Entrepreneur FULL Assignment (Hotel Industry) PDF

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Assignment to be used as reference when you are taking the subject entrepreneurship...

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No 1 2 3

Assessment/Description Executive Summary Introduction Content -Industry Analysis -Market Analysis -Marketing Plan -Management Team and Company Structure -Operations Plan -Simple Budgeting Forecast

4 Future Growth 5 References 6 Appendix Table of Content

Pages 2 2-4 4-29

29-30 30-32

1.0 Executive Summary This is a general statement about Salvus City Hotel which is a modern hotel provided a safety and convenience homestay to customers. The mission of Salvus City Hotel is to differentiate Salvus City Hotel from other competitors and become outstanding regarding the safety features and convenience environment which could minimize the homestay problem 1

meet by consumer during they business travel. Porter five forces of threat and Market analysis had been carried out in order to have deeper understanding about the business environment, consumer preferences and the market trend. Other than that, this business proposal also included target market and 4Ps which is Product, Price, Place and Promotion to enable Salvus City Hotel to identify Salvus City Hotel’s major consumer and using 4Ps to satisfy Salvus City Hotel’s customers. Besides that, Salvus City Hotel also have a strong management team which have different expertise on the hospitality industry to came out operational plan in order to run Salvus City Hotel smoothly. Moreover, this proposal also stated the financial performance of Salvus City Hotel which included expected revenue& profit, expenses, start-up cost and etc. In order to sustain in the future, Salvus City Hotel also have a list of future plan which may need to achieve in the future. 2.0 Introduction

Figure 1: Outlook of Hotel Salvus City Hotel is modern hotel in Kuala Lumpur which was founded by Chong Chun Keen who is the CEO of Salvus City Hotel and a management team consisted of 5 individuals who had expertise and knowledge which will suitable for operating a hotel. Reason the name Salvus is chosen because Salvus is the origin word of safety and the company wishes to create a safety and convenience environment for customers. Salvus City Hotel target business traveller as main customers. Other than that Salvus City Hotel’s mission is to differentiate Salvus City Hotel from other competitors and become outstanding regarding the safety features and convenience environment which could minimize the homestay problem meet by consumer during they business travel. To achieve the mission, Salvus City Hotel will maximize the uses of technologies and reduce man power in order to minimize the errors which will cause by humans such as stealth, attitude problem, low working motivation etc. Salvus City Hotel could ensure privacy of customers and also protect the documents of customers by reducing the chances of being stolen. 2

Figure 2: Floorplan of Hotel

Figure 3: Floorplan of room

Figure 4: Images of Room Salvus City Hotel located at Bukit Bintang Jalan Alor which is a 3 stories building with 62 rooms. Salvus City Hotel will also provide each customer a card to assess to their room and for consumption purpose within Salvus City Hotel to provide convenience for customers by preventing them from carrying cash everywhere. Furthermore, Salvus City Hotel will also provide the high security room to every customer to ensure the comfort and safety of customers. As a special feature, Salvus City Hotel will use a delivery robot “Savioke” to send the item which customer need, or sending customer’s clothes for the laundry service, for example when a customer need a bottle of water, customer can order a bottle of water through the tablet provided and it will reached them through the robot. If Savioke unable to use at certain time for example they are going to have maintenance, Salvus City Hotel will also have the food lift to send the item demanded by customer to the particular floor, then customer can collect their food. Salvus City Hotel able to reduce the man power needed and enhance the privacy of customers by using the robot. Other than that Salvus City Hotel will also have collaboration with TOPMAN that sells coats, belts, formal wears and accessories to customers. This is because sometimes the clothes of customer will get dirty or spoiled which 3

may cause customer may not able to attend to an important meeting with their fullest so they could purchase what they needs at TOPMAN. If customer not that urgent, Salvus City Hotel will also provide laundry service to customers. Lastly, Salvus City Hotel will also provide automated vacuum cleaner at each of the room. The targeted industry is hospitality industry, the reason for this industry is chosen because hospitality industry will continue to grow due to world globalization and nowadays every people can travel to foreign country easily. The improvement of technology provides a huge convenience for countries in term of communication and transportation, this will able to enhance the connection between countries. Most importantly, Malaysia has been a member of WTO, ASEAN, Regional Comprehensive Economic Partnership (RCEP) which aim to increase the trade between countries and globalization. This cause increase large demand of hotel stays for those international traveller.

