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Pan Pacific Kuala Lumpur Airport Hotel Business Strategy

5.0 Key Factors for Success

Key factors for success (KFS) are the critical factors or activities required for ensuring the success of a business. They need to be identified so that an organization can ensure that they can delivers value that meets and exceeds the expectations of its targeted customers better than competitors (Bowie and Buttle, 2007).

Two key factors for success have been identified for PPKLIA hotel. The hotel physical’s condition and hotel website.

PPKLIA established 11 years ago, the exterior of the hotel building now seems aged and the exterior image of the hotel is in old condition with an unattractive design. At first sight, it does not bring an impression of the hotel being a 5-star luxury hotel. This can be considered as one of their weaknesses since there is often an intuitive feeling that effective design can attract customers from the desired target market segment and enable the hotel to price accordingly while operating the unit in an efficient way with the result of this greater market awareness and customer volume is increased profits (Ransley and Ingram, 2001). Hence, PPKLIA should have a refurbishment plan to upgrade the hotel’s design in order to achieve what had stated by Ransley and Ingram.

The hotel web site is another factor which is considered critical to the hotel. To hospitality practitioners, the internet offers a means for them to sell their products to global customers without any geographical or time constraints (Huizingh, 2000). The driving force for hospitality suppliers to establish their web sites includes lower distribution costs and thus higher profits, and a larger potential market. Similarly, consumers can search for their needed information and directly communicate with suppliers at any time and in any place (Waller, 2003). Thus, the web site is an important medium for the hotel to communicate with their markets.

6.0 Mission Statement

Organizations develop corporate mission statement in order to share them with their managers, employees and in many cases, customers and other publics (Kotler et al., 2006). According to Pearce and Robinson (1991), mission statement can be defined as broad statement of characteristics (product and market), goals (profit and growth) and philosophies of a business or simply its purpose and philosophies (Byars, 1984). Mission statement below is based on current situation and potential development of PPKLIA.

Pan Pacific Kuala Lumpur International Airport Hotel will be regarded as the paramount leader of airport hotel in Asia exemplifying service of unmatched sincerity and professionalism.

Pan Pacific Kuala Lumpur International Airport Hotel will be the best choice in serving the honorable business and leisure travelers according their different needs and wants. At here, we will treat all of our guests as our priority through the delivering of caring and efficient hospitality to create a truly unique signature service where every signature service comprises of our commitment and responsibility on the service provided.

Our dedicated employees will go through a series of developing and training in an effort to mould them to become an extraordinary individual in providing a unique sense of professionalism to the guests. We will ensure that every employee is treated fairly with dignity where constantly support and caring from leaders to continuously improve productivity and customer satisfaction.

As our hotel surrounded by an oasis of greenery in fusion with luxury, we committed to environmental protection and stewardship by mitigate the impacts on the environment with all the stakeholders to promote and implement responsible environmental practices and continuous improvements.

We will ensure our products and services will remain in the high quality to provide satisfaction to the current and future potential customers and at the same time to breakthrough the limitation in creating competitive advantage vis-à-vis competitors by actively expanding our presence globally, with potential developments in a number of domestic and international markets.

7.0 Strategy Formulation

The task of analyzing the organization’s external and internal environments and then selecting appropriate strategies constitutes strategy formulation. It is a process of taking actions consistent with the selected strategies of the organization (Hill and Jones, 2006).

7.1 Prioritize Existing and New Target Market

PPKLIA’s current target market composed of business travelers, airline crews, tourists and transit passenger, while 80 per cent of the hotel guests are foreigners with the largest group coming from the United Kingdom and Australia.

According to Bowie and Buttle (2007), business travelers tend to be less price-sensitive, since employer generally meets hospitality and travel expenses. This has made them have more budgets to spend in the hotel. Also, they are less concern on seasonal aspects because business travelers contain business trips that are unavoidable due to their job nature. Moreover, with the recent economic downturn, many companies revised their travel spending, with companies arranging meeting near the airport in order for delegates to fly in and out on the same day (Boston Business School, 2009). This causes business travelers as frequent, or regular, users of airport hotel accommodation. Therefore, a 50 percent of target market allocation for business travelers should firstly being prioritized.

