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TAYLOR’S UNIVERSITY | SABD | FNBE
SCHOOL OF ARCHITECTURE, BUILDING AND DESIGN
FOUNDATION IN NATURAL AND BUILT ENVIRONMENT
MODULE: PRINCIPLES OF ECONOMICS [ECN30205]
REPORT TITLE: A Tale of Two Businesses - A Comparative Analysis of Two Businesses of Similar Industry in Different Geographical Locations
BUSINESS INDUSTRY: HOSPITALITY
LECTURER: MR.CHANG JAU HO
SUBMISSION DATE: 22 MAY 2015
LAU MAO HUA 0320249
WONG QIN KAI 0320024
LIM TING LE 0320028
LEE JIA KIAM 0320029
NABILA HANIM BINTI SALLEH@MAN 0321368
NADHIRAH BINTI MOHD ZAIN 0321366
NUR AZREEN BINTI SAMIU 0321370
CHIN KHANG WEI 0320728
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TABLE OF CONTENT
TITLE PAGE NUMBER
COVER PAGE 1
TABLE OF CONTENT 2
KEY SUMMARY 3
BRIEF BIO OF THE BUSINESS 4-5
COMPARATIVE ANALYSIS OF THE BUSINESSES’ COMPETITIVE TRAITS 6-10
RECOMMENDATION 11-14
APPENDICES 15-26
REFERENCES 27
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KEY SUMMARY
In a group of eight people, we need to select two businesses with the history of 10 years and
above within the same industry in different geographical location for research purpose. We had selected
Hotel Continental and The 5 Elements Hotel as our businesses to study. Hotel Continental has 46 years of
experiences in Penang while The 5 Elements Hotel has 42 years of experiences in Kuala Lumpur. We
need to conduct preliminary research and conduct a personal interview with the hotel manager to get more
information about the business. In addition, we also need to conduct on-site observations of the
businesses we had selected. In this report, we will be discussing about the background information and
the competitive behavior of the two businesses in their respective markets.
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BRIEF BIO OF THE BUSINESS
A. Hotel Continental Penang
Hotel Continental is located at Penang Road, Penang. It was founded on 29 November 1969 by
Loh’s Family. When contacted with Mr.Fadzil, hotel manager, he said that the top management and
himself are not sure about the motivate of Loh’s Family to start this business. Mr. Fadzil believed that it is
because of the island which will attract visitors to come (personal communication, May 1, 2015). Hotel
Continental have approximately 80 peoples of employees including the top management which half of
them came from local citizens and another half came from foreign country. Hotel Continental provides a
total number of 231 rooms to the market which include superior room, deluxe room, super deluxe room
and executive suite room. Besides that, Hotel Continental also provides services facilities such as
restaurant, conference room, laundry service, car park, swimming pool and etc. The hotel can be fully
occupied during peak season. On the other hand, the hotel’s capacity can up to 60% to 70% during off-
peak season. Most of the customers come from corporate businessmen and private agent groups. In the
past 5 years, Hotel Continental had graded as a 3-star hotel by Malaysian Association of Hotels (MAH)
and Coffee House is a qualified halal restaurant. Besides that, Hotel Continental had upgraded the
standard room to superior room and upgrading the amenities inside the room such as LCD television,
minibar, in-room movies channels and so forth. Mr. Fadzil believed that this hotel can sustain longer
because of the strategic location.
B. The 5 Elements Hotel KL
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The 5 Elements Hotel is located at Chinatown, Kuala Lumpur. It was founded in 1973 and it was taken
over by new management in year 2008. The key founder of this hostel is a Malaysian Chinese
businessman but currently it is in-charged by Tan Sri Lam’s daughter. The key founder start this business
with the motivation of the founder is operating property development company by that time and take this
opportunity to start the business and gain profit from it. The idea of The 5 Elements Hotel’s name is mainly
due to its location which had the traditional concept in it and they decided to use the five basic elements -
fire, metals, earth, wood and water as the concept of their name. The 5 Elements Hotel has approximately
30 employees which most of them came from foreign country. The 5 Elements Hotel has the total of 104
rooms which include standard single rooms, superior twin rooms, deluxe queen rooms, and themed suites.
During peak seasons, the hotel’s capacity can up to 60% to 70% which are about 4000 people. In contrast,
the hotel’s capacity can only up to 30% during off peak season which are around 2500 to 3000 people.
