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 - – geopolitical disruptions, there is backlash against globalization, increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings,
supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy, 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 -
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.
High switching costs
– The high switching costs that Priceline Kimpton has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
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.
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.
Superior customer experience
– The customer experience strategy of Priceline Kimpton in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
Sustainable margins compare to other players in Technology & Operations industry
– Kimpton Hotels - Setting Prices on Priceline (A) firm has clearly differentiated products in the market place. This has enabled Priceline Kimpton to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Priceline Kimpton to invest into research and development (R&D) and innovation.
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.
Operational resilience
– The operational resilience strategy in the Kimpton Hotels - Setting Prices on Priceline (A) Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
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.
Ability to recruit top talent
– Priceline Kimpton is one of the leading recruiters in the industry. Managers in the Kimpton Hotels - Setting Prices on Priceline (A) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
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 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.
Slow to strategic competitive environment developments
– As Kimpton Hotels - Setting Prices on Priceline (A) HBR case study mentions - Priceline Kimpton takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
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.
Workers concerns about automation
– As automation is fast increasing in the segment, Priceline Kimpton needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Kimpton Hotels - Setting Prices on Priceline (A) HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Priceline Kimpton has relatively successful track record of launching new products.
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.
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.
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.
Products dominated business model
– Even though Priceline Kimpton has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Kimpton Hotels - Setting Prices on Priceline (A) should strive to include more intangible value offerings along with its core products and services.
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.
Increasing silos among functional specialists
– The organizational structure of Priceline Kimpton is dominated by functional specialists. It is not different from other players in the Technology & Operations segment. Priceline Kimpton needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Priceline Kimpton to focus more on services rather than just following the product oriented approach.
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 -
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.
Learning at scale
– Online learning technologies has now opened space for Priceline Kimpton to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Creating value in data economy
– The success of analytics program of Priceline Kimpton has opened avenues for new revenue streams for the organization in the industry. This can help Priceline Kimpton to build a more holistic ecosystem as suggested in the Kimpton Hotels - Setting Prices on Priceline (A) case study. Priceline Kimpton can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Leveraging digital technologies
– Priceline Kimpton can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
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.
Better consumer reach
– The expansion of the 5G network will help Priceline Kimpton to increase its market reach. Priceline Kimpton will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
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.
Using analytics as competitive advantage
– Priceline Kimpton has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Kimpton Hotels - Setting Prices on Priceline (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Priceline Kimpton to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Priceline Kimpton to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Priceline Kimpton can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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.
Developing new processes and practices
– Priceline Kimpton can develop new processes and procedures in Technology & Operations industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
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 -
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Priceline Kimpton can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Kimpton Hotels - Setting Prices on Priceline (A) .
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 .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Priceline Kimpton with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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.
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.
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.
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.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Priceline Kimpton in the Technology & Operations sector and impact the bottomline of the organization.
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.
Increasing wage structure of Priceline Kimpton
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Priceline Kimpton.
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.
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.