Background to the study
The Russell Hotel is one of the small and medium enterprises operating within the Australian Hospitality industry. The firm is located in Sydney. Since its inception in 1887, the firm has been able to provide high quality services to its customers.
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The firm’s location at ‘The Rocks’ which is one of the major historic sites in Australia contributes to the firm’s competitive advantage (The Rusell Hotel para. 6) by attracting a wide range of tourists annually. In the years that the company has been in operation, it has continued to emphasis on personable and charming services. For example, the firm’s rooms are customized to address diversity in customer requirements.
This is in line with customer-focus which is one of the firm’s core elements in its mission statement. Customer focus should be effectively entrenched by the top management. Such an effort would contribute towards a change in attitude amongst the employees across the entire firm. The resultant effect is that the firm all the employees’ activities will be focused at achieving a high level of customer satisfaction (Hill and Jones 135).
In its operation, Russell Hotel has incorporated the concept of strategic management in an effort to cope with the changes occurring in the hospitality industry. According to Enz (13), strategic management is vital for firms within the hospitality industry since it enables the firm define a strategic direction via identification of weaknesses and identification of opportunities.
One of the concepts which the firm has incorporated is internal and external analysis. This enables the firm to identify gaps in its operation (Harris 65). One of the ways through which the firm accomplishes this is via incorporation of customer relationship management. The firm has established an effective internal and external communication system.
Lack of communication in an organization can hinder its effectiveness in strategic management (Hitt, Ireland and Hoskisson 345). In an effort to improve communication with the customers, Russell Hotel has incorporated the CRM software. This has culminated to creation of a strong relationship between the firm and its customers.
For example, the customers are able to communicate their complaints and complements to the management team. The CRM software is vital in a firm’s effort to build intelligence. In its strategic analysis, Russell Hotel management team analyzes the market feedback from time to time.
The report entails identification of the gaps existing in Russell Hotel, Sydney. The core objective is to propose the various strategies which the firm’s management team can incorporate so as to seal the identified gaps.
The report is organized into a number of sections. The first section entails an internal and external analysis of the firm via adoption of the SWOT model. The identified gaps are expounded further.
The second section gives an analysis of the various strategies which the firm can incorporate in order to seal the gaps identified. The method of evaluating the feasibility of the strategies is illustrated in the third section. Finally, a conclusion and a number of recommendations are given.
Internal and external analysis
Strategic planning is paramount in a firm’s effort to understand business dynamics (Johnson, Scholes and Whittington 45). In an effort to understand the firm’s internal and external environment, the firm’s management team utilizes the SWOT analysis model which enables the firm to identify its strengths, weaknesses, opportunities and threats.
The effectiveness of the SWOT analysis model is enhanced by the customer relationship management software (Hubbard, Rice & Beamish 5). The table below gives an illustration of the firm’s internal and external analysis.
|Internal analysis (Strengths and weaknesses)||External analysis (opportunities and threats)|
High level of customer service
Opening other outlets
Growth in tourism industry
Steep stair case
Increase in competition
Change in customers’ product tastes and preferences
Steep stair case
Despite its effort to develop a high competitive advantage via ensuring a high level of customer satisfaction, there are gaps which the firm is required to address. From the market feedback, the firm’s management team has identified that there are numerous complaints in relation to ease of accessing the rooms. One of the major complaints is with regard to the hotel stairs.
Operating in a storey building, Russell Hotel has long winding stairs. There are also complaints that the stairs are narrow and steep which makes it difficult for customers to access their rooms.
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Absence of an elevator at the hotel’s reception makes the situation worse. Difficulty in accessing the rooms limits the firm’s competitiveness despite the distant and pleasant view of the surrounding that one receives. For example, the steep stair cases have been in existence for a long duration of the hotel’s operation. This has negatively impacted the firm’s competitiveness by limiting customer loyalty.
Lack of sufficient facilities
There are diverse amenities offered by the firm. How ever, there are complaints that the firm does not have refrigeration facilities where customers can preserve their soft drinks. In addition, customers also complain of lack of private bathrooms for each room. Shared bathrooms are one of the issues which increase the Russell Hotel customer’s level of dissatisfaction.
Some of the customers complain citing the hotel to be old and not being stylish. Some of the issues cited include old furnishings and creaking floorboards. Russell Hotel has a narrow range of products. This is evident in the fact that the firm has adopted a limited service model by offering breakfast only to its customers.
Strategies to address the problems faced by Russell Hotel
The hospitality industry in Australia is witnessing a rampant growth. One of the main reasons which accounts for this growth is increment in the number of potential investors venturing the industry. Considering the competitive nature of the hospitality industry, it is vital for firms in this industry to expand their services.
