Rationale of the study
Tourism is an economic, environmental and social force of global proportions Developing a strong and sustainable tourism industry has become a priority of great importance of many countries
Vietnam's tourism sector is a key industry, significantly contributing to the country's income and job creation As Hanoi's tourism rapidly grows, the demand for hotels and accommodations surges, attracting new entrants to the market and intensifying competition However, the volatility within the tourism and hotel industry poses challenges for hotel development Therefore, it is essential for each hotel to establish clear development strategies to navigate these dynamics effectively.
The Vietnam Trade Union Hotel in Hanoi serves as the primary financial resource and headquarters for the Vietnam Trade Union Company, making its health and development crucial for the company's overall success Despite achieving positive business results and showcasing significant growth potential, the hotel faces numerous challenges in the tourism industry from 2011 to 2020, particularly due to the lack of a specific strategy for this new period To address these challenges, it is essential for the hotel to implement aligned business strategies, making it urgent to conduct a study focused on developing effective strategies for the Vietnam Trade Union Hotel during this timeframe.
Research objectives
This research project aims to achieve the following objectives:
To provide an overall picture of Vietnam Trade Union Hotel’s business activities with regard to strategy development.
To analyze and evaluate the internal and external factors affecting Vietnam Trade Union Hotel
To identify possibly feasible strategies for the hotel for the period from 2011 - 2020.
To propose some solutions for applying strategies for the hotel.
Research methodology
This study employs internal and external audits alongside EFE and IFE matrixes, integrating the 5-force model for comprehensive analysis The outcomes from these matrixes and the model are subsequently aligned with SWOT and IE matrixes to uncover viable strategic options To pinpoint the most suitable strategies, the QSPM matrix is utilized, leading to the proposal of actionable solutions for strategy implementation.
This project utilized qualitative research methods for extensive data collection and analysis, drawing from both primary and secondary sources The qualitative approach will facilitate the evaluation of business activities and strategies at the Vietnam Trade Union Hotel, considering various internal and external factors The subsequent sections will detail the methods employed to gather and analyze the data sources utilized in this study.
For theory framework, textbooks on Tourism, Hotel Management, Strategy Management and Hotel Marketing are selected as sources of reference
External evaluation will involve gathering reports, articles, and data from various sources, including VNAT, ITDR, the Hanoi Administration of Tourism, and the Vietnam Trade Union Hotel This secondary data will offer insights into the overall tourism landscape in Vietnam and Hanoi, as well as the supply and demand for hotel accommodations and the business performance of the Vietnam Trade Union Hotel.
Primary data source were collected using qualitative method as follow:
• In-depth interviews will be conducted with General Manager of the hotel and other heads of department
• Besides interviews, observation will be applied to evaluate the other related fields of business and operation of the hotel
Research scope and limitation
The research focuses on the business activities and results in Vietnam Trade Union Hotel and tourism and hotel industry in Hanoi in the period from 2005 to
2010 Other supporting research, data collections are limited to Hanoi area.
This project includes 3 main chapters:
Chapter 1: Basic theory on business strategy
Chapter 2: Analysis and evaluation of Business environment and activities of
Vietnam Trade Union Hotel in Hanoi
Chapter 3: Business strategies for Vietnam Trade Union Hotel in Hanoi for the period from 2011 – 2020
BASIC THEORY ON BUSINESS STRATEGY
To effectively develop a business strategy, it is essential to have a clear definition of strategy to guide analysis and study Various definitions highlight this concept, such as Chandler's view that strategy involves determining an enterprise's long-term goals and objectives, along with the necessary actions and resource allocation to achieve them Similarly, Quinn describes strategy as a cohesive plan that integrates an organization's major goals, policies, and actions Johnson and Scholes further define strategy as the long-term direction and scope of an organization, aimed at gaining a competitive advantage by aligning resources with market needs and stakeholder expectations Collectively, these definitions underscore that strategy is crucial for identifying how a business can effectively reach its goals and objectives.
In application, there are 3 levels of strategies The first one is Corporate
Business strategy encompasses the overall purpose and scope of a company to fulfill stakeholder expectations, while Business Unit Strategy focuses on achieving competitive success within specific markets by emphasizing product selection, customer needs, and gaining an edge over competitors Lastly, Operational Strategy organizes the various components of a business to effectively implement the strategic direction set at the corporate and business unit levels.
This study prioritizes strategic business level strategies, highlighting their significance over other levels Nevertheless, it also acknowledges the importance of various other strategies, as they are closely interconnected and influence one another.
To determine the most suitable strategies for a business, it is essential to explore a diverse range of options This article briefly outlines various types of strategies, including integration strategies, intensive strategies, diversification strategies, defensive strategies, and Michael Porter’s Generic Strategies.
Integration strategies can enhance a company's operational efficiency and effectiveness while reducing costs By becoming less dependent on suppliers and distribution channels, or by incorporating competitors into its operations, a business can strengthen its market position and diminish competition.
Forward integration involves a company gaining ownership or control over its distribution channels, while backward integration refers to acquiring control over suppliers Additionally, horizontal integration occurs when a company takes ownership or control of competitors through mergers, acquisitions, or takeovers.
These strategies can be applied when it is more profitable to do and the company has enough resources and ability to do.
When a company wants to improve its competitive position with existing products, intensive strategies are to be applied Intensive strategies include strategies like market penetration, market development, and product development.
To enhance market share, a company can implement market penetration strategies through intensified marketing efforts, such as increasing sales staff, boosting advertising budgets, and launching sales promotions Additionally, the company can explore market development by introducing its existing products or services into new geographic regions Lastly, product development can be pursued by improving or modifying current offerings to drive sales growth.
Investing in a single industry can be risky, prompting companies to adopt diversification strategies to mitigate risk and enhance revenue and profit These strategies include concentric diversification, which involves introducing new but unrelated products or services, and horizontal diversification, which targets existing customers with new offerings Horizontal diversification is generally less risky than conglomerate diversification, as it leverages the company's familiarity with its customer base, making it a safer approach to expanding the business.
At time, a business may face difficulties or want to change business focus or direction etc and thus it may think of defensive strategies.
Retrenchment is a strategic approach for businesses to improve financial health by reducing costs and assets, which may involve selling land and properties, closing factories, or downsizing the workforce A key component of this strategy is divestiture, where companies sell off unprofitable divisions or those that require excessive capital investment In more drastic cases, a company may opt for liquidation, selling all its assets individually for their tangible value.
Michael Porter identifies two primary types of strengths for firms: cost advantage and differentiation These strengths lead to three generic strategies that businesses can adopt: cost leadership, differentiation, and focus Each of these strategies is implemented at the business unit level to enhance competitive positioning.
Integration strategies primarily aim to achieve cost leadership, allowing companies to become the lowest-cost producers in their industry while maintaining quality This enables them to sell products at average industry prices for higher profits than competitors or at lower prices to capture market share In the event of a price war, such companies can remain profitable while competitors incur losses Additionally, as the industry matures and prices fall, they can sustain profitability longer Cost advantages can be realized through improved process efficiencies, access to lower-cost materials, strategic outsourcing, and vertical integration, or by eliminating certain costs altogether.
Implementing a differentiation strategy involves creating a product or service with unique features that customers value and perceive as superior to competitors' offerings This distinctiveness allows a company to command a premium price for its differentiated product or service.
The focus strategy involves a company targeting a specific market segment to achieve either cost leadership or differentiation By concentrating on this niche, the company can better address the unique needs of its customers, fostering strong customer loyalty This loyalty not only enhances customer satisfaction but also acts as a barrier to entry for competitors, making it difficult for them to directly challenge the focused company.
The strategy management process consists of three key stages: strategy formulation, strategy implementation, and strategy evaluation This study will focus extensively on strategy formulation, while the other stages will be addressed as supportive processes.
Strategy formulation includes setting business mission, identifying external opportunities and threats, identifying internal strengths and weaknesses, generating pool of strategies for choice.
Creating a business mission is a crucial initial step in the strategy development process As defined by Mintzberg, a business mission articulates the fundamental role of an organization within society, focusing on the products and services it offers to its customers.
