Case Study Description of Kimpton Hotels - Setting Prices on Priceline (A)
In June 2008, the Kimpton Hotels' area director of revenue management (director) for Washington, D.C. was trying to process the most recent customer information report from Priceline.com (Priceline). In an attempt to improve revenues during periods of low occupancy at the hotel, the director had recently been using Priceline's "name your own price" bidding format. While using this sales channel had limited success, the director was wondering the best way to maximize the revenue coming from Priceline without cannibalizing existing sales or tarnishing the Kimpton brand. His challenge was to create a pricing strategy that would determine the optimal posted price for rooms in the Washington, D. C. hotel as well as the number of rooms that should be provided to Priceline.
Authors :: Chris K. Anderson, John G. Wilson, Joel Read
Swot Analysis of "Kimpton Hotels - Setting Prices on Priceline (A)" written by Chris K. Anderson, John G. Wilson, Joel Read includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Priceline Kimpton facing as an external strategic factors. Some of the topics covered in Kimpton Hotels - Setting Prices on Priceline (A) case study are - Strategic Management Strategies, and Technology & Operations.
Some of the macro environment factors that can be used to understand the Kimpton Hotels - Setting Prices on Priceline (A) casestudy better are - – increasing energy prices, increasing household debt because of falling income levels, customer relationship management is fast transforming because of increasing concerns over data privacy, challanges to central banks by blockchain based private currencies, there is backlash against globalization, increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion,
banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing, etc
Introduction to SWOT Analysis of Kimpton Hotels - Setting Prices on Priceline (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Kimpton Hotels - Setting Prices on Priceline (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Priceline Kimpton, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Priceline Kimpton operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Kimpton Hotels - Setting Prices on Priceline (A) can be done for the following purposes –
1. Strategic planning using facts provided in Kimpton Hotels - Setting Prices on Priceline (A) case study
2. Improving business portfolio management of Priceline Kimpton
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Priceline Kimpton
Strengths Kimpton Hotels - Setting Prices on Priceline (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Priceline Kimpton in Kimpton Hotels - Setting Prices on Priceline (A) Harvard Business Review case study are -
Ability to lead change in Technology & Operations field
– Priceline Kimpton is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Priceline Kimpton in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– Priceline Kimpton has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Priceline Kimpton has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Strong track record of project management
– Priceline Kimpton is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– Priceline Kimpton has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Kimpton Hotels - Setting Prices on Priceline (A) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Analytics focus
– Priceline Kimpton is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Chris K. Anderson, John G. Wilson, Joel Read can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Low bargaining power of suppliers
– Suppliers of Priceline Kimpton in the sector have low bargaining power. Kimpton Hotels - Setting Prices on Priceline (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Priceline Kimpton to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Priceline Kimpton digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Priceline Kimpton has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Learning organization
- Priceline Kimpton is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Priceline Kimpton is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Kimpton Hotels - Setting Prices on Priceline (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Priceline Kimpton has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Kimpton Hotels - Setting Prices on Priceline (A) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Diverse revenue streams
– Priceline Kimpton is present in almost all the verticals within the industry. This has provided firm in Kimpton Hotels - Setting Prices on Priceline (A) case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Organizational Resilience of Priceline Kimpton
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Priceline Kimpton does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Innovation driven organization
– Priceline Kimpton is one of the most innovative firm in sector. Manager in Kimpton Hotels - Setting Prices on Priceline (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses Kimpton Hotels - Setting Prices on Priceline (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Kimpton Hotels - Setting Prices on Priceline (A) are -
High bargaining power of channel partners
– Because of the regulatory requirements, Chris K. Anderson, John G. Wilson, Joel Read suggests that, Priceline Kimpton is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Need for greater diversity
– Priceline Kimpton has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Kimpton Hotels - Setting Prices on Priceline (A), in the dynamic environment Priceline Kimpton has struggled to respond to the nimble upstart competition. Priceline Kimpton has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Interest costs
– Compare to the competition, Priceline Kimpton has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Low market penetration in new markets
– Outside its home market of Priceline Kimpton, firm in the HBR case study Kimpton Hotels - Setting Prices on Priceline (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High cash cycle compare to competitors
Priceline Kimpton has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Priceline Kimpton is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Kimpton Hotels - Setting Prices on Priceline (A) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Lack of clear differentiation of Priceline Kimpton products
– To increase the profitability and margins on the products, Priceline Kimpton needs to provide more differentiated products than what it is currently offering in the marketplace.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Kimpton Hotels - Setting Prices on Priceline (A), is just above the industry average. Priceline Kimpton needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Priceline Kimpton supply chain. Even after few cautionary changes mentioned in the HBR case study - Kimpton Hotels - Setting Prices on Priceline (A), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Priceline Kimpton vulnerable to further global disruptions in South East Asia.
High operating costs
– Compare to the competitors, firm in the HBR case study Kimpton Hotels - Setting Prices on Priceline (A) has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Priceline Kimpton 's lucrative customers.
Opportunities Kimpton Hotels - Setting Prices on Priceline (A) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Kimpton Hotels - Setting Prices on Priceline (A) are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Priceline Kimpton can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Kimpton Hotels - Setting Prices on Priceline (A), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Manufacturing automation
– Priceline Kimpton can use the latest technology developments to improve its manufacturing and designing process in Technology & Operations segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Priceline Kimpton to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Priceline Kimpton to hire the very best people irrespective of their geographical location.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Priceline Kimpton is facing challenges because of the dominance of functional experts in the organization. Kimpton Hotels - Setting Prices on Priceline (A) case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Priceline Kimpton in the consumer business. Now Priceline Kimpton can target international markets with far fewer capital restrictions requirements than the existing system.
Buying journey improvements
– Priceline Kimpton can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Kimpton Hotels - Setting Prices on Priceline (A) suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Priceline Kimpton can use these opportunities to build new business models that can help the communities that Priceline Kimpton operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
Loyalty marketing
– Priceline Kimpton has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Priceline Kimpton can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Priceline Kimpton in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Technology & Operations segment, and it will provide faster access to the consumers.
Low interest rates
– Even though inflation is raising its head in most developed economies, Priceline Kimpton can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Technology & Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Priceline Kimpton can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Priceline Kimpton can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Building a culture of innovation
– managers at Priceline Kimpton can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Technology & Operations segment.
Threats Kimpton Hotels - Setting Prices on Priceline (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Kimpton Hotels - Setting Prices on Priceline (A) are -
High dependence on third party suppliers
– Priceline Kimpton high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Kimpton Hotels - Setting Prices on Priceline (A), Priceline Kimpton may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Technology & Operations .
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Stagnating economy with rate increase
– Priceline Kimpton can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Priceline Kimpton needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Priceline Kimpton business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Priceline Kimpton needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Priceline Kimpton can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
Easy access to finance
– Easy access to finance in Technology & Operations field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Priceline Kimpton can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Priceline Kimpton.
Technology acceleration in Forth Industrial Revolution
– Priceline Kimpton has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Priceline Kimpton needs to keep up with the evolution of technology in the Technology & Operations sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Priceline Kimpton will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Priceline Kimpton in the Technology & Operations industry. The Technology & Operations industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Weighted SWOT Analysis of Kimpton Hotels - Setting Prices on Priceline (A) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Kimpton Hotels - Setting Prices on Priceline (A) needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Kimpton Hotels - Setting Prices on Priceline (A) is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Kimpton Hotels - Setting Prices on Priceline (A) is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Kimpton Hotels - Setting Prices on Priceline (A) is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Priceline Kimpton needs to make to build a sustainable competitive advantage.