Primula Parkroyal Hotel

CASE 16 TEACHING NOTES

Primula Parkroyal Hotel
Jochen Wirtz and Aliah Hanim M. Salleh1
Synopsis
Primula Parkroyal, a beach resort-cum-business hotel in Malaysia, was drawing
up its marketing plan for 2001. To be considered in this marketing plan, was how
the hotel should be re-positioned, so that it can uniquely differentiate itself in the
long term, compared to its competitors in Terengganu State. The overall
objectives, after the change in senior management in 1999, followed by the
subsequent change in government ownership in 2000, was to aggressively target
new markets and adopt cost savings measures to increase the hotels yield and
profitability. To achieve this objective, it had to decide on what marketing goals
and objectives to set for 2001, and what customer segments to target. Having a
new management reputed to be good at turning around hotels was one
advantage it had. Other favourable factors included its strategic location, a good
property and as a potentially attractive tourist destination. However, PPRs
management had to face the following challenges: training to continually improve
the quality of the services delivered, optimising room revenues through yield
management and cutting operational costs.
Teaching Objectives
This case introduces students to the importance of target marketing and
positioning, crucial elements at the strategic planning stage. The teaching
objectives of the case are:
1. To highlight the need to develop a long-term competitive differentiation

through effective service positioning;

2. To understand the need to segment markets and identify attractive market
segments to achieve targeted goals;
3. To appreciate the important aspects of managing and marketing a hotel
service business.
Discussion Questions
1

Jochen Wirtz is Associate Professor of Marketing, NUS Business School, National University of
Singapore; and. Aliah Hanim M. Salleh is Associate Professor of Marketing, Faculty of Business Management,
Universiti Kebangsaan Malaysia.
The authors acknowledge the generous support in terms of time, information and feedback on earlier
drafts of this case provided by Mr Mok Pin Chuan, General Manager of Primula Parkroyal Hotel. The authors
also thank Jasmine Ow Min Cheng for her research assistance in gathering much of the data and in the case
write-up.
The exchange rate at the time the case was written (April 2001) was US$1 = RM$3.80.

Primula Parkroyal Hotel

1. What should PPRs positioning be to differentiate it from its

competitors?
An assessment of the service offerings of competing hotels in Terengganu
(Table 1) would reveal the following advantages PPR has compared to its
competitors:

PPR is the only hotel that is both close to the town centre as well as has
a beachfront.
While the other hotels have either chalets or regular hotel rooms, PPR
has not only suites, but also deluxe and family rooms, the latter being
directly accessible to the beach.
A comparison of physical facilities and services provided among the six
hotels would show that PPR provides the widest and most
comprehensive range of services and facilities at the most competitive
rates among the six.

Based on the above analysis, it is apparent that PPR could easily establish itself
as a hotel where one could relax and have fun, but at the same time, deal with
business matters when the need arises. This is what none of the other six
competitors could promise. While Sutra Beach Resort may be able to match PPR
in terms of luxury, it is located far (38km to be exact) from the town centre.
Although Glenmarie Kenyir boosts just as much facilities and services as PPR
does, its room rates are the most expensive among all the hotels and it is also
situated furthest away from the town area. As for the other four competing hotels,
though situated in/close to town, they could not provide the luxury and the
facilities sought by the business class. PPR is thus the only hotel in Terengganu
that allows customers the best of both worlds, proximity to town and the luxury of
a business class hotel, as well as the fun of a beach resort. PPR should thus
capitalise on this and promote itself as the only holiday resort cum business hotel
in the region, selling itself on the promise of both business and leisure. Even for
leisure travellers, the proximity to the town could be exploited, allowing guests to
go for shopping, sightseeing and eating-out trips.
2. What should be its target markets for the coming year(s)? Should they
be the same for peak and off-peak seasons?
Given Terengganus main attractions of unspoilt natural landscape (beaches,
virgin tropical jungle, waterfalls) and fishing villages, which may have little
competition regionally but not internationally, it may be easier to attract regional
tourists than international tourists. This is because tourists may not be willing to
travel too far for Terengganus non-unique attractions, which may also be
available nearer to such tourists homes, and/or may be more easily accessible
than Terengganu. Moreover, the location is rather inaccessible, the local airport
being off the routes covered by major international airlines. Hence, PPR should
concentrate on attracting regional tourists instead of spending precious