40% of the customers come from online bookings such as Agoda and its own official website, while
customers from the travel agents and business cooperation worker contributes 30% each to the total
amount of the customers. Most of the customers are usually Malaysian and Singaporean families who
have the income around RM5000-RM10000. The hotel had been renovated in year 2013 due to the 35
years old building and hence upgrading the hotel’s facilities and amenities. The 5 Elements Hotel had
implemented modern type of marketing to expand their market which provides online booking on its own
website and Agoda.
YouTube Link: https://youtu.be/IMM_ZcHprdc
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COMPARATIVE ANALYSIS OF THE BUSINESSES’ COMPETITIVE TRAITS
A. Hotel Continental Penang
In Penang, there are around 450 until 500 businesses operating in hotel industry which include
budget hotels and homestays. Market shares of this business are quite small in Penang as there are
numerous competitors in this geographical location. Bayview Hotel, Hotel Malaysia and Cititel Hotel are the
businesses that operate in Penang Road which are also classified as the top competitors of Hotel
Continental. Bayview Hotel is qualified as a 4-star hotel in Penang by Malaysian Association of Hotels
(MAH). It offers a total of 333 rooms and suites to the customers which inclusive of standard rooms,
superior rooms, deluxe & grand deluxe rooms, family rooms, junior suites and premier floor’s rooms.
Meanwhile, Hotel Malaysia is one of the 2-star hotel in Penang by MAH. Hotel Malaysia provides 126
rooms to the customers who include standard rooms, superior rooms and deluxe rooms. Cititel Hotel
graded as one of the 4-star hotel in Penang by MAH. Cititel Hotel offers 451 comfortable rooms which
include standard rooms, superior rooms, deluxe rooms and executive suites. According to Mr.Fadzil, the
hotel competes with other businesses in term of providing good services. He said that he will find the
alternative way to receive suggestion and recommendation from the customers via internet and investigate
the problem and hence provide necessary training if applicable. Hotel Continental has a low pricing power
because there are too many competitors in Penang and the hotel had adjusted their rates four times due to
the implementation of Goods and Services Tax (GST) and the rates of other businesses. According to Mr.
Fadzil, it is hard for the new business to enter this market because there are too many competitors around
and they had to compete with each other by providing good amenities and facilities as well as providing a
reasonable rate. Hotel Continental is a monopolistic competitive firm because there are too many
competitors in the market. Many competitors are caused by weak barriers to entry which businesses are
easy to enter and exit the market. Due to the large number of competitors, businesses will be having a
weak pricing power and the competition among other businesses are strong in term of pricing and
advertising in order to get more customers.
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B. The 5 Elements Hotel KL
There are around 200 businesses operating in hospitality industry in Chinatown, Kuala Lumpur.
The market shares of this business and its top competitors are quite equivalent as everyone facing the
same situation due to the drop in demand which caused by the decreasing number of tourists coming to
Malaysia due to the issues happening in Malaysia such as the flight incidents, safety of Sabah and also the
drop of economics in United Kingdom. Geo Hotel, Swiss Inn Hotel and Ancasa Hotel are the top
competitors of The 5 Elements Hotel because they are the hotels that operate within Chinatown. Geo Hotel
is a 3-star hotel which provides a total number of 180 rooms to serve its customers. Room types available
at Geo Hotel are standard rooms, deluxe rooms, family rooms and premier suites. Swiss Inn Hotel is a 3-
star hotel operating under Swiss-Garden International. Swiss Inn Hotel provides a total number of 151
rooms to the market which include superior rooms, deluxe rooms and family rooms. Ancasa Hotel is a 3-
star hotels which provides 294 rooms which inclusive of standard rooms, superior rooms, deluxe rooms,
family suites, junior suites and Ancasa floor’s rooms. Ancasa Hotel also provided spa services for its
customers which enhance people to stay at that hotel for the enjoyment of the spa. According to Mr.