THEORY ON BUSINESS STRATEGY
Business Strategy
To effectively develop a business strategy, it is essential to have a clear definition of strategy that guides study and analysis Various definitions highlight this concept, such as Chandler's view that strategy involves determining long-term goals and allocating resources to achieve them Quinn defines strategy as a cohesive plan that integrates an organization's major goals, policies, and actions Johnson and Scholes describe strategy as the long-term direction and scope of an organization, aimed at gaining a competitive advantage by aligning resources with market needs and stakeholder expectations Collectively, these definitions emphasize that strategy focuses on how a business or organization can achieve its goals and objectives.
In application, there are 3 levels of strategies The first one is Corporate
Business strategy encompasses the overall purpose and scope of an organization to fulfill stakeholder expectations It is divided into three main categories: Corporate Strategy, which focuses on the broader vision; Business Unit Strategy, which emphasizes competitive tactics within specific markets, including product selection and customer needs; and Operational Strategy, which organizes the various components of a business to effectively implement the strategic direction set at the corporate and business-unit levels.
This study primarily focuses on strategic business level strategies, highlighting their significance Nonetheless, it also acknowledges the importance of other strategy types, as they are closely interconnected and interact with one another.
To determine the most suitable strategies for a business, it's essential to explore a variety of options This article briefly outlines key strategy types, including integration strategies, intensive strategies, diversification strategies, defensive strategies, and Michael Porter’s Generic Strategies.
Integration strategies enable companies to enhance operational efficiency, cut costs, and gain independence from suppliers and distribution channels By incorporating competitors into their operations, businesses can strengthen their market position and reduce competition.
Forward integration involves a company gaining ownership or control over its distribution channels, while backward integration refers to acquiring control over suppliers Additionally, horizontal integration occurs when a company takes ownership or control of competitors through mergers, acquisitions, and takeovers.
These strategies can be applied when it is more profitable to do and the company has enough resources and ability to do.
When a company wants to improve its competitive position with existing products, intensive strategies are to be applied Intensive strategies include strategies like market penetration, market development, and product development.
To enhance market share, a company can employ market penetration strategies, which involve intensifying marketing efforts through increased sales staff, advertising, and sales promotions Additionally, the company can pursue market development by introducing existing products or services into new geographic areas Lastly, product development can drive sales growth by improving or modifying current offerings.
Investing in a single industry can be risky, prompting companies to adopt diversification strategies to mitigate risk and boost revenue These strategies include concentric diversification, which involves introducing new but unrelated products or services, and horizontal diversification, which targets existing customers with new offerings Horizontal diversification is generally less risky than conglomerate diversification, as it leverages the company's familiarity with its customer base.
At time, a business may face difficulties or want to change business focus or direction etc and thus it may think of defensive strategies.
Businesses can implement retrenchment strategies to address declining sales and profits through cost and asset reduction This may involve selling land and properties, closing factories, or reducing the workforce Additionally, companies may opt for divestiture by selling off unprofitable divisions or those that require excessive capital, aligning better with their core activities In more extreme cases, liquidation may be pursued, which entails selling all company assets individually for their tangible value.
Michael Porter identifies two primary types of competitive strengths for firms: cost advantage and differentiation These strengths lead to three generic strategies that businesses can employ: cost leadership, differentiation, and focus These strategies are implemented at the business unit level to enhance a firm's market position.
Integration strategies are primarily employed to achieve cost leadership, allowing a company to become the lowest-cost producer within its industry while maintaining quality This enables the business to either sell at average industry prices for higher profits than competitors or undercut prices to capture market share In the event of a price war, the company can still maintain profitability, while competitors may incur losses Even as the industry matures and prices fall, the company can sustain profitability for a longer duration Cost advantages can be realized through enhanced process efficiencies, exclusive access to low-cost materials, strategic outsourcing and vertical integration, or by eliminating certain costs altogether.
Implementing a differentiation strategy involves creating a product or service with unique features that customers value and perceive as superior to competitors' offerings This distinctiveness allows companies to command a premium price for their differentiated products or services.
The focus strategy enables a company to concentrate on a specific market segment, striving for either cost advantage or differentiation By dedicating resources to this narrow segment, the company can effectively meet its unique needs, fostering strong customer loyalty that deters direct competition from other businesses.
Strategy building process
The strategy management process consists of three key stages: strategy formulation, strategy implementation, and strategy evaluation This study will focus primarily on strategy formulation, while briefly addressing the other stages as supporting processes.
Strategy formulation includes setting business mission, identifying external opportunities and threats, identifying internal strengths and weaknesses, generating pool of strategies for choice.
Crafting a business mission is the foundational step in the strategy development process As defined by Mintzberg, a business mission articulates the fundamental role of an organization within society, focusing on the products and services it provides to its customers.
A business mission should clearly articulate the company's purpose for existence, outline its strategic scope by specifying the range of products and services offered, and describe its competitive methods Additionally, it should establish policies and standards of behavior that reflect the organization's values and culture.
The outcome of the business mission setting is the vision statement and mission statement These statements should cover all elements mentioned above.
As mentioned above, the purpose of an external assessment is to identify opportunities that could benefit a company and threats that a company should avoid.
In order to do external assessment keys external forces and process should be established.
Fred R David categorizes external forces into five key areas: Economic forces; Social, cultural, demographic, and environmental forces; Political, governmental, and legal forces; Technological forces; and Competitive forces For the purposes of this study, these forces can be streamlined into two primary levels: the macro environment level and the industry level.
The PEST analysis encompasses four key factors: Political, Economic, Social, and Technological forces, which are essential for understanding the broader environment affecting industries Additionally, it is important to consider industry-specific environmental factors that influence market dynamics and business strategies.
Michael Porter's five forces model serves as a crucial framework for industry analysis and business strategy development, identifying and analyzing five competitive forces that shape the intensity and attractiveness of a market The model assesses how these forces influence overall industry profitability, indicating that an "unattractive" industry is one where the interplay of these forces reduces profitability.
The five forces that shape industry competition are: the threat posed by new entrants, the intensity of rivalry among existing competitors, the potential for substitute products or services, the bargaining power held by customers, and the bargaining power of suppliers.
• The entry of new competitors will eventually decrease profitability for all companies in the industry.
• The intensity of competitive rivalry is the major determinant of the competitiveness in most of the industry.
Substitute products or services lie beyond the typical boundaries of a given market, increasing the likelihood of customers opting for alternatives This shift poses a significant threat to the revenue and profitability of an industry.
• The bargaining power of customers is the ability of customers to put the company under pressure, which also affects the customer's sensitivity to price changes.
The bargaining power of suppliers poses a significant challenge for the company, especially when there are limited substitutes available In such scenarios, suppliers may decline to collaborate or impose exorbitant prices for exclusive resources, placing the company in a precarious position.
1.2.2.2 The process of performing external assessment
This process starts with the collection of competitive intelligence and information about social, cultural, demographic, environmental, economic, political, legal, governmental, and technological trends
The second step in the process involves assimilating and evaluating the gathered information It is essential to prioritize the identified factors by ranking them from 1, representing the most critical opportunity or threat, to 20, indicating the least significant This prioritized list should then be effectively communicated and widely distributed throughout the company.
Every organization has distinct strengths and weaknesses across its various functional areas, making internal assessments essential for identifying these factors Since no enterprise excels or falters uniformly across all domains, conducting a thorough evaluation of internal capabilities is crucial This internal assessment complements external evaluations, forming a foundation for setting strategic objectives Additionally, it is important to identify key internal forces and processes to enhance overall performance.
There are many forces and indicators that internal assessment needs to look at in all fields of management, marketing, finance/accounting, production/operations, research & development, management information systems.
Other resources are also needed to be looked at They are: physical resources, human resources, organizational resources.
To build competitive advantages, it is essential to identify and leverage distinctive competencies—strengths that competitors find difficult to replicate or match—while evaluating key internal forces.
1.2.3.2 The process of performing internal assessment
Conducting an internal assessment closely mirrors the external assessment process, beginning with the collection of information regarding company operations This information is then assimilated and evaluated, with collected factors prioritized on a scale from 1 to 20, where 1 represents the most critical strengths and weaknesses and 20 denotes the least significant Once prioritized, this list should be effectively communicated and widely distributed throughout the organization.
The process of performing an internal assessment provides more opportunity for doers to understand how their jobs, departments, and divisions fit into the whole organization or company.