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advertising dollars to reach out to potential but geographically dispersed

customers.
PPRs strategic location puts it in a favourable position to cater to both the
business and leisure segments. To be more cost effective and efficient in
reaching out to these travellers, PPR could focus on corporate accounts and
travel agents respectively. For business travellers, it should focus on corporate
accounts rather than individual business travellers since the former tend to make
room bookings in bulk. Moreover, individual business travellers may not visit the
same place frequently. This makes marketing to them more expensive.
To reach the leisure segment, especially families and groups, and even
individuals travelling alone on short trips, PPR could liase with travel agents,
which also make bulk bookings. By setting up incentive schemes such
discounted hotel stays during peak seasons or even free hotel stays during off
peak seasons for such travel agents, PPR could develop goodwill and forms long
lasting relationships with them. This would thus encourage the travel agents to
promote PPR more aggressively to travel groups or individual travellers.
Alternatively, PPR could market directly to these tourists. This option would be
more viable for the local segments. PPR could sell on free and easy packages,
comprising hotel stay and transport, which can be easily arranged. PPR should
also promote more aggressively, hotel packages bundled with attractive one-day
tours (e.g. boating/sightseeing to Kenyir Lake or Kapas Island off Marang, a river
cruise to visit the local museum or fishing villages such as in Marang) or even
two to four-day-tours (e.g., a snorkeling at Redang/Perhentian Islands to enjoy
the coral reefs/fishes in the South China Sea off Terengganu, or fishing and
jungle trekking at Lake Kenyir, to Taman Negara, Malaysias National Park with
virgin jungle, mountains, waterfalls and lakes).
As regular holidaymakers tend to be less price-conscious than budget travellers
during peak seasons, marketing efforts should be primarily targeted at regular
tourists. Some efforts should also be directed at corporate accounts that send
employees on regular leisure trips annually.
In the off peak seasons where demand is low, PPR could then turn its attention to
budget travellers with promises of a luxurious stay at affordable discounted
prices. PPR should also promote convention packages to corporations whose
reason for travelling is mainly business and would thus be less concerned with
seasonal variations in weather than holidaymakers.
3. How could PPR improve room revenue during all seasons?
In general, PPR could use the following five strategies to improve room
revenues:

Primula Parkroyal Hotel

i. encourage current guests to prolong their stay;

ii. encourage current guests to visit Terengganu and hence patronise the
hotel more often;
iii. encourage more visitors to Terengganu, and try to get them to stay at
PPR;
iv. get a higher market share of current arrivals to Terengganu, persuading
them to stay with PPR instead of other competing hotels.
v. in combination with any of the above: develop and promote attractive
discount packages to boost room sales during off-peak/monsoon
months between December and March.
To encourage current guests to prolong their stay, PPR could introduce
progressive discounted room rates. PPR should first analyse the average length
of stay per trip. Then, progressive discounts on additional room nights over and
above the average length of stay could be given to entice guests to stay longer.
For example, guests get the first three nights at regular prices, and the fourth
night at 25% discount, and every further night at 35% discount. However, this
should only be implemented during off peak seasons where there is excess room
capacity to minimise opportunity loss.
To attract tourists to the hotel more often, loyalty programmes could be
introduced. Besides the Pacific Privilege cards given to individual travellers,
guests who chalk up a certain number of room nights, or who spent over a
certain amount at the hotel could be awarded with a special VIP card that entitled
them to priority booking, a slight discount, and/or some freebies such as a free
breakfast and/or dinner, and a welcome drink during peak seasons, and heavy
discounts in addition to any other current promotions during off peak seasons.
This could not only encourage tourists to frequent the hotel, but may also shift
some demand to off peak seasons. PPR could also make use of Basss existing
Reward Partner program to encourage its customers to earn reward points for
stays in exchange for gifts or discounts on air flights. Alternatively, PPR could
offer cardholders a free night of stay with every three room-nights booked in lieu
of discounts (for off peak seasons). This may even prove more effective than
discounts as cardholders may be tempted to redeem the free stay (equivalent to
a 25% discount) and return more often. PPR could also leverage on the
resources of Basss chain of hotels and award VIP cards to even the corporate
and government segment, such as the Corporate Bonus Card, a rate program for
companies that provide 20 or more rooms nights per year; and the Government
Bonus Card, a similar rate program that is targeted at the government
departments. To further attract the corporate segment during off peak seasons,
PPR could introduce the Parkroyal Conference Planner, a program that is
already in place in other Basss chains of Parkroyal hotels, which provides
corporations with seamless assistance in their business conferences that are
held regularly in the hotel.