Besides, a 35 percent of target market will be allocate for transit air travelers as the second group to be prioritized since PPKLIA is the preferred choice for transit air travelers with a few long hour in-between flights. Due to the nature of location of the hotel, it provides convenience to this target market to check-out the hotel and able to catch their flight by just going through a 5-minute walking distance of sky bridge that connecting the hotel and airport. Moreover, these transit passengers are mostly come from the Europe countries where they have high spending power. Thus, it should not be overlooked.

Airline crew is the third priority target market group with a 15 percent of target market allocation for it since PPKLIA is an airport hotel, the high volume of intercontinental, regional and international flights, coupled with the need for airline crew to have proper rest periods between flights, has created a demand for group accommodation for hotels within approximately 15 – 45 minutes travel time of major airports (Bowie and Buttle, 2007). While the distance between KLIA and PPKLIA is only a 5-minute walk make it as the preferred choice of hotel for airline crew to stay in.

A prediction from World Tourism Organization (WTO) on China, it expected to send 100 million visitors to other countries (Zhang et al., 2000). Thus, a 60 percent of market allocation should falls under it as first future potential target market to be prioritized. On the other hand, with the popularize by the Tourism Minister Datuk Seri Dr. Ng Yen Yen, the Japan market would permeate into Malaysia gradually by selling product-service that suit the different target market such as sophisticated office ladies and men, students and pensioners. Therefore, this market would have a 40 percent of market allocation being ranked as the second market to be prioritized. Hence, PPKLIA should grab this opportunity to adjust its’ products and services to prioritize these markets by cater the needs and wants for the Chinese and Japanese in an effort to enlarge its target market for the business.

7.2 Positioning Statement

The concept of positioning statement in a marketing strategy calls for the creation of an image – the consumer’s perception of the subjective attributes of the property vis-à-vis those of the competition. This perception may be radically different from the property’s physical characteristics and the distinction between the perception and the reality is especially important for hotel marketers (Lewis, 1981).

Based on the previous internal and external analysis, a repositioning should be carried out in order to revise the marketing strategy for PPKLIA as to increase sales. As a result, a new positioning map (Please refer to Appendix I) has been developed that emphasized on offering the same quality product-service to the guests but with lower price. From the previous positioning map, PPKLIA being plotted at the highest position for the two variables since it has the most expensive room rate compared to its competitors and is the nearest to the subject location, KLIA. As in the new positioning map, PPKLIA is being proposed to lower its ranking from five to four for the price variable. In other words, PPKLIA is encouraged to lower its room rate to the range of RM 375.00 – RM 450.00 in order not to have a big difference with its primary competitors while at the same time maintain its quality.

Below is an overall positioning statement follow along with statements for various targeted segment of PPKLIA.

Pan Pacific Kuala Lumpur International Airport Hotel is a five-star airport hotel recognized by prestige awards and accolades based on the high quality product-service offered. At here, we have world-class luxury rooms and suites which are designed to exceptional standards with an intrinsic eye to detail with sumptuous food and beverage outlets serving an extensive variety of exotic cuisine. Meanwhile, a complete facilities and services are offered as well. We also provide a broad array of meeting and banquet services for business travelers and corporate group. Our hotel is surrounded by an oasis of greenery in fusion with luxury themed hotel to boast a relaxation during guests’ accommodation. All employees are treated as the hotel’s associates where associate implies partnership and working together and thus they would bring out the best in serving the external customers – our guests.

  • Business Travelers: “As one of the finest and most conveniently located hotels in Kuala Lumpur, Pan Pacific Kuala Lumpur International Airport Hotel is the preferred hotel for business travelers and corporate groups to conduct meetings and functions in our conference venues that offer enormous flexibility from a magnificent ballroom to our state-of-the-art auditoriums. Also, we provide a home away from home and an office away from the office with a complete set of secretarial services at the Business Centre to serve the needs of productive business travelers.”
  • Airline Crew: “In Pan Pacific Kuala Lumpur International Airport Hotel, the hotel’s lush tropical landscape, water features and soothing environment make for a rejuvenating break in combating jet lagged and weary airline crew that becoming a limiting factor in aircraft operations.”
  • Transit Passengers: “We are a full-service airport hotel conveniently located adjacent to the Kuala Lumpur International Airport with immediate access to the hotel via a sky bridge. It is the preferred hotel choice for transit air travelers with a few long hours in-between flights. Air travelers with early morning departures or late night arrivals will find the hotel perfectly suited to their unique needs.”