To develop effective strategies that align with a company's mission and objectives, it is essential to conduct thorough internal and external assessments This process involves three key stages: gathering input, matching findings with the company's goals, and making informed decisions By evaluating feasible alternative strategies, companies can ensure that their strategic plans are well-informed and targeted towards successful outcomes.
In this phase, the EFE Matrix, IFE Matrix, and CPM are created to supply essential input data for the subsequent matching and decision-making stages The methodologies for constructing these matrices will be elaborated on later in this research.
Tools to build business strategies
This section will delve into the various tools applicable for each stage of strategy analysis and choice, providing a detailed discussion The tools will be organized according to their respective stages, aligning with the overall framework of strategy analysis and selection.
The External Factor Evaluation (EFE) matrix is an effective tool for assessing current business conditions, allowing companies to visualize and prioritize the opportunities and threats they encounter.
EFE matrix can be developed with the following steps:
• First, gather a list of external factors and divide them into two groups: opportunities and threats.
To effectively evaluate factors, assign a weight to each, ranging from 0 to 1, where 0 indicates no importance and 1 signifies the highest influence Ensure that the combined total of all assigned weights equals 1.
To evaluate the effectiveness of a firm's current strategies, assign a rating between 1 and 4 for each factor A rating of 1 signifies a poor response, 2 indicates below average, 3 represents above average, and 4 denotes a superior response.
• Fourth, multiply each factor weight with its rating This will calculate the weighted score for each factor.
• Finally, total all weighted scores by adding up all weighted scores for each factor This will calculate the total weighted score for the company.
Table 1.1 Example of a blank EEF Matrix Opportunities Weight Rating Weighted score Threats
Poor (1), below average (2), above average (3), superior (4)
Source: Adapted from Fred R David, Strategic Management Concepts & Cases [7, p111]
Internal Factor Evaluation (IFE) matrix is tool for evaluating major strengths and weaknesses in functional areas of a business.
EFE matrix can be developed with the following steps:
• First, gather a list of about 20 internal factors and divide them into two groups: strengths and weaknesses.
To effectively evaluate factors, assign a weight to each one, ensuring the value ranges from 0 to 1 A weight of zero indicates that the factor holds no importance, while a weight of one signifies that it is the most critical factor It's essential that the sum of all assigned weights equals 1 to maintain a balanced assessment.
To evaluate the effectiveness of a company's current strategies, assign a rating from 1 to 4 for each factor A rating of 1 signifies a major weakness, while 2 indicates a minor weakness Conversely, a rating of 3 reflects a minor strength, and a rating of 4 denotes a major strength This systematic approach helps in assessing the company's strategic responses to various factors.
• Fourth, multiply each factor weight with its rating This will calculate the weighted score for each factor.
• Finally, total all weighted scores by adding up all weighted scores for each factor This will calculate the total weighted score for the company.
Table 1.2 Example of a blank IEF Matrix
Strengths Weight Rating Weighted score
Source: Adapted from Fred R David, Strategic Management Concepts & Cases [7, p151]
The Competitive Profile Matrix (CPM) is a strategic tool used to assess a company's strengths and weaknesses in relation to its main competitors within the industry By focusing on critical success factors, the CPM provides a comprehensive evaluation of both internal and external elements that influence a company's overall competitive position.
The construction of the Competitive Profile Matrix (CPM) closely resembles that of Internal and External Evaluation Matrixes In the CPM, ratings reflect a company's responsiveness to critical success factors, with a score of 4.0 indicating excellent performance and a strong response, while a score of 1.0 signifies a poor response to these essential factors.
Table 1.3 Example of a blank CPM Matrix
Company Competitor 1 Competitor 2 Critical success factors
Source: Adapted from Fred R David, Strategic Management Concepts & Cases [7, p112]
SWOT is a key tool to formulate strategic plans Each letter in the word SWOT represents one strong word: S = strengths, W = weaknesses,
The SWOT model is a strategic tool that evaluates both internal and external factors impacting a business Internal factors include strengths and weaknesses, while external factors encompass opportunities and threats By identifying these elements, companies can develop strategies that align their strengths with opportunities and mitigate weaknesses against potential threats.
The Strategic Position & Action Evaluation matrix is a strategic management tool that focuses on strategy formulation especially as related to the competitive position of an organization.
The SPACE matrix is broken down to four quadrants presenting different type or a nature of a strategy: Aggressive, Conservative, Defensive, and Competitive.
The SPACE matrix is developed by charting the calculated values for competitive advantage (CA) and industry strength (IS) on the X-axis, while the Y-axis reflects environmental stability (ES) and financial strength (FS) To create the SPACE matrix, follow a series of systematic steps.
• Choose a set of variables to be used to gauge the competitive advantage(CA), industry strength (IS), environmental stability (ES), and financial strength (FS).
To evaluate various factors, employ a specific rating system tailored to each dimension Assess competitive advantage (CA) and environmental stability (ES) on a scale from -6 (worst) to -1 (best), while industry strength (IS) and financial strength (FS) should be rated from +1 (worst) to +6 (best).
• Find the average scores for competitive advantage (CA), industry strength (IS), environmental stability (ES), and financial strength (FS).
• Add the average score for the competitive advantage (CA) and industry strength (IS) dimensions to come to final point on axis X on the SPACE matrix.
• Add the average score for the SPACE matrix environmental stability (ES) and financial strength (FS) dimensions to come to final point on the axis Y.
• Find intersection of your X and Y points Draw a line from the center of the SPACE matrix to your point This line reveals the type of strategy the company should pursue.
1.3.2.3 The Internal-External (IE) Maxtrix
The Internal-External (IE) matrix is a strategic management tool designed to assess a business's working conditions and strategic position by analyzing both internal and external factors The development of this matrix involves a systematic approach that includes several key steps for effective evaluation.
• Take score from the EFE matrix and plot it on the y-axis
• Take score from the IFE matrix and plot it on the x-axis
• Draw a vertical line across the plane
The point where the horizontal line meets the vertical line is the determinant of suggested strategy that a company should follow.
Figure 1.1 Example of a blank IE Matrix
Source: Adapted from Fred R David, Strategic Management Concepts & Cases [7, p213]
The IE Matrix is divided into 3 main divisions that have different strategy implication.
Division 1, encompassing cells I, II, and III, advocates for a "grow and build" strategy Recommended approaches include market penetration, market development, product development, as well as backward, forward, and horizontal integration.
• Division 2 which includes cells IV, V, and VI suggests the “hold and maintain” strategy The suitable strategies should be market penetration and product development.
• Division 3 which includes cells VII, VIII, and IX suggests the “harvest or exit” strategy.
The Qualitative Strategic Planning Matrix (QSPM) is employed in this phase to objectively identify the most effective strategy by integrating insights from various management techniques and straightforward calculations By aligning inputs from the initial stage with outcomes from the matching stage, the QSPM facilitates an objective decision-making process among alternative strategies.
The QSPM can be constructed with the following steps:
To develop a comprehensive QSPM, begin by compiling a list of critical internal and external factors Place these factors in the left column of the QSPM, ensuring they are derived from the EFE (External Factor Evaluation) matrix and the IFE (Internal Factor Evaluation) matrix This structured approach will facilitate a clearer analysis of the strategic options available.
• Identify strategy alternatives that will be further evaluated and place them at the top of the table
• Weight each key external and internal factor Again, weighted scores can be taken from the IFE and EFE matrixes.
Characteristics of Hotel industry
The hotel industry, as a segment of the service sector, exhibits unique characteristics that differentiate it from traditional goods-based industries Key distinctions include the intangibility and perishability of its offerings; for instance, if a hotel room remains unsold today, the potential revenue for that day is irrevocably lost, unlike tangible products that can be sold later Additionally, the consumption and production of hotel services occur simultaneously, further emphasizing the industry's distinctive nature.
Selling traditional products involves delivering goods to customers, while selling hotel rooms and services requires attracting customers to the location Unlike physical products that can be transported, hotel rooms and theme parks are fixed assets that cannot be moved Consequently, two identical hotels in different cities, such as Hanoi and Hai Phong, do not compete with each other In contrast, medical companies in different locations can compete if they offer the same products to the same market.
In the competitive landscape of the hotel industry, major chains like Sofitel (by Accor) and Sheraton (by Sherwood) vie for market share through diverse product brands However, in Vietnam's hotel sector, competition is not uniform, as hotels face a unique array of competitors influenced by varying business models and geographic locations.
