Global Pricing Decision

::Tune Hotels::
+ Diajeng Karunia Cinta + Nurdin Lubis + Nurkhatama Dewi

History

Tune Hotel is another brilliant idea from its co-founder Datuk Tony Fernandes, also the founder and CEO of the low cost carrier (LCC) airline Air Asia when he addressed the need for affordable, quality accommodation in Southeast Asia Tune Hotel has opened its first flagship no-frills hotel in Kuala Lumpur at Jalan Tuanku Abdul Rahman on 9 April 2007. The hotel offered 173 single and double budget, limited service rooms Tune Hotels claims to offer "a five-star sleeping experience at a one-star price", with rooms charges start from as low as RM 9.90 for customers who book in advance through the website. Tune Hotels Sdn.Bhd. is 72.19 per cent owned by Tune Ventures Sdn. Bhd. While Datuk Kalimullah Hassan and Lim Kian Onn hold 12.03 per cent each. Another 3.75 per cent is held by Tune Hotels Employee Holdings Sdn. Bhd The shareholders behind Tune Ventures are Datuk Tony Frnandes (40 per cent), Datuk Kamarudin Meranun (30 per cent), Dennis Melka (25 per cent) and Tune Strategic Inv stments Ltd (five per cent) according to press reports

The hotels
20072009

2012

2012

now 14 hotels in Malaysia 2 first hotels in Indonesia ; Bali (Kuta & Legian) 8 hotels in Indonesia Pasar Baru (Jakarta), Pekanbaru, Makassar, Surabaya, dan Palembang Bekasi, Bandung, Solo

And many others in Philippines, India, Thailand, United Kingdom

Customer Focus

Understand customers preferences and requirement & effectively use skills and resources to satisfy customers. Tune Hotels focus more on smart & budget travelers Pay only for used facilities & amenities Add-on system conserve both customer fund and environment

Pricing Strategy

New creative and innovative concept - 5-star sleeping experience with 1star price : 5-star bed, Power shower, Clean environment, 24-hour security, Central location Have the same rate structure as Air Asia which starts from RM 0.01 per night if bookings are made in advance, special promotion and non-peak period, but the price will fluctuate from time to time. The average room rates will be about RM 59.90 Tune Hotel provides the add-ons core amenities and facilities that are charged separately such as air-conditioning: RM 4.90 for five hours and RM 9.90 for 12 hours; toiletries amenities and towels for RM10 but RM5 will be refunded when the item had been returned; lockers for rent for luggage storage and wireless surfing (Wi-fi) RM 9.99 for 24 hours. Online booking

Return on investment
Quantitative objectives for marketing stated, to achieve 10% sales growth within one year of operations; to capture 15% market share in the hotel industry; to generate 48% return on sales; to generate at least 5% return on investment on $100,000 worth of investment (scribd inc 2012, p. 11)

Given Information: Final cost per room is $2.89; Cost per room is $1.50; Total Invested Capital of $100,000; No. of Room 2092 (breakeven analysis); ROI of 0.0604 or 6%. Return on sales calculation (Profit/Sales)

Investment Turnover calculation (ROI/Return on sales)

Sales calculation (Investment turnover * Invested capital) 0.1258*$100,000 = $12,583.06 No. of Room calculation (Sales/Final cost per room)

Remark: According to the final price set up, ROI of 6% has satisfied the minimum predetermined ROI of of at least 5%

Bargaining Power of Suppliers

Commercial Partners Pensonic : AC, plasma TV, ceiling fan Senses : Toileteries King Koil : Bed Nippon Paint : paint CIMB Bank : Cell phone banking

PEST ANALYSIS
POLITICAL ENVIRONMENT Investment tax allowance has been granted by the Ministry of Finance, Malaysia. Cooperative operating relations with Thailand and Indonesia.(A New Year Brings New Fortunes and Opportunity, 2005) Government incentives are given to low and moderately cost hotel businesses (Malaysian Industrial Development Authority, 2004) Government has relaxed foreign investment restrictions (Index of Economic Freedom2008 Malaysia, 2008) Politically stable country for investment and peaceful for tourism (Report: Opportunitiesin Malaysian Tourism Industry (2007-2009), 2008)

