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Strategy Options for Hotel in Sydney, Australia

Customer Attraction

The current financial situation and CVP report indicate that the hotel’s price strategy is the best approach to attract clients during the high, shoulder and low seasons. Moreover, the hotel will continue to support the brand values and will not replace or eliminate some services during the shoulder and low seasons. The selected location is Sydney, Australia. The customer persona is a representative of the above-average middle class, who desires to have a comfortable stay with high-quality service and essential accommodation for an excellent experience.

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For instance, the prices for the Deluxe room will be adjusted following the season change; however, breakfasts and in-house services will be provided to the guests. On the contrary, the Standard room pricing will follow the Deluxe approach; however, during the low season, breakfast can be provided as an extra service, or its price will be added to the low season price for the Standard room.

Another tactic to attract clients is to keep rooms’ accommodation untouched. Some competitors take away additional towels from rooms to reduce expenses on laundry. The brand’s value states that guests should experience the most excellent service within the hotel so that towels will be provided equally during the high, shoulder, and low seasons. Moreover, the current furniture in the Deluxe room meets all the requirements not only indicated in ISO 18513, but also in the industry trends (Moreo, Green, & O’Halloran, 2018). In this case, the luxury furniture and spacious rooms are essential to attract clients and maintain the proper level of services and quality.

Deluxe Room.
Image 1: Deluxe Room, photo taken from booking.com.
Standard Room
Image 1: Standard Room, photo taken from booking.com

The Standard room attracts guests with a more simplistic design and furniture. Nonetheless, it has the necessary accommodation for a comfortable stay. While the room is less spacious, the furniture is located accurately to create the image of the “bigger room.”

Recommendations

Despite having substantial capital for investments and business model diversification, much attention to detail is required for successful investment in the hotel business. The fast-changing environment in the hospitality industry indicates that the brand should invest funds in new types of hotels or services. In this case, the hotel can conduct vertical diversification and invest capital in different hotel business models. However, a new model of apart-hotels is becoming quite popular in the world, by which the investments with little risks can significantly enhance and expand the current hotel business and guarantee high return margins on invested capital.

The aparthotel is, to a certain extent, a model of ownership that multiple owners can own. The company opens such a facility and offers rental contracts for clients. The client can contact hotel owners and purchase a seasonal pass or rent the entire room in such an aparthotel (Medina-Muñoz, Medina-Muñoz, & Sánchez-Medina, 2016). The idea is that guests can live in it paying some money for the service, and when they are not there, the apartments will be at the disposal of the hotel operator and will earn the client some dividends or discounts.

Among the advantages of investing in apartments in an aparthotel is a quick payback of investments, at the same time, all management concerns are taken over by the management company. The hotel should only invest in the construction project and hire a professional management company that is the best in terms of brand-price quality. Together with it, the hotel can develop a product that meets all standards of service of the Premier hotel chain. As a result, such a facility is under the control of the management company; however, the hotel is a beneficiary that creates a professional and quality product for its clients.

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Evaluation

The current leverage index is 1,04, meaning that the hotel has assets twice more than its debt obligations. Such a financial behavior positively affects revenues and profits, as more capital can be allocated for improvements, diversification, or any other investment project. The effect of financial leverage is manifested in the increase in return on equity using borrowed capital, despite its payback. When a company has acquired capital, it is obliged to pay interest and repay the debt in the future. These percentages are deducted from taxable profit and increase its value for investors.

However, the more debt a company has in the capital structure, the higher the financial risk is. This means that, regardless of the level of income from its operations, the company must pay both the principal amount of the debt when it is due and the interest in it (Akron, Demir, Díez-Esteban, & García-Gómez, 2020). The recommended minimum value of the coefficient of autonomy is estimated at 0.5, which characterizes the ability of an enterprise to fulfill its external obligations by its assets, its independence from borrowed sources. The Safety margin is 95,2%, which indicates that the hotel has little or no investment risks.

For investors, such a rate suggests that the company can be trusted regarding collaboration or investment. For the 2021 year, such an index indicates that the invested funds and available capital will be growing and that they are secured by adequate financial management. As a result, the hotel can ensure investors that any future or planned project will be successful and conducted with maximum possible accuracy and quality.

References

Akron, S., Demir, E., Díez-Esteban, J. M., & García-Gómez, C. D. (2020). Economic policy uncertainty and corporate investment: Evidence from the US hospitality industry. Tourism Management, 77, 104-119.

Medina-Muñoz, D. R., Medina-Muñoz, R. D., & Sánchez-Medina, A. J. (2016). Renovation strategies for accommodation at mature destinations: A tourist demand-based approach. International Journal of Hospitality Management, 54, 127-138.

Moreo, A., Green, A. J., & O’Halloran, R. (2018). What certifications are important in the hospitality industry? Journal of Human Resources in Hospitality & Tourism, 17(1), 121-135.

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StudyCorgi. 2022. "Strategy Options for Hotel in Sydney, Australia." April 16, 2022. https://studycorgi.com/strategy-options-for-hotel-in-sydney-australia/.

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StudyCorgi. (2022) 'Strategy Options for Hotel in Sydney, Australia'. 16 April.

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