The unique characteristics of the hospitality industry necessitate tailored strategies that differ from those in other production sectors For instance, when a hotel opts for a market development strategy, it faces the challenge of not being able to physically relocate its hotel rooms to new geographic locations.
To achieve success, hotels must enhance their promotional and advertising efforts However, these strategies alone do not ensure positive outcomes, as potential guests must first decide whether to visit the destination where the hotel is situated.
ANALYSIS AND EVALUATION OF BUSINESS NVIRONMENT AND
The foundation and development
Founded in 1989, the Vietnam Trade Union Company operates under the Viet Nam General Confederation of Labor and stands as a prominent leader in Vietnam's travel and hotel industry, offering a diverse range of services.
• Holding international and domestic tour
• Real estate business and commercial import and export
As a member of the Confederation of Labor, the company fulfills two primary responsibilities: it functions as a commercial business while also serving the political role of providing services and accommodations for trade union members in Vietnam, along with other non-profit tasks assigned by the Confederation This dual role positions the company as a blend of commercial and non-commercial entities within a single organization The company operates a chain of hotels under the name Viet Nam Trade Union, located in Hà Nội, Đồ Sơn, Hạ Long, Kim Bôi, and Sa Pa, each offering varying levels of service and facilities, while maintaining financial independence.
The company, located at 14 Tran Binh Trong Street in Hanoi, began its journey in 2001 with the establishment of the Vietnam Trade Union Hotel, which has been the primary financial backbone for its operations and growth This foundational role of the hotel continues to be significant today In 2007, the company expanded its portfolio by taking on the management of a second hotel in Đồ Sơn.
The Vietnam Trade Union Company has been tasked by the Vietnam General Confederation of Labor to enhance the performance of its properties in Ha Long, Kim Boi, Sa Pa, and Hoa Binh This initiative involves leasing these locations to operate on a financially independent basis Transitioning from an independent hotel to a hotel chain, the Vietnam Trade Union Hotel in Hanoi serves as the headquarters and a crucial revenue center It plays a vital role in sharing expertise, skilled staff, and resources across the chain, ensuring the overall growth and development of the company.
Facilities and services
The Viet Nam Trade Union in Hanoi is a 3-star hotel featuring a total of 180 rooms, which are categorized into five types: Executive Suite, Deluxe Room, Superior, Standard Twin, and Triple.
Table 2.1 Vietnam Trade Union Hotel in Hanoi Room Tariff
Deluxe room (Twin & Double) 75 USD
(Source: Vietnam Trade Union Hotel[2])
The hotel features a restaurant on the ground floor that serves a diverse menu of Vietnamese, Chinese, and European cuisine With a total capacity of 500 seats, the restaurant is divided into two dining rooms, providing ample space for guests to enjoy their meals.
The hotel features five well-equipped meeting rooms, accommodating a range of group sizes The largest room can host up to 300 attendees, while the smallest is designed for intimate gatherings of up to 40 people Each meeting space is fitted with modern amenities to ensure successful events.
The hotel also operates 2 tennis courts in the premises There is also a souvenir shop on the ground floor proving miscellaneous items for in-house guests.
The hotel offers complimentary Wi-Fi throughout the premises, ensuring that business travelers stay connected For guests without personal computers, a small business center is available, featuring two internet-connected computers for free use.
This 3-star hotel in Hanoi offers a variety of services to enhance your stay, including laundry service, room service, currency exchange, air ticket booking, tour and travel arrangements, and porter service.
Hotel organization chart
The Vietnam Trade Union hotel in Hanoi is managed by the Vietnam Trade Union company, which initially operated solely the hotel Prior to its expansion, the management board, along with departments such as accounting, administration, personnel, and sales and marketing, directly handled the hotel's operations and support services.
Since its expansion, the hotel has unofficially become the company's headquarters, with functional departments that not only support the hotel itself but also assist other hotels, each of which maintains its own functional department.
Chart 2.1 Organization chart of Vietnam Trade Union Company
Deputy Managers Hotel in Hanoi
Marketing Admin & Project Travel Hotel in Hotel in Hotel in Hotel in Accounting
Chart 2.2 Organization chart of Vietnam Trade Union Hotel in Hanoi
In this chart we cannot see the other functional departments as they belong to the company not to the hotel The disadvantage of this organization will be discussed later.
Business results
Over the past five years, the hotel has consistently generated the highest revenue among all company properties and business activities, underscoring its critical role in the company's overall financial health and success.
Table 2.2 Vietnam Trade Union Company Business results from 2006 to 2010
(the amount is in billion VND)
* = estimated figure (Source: Vietnam Trade Union Company [2])
Manager (of the company & hotel)
Over the past five years, the hotel has demonstrated impressive business performance and significant growth The table below outlines the hotel's financial results from 2006 to 2010, highlighting its consistent success and development during this period.
Table 2.3 Vietnam Trade Union Hotel in Hanoi Business results from 2006 - 2010
( the amount is in billion VND)
* = estimated figure (Source: Vietnam Trade Union Hotel[2])
The hotel attracts a diverse clientele, with 56% of guests being international travelers and 44% being Vietnamese The primary source of guests is tour operators and travel agencies, accounting for 50% of total visitors Additionally, 10% of guests come from the Viet Nam General Confederation of Labor, primarily for business meetings or organized leisure trips The remaining 40% are Free Independent Travelers, visiting for either business or leisure purposes.
Vietnam Trade Union Hotel External Assessment
The hotel and tourism industry relies heavily on both domestic and international tourists as primary revenue sources Consequently, the economic conditions within the country and globally significantly influence the health of this industry.
In recent years, the global economy has faced crises that have hindered the growth of the tourism industry, prompting travelers to be more budget-conscious In 2008, international tourist arrivals reached over 922 million, marking a 1.9% increase from the previous year, with tourism receipts totaling US$944 billion However, the recession led to a significant decline in international travel demand starting in June 2008, causing growth in worldwide tourism arrivals to fall to just 2% This downward trend continued into 2009, with a 4% decrease in global tourism, resulting in only 880 million international tourist arrivals.
Following a year of recovery, the global economy is experiencing slow growth, which is anticipated to persist into 2011 and 2012 The United Nations projects a baseline forecast of 3.1 percent growth for the world gross product (WGP).
In 2010, international tourism experienced a robust recovery, with a notable increase of 7% to 935 million arrivals, rebounding from a 4% decline in 2009 due to the global economic crisis The World Tourism Organization reported that most global destinations saw positive growth, effectively offsetting previous losses Asia emerged as the leading region, achieving a remarkable growth rate of 13%, with international tourist arrivals reaching a record 204 million in 2010, up from 181 million the previous year This upward trend in tourism is anticipated to continue as the global economy recovers.
2011 but at a slower pace UNWTO forecasts international tourist arrivals to grow at between 4% to 5% in 2011, a rate slightly above the long-term average [11]
This fact poses a great opportunity for tourism industry in Vietnam in general and for the hotel industry in Vietnam in particular to get more guests and increase the revenue.
In 2010, Vietnam's economy demonstrated a robust recovery, with a GDP of $104.6 billion and a growth rate of 6.78%, surpassing forecasts by 0.3% This positive trend coincided with the global economic recovery, although the year was also marked by several significant challenges for the Vietnamese economy.
• The interest rate race started by commercial banks which reached 18% at its peak This event negatively influenced the goods market
• The gold and foreign currency market chaos putting the gold price reaching the record high of 38 million dong per tael and pushing the exchange rate to 21,000 VND to 1 USD.
• The high inflation rate of 11.75%
• Real estate prices followed gold prices and urban planning This event made the real estate prices increased sharply in 2010 by 30-100 percent
These events are forecasted to continue in the future and thus pose both opportunities and threats for hotel industry in general and for Trade Union hotel in particular.
The recovery of the economy is boosting the travel budget for domestic tourists, a vital revenue source for the hotel and tourism industry Additionally, the favorable exchange rate between the VND and USD makes hotels more affordable for foreign visitors, as most expenses are incurred in Vietnamese Dong Furthermore, high real estate prices may deter potential competitors from entering the hotel market.
Amidst a sluggish economic recovery, soaring inflation, and volatile markets for gold and foreign currencies, many individuals are opting to tighten their budgets and prioritize saving over luxury spending This shift in financial behavior is leading people to invest their money in banks, dollars, or gold instead of indulging in travel.
