NHONG HOTEL BUSINESS PROPOSAL

Prepared for Business Communication Course International University, Ho Chi Minh City, Vietnam

Prepared by Tran Thi My Hanh Tran Ngoc Hien Ngo Le My Ngan Truong Duc Nguyen Lai Nguyen Bao Quynh Nguyen Hoang Quynh Phan Thi Thu Thao Le Thi Thuy Phuong

December 24, 2012

MEMORANDUM DATE: TO: FORM: SUBJECT: December 24, 2012. Mr. Nguyen Huu Khoa, Lecturer Group BC7 NHONG HOTEL BUSINESS PROPOSAL

We are pleased to summit to you the business proposal for Nhong Hotel. We are seeking for an investment of seven and a half billions Vietnam Dong to start this business. We believe that our business can start to make profit in less than three years time. At the beginning, we want to service the demand of the noon nap for the officers working in District 1, specifically in four office buildings: Diamond Plaza, Kumho Asiana Plaza, Vincom Center and Metropolitan Building. Our mission is to bring the high quality facilities and services to customers naps. Moreover, our business aims to create a happy environment for customers to come, share and enjoy our service. Having all these missions in heart, we are trying to become the number one hotel system specializing in serving short naps in Vietnam within six year. Our business proposal also includes details about problem statement, literatire review, company information, methodology, marketing strategy and some financial analysis. For more information, please feel free to contact us via email at nhonghotel@gmail.com, via phone at 08.38369551. Sincerely yours,

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EXECUTIVE SUMMARY Nhong Hotel is the pioneer hotel chain following the new beautiful hospitality concept of accommodation for guests to take short naps. This concept has been applied successfully and become a trend in many countries like Japan, China, ect. Similar to its sister and brother, Nhong offers a number of extremely small rooms (called capsules or cabins) with an aim to provide affordable and basic place. Opportunities In order to have a deep understanding and best preparation, we already studied on and analyzed current market situation, market trend and customer insights through primary research on customer satisfaction and numerous previous research on hospitality industry in both Vietnam and overseas. From the results, there is a high demand for this kind of place from officers and backpacking travellers in the city. Also, Nhong gets high competitive advantages: pioneer catching the new trend, differentiating experiences, low cost, and response. How to talk to target customer We have a specific marketing communication strategy of mixing chosen effective tactics from both above-the-line and below-the-line based on each phase to maximize communication effects and minimize the costs. Why now We believe that this is the right time to open Nhong Hotel as there is no similar accommodation offering similar services for some reasons. The living standard is increasing and people now are more caring about health, especially in food and rest regime. In this modern and busy life, officers have a high demand for a comfortable place to take rests at noon but they do not have any support. So this is the time to be a pioneer, a trend-setter in Vietnam. Finance and prospect

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The estimated initial capital for establishing Nhong Hotel is seven and a half billions Vietnam dongs. This number counts for modern and high-end facilities, good location and well-trained staff to offer the best experiences to customers through our convenient and attractive services. Although the cost is quite high, the risk is low and the return-on-investment rate is also high as the pay-back period is nearly three years. Thus, the profitability of Nhong Hotel is very promising. In conclusion, Nhong Hotel promises to bring both social and economic benefits to all parties. The future power of prominent position and high profitability make Nhong Hotel is just worth to invest on.

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TABLE OF CONTENTS MEMORANDUM ................................................................................................................................ ii EXECUTIVE SUMMARY .................................................................................................................. iii TABLE OF CONTENTS ...................................................................................................................... v LIST OF ILLUSTRATIONS .............................................................................................................. vii CHAPTER 1: INTRODUCTION ......................................................................................................... 1 1. Background and Rationale ........................................................................................................ 1 2. Problem Statement .................................................................................................................... 1 3. Significance ............................................................................................................................... 2 4. Objectives .................................................................................................................................. 2 5. Research Questions ................................................................................................................... 3 6. Scope and Limitation ................................................................................................................ 3 CHAPTER 2: THE REVIEW OF RELEVANT LITERATURE ......................................................... 5 1. Concept Review ........................................................................................................................ 5 2. Literature Review for Market Research Customer Satisfaction ............................................ 7 CHAPTER 3: COMPANY INFORMATION .................................................................................... 12 1. Company Name Logo Slogan ........................................................................................... 12 2. Vision and Mission ................................................................................................................. 13 3. Core Values ............................................................................................................................. 13 4. Initial Capital ........................................................................................................................... 13 5. Target Market .......................................................................................................................... 14 6. Marketing Mix ........................................................................................................................ 15 7. Competitive Advantages ......................................................................................................... 21 8. Investors Interest .................................................................................................................... 23 v

CHAPTER 04: RESEARCH METHODOLOGY .............................................................................. 27 1. Research Approach ................................................................................................................. 27 2. Research Design ...................................................................................................................... 27 3. Sampling Plan ......................................................................................................................... 28 4. Data Collection Method .......................................................................................................... 29 REFERENCES .................................................................................................................................... 32 APPENDIX 1 SWOT ANALYSIS .................................................................................................. 35 APPENDIX 2 RESULTS FROM MARKET RESEARCH ............................................................. 37

