Assignment 3: The Future of Hotels in Kuta and Legian

This article is a summary of the assignment in our third field research destination: Bali, Indonesia. It is an introduction in the assignment and a brief summary of our ideas of advice to large organisations in Kuta and Legian. For a more detailed insight, links are given in each section which lead you to separate articles about each topic.

The assignment in Bali, our last destination, was building on the foundation and knowledge we had from the previous assignments. We were supposed to come up with advice for local stakeholders (micro & small or medium and large) on how to obtain, maintain or improve a competitive position in their area. Thus, we could use the knowledge about destination competitiveness from Sri Lanka and apply it to the context of Bali  (see here).

For the third destination, the TDM Program had changed all group compilations, to mix it up a little and give us all both, a fresh start and a new challenge. My group, Janet from Germany, Kryschja from the Netherlands and I, was assigned to look at large organisations in the research area of Kuta and Legian, by far the most touristic and most crowded area of Bali. (see here)

map bali

In recent years, the hotel landscape of Kuta and Legian has experienced a significant increase, which has led to fierce competition amongst stakeholders. The objective of this report is to advice medium and large hotels in the area on how to obtain a stronger competitive position.

Thus, the report aims to answer the following research question:

How can the MLOs in Kuta and Legian obtain, improve or maintain a strong competitive position in the future?”

The findings are based on primary research in the destination. The current situation was investigated to define possible issues or gaps between supply and demand.

To forecast likely future development, we considered drivers of changes which may have an impact on the area. Global tourism trends are highly diverse and we needed to place them into the context of the destination to determine whether they are relevant for Bali or not (see here). Based on this, the preferred future for MLOs is defined as a strong competitive position.

Our report serves as a practical guide for medium and large hotels in Kuta and Legian on how to obtain a stronger competitive position. We decided to focus solely on hotels for several reasons. First, the majority of large organisations in the area are hotels, whereas most restaurants, spas, shops etc. are rather small, locally owned businesses. Second, we excluded any chain business from our consideration for reasons of inflexibility and global management. We found that our advice would be rather difficult to implement in chain brands. As a result, we focused on hotels, since any large restaurant or shop in Kuta and Legian belongs to a large national or international chain.

karteresearch.png

Our research map

We made, however,  a clear distinction between Newcomers and Established hotels. Newcomers were defined as businesses which are either going to enter the market in the near future or have been operating for less than three years. Established hotels, on the other hand, have been in the area for three years or longer.

The current situation in the area is highly competitive among hotels, due to an imbalance between supply and demand.

We suggest that determining relevant tourism trends helps to be successful in the future. The marketing mix and SWOT analysis serve as tools to analyse the market and the business’ position.

Research showed that three elements play a central role in competitive positioning, which we define as the preferred future for hotels. The mechanism of competitiveness consists of socio-economic prosperity, the hotel’s productivity and the overall tourist satisfaction.

mechanism

The Mechanism of Competitiveness

For a stronger competitive position, two strategies of four phases are presented to Newcomers and Established hotels, respectively.

For Newcomers, the phases are

(1) Re-orientation, (2) Identification, (3) Implementation, and (4) Establishment.

For Established, the phases are

(1) Re- orientation, (2) Identification, (3) Reaction, and (4) Innovation.

mechanism 2

 

For both stakeholder groups the purpose of the re-orientation phase is to provide the hotel with a clear understanding of the market and future expectations.

The identification phase is to determine the current position by analysing own strengths and weaknesses and benchmarking competitors.

Phase three and four differ in terms of tasks for both categories.

New businesses are generally more flexible in changing their strategy or implementing new facilities, which may provide them with a stronger competitive position. An established position in the area is yet be obtained in most cases, which will come eventually, if the hotel is successful.

Established hotels, on the other hand, are rather advised to react on identified weaknesses from the previous phase and utilise available facilities rather than creating new ones. This is more cost effective and can be realized in a shorter period of time. New facilities or services are only worthwhile to implement if they are innovative enough to create originality for the hotel.

A stronger competitive position of each individual stakeholder in the area will eventually enhance the image of the destination Bali itself. This has a stronger effect yet, if the stakeholders put more emphasis on working together and create a stakeholder network.

 

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