Vietnam's rich agricultural heritage, centered around wet rice cultivation, is a cornerstone of its ancient culture, making it one of the oldest in East Asia The significant influence of Chinese civilization has shaped Vietnam's political structure, governance, and Confucian values, firmly positioning it within the East Asian Cultural Sphere.
Following the Chinese domination, Vietnam experienced French colonial rule, which introduced European merchant influences, including Catholicism and the Latin alphabet Prior to the 1990s, tourism and hotels were viewed as luxurious and contrary to traditional moral values, often linked to social evils, making involvement in these sectors culturally challenging However, since the 1990s, Vietnam has increasingly embraced Asian, European, and American cultures and media, leading to a shift in perception among the new generation who now view hotels and tourism as standard business practices, resulting in a diminishing association between these industries and social evils.
Vietnam has become increasingly open in various aspects of life while preserving its unique cultural characteristics, creating an environment with minimal barriers for the hotel and tourism industry Renowned for their hospitality and strong work ethic, the Vietnamese people contribute significantly to this sector Additionally, the country's youthful population offers a promising labor force, making the socio-cultural landscape highly conducive for tourism and hotel business development.
Influenced by Confucian values, Vietnamese culture places a high emphasis on obtaining university degrees, often leading to a perception that vocational training is inferior As a result, many individuals aspire to office or management positions rather than entry-level jobs This mindset has contributed to a shortage of skilled workers, which is essential for various industries.
28 especially labor-intensive ones like hotel and tourism It is also the reality that the tourism and hotel industry in Vietnam is facing.
The Constitution affirms the authority of the people under the guidance of the Communist Party, with power being exercised through the National Assembly at the central level and the People's Councils at local levels.
The National Assembly serves as the highest representative and legislative authority, elected through universal suffrage It is responsible for electing key officials, including the President, Vice-President, Chairman and Vice-Chairman of the National Assembly, members of the Standing Committee, and the Prime Minister.
Vietnam's political stability has fostered a conducive environment for business, with no significant crises or unrest affecting operations Despite concerns raised by international organizations regarding transparency and corruption, Vietnam remains a reliable destination for investment The government is actively working to enhance this perception and promote a trustworthy business landscape.
Tourism in Vietnam is recognized as a crucial economic sector, integral to the nation's social and economic development strategy This necessitates a transformative approach from all government levels and tourism entities to fully harness national resources for tourism growth, aligning with the vision outlined in the seventh resolution of the Vietnamese Central Communist Party This strategic direction remains steadfast and is expected to continue in the future.
Vietnam Trade Union Hotel Internal Assessment
Following the expansion to manage three additional hotels in Hai Phong, Ha Long, and Hoa Binh, the functional departments of the Vietnam Trade Union Company, including Administration, Sales and Marketing, and Accounting, now oversee multiple hotels Consequently, the Vietnam Trade Union hotel in Hanoi receives less attention and support from these departments The company's manager, who also oversees the hotel, is responsible for all properties under his command, including the travel center and various projects related to the Vietnam Confederation of Labor and the Communist Party The geographical spread of the hotels necessitates extensive travel, which significantly limits the manager's ability to effectively check and supervise operations.
The Vietnam Trade Union Hotel in Hanoi primarily operates independently, leading to unclear roles for essential departments such as Administration, Sales and Marketing, and Accounting Essentially, this hotel functions similarly to one that lacks these critical departments altogether.
The expansion of the Vietnam Trade Union Company offers significant advantages for the Vietnam Trade Union Hotel in Hanoi, particularly in optimizing human resources By strategically transferring staff between hotels, such as moving employees from the low season in Do Son to the high season in Hanoi, the company effectively mitigates the impact of seasonal fluctuations This approach not only enhances operational efficiency but also helps control labor costs, ensuring that resources are utilized effectively throughout the year.
While Hanoi's hotel staff are generally skilled and knowledgeable, this level of expertise is not consistently found across other hotels in the chain, raising concerns about training standards To address this issue, the company has implemented a staff rotation program, where experienced employees are dispatched to new hotels for setup and training, while local staff receive on-the-job training at the Vietnam Trade Union Hotel in Hanoi This approach has contributed to a modest improvement in the overall quality of hotel staff.
The Vietnam Trade Union Hotel in Hanoi conducts annual training programs focused on both management and technical skills for middle managers and entry-level staff However, the effectiveness of these training sessions is hindered by vague job descriptions and unclear task standards The training budget is developed through a bottom-up approach by the Administration and Personnel department, which treats training as a mandatory yearly activity While this method is not inherently flawed, it stifles creativity and innovation in training planning Additionally, the lack of established standards complicates the training needs assessment, making it challenging to determine the necessary training programs.
One significant weakness in the hotel staff is their English proficiency, with only 20% reaching an intermediate level capable of fluent communication with guests, despite over 56% of guests being foreigners The hotel conducted its only official TOEIC test in 2007, where only 10% of participants met the required level for their positions Although a series of English training courses have since been implemented, improving overall language skills, no subsequent TOEIC tests have been conducted to assess progress.
The hotel is currently experiencing challenges due to its workforce demographics, with 89% of employees aged between 20 and 40, and 56% of these being female This age group is more likely to take maternity leave, complicating work planning and escalating costs related to employee benefits, training for replacements, and overtime expenses.
However the young employees is also a strength as young people are more motivated, energetic and enthusiastic which are very necessary for hospitality industry.
In addition, most of the workforce at the hotel has a good knowledge background There are 81 employees finish universities, 16 are college graduates,
104 are vocational school leavers This fact shows a very high potential for further development of the quality of the workforce.
The Trade Union Hotel brand, established by the Vietnam Confederation of Labor to cater to employees of state-owned enterprises, faces significant challenges regarding its public image Many of its hotels are perceived as low-quality, with subpar facilities and management, leading to a negative reputation among Vietnamese consumers The common reference to the Vietnam Trade Union Hotel in Hanoi as simply "Trade Union Hotel" further complicates brand recognition, causing confusion for those unfamiliar with its offerings As tourism in Hanoi is expected to rise, this negative perception could pose substantial disadvantages for the hotel in attracting new guests.
The management functions are performed rather well with planning, organizing, staffing, motivating, controlling
Effective planning is achieved through an annual plan and a review of its implementation at the start of each fiscal year However, the management of the information system is weak, leading to subjective yearly objectives The current general manager, who is well-informed and proactive in updating planning information, plays a crucial role in modifying the plan to ensure its feasibility While this expertise is beneficial, it also creates a reliance on a single individual, posing potential risks for the organization.
Regarding the organization, the only problem the hotel has is with the way to structure the hotel in particular and with the company in general as discussed above.
The hotel excels in employee motivation, benefiting from its status as a Trade Union organization Despite offering an average salary of just over 3 million VND (approximately 150 USD) per month, the job security and attractive employee benefits contribute to a positive work environment.
Effective hotel management requires not only the successful implementation of objectives and budget controls but also the establishment of job standards to assess employee performance and facilitate training.
As a direct affiliate of the Vietnam Confederation of Labor, the hotel has a significant advantage in securing development capital, which it should leverage for its growth and expansion.
The hotel is performing with rather good results Revenue and income before tax of the hotel keep increasing over year
Table 2.7 The increase in Revenue and Income before tax of
Vietnam Trade Union Hotel in Hanoi (number in billion VND)
Income before tax increase rate 37.84% 70.59% 37.93% 60.00%
(Source: Vietnam Trade Union Hotel in Hanoi [2])
The hotel has demonstrated exceptional performance compared to industry averages, achieving a significant increase in its average daily rate from US$30.26 in 2006 to US$55.89 in 2010 In 2010, the average daily rate for the 3-star hotel segment was US$38.55, while the hotel surpassed this benchmark Additionally, the hotel's occupancy rate reached 83.63%, well above the industry average of 63.79% for 3-star hotels that year Overall, the hotel is excelling in both key performance indicators, positioning itself favorably within the market.
The financial function of the hotel faces significant challenges, primarily due to its placement within the accounting department, which focuses more on accounting tasks than on financial management This structure results in a lack of essential financial indicators, hindering effective analysis and informed managerial decision-making.