3.0 Content 3.1 Industry Analysis Porter's Five Forces As a business analysis model, Porter's Five Forces is used to explain why different industries are able to sustain different levels of profitability. The model is used to analyse the industry structure of a company as well as its corporate strategy. Porter’s five forces approach aims to reveal the possible new entries into the industry, bargaining powers of the suppliers and customers, competition between current businesses, and threats of substitute products. When all the opportunities and threats created by each industrial force becomes clear, it will be possible for hotel managers to generate and conduct offensive and defensive strategies to position their businesses appropriately (Tavitiyaman, Qu& Zhang,20'l1, p. 648), Threat of New Entrants New competitors may entry to the market and threaten the market share of the present businesses in the industry and increase the capacity, creating excess supply, they might lead to reductions of the prices and consequently a decrease in the incomes of competitive businesses. According to Michael Porter (1980), threat of new entrants are determined by barriers to entry such as economies of scale which include size and scope of operations 4

required to achieve viable cost structure; product differentiation, switching costs and customer loyalty created by quality, reliability and brand image. High capital costs and a high proportion of fixed costs to total costs are needed to operate a hotel on a global basis. Hotel Industry is highly related to the considerable economies of scale. The capital resources should be managed cost effectively to construction, furnishing and equipment, pre-operational expenses and finance. Hotels enable them to differentiate themselves through good location for the relative target market and quality of service. Good management and trained and motivated staff are also dependable. Hotel projects always require a lot of capital investments. Hotels cannot be easily traded, but must be retained on a long-term basis for investment purposes. The industry is subject to considerable cost advantages or disadvantages independent of size. Government policy is not hostile to new hotels. It might be facilitative in sites considered for hotel construction, or they might make it more difficult (Cheng, 2013, pp. 52-57; Rutila and Tuominen, 2014, p.'l9). Factors of economies of scale and high capital cost of entry as well as the limited supply of suitable locations cause the hotel industry exhibits high entry barriers restricting new entrants. As summarise, the threat generated by new entries into the industry is due to some present entry obstacles. Porter has listed these obstacles differentiation,

(3) capital needs,

(4) access

as (1) scale economies, to chains

(2) product

of distribution,

(5) cost

disadvantages independent of scale, (6) present brand loyalty and (7)government policies (Porter, 2008, pp. 3-5). An industry with strong barriers to entry is an attractive feature for companies that would prefer to operate in a space with fewer competitors. Salvus City Hotel has a medium threat of new entry since it has an ideal location at Kuala Lumpur town centre. It has few competitors in the hotel industry compare to those luxury hotel since it targets business traveller as the main customer and position itself as an affordable chain hotel that provide safety and convenience to the customers. Bargaining Power of Suppliers When a product is an important input in the industry success, the suppliers will have more bargaining power. The supplier’s input is important to the success of the customer’s product and service such as local tourist operators, thereby lowering the customer’s price sensitivity. Hospitality industry has a great demand for enhanced global information and booking capabilities. (Kotler et al., 1998, pp.761). However, the hotel industry all over the world has a 5