PEST ANALYSIS
ECONOMIC ENVIRONMENT

Malaysia has a heavy tourist influx which is continuously incrementing every year (Flights to Malaysia, Malaysia Flights, Malaysia Bound Flights, Malaysia,) Economic slowdown in the airplane industry is seen due to surging fuel prices andinability to keep fares low. High fares are diverting tourists. Level of personal disposable income in Malaysia is increase. (Report: Opportunities in Malaysian Tourism Industry (2007-2009), 2008) A double deduction is granted to companies that wish to operate and promote tourism overseas. Deduction is granted on advertising, marketing, market research and maintenance of sales offices. (Malaysian Industrial Development Authority, 2004) Industrial Building Allowance (IBA) grants initial 10% allowance and annual 3% allowance on constructing hotels. Generous exemptions on import and sales tariffs is granted on machinery and equipment.

PEST ANALYSIS
SOCIAL ENVIRONMENT

Budget hotels in Malaysia become over-booked and there is a need for more 500 million people in southeast Asian region, huge travelling potential Kuala Lumpur is an ideal tourist detination with eateries, cafes, branded and budget stores (Tune Hotels Budget Hotel (RM 9.99), Air Asia Hotels, in Kuala Lumpur Tourist events like Malaysias Mega Sale Carnival (5th July-1st September), International Fireworks Competition and International Climbathon attract tourists. (Welcome to Tourism Malaysias Official Site, 2008) Medical tourism is increasing people are coming for medical checkups Education tourism is on the rise international students are coming to Malaysia (Report: Opportunities in Malaysian Tourism Industry (2007-2009), 2008) Tourism Malaysia recorded 10.9 million tourist arrivals from January to June compared with 10.7 million last year. (Flights to Malaysia, Malaysia Flights, Malaysia Bound Flights, Malaysia, 2008)

PEST ANALYSIS
TECHNOLOGICAL ENVIRONMENT Malaysia has well developed telephone systems; both, landline and cellular domestic and international Radio broadcast stations AM/FM TV broadcast stations ISPs (PEST Analysis, Exercise, 2000-2008) 5 International and 15 domestic airports

Marketing Strategy
Segment identification using segmentation variables Malaysia is a simple market with easily identifiable variables available for segmentation. It has high potency cities to lodge a budget hotel, potential customer groups available demographically, psychographically and behaviourally to divide the market. Target segments Geographic : Cities - Kuala Lumpur (capital) Demographic : Life stage: young singles, young couples (honeymooners, etc.), married without children, married with little kids, retirees and senior citizens Occupation: students, trainees Income: > RM3000, RM3000-RM5000, Nationality: ASEAN (Thailand, Indonesia, Singapore, etc.)

Marketing Strategy
Positioning statement Tune Hotels is the first of its kind one star hotel with a five star lodging experience at low frills, and lowest costs among an array of budget hotels. Ideal option for those who seek a five star sleeping experience at a one star price

CHANNEL ALTERNATIVES
E-commerce has been incorporated for a brick-and-click marketing practice. Selective distribution of the service would be done through few channels. (Selective distribution, n.d.)

Tune Hotels Website : Advance bookings can be made, 3 months prior and cancellation charges apply if booking is changed 24 hours before the booked date. (Tune Hotel, n.d.) Tune Hotels Call Center : It entertains bookings via telephone from Monday to Friday 9AM-9PM. (Asia Best Value Hotels, 2008) Air Asia Partnership : Being Air Asias hotel partner, Tune Hotels reservations can be made through Air Asia offices while booking flights to KL. (AirAsias Hotel Partners, n.d.) Front-desk Reservations : Clients aware of Tune Hotels can walk in to reserve a room through easy processing. Reservation Counters at the LCC Terminal : Bookings can be made on landing at the LCC Terminal at the Tune Hotels desk. (Phuket`Gazette, online English newspaper, 2008)

Tune Hotels Service-Performance Process Map

Communications Design

A combination of message strategies, incorporating catchy taglines has been designed for Tune Hotels, using glimpses from the target markets. Taglines have been designed to hit the market with the brand name. They comply with the sparky, leisure and fun-oriented theme of the hotel.

Check-in and Tune Out Get Tune-ified Get in Tune

Thank You!