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To increase the number of visitors to Terengganu, PPR would have to work with
the local government to promote the place as a tourist attraction. As low tourist
arrival rates could be attributed mainly to inaccessibility and a lack of tourist
attractions, PPR should work on these two areas. For example, PPR could
arrange tour buses to pick up visitors from the international airport in Kuala
Lumpur to Terengganu, and to PPR directly. To cater to local visitors, PPR could
similarly arrange tour buses to pick them up at various points in town. PPR could
also target their marketing efforts at Singaporeans, whose stressful lifestyles
would make them welcome frequent short breaks. The hotel could either work
with travel agents or plan their own free and easy tour packages, and market
them to Singaporeans. Tour buses could be arranged to ferry visitors to and from
Terengganu directly from Singapore.
More promotion could be done to promote Terengganus myriad back to nature
wonders in terms of its tranquil inland lake (Tasik Kenyir), waterfalls, pristine
beaches and islands, river-side communities, fruit orchards, ethnic culture and
other unique attractions that would warrant tourists from afar to make a special
stop at the state. Marang Resort and Safaris, located off the main coastal road
between Kemaman and Marang village, is a case in point that manages to do
just this, in carving its own market niche. This resort managed to be ranked
among the worlds top three most unique resorts. With both beachfront and
riverine chalets, this unique resort offers custom-tailored packages for specialist
groups and vacationers seeking activity, rest and relaxation among tropical
nature.
In general, to attract tourists to stay at PPR year round, the hotel should plan
promotional activities corresponding to the various festive occasions around the
year. They could organise food and cultural festivals, day/night tours around the
state to fishing villages, etc., and offer these free of charge to tourists who stay
over at PPR for over a certain number of nights. Discounts on room rates should
be given only in off peak seasons, when there are unfilled rooms to minimise
opportunity costs. During the off peak seasons, PPR could also organise trade
shows, exhibitions, Family Days or Dinner & Dance functions for corporations or
the government departments.
PPR could also hold periodical Internet promotions to appeal to Internet users
who surf the Web to look for bargain getaways or link PPRs website to local
tourism boards web pages to generate wider publicity and exposure. In addition,
PPR could tie in with the tourism board and set up tourists information booths at
airports or ferry terminals that heavily promote PPR as the hotel to stay in when
travelling to Kuala Terengganu. PPR could also participate actively in
government-sponsored tourism campaigns such as the Visit Malaysia campaign
to further attract tourists to stay.
4. What are PPRs key challenges to achieve its target positioning and
improve room revenues?

Primula Parkroyal Hotel

To achieve its target positioning, PPRs key challenge lies in the training of its
staff to provide world-class quality services. Before the management take-over in
1996, the hotels service standards were poor despite having the facilities and
amenities appropriate of a four-star hotel. This was mostly due to the work
culture inherited from the previous management, which gave rise to poor staff
attitudes, low morale and a lack of motivation to serve. PPRs less than ideal
service standards in the past could also be attributed to its inefficient recruitment
process that resulted in high turnover rates. However, it should be recognised
that the mainly Muslim labour supply makes it difficult to recruit appropriate
servers, who may have to serve alcohol and other foods, which is against the
Muslim religion.
However this has changed with the increased emphasis on educating and
training the staffs to provide top-notch services. Due in part to the need to reduce
operating costs to boost hotel revenue; PPR faced the issue of freezing of all
new employments unless absolutely necessary. In order to balance up the
existing workforce, PPR has to face the challenge of constantly cross training its
staffs and carrying out job rotations.
Besides having to design a proper recruitment and training system, PPR too
needs to encourage and instil a customer-oriented culture among the staffs. This
is in line with its aim to provide world-class service delivery to all its guests.
Problems with room revenues is the direct result of highly fluctuating and
generally low demand for rooms, which leaves PPR with huge excess room
capacity, especially during off peak seasons. Low demand for rooms is probably
caused by Terengganu being highly inaccessible to tourists, and a generally low
awareness of Terengganus tourist attractions and unspoilt nature among
international travellers. This low demand is further worsened by seasonal
variations in weather, which exaggerated demand fluctuations between peak and
off peak periods. PPR would have to work out plans to reduce accessibility
problems, and increase promotional efforts and plan more activities during off
peak seasons to encourage tourist arrivals.
5. What actions would you recommend PPR to take over the next 12
months?
PPR should continue to stress on quality service delivery from its staff. This can
be achieved by first, being more selective in the recruitment process by hiring
applicants with a passion to serve, and who are service-oriented and ideally
already proficient in English. Employees should then be equipped with the
necessary skills for their positions by putting them on the relevant courses. To
further increase their confidence, all frontline employees should be sent for
English proficiency courses and etiquette classes. All employees should also be
inculcated an orientation towards achieving the high service standards.

