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Question 1. 1. A new hotel has been opened in Downtown USA for approximately one year. The hotel is located in the main business district of the downtown area, which is thriving and growing. Several new businesses have entered that area over the past year as regentrification occurs. The businesses range from small restaurants to specialty shops and some professional services. As a part of the regentrification program, several new condominium style homes have been incorporated. There are currently two major groups relocating into these complexes: the young professionals who have just finished college and are taking jobs in the area (a part of the millennial generation) and a group of baby boomers who have recently entered or are about to enter into retirement. Both groups have moved into the area for the lifestyle provided through the local businesses.

As a part of the hotel amenities, they have offered a variety of activities for their guests. The main amenities that they have offered over this past year include: professional massage packages, paddle boating/kayaking on the river, spa packages, and aerobics classes. Each has specific pricing and usage rates. Management has observed that while hotel occupancy is high, amenity utilization is only around 45%. They seek to increase usage either by creating bundles for hotel guests or developing programs for non-hotel residents.

Management desires to maintain a 25% profit margin on bundled amenities and 40% profit on community programs. They seek guidance on pricing strategies, target markets, promotional campaigns, brand positioning, and overall brand image considerations. Specific focus is on bundling three amenities into a profitable package, developing packages for community use with higher profit margins, and designing promotional strategies suitable for both hotel guests and external customers.

Paper For Above instruction

The hospitality industry continuously seeks innovative strategies to enhance revenue streams and optimize service utilization. In this context, developing and pricing amenity bundles, targeting local community members, and creating effective promotional campaigns are crucial. This paper explores these aspects in detail, emphasizing strategic pricing, market segmentation, branding, and promotional initiatives.

Bundled Pricing Program for Hotel Amenities

To address the hotel's goal of increasing amenity usage among guests, a strategic bundled pricing approach can be implemented. I propose creating a package that combines three popular amenities: the professional massage, paddle boating/kayaking, and aerobics classes. These choices balance relaxation and active engagement, appealing to both young professionals and retirees.

Determining the optimal price for this bundle requires analyzing the costs, desired profit margin, and customer price sensitivity. Assume the average prices and costs: the massage is priced at $60, paddle boating at $25 first hour plus additional fees, and aerobics at $35 per session. Their respective profit margins are approximately 40%, 35%, and 40%. The hotel aims for a 25% profit margin on the bundle.

Calculating the combined variable costs and margins, the total cost for these amenities averages around $50. To achieve a 25% profit margin, the final bundle price should be set at approximately $67.50. This is derived by dividing the total cost by (1 - desired profit margin):

Price = Total Cost / (1 - 0.25) = $50 / 0.75 = $66.67

Rounding to a consumer-friendly figure, the bundle would be priced at $67.50. This price ensures a profit margin of 25% while offering value to guests. However, if customer price elasticity is high at 1.3, indicating sensitivity to price changes, a lower price point could stimulate higher demand, potentially raising overall revenue. Reducing the bundle price to around $60 could increase utilization beyond 45%, compensating for lower margins per unit through increased volume.

Developing Packages for Non-Hotel Residents

To attract non-hotel community members, the hotel should offer packages with targeted appeal. The primary market segments include local professionals, retirees, and health-conscious individuals seeking wellness activities. Offering a combination of spa packages, paddle boating, and aerobics aligns with these interests.

To achieve a 40% profit margin, the pricing must incorporate additional costs such as marketing and administrative expenses. Given the average variable cost of $50 for the package, the wholesale price should be approximately $67 (adding 30% markup for wholesalers), and the retail price should be set to maintain a 25% markup on the selling price. Consequently, final customer pricing could be around $85—moderately higher to offset the added profit margin and costs.

The concern with high price sensitivity (elasticity >1) is that premium pricing could deter participation. To mitigate this, offering tiered packages or promotional discounts during initial launch phases can attract a broader audience while communicating the value and luxury of the amenities.

Promotional Campaign for Non-Hotel Guests

An effective promotional campaign should utilize a multi-platform approach. Social media platforms such as Facebook and Instagram can target local residents through geo-targeted ads, emphasizing the wellness and lifestyle benefits. Collaborations with local magazines and community centers can expand outreach. Email marketing campaigns should highlight introductory offers and package deals.

Additionally, hosting open house events showcasing amenities, with live demonstrations and special trial offers, can generate immediate interest. Partnering with local influencers and health bloggers can further enhance credibility and visibility, especially within community wellness groups.

Brand Image and Equity Considerations

Management should ensure that the new amenity packages reinforce the hotel’s branding as a premium lifestyle destination. Overpromoting affordability at the expense of perceived quality could dilute brand equity. Maintaining consistent quality standards across amenities and emphasizing luxury, relaxation, and community engagement will preserve brand integrity. Transparency about pricing and amenities’ benefits is essential to sustain trust and customer loyalty.

Slogan and Brand Integration

The proposed slogan is: "Luxury Living, Local Experiences." This phrase encapsulates the hotel’s positioning as a provider of upscale lifestyle amenities tailored for both guests and locals. It reinforces the brand’s commitment to offering exclusive, community-oriented experiences that elevate everyday living. The slogan should be integrated into all marketing materials, including signage, digital campaigns, and collateral, to create a cohesive brand message. It also aligns with the hotel’s overall branding strategy focusing on quality, community, and lifestyle enhancement.

Conclusion

Innovative pricing strategies, targeted marketing, and brand consistency are vital for the hotel to successfully increase amenity utilization and attract local customers. Balancing profit goals with customer price sensitivity requires careful analysis and creative promotional efforts. A strategic approach that combines value, exclusivity, and community engagement will foster sustained growth and reinforce the hotel’s position as a lifestyle-centric destination.

References

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