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LIST OF ILLUSTRATIONS Figure 1: Five Dimensions of Service Quality Figure 2: Company name, logo and slogan of Nhong Hotel Figure 3: Facilities inside a capsule Figure 4: Intended location for Nhong Hotel (125/37 Ly Tu Trong Street, District 1, HCMC) Figure 5: Map of neighborhood area Figure 6: Panels and Print advertisement for launch phase Figure 7: Website and Facebook page of Hong Hotel Figure 8: Daily-consumed services Figure 9: Cash-flow chart Figure 10: Triangular research approach Figure 11: Process of data collection Figure 12: Income level in District 1 Figure 13: Affordable price range among target customers Figure 14: Extra services needed by customers Table 1: Initial capital (First-year estimation) Table 2: Revenue estimation for first three years Table 3: SWOT Analysis vii

CHAPTER 1: INTRODUCTION

1. Background and Rationale

Vietnam has a potentially-developing economy and is known as an Asian Dragon. In recent years, the increase of Gross Domestic Product has been at about seven and a half percent per year in average (MB Capital, 2012). Additionally, according to City Group, in 2050, Vietnam is predicted to become the fifth country having the rapid economic growth with the foreseen GDP is five thousand billions USD (Business Insider, 2011).

Ho Chi Minh City always plays an important role in the economic development of the whole country. In 2012, this city obtains a ten-percent growth in GDP, about one time and a half greater than Vietnam as a whole; and the GDP per capita is also as high as 3,600 USD. It is reported that over a half of number of businesses in Vietnam is located in Ho Chi Minh City and Hanoi, which means the quantity of officers in recent years has shown a significant upward trend. Although the number of businesses has been dramatically increasing, the area for office buildings remains the same. Therefore, it does not ensure sufficient space for officers activities, especially resting.

2. Problem Statement

The working condition is very important, it can help guarantee for workers health and productivity so far. The standard of living is increasing along with the development of economy; people care not only about mental but also physical well-beings. In modern life, people, especially officers, are facing mostly with health problems. To adapt with the fast life and an overloaded working life as it is, officer should have good preparation to improve their health more often. Resting gives a hand in

improving the officers' health. Busy life does not allow officers to take rests at home but in their offices. So, does it ensure good health for officers?

Owning to these problems, providing a place for officers to take rests at noon becomes the most concern concurrently. Nhong Hotel, a capsule hotel system, can bring officers the most modern hotel for taking short nap combined with extra services such as lunch, drink, and entertainments. Nhong aims at providing the first and also the best service system with high quality and convenience, as well as becoming companions of officers to bring the best health for them.

3. Significance

Office is not a suitable place to rest between two work-shifts because of some difficulties such as lack of space, lack of privacy, and no comfortable beds to lie on. Nhong Hotel provides customers with qualified and affordable places to take a rest along with other extra services such as massaging, lunch serving... just nearby officers workplace, only five minutes to reach Nhong Hotel. This is the place for them to rest and to reduce their stresses after long hour of working. Thanks for that, Nhong Hotel not only contributes a higher standard live for officers but also help to improve their working efficiency to be more effective. Therefore, Nhong contributes to the improvement of both peoples healthy and wealthy. Besides that, backpacking travelers can choose Nhong as a mini hotel whenever they need.

Furthermore, Nhong is a very interesting place for active and explorative people, who want to experience interesting feeling in a pupal-chamber shaped room at Nhong.

4. Objectives

The research aims to find out the best way to offer a service that receives the most appreciation from customers in the context of Nhong Hotel. Specifically, 2

To find out which factors affect customer satisfaction in hospitality industry, particularly in the context of Nhong Hotel in Ho Chi Minh City;

To find out which price range is the most suitable to target customers of Nhong Hotel in Ho Chi Minh City;

To find out which extra services our target customers need;

Hopefully, the research can help us provide a sufficient set of facilities to set up a point-of-parity with other indirect competitors in the market. Furthermore, it also acts as a guide for us in choosing which factors to focus for our accommodation services. Based on research findings about which factors affect customer satisfaction, we will prioritize our limited resources in the development of those factors and enhance customer experience with our service.

5. Research Questions

Our research aims to answer the following three research questions:

Which factors affect customer satisfaction in the context of capsule hotel? Which price range is the most suitable to officers and backpacking travelers (target customers of Nhong Hotel)?

Which extra services or facilities do customers need?

6. Scopes and Limitation

Because Nhong is just on the initial phase of launch, our research is only targeted at officers in District 1 and backpacking travelers only. Therefore, there are some limitations in our research. Despite pupalchamber shaped have been launch in foreign countries; this kind of business is still brand new in Viet

Nam market. Hence, we do not have sufficient experience to desire the most effective research. Moreover, time and budget constraint will also put us off conducting survey with a large sample size. Thus, the result cannot be generalized to the whole target customers, especially when we will expand our business later on.

CHAPTER 2: THE REVIEW OF RELEVANT LITERATURE

1. Concept Review

Company Mission is the unique purpose that sets a company apart from others of its type and identifies the scope of its operations in product, market, and technology terms (Pearce II & Robinson, 2009, p.25). Vision statement is a statement that presents a firms strategic intent designed to focus the energies and resources of the company on achieving a desirable future (Pearce II & Robinson, 2009, p.37).

Competitive Advantage is defined as the philosophy of choosing only those competitive arenas where victories are clearly achievable (South, 1981). Michael Porter stated that, in general, there are only two basic competitive advantages a firm may possess, cost advantage or differentiation advantage (Porter, 1985).