Primula Parkroyal Hotel

Management should also continue to cultivate a friendly and caring corporate

culture to give staff a sense belonging and make them feel part of the
establishment. Specifically, employees should be made to feel appreciated.
Appropriate rewards schemes such as the Best employee of the month and Top
Department of the Quarter awards (which are already being done by SPHC
hotels in Malaysia) could be implemented. Furthermore, bonuses, promotions
and recognition should be given to those employees that clearly demonstrate
customer orientation, effectiveness in dealing with customers and productivity. No
other tool is as effective in unambiguously communicating to staff what is desired
from them, and instilling the wanted corporate culture. This will then translate into
higher service quality being provided by the staff.
To further improve staff morale, employees must be made to realise the
importance of each and every appointment. It is thus necessary to give them
responsibility and make them accountable for their jobs. To allow them to perform
their duties more effectively, they must also be empowered appropriately. For
example, PPR could empower frontline employees to recover service failures,
and to conduct their own quality control (rather than supervisors constantly
checking on staff). Periodic quality control of course is required, and regular
institutionalised feedback to encourage good performances and discuss areas for
improvement.
In addition to continually improve the hotels service standards through staff
training and motivation, marketing activities to improve hotel revenues and to
smooth out fluctuating demand should be planned. First, a progressive discount
scheme for room rates should be implemented during off peak seasons to
manage demand. Loyalty programmes that would entitle guests to discounts and
special benefits, as discussed previously, should be awarded to regular guests.
PPR could also market Hotel Memberships, which would entitle guests to similar
benefits as the VIP cardholders. This might encourage guests to return more
often and stay with PPR. (One such on-going scheme is the Pacific Privilege
Membership, where card members receive attractive discounts and promotional
offers for residing in the Parkroyal, Centra and Travelodge accommodations in
the Asia-Pacific region). As discussed earlier, such special privilege cards could
also be extended to the business and corporate segments. PPR could also make
use of its extensive customer data base system to provide customized services
and highly personalised holiday packages to its customers.
However, guests would not return simply for the sake of staying at the hotel.
Thus, it is also essential that activities be planned year round to attract tourists to
return. A sample calendar of events is shown in Exhibit 1.
PPR should especially plan and promote conventions to be held during off peak
seasons where there is excess room capacity, by offering attractive packages.
These could include better discounts for bulk booking of rooms, assistance in
organising and planning convention activities, free use of amenities as further

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incentives to stay with PPR, organising of Family Days and Dinner & Dance for
corporations, etc. Yield management can also be applied, especially during
school holidays when the hotel always enjoys high occupancy.
Lastly, revenues could also be increased through the hotels various F&B outlets.
These restaurants/coffee houses could offer daily buffets such as Seafood
Extravaganza, Sunset BBQ, etc., to attract both locals and tourists. These
meals could also double up as freebies that PPR can offer to its guests for
prolonging their stay, or for repeat stays. The regular distribution of flyers,
displaying of banners and maintaining attractive billboards can be used to
promote food and beverage specials to the local market.
In line with increasing the profitability of PPR, the management should also adopt
cost savings measures such as freezing all new appointments or replacements.
Staff from redundant positions can be transferred to the lean departments in
order to balance up the workforce. As the hotels total salary, wages and staff
related benefits made up of 39.2% of total hotel revenue, every effort must be
made to bring down this cost. Management should also continue to find ways on
saving electricity, fuel and general maintenance.

Primula Parkroyal Hotel

Exhibit 1: Primula Parkroyal Calendar of Events

2001 Proposed Activities
Jan

Reasons for Proposed Activities

Special Occasions

New Years Day

Hari Raya Puasa

Chinese New Year

End of Ramadan

Hulu Terengganu
Cultural Fest

May

Cultural Fest
Sports Extravaganza
Family Packages Special
Turtle Viewing Season

Terengganu Theatre
Festival
Dungun Cultural Fest
National Taekwondo
Championship
Beach carnival
Attracting families on
vacation

Convention Packages Special

Feb
Chinese New Year Special
Convention Packages Special
Mar
Malay Foods Festival
Apr
Cultural Fest

Jun
Sports Extravaganza
Family Packages Special
Cultural Fest
Fishing Competitions
Turtle Viewing Season

