Critical Analysis Of The Management Decisions Of StayTogether Hotel Chain

Question:

Discuss about the Integrating Knowledge Business Management.

According to the case study, there will be a new hotel chain named StayTogether formed as a result of a merger of ten different hotel chains. The main reason of the merger is that the hotel chains are encountering significant losses due to the rise of numerous hotel room booking websites that book the rooms for users at a much discounted rate. Due to this particular reason, the hotels are encountering losses that they are not able to compensate for. Hence, the ten hotel chains have come together to merge and use a new system that will enable the users to book rooms online but at the same time, the hotel chain will not encounter significant losses.

In this report, a critical analysis has been undertaken on the management decisions of StayTogether and accordingly suitable recommendations have been provided.

The main issue the hotel chains are facing is the growth of the online hotel booking apps. Before the rise of these apps, the customers had to visit the hotels or their offices to book the rooms for the numbers of days they would live there. However, in peak tourism months, due to lack of sufficient rooms in the hotels, the customers could not book rooms and had to go from hotel to hotel to find a room. With the new online booking apps, the customers can book the rooms online long before their visit to the hotels (Reijers, Mendling & Recker, 2015). As a result, these mobile apps have become extremely popular among the tourists and other customers. However, the main feature of these apps that have posed a serious financial problem for the hotel chains is the massive discounts provided by these apps for booking the hotel rooms. The discounts have resulted in attracting a huge number of customers for the tourists but on the other hand, the hotels are receiving much less revenue from the deals due to discounts as well as the service fees for the apps. Again, due to the high influx of customers, the maintenance costs of the hotels have risen significantly. As a result of all these, the hotel chains are encountering severe losses to such extent that some hotel chains are even on the verge of closing down.

The ten separate hotel chains discussed in the case study have come together to develop a strategy to counter this problem and generate more revenue from the services. The new strategy includes the following points.

The ten hotel chains will merge together and operate as a single hotel chain namely “StayTogether Hotel Chain”.

There will be a specific Android and iOS app that the customers can use to book rooms for this particular hotel chain only unlike other commercial hotel booking apps.

The prices of the rooms will be fixed but not too high.

The room prices in peak months will have higher rates than usual.

In order to compensate for the fixed rates (without discounts), there will be some other offers and benefits for the customers as decided by the management team. The benefits and offers to be provided to the customers are discussed below.

The Main Issue Faced by the Hotel Chains

Customer Loyalty Program – Although there will be no direct discounts on the hotel rooms for the customers, the management team has decided to introduce a customer loyalty program to reward the frequently visiting customers. There will be a number of offers for the customers based on the loyalty points gathered by them. Loyalty points can be accumulated by a customer with increasing visits to the hotel chain as well as the frequency of the visits. The offers based on these loyalty points will increase with the increase in the points. At a certain point, the customer will be able to access free transportation to the hotel from the railway station or the airport. The customers bringing their own cars will be able to access the hotel’s free parking space as well. With even higher loyalty point, the customer will be awarded with free nights at the hotel. The management team expects that these offers will interest the customers to visit the hotel chain more often and will result in increasing revenue of the company.

Buffet Meal – Another issue the management team wants to address is the increasing maintenance and wage costs. Due to the large number of waiters, the company has to pay a huge sum on wages every year. Moreover, due to wastage of the excess food, the company encounters severe losses. In order to solve this problem, the management team has decided to introduce buffet meal system. In this system, the visitors will serve themselves and will only take the amount of food that they will able to consume. There will be two benefits of this system – the total number of waiters can be reduced and there will be less wastage of food. Another feature of this scheme is that the visitors will have to pay the price of food together with the hotel room fees. The management team has also planned to keep a small restaurant area where the children, old and disabled visitors will be able to get normal restaurant facilities instead of the buffet system.

Rebates – The management team is also considering tying relationship with some airline companies for mutual benefits regarding customers. According to the proposed terms of this partnership, the customers reaching the hotel through these airline companies, they will get certain rebates. These rebates will be applicable on hotel fare or the meal prices. The management team expects that this scheme will benefit them as well as the airline companies.

Charity – The management team has proposed a new charity scheme. In this scheme, the customers will be able to nominate a charity at every visit. To this nominated charity, the company will pay 1% of their billable expenses.

