Novotel Hotel

 

3. Hotel market and description

 

Table 1. 10 Lithuania areas with hotel-type placement for 2012. Foreign visitors spent the majority of nights.

Diagram 1. Most visited place on Lithuania by foreigners.

Table below we can easily see from the statistics of 20011-2013, that the greater part of the hotel's customers are foreigners, which means that companies should actively work with foreign companies, ie develop and promote cooperation. It is the company to achieve greater employment. All of this brings a huge profit, because as mentioned earlier, corporate customers of most of the living guests.

4. Market segmentation

As market segmentation according to one attribute often doesn’t detailed, based on various characteristics. The most important feature – is geographical. Distinguishing local and foreign visitors segments. 
UAB HEKON "distinguishes market segment by demographic characteristic - the level of income, people's age and sex, occupation, education, 
To segment according to psychographic character, the company takes into account the user's personality and behavioral characteristics. 
Market segmentation, according to consumer behavior (reasons for the choice of this service, the user needs, desires, and so on.).

5. Competitive analyze

                  UAB HEKON "to assess and competitors. The analysis of competitors to exploit other weaknesses and take a position, to secure yourself the most favorable conditions. Competitors - it is not just the same company providing the UAB HEKON 'competition classification: 
Enterprise competition. Vilnius hotels to position themselves in the market, trying to meet all user needs. To achieve this goal, hotels reduce prices for services, offering a variety of promotions, packages or interesting to the user own approach advertising. Each individual chooses their hotel services, sales promotion, but the company acting in a single environment, are forced to compete. 
Hotel UAB HEKON has a number of competitors. The biggest among them: 
- SAS Hotel. Location - in the heart of Old Town. Built in 1901m. Finally renovated - 1998. Radisson Blu There is 119 in classic-style rooms, including Business Class rooms and suites. Free parking. 
- Radisson BLU. 299 rooms. Oslo offers the largest conference rooms can accommodate up to 1,000 people. Free parking.

	Number of rooms	Restaurant	Bar	Pool	Sauna	Conference room	Free parking	Mini bar	Free Wi-Fi	Sport room	All services
Novotel Vilnius Centre (4*)	159	+	+		+	+		+	+	+	7
Radisson BLU (4*)	299	+	+		+	+	+	+	+	+	8
Radisson SAS Astorija (5*)	119	+	+	+	+	+	+	+	+	+	9

Table1. Represents a comparison of the data with the ‘’NOVOTEL VILNIUS CENTER’’ and main competitors hotel ‘’ RADISON BLUE, SCANDIC, AMBERTON, CROWN PLAZA’

 

3. Product pricing principles UAB HEKON

3.1. UAB „HEKON“ pricing policy

 

Every year, the month and year set targets available, which are: 
- Employment - to increase the number of hotel rooms occupied; 
- GOP - that is to say total revenue-total cost = gain; 
- The average price of a room.

 

3.2Service for sale & consumer pricing

. Let’s calculate the price of accommodation for one day. Calculations are presented on table 1.

Nr.	Element name and price	Value, Lt.
	Variable cost	88.15
1.	Raw material	50.86
2.	Breakfast	27.65
3.	Hygiene supplies	8.69
4.	Towels	9.16
5.	Work labor	3.13
	Labor cost x average salary 1/2h x 6.25lt
	Social insurance	2.16
	Regular cost	20.89
1	Electricity	4.5
2	10 kw x 0.45lt
3	Cold water	1.69
	0.4m3 x 4.22lt
4	Hot water	5.7
	0,3 m3 x 19lt
5	Communication service	5
6	Internet service	2.12
7	Product cost	109.4
	Regular  + Variable
8	Mark-up	33.07
9	Net price	142.11
10	VAT (9% from created service)	12.78
11	Gross	152.89

Table1. We got the price for one day. It is equal 152.89LT retail price

 

In order to get profit we are adding approximately 57%:

152.89*57% = 240Lt  - unique price for one room retail price + mark up = profit

 

.

We get that one night accommodation selling to the consumer price including VAT is 152.97. Intermediaries should be assessed upon the specific weight should get product cost if the volume skonto discounts and outsourcing costs in percent difference from the list price should get relatively high, it is worth seeing if there are no suitable alternatives are available, however, because the reseller can become successful if have competitive prices. And of course, the mark-up should not be too high, again in order to be price competitive.