Research and development often represents a significant weakness for independent hotels, including those with 3-star ratings or higher This is evident in the general lack of awareness and understanding regarding the importance of R&D within the hospitality industry.
Developing SWOT matrix for Vietnam Trade Union Hotel in Hanoi
The internal and external assessment has provided the information for forming SWOT matrix This matrix is as follow:
Figure 2.1 SWOT Matrix for Vietnam Trade Union Hotel in Hanoi
1 Abundant of young labor with good labor rotation system
2 Labor has good knowledge background
3 Newly renovated hotel with modern facilities at low cost
2 Lack of detail job description and standards
3 Low level of foreign language
4 Majority of staff are female in the age of giving birth
6 No application of Yield Management
8 Low-level application of Information Technology
9 Poor management of information system
1 More foreign guests coming to
2 High exchange rate between VND &
3 Big source of young labor
4 Chances for investing and expansion
5 Development of internet and e-tourism
7 Hanoi is attracting domestic tourists
1 Expand and upgrade hotel to 4 or 5 star to charge premium price (S1,S2,S3,S4,S5, O1,O2,O4)
2 Offer extra service to increase tourists expenditure (S1,S2,S5, O4,O7)
1 Increase the number of male employee through more careful selection (W4,O3)
2 Apply PMS to start selling online with Yield
Management and Information system management (W6,W8,W9, O6)
1 People practice economy and reduce budget for traveling
1 Remain as 3-star hotel and take advantage of low labor cost, depreciation to be cost leadership (S3,S1,T1)
1 Develop a brand image of being environmental friendly W5,T3
2 Blend the brand with other Trade Union Hotel and cut
4 Entrance of int’l hotel chains
5 Competing hotels with better features advertise hotel as a green hotel (S1,S4, T3,T5) down service and other application to stay price competitive (W3,W5,T1)
Developing IE Matrix for Vietnam Trade Union Hotel in Hanoi
From the building of EFE and IFE matrixes in the earlier part showed the scores for the two matrixes as follow:
• The score of EFE Matrix of the hotel is 2.91
• The score of IFE Matrix of the hotel is 2.11
From that IE Matrix for the hotel can be developed as in figure 2.2:
Figure 2.2 IE Matrix for Vietnam Trade Union Hotel in Hanoi
High 3.00 to 4.00 Medium 2.00 to 2.99 Low
The hotel currently resides in the Hold and Maintain Division of the strategic matrix, with market penetration and product development being the most applicable strategies However, with an EFE total weighted score of 2.91, it is on the verge of transitioning to the Grow and Build Division, where intensive strategies such as market penetration, market development, and product development, as well as integrative strategies, would be more suitable The external assessment indicates significant opportunities for the hotel, suggesting that with a bit more effort, it can fully move into the Grow and Build Division.
The hotel should focus on a total weighted score of 1.0 by implementing strategies such as Market Penetration and Product Development These intensive strategies align well with the hotel’s current position and are particularly effective within the hospitality industry.
From the analysis of SWOT and IE matrixes the strategies can be grouped into 2 groups or two major strategies as below:
To compete in the high-end market, it is essential to upgrade the hotel to a four or five-star standard by enhancing the scale, service quality, and workforce This product development will be supported by the hotel's significant land for expansion, a plentiful labor supply, and access to capital, allowing for the introduction of a new and distinctive brand.
To capitalize on the current economic climate, we aim to expand within the 3-star market by enhancing our product offerings and leveraging our newly renovated, modern facilities By maintaining low operational costs through efficient labor rotation, we can remain price competitive, attracting more customers and increasing our market share in a landscape where consumers are increasingly budget-conscious.
The analysis and choice of the two strategies for the new period of operation of the hotel will be discussed in detail in the next chapter.
BUSINESS STRATEGIES FOR VIETNAM TRADE UNION HOTEL IN
General analysis
An intensive strategy is ideal for hotels focusing on market penetration and product development, categorized into two main approaches The first strategy involves upgrading the hotel to a 4 or 5-star rating to attract the high-end market The second strategy maintains a presence in the 3-star market Both options emphasize expansion by increasing the number of rooms to enhance "product units" and capture a larger market share.
Choosing this hotel option offers two significant advantages: first, the availability of ready-to-use land for expansion, allowing for the construction of two additional wings that could triple the number of rooms, resulting in substantial cost savings Second, the hotel can tap into a large local workforce, enabling it to achieve a higher average daily rate of $126—nearly double its current rate With increased room capacity and elevated pricing, the hotel is positioned to significantly boost revenue while benefiting from lower local purchasing costs and an affordable labor force, ultimately leading to greater profitability.
The first choice presents several disadvantages for the hotel Many employees lack English fluency, which is crucial for higher-tier service Additionally, the hotel's association with the Trade Union brand, perceived as low-end, poses a challenge Upgrading to a 4 or 5-star rating would require competing with established hotel chains in Hanoi and potential new entrants, making it difficult to secure a profitable market share A significant overhaul of the labor force and management would be necessary, conflicting with the Trade Union's core value of worker protection, as mandated by the Vietnam Confederation of Labor Furthermore, the current management board's term ends in a year, and any changes could lead to shifts in policies and management effectiveness Lastly, rebranding is essential, as the Trade Union name does not align with a luxury image.
The hotel stands out as the top choice in the 3-star segment, boasting a higher room occupancy rate and average daily rate than the industry average Additionally, the available land for expansion presents significant cost-saving opportunities While two direct competitors, Kim Lien and La Thanh, share similar advantages, they do not match the prime location of the Vietnam Trade Union Hotel in Hanoi.
While this choice presents no significant disadvantages, the potential for a substantial increase in revenue and profit is limited, as the hotel's current average daily rate exceeds the industry average Raising the average daily rate risks alienating customers, as evidenced by the data in Table 2.3, which shows a decline in occupancy rates from 89.4% in 2007 to 83.6% in 2010, despite the rate increase Ultimately, while this option is a safe strategy, it does not provide the same level of benefit as the more aggressive alternatives.
QSPM Matrix analysis
From the above analysis and the analysis of internal and external factors in Chapter 2, the following QSP Matrix is developed for Vietnam Trade Union hotel in Hanoi.
Table 3.1 QSPM Matrix for Vietnam Trade Union Hotel in Hanoi
Key Factors Weight AS TAS AS TAS
1.People practice economy, reduce budget for traveling 0.09 1 0.09 2 0.18
4 Entrance of experienced international hotel chains 0.07 1 0.07 3 0.21
5 Competing hotels with some better features 0.05 - - 1 0.05
1 More foreign guests coming to Vietnam 0.12 4 0.48 2 0.24
2 High exchange rate between VND and USD 0.13 4 0.52 3 0.39
3 Huge source of young labor 0.09 3 0.27 4 0.36
4 Stable politic system creating chances for investment 0.07 4 0.28 3 0.21
5 Development of internet and e-tourism 0.11 4 0.44 3 0.33
7 Hanoi is attracting domestic& international tourists 0.12 3 0.36 4 0.48
1 Abundant of young labor, good labor rotation system 0.10 3 0.30 4 0.40
2 Labor has good knowledge background 0.04 3 0.12 3 0.12
3 Newly renovated hotel with modern facilities 0.07 3 0.21 3 0.21
2 Lack of detail job description and standards 0.07 1 0.07 2 0.14
3 Low level of English and foreign language 0.10 1 0.1 2 0.20
4 Majority of staff are female in the age of giving birth 0.07 2 0.14 2 0.14
6 No application of Yield (or Revenue) Management 0.06 1 0.06 1 0.06
7 No financial analysis for managerial decision 0.06 1 0.06 1 0.06
8 Low-level application of Information Technology 0.04 1 0.04 2 0.08
9 Poor management of information system 0.05 2 0.1 2 0.10
From the Matrix above it is clear that the second choice is more attractive.
Strategies for Vietnam Trade Union Hotel from 2011 – 2020
Between 2011 and 2020, the Vietnam Trade Union hotel in Hanoi will implement an intensive strategy focused on market penetration and product development This approach aims to increase the number of rooms and establish the hotel as a green, high-end option within the 3-star segment, specifically targeting high-spending foreign and Vietnamese tourists.
