Low-Cost (Budget Hotel) Strategy (Operations strategy for Low- cost
Hotels)
11 Operational strategies to be followed for Low-Budget Hotels
Hospitality Industry in India is considered as the sunrise Industry, which means it has a huge
scope in the near future. It is one of the most profitable industry which nearly
accounts for over 8.78 % of the total workforce. Low-Budget hotels are hotels that are
developed for travellers for short stay on Low budget.
The Market segmentation of Hotels can type:
1. By Type
Chain Hotels
Independent Hotels
2. By Segment
Service Apartments
Budget and Economy Hotels
Mid and upper mid-scale Hotels
Luxury Hotels
1.Design of Goods and Services
Great products and services are the keys to success. The Budget Hotels lays emphasis
on no frills, self-service facility with smaller inventory of rooms as also a control on
pricing. An effective product strategy links product strategy links product decision
with investment, market share, and product life-cycle, and defines the breadth of the
product line. The objective of the product decision is to develop and implement a
product strategy that meets the demands of the market place with a competitive
advantage. Thus, the product strategy should focus on developing a competitive
advantage via differentiation, low cost, rapid response, or a combination of these.
The profitability of the budget hotel is also decided by the cost of land, which should
not exceed 15-20 per cent of the total project cost.
Competitive Pricing Strategy
Bottom-Approach Pricing: This pricing strategy determines the selling price of a
product or service by taking the expenses made on the product and adding the profit
margin to it. Businesses need to be sure of the cost allocation of their products or
services while utilizing the Bottom Price. Bottom-up strategy should be adopted for
the pricing strategy of the goods and services for a low budget hotel. The benefits of
adopting this pricing strategy for the goods and services for this low budget hotel are
mentioned below:
Predict Profits: The Business gets to predict the profits that would be generated on the
product or services sales. Because the selling price of the product or services is
determined by considering the profits, the profit generated can thus be estimated and
hence, it can adapt to the figures easily. The Hotel should ensure that their product or
service is achieving the target sales so that the predicted profit is achieved.
Employee Engagement: One of the benefits of adopting this pricing strategy is
employee engagement. The employee wages are directly related to the sales of the
product and services so the it will engage the employees with the product/services and
drive more sales. This strategy will keep the employees on board and drive more
sales.
When the engagement and satisfaction with the product /service is great from the
bottom level, then it also keeps the business alive for the long- term and accordingly
generate profits.
Pricing of the Rooms
The price range of the rooms should be kept as RS.1000 per room approximately.
The Room service should be cut down and should be made to “Help yourself” to cut
down the costs for a Low-Cost Budget Hotel. With this method, the Hotel can be
operated with less staff.
The size of the Hotel rooms should be kept small only.
Single room charges-Rs.780
Double Room charges-Rs.960
If the booking will be made online, then the customer can avail a discount of Rs 60.
This practice will cut the marketing costs which contributes to 10-15% of the room
costs.
