The current trends in globalization and increased internationalization have shaped the hospitality industry and various stakeholders need to rethink the on their approach to the industry. The competition in the hospitality industry has increased with global players introducing new quality and improved services at an affordable cost. Dalian friendship hotel has been on the forefront in ensuring it is competitive in the competitive environment city of Dalian surrounded by global and local players in the hospitality industry. The hotel industry in the globe has shifted its interest to inventory of revenue management. The marketing strategy of the global players and the concept of perishability in the hospitality industry need to be taken into consideration when making decisions regarding to increasing profitability of the hotel industry.
Dalian has been performing various on the global market research to facilitate forecasting of sales and facilitate planning and achievement of a competitive advantage. This has been through studying various trends in the hospitality industry such as tourists’ trends in the city of Dalian and other cities in the country. These studies have involved studying of their spending trends and changes in demand for the services and products due to changes in the price. This analyses have helped the hotel to make various forecasting in the market which has been useful in the marketing, planning and formulation of strategic policies that have led to achievement of a competitive advantage for the company. However, there are various loopholes in the research conducted Dalian hotel, which has led to development of weaknesses in their marketing strategies. With the high perishability of the hospitality industry, the loopholes have led to losses, which should form the basis of the learning curve for the company to improve its profitability. The hospitality industry in which hotel operates is highly service based and personalization of such services is essential in increasing and building customer loyalty. This has been lacking in the services offered by Dalian hotel. The increased globalization has led players to rethink of the policy diversification to accommodate people from different cultural background. Dalian friendship hotel, as an international player has been failing on diversification of its policies to enlarge its global market of travelling tourists and business people. This has led to low and non-increasing revenues. Identifying the global customer’s needs will be essential in profit maximization; the hotel has been spending little in research related to identifying the needs of the global customer. There is a need for Dalian friendship hotel to shift from the traditional revenue management that largely focused on revenue management from rooms without taking into account the revenues that could be generated from the visiting guests. There is a need to diversify the sources of revenue from various activities and develop a more comprehensive system that will increase the profits. There has been a conception about the services offered by the hotel, and such conceptions are essential with the current modern technology and increased use of information and technology. Improvement of services includes incorporation of various activities in the hotel such as restaurant, casino, venue rentals and spa. Unification of these services for Dalian friendship hotel has not been comprehensive in the past, which has led to decreased revenues from the visiting guests.
There are various programs that customers identify to associate the hotel with, in common business practice it is referred to as creation of a brand. This is essential in development of customer loyalty. For example, the hotel can initiate a casino program for customers and members, which will win the customers a free room or a dinner and various other awards. This will facilitate collection of data about these customers by the hotel, which will be essential in planning. These data about the company include services such as frequency of patronage, the book window and the latest customer case among other important information. These data are essential in decision-making and formulation of policies and strategies that facilitate achievement of a competitive advantage. Many global players in the hospitality industry have introduced a variety of programs to create customer loyalty. Dalian friendship hotel has not created much of these programs, which are essential in gathering information of the customer about the services offered by the hotel. Such information is essential in facilitating improvement of services and development of customer loyalty that is essential in increasing the organization profitability.
The global hotel industry has been shifting from the concept of revenue per available room (Rev/PAR) to the concept of gross profit per available room (GOPAR), total revenue per available room (TOTALPAR) and other indicators that are comprehensive. Dalian system of revenue management has not developed complete comprehensive revenue management to capture all the revenues that accrue to visiting guests. It will be essential for Dalian friendship hotel to establish comprehensive revenue management to achieve a competitive advantage. The diversification will be important in identifying individual customer consumption habits and behaviors. Understanding individual and group customers’ behaviors and consumption habits will be essential for the hotel since catering services are important and can be a source of increasing profitability for the hotel (Viklund para 10). The revenue management of Dalian friendship hotel has not adopted the revenue per square (REVPAS) effectively, which measures the revenue generated per square foot. This an effective measurement of revenue generated from group activities, dining and restaurant revenues. The measurement can be used to measure each group activity and evaluate the contribution from each group.
