Effect Of Cartelization And Loyalty Programs On Hotel Market

Question:

What Effect Of Cartelization Stated In This Report?

In this report, the amalgamation and the merger of the hotel as stated in the case study will be critically evaluated to understand the risk and benefits of amalgamation. It can be stated here that the decision to amalgamate is to combat market pressure and can be viewed as a decision to form a cartel. This will help the firms in charging prices above the market prevailing rates. This decision by the firms has been taken to combat the increased bargaining power that the users of the services (Walker, 2016). Moreover, in this report the effectiveness of the different customer loyalty scheme that the company has adopted in order to increase market share and revenue have been critically evaluated. In this regard, the effect of the different programs on the market and the customers has also been evaluated. Information system and information technology have been distinguished in the project and its effect on the hotel market and loyalty programs have been discussed in the report.

The decision by the hotel chains to merge their business to combat pressure from the low priced hotel accommodation can be stated as a policy to form a cartel or create a monopoly kind of situation in the market. This will enable the hoteliers to charge a higher degree of price, this would be possible because, cartelization will allow them with certain degree of monopoly power therefore pricing power (Motta, 2004).

The effect of this decision by the hotel chains will increase the profit, as they will be able to charge higher price for the same unit. This will also be possible because the other hotels in the group will also charge a similar price and the people will be forced to subscribe the services at the hotel advertised rates. In this case it can also be stated that this will also increase the producer surplus for the entire group reducing the consumer surplus (Waterson, 2004). This will be possible because they will provide the service after the formation of the carte at a rate, which is higher than earlier. In this regard, it can be further stated that if a single hotel chain cheats or violates the price determined by the group. The entire system is expected to fail and will have the potential to ruin the market by driving the organizations into a price war.  The price war will be because in order to gain additional market share the organizations in the industry will offer discounts and reduce prices to compete with others. It will happen at one stage that there will be no profits to be drawn from the market and the firms will be forced to withdraw themselves (Abreu, Pearce & Stacchett, 1986).

The effect of cartel formation on the customers and subscribers of services are always negative and is not desired for. This is because cartel formation prevents them from having any kinds of consumer surplus. This is because the companies and the organization in the cartels are facilitated with pricing power and therefore charge the maximum that the subscribers or the customers are willing to pay and the customers and the service users end up paying the prices that they demand having no other choice. Therefore, from a customer perspective a cartel is never desirable. It also reduces the reduces the consumer surplus which is a disincentive for them (Chamberlin, 2015). 

Evaluation of Amalgamation Decision

In this regard, it can be stated that the managements decision of implementing the  Stay Together Loyalty, rewarding customers with airport transfers, car parking on site and free nights is aimed toward increasing the demand of the services provided by the company. The benefits that the amalgamation of the company is aimed, towards increasing the sales of the company. In this regard, it can be further stated that the benefits that the group is providing is providing them with incentives. This will help in increasing the demand for the services that the company is providing. In this regard, it can be further stated that this will help in retaining the customers and increase the market share (Patino, Pitta & Quinones, 2012).

The customers of the company are be incentivized in the following way, if they stay for longer period of time, the customers they are  provided with reward point which they can use for future stays. In this regard, it can be stated that this will increase the sales of the services for the company, in expectation of earning rewards the customers will further subscribe to the services of the group.

The onsite car parking facilities, facilitates the customers by reliving them of the parking charges which otherwise, would had to be paid in excess of the hotel rents. This helps the customers in paying less and increase the value of the service provided by the company among them.  More over it can be also stated that the airport transfer facilities also lessens the hassle of the customer travelling to and from the airport. This acts as an incentive, that is provided to the customers and increases the sales of the service. It can be further stated that this decision of the management is based on the principles of increasing the customer satisfaction in order to increase the sales of the services. Here it can be stated that customer satisfaction is either in increased by the quality of the service, or by providing amenities to them. In this regard it has been evident from the decision of the management that it is not only focusing solely on the qualitative factor of service but also by increasing the amenities in order to promote demand or attract them (Colquitt, Lepine, & Wesson,  2011). 

The management in this regard has decided that, If a kitchen and standard restaurant is on site, buffet breakfast and dinner is included in the hotel room price. This is to add to the dollar value earned per guest. Exclusive restaurants on site will charge extra.  Here it can be stated that this will increases the quality of service. The intention of the management is clearly to increase the value of the service. Here it can be further stated this will provide the customers with food facilities. This will help in increasing the market share, as they will have to pay less on their travel expenses if the cost of food is included in the room rent. In addition it can be further stated that the company can advertise this in their tariff so that the customers can have an idea on what the amenities are. This will provide for a unique selling proposition for the company to its service users. The decision of facilitating a onsite exclusive restaurant will provide additional business and revenue earning opportunity for the organization. It can be expected that there would be some boarders, who will be opting for this despite of the complementary services being provided to them. This is because they will be tempted towards the exclusive range of food that is being offered to them and these people do not mind paying extra for additional services (Xu,& li, 2012). In this regard it can be further stated that this will ensure the amalgamation in earning additional revenue. This will also help in fulfilling their business objective and profit maximization.