great demand and is relied on the supply of the labor and experienced trained personnel. Hotels are not significantly subject to the bargaining power of their suppliers and suffer low levels of indirect pressure on their competitiveness from this source compared to other industries. For a sustainable business strategy over the long term a hotel will have to maintain a permanent cost advantage over potential competitors in higher strategic groups. Powerful suppliers might threaten the productivity of businesses in an industry by either raising the prices or lowering the quality of the products. When the bargaining power is seen from the perspective of the hotel industry, the hotels need the furthered global information and reservation services. Moreover, hotels engage in business with various suppliers from the execution of the project to the service provided for the guests such as furniture, textile, construction, food and beverages, entertainment. However, unlike other industries, hotels are not confronted with the bargaining power of suppliers intensely. As hotel managements should cooperate with suppliers that contribute to gain cost advantage in order to gain cost advantage against their competitors at all times along with the creation of products and services that diversify in their own strategic groups (Cheng, 2013, p. 54). The fewer the number of suppliers, and the more a company depends upon a supplier, the more power a supplier holds. The bargaining power of suppliers over Salvus City Hotel is low. The hotel industry is only subjected to the power of the labor, trained staff and personnel to run their business and provide services to their customers. Since Salvus City Hotel is emphasised on systematic management, the requirement of the manpower is at the minimum rate, therefore it is less subjected to the bargaining power of suppliers and it has lower and indirect pressure on their competitiveness. Salvus City Hotel purchases from suppliers globally and the bargaining power of most suppliers is low due to the lack of uniqueness of products and services supplied. In addition, the importance of order volume for Salvus City Hotel’s suppliers is paramount and there is less supplier switching costs for Salvus City Hotel on most cases. Bargaining power of Buyers Porter (1980) mentioned that the buyers of goods and services from an industry may be powerful if they are more concentrated than the players in the industry and are able to force down prices as well as reduce the industry’s margin. They can force down prices by purchasing from the industry in large volumes, or increase costs through demand for higher quality products and services. If the products and services purchased by buyers lack 6

differentiation or increasing costs, they can easily find acceptable alternative sources of supply. If the industry’s input is not important to the success of the buyer’s product and service, price sensitivity thus increased. Certain buyer groups which include tour operators, domestic or international airlines and large customers exercise bargaining power as a result of their concentration or bulk purchases of hotel rooms. Differentiation is a significant factor in respect of the business travellers and for certain categories of independent leisure travellers. Business travellers will tend not to be price-sensitive if the purchase of a hotel room represents only an insignificant item relative to the underlying business transaction. Otherwise, large- scale buyers of hotel rooms for business purposes will tend to “shop around” for special rates. Buyers of hotel rooms are often, as a group, rather fragmented on a worldwide basis. Leisure travellers will tend to be more price-sensitive. In this context the hotel’ s choice of leisure travellers and other categories of concentrated buyers becomes crucial or will be more subject to the bargaining power of buyers. Purchases of hotel rooms are important to certain categories of leisure traveller, and to most categories of business traveller. Within the industry, the bargaining power of buyers varies significantly depending upon a hotel’s target buyer group, but this factor becomes acute in a situation of oversupply or where buyers of hotel rooms are concentrated. Salvus City Hotel should subject to the high power of buyers. Buyers exercise power over Salvus City Hotel when the purchasing of hotel rooms in bulk is required. When they require in large-scale, they have greater bargaining power to force down the price. However, Salvus City Hotel is strongly emphasised on safety for the business travellers. They can enjoy a most safeness environment when they represent their company to have a meeting in certain places. This competitive advantage of Salvus City Hotel make the customers would not easily switch to other hotels and they are demanding on it. Therefore, could lower their bargaining power.

Threat of substitute products or services Michael Porter (1980) indicated that substitute products can be existing or potential products and services which are able to perform the same function. Substitute products can lower the costs, and/or provide better quality performance and better value which is adaptable to the technology change to customers. There is no threat of substitute products or services 7

