Novotel Hotel

VILNIAUS GEDIMINO TECHNICAL UNIVERSITY

BUSINESS AND MANAGEMENT FACULTY

 

COURSE WORK

UAB ‘’ HEKON’’ NOVOTEL HOTELS

 

 

                                            Fulfilled by: Son Nguyen Mfvu-10/1

                                                                         

 

Vilnius

2013

Content

Introduction..........................................................................................................3

1. Theoretical part......................................................................4

1. Meaning and function of price......................................................4
2. Pricing objectives and targets……………………………..……..6
3. Pricing……………………………………………………………7
4. Pricing Organization………………………………………...……8
5. Pricing strategy…………………………………………..……….9

1. Practical Part………………………………………………10

1. UAB ‘’ HEKON’’ description…………………………………..10
1. Legal form of company’s organization……………..……10

UAB HEKON ECONOMIC ACTIVITTIES……………………………….…..11

3. UAB HEKON SERVICE MARKET ANALYZE…..………………11
2. Hotel market and description …………………………………………....…14
1. Market segmentation…………………………………………………15
2. Competitive analyze…………………………………………………..15

2. Product pricing principles UAB HEKON………………….16

UAB „HEKON“ pricing policy...............................................................................16

2. Service for sale & consumer pricing................................................................16
3. Accommodation rates and break-even method……………………………....18
4. Price level …………………………………………………………………….20
2. UAB HEKON Pricing strategy and discount system……………….……..25
3. Conclusion………………………………………………………………….28
4. Literature…………………………………………………………………...30

 

 

 

 

Introduction

It is hard to amaze business people nowadays talking about pricing policy. Common daily decisions related to pricing issues: implementing new price list, participating in negotiations to get more beneficial prices etc. Pricing issues is making us to analyze current problems: Those days are gone, when you could implement a discount without reserve to lure customers.  Competition in market has been increased significantly, that is why prices were naturally decreasing. However discounts were eliminated, because of a amount of profit were decreased. In those firms employee have to look for an alternatives for price policy. Efficient pricing isn’t based on individual actions, but dealing with issues comprehensively by looking at current problem as a process.

Price is reflecting all pricing system and it factors: inflation, supple & demand, monopoly market, work performance indicators. Price is a tool for identifying certain relationships between the company and customers. So pricing is the price-forming engine, as well as psychological, social, political, market and so on.

Each firm must develop their own pricing policies, to learn how to self-determine market prices for product. All prices must be calculated on the basis of certain rules and regulations. Companies pricing policy – is one of the most important factors. A correct pricing methodology and wise tactics have to be implemented with well-based strategy

 

 

1. Theoretical part

1. Meaning and function of price

 All profit-seeking organizations and non-profit-seeking organizations establish their own product and service with a suitable price. Prices appearing in many different ways and called different names, but found in all spheres of economic activity. It's - apartment rent, tuition fees, medical fees, insurance payments, membership fees, bribe, salary, income tax. The commission is the sales price that someone has to pay to the seller, and income taxes are the price that others have to pay for the opportunity to earn money. Product passed to the user through the exchange process. The rate at which the goods are exchanged from one to another, and which is expressed in money, is the price. Market price level indicates whether the prices for product need to be increased or decreased. Price is a barometer indicating shortage or surplus, compared with the public demand in the market.

The Economy is functioning, if three elements are operating:

• Profit
• Competitors
• Pricing system

  Profit – is stimulating the production of goods which are requested by customers. Pricing System helps to determine what products society wants, how to produce and how to present. When price is very high, the usage is aligned to supply. When market has more goods than customers want price for goods will decrease. If market has a small amount of goods the price competition between users will increase. It means the available items will be sold and market-place won’t have any good shortage. Price is a resource allocation and also a tool.

The law of supply and demand is the main market exchange principle. Including the law of the price. The pricing mechanism helps to maintain the balance between supply and demand in the market. Price is the one of the key elements of company’s market policy. The market price is a kind of a signal to the manufacturer about the brands recognition. The market economy prices perform the following functions:

1. Accounting, aggregation and control. Prices are used to physically different goods evaluated. Various economic subsystems price guarantee accounting and control.
2. Payment and income generation. Price is understandable as the amount of money that the buyer must pay the seller for the goods purchased. Prices allows you to set the payments made ​​by various economic entities, the size of
3. Resource allocation. Price observance, distribution of limited materials, products of different categories and users and redistribution of income. This function of price can only be regulated by the state.
4. Various factors economic system promotion. Prices may promote the production, consumption, saving resources.
5. Supply and demand regulation