Differentiation Strategy Strategies dependent on differentiation are designed to appeal to customers with a special sensitivity for a particular product attribute. By stressing the attribute above other product qualities, the firm attempts to build customer loyalty (Pearce II & Robinson, 2009, p.204)

Integrated marketing communications (IMC) involves coordinating the various promotional elements and other marketing activities that communicate with a firms customers. The American Association of Advertising Agencies defines IMC as a concept of marketing communications planning that recognizes the added value of a comprehensive plan that evaluates the strategic roles of a variety of communication disciplines - for example, general advertising, direct marketing, sales promotion, and public relations- and combines these disciplines to provide clarity, consistency, and maximum communications impact. (Belch, 2003, p. 9)

Logo refers to a means to indicate origin, ownership or association (Keller, 2007). Slogan is defined as a short phrase to give descriptive or persuasive information about brand (Keller, 2007).

Low-cost Strategy involves the firm winning market share by appealing to cost-conscious or pricesensitive customers. This is achieved by having the lowest prices in the target market segment, or at least the lowest price to value ratio (price compared to what customers receive) (Porter, 1980).

Marketing Mix refers to a unique blend of product, distribution (place), promotion, and pricing strategies (the four Ps) designed to produce mutually satisfying exchangers with a target market (Lamb, Hair & McDaniel, 2005, p.16).

Promotional Mix Promotion has been defined as the coordination of all seller-initiated efforts to set up channels of information and persuasion in order to sell goods and services or promote an idea. While implicit communication occurs through the various elements of the marketing mix, most of an organizations communications with the marketplace take place as part of a carefully planned and controlled promotional program. The basic tools used to accomplish an organizations communication objectives are often referred to as the promotional mix (Belch & Belch, 2003)

SWOT Analysis SWOT is an acronym for the internal Strengths and Weaknesses of a firm, and the environmental Opportunities and Threats facing that firm. SWOT analysis is a technique through which manager create a quick overview of a companys strategic situation (Pearce II & Robinson, 2009, p.159).

Opportunity a major favorable situation in a firms environment Threat a major unfavorable situation in a firms environment

Strength a resource advantage relative to competitors and the needs of the market a firm servers or expects to serve

Weakness a limitation or deficiency in one or more resources or competencies relative to competitors that impedes

Target Customer (or Target Market) is defined as a group of people or organizations for which an organization designs, implements, and maintains a marketing mix intended to meet the needs of that group, resulting in mutually satisfying exchangers (Lamb, Hair & McDaniel, 2005, p.200).

2. Literature Review for Market Research Customer Satisfaction

Customer satisfaction has drawn a lot of attention from marketing practitioners since 1970s, as there have been many studies taken in this field (Churchill & Surprenant, 1982; Jones & Suh, 2000). However, we do not have a particular standard definition for the term customer satisfaction but several ones proposed by various scholars. The focus of some research is on the disconfirmation of expectations theory that explains the customer is satisfied when he or she feels that the products performance is equal to or more than what was expected (confirmation). But if perceived performance falls short of his/her expectations (disconfirmation), then the customer is dissatisfied (Oliver, 1980). Expectations here are defined as beliefs about service delivery that serve as standards or reference points against which performance is judged (Zeithaml, Bitner & Gremler, 2006). According to Ziethaml and Bitner, satisfaction is the customers evaluation of a product/service in terms of whether the product/service has met the customers requirements and expectations. Satisfaction occurs when the consumers expectations go beyond after using the product or services.

Another model of customer satisfaction defines it as a complete evaluation of accumulated purchase and consumption experience, which reflects a comparison between the sacrifice experienced and the 7

perceived rewards (Iglesias & Guillen, 2004). The sacrifice here includes monetary costs of purchasing the service as well as intangible costs such as the time and energy expended to visit the coffee shop or to queue in line waiting for the drink. Thus, the premium that the customer has to pay at a high-price coffee chain is traded off against the perceived rewards he/she obtains. Thus, the level of satisfaction increases if the rewards are greater compared with the sacrifice.

In general, there are two ways of viewing satisfaction: (Ziethaml & Bitner, 2006)

Service encounter satisfaction: Satisfaction or dissatisfaction occurs with specific service encounters

Overall satisfaction: This kind of satisfaction is based on multiple encounters or experiences.

Differences and Relationship between Customer Satisfaction and Service Quality

There is much confusion regarding the concepts of customer satisfaction and service quality; and the literature on services has made a distinction between service quality and customer satisfaction (Bitner, 1990; Parasuraman, Zeithaml & Berry, 1988). Parasuraman, Zeithaml and Berry (1988) proposed that service quality involves an attitude and is an evaluation over several service encounters over time.

On the other hand, Oliver (1981) followed current thinking and defined satisfaction as a psychological state resulting when the emotion surrounding disconfirmed expectations is coupled with the consumers prior feelings about the consumption experience. Oliver further differentiated customer satisfaction from service quality in his definition of attitude as the consumers relatively enduring affective orientation for a product, store, or process while satisfaction is the emotional reaction following a disconfirmation experience which acts on the base attitude level and is consumption-specific. Hence,

service quality is more stable and satisfaction is situationally oriented (Oliver, 1981; Parasuraman et al., 1988).