The expectation of the management team is that these four schemes will help them attract more customers as well as mitigated the issues of the current system. In order to implement these schemes, the company will have to do the following.

1. Development of Android and iOS app for online booking system
2. Restructuring of the prices of the rooms based on capacity (e.g. 2 bed, 3 bed, etc.), type (AC/Non-AC) and services (e.g. personal, dormitory, etc.)

• Design of loyalty points structure (e.g. 100 points for 2^nd visit, 500 points for 3^rd visit within 3 months, etc.)

1. Rent of cars for providing transport for loyal customers
2. Construction of the parking area for loyal customers bringing their own cars
3. Application of new rebate rates

• Redesign of the restaurant for accommodating buffet meal system

Although the offers proposed by the management team are good enough to attract more customers, the company may face some serious IT and IS issues that can completely nullify the benefits of the new schemes and offers.

The Strategy Developed by StayTogether Hotel Chain to Address the Issue

Development of the App – As per the proposed plan, the company will develop an online booking app for Android and iOS users. However, development of an app is not an easy task due to the fact that the development requires going through several stages like prototype, α-version, β-version, demo version and others (Botha, Kourie & Snyman, 2014). Even after the full version is complete, there remain several bugs and errors that are to be removed using new patches. Again, the user interface must be attractive and easy to understand for the customers. Hence, the company will face significant challenge in developing the proposed new app.

Cyber Security – Cyber security will be significant challenge for the company once the proposed app becomes fully operational. For booking purposes, the customers will have to enter their personal information in the app and as a result, the app will be the target for different unethical hackers (Lee, Hung & Chau, 2013). Moreover, some malwares can block the traffic on the server of the app and the personal information entered by the users will be redirected to a different rogue server. Hence, the privacy of the users will be lost unless sufficient cyber security measures are taken.

Data Management – There may some issues arising in data management if there is no suitable data processing system. With increasing customers, there will be influx of a huge amount of data. Manual operations will not be able to handle all the data accurately (Ferrero & Sison, 2014). Hence, an automated data management system is necessary or the company will face significant challenge in managing all the customer information.

Customer Care – The company will also face significant challenge if there is no customer care service to address the queries of the customer. A good customer care service is an essential component of a successful information system.

Once the company upgrades the existing technical setup, there will be opportunities for new business ventures that will help attracting more customers and gather more revenue. Some of the business opportunities can be automated tour guide, separate restaurant and fast food chain and others. However, in order to start venturing into these opportunities, the company needs to develop and increase the brand value so that the customers choose this company instead of other rivals of the company.

Conclusion

In this report, a critical analysis has been undertaken on the management decisions of StayTogether and accordingly suitable recommendations have been provided. The main issue the hotel chains are facing is the growth of the online hotel booking apps. Before the rise of these apps, the customers had to visit the hotels or their offices to book the rooms for the numbers of days they would live there. The main feature of these apps that have posed a serious financial problem for the hotel chains is the massive discounts provided by these apps for booking the hotel rooms. The discounts have resulted in attracting a huge number of customers for the tourists but on the other hand, the hotels are receiving much less revenue from the deals due to discounts as well as the service fees for the apps. The ten separate hotel chains discussed in the case study have come together to develop a strategy to counter this problem and generate more revenue from the services. The ten hotel chains will merge together and operate as a single hotel chain namely “StayTogether Hotel Chain”. There will be a specific Android and iOS app that the customers can use to book rooms for this particular hotel chain only unlike other commercial hotel booking apps. The prices of the rooms will be fixed but not too high. The room prices in peak months will have higher rates than usual.

Based on the analysis of the new proposed hotel chain, the following recommendations can be suggested.

• The company should carefully prepare the different prices of rooms, food and services so that the customers are happy and the company itself does not encounter any significant losses.
• Since there will be no discounts for the room prices, the company should implement other offers carefully to attract the customers.
• The company should develop the mobile app by removing bugs and errors as well as implementing an attractive and user-friendly interface.
• Suitable cyber security measures must be taken to protect the personal information of the customers.
• An automated data management system is necessary or the company will face significant challenge in managing all the customer information.
• The company should also implement a customer care service for addressing the queries of a customer.

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