The above strategies are said specifically as follow:
From 2011 to 2012, the Vietnam Trade Union Hotel aims to enhance its offerings by increasing the number of rooms and improving facilities and services The hotel plans to strengthen its brand recognition and transition towards becoming a green hotel, targeting high-spending foreign and Vietnamese tourists By leveraging local labor, available land, and suppliers, the hotel seeks to achieve cost leadership while preserving its image as a luxurious 3-star establishment.
The goals for the strategies will be
• Achieving 20% of the market share in the next 5 years
• Double the revenue of the hotel
• Maintain the leading position in Average daily rate in the 3-star segment
• Being perceived as a green and premium hotel in the 3 star segment
To achieve its strategic goals, the hotel must leverage its workforce, land, and prime location while addressing its weaknesses, including inadequate infrastructure, employee skill levels, ineffective use of information technology, and a confused brand identity.
To effectively address the identified weaknesses and leverage the advantages within the hotel industry, companies can implement strategic solutions across various areas, including organizational structure, human resources, marketing, and information technology By developing a comprehensive green plan, hotels can enhance their image as environmentally friendly establishments, ultimately attracting eco-conscious guests and improving overall sustainability.
Solutions for applying strategies
To capture a 20% market share in Hanoi's 3-star segment, the hotel needs to increase its room capacity significantly In 2010, the hotel sold 35,231 rooms, achieving a market share of only 7.65% despite an impressive occupancy rate of 83% Given that the total room sales in the 3-star segment amounted to approximately 460,545 rooms, the hotel must double its current room count to meet its target With a projected rise in tourist numbers and leveraging its prime location, maintaining a high occupancy rate is feasible Therefore, the hotel should aim to expand to around 270 rooms by constructing two additional wings, each containing 70 rooms, to facilitate this growth.
To ensure a seamless experience for hotel guests, a comprehensive construction plan is essential The development and operational readiness of the new wings should be completed within a two-year timeframe.
3.3.2 Turning the hotel into a green hotel
As global warming and air quality degradation intensify, environmental concerns are increasingly influencing travelers' choices when booking holidays Many guests now prioritize a hotel's eco-friendly practices as a key criterion for their selection, particularly in polluted urban areas like Hanoi, where the demand for green accommodations is on the rise.
To transform a hotel into a green establishment, two key actions must be taken: first, planting trees and bonsai both inside and outside the hotel to foster a lush environment; second, implementing a comprehensive green plan to enhance the hotel's eco-friendliness These initiatives not only reposition the hotel in the market but also strengthen its brand identity, helping it to distinguish itself from direct competitors and attract potential guests.
A study is necessary to design indoor bonsai and outdoor tree landscaping, taking into account the construction of two new wings.
To implement an effective green plan, a team of department heads will be established to formulate policies and strategies focused on sustainability This initiative will involve creating specific guidelines, allocating necessary resources, and designating responsibilities to ensure the reduction, reuse, and recycling of materials whenever feasible.
Step 1: Forming a Green action team
Step 2: Conducting audit of current hotel practices with regards on what can be reduced, reused and recycled The audit can be done by the team and/or with specialists on environment or ISO 14001: 2004.
Step 3: Developing environment codes and policies These codes and policies will be incorporated into hotel operation and Standard Operating Procedures for each job position.
Step 4: Provide staff training accordingly.
All employees in the hotel are invited to join the program by strictly following the policies on environment set by the hotel and contributing idea.
Guests are encouraged to participate in our eco-friendly initiatives, such as the linen program, which allows them to opt for reusing towels by hanging them up instead of requesting fresh ones daily.
Implementing this eco-friendly strategy can reduce hotel operating costs by at least 20%, while simultaneously serving as an effective marketing tool to attract environmentally conscious guests.
To effectively implement a strategy focused on market penetration and product development, marketing efforts must prioritize increasing sales This can be achieved by expanding the sales force, enhancing distribution channels, and investing in intensive advertising and sales promotions Additionally, focusing on market segmentation will help tailor approaches to specific customer needs, ultimately driving sales growth.
To effectively target its audience, the hotel should prioritize market segmentation, concentrating on the European and Australian markets, as well as the Vietnamese business sector, where it has already established a strong presence.
To successfully promote and sell the hotel, it is essential to establish a clear brand image supported by a strong positioning statement The hotel is adopting a new strategy to present itself as a green, premium establishment within the 3-star segment, featuring numerous quality rooms and meeting facilities Therefore, the proposed positioning statement is: "A green and peaceful place for doing business."
To enhance the visibility of the Vietnam Trade Union Hotel in Hanoi and distinguish it from other Trade Union Hotels, a robust advertising strategy will be implemented as part of the market penetration plan.
To maximize visibility, hotels should allocate a budget of at least 4% of their revenue for advertising during the first two years, reducing it to 1% thereafter Given the lack of an in-house sales and marketing team, it is more cost-effective to outsource advertising activities Instead, the hotel can leverage a team of "virus marketers" within the existing sales and marketing staff to implement online viral marketing strategies This approach allows the hotel to effectively promote its services without the overhead of a dedicated marketing team.
• Making funny and/or impressive clips, pictures about the hotel to post on internet, blogs, face book or the like of employees and employees’ friends and families.
• Create forum and topic about hotel
• Sending employees to “chat rooms” to spread out the information about hotel.
Virus marketing for Vietnam Trade Union Hotel focuses on showcasing high-quality services and facilities while emphasizing environmental friendliness This approach highlights the unique attributes that set Vietnam Trade Union Hotel apart from other Trade Union Hotels.
Organization chart of Vietnam Trade Union Company
Deputy Managers Hotel in Hanoi
Marketing Admin & Project Travel Hotel in Hotel in Hotel in Hotel in Accounting
Organization chart of Vietnam Trade Union Hotel in Hanoi
In this chart we cannot see the other functional departments as they belong to the company not to the hotel The disadvantage of this organization will be discussed later.
Over the past five years, the hotel has consistently generated the highest revenue among all the company's property and business activities, underscoring its crucial role in the company's overall business and financial well-being.
Table 2.2 Vietnam Trade Union Company Business results from 2006 to 2010
(the amount is in billion VND)
* = estimated figure (Source: Vietnam Trade Union Company [2])
Manager (of the company & hotel)
Over the past five years, the hotel has demonstrated impressive business performance and robust growth The accompanying table details the hotel's financial results from 2006 to 2010, highlighting its consistent success during this period.
Table 2.3 Vietnam Trade Union Hotel in Hanoi Business results from 2006 - 2010
( the amount is in billion VND)
* = estimated figure (Source: Vietnam Trade Union Hotel[2])
The hotel attracts a diverse range of guests, with 56% being foreign travelers and 44% Vietnamese The primary source of guests is tour operators and travel agencies, contributing to 50% of the total clientele Additionally, 10% of guests come from the Viet Nam General Confederation of Labor, often visiting for business meetings or organized vacations The remaining 40% consists of Free Independent Travelers who stay at the hotel for both business and leisure purposes.
2.2 Vietnam Trade Union Hotel External Assessment
The hotel and tourism industry relies heavily on both domestic and international tourists as key revenue sources Consequently, the economic conditions within the country and globally significantly influence the health of this sector.
In recent years, the global economy has faced crises that hindered the growth of the tourism industry, as travelers became more budget-conscious In 2008, international tourist arrivals reached over 922 million, marking a 1.9% increase from 2007, with tourism receipts totaling US$944 billion However, the recession led to a significant decline in travel demand starting in June 2008, resulting in a mere 2% growth in international arrivals This downward trend continued into 2009, with a 4% decrease in global tourism, leading to only 880 million international arrivals.
Following a year of recovery, the global economy is experiencing a gradual growth, projected to persist into 2011 and 2012 According to the United Nations' baseline forecast, the growth rate of world gross product (WGP) is anticipated to be 3.1 percent.
In 2010, international tourism rebounded significantly, achieving a 7% increase to 935 million arrivals, following a 4% decline in 2009 due to the global economic crisis The World Tourism Organization noted that most global destinations recorded positive growth, effectively offsetting previous losses Asia emerged as the fastest-growing region, with a remarkable growth rate of 13%, reaching a record 204 million international tourist arrivals in 2010, up from 181 million in 2009 This upward trend in tourism is anticipated to continue as the global economy recovers.
2011 but at a slower pace UNWTO forecasts international tourist arrivals to grow at between 4% to 5% in 2011, a rate slightly above the long-term average [11]
This fact poses a great opportunity for tourism industry in Vietnam in general and for the hotel industry in Vietnam in particular to get more guests and increase the revenue.