Frankie, every hotel is trying their best to provide good products and services to its customers so that the
customers have a good impression and will stay at the hotel next time. Hence, the main reason why these
competitors are so special is due to their pricing and marketing strategy. Mr.Frankie said that the hotels will
be running a various type of promotions through internet which most of the people get the information from
and hence attract people from its competitors such as early bird promotion, buy three free one night
promotion and so on (personal communication, May 20, 2015). It’s hard for new business to enter this
market because there are too many competitors in this market. Besides that, the new business must also
need to take the risk which it will not be gaining much profit due to higher number of supply in the market
while the market demand is lower. Every business needs to compete with each other to get the customers.
The 5 Elements Hotel is a monopolistic competitive firm because it has a large number of competitors in
that geographical location, weak barriers to entry which firm can easily enter and exit the market, sell
differentiated products and constantly advertising their products to the market to gain more customers. The
5 Elements Hotel has around 200 of competitors which give the hotel a low pricing power because if the
hotel set a high price for its service to gain more profit, they will lose the customers. Every hotel wants to
have its own customers and causes the competition among the hotels are big in term of pricing,
advertising, products and services provided by the hotel. PRINCIPLES OF ECONOMICS [ECN30205]
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Comparative Analysis Summary Table
Competitive Traits Hotel Continental The 5 Elements Hotel
1. Number of Competitors
250 - 300 200 - 250
2.Barrier to Entry WeakThey just need around RM 5 million to start the business. They have to do the market survey before entering the market.
ModerateBecause their new business has to compete with the existing business.They have to purchase a land to start a hotel business which is expensive.
3.Differentiated Product
AccomodationExecutive SuiteDeluxe RoomSuper Deluxe RoomSuperior RoomDiningBuffet BreakfastSemi-Buffet Lunch
AccomodationStandard RoomSuperior RoomDeluxe RoomThemed Suite( Metal Suite, Water Suite, Fire Suite, Wood Suite, Earth Suite)DiningBuffet Breakfast
4.Pricing Power Weak Price Taker. The competition around is stringent. If they raise the price, customer will turn away and go to other hotel nearby.
Weak Price Taker. Many budget hotels around have lower price range than them.
5.Other Characteristics
1. Strategic Location - Penang City Centre2. Convenient Location - Many restaurants, bus stop and convenient shop around3. Facilities - Have swimming pool4. Have their own company website5. Hospitality Offer6. WiFi on every floors7. In-room Astro Channel Offered
1. Have Tour Guide Services2. Strategic Location - Near Chinatown3. Have travel agent to bring in visitors4. Direct Marketing - Online promotion5. Have their own company websites6. Not much 3-star hotel nearby, mostly budget level nearby7. Free WiFi on every floor
6.Verdict Monopolistic Competition Monopolistic Competition
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According to the analysis, Hotel Continental is more commercially successful because they earn more
yearly revenue than The 5 Elements Hotel. Compare to The 5 Elements Hotel in Klang Valley, Hotel
Continental has about 70% occupancy. Whereby, The 5 Elements Hotel has only about 30% for their off-
peak season. Moreover, Hotel Continental is more competitive and fiercer in Penang, with about 50 more
competitors in Penang. However, Continental Hotel is able to survive and their business is getting better
over years. Furthermore, Hotel Continental provides more characteristics compare to The 5 Elements
Hotel. Both of the hotels cannot put the price as they want, because there are many competitors among
them.
YouTube Link: https://youtu.be/IMM_ZcHprdc:
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RECOMMENDATION
A. Hotel Continental Penang
1) Do more marketing and advertising
Continental Hotel can do more advertising on the market and even social media sites. They can penetrate
the market with the platform such as “Trip Advisor”, “Hotel Finder” and so on to boost their existence. Also,
they can make a mutual agreement with Tourism Board within Malaysia. For example, Continental Hotel
can do a partnership with Penang Tourism Government and make the hotel available on the tourism
guidebook. Continental Hotel can give out free parking for their touring bus and discount for the tourism
company. This helps Continental Hotel to have secure customers in a long run.
2) Provide better services and catering
Service is the emphasis in hotel industry. Continental Hotel can improvise their room services, ushering,
and front desk registration. If the customers are satisfied with their services, they will recommend the hotel
to their friends and come back to visit Continental Hotel in the future. Every customer is entitled to get a
free breakfast for staying in Continental Hotel, hence the food served must be clean, hygienic and tasty.