for the Hotel Industry except there are switching domestic travels to international ones or changing some destinations for ones with cheaper costs. Some of the tourists have more tendency towards choosing cheaper accommodation such as motels, hostels, guesthouses and staying with relatives (Cheng, 20,1 3, pp. 52-53). This market is either low-income or costconscious, but in any event, it is quite price-sensitive. Low cost basis in a niche segment is important for a hotel operator to compete in the hotel industry. A safety, modern, comfortable but not luxurious hotel situated in a popular and convenient location appearing to offer good value also can help a hotel to compete in the industry. The importance of location to the target market may be over-rated. The hotel operator may not be able to rely solely on location to retain its market share in a situation of oversupply and consequently intense rivalry. It must be focus on more differentiation to gain some competitive advantage. A hotel will be subject to powerful buyers only if its marketing strategy concentrates on attracting tour groups, provided no oversupply for the hotel’s target market develops. However, substitute products are not a major present or likely threat to hotel industry as a whole for those particularly catering for business traveller. Threat of substitute products or services of Salvus City Hotel is medium. Salvus City Hotel aims to provide safety and convenience environment to business traveller. It is not easily being substitute by other hotels, staying in the homes of friends and relatives and people renting apartments for short periods of time. This is because arrangement of these options is inconvenience since business traveller will go to anywhere in the world and these arrangements can be time-consuming and associated with a great deal of hassle. However, hotel industry is faced with technology-fuelled indirect substitution such as video conferencing, since this form of communication can eliminate the need to travel to another place and stay in a hotel. Business traveller can just utilize video conferencing to have a meeting.

Rivalry among Existing Competitors Rivalry between the existing competitors is result from many or equally strong competitors, insufficient differentiation, high fixed costs, surplus capacity, slow expansion of the industry and obstacles for exiting. These elements increase the volume of the competition between 8

businesses (Porter, 2008, p. 9). The increasing numbers of construction of new hotels, timesharing system, renting housing increases the competition in the hotel industry. Price is the key factor to determine the competition in the hotel industry. The other factors are segments and location (Tavitiyaman et al, 2011, p. 649). , Competition tends to be intense in the hotel industry when considered all the factors together. Moreover, strategic and economic factors will develop some barriers to exit from the hotel sector. In addition, it can be hard convincing people that goods and services differ from economical hotels to the luxurious hotels. (Rutila, 2014, p.1) In hotel industry, the product differentiation and the switching cost of consumers is low, they can change hotel anytime so degree of rivalry is high. However, since Salvus City Hotel focuses on niche market which is business traveller and emphasises on high-technology, safety and convenience, there is fewer competitor in the industry and the rivalry is less intense (medium). The potential competitors of Salvus City Hotel are Holiday Inn Express Kuala Lumpur City Centre and Hilton Hotel. In conclusion, Salvus City Hotel can increase its overall attractiveness in the hotel industry since most of the elements in Porter’s Five Forces are low to medium. Salvus City Hotel has medium threat of new entrants since it positions itself as an affordable chain hotel that provides safety and convenience to the customers. It has low bargaining power of suppliers because it only requires small amount of supply of staff and has more than 3000 suppliers globally. There is medium threat of substitute services for Salvus City Hotel since it is not easily substitute by others since it provides safety and convenience environment to business traveller which does not offer by other hotels. Medium rivalry among existing competitors due to its uniqueness also make Salvus City Hotel can increase its overall attractiveness. However, medium to high bargaining power of buyers sometimes affect the profit of Salvus City Hotel. When Salvus City Hotel cooperate with some companies to let their assignees stay in the hotel by long term agreement, the bargaining power of companies will be greater and they will force down the prices.

3.2 Market Analysis Market trends

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Malaysia is a country that has multiple ethnic and religious and with extensive geographical diversity, exotic wildlife, tropical forests and spectacular beaches. Malaysia’s population is approximately 31.4 million (2017 government estimate) with 62% being of Malay heritage. Different ethnic groups reflect the country’s diversity in the share of, such as Chinese, Indians and Indigenous, in its total population. The Malaysia’s economy performed well above expectations in the year 2017. It was rebounded after the decline in 2016. Domestic demand contributed primarily in the increasing of real GDP by 5.9% year-on-year (y-o-y), reinforced by resilient external sector. The growth was driven by the increase in demand in the manufacturing and services, as well as rebound in the agriculture sector. Sabah (8....