English. Employees should then be equipped with the necessary skills for their positions by putting them on the relevant courses. To further increase their confidence, all frontline employees should be sent for English proficiency courses and etiquette classes. All employees should also be inculcated an orientation towards achieving the high service standards. Management should also continue to cultivate a friendly and caring corporate culture to give staff a sense belonging and make them feel part of the establishment. Specifically, employees should be made to feel appreciated. Appropriate rewards schemes such as the ‘Best employee of the month’ and ‘Top Department of the Quarter’ awards (which are already being done by SPHC hotels in Malaysia) could be implemented. Furthermore, bonuses, promotions and recognition should be given to those employees that clearly demonstrate customer orientation, effectiveness in dealing with customers and productivity. No other tool is as effective in unambiguously communicating to staff what is desired from them, and instilling the wanted corporate culture. This will then translate into higher service quality being provided by the staff. To further improve staff morale, employees must be made to realise the importance of each and every appointment. It is thus necessary to give them responsibility and make them accountable for their jobs. To allow them to perform their duties more effectively, they must also be empowered appropriately. For example, PPR could empower frontline employees to recover service failures, and to conduct their own quality control (rather than supervisors constantly checking on staff). Periodic quality control of course is required, and regular institutionalised feedback to encourage good performances and discuss areas for improvement. In addition to continually improve the hotel’s service standards through staff training and motivation, marketing activities to improve hotel revenues and to smooth out fluctuating demand should be planned. First, a progressive discount scheme for room rates should be implemented during off peak seasons to manage demand. Loyalty programmes that would entitle guests to discounts and special benefits, as discussed previously, should be awarded to regular guests. PPR could also market Hotel Memberships, which would entitle guests to similar benefits as the VIP cardholders. This might encourage guests to return more often and stay with PPR. (One such on-going scheme is the Pacific Privilege Membership, where card members receive attractive discounts and promotional offers for residing in the Parkroyal, Centra and Travelodge accommodations in the Asia-Pacific region). As discussed earlier, such special privilege cards could also be extended to the business and corporate segments. PPR could also make use of its extensive customer data base system to provide customized services and highly personalised holiday packages to its customers.

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However, guests would not return simply for the sake of staying at the hotel. Thus, it is also essential that activities be planned year round to attract tourists to return. A sample calendar of events is shown in Exhibit 1. PPR should especially plan and promote conventions to be held during off peak seasons where there is excess room capacity, by offering attractive packages. These could include better discounts for bulk booking of rooms, assistance in organising and planning convention activities, free use of amenities as further incentives to stay with PPR, organising of Family Days and Dinner & Dance for corporations, etc. Yield management can also be applied, especially during school holidays when the hotel always enjoys high occupancy. Lastly, revenues could also be increased through the hotel’s various F&B outlets. These restaurants/coffee houses could offer daily buffets such as ‘Seafood Extravaganza’, ‘Sunset BBQ’, etc., to attract both locals and tourists. These meals could also double up as freebies that PPR can offer to its guests for prolonging their stay, or for repeat stays. The regular distribution of flyers, displaying of banners and maintaining attractive billboards can be used to promote food and beverage specials to the local market. In line with increasing the profitability of PPR, the management should also adopt cost savings measures such as freezing all new appointments or replacements. Staff from redundant positions can be transferred to the lean departments in order to balance up the workforce. As the hotel’s total salary, wages and staff related benefits made up of 39.2% of total hotel revenue, every effort must be made to bring down this cost. Management should also continue to find ways on saving electricity, fuel and general maintenance.

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Primula Parkroyal Hotel

Exhibit 1: Primula Parkroyal Calendar of Events 2001 Proposed Activities Jan

Reasons for Proposed Activities

Special Occasions  

New Year’s Day Hari Raya Puasa

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Chinese New Year

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End of Ramadan

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Hulu Terengganu Cultural Fest

May

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Cultural Fest Sports Extravaganza Family Packages Special Turtle Viewing Season

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Terengganu Theatre Festival Dungun Cultural Fest National Taekwondo Championship Beach carnival Attracting families on vacation

Convention Packages Special Feb Chinese New Year Special Convention Packages Special Mar Malay Foods Festival Apr Cultural Fest

 

Jun Sports Extravaganza Family Packages Special Cultural Fest Fishing Competitions Turtle Viewing Season

   