This can attract the customers to have and pay for their lunch and dinner at the same place. By doing this,
Continental Hotel can boost their extra revenue on lunch and dinner. Since most of the customers are not
familiar with Penang area, Continental Hotel can also provide tour guiding services for those who
requested. In a short run, people are more likely to visit Continental Hotel for their convenient tour guiding
and indirectly make revenue out of it.
3) Increase facilities
Continental Hotel can provide better facilities such as a gym, better air conditioners, more channels in their
television and so on. Moreover, they should provide free Wi-Fi service in the room. Leisure travellers would
rather have a good connection to scroll through social media updates or keep in touch with family and
friends instead of other treats such as robes and slippers in the room or coffee or tea available in the hotel
lobby upon arrival. Modern travellers are hyper connected and cannot bear to be offline, while business
travellers need to be able to check their email and take online conference call. This can help them to give
maximum comfort to the customers.
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4) Keep the environment clean and provide a better view.
The surrounding and building of Continental Hotel have to always keep clean and preserved. This can
increase people’s confidence in visiting Continental Hotel. It should not have rubbish around and the paint
on the building should always look new. Small renovation might be needed to replace the wall with a
transparent glass so that the customers can enjoy the Penang’s view and the beach outside the hotel.
5) Have more parking bays
Parking is always a problem in a hectic city like Penang. Customers will sometimes prefer to stay in
Continental Hotel for their sufficient parking bays. This provides convenience to the customers as well.
Having sufficient transports will also prevent traffic jam around Continental Hotel, customers will not park
their cars everywhere and block the traffic around the area.
6) Cut down unnecessary workers and hire more professions in hotel management
We realize that most of the workers in the hotel have no actual experience in managing hotel. If
Continental Hotel can remove some of those excess workers, they can cut down their cost. At the same
time, they should hire more people with hotel management degree who are professional in hotel
management to run the hotel. They can give motivational talk or workshop to boost the speed, efficiency
and productivity of the existing workers as well. As a result, they can have a good record and reputation in
customers’ eyes. After all, reputation is a vital for a business.
B. The 5 Elements Hotel , Kuala Lumpur
1) Social media
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The hospitality industry should be using social media to reach consumers. One of the most recent
strategies is location-based marketing, in which to contact a consumer via a short message service (SMS)
text. But this text is only sent to potential customers who have entered a certain location. With hotels, they
could “geofence” airports or convention centers in your city to send a message to people, telling them of
their services. Apart from that, consumers nowadays shop much differently than they did in the past, they
will gather information from the internet before making a purchase. It also applies to hotel stays. Starting a
hospitality or travel blog can increase the quality content on their website, which drives the online presence
and improves their website search rank. If The 5 Elements Hotel ends up on the first page of search
results, people are more attracted to make a reservation. But stick with articles that are informative, as
opposed to promotional.
2) Reimbursement
The hotel can offer reimbursement for the fees that guests pay airlines for their checked bags. They can set a limit on the number of bags and the timing of this offering to attract more guests. By having this reimbursement attract more foreign tourist since they can get discount out of their luggage. This novel idea is coming from Loews Hotels.
3) Promotion and offer more package deals
Some people are flexible with their travel schedule and might want to stay an extra night. If offer them 50% off on the third night when they pay the regular rate for the first two nights, many will take the offer and this will generate incremental revenue. Besides that, in order to attract guests to the hotel and increase their occupancy, they can offer package deals. For example, a “girl’s weekend” package would include complimentary wine, chocolates, a massage at the hotel or with a partnering practitioner and a gift basket with spa-themed toiletries. Hoteliers can price these packages slightly higher than normal rates, as the complimentary items add value to the overall experience.
4) Make a few rooms pet friendly
Many travellers would love to take their pet along. So, pet-friendly hotels are the best and attractive option for families who want to avoid the stress and expenses of kenneling a dog or finding a babysitter. If the hotel make it pet-friendly, they are not only attracting different segment of traveller, but also charging them more for the rooms.
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5) Network with other nearby business
Networking with other area businesses that tend to attract travellers and tourists such as amusement parks, museums and restaurants to increases revenue for the hotel and the business partner, and at the same time, benefits the customer. A hotel could offer discounted tickets to local attractions that benefit current hotel guests. Business can be driven to the hotel if the hotel offers a special rate for anyone who books a room and shows a ticket or receipt from the hotel’s networking partner.