7.3 Gap Analysis & Ansoff Matrix

Gap analysis is the art and science of computing the size of the gap between the sales objectives, and where a forecast based on the SWOT analysis of sales in the future on the identified threats and opportunities that impact on the business (Bowie and Buttle, 2007). It is an analytical tool to be used in conjunction with the Ansoff matrix which is the four alternative strategies to help determine how far each type of action will bridge the gap between initial forecasts for growth and the corporate objective for growth.

PPKLIA can be considered as a business with growth-oriented that are more likely to set ambitious stretch targets that want to see the value of their investment increase. If achieved, there will be an improvement on the market value or capitalization of the business. As a result, a gap analysis and ansoff matrix (Please refer to appendix J and K) has been developed for PPKLIA to forecast the future sales that can be achieved in three years time.

PPKLIA may starts improving its sales by adopting the lowest-risk growth strategy, market penetration. It is a strategy to improve sales by using the existing products in existing markets and this could increase the current customers’ rate of use or attracting competitors’ customers (Hsu and Powers, 2002). In order to do that, a plan in increasing the rooms sales of 5 percent has been suggested through the increase of frequency. Besides that, it is advisable to encourage spend from existing customers by creating more different loyalty program for different target market since PPKLIA only offers loyalty program to secretary and left out the others. Meanwhile, a frequent stay program will be offered after the creating of loyalty program where points will be awarded to guests based on their frequent of stay in the hotel. On the other hand, the hotel staffs especially from front office (front desk, operator, and concierge) should be trained on their up selling skills in order to sell the most profitable product to the guest to achieve maximum revenue for the hotel while ensuring total customer satisfactions. Besides, advertising and direct mail campaigns will be carried out to target at the ex-customers too. All these activities can help to boost a 5 percent of sales increase to rooms department and may bring the current hotel revenue of RM 61,709,000 to RM 78,843,093 in the future of three years time.

The next strategy to be implemented is the market extension. It features the roll out of existing product-service offers in new markets (Bowie and Buttle, 2007). According to Hsu and Powers (2002), it has greater risk than market penetration because the hotel may lose its market development expenditures if the effort fails. The most common market development activity is to identify new geographic markets. From the previously conducted SWOT analysis, Chinese and Japanese target markets have been identified as the potential target markets for PPKLIA in the future and a succession of marketing communication will be carried out to capture this market. By targeting 3 percent of China and 2 percent of Japan market can help in increasing 5 percent of room sales and contribute an overall sale of RM 82,726,908.

Another Ansoff strategy where it emphasized on developing new products in a hotel to increase customer satisfaction by improving the product offered. They are usually improvements and product modifications, rather than radical new product-service concepts (Bowie and Buttle, 2007). However, it is somewhat riskier than market penetration because of the costs involved (Hsu and Powers, 2002). According to Mr. Alex Chin, the director of sales of PPKLIA hotel year 2009, there is a rules of thumb where refurbishment will be carried out on the food and beverage outlets every five years and ten years for rooms because what hospitality operations offer is an experience and the physical setting is a representation of the experience offered (Hsu and Powers, 2002). The refurbishment can enhance the quality of products and hence create novelty to the existing markets. Besides, infusion of new technology into the hotel also consider as one of the tactics in enhancing the products and services offered. Technology features to be introduced such as the energy management on controlling rooms’ air-conditioner and lighting operation where the central computer determines occupancy status and adjusts energy consumption accordingly. Based on the previous internal analysis, the spa service provided in PPKLIA has the high potential to become one of the income generators to the hotel. However, it is not well managed and fully developed. Hence, enlarge its services and products by offering more variety of packages to choose from would attract more guests who emphasize on healthy living. The product development would help in increasing 3 percent of the rooms and spa sales that worth RM 3,205,787 and lead to a future total sales of RM 85,932,695 in the year 2011.