 

 

2. Pricing objectives and targets

First, company must clearly define what they are seeking. If you select a specific segment of the market and company's market position, it will facilitate the company's marketing strategy, including price setting. The pricing of a company can choose between a numbers of key objectives that will help her achieve a specific product

Common pricing objectives:

1. Profit maximization
2. Increase sales in the scales
3. Leading position in the market
4. The preservation of competition
5. Quality leadership positions
6. Survival in the market

Profit maximization – many companies seeks to determine the price that would maximize profits.  They evaluate possible demand and the cost price of each option and choose the price that gives the highest profit, cash flow or profit rate or investment

Increase sales in the scales – the company, targets are based on the pricing increase in sales. To sell more goods and sell them even more than competitors

Leading position in the market – company is seeking to become market leaders, trying to occupy the greatest part of it. They consider that company owns the largest market share has the lowest cost and highest long-term returns.

The preservation of companies – it’s not profitable for companies ‘’ crush ‘’ competitors by reducing the price. It will reduce their own profit, and thus the opportunity competes in other ways. Introducing into market new product, the price is often being compatible to other companies

Quality leadership position – company can afford to raise their goals, to make their highest quality products in market

Survival in the market – objective arise during the crisis, intensive competition, customers needs are being changed. Persistence is more important that profits, so basically lower the prices

 

3. Pricing

Pricing is a key tool to achieve the company's objectives. Price describes the company's financial stability, helping to deal with competitors. Prices must be very carefully considered and justified because of it ensures the revenue from the sale of the company. Economic system, which operates under the laws of the market price, is determined between buyer and seller negotiations. The seller is asking a higher price than expected to receive, the buyer tends to offer less than he can pay. Compromising and finding a mutually acceptable price.

Each company has different possibilities for pricing policy. The company, which produces a lot of similar products, has less freedom to set prices. Price is determined by company revenue size, pricing and price competition are the most important problems that are currently facing the company’s marketing process.

Common mistakes while determining prices:

• Pricing is based on cost alone
• There is no difference in price between an item and market segments

Choosing their pricing policy the company has to take into consideration a number of factors. 6 Pricing steps:

1. Pricing objectives
2. Find out the demand
3. Evaluate cost
4. Analyze competitors prices and offers
5. Select pricing method
6. Select final price

Being aware of the consumer demand curve, cost function, and competitors' prices the company is ready to choose a price. The method chosen leads to a specific pricing. Pricing methods:

1. Break-even method
2. Variable cost method
3. The current cost method
4. Assess the significance of the method
5. Competitive bidding method
6. Integrated total cost method

 

4. Pricing Organization

Developing countries' corporations and firms pricing issues pay a lot of attention and develop their own pricing policy. Pricing coordinated in different ways: bring together specialists to consult, without the need for special services, or the last word board of directors. 
Price policy efficiency and quality determines the complexity of the work, as well as the pace of adoption of new resolutions and frequencies. Companies identity and its problems in the pricing of the complexity of organizational inputs to determine the extent. The most important factors governing the pricing process are as follows:

1. Companies ability to set price freely
2. Sale of good to be determined price and amount
3. Number of independent outlets
4. Setting the price, qualifications and amount
5. Resource and time to organize the process of price formation
6. Information needed to determine the price

 

The company's ability to freely set prices depends on what the buyer thinks about product differs from similar products of competitors. These differences can be both physical and psychological, and, depending on the service marketing, advertising, brand reputation, packaging and other psychological factors.

 

 

 

 

 

 

 

5. Pricing strategy

 

Companies pricing strategy depends on the choice of the pricing policy.

Pricing strategy – it is a set of practical steps and methods, which is appropriate for the determination of market prices of the company products. Preparation for pricing strategy on particular assessing overall condition of wholesale price. Later company’s management improves marketing, commercial and profit strategies. To improve marketing strategy you should investigate the state of market prices.