There are also many debates about whether customer satisfaction is the antecedent of service quality or the result of service quality. Initially, scholars stated that satisfaction is an antecedent of service quality because in order to reach an overall attitude (service quality) requires an accumulation of satisfactory encounters (Bolton & Drew, 1991). However, other scholars opposed to that view and proposed that service quality is the antecedent of customer satisfaction (Cronin & Taylor, 1992; Rust & Oliver, 1994; Swan & Bowers, 1998). Research by Cronin & Taylor (1992) showed that service quality has a significant effect on customer satisfaction. According to Zeithaml et al. (2006), customer satisfaction is a broader concept than service quality, which focuses specifically on dimensions of service. Service quality is just one component of the customer satisfaction concept. It is also influenced by customers perceptions of product quality, and price, personal factors (such as the emotional state of the customer) and uncontrollable situational factors (weather conditions).

The relationship between expectation, perceived service quality and customers satisfaction have been investigated in a number of researches. They found that, there is very strong relationship between service quality and customer satisfaction (Parasuraman et al., 1985; 1988). The higher level of perceived service quality results in increased customer satisfaction (Jain & Gupta, 2004).

Measurement of Customer Satisfaction and Service Quality

Several theories of measuring customer satisfaction have been proposed by scholars but there is no commonly agreed method. Among the most well-known are the confirmation-disconfirmation approach, the performance-only approach and the overall satisfaction approach.

The confirmation-disconfirmation approach compares the expectations of a user of a product or service with what he actually experienced (Yuksel & Rimmington, 1998).

The performance-only approach measures transactional-specific satisfaction (Nicholls, Gilbert & Roslow, 1998). A method widely reported in research of the performance-only approach is the customer satisfaction survey. This instrument assesses satisfaction after a service encounter, using measures of service quality and customer satisfaction.

The SERVQUAL framework developed by Parasuraman et al. in 1988 is a method of evaluating service quality for service industries and came from research which suggests that customer satisfaction is based on multiple factors rather than one factor. Parasuraman et al. (1988) came up with five dimensions used to measure service quality - tangibles, reliability, responsiveness, assurance and empathy. The SERVQUAL survey is used all over the world in many industries and is widely regarded as a reliable method of measuring service quality, which in turn leads to a measurement of customer satisfaction.

SERVQUAL Theoretical Framework

Parasunaman et al. (1988) suggested that service quality can be meassured by five dimensions: tangibles, reliability, responsiveness, assurance and empathy.

Tangibles - This dimension, which is defined as the physical appearance of facilities, equipment, staff, and written materials. Tangibles are used by firms to convey image and signal quality (Zeithaml et al., 2006).

Reliability - Reliability is defined as the ability to perform the promised service dependably and accurately or delivering on its promises (Zeithaml et al., 2006, p. 117). 10

Responsiveness - Responsiveness is the willingness to help customers and provide prompt service (Zeithaml et al., 2006, p. 117).

Assurance - Assurance is defined as the employees knowledge and courtesy and the service providers ability to inspire trust and confidence. (Zeithaml et al., 2006, p. 119).

Empathy - Empathy is defined as the caring, individualized attention the firm provides its customer (Zeithaml et al., 2006, p. 120). This is the ability used to provide customized services mostly by small firms to win over larger companies. Empathy

Many small companies use this ability to provide customized services as a competitive advantage over the larger firms. This dimension is also more suitable in industries where building relationships with customers ensures the firms survival as opposed to transaction marketing (Andaleeb & Conway, 2006).

Figure 1: Five Dimensions of Service Quality. Reproduced from: Parasunaman et al. (1988).

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CHAPTER 3: COMPANY INFORMATION

1. Company Name Logo Slogan

Figure 2: Company name, logo and slogan of Nhong Hotel

a. Company name Because the hotel rooms have the architecture form similar to capsules, company name Nhong is the Vietnamese term for capsule. It is also a way to remind customer about the special shape of hotel rooms, which can bring a brand-new experience. Hopefully, the translation can make the name easy and familiar for our Vietnamese customers to call and remember.

b. Slogan Your naps, we care. The slogan helps transform our mission to the customers that Nhong Hotel wants to be the number one hotel chain in caring naps for customers. Moreover, this can help customers understand that we start the business not only for profit but also for customers benefits (customers health).

c. Logo In Vietnamese, Nhong also means pupa. Our logo in inspired from image of a butterfly breaking out of its pupa to illustration our vision to transform the initial business idea to become a popular hotel model in the future. 12

2. Vision and Mission

Company vision: Nhong Hotel strives to bring a new trend in taking short naps into Vietnam and become a professional hotel chain in Vietnam.

Mission statement: Nhong Hotel will bring customers the most convenient places for their nap with a high quality facilities and services in order to meet requirements in the dynamic life and fast-paced environment of modern life. Each serving staff of Nhong Hotel will try their best to ensure our customers nap.

3. Core Values

Professional Passion Caring Efficiency Work-life balance Customer-oriented

4. Initial Capital

To start up this business, our company needs a capital of approximately 7.3 billion VND. The table below shows cost breakdown for the first year.

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Detail Rental cost Wage Repair and maintenance Facilities Materials

Per month (VND) 40,000,000 38,500,000 5,000,000

Total 480,000,000 462,000,000 60,000,000 5,500,000

60,000,000 Flyers/leaflets

720,000,000 5,000,000 50,000,000 34,000,000 7,311,000,000

Advertising

Print media Online media

TOTAL

Table 1: Initial capital (First-year estimation)

5. Target Market

Nhong Hotel is a new hotel model in Vietnam. Therefore, to minimize risks, we just serve a niche market comprised of officers and backpacking travelers. Target market can be expanded in the future when capsule hotel becomes familiar with Vietnamese people and sufficient capital is obtained.

