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Listed in 2012, Global Premium Hotels Ltd (GPHL) is a Singapore based hotel operator and developer. The group’s first hotel, Fragrance Hotel Sapphire started its operation in 1998, and over the years the group has grown to include 23 hotels located across the island. Besides the “Fragrance hotel” brand which provides economy class accommodation, the group launched the Parc Sovereign Hotel in 2011, its first premium hotel under the “Parc Sovereign” Brand. Located near land marks such as Singapore Art Museum, Chijmes and LASALLE College of the Arts, the hotel aims to provide mid-tier accommodation to traveller with a passion for the arts. (Global Premium Hotels Limited, 2012) With its newly created brand, the group is aiming to target the mid-tier segment of the market. The new brand also allows the group to price the room in the hotels under the “Parc Sovereign” brand higher to generate more revenue. This has proven to be successful as hotel revenue has increased from S$50,952,000 in 2011 to S$58,934,000 in 2012. However, profit for the group has dropped to S$18,453,000 in 2012 from S$22,624,000 in 2011 in spite of the increase in revenue. (Global Premium Hotels Limited, 2012) This is due in part to the cost incurred from the restructuring of the group to prepare for IPO in 2012. The group hopes to continue expanding its “Parc Sovereign” brand in the future and increase its marketing share in the mid-tier segment. 1b)
The Group’s organizational structure is shown as the below chart:
The pricing decision making process likely involves the Board of Directors, the CEO and the Executive Officers. The Board of Directors, led by the Chairman, protects the interest of the shareholder. They periodically review the Group’s financial performance and set the strategic direction for the development of the group. (Global Premium Hotels Limited, 2012) A change in the strategic direction may result in a change in the pricing strategy. As a member of the Board, the Chief Executive Officer is responsible for implementing strategy by the Group and seeks approval from the management to such practice. (Global Premium Hotels Limited, 2012) Aided by the Executive Officers, the CEO has full control over the business directions and operation decision. An example of a pricing decision making process may be for the board of directors to decide to set their target on increasing the profit growth for the following year by a certain percentage. This decision may lead to a need to change of the current pricing strategy of the hotels to bring increase profits. The CEO will work with his executive officers to formulate a proposal for achieving this target set by the board. This proposal may include a change in pricing. The CEO will then seek approval from the Board for the proposed change. Once approved, the CEO will carry out the plan and decide on the new price with the assistance his executive officers. 1c)
According to the Group’s financial report for 2012, the group owns a total of 23 hotels with 1,738 hotel rooms. The total profit before tax for the year of 2012 is S$22,930,000. The Cost of sales is S$7,977,000. The fixed cost of the year is the sum of Administrative expenses of S$22,964,000 and Finance expenses of S$6,974,000, the total of which works out to be S$29,938,000. (Global Premium Hotels Limited, 2012) S$7,977,000/1,738 = S$4,598.
The variable cost of each hotel room of the year 2012 is calculated to be S$4,598. P = [(π + F)/Q] + V
P = [(S$22,930,000 + S$29,938,000)/1,738] + S$4,598
P = S$30418.87 + S$4,598...
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