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 - – banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs, increasing commodity prices, geopolitical disruptions, increasing household debt because of falling income levels, cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%,
talent flight as more people leaving formal jobs, 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 -
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.
High brand equity
– Priceline Kimpton has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Priceline Kimpton to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Training and development
– Priceline Kimpton has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Kimpton Hotels - Setting Prices on Priceline (A) Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
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.
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Priceline Kimpton are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
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.
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.
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.
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.
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 -
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.
No frontier risks strategy
– After analyzing the HBR case study Kimpton Hotels - Setting Prices on Priceline (A), it seems that company is thinking about the frontier risks that can impact Technology & Operations strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
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.
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.
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.
Skills based hiring
– The stress on hiring functional specialists at Priceline Kimpton has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Aligning sales with marketing
– It come across in the case study Kimpton Hotels - Setting Prices on Priceline (A) that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Kimpton Hotels - Setting Prices on Priceline (A) can leverage the sales team experience to cultivate customer relationships as Priceline Kimpton is planning to shift buying processes online.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 -
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.
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.
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 .
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.
Regulatory challenges
– Priceline Kimpton needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Technology & Operations industry regulations.
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.
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.
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.
Shortening product life cycle
– it is one of the major threat that Priceline Kimpton is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
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) .
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.
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.