Below are descriptions of our target market in term of demographics, geographic, psychology and behaviors.

Officers

Aging from 22

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Working mainly in four office building: Diamond Plaza, Kuhn Asiana Plaza, Vincom Center and Metropolitan Building in District 1

Average to high income (8,000,000 VND and above) Busy, easy to get stress and self-caring Benefit-sought: a tidy and affordable place to take a nap between two work-shifts

Backpacking travelers

Aging from 18 - 40 Moving continually from one city to another Active, dynamic and explorative Benefit-sought: an affordable place that can offer services like a mini hotel

6. Marketing Mix

a. Service description

Nhong Hotel is a hotel chain that offers a number of extremely small rooms (called capsules or cabins) with an aim to provide affordable and basic accommodations for guests to take short naps. The total number of capsules that Nhong Hotel operates is 100, which may be sufficient for our niche market. In noontime, Nhong Hotel is expected to run full capacity. Meanwhile, our service is expected to run half capacity (50 capsules) in other time of the day.

To make the best use of the rental area, rooms are arranged in three stories, which means a row of capsules will be put on another row; and we have three rows in total on each floor. To reach capsules on second and third floor, customers can use ladders.

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Figure 3: Facilities inside a capsule

With the dimension of 1 x 1 x 2 meters, a cabin is equipped with basic facilities such as:

Mattress Cushion Blanket Television Air-conditioner Electricity outlet Mini-table Wireless connection

b. Price

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In order to offer price variety to customers, Nhong Hotel will offer two options for service packages.

Single-use package

Intended for guest who just need a temporary accommodation (Main customers are backpacking travelers)

Price: 40.000 VND per hour (before 3 p.m.) or 30.000 VND per hour (after 3 p.m.)

Monthly package

Intended for guests who frequently use our accommodation service during a month (Main customers are officers)

Price: 750.000 VND per month (excluding extra services)

Extra service:

Lunch set (including cooked rice, food, soup and soft drink): 30,000 VND per set Massage pads: 10,000 VND per use (before 3 p.m.) or 20,000 VND for the first 2 hours + 5,000 VND for each of next hours (after 3 p.m.)

c. Location

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Figure 4: Intended location for Nhong Hotel (125/37 Ly Tu Trong Street, District 1, HCMC)

Nhong Hotel will be located 125/37 Ly Tu Trong Street, District 1, Ho Chi Minh City, a four-floor apartment in an alley on Ly To Trong Street. This location is suitable for our business because of three main reasons:

Firstly, located in an alley, where there are fewer vehicles or pedestrians, Nhong Hotel will be a quiet and comfortable place for our customers to take naps.

Secondly, rental cost of an apartment in an alley is much lower than a front-line one, which allows us to rent a four-floor apartment and have sufficient room to set up 100 capsules and other extra services as well.

Lastly, a location in the center of District 1 is the most convenient for our target customers, which is officers working in Diamond Plaza, Kumho Asiana Plaza, Vincom Center and Metropolitan Building (as shown in the map below). Moreover, it also locates near popular

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places that attract foreign visitors in Ho Chi Minh City such as Ben Thanh Market, foreign quarter in Bui Vien Street, City Theater and major shopping malls.

Figure 5: Map of neighborhood area

d. Promotion

We intend to run promotion on an IMC (Integrated Marketing Communications) basis, which includes making use most of promotional tools. Particularly, some tactics of both above-the-line (advertising) and below-the-line (interactive marketing, public relation, direct marketing and sale promotion) are comprehensively applied to gain the best communication effects. Overall, the umbrella message (or creative message) of our communications will focus on the differentiated experience that Hong Hotel can bring about.

NHONG HOTEL IS THE FIRST HOTEL FOR EXTREMELY SHORT NAPS 19

Around the launch week, we will focus mostly on advertising to create a buzz around our target customers. Advertising at this initial phase will be quite aggressive.

Print advertisement in newspaper (Tuoi Tre, Thanh Nien and some other specific ones in Ho Chi Minh city) to reach mass audiences effectively and efficiently

Panels are displayed on the side of our apartment to save costs and reach the right consumers POSM (standee, poster and leaflet): Standees and posters will be displayed in the apartment to give a brief description of our services. Leaflet will be distributed in four target office buildings (Diamond Plaza, Kuhn Asiana Plaza, Vincom Center and Metropolitan Building)

Figure 6: Panels and Print advertisement for launch phase

In the long run, we will move to and maintain only below-the-line activities to save marketing costs. In pre-launch stage, especially within 15 days before, we will send direct mail to officers in our four target office buildings to announce our upcoming services, and even promotional campaigns later on. All of these mails will be sent using MailChimp, which is a FREE direct-mail client, to save cost.

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Interactive marketing tools are also taken full advantage on our marketing communication strategy. Specifically, we will use website and Facebook as the main channel to keep in touch and communicate with our target customers by providing them all information about the hotel and its services. Moreover, upcoming sales promotions will be updated on these channels also.

Figure 7: Website and Facebook page of Nhong Hotel

Beside this tactic, online PR will also be used, along with forum seeding.

