Step 4/10: Competition in the market
You are playing this game in a competition: all of the teams start with the same history. The main outlines of your tasks in running the hotel are:
- Keep the hotel financially healthy, and run it in a profitable way. This does not mean you have to go for maximum profit: you can have other targets as well, as long as you make (acceptable) profit.
- Keep it independent (not joining a big hotel chain, no selling the assets, or even the entire hotel etc.).
You will compete with a number of teams for customers. The customers will make use of your hotel or one of the competing hotels in your city. The market will develop depending on the actions of all of the hotels in their city.
Basic options to have a growth in occupancy rate are:
- Attract customers from your competitors;
- The market in your city grows by the teams' activities or it might grow by itself;
- Have a better adapted offer for the customers (better fulfilling their needs and wants).
- You have higher marks given by your coach because the explanations of your decisions are better.
Theory on market competition
A way to check the competition is by looking at three types of competition:
- Generic competition (on time and money)
How many people travel, what is the average income? How, on average, do they spend their income? What are the consumers' sentiments? Consumers can only spend their money - and their time - once. Try to use some realistic figures from you real local situation in your country.
- Specific competition (on alternatives).
If consumers decide to spend their money on leisure, they can choose to stay in a hotel, a campsite, use Airbnb, stay with friends and relatives etc. Try to use some realistic figures from your real local situation.
- Selective competition (with your direct competitors)
If consumers choose for a hotel, other competitors offering practically the same product are the most likely competitor. The competition is now mostly based on brand and product specifications.
As the normal economic competition rules apply to your city, you are not allowed to work too close together on prices: making price-covenants with competitors is forbidden. Creating an organization which covers the interests of several hotels or of all of the hotels (for instance, in a promotion) is allowed. This could be a DMO. Any serious cooperation could bring advantages to the partners if there was a serious ground (an agreement) and described obligations and advantages for all parties.
It is important that customers have a free choice.
A lot of information on your competitors is freely available. Some information should be kept secret not only for the sake of your hotel, but also by law. If problems arise you could accuse another hotel of an illegal action, or for that matter, get accused. Coaches could give you a fine related to (for instance) legal issues or, for that matter, bonuses.
You might find out that some of the competitors have the same plans as you have: well, welcome to the real world: that’s life! The same goes for logos and hotel names, although this might make things complicated for the consumer. You can get some of this information from the market (at the Trade Fair during the game). You can adapt to these findings: if this concerns your hotel name and logo, this is tricky and expensive. If it concerns your strategy, adapt it slowly, otherwise customers won't understand the shift.
As in reality, you do not know in advance what your competitors are up to. Market research may show that the weekends market will grow. But if this market grows just by 5% and all of the hotels in the city anticipate this development, there will be far too many hotel rooms offered in this market and thus the average occupancy rate will drop (even though the market has grown)!
This could also mean that other markets - which did not seem too interesting before - become very interesting.
Competitions in the game
There are two competitions in the game in each city:
All teams will automatically be participating in both of these competitions. Each year, all of the hotels will be ranked on their net profit and creativity. A rank outside of the Top 3 does not mean that your team is doing a bad job. Sticking to your strategy is the most important thing: having a high rank on profit is just a nice extra.
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