6) Add some entertainment
Give the guests a little something extra to look forward to with some free or inexpensive entertainment. For example, they could have a local musician play his guitar out by the pool or have Bingo at 7:00 pm at the lobby.
YouTube Link: https://youtu.be/IMM_ZcHprdc
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APPENDICES
A. Hotel Continental Penang
i) Interview Question
1) When was the business founded? The business is founded on 29 November 1969
2) Who are the key founders? Key founders is Loh’s Family
3) What prompted/motivated the founders to start this business? I am not sure what was the motive of Loh’s family to start this business. I asked the top management, they are also not sure about it. But the possibility is about the island.
4) What are the main products or services provided? Hospitality and the room service
5) Who are the customers? (e.g. Age group, income-level, education-level, etc.) Our major customers are from corporate businessmen and private agent groups - about 70% come from businessmen 20% from private agents and 10% from F.I.T
6) What is the business’ annual revenue figure? Gained about 9 mil last year
7) What is the current estimated number of customers during peak season and off-peak season ? Non-peak season around 60% to 70%. Peak season will be 99% or even 100% occupied.
8) How many branch offices/stores do you have? Actually we only have one branch. Actually among all the family members, they have a lot of hotels and factories in China and other country. But in Penang is only one. Sometimes people think that we are merged with other coordinator.
9) How many number of employees do you have for this business?We have about 79 employees including admins and top management. 50% of our employees are foreigners and another 50% are local.
10) Can you provide us a brief history of your business and its most recent developments?( accomplished change in past 3-5 years )
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I’m not really sure about the history even my top manager is not really sure about how they founded the hotel. The main propose why the hotel can stand for long is because of the strategic location.
11) Do you have many competitors? Who are they? Who are your top 3 competitors and what made them so special when compare to this business? Our main competitors are Bayview Hotel, Cititel Hotel and Hotel Malaysia. We have given good services to them and let them feel more valuable for this service (hospitality). 12) How big is your market share as well as your top competitors? Market share is small because 80% of hotels are located in Georgetown. We have roughly 200 to 300 hotels in Penang.
13) Is the business constantly facing strong competition from other competitors? What strategies have they used to compete with you? Mainly is the facilities and the hospitality. Doing online service and Wi-Fi service are provided in every room. We got a swimming pool in our hotel which can counted as main factor of our strategies. 14) How much capital is required to start this business? Any specialized field of knowledge needed to run this business? More than 5 mil because of the facilities and all the setups. 15) Generally, do you feel it is easy or hard to enter this market? Why? What obstacles they may face when they enter to this market? In Penang, you can start a hotel business but there will be a risk because there are lot of competitor. New businesses must be dare to take the challenge and be smart. Before entering to this business, businesses need to do more survey about the market to fulfill the needs.
16) How do you compete with your competitors i.e. what strategies do you employ to divert customers away from your competitors in term of pricing, advertising, product variety and promotion? Provide good service to the customers. Facilities in the room, online promotion on our own website.
ii)Contact Details of Interviewee
Name: Mohd Fadzil
Position: Hotel Manager
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Email: hm@hotelcontinental.com.my
Contact Number: 016-4180183
Website: www.hotelcontinental.com.my
Facebook: www.facebook.com/hotelcontipg
ii) Accommodation and Facilities
Superior Room Deluxe Room
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Super Deluxe Room Executive Suite
Coffee House Reception Counter
Swimming Pool Lift Lobby
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Decoration- Indoor Water Fountain Hotel View
iii) Competitors
Cititel Hotel Bayview Hotel
Hotel Malaysia
B. The 5 Elements Hotel KLPRINCIPLES OF ECONOMICS [ECN30205]
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i) Interview Questions
1. When was the business founded?Founded in 1973 but started a new management in 2008
2. Who are the key founders?Malaysian Chinese businessman. Currently,Tan Sri Lim’s daughter is in-charge of the business.
3. What prompted/motivated the founders to start this business?Because of property management
4. What are the main products or services provided?Hospitality services
5. Who are the customers? (E.g. Age group, income-level, education level, etc.)Mostly are Malaysians (family). Also tourists from Singapore & Indonesia. Customers with middle income (RM5-10K)
6. What is the business’ annual revenue figure?Around RM 3 million (hotel only) . But last 4 months in 2015, the businesses experienced a bad drop.
