Competition

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Step 4/10: Competition in the market

You are playing this game in a competition: all of the teams start with the same history. The main outlines of your tasks in running the hotel are:

• Keep the hotel financially healthy, and run it in a profitable way. This does not mean you have to go for maximum profit: you can have other targets as well, as long as you make (acceptable) profit.
• Keep it independent (no joining a big company, no selling the assets or the entire hotel etc.).

You will compete with a number of teams for customers in your city. The customers will be "divided" between the competing teams/hotels in your city. The market will develop depending on the actions of all of the hotels in their city. So a market can develop differently in one city, because all of the teams go, for instance, for price-leadership.

Basic options to have a grow in occupancy rate are:

• Lure customers away from your competitor;
• The market in your city grows by the teams' activities or it might grow by itself;
• Have a better adapted offer for the customers (better fulfilling their needs and wants).
• You have higher marks given by your coach because the explanations of your decisions are better.

Theory on market competition

A way to check the competition is by looking at three forms of competitions.

• Generic competition on time and money

How many people travel, what is the average income? What, on an average, do they spend their income on? What are the consumer's sentiments? Consumers can only spend their money - and their time -once. Try to use some realistic figures from you real local situation in your country.

• Specific competition on alternatives.

If they decide to spend their money on leisure, they can choose to stay in a hotel, a campsite, use Airbnb, stay with friends and relatives etc. Try to use some realistic figures from your real local situation.

• Selective competition with your direct competitors: so the consumers choice for a brand.

If they opt for a hotel, the other competitor offering practically the same products are the most likely competitor. The competition is now mostly based on brand and product specifications. So these are your colleague management teams and hotels in your city. Other city's do not affect your market in this simulation.

Together

As the normal economic competition rules apply to your city, you are not allowed to work too close together on prices: making price-covenants with competitors is forbidden. Creating an organization which covers the interests of several hotels or of all of the hotels (for instance, in a promotion) is allowed. This could be a DMO. Any serious cooperation could bring advantages to the partners if there was a serious ground (an agreement) and described obligations and advantages for all parties. It is important is that the customers have to have a free choice.

Secret

A lot of information on your competitors is available to be gathered freely. Some information should be kept secret not only for the sake of your hotel, but also by law. If problems arise you could accuse another hotel of an illegal action, or for that matter, get accused. Coaches could give you a fine related to (for instance) legal issues or, for that matter, bonuses.

Same choices

You might find out that some of the competitors have the same plans as you have: well, welcome to the real world: that’s life! The same goes for logos and hotel-names, though this might make things complicated for the guests. You can get some of this information from the market (at the Trade Fair during the game). You can adapt to these findings: if this concerns your hotel name and logo, this is tricky and expensive (if done do so before year 1). If it means your strategy, adapt it over slowly, otherwise customers will not understand what you stand for.

Self-defeating prophecy

Very much related to the prisoner's dilemma, we would like to explain an interesting problem in the market. As in reality, you do not know in advance what your competitors are going to aim for. So if market research shows that the market for weekends will grow, this will almost certainly happen. But if this market grows just by 5% and all of the hotels anticipate this development, there will far too many hotel rooms contracted to this market and the average occupancy rate will drop (even though the market has grown)!
This could also mean that other markets -which did not seem too interesting before- become very interesting. This situation is very realistic and means that you can react in what is called an anti-cyclical way: you are acting in the opposite way to that suggested, because you are anticipating how you think your competitors will react.

This also means that it is a good idea to keep your decisions to yourselves.

Competitions in the game

There are two competitions in the game which each run separately in any city. The first one is

• The competition on net profit, the second one is
• The competition on creativity.

All teams will automatically be participating in both of these competitions. Each year all of the hotels will be ranked on net profit and creativity and the top three will be revealed. As you will understand a competition like the one we are playing, means there can only be three teams in the top three, and the other teams will always be outside of the top three at any time. This does not mean that being outside the top three mans these teams are doing a bad job. Sticking to your strategy is the most important thing: having a high ranking on profit is just a nice topping or an extra. It is hard for you to directly influence this, keep that in mind.

→ Go! Following the e-Manual? Step 5/10 is the page Hotelname, click here

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Emerald Forest Hotel offering an emerald hotel experience! | Run your own hotel in this management simulation.