Finally, sale promotion is an indispensable tactic in hospitality business. For the launch week only, we offer 20% off for all of our services to encourage as many trials as possible. Moreover, as mentioned before, we will have special prices for frequent users with just 750.000 VND/month.

7. Competitive Advantages

Nhong Hotels competitive advantage is the unique system that we created to take advantage over our competitors. The idea is to create customer value in an efficient and sustainable way to help us survive

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in this severe competition out there on the market. Listed below are four competitive advantages that are achieved via being the pioneer, differentiation, low cost and response.

a. Advantages of being a pioneer

Firstly, Nhong Hotel had the significant advantage of being the pioneer in this type of hotel service. In other words, at the time our business officially is launched, Nhong Hotel will be the first and only company to provide this kind of service in Vietnam. Being a pioneer may result in gaining the awareness from customers and market dominance. And the explanation for this could be that we foresee the potential of this promising market; therefore as the first-mover, we can catch the emerging trend to meet the obvious demand of customers. Our service aims to be the most preferable choice whenever our target customers want the service that we provide. Customer will tend not to want to waste time looking for information about other services or avoid being disappointed when they switch to another brand of a newcomer.

b. Advantages by differentiating

In the long run, we will be outstanding even when there are new competitors entering this market by distinguishing our offering in a way that our customers perceive as adding value. We differentiate ourselves as well as our service, first by engaging customers in a new experience of taking nap. There are so many discomforts for an officer to sleep in his office, so when they are offered a place with special layout which is comfortable, private and spacious to sleep, they are receiving the added value from our service. We also manifest Nhong Hotels services through the convenience of setting the location near the center buildings and along with many extra services. Therefore, that is the way we better their life, let them experience our service and become immersed or even an active participant later on. 22

c. Advantages of low cost

In this struggling economy, everyday every one of us meets the difficulties in planning our budget. Therefore we believe that is how our service being considered attractive to customers by offering an affordable cost. As Nhong Hotels main service is just for customer who primarily wants a short nap but nothing else, so our price is not as expensive as of other hotels. We use the space effectively so the fixed cost is reduced significantly while we can accommodate more customers compared to other hotels or amenities.

d. Advantages of response

We know that we are doing business in the service sector; hence, we must keep making our customers happy every time they come to us. As we have a direct channel for customer to interact with us, we will me more flexible in responding to their ever-changing demand in our service about the design and volume. Quickness is also another strength of us; once we can achieve this, we believe that we will be a strong brand and can compete with any competitor who later on may enter this market.

8. Investors Interest

a. Social benefits

As the position of our investors, you will bring huge social benefits to a huge community. Firstly, you provide a clean and comfortable place for officers to take a nap after hard-working hours in the morning. Furthermore, travelers also have a good destination to take a rest before they continue their trips. Besides that, with facilities like TV, wireless connection and massage pads, our customers can entertain, relax and release their stress in the cabin. Generally, our services can help customers feel

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healthier and more energetic. From that, everyone would work more efficiently and play more efficiently.

b. Economic benefits

Nhong Hotel is an attractive project for investors thanks to three characteristics: high return, low risk and short payback period.

First of all, our services are daily-consumed services. It means that our services are consumed every day; therefore, the return on investment will be high.

Figure 8: Daily-consumed services

In addition to high return, investors just face low risk when investing in our project. The reason is that capsule hotel is very popular in many countries such as Japan, China and Singapore; therefore, we could learn from the previous and avoid a large amount of risk. Furthermore, hospitality is also a longlived and popular industry in Vietnam and we can easily employ qualified and highly-experienced staffs.

Hence, due to the above advantages, we could minimize the risks not only for us but also for investors.

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Year 1

Detail Main service Extra service

Estimation 150h x 26d x 12m x 40,000 50 x 26d x 12m x 30,000 200h x 26d x 12m x 40,000 65 x 26d x 12m x 30,000 200h x 26d x 12m x 40,000 65 x 26d x 12m x 30,000

Break-down 1,872,000,000

Total estimation 2,340,000,000

468,000,000 2,496,000,000 3,104,400,000 608,400,000 2,496,000,000 608,400,000 3,104,400,000

Main service Extra service

Main service Extra service

Table 2: Revenue estimation for first three years

Figure 9: Cash-flow chart

Last but not least, our project also has short payback period. As our estimation, the initial investment is over 7.3 billion VND, but revenue for the first year is 2.34 billion and for the next two years are more than 3.104 billion. Thus, investors will receive return-on-investment just starting from 2.6 years time, which is very short for the investment.

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Due to the above-mentioned benefits, we do believe that Nhong Hotel deserves to be the first and the best choice for your investment.

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CHAPTER 4: RESEARCH METHODOLOGY

1. Research Approach

In this research, both qualitative and quantitative methods, which belong to triangular approach, are applied as they are complement to each other. Between them, quantitative will be the main approach in the aim of finding out the most determinant dimensions of service quality. Firstly, we would like to use the qualitative research to explore customer interest; then based on this exploration, we continually apply the quantitative research to measure, in descriptive number, the result from the first phase. Finally, we will conduct the qualitative research again to explain the findings from the second phase, get more customer insights, and to give more appropriate suggestions.