When new products are introduced in new markets, diversification occurs. The diversification strategy focuses on creating new product-service offers for new target markets. This is the riskiest growth strategy, since the company has no existing customer or product knowledge to exploit (Bowie and Buttle, 2007). The tactic suggested to PPKLIA is to open a new themed restaurant to cater the Chinese and Japanese target market. The themed restaurant may offer Chinese and or Japanese cuisine since PPKLIA does not have these cuisines served on the current food and beverage outlets. If the plan succeeds, it would increase 7 percent of room sales and food & beverage sales that contributes to an overall total sale of RM 90,252,325. According to the gap analysis graph, there is still gap between the diversification strategies and corporate sales objectives with an amount of RM 3,329,351. This is due to the corporate sales objectives being set in an ambitious manner and may need further revise.

7.4 Marketing Mix Objectives

Marketing mix decisions is made from the marketing strategies and marketing tactics in order to achieve agreed marketing objectives. Marketing mixes for both the strategies and tactics to ensure that the organization wins sales from the targeted customers against the identified competitors (Bowie and Buttle, 2007).

According to Bowie and Buttle (2007), objectives should be Specific, Measureable, Achievable, Realistic, and carried out within a set Timetable (SMART). SMART objectives provide an operational target that measure the performance of the business and act as a control mechanism in determining whether management is effective.

Below are the SMART objectives set for PPKLIA to be achieved in the next three years.

  1. Annual / monthly sales Objectives:
    • To increase sales from RM 61,709,000 in the current year (2008) to RM 93,581,676 in three years time.
  2. Customer Mix:
    • To target Chinese and Japanese leisure market, and achieve 10% of the overall customer mix of the hotel in three years.
  3. Location:
    • To purchase five busses in three years time to enhance the accessibility between the hotel and Kuala Lumpur city centre.
  4. Product Development
    • To reduce 20 percent of the energy consumption from guestrooms annually.
    • To increase 10 percent food and beverage sales in three years time by establishing new themed food and beverage outlet
    • To increase 30 different variety spa product-service within three years
  5. Pricing
    • To set the current room rate 25 percent lower to have similar price with its competitors within a year
    • To offer 30 different variety of packages within three years
    • To setup discriminatory pricing for transit air travelers can fences based on the two types of length of time staying in the hotel with two types of prices within a year.
  6. Distribution
    • To increase bookings generated through mobile device by 10 percent in a year.
    • To increase bookings generated through the website by 25 percent in the next 12 months
  7. Marketing Communication Objectives
    • To increase five percent room sales through e-mail marketing within three years.
    • To increase awareness amongst Chinese and Japanese market by allocates RM 1 million of advertising fees for three years time
  8. People
    • To conduct stimulation training for new entrants once being employed and interpersonal customer service training for existing employee every six months.
    • To form empowerment culture within three years time.

8.0 Marketing Mix Strategies

All marketing decisions to accomplish the firm’s grand strategies and annual objectives can be expressed in terms of the marketing mix variables of location, product-service offer, price, distribution, marketing communications, and people. Marketing mix strategies are plans of action to show how the marketing mix variables will be used to achieve the marketing mix objectives and grand strategies (Reich, 1997).

8.1 Location Strategy

According Powers (1990), there are three most important factors to consider when opening a hotel, “location, location, and location”. Without a good or excellent location the business’s chances of success are greatly reduced.

PPKLIA sited on 2.25 hectares of land at Sepang which is a town and district located in the southern part of the state of Selangor in Malaysia. Formerly a sleepy town, Sepang has grown by leaps and bounds due to several recent developments such as the Sepang International Circuit and Sepang Goldcoast. However, it still lack of tourist spots that would offer sightseeing or entertainments. Transit passengers, who prefer not to rest in the room during the few long hours in-between flights, would suggest to pay a visit to Kuala Lumpur (KL). As the capital of Malaysia, it is the most modern and developed city in the country, with contemporary high-rises and world-class hotels, glitzy shopping malls, and international cuisine. It would definitely provide an ultimate guests’ satisfaction in the aspects of entertainments. Also, places such as Putra World Trade Centre, Kuala Lumpur Convention Centre and so on are where most of the business travelers would have their meetings, conference, or trade show conducted.