Marang Cultural Fest

Squid Fishing Fiesta
Boat and Marina Show
Attracting families on
vacation

Terengganu Beach
Games
Kemaman Cultural
Fest

Jul
Sports Extravaganza
Cultural Fest
Turtle Viewing Season

Primula Parkroyal Hotel

Aug
Sports Extravaganza
Cultural Fest
Turtle Viewing Season

Kenyir Kayak Regatta

Terengganu Literary
Week
International Long
Boat Race

Sep
Sports Extravaganza
Cultural Fest
Lantern Festival
Turtle Viewing Season

Beach Festival 98
Terengganu Gathering
of Performing Arts
Mid Autumn Festival

Oct
Sports Extravaganza

Cultural Gathering
Terengganu Open
Traditional Dance
Competition

Nov

Conventions Packages Special

Family Packages Special

Crafts, Arts & Textiles

Expo
Batik & Craft Festival
Attract families on
vacation

Dec
Magic Show
Convention Packages Special
Family Packages Special
Christmas Promotion
Legend:
Monsoon season

School holidays

Turtle viewing season

Peak periods

School holiday treat

for children
Christmas
Attract families on
vacation

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10

Update on what happened since June 1997

PPR was relaunched in August 1997, with the ceremony officiated by the
Malaysian Minister of Tourism and Culture. It repositioned itself as the premier
business resort hotel in Kuala Terengganu.
From January to September 1997, 70% of 300 staff resigned. Nevertheless,
recruitment was not found to be a problem. However, recognising that
maintaining high service standards is difficult without a loyal workforce, an
employee retention program became the main HRD agenda for 1998. Training
and Development was geared to be the driving force to ensure that all staff was
well versed in their respective departments standard operating procedures. A
positive working environment was seen as crucial to propagate productivity and
work satisfaction, and would create happy, motivated staff capable of delivering
good quality service.
In February 1998, PPR faced a further competitive threat with the launch of two
new hotels in its Kuala Terengganu market, though these two new hotels are
closer to the Seri Malaysia positioning. Total room capacity in Kuala Terengganu
thus increased by 30% (Yen Tin Mid-Town with 150 rooms, and Grand
Continental with 192 rooms). Both hotels were located in town. In January 1998,
Yen Tin advertised its rooms at RM69 per room with breakfast, while Permai Park
Inn launched at RM70 per room. Their entry aggravated an already high excess
capacity that become more pronounced during the slow-down of the Malaysian
economy, and a 30% devaluation of its currency against the US Dollar in
October1997.
Responding to the Asian economic crisis accelerating in the fourth quarter of
1997, government and corporate spending in four and five star hotels was cut
drastically since November 1997. PPRs major supporter, the Malaysian
government, had cancelled both rooms and banquet business from October 1997
onwards. Furthermore, the extensive international media coverage of the haze
problem, which resulted mainly from forest fires in Indonesia, severely affected
international tourist arrivals. The combined effect of the economic crisis and the
haze problem was a severe drop in 1997 room revenue.
The Great Escape package aimed at Malaysian city dwellers was introduced in
December 1997, and through heavy discounting, the hotel managed to meet its
budgeted occupancy rate of 36% during the off-peak December month. Even the
revenue from the F&B was affected when tourists held on to their dollars more
cautiously and spent less per day on F&B. As a response, costs were cut
wherever possible. This included closing the Grill restaurant and the Garden
Wing outside the peak season in 1998.
Overall, 1997 closed on a disappointing tone with a gross operating loss of
RM516, 761. The situation did not improve in 1998 when the hotel posted a loss

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11

of over RM 0.9 million in gross operating profits. However, with changes in the
hotels senior management in 1999, followed by a change in government
spending policy in April of the same year, the hotel managed to turn around and
post a gain of more than RM 28,000 in gross operating profits by the year-end.
Compared to 1998, this figure represented a turn around of almost RM 1 million.
For the next twelve months, PPRs current management would be focusing its
efforts to increase sales presence in Kuala Lumpur, Kota Bharu and Kuantan.
PPR would be targeting its marketing efforts on increasing the government
residential conference packages in these areas. Though low in yield, this market
is still able to produce volume and contribute almost 28.5% of total room nights in
year 2000. PPRs management anticipates that the government related
residential conferences would maintain or even surpass the target set for this
segment in 2001, despite the imminent slowdown in the world economy.
The management too aims to continue its efforts to penetrate into competitors
target segment while maintaining its own high levels of customer relations with
PPRs existing regular clients. This would be achieved through the aggressive
promotions of room packages to local colleges and leisure market of the East
Coast.