 

3.3Accommodation rates and break-even method

Novotel Vilnius Center one day accommodation service price calculation. Company accommodation service provides an average of 2671 times a month  
Services unit variable costs 88.15 LT / pcs. Total variable expenses - 235,448.65 / month  
BKK = 88.15 x 2671 = LT 235,448.65LT (regular cost x accommodation service avr.)

BPK=20,89*2671=55797,19 (variable cost x accommodation service avr.)

We have to set a price for one piece, so that company could reach 20% efficiency. Also we have to set break-even point and calculate.

Solution: 

Calculating the cost:

55797.19 +88.15 x2671 = 291,245.84

Calculating profit :

291245,84x 0,20 = 58249,17

Comprehensive income:

291245,84+ 58249,17= 349495,01

Knowing that BPj = PxQ 
P = BPj / Q = 349,495.01 / 2671 = 130.85

Means, if company sells this service with price 130.85 litas they will receive 58249,17 litas of pure profit and reaches what was planned. Graph of this calculation shown below. Pic. 1

 

 

 

 

Pic. 1 Break –Even analysis

 

Also we have to calculate break point:

Qnt= BPK/(P-VKK)

Qnt=55797.19/(130.85-88.15)=1306

 

BPjnt=Px(BPK/(P-VKK))

BPjnt=130.85*(55797.19/(130.85-88.15))=170890.10

If company will provide service less that 1306, it will suffer a loss. Therefore point is called break point. From this point begins to get profits, firm to cover the general cost of production, it has allowed at least for 1306, and then will return 170,890.10LT

 

 

 

3.5UAB HEKON pricing strategy and discount system

Table no. 1 are presented in all Novotel Vilnius Centre hotel the prices which, in particular, is covering all customer segments, that is, from spouses to children to businessmen. Prices vary depending on who the customer is, how he buys the service, when he buys the service, or the contracts are awarded, and so on: 
- Public rates - the rates, which are published in various websites offered directly into contact with the hotel, or simply due to the hotel without reservation. Of course, as I mentioned earlier, the price of the service is different acquisition conditions. This price range is divided into individual clients all bids and to individuals who belong to corporation Accor loyalty program called the A | Club. 
- Negotiated rates - the rates for the agents, ie, agencies or companies that sign a contract with the hotel and also the price for the partners, ie corp. other Accor hotels belonging to their employees. 
- Group rates - rates that are only applicable for group bookings (group - 8 or more rooms).

 

 

 

 

 

 

Table1. Novotel price

	2010	2011	2012
Number of guests	1259,4	1326,7	1055,3
Accommodated Lithuanian residents	528,8	531,0	394,2
Accommodated foreigners	730,6	795,7	661,1
Foreigners in %	58,0%	60,0%	62,6%

Number of guest in Hotel by year (rate in %)

 

 

4. Conclusion

1.This is one of the main company's activity and profitability regulatory elements. 
2.  It is necessary to focus on the pricing policy of the company to achieve greater operational efficiency. 
3. Prices formed thanks not only for the level of profitability, but also image. The higher the price the user point of view, it means a higher quality product. 
4. Under the law of supply-demand, higher price leads to lower demand. Therefore, the company should not raise prices too much and to keep it competitive, otherwise affects profitability. 
5. The main objectives to which the company has to take to achieve them selecting pricing strategies are: 
*Life Assurance Company; 
* profit maximization; 
* Market share increase; 
* Increasing employment. 
6. Since the company was profitable and able to compete amongst the many similar hotels and even the higher-end hotels, it can be said that the company chose the correct pricing strategy. 
7. UAB HEKON, setting its prices, the development strategies targeted to foreign companies and foreign guests, since it constitutes a major part of the hotel's clients, ie about 80%. 
8. Novotel Vilnius Centre would suggest to carry out regular market research, please follow the user needs to create new bids, especially in the off-season, so to attract an increasing number of clients. 
9. I would suggest more frequent events in the hotel, as they are an opportunity to make new contacts with potential customers

 

5.Literature

1. Bagdonas, V. Kainodara ir kontraktai. Vilnius: Technika, 2002. 39 psl.
2. www.novotel.com
3. www.wikipedia.com/ pricing_strategy
4. Sales department
5. Statistic department