Figure 10: Triangular research approach

2. Research Design

All three types of research: exploratory, descriptive and explanatory, are applied in order to achieve the objectives:

In exploratory study, we would review literature, search information related from different prestige sources, and conduct an in-depth interview with 5 potential customers to gain a better understanding of the research subject and the most appropriate and approachable questionnaire.

Descriptive study is the main way to collect primary data. As primary data is collected enough, we will use Statistical Package for Social Sciences (SPSS) software to process and analyze the

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data to find the answers for the question Which service dimensions will lead to higher level of customer satisfaction?. In explanatory study, we would like to use in-depth interview with 3 experts in hospitality industry to gain explanation for the findings from phase 2, descriptive study.

3. Sampling Plan

a. Target population

Nhong Hotel is a hotel chain for officers who look for a tidy and affordable place to take a nap between two work-shifts, and backpacking travelers who only want a hotel to rest temporarily in two or three hours. This research will be conducted with potential customers of Nhong Hotel. Specifically, the target population of this research is:

Officers:

Aging from 22 Working in District 1 and 3 Average to high income (above 8,000,000 VND) Busy, easy to get stress and self-caring Benefit-sought: a tidy and affordable place to take a nap between two work-shifts

Backpacking travelers:

Aging from 18 - 40 Moving continually from one city to another Active, dynamic and explorative 28

Benefit-sought: an affordable place that can offer services like a mini hotel

b. Sampling Method

Convenient sampling method, a technique that goes for the sample that is available in the light of easy access (Bryman & Bell, 2007), is an ideal non-probability sampling method that we would like to use to get the easiest way to access respondents. In this research, we cannot use a probability sampling because of the limitations in time and budget for the project.

In sampling stage, we will go to office building and foreigner quarter to conduct survey with our potential customers. Specifically,

Office building: Kumho Asiana Plaza, Diamond Plaza, Vincom center and Metropolitan Building

Foreigner quarter: Bui Vien Street, District 1, Ho Chi Minh City

In order to avoid unintentional bias, we will conduct survey at different time.

c. Sample Size

Due to the limited budget, we cannot conduct the research with a large sample size.

For pilot test, 10 potential customers will be selected to complete the questionnaire to test the understandability and meaningfulness of the questionnaire.

For final survey, 100 potential customers will be selected.

4. Data Collection Method

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a. Secondary Data

Online information about hotel in general and capsule hotel in specific from different prestige sources on the internet, previous researches, books, journals and articles written about hospitality industry will be used as secondary data.

b. Primary Data

In-depth interview and paper questionnaires methods will be applied in order to collect primary data for this research. Specifically:

In exploratory study, we will chose 5 customers for in-depth interview to get a deeper insights about service quality of hotels

In descriptive study, questionnaires will be distributed to our potential customers at four abovementioned office buildings (Kumho Asiana Plaza, Diamond Plaza, Vincom Center and Metropolitan Building) and foreigner quarter (Bui Vien Street, District 1)

In explanatory study, we apply in-depth interview method again with 3 experts in hospitality industry to obtain a better explanations for the findings obtained from descriptive study.

In general, the process of data collection can be summarized in the following chart:

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Figure 11: Process of data collection

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REFERENCES

Belch, G. E., & Belch, M. A. (2003). Advertising and promotion: An integrated marketing communications perspective. (6th ed.). USA: McGraw-Hill/Irwin. Bitner, M. J., (1990). Evaluating service encounters: the effect of physical surroundings and employee responses. Journal of Marketing, 54(April), 69-82. Bolton, R. N., & Drew, J. H. (1991). A longitudinal analysis of the impact of service changes on customer attitudes. Journal of Marketing, 55(January), 1-9. Bryman, A., & Bell, E. (2007). Business Research Methods. (2nd ed.). Oxford, UK: Oxford University Press. Business Insider. (2011, November 11). Vit nam c tc pht trin nhanh th 5 th gii vo nm 2050?. Tin Online. Retrieved from http://tinonline.info/c72a17138/thi-truong/viet-nam-co-toc-do-phattrien-nhanh-thu-5-the-gioi-vao-nam-2050.html Churchill, G. A., & Surprenant, C. (1982). An Investigation into the Determinants of Consumer Satisfaction. Journal of Marketing Research, 19(4), 491-504. Cronin, J. J., & Taylor, S. A. (1992). Measuring service quality: a re-examination and extension. Journal of Marketing, 56(3), 55-68. Iglesias, M. P., & Guillen, M. J. Y. (2004). Perceived quality and price: their impact on the satisfaction of restaurant customers. International Journal of Contemporary Hospitality Management, 16(4), 373379. Jain, S. K., & Gupta, G. (2004). Measuring Service Quality: SERVQUAL vs. SERVPERF Scales. VIKALPA, 29(2), 25-37. 32