In the global economies tourism industry has been shaped a great deal, the global poor economy however, has taken a toll on all people and the players need to rethink on new strategies to approach the global market. In the hospitality industry even with the worsening economy, lowering will not be the best idea since the profitability will be affected. Dalian friendship hotel has not been employing some new strategies such as providing packaged food will be a new strategy to facilitate profitability. The global tourists have shifted their attention to places where they will get great unforgettable experiences and sensually orchestrated experiences. Dalian has not been on the forefront in providing these experiences to the visiting tourists. There are other activities that the company has not been effective, and if it were effective, it could increase its profitability. Improving profitability in the global competitive environment the management of Dalian will have to move from their comfort zone. The hotel has not engaged effectively in exotic, relaxation and eco-travels. These present opportunities upon which the company can increase its profitability. In the introduction of luxury products, the company will require to identify the most loyal customers. Dalian friendship hotel has not been providing many luxurious products effectively due to lack information in decision-making and errors in the identification of loyal luxurious customers. Loyal customers will help in boosting the profits of the organization since even in occurrence of an error they forgive readily. The loyal customers are value sensitive, and their decision-making is not just based on the price but the value of the good or service.
To increase the revenues Dalian friendship hotel will have to consider their plans of the organization of the hotel. Consideration on the revenue per square area (REVPAS) method is an important method of evaluating the various activities taking place in the organization. This method will help in evaluating allocation of rooms and the general setting of the organization. Allocation will help the organization in ensuring the activities that generate more revenue are allocated competitive areas to facilitate achievement of a competitive advantage for the organization. As a three star hotel Dalian friendship hotel has been aiming high quality customers and business travelers. This should endure to provide high quality services to their customers. However, there has been a shift of the strategies used in the hotel industry from the improving management quality and services. These two factors are imperative for the organization to improve its competitiveness in the market but the organization should also adopt the approach of maximizing the revenue per square feet. This achieved by proper planning of the floors and the space available for the organization. Dalian Friendship Hotel has been on a plan to identify the most competitive plan for the hotel to maximize revenues. The present arrangement of the Dalian Friendship hotel includes the arrangement of the seven-storey building. In the ground floor, there is a café restaurant, duty free shop, business centre, check-in counter and a friendship teashop. The analysis of the revenue generated per square feet should guide the hotel management of the organization management and allocation of square meters of the hotel. The activities that generate highest revenue per square meter should allocate more space to improve and increase the profitability of the hotel. The plan should facilitate maximization of the revenues from the existing floor space.
The duty free shop has been established under a joint venture and it cannot be terminated from operations from the hotel. The proposed plan is to move it from the ground floor to the fifth floor. This will facilitate profit maximization in the organization since the duty free shop revenues per square meters have been low at 1.7 Yuan. This will create more space for the banking hall activities, which have been having the highest revenues per square feet. The duty free shop does not sell the products to the public and moving its activities to the fifth floor will have deepening effects on its performance and its profitability. Creating more space for the banking hall will increase the profitability of the hotel this due to the fact that the revenue per square meters for the banking activities such as the ATM has been high. Dalian Friendship Hotel gift shop has been made and set up mainly for sailors and travelers arriving in Dalian by ship. The gift shop offers tourists tour guides and the travelers and the sailors come to the hotel to purchase them. The delivery is done by the hotel in the department running the gift shop to the ships. This will attract the travelers and the sailors to the Dalian friendship hotel gift shop. Moving the gift shop will not affect the performance of the gift shop since the sailors and travelers are not required to carry their purchases to the ships. The rent form the duty free shop has been very low and the first floor of any commercial building is the floor, which maximizes revenues. The revenue obtained from the duty free shop are only 1.7 per square meter, the average rent payment for other equivalent establishment, on the same floor ranges from five to six per square meter. The location of Dalian Friendship Hotel is appropriate for the banking industry and the revenue management of the Dalian should consider allocating the whole first floor to the banking hall. The revenue per square meter for the banking hall will provide good revenue for the hotel than the duty free shop. The plan to shift the check-in counter to the third floor will be appropriate for the organization, the previous check in counter located on the third floor was not attractive and the upgrading of the check-in counter in the third floor will create a competitive advantage for the hotel.
