The main issues in this case are regarding to a scarce resource, a beachfront Palapa, which is an important product for this resort adding great value to customers. Due to this very limited spots The Caribbean Palm Resort has been struggling for developing the right pricing strategy in order to achieve both revenue and customer satisfaction goals. However, the approaches to date they considered have been inconsistent and too complex. As a result, it could confuse customers and staff and also jeopardise their business.
Generation and Evaluation of Main Issues
* Limited supply and High demand: The resort does not have as many as palapas as they have rooms. The palapa availability accounts for only about a quarter of the total room availability (26%, Room-350/ Palapa-92). * First-come, first-serve basis: This system is inefficient for such a scarce resource, which is in very high demand. The resort could generate revenue with rental system. If the hotel runs palapas with free operating system such as other hotel amenities, the customers tend to take using palapas for granted. And if they had no opportunity to use them they might feel more frustrated and have a negative perception of this resort. * The Claiming Process: The reservation policy of Palapas is an informal process with leaving customers’ items. The informal claiming process looks unprofessional and many incidents of lost items could occur in the resort. Again, due to these facts the resort could get a bad reputation.
Pricing Strategy (Current One)
* Timeframe: All pricing policies are a daily basis. It might not be efficient to use palapas. The Users do not stay at palapas all day. Some could leave earlier (stay just half day). * Unfairness: 50% of palapas in each row are rented and the rest are free. Some customers who pay for the spot could feel discriminated especially if others take spots for free in the same row. * Inconsistency: Once the right pricing strategy is in place the resort should enforce it consistently. The resort keeps changing its price policy frequently and it confuses the customers and it is unreliable.
* Too much responsibility: It is no longer a towel hut. It covers not only distributing and collecting towels but also explaining policy, taking reservations and managing palapas and customers’ complaints and so on.
Recommended Solutions and Justification
* Increasing the supply: The resort could provide more palapas so that more quests can have opportunity to enjoy it. However I assume that there could be a limitation of installing palapas by government (such as not to damage the nature). There is no information regarding government’s permission. If so, they should offer alternatives for customers. The alternatives could be canopies or beach umbrellas. However, these should be provided free. * Abandoning the first-come, first-served system: All palapas should be rented so that some customers who choose not to pay for palapas would not feel frustrated or slighted and it is fairer for every customer to pay for them and no one needs to line up and waste time.
* Consistent and reliable pricing strategy: The Price system should be an hourly basis not daily. For instance, the resort charges $8 / hour for the use of a palapa. The resort needs to optimize their scarce resource wisely. * Allocating towel hut’s responsibility: The resort should add divisions to share the roles of current towel hut. They do not need a reservation team because palapa reservation should be done during room reservation process and there is no more first-come, first-served system. However, Its responsibility needs to be shared by a towel team, a beach chair or canopy rental team and a customer service team that can manage customers’ complaints and so on.