Jones, M. A., & Suh, J. (2000). Transaction-Specific Satisfaction and Overall Satisfaction: An Empirical Analysis. Journal of Services Marketing, 14(2), 147159. Keller, K. L., (2007). Strategic Brand Management: Building, Measuring, and Managing Brand Equity. (3rd ed.). United States of America: Prentice Hall. Lamb, C. W., Hair, J. F., & McDaniel, C. (2005). Essentials of marketing. (4th ed.). United States of America: South-Western. MB Capital. (2012). Why vietnam?. Retrieved from http://www.mbcapital.com.vn/index.php?option=com_content&view=article&id=74&Itemid=2&lang= vi Nicholls, J. A., Gilbert, G. R. & Roslow, S. (1998). Parsimonious measurement of customer satisfaction with personal service and the service setting. Journal of Consumer Marketing, 15(3), 239253. Oliver, R. L., (1980). A cognitive model of the antecedents and consequences of satisfaction decisions. Journal of Marketing Research, 17(November), 460-469. Oliver, R. L., (1981). Measurement and evaluation of satisfaction process in retail settings. Journal of Retailing, 57(Fall), 25-48. Parasuraman, A., Zeithaml, V. A., & Berry, L. L. (1985). A conceptual model of service quality and its implications for future research. Journal of Marketing, 49(4), 41-50. Parasuraman, A., Zeithaml, V. A., & Berry, L. L. (1988). Reassessment of expectations as a comparison standard in measuring service quality: implications for further research. Journal of Marketing, 58(January), 111-24.

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Parasuraman, A., Zeithaml, V. A., & Berry, L. L. (1988). SERVQUAL: A multiple-item scale for measuring consumer perceptions of service quality. Journal of Retailing, 64(1), 12-37. Pearce II, J. A., & Robinson, R. B. (2009). Strategic management: Formulation, implementation, and control. (7th ed.). Singapore: McGraw-Hill/Irwin. Porter, M. E., (1980). Competitive strategy: Techniques for analyzing industries and competitors. New York, USA: The Free Press. Porter, M. E., (1985). Competitive advantage: Creating and sustaining superior performance. New York, USA: The Free Press. Rust, R. T., & Oliver, R. L. (1994). Service quality. Insights and managerial implications. Annals of Tourism Research, 21(4), 745-755. South, S. E., (1981). Competitive advantage: The cornerstone of strategic thinking. Journal of Business Strategy, 1(4), 15-25. Swan, J. E., & Bowers, M. R. (1998). Services quality and satisfaction: The process of people doing things together. Journal of Service Marketing, 12(1), 59-72. VnEconomy. (2012, November 28). Kinh t tp.hcm tng gp gn hai ln c nc. Thi bo Kinh t Vit Nam. Retrieved from http://vneconomy.vn/20121128105031908P0C9920/kinh-te-tphcm-tang-gap-ganhai-lan-ca-nuoc.htm Yuksel, A., & Rimmington, M. (1998). Customer-satisfaction mebasurement. Cornell Hotel & Restaurant Administration Quarterly, 39 (6), 60-67. Zeithaml, V. A., Bitner, M. J., & Gremler, D. D. (2006). Services marketing: integrating customer focus across the firm. (4th ed.). NY, USA: McGraw-Hill.

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APPENDIX 1 SWOT ANALYSIS

Table below shows the SWOT Analysis conducted before reaching the final decision and going into detailed planning for Nhong Hotel.

STRENGTHS The first and only one hotel follow this concept in Vietnam Build a strong brand and create a high bargaining power of suppliers Hospitality: long-lived and popular industry in Vietnam Easy to find experienced staff Offer really good service Innovative concept of convenient service: offering short stay with affordable price + many extra services Meet consumers needs Short pay-back period, high return and low risk OPPORTUNITIES There is currently no other similar service or service can replace it No threat of substitute services

WEAKNESSES High initial capital for good facilities Be a little bit far away from target buildings if customers intend to walk They could hesitate or be lazy to come

THREATS High threat of new competition as others can easily run the same business Many offices have been being changed

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 High demand of a comfortable place for a short nap from officers and backpacking travellers High opportunity to run full capacity There are many hotels applied this concept in other countries Have chances to learn from their experiences (success and failure) Can avoid the dont and build a better hotel

their structure to provide spaces for employees to take a rest during time-break Demand decreases Vietnamese are collectivism They usually have lunch together and have a long conversation during this time They dont have enough time for take a nap even though they want to

Table 3: SWOT Analysis

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APPENDIX 2 RESULTS FROM MARKET RESEARCH

A research was done to classify and estimated needs of officers while choosing a nap-service, some interesting results was found out. The first note-worthy thing is the income level. Thanks to the developing of economy, the income level of officers in District 1 had a supprised trend. There are 32.5% of employees in the low level within one million to under five million. However, the number of workers in the middle class exceeds quite far, 52.8% compared with the previous number. The second question to figure out is Which price level is suitable for you?. Although the majority of customers want cheap price, about 80 percent of customers want the price at less than 20,000 VND; there are also 69 percent who are willing pay the price from 25,000 dong to 40,000 dong a nap-hour. Finally, for the question Do you want us to provide any other services/facilities?, customers respond that, they all want a sleeping package including a mattress, blanket and a pillow; and air-conditioner. In addition, they mostly want the service to provide them Internet access and a massage solution.

The figures belows are statistical illustration for our market survey:

15% 33%
Low (from 1 million VND to less than 5 million VND) Average (from 5 million VND to 10 million VND) High (above 10 million VND)

52%

Figure 12: Income level in District 1

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90 80 70 60 50 40 30 20 10 0

80 69

32 17

Less than 20,000

From 25,000 to 40,000

From 40,000 to 50,000

Over 50,000

Figure 13: Affordable price range among target customers

100 90 80 70 60 50 40 30 20 10 0

94

89

56 47

52

Air-condiJoner

TV

Music player

Massage pad

Internet

Figure 14: Extra services needed by customers

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