In the second floor, there is a lease agreement with the Japanese restaurant, which will be for seven years. The rent income expected from this lease agreement is low but since the agreement has already been made. Such a contract cannot be revoked and there can be no other business that can take place in the second floor. Dalian friendship hotel should engage in the short-term lease agreement. This will facilitate the hotel to review the rental payment to match them with the current rents rates in the market. The hotel revenue management will be able to receive high revenues from high revenues contributed by the lease. For example, the seven-year lease agreement with Japanese restaurant, which will be ending in 2018, could be ending in 2014 or earlier. The restaurant could be requested to increase the rental payments to match the current market rate of interest. However, there are no plans to change the current setting of the second floor until 2018, when the lease agreement ends.
The hotel had introduced offices in the third and the fourth floor due to low occupancy rate of the rooms. However, the offices have experienced low occupancy and the revenues accruing from the office renting has been less as compared to the rooms. Majority of the offices are export, custom related, and relocating them to different locations will have some implications on the lease agreement. The sales forecast from the current planning of the third floor is expected to generate revenues amounting to 4.36 per square meter from the rooms and 3.03 per square meter from the offices. This shows that the revenue generation from the operations of the rooms is high and the hotel revenue management should consider replacing the offices with the rooms. The offices have been generating low revenues and they cannot be relocated to some other locations since their business will be affected. In the current plan, the hotel only operates only 21 rooms. If the offices are converted to rooms, the rooms will increase to 28 and the revenues accrued to change will be 4.36 per square meter. With the change in of the reception from the first floor to the third floor, the revenues accrued to the rooms will increase. The revenue generation from the rooms in the fourth floor will be expected to increase with the changes in the third floor and the change of the reception from the first to the third floor.
The vacancy of the hotel rooms had pushed the Dalian hotel revenue management to introducing offices to reduce the occupancy rate. However, the leasing rate for the offices has been low and the set objectives for the leasing of the offices led to a drop in the revenues. Dalian Friendship hotel should consider reviewing to their initial plan of rooms in the third and the fourth floor since the revenues from the rooms are high than those from the offices. All the rooms in the fifth floor should be moved to the third and the fourth floor, which will facilitate space maximization. The fifth floor will also be free for other activities of the organization such as gymnastics and recreation centre. Maintaining the status of the offices and the rooms will not facilitate the hotel to maximize the profits from the activities. The concentration of the rooms in one area will improve the occupancy rate of the hotel and thereby maximizing the revenues. Dalian friendship hotel will expect an additional increase of 390000 Yuan’s in revenue if it changes from the old system of having offices in the third floor and some rooms in the fifth. The new plan will create more space in the fifth floor and concentrate the rooms in the third and the fourth floor. Occupancy is expected to increase and hence an increase in revenues. The reception is also expected to be moved in the third floor near the lift this will enhance the guests to identify with the rooms. The current plan with the reception at the ground does not encourage guests who would be potential customers. A shift to the current plan will shift the reception to the third floor creating more space in the first floor and strategically positioning it to the third floor where the rooms will be concentrated.