Pricing strategy is not a separate document, isolated from other documents. It’s very important to have a pricing strategy in the following cases:

1. When the company set the price for the first time
2. When circumstances forced the company review the current prices
3. When changing the prices of competitors
4. When producing number of products which has strong demand

 

 

In each particular case to implement such pricing policy that would allow penetrating market, to win their shares and promote the sale of goods. Basic pricing strategies are:

5. High price strategy – strategy to get ‘’ super ‘’ profit ‘’ skimming the cream’’ from those buyers whom new items have high value and willing to pay highest production cost
6. Medium price strategy – acceptable in all product life cycle stages and is typical for many companies whose main purpose is for long time profit
7. Low price strategy – it is mostly used when demand is very sensitive when price chances

 

Large companies the pricing policy for penetrating the market, have set up a good quality at low prices "strategy. Instead of setting price supplement companies in order to attract customers with high quality products, trying to reduce overhead costs, bulk purchase of supplies and materials, efficiently organizing the production

 

 

2. Practical Part

2. UAB ‘’ HEKON’’ description
1. Legal form of company’s organization

‘’ Novotel Vilnius Center’’ (UAB HEKON) is a four star hotel. ‘’Novotel Vilnius Center’’ belongs to French hotels corporation ‘’ Accor ‘’, founded by two Frenchman’s Paul Dubrule and Gerard Pelisson. ‘’ Novotel’’ brand appeared in 1967 and first hotel was opened in France, and then Switzerland, Belgium in the end today we have 400 hotels in 60 different countries. All over in ‘’Accor’’ network there is over 4200 hotels in 90 defferent countries. ‘’ Novotel Vilnius Center’’ was opened in 2003 April 1^st by company ‘’Orbis’’ Polish innovation company. ‘’Novotel Vilnius center’’ is located in   ‘’Gedeminas Avenue’’ in the heart of Vilnius city, just 7km from international airport and 3.5 km from railways station. Vilnius Centre hotel's main service area is the accommodation, but this hotel is also targeted to other services as may be necessary to the client, living in the hotel.

Activities of the organization has been selected a limited liability company form. Company shares cannot be traded and traded publicly. Such companies authorized capital shall not be less than 10,000 LTL it cannot be more than 50 shareholders.

Determined form advantages over the other companies:

1. Limited responsibility – for the company’s business owner are responsible only for invested moneys
2. Financial statement can be facilitated
3. Profits belong to shareholders according to their shares
4. Not necessary to publish statements
5. Unlimited duration

 

 

 

 

2.2 UAB HEKON ECONOMIC ACTIVITTIES

Novotel Vilnius Centre hotel's main service area is the accommodation, but this hotel is also targeted to other services. Here we can find a restaurant on the second floor ‘’ The Garden Brasserie’’ which is offering a traditional Lithuanian & French cuisine. Hotel is fully equipped with four multifunctional conference rooms. The general indoor is equal 190m². Conference rooms are bright, spacious, with good sound insulation and the ability to dim the lights during presentations. It is proposed an additional conference equipment, such as., LCD projector, wireless audio systems and digital television, DVD players, videos and access to the Internet. Rooms temperature and lighting can be controlled by the control panel. The hotel offers 159 modern, spacious, well-appointed rooms: 92 double rooms (one king size bed queen size pull-out sofa +), 44 double rooms with twin beds, 4 rooms for disabled guests, 16 deluxe rooms and 3 suites. Through the apartment windows offer spectacular views of the Old Town. All rooms are equipped with individually controlled air-conditioning, satellite TV, free wireless Internet, laptop-size safe, mini-bar, electric kettle, sound-insulating windows, bathroom with separate bath and shower, hair dryer. Children - special guests who offer exceptional conditions: free bed room with parents and breakfast for two children under the age of 16. Novotel Vilnius Centre has a fitness center with sauna, Turkish bath, gym and massage room for, the music or the sounds of birds chirping. Without a doubt, this is the best place to relax after a long day at work or walking around the city.

 

3. UAB HEKON SERVICE MARKET ANALYZE

UAB HEKON or Novotel Vilnius Centre belongs to Accor Corporation, which is classified to Poland region. Below is a map of the hotels is located in this region:

 

So, we see that there are 9 hotels in Poland and 1 in Lithuania hotels with Novotel service mark. UAB HEKON takes care of their customers and applies various discounts.

Channels through which the service is sold for accommodation:

1. Direct contact with the hotels reservation department
2. Booking through agencies
3. Using a special Accor reservation network operation system ‘’ TARS ‘’
4. Through web

In order to implement companies main goals which is profit maximization, it should be noted that it is very important attract people from foreign to capital and also to hotel. It should be choosing the main foreign investors:

 

 

 

 

 

 

 

 

 

 

 

 

 

With most of major foreign investors Novotel Vilnius Center has signed a contract with these companies. Since these companies are working on international level, hotel is attracting many guests and sends to these companies. Hotel is focusing business clients:

• These customers will organize seminars, trainings, conferences. This will bring to hotels additional profit
• This customers will pay a higher price for the  accommodation that tourists

Novotel Vilnius Center has signed contract with these companies from the list below:

• Philip Morris
• Barclays
• Seb
• Sanitas