However, guests who want to access to KL from PPKLIA may feel inconvenience since the hotel located 58 kilometers away from KL and it needs 50 minutes of car driving time to reach there. Even though there is a rail service by Express Rail Link (ERL) which is a standard gauge and electrified airport rail link in Malaysia that connects the KLIA with the Kuala Lumpur Sentral (KL Sentral) transportation hub. Nevertheless, the service is costly for guests who need often access to KL from PPKLIA with a one way ticket that cost RM 35.00 for an adult and RM 15.00 for a child.

In order to enhance the accessibility to KL, a strategy on setting up a free shuttle bus service for in-house guests will be proposed. Firstly, for the first year of this proposing, two busses will purchase and performance measurement will be implemented in order to know whether the outcome of this strategy brings an increase on sales to the hotel, then only to proceed to the original proposed plan to purchase three more busses. This is because the purchasing of a bus is costly, thus, if it does not bring a good outcome, a new strategy may need to develop.

There are two routes to be offer in this service where the first route will have a linkage between the hotel and the Nilai commuter station. Although there are buses at the airport’s bus station are offering the same service, however, the buses will stop at every bus station to pick up passengers and it would spend about 45 minutes to reach Nilai commuter station whereas the free shuttle bus service will offer direct route for the in-house guests to the commuter station with just 15 minutes with the frequency of every 15 minutes. Another route will link from the hotel to the KL city centre with the frequency of every hour. The service will only operate from 9 a.m. till 9 p.m. for both routes.

8.2 New Product Development Strategy

Kotler et al (2004) define new product as a good, service or idea that is perceived by some potential customers as new. Most new product developments in hospitality operations are evolutionary rather than revolutionary (Bowie and Buttle, 2007).

8.1.1 Guests Rooms

Since PPKLIA is an airport hotel that linked with KLIA, we would propose that the concept of the hotel should match with the KLIA. According to Sharp (1999), KLIA represents a fusion between nature and high technology with the concept of symbiosis, which Kisho Kurokawa, the designer of KLIA has described as an airport in the forest which is the world’s first environmentally friendly airport. As a result, PPKLIA should blend a unique amalgamation of ‘green’ (environmental concern) into the hotel since its greenery surrounding provides a vantage point to become a green hotel.

PPKLIA utilizes this transformation as a repositioning tool to differentiate itself from its competitors in order to maintain its leading position in the market.

One of the key features in creating green hotel is to reduce the energy consumption in the hotel. Based on a study by Page and Siminovitch (2000), an estimate roughly of 60 percent of lighting energy usage occurs during 9 am to 4 pm period when rooms are generally not occupied. Hence, by introducing of key cards systems which include an energy management features that control the lighting operation where the central computer determines occupancy status and adjusts energy consumption accordingly. It keeps the room constant at a minimal comfort level until a guest requests a more comfortable temperature. It will also switch off the lightning operation in the room automatically when guests are not present.

According to Mr. Alex Chin, the director of sales of PPKLIA hotel year 2009, the installation of solar film coating at Degree 24-hour Restaurant and Travellers Bar and Grill help to reduce heat from the sun light that penetrate through the large clear windows and glasses. When heat reduced, the energy cost of air-conditioning would be reduced as well. Thus, this same concept would apply in the guest rooms as well to reduce heat and at the same time the furniture and fixtures in the rooms are also protected from ultra violet damage and should last longer and look much better.

To assist in the spectacular metamorphosis of PPKLIA, the transformation program will be conducted in stages so as to minimize disturbance to guests and the properties will remain open throughout the transformation. The new key card system will be installing on the first year of the implementation of the objective for the third to sixth floor; while the remaining floors will proceed in the second year. At the same time of installing the new key card system, the solar coating firm will be installing as well.

8.1.2 Food and beverage outlets

One critical attribute of successful hotel food and beverage outlets is their ability to appropriately respond to the changing needs of the market while maintaining a profitable operation (Siguaw and Enz, 2007).