In the fifth floor, the current plan includes offices and rooms. The room occupancy is low rated at 60-65%. The offices lease agreement has been low and the offices have not been fully occupied. This has led to non-achievement of a competitive advantage for Dalian Friendship hotel with the current plan recommending that all the rooms be shifted to the fourth and third floor. The current expected profit from the rooms and offices are 2.47 and 2.00 respectively per square meter per day. There are other activities that can be performed in the fifth floor and generate more revenues for the hotel. In the new recommendation, Dalian Friendship hotel should consider exiting the office occupancy and move all the rooms to third and fourth floor. The fifth floor would left free and the gift shop should shift to this floor. The gift shop is not open to the public and sells duty free and domestic liquor. The expected revenues from the duty-free are 1.37 per square meter and the local liquor is expected revenues are 3.42 per square feet. Concentration of the rooms in the second and the third floor will boost the business in the duty free shop. Two Chinese local liquors are recommended for sale in the duty free shop, these include the Waliangye and Moutai. The two Chinese white wines are original, the market has been flooded with counterfeit wine brands, and the locals are afraid and avoiding to purchase these fake brands locally. They only buy these wines from the original retailers. Dalian friendship hotel is an established entity in China and the locals will have trust in its products that it will not supply fake products. Several other companies have invested in this kind of investment like the Silver Base Company. it has been distributing the wuliangye liquor and has been a success in the business. In addition, there are two companies in Hong Kong, which had established two high-end distribution networks for the Chinese wines. Dalian friendship hotel has been established in the market and consumers will trust their brands. This presents an opportunity for Dalian revenue management to increase revenues.
The Implementation Plan
If the recommendations are implemented the sales in Dalian friendship hotel will increase to 1.4 million Yuan. This will be achieved through improving advertisement of the hotel. For example adding a print banner on the fifth floor, such a banner will be used to notify potential customers, of the innovations and renovations that have been made to increase customer satisfaction at Dalia. To improve the advertising there has been a suggestion of placing a left banner on the ceiling which will be visible, while introducing the new inventions at Dalian. This will increase the awareness in the town and around the world through better photos on its websites. The current advertising strategies for the company have not been optimal as they only have one billboard. The leasing of the other area only generates 50000 Yuan. Under the new recommendations, the old billboard should be replaced with a LED billboard, which can play movies or change to different advertisements. This would be expected to increase the revenues from the current 500,000 to 800,000 Yuan. In addition, the hotel should additional printed billboards on the front facing and the fifth floor. The advertisement on the fifth floor will be efficient in advertising the duty free shop, which will move to the fifth floor. The fifth floor used for the duty shop will require no window; therefore, it will be utilized by introducing the billboards. This will generate more revenue for the hotel and the space will be utilized maximally. Under the new recommendations, Dalian Friendship will be able to generate more revenue and enhance its competitiveness.
Implementation of the strategies at Dalian friendship hotel will require development of an implementation plan that will not affect the operations of hotel a big deal. The shifting of various activities will require systematic approach to eliminate confusion and waste of resources. The best strategy to implement the recommendation of the hotel will be first to shift the rooms and give notice of vacation of the office holders. The rooms in the fifth floor should be eliminated to give space for the duty free shop in the first floor. The lease agreement between the hotel and office owners should not be renewed pending the new recommendations. This will facilitate their vacation of the offices in the third and fifth floor to create space for more rooms, which will facilitate generation of more income by the hotel. The second floor has no pending changes, there will be no changes since the lease agreement between Dalian Friendship hotel, and the Japanese hotel will end in 2018. Movement of the check-in counter will not affect the operations in many areas of the hotel since the check-in counter will be moved to the third floor on an area near the lift. On vacation of the offices and all the rooms and offices in the fifth floor vacated various renovations should be done on the floor to facilitate development of a modern duty free shop. When the fifth floor will be renovated the duty free shop will shift to the fifth floor and the hotel will be in a position to invite banks for a lease agreement. Banking activities in the first floor will increase the revenues for the hotel and in the implantation of the revenue per square meter strategy of increasing the profits. All the rooms will be shifted to the third and the fourth floor where their concentration will be high therefore, encouraging more guests. The gift shop will be able to serve the customers efficiently on fifth floor since its operations are not affected by the shift. The hotel should develop a LED advertisement on the ground floor to notify the customers of the changes in the structuring. The LED advertisement should have various videos of the new development in the hotel like the duty free shop entrance and the internal operations. The reception should be involved in the advertisement. All the implemented changes should be involved on the advertisement to ensure a comprehensive notification to the hotel’s customers. On implementation of the various recommendations, the hotel will experience higher revenues.