7. What is the current estimated number of customers during peak season and off-peak season?Peak season : 60% -70 %. (4000 people)Off-peak season : can go as low as 30% (2500-3000 people)
8. How many branch offices/stores do you have (if applicable)?1 branch only
9. How much number of employees do you have for this business?30 workers (administrative, front desk, café, maintenance, housekeeping). Mostly are foreign workers with permit.
10. Can you provide us a brief history of your business and its most recent developments? (Accomplished change in past 3-5 years)- Changed to new management in 2008.- Started direct marketing- Modern way of marketing (online marketing-40%) –Agoda- By agents (30%) –tourists from China & Indonesia
11. Do you have many competitors? Who are they? Who are your top 3 competitors and what made them so special when compare to this business?Many competitors.Top competitors are Geo Hotel, Swiss Hotel, Ancasa Hotel Pricing, good services and rooms and also PR(human relations)
12. How big is your market share as well as your top competitors?PRINCIPLES OF ECONOMICS [ECN30205]
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Quite equivalent: Everyone is having the same situation (40% of capacity during the month)
13. Is the business constantly facing strong competition from others competitors? What strategies have they used to compete with you?Yes. Pricing, marketing strategy(online) Other business got 60% from online bookings while The 5 Elements Hotel has only 30%.
14. How much capital is required to start this business? What, if any, specialized field of knowledge do you need to run this business?Buildings only: RM100 millionLand: RM150-200 millionTo renovate, cost around 20-30 million
15. Generally, do you feel it is easy or hard to enter this market? Why? What obstacles they may face when they enter to this market?Very hard as there are around 200 hotels (competitors) around Chinatown- Less tourists coming to Malaysia, demand drops so bad. Especially last year around 15K(Europe economy, Sabah, MH). Tourists in Thailand and Bali are also dropping.- Market small (suppliers more, demand less)
16. How do you compete with your competitors i.e. what strategies do you employ to divert customers away from your competitors in term of pricing, advertising, product variety and promotion? How successful do the business are?Promotion through online such as buy 3 free 1 night, flexible date (e.g: in June)
17. Are your pricing decisions strongly affected by your competitors? Why or why not?Yes. Very strong because there are too many competitors.
ii) Contact Details of Interviewee
Name: Frankie Ng
Position: Hotel Manager
Email: frankie@the5elementshotel.com.my
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Contact Number: 012-7169280
Website: www.the5elementshotel.com.myFacebook: www.facebook.com/the5elementskl
iii) Accommodation and Facilities
Standard single Superior twin
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Deluxe Queen Metal Suite
Earth Suite Water Suite
Fire suite Wood Suite
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Entrance Reception Counter
Waiting Area Lift Lobby
Restaurant Decoration- Indoor Water Fountain
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Decorations inside the hotel area Hotel View
iv) CompetitorsPRINCIPLES OF ECONOMICS [ECN30205]
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Swiss Inn Kuala Lumpur Geo Hotel
Ancasa Hotel
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REFERENCES
Agoda.com: Smarter Hotel Booking. (n.d.). Retrieved May 21, 2015, from http://www.agoda.com/
AnCasa Hotel and Spa. (n.d.). Retrieved May 21, 2015, from http://www.ancasahotelkualalumpur.com/
Bayview Hotel Georgetown, Penang. (n.d.). Retrieved May 22, 2015, from
http://www.bayviewhotels.com/georgetown/index.aspx?page=home
Cititel Penang. (n.d.). Retrieved May 21, 2015, from http://www.cititelpenang.com/default-en.html
Frank, R., & Bernanke, B. (2013). Principles of economics (5th ed.). New York, NY: McGraw-Hill/Irwin.
Geo Hotel Kuala Lumpur. (n.d.). Retrieved May 21, 2015, from http://www.geohotelkl.com/
Hotel Continental | Penang, Malaysia. (n.d.). Retrieved May 21, 2015, from
http://www.hotelcontinental.com.my
Hotel Malaysia Penang. (n.d.). Retrieved May 22, 2015, from http://www.hotelmalaysia.com.my/
Swiss-Inn Kuala Lumpur. (n.d.). Retrieved May 21, 2015, from http://www.swissgarden.com/hotels/sikl/
The 5 Elements Hotel KL. (n.d.). Retrieved May 22, 2015, from http://www.the5elementshotel.com.my
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