In 2010, Vietnam's economy experienced a significant recovery, achieving a GDP of $104.6 billion and a growth rate of 6.78%, surpassing initial forecasts by 0.3% However, this year also brought notable challenges for the Vietnamese economy.
• The interest rate race started by commercial banks which reached 18% at its peak This event negatively influenced the goods market
• The gold and foreign currency market chaos putting the gold price reaching the record high of 38 million dong per tael and pushing the exchange rate to 21,000 VND to 1 USD.
• The high inflation rate of 11.75%
• Real estate prices followed gold prices and urban planning This event made the real estate prices increased sharply in 2010 by 30-100 percent
These events are forecasted to continue in the future and thus pose both opportunities and threats for hotel industry in general and for Trade Union hotel in particular.
The economic recovery is boosting the demand and budget for domestic travel, significantly benefiting the hotel and tourism industry Additionally, the favorable exchange rate between the VND and USD makes accommodations more affordable for foreign tourists, as most expenses are incurred in Vietnamese Dong Furthermore, high real estate prices may deter potential competitors from entering the hotel market, reinforcing the industry's stability.
The sluggish economic recovery, coupled with high inflation and volatile gold and foreign currency markets, is prompting individuals to tighten their budgets and prioritize savings over luxury spending As a result, many are choosing to invest in banks, dollars, or gold instead of traveling.
Vietnam's rich agricultural heritage is rooted in wet rice cultivation, making it one of the oldest cultures in East Asia Influenced by Chinese civilization over centuries, Vietnam embodies aspects of East Asian cultural traditions, particularly in its political structures, governance, and the Confucian values that shape its social and moral ethics.
Vietnam's cultural landscape has evolved significantly since the French colonial period, which introduced European influences such as Catholicism and the Latin alphabet Prior to the 1990s, tourism and hotels were viewed as luxurious and contrary to traditional values, often linked to social issues, making it difficult for individuals to engage in these industries However, since the 1990s, Vietnam has increasingly embraced Asian, European, and American cultures, leading to a shift in perception among the new generation Today, hotels and tourism are seen as legitimate businesses, and the stigma surrounding them has diminished considerably.
Vietnam is increasingly open to various aspects of life while preserving its unique cultural identity, creating a conducive environment for the hotel and tourism industry With minimal barriers in cultural and social norms, the country welcomes business opportunities in this sector Renowned for their hospitality and strong work ethic, the Vietnamese people contribute significantly to the industry's growth Additionally, Vietnam's young population serves as a valuable labor source, further enhancing the favorable socio-cultural landscape for tourism and hotel ventures.
Influenced by Confucian values, Vietnamese culture places a strong emphasis on obtaining university degrees, often leading to a devaluation of vocational training As a result, many individuals pursue office or management positions instead of entry-level jobs This trend has contributed to a significant shortage of skilled workers, which is essential across various industries.
28 especially labor-intensive ones like hotel and tourism It is also the reality that the tourism and hotel industry in Vietnam is facing.
The Constitution reinforces the supremacy of the people guided by the Communist Party, with the National Assembly representing the people's power at the central level and the People's Councils exercising authority at local levels.
The increase of tourists to Hanoi from 2005 - 2010
The data indicates a steady annual increase of 10% in hotel demand in Hanoi until 2020, suggesting a significant future need for accommodations This growing demand will likely diminish customers' bargaining power in the hotel industry According to CBRE's report, the long-term outlook for hotel usage is promising, as an increasing number of Vietnamese tourists and business travelers seek higher-quality branded options Notably, domestic visitors to Hanoi outnumber foreign tourists by more than six times, and with quality rooms, excellent facilities, and a prime location, this trend presents lucrative opportunities for hotels in the area.
Hanoi, the capital of Vietnam, boasts a diverse array of suppliers for hotel equipment, amenities, cleaning services, food, drinks, and stationery, ensuring that hotels in the city have ample choices to meet their needs The city's strong economic center and efficient transportation infrastructure eliminate supply shortages, resulting in a competitive market where suppliers possess limited bargaining power over hotels.
2.2.2.4 Potential Entry of new competitors
Hanoi's real estate market is characterized by consistently rising land prices, as highlighted in a CBRE report indicating price appreciation across all districts in 2010 Notably, the fourth quarter saw landed house prices increase by 12-15% This upward trend, combined with elevated construction costs, creates significant barriers for potential investors and homeowners.
Hanoi's hotel market faces stiff competition from 38 other entrants, with a growing demand for condominiums and office rentals making these projects more appealing to investors Despite this, CBRE identifies significant opportunities for the development of branded budget (3-star) to high-end (4-star) hotels, as existing independent hotels lack consistent service and effective marketing Additionally, major hotel chains such as Ritz Carlton, St Regis, Mandarin Oriental, Shangri-La, and Four Seasons are expected to enter the Hanoi market within the next five years, intensifying competition in the 5-star segment.
The analysis indicates that the potential for new competitors entering the 3-star hotel segment in Hanoi is low However, the impending development of 4 and 5-star hotels by major chains could significantly increase room supply in the city This influx may lead guests to opt for higher-end accommodations, potentially diminishing the market share of all hotel segments as customers seek quality service.
2.2.2.5 Potential development of Substitute products
In major cities, finding alternatives to 3-star hotel accommodations is challenging, as the only substitutes are guest houses, 1 or 2-star hotels, and 5-star hotels However, guest houses and lower-rated hotels often lack the quality and satisfaction that guests seek, while 5-star options are prohibitively expensive Consequently, the limited availability of substitute products presents a low threat in this market segment.
2.2.3 Evaluation of Opportunities and Threats
From the above analysis threats and opportunities are identified as follow:
The slow economic recovery and unstable conditions are prompting individuals to tighten their budgets, particularly for travel, which poses a significant threat to the hotel industry Currently, the hotel has not implemented any strategies to address this challenge, resulting in a low response rating of 1.
The hotel faces a significant threat due to a shortage of skilled workers necessary for enhancing service quality and fostering development Although the hotel is prioritizing staff training, the absence of standardized job descriptions hampers the effectiveness of these training initiatives Consequently, the hotel's efforts to address this challenge are rated a 3.
Pollution in major cities significantly impacts the travel experience for tourists, deterring them from choosing accommodations such as the Vietnam Trade Union Hotel in Hanoi This environmental challenge poses a moderate threat to the hospitality industry, yet the hotel currently lacks effective measures to address the issue, resulting in a low rating of 1.
The rise of the internet and e-tourism poses a significant threat to the Vietnam Trade Union Hotel in Hanoi, as competing hotels can attract its guests through online platforms With an increasing number of accommodation options available online, the hotel faces a heightened risk of losing clientele Unfortunately, the hotel has yet to implement effective online selling strategies, resulting in a low preparedness rating of 1.
The entry of established international hotel chains poses a minimal threat, as they primarily target the 4 to 5-star market, while the hotel currently operates as a 3-star establishment In response, the hotel is committed to enhancing its facilities and services with the goal of achieving a 4-star rating.
The hotel faces significant competition from others like Hoa Binh, which excels in IT management, and larger establishments such as Kim Liên and La Thanh This presents a considerable threat to its market position Currently, the hotel employs a Property Management System for operations; however, its implementation is limited, primarily automating tasks for Front Office and Housekeeping staff There are no plans for expansion, leading to a performance response rating of 2.
Vietnam is emerging as a safe and appealing destination for an increasing number of international visitors, presenting significant opportunities for growth In response, hotels are enhancing their services by offering English language training and upgrading their facilities to better accommodate foreign guests, earning a commendable rating of 4.
A high exchange rate between the Vietnamese Dong (VND) and the US Dollar (USD) makes hotels appear more affordable to foreign tourists, as most expenses are paid in VND This is crucial for attracting international visitors By sourcing supplies and amenities locally, hotels can further reduce costs, enabling them to offer competitive room rates.
• Young population can provide huge source of young labor for hotel and tourism This is weighted important and the hotel is taking advantage of it thus the rating is 3.
A stable political system free from terrorism and chaos fosters a secure environment conducive to development and investment This stability is crucial for growth, and while the hotel has not yet capitalized on this aspect in its plans, it remains acutely aware of its significance, resulting in a rating of 2.