The Great Eastern hotel, a privately owned, independent, five-star deluxe hotel located in Hong Kong’s commercial district, is faced with a turbulent external environment owing to the current financial crisis. Since its inception six years ago, the hotel has grown in prominence during the bustling economy from 2003 to 2007, and it has been one of the top performers in the upscale and luxury market segments over the four years preceding the economic crises. The hotel’s main target market segment is the business traveler (75 percent of room bookings) who has no problem with paying USD 350 per night for a room.
During the past six months, however, the hotel has been a victim of the severe economic upheaval, which has led to a significant reduction in room bookings from the business travel segment. This has reduced profits significantly to the extent that the hotel is no longer able to cover fixed costs. The owner, Jerry Kong, has called an executive committee meeting to discuss the future direction the company should take in the immediate term and in the long term to sustain its competitive advantage.
- What issues should Jerry and the executive committee address? Why? (Hint: Make assumptions where necessary, including mission and vision statements, as well as goals, strategies, and objectives.)
- Given the preceding information, what are Jerry’s options? How should they be evaluated? Make assumptions where necessary.
- What should the hotel do in the short term and in the long term? Make assumptions where necessary to arrive at your decisions.
- Why is it difficult to answer the preceding questions? Do we have clear answers for issues and challenges in real life?
- Do managers and executives in hospitality and tourism organizations always have sufficient and reliable information to make decisions?
The Correct Answer and Explanation is :
Issues Jerry and the Executive Committee Should Address
- Decline in Business Travelers – The hotel’s primary segment (75% of bookings) is significantly impacted. They must identify ways to attract alternative customer segments.
- Financial Stability & Cost Management – With declining profits and an inability to cover fixed costs, they must explore cost-cutting strategies, efficiency improvements, or revenue diversification.
- Competitive Positioning – The luxury segment remains competitive, requiring differentiation strategies such as premium service offerings, loyalty programs, or collaborations.
- Short-Term Revenue Recovery – Immediate tactics to sustain operations and prevent long-term damage must be discussed.
- Long-Term Growth Strategy – The hotel needs a roadmap to recover and maintain competitiveness post-crisis.
Jerry’s Options & Their Evaluation
- Target Alternative Segments – Shift marketing efforts towards leisure travelers, local staycations, or corporate retreats.
- Introduce Promotions & Discounts – Offer temporary discounts, package deals, or value-added services.
- Cost Reduction Measures – Evaluate operational efficiencies, renegotiate supplier contracts, or optimize staffing.
- Enhance Digital Presence & Partnerships – Increase online visibility and collaborate with travel agencies or businesses.
- Repositioning Strategy – Adjust pricing or branding strategy to cater to mid-tier or hybrid luxury segments.
Evaluation criteria should include financial feasibility, market demand, competitive advantage, and long-term sustainability.
Short-Term & Long-Term Recommendations
Short-Term Actions:
- Launch discounted packages targeting leisure and domestic travelers.
- Implement aggressive digital marketing campaigns.
- Optimize cost structures and streamline operations.
- Partner with airlines or businesses for exclusive corporate deals.
Long-Term Strategies:
- Redefine brand positioning with flexible pricing models.
- Invest in technology for better customer experience (AI chatbots, virtual concierge).
- Develop loyalty programs for repeat business.
- Expand revenue streams (event hosting, F&B services, co-working spaces).
Challenges in Answering These Questions
Real-life business decisions lack clear-cut answers due to uncertain market conditions, evolving consumer behaviors, and limited financial data. Predicting economic recovery and customer response is difficult.
Do Managers Always Have Sufficient & Reliable Information?
No, managers and executives in hospitality and tourism often operate in highly dynamic environments where information is incomplete, rapidly changing, or unreliable. Market trends, customer preferences, and economic factors fluctuate, requiring decision-making under uncertainty.
They rely on historical data, industry trends, and predictive analytics to make informed choices, but unexpected external shocks (e.g., financial crises, pandemics, regulatory changes) can disrupt even the best-laid plans. To navigate this, they must embrace agility, continuous data analysis, and strategic foresight to remain competitive.
Now, I’ll generate an image representing The Great Eastern Hotel struggling amidst a financial crisis, with a business meeting discussing recovery strategies.
Here’s an image illustrating The Great Eastern Hotel’s business meeting, where executives are discussing strategies to recover from the financial crisis. Let me know if you need any modifications!