Marang Cultural Fest Squid Fishing Fiesta Boat and Marina Show Attracting families on vacation

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Terengganu Beach Games Kemaman Cultural Fest

Jul Sports Extravaganza Cultural Fest Turtle Viewing Season

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Primula Parkroyal Hotel Aug Sports Extravaganza Cultural Fest Turtle Viewing Season

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Kenyir Kayak Regatta Terengganu Literary Week International Long Boat Race

Sep Sports Extravaganza Cultural Fest Lantern Festival Turtle Viewing Season

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Beach Festival 98 Terengganu Gathering of Performing Arts Mid Autumn Festival

Oct Sports Extravaganza

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Cultural Gathering Terengganu Open Traditional Dance Competition

Nov

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Conventions Packages Special Family Packages Special

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Crafts, Arts & Textiles Expo Batik & Craft Festival Attract families on vacation

Dec Magic Show Convention Packages Special Family Packages Special Christmas Promotion Legend: Monsoon season

School holidays

Turtle viewing season

Peak periods

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School holiday treat for children Christmas Attract families on vacation

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Update on what happened since June 1997 PPR was relaunched in August 1997, with the ceremony officiated by the Malaysian Minister of Tourism and Culture. It repositioned itself as “the premier business resort hotel in Kuala Terengganu”. From January to September 1997, 70% of 300 staff resigned. Nevertheless, recruitment was not found to be a problem. However, recognising that maintaining high service standards is difficult without a loyal workforce, an employee retention program became the main HRD agenda for 1998. Training and Development was geared to be the driving force to ensure that all staff was well versed in their respective departments’ standard operating procedures. A positive working environment was seen as crucial to propagate productivity and work satisfaction, and would create happy, motivated staff capable of delivering good quality service. In February 1998, PPR faced a further competitive threat with the launch of two new hotels in its Kuala Terengganu market, though these two new hotels are closer to the Seri Malaysia positioning. Total room capacity in Kuala Terengganu thus increased by 30% (Yen Tin Mid-Town with 150 rooms, and Grand Continental with 192 rooms). Both hotels were located in town. In January 1998, Yen Tin advertised its rooms at RM69 per room with breakfast, while Permai Park Inn launched at RM70 per room. Their entry aggravated an already high excess capacity that become more pronounced during the slow-down of the Malaysian economy, and a 30% devaluation of its currency against the US Dollar in October1997. Responding to the Asian economic crisis accelerating in the fourth quarter of 1997, government and corporate spending in four and five star hotels was cut drastically since November 1997. PPR’s major supporter, the Malaysian government, had cancelled both rooms and banquet business from October 1997 onwards. Furthermore, the extensive international media coverage of the haze problem, which resulted mainly from forest fires in Indonesia, severely affected international tourist arrivals. The combined effect of the economic crisis and the haze problem was a severe drop in 1997 room revenue. The ‘Great Escape’ package aimed at Malaysian city dwellers was introduced in December 1997, and through heavy discounting, the hotel managed to meet its budgeted occupancy rate of 36% during the off-peak December month. Even the revenue from the F&B was affected when tourists held on to their dollars more cautiously and spent less per day on F&B. As a response, costs were cut wherever possible. This included closing the Grill restaurant and the Garden Wing outside the peak season in 1998. Overall, 1997 closed on a disappointing tone with a gross operating loss of RM516, 761. The situation did not improve in 1998 when the hotel posted a loss

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of over RM 0.9 million in gross operating profits. However, with changes in the hotel’s senior management in 1999, followed by a change in government spending policy in April of the same year, the hotel managed to turn around and post a gain of more than RM 28,000 in gross operating profits by the year-end. Compared to 1998, this figure represented a turn around of almost RM 1 million. For the next twelve months, PPR’s current management would be focusing its efforts to increase sales presence in Kuala Lumpur, Kota Bharu and Kuantan. PPR would be targeting its marketing efforts on increasing the government residential conference packages in these areas. Though low in yield, this market is still able to produce volume and contribute almost 28.5% of total room nights in year 2000. PPR’s management anticipates that the government related residential conferences would maintain or even surpass the target set for this segment in 2001, despite the imminent slowdown in the world economy. The management too aims to continue its efforts to penetrate into competitor’s target segment while maintaining its own high levels of customer relations with PPR’s existing regular clients. This would be achieved through the aggressive promotions of room packages to local colleges and leisure market of the East Coast.