Effect of Cartel Formation

Here in this regard it can be further stated that the amalgamation can make ventures and contracts with the other airline companies. Where both will be benefited, they can make a pact that if a customer travels by a certain airline he or she will be applicable for certain rebate in the hotels. In this regard, it can stated that this will help in increasing the sales for both the companies, the company itself and the airline with which it makes the pact (Lorna Wang & Bowie, 2009).

The reason behind the increase in sales is because the passengers in hope of getting special discount in the hotel will fly in the stipulated airline. This will increase its sales, in this regard it can be further stated that this customer might not have chosen the particular air line had the discount not been provide, therefore this customer can be treated as addition customers for the company resulting in increasing the revenue of the airline firm from the pact. The same will be true in case of, stay to gather, in this case it can be stated that the flyers that otherwise would have chosen a different place of stay will choose stay together as their preferred staying option. This will be certainly because of the discount that Stay Together will provide. This will also help in increasing the sales of its services in every regard. This would prove to be beneficial for the company. If the company can further facilitate them with options, like providing them with opportunities of choosing credits, free nights, or meals. It can be stated that this will help in increasing the sales of the services further (Sanchez,& Satir, 2005). It can be further stated here that flexibility in service also helps in increasing the demand. This is because; flexibility helps in catering and addressing the demand of a varied section of people. As it helps in catering to varied section of people, it enables in having a larger customer base for Stay Together. 

management has taken a corporate social responsibility of providing 1% of the total billable to charity. This will help the society and the people requiring help and need in a better manner. In this case, it can be stated that this noble cause will also help in addressing customers with similar values. It can be further stated here that social causes and social statements help in increasing the market share of any company. This has been evident from various market researches. It can be stated here that companies apart from addressing social causes and requirement also declare of a corporate social responsibility to create a clear image in the minds of the people. This is an effective marketing policy as well. Customers in order to donate more or contribute to the social cause in an increased manner, purchase or spend more so that the bill increases. In this regard it becomes evident that this provides more revenue to the company as well as, help in addressing the social cause in a better way (Mauri, 2013).

Impact on Customers and Subscribers

Information system and information technology help in increasing the market for the companies in the present context. In this regard it can be further stated that the use of information technology and information system will enable the amalgamation in better management of the 1000 hotel all across the globe. This is because information technology facilitates in faster transmission of information. This helps in adopting policies for the international phenomenon in an efficient and faster manner. In this regard it can be stated as well information technology helps in addressing clients from all across the globe (Kim, Cavusgil, Calantone, 2006). The customers can book form a distant place in advance without incurring any additional cost. In this regard, it can be further stated that this helps in further expanding the market (Buhalis, &O'Connor, 2005). An effective information system enables the organization in storing the data and other requisite involved in the operation of the organization in a better manner. This helps in analyzing the data in a better manner and user it in future to increase the business. In this regard it has been evident that the amalgamation of the companies needs to have a effective information technology and system in store for better performance (Romney & Steinbart, 2012).  

It can be recommended here that the amalgamation needs to formulate a efficient information system in order to organize itself in a better manner. In this regard it can be further stated that incorporation of appropriate information technology will help in addressing more customers and increase the revenue of the firm. It can also be recommended, here that the amalgamation can also make contract with other modes of transport, which will help in further increasing the business. Making contracts with the tourism departments and providing tourist facilities also help in increase the desirability of the chain and increase the revenue fort them which is the sole objective here (Wong Ooi Mei, Dean & Whit, 1999).

Conclusion

In concluding the report, it has been evident that forming a chain and amalgamating with other organization, helps in decreasing the competition in the market and enables the organization in charging a price above the equilibrium rate. This is because the system provides them with a certain degree of pricing power. In this regard, it can be stated that even though it is beneficial for the companies in this regard but it is not desirable from the customer point of view. In this regard, it can be further stated that providing the customers with addition incentives and facilities help in increasing the market share and sales. In this regard, it can be stated that the amalgamation has adopted a similar policy in increasing the demand. It has also been evident from here that making contract with similar services and providing benefits to customers also help in increasing the demand for products of products for both the companies. In this regard, it can be stated that the role of information system and information technology is important. It can be further stated that this helps in increasing the efficiency of the entire system.

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