One of the ways through which this can be achieved is via incorporation of the concept of product diversification (Okumas, Altinay and Chathoth 54). Russell Hotel’s competitiveness can be improved via integration of related diversification. Related diversification refers to expansion of a firm’s product range via inclusion of products related the core business activity (Hitt, Ireland and Hoskisson 175).
The firm’s management team should consider expanding the firm’s menu. This will enable the firm to venture into other new market segment thus repositioning itself effectively in the market (Thompson, Strickland and Gamble 45). For example, the firm should consider serving other meals such as lunch and dinner.
In its product expansion strategy, the firm’s management team should consider diversity of consumers with regard to taste and preferences. In order to attract a wide range of customers, a variety of food products should be included in the firm’s menu. Incorporation of product diversity should be conducted in such a way that it reflects the changes in the market (Spears 35).
For example, the firm’s management team should consider demographic changes occurring in the market. Considering the fact foreign tourists are amongst the firm’s major customers, it is paramount for the management team to consider offering foreign dishes.
In its new product development, the firm’s management team should consider conducting a comprehensive market research. This will enable the firm to identify existing market opportunity and hence develop products which are in line with customers requirements (Lewia 67).
In addition, conducting a market research will enable the firm’s management team to determine whether there is a sufficient market for the new product being developed so as to attain a sufficient return on investment (Hassanien, Dale and Clarke 9). For example, age as a demographic change is one of the aspects which the firm’s management team should consider integrating.
One of the ways through which Russell Hotel can exploit this is through provision of specialized hospitality products. For example, to cater for the aged, the firm’s management team should consider providing spa services which is in line with customers’ trend with regard to health ((Hassanien, Dale and Clarke 11).
In order to enhance its competitiveness, continuous product innovation should be conducted. This arises from the fact that there is a high probability of the competitors offering products which mimic the firm’s product (David 45). Through innovation, it will be possible for the firm to differentiate its products from those of its competitors (Mia and Patiar 111).
In order to achieve this, the firm’s research and development team should consider competitors as one of its market research variables. This will ensure that the firm effectively capitalizes on the gaps. Hospitality firms should undertake continuous product innovation so as to develop an edge over their competitors (Hassanien, Dale and Clarke 10).
Refurbishment of the firm’s facilities
Refurbishment is currently being considered as one of the most effective way through which firm’s in the hotel industry can attain their competitiveness (Jones and Haven-Tang 100). In its product development strategy, Russell Hotel should also consider undertaking continuous refurbishment of the firm’s facilities.
This will contribute towards an improvement of the firm’s competitiveness via provision of acceptable services (Hassanien, Dale and Clarke 9). Considering the cost of refurbishment and the changes in the hospitality industry, refurbishment should be undertaken within a range of 3 years.
One of the issues which should be considered is inclusion of an elevator in the firm’s premises. This will help in solving accessibility challenges facing the firm. As a result, the firm will be able to increase its customer base by attracting new customers. For example, accessibility of the firm’s rooms will play a significant role in attracting the physically challenged customers.
For example, in the process of refurbishing the hotel, it is important for the firm’s management team to ensure that wheel chairs can easily be used in the hotel. In addition, the firm’s management team should ensure that private bathrooms are built. Through refurbishment of the hotel’s facilities, there is a high probability of the firm increasing its customer base by attracting new customers since the hotel will be stylish.
In order to determine the feasibility of these strategies, the firm’s management team will continuously evaluate changes in its profitability level.
Despite the cost of implementing these strategies being relatively high, the firm’s management team expects that there will be a significant change in its profit level within the first three years of their implementation. The table below gives an illustration of the expected cost and growth in profit level. The firm will compare the actual and the expected profits level.
|Strategy||Cost of investment Y0 (Amount in $)||Expected growth in profit (Amount in $)|
From the above analysis, it is evident that Russell Hotel is faced with a challenge in relation to customer satisfaction despite the high level of customer service offered by the firm’s staff. This is evident in the fact that there are numerous customer complaints in relation to the firm’s facilities.
Despite its strategic location, accessibility to the firm’s rooms is a challenge due to the steep and narrow stair case. This limits the customers’ level of satisfaction. In addition, the firm does not have sufficient facilities to effectively cater for the customers needs.
In order to improve its competitiveness, Russell Hotel management team should consider the following.
- In its product diversification strategy, the firm should customize its products to meet the customers’ diverse tastes and preferences.
- Continuous training should be conducted on the firm’s research and development team. This will increase its effectiveness in analyzing changes in the hospitality industry hence exploiting the opportunities presented.
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