Thus, the key concerns on product development for PPKLIA’s food and beverage outlets will focus on establishing a new themed restaurant. The purpose of having this new restaurant is to serve the needs of the future potential market from China and Japan.

Although both of the targeted markets are from different culture and having distinct dietary habit, however, this strategy proposed on the concept similar to the Four Seasons Hotel in Canada that using only one food and beverage outlet with two dining rooms to provide the fusion of Chinese and Japanese cuisine. By having a single food and beverage outlet, the hotel can offer two dining rooms that differ in design, but it shares the same menu, chefs, line cooks, and kitchens. Compared to having multiple outlets, this approach allows the service staff members to provide greater attention to food quality and presentation, to focus on small details, and to deliver higher service levels via a small, highly qualified staff.

The new themed food and beverage outlet will build at the second floor of the hotel building by using the closed down North Indian restaurant, Ashoka. The renovation for this new restaurant will implement on the third quarter of the year 2010. When the restaurant is ready for operation with an estimation of six months time from the renovation process to the ability of fully operate, the Chinese and Japanese market already been permeating into Malaysia and would helps in increasing the food and beverage sales to the business. The reengineering of menus and recipe will implement by stages where the first stage will starts on the year end of 2009. Performance measurement will carry out monthly for duration of six months; second stage will proceed if the outcomes fulfill the objectives. On the contrary, a new strategy may need to develop.

8.1.3 Spa

In the late 1990s, hotel spas started to follow the path of other operating departments and transformed from support facilities to profit centers where it functions as the complements the lodging experience, drives occupancy levels, enhances average daily rate and provides a distinctive marketing advantage (Anderson, 2007).

PPKLIA as a full service airport hotel shouldn’t left out the development of its spa service since the demand of spa is increasing where it can create prolonged wellness that integrates and renews body, mind, and spirit.

To fully develop the spa operation in PPKLIA, one should know that spas are no longer solely about frivolous self-indulgence and luxurious pampering. PPKLIA should enhance its product-service by adding in a wide range of choices of spa packages with different characteristics for different guests’ needs such as day spas, medical spas, mineral spring spas or club spas. PPKLIA may need to reevaluate and repackage it with a broader emphasis on self-care, stress relief, emotional balancing, and preventative wellness modalities. Since there is a lots of types of spa, PPKLIA may introduce a few spa type for market testing starting on the year 2009 and the testing may go for a year in order to capture the market preferences and then do repositioning on the following year to offer only one or two types of spa that is the best seller on the year 2009.

8.3 Pricing Strategy

Price is a component of the marketing mix and the vehicle used in free enterprise to allocate limited resources. Therefore, organizations should put a great deal of effort into formulating their pricing strategies that integrates marketing and finance in an attempt to create an atmosphere of mutual satisfaction. The product-service attributes are combined with price to provide enough value to satisfy customers, while enabling the organization to cover costs and make adequate profit (Reid and Bonjanic, 2009).

8.3.1 Competitor-Based Pricing

From the above competitor set analysis, it can clearly be seen that PPKLIA has the highest pricing when compared to its three other direct competitors. Therefore, PPKLIA should adopt competition-based pricing approach, which is the establishment of price based largely on those of competitors, with less attention paid to costs or demand. The firm might charge the same, more, or less than its major competitors (Kotler et al., 2006). According to Kotler et al. (2006), firms feel that the going price represents the collective wisdom of the industry concerning the price that will yield a fair return; meanwhile holding to the going price will avoid harmful price wars. PPKLIA may need to lower its room rate 20 to 25 percent with which mean the lowest available room rate should be in the range of RM 375.00 – RM 400.00 considering the pricing of its main competitors is also close to this price range. A 5 percent of the current room rate will slashed for the first year and it can be adjust gradually to a certain level that profitable to the business as well. There is another major reason to cut prices, as Kotler et al. (2006) stated, companies cut prices in a drive to dominate the market in the hope of gaining market share through larger volume. The price cutting of PPKLIA would lead its customer to perceive there is better value being offered in the hotel, thus increasing demand.

8.3.2 Product-Bundling Pricing

The hotel should also implement product-bundle pricing where it combines several of hotel’s products and offer the bundle at a reduced price.

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