Rotorua Hotel Development: A Feasibility Study of a Five-Star Complex

This report analyzes the feasibility of developing a five-star hotel complex in Rotorua, New Zealand, considering market demand, competition, and various environmental factors. The methodology involves a comprehensive analysis of secondary data from accredited websites, journals, and research databases. The findings indicate a development boom in New Zealand's hotel industry, presenting opportunities for a five-star hotel in Rotorua, despite moderate competition. A C-PEST analysis reveals that political and economic factors are favorable, while socio-cultural and technological factors offer advantages. The proposed location near Mount Ngongotaha is accessible but has weaknesses like low tourist numbers and high operating costs. The report recommends market entry with innovative and product differentiation strategies, benchmarking with successful hotels in Rotorua to sustain competitive forces and gain market share. The study concludes that Rotorua has high potential for hotel development and can be tapped through analysis of market demand and viability.

Running Head: HOTEL MANAGEMENT 1
HOTEL MANAGEMENT

HOTEL MANAGEMENT 2
Executive Summary
The paper has analyzed the development of a five-star hotel complex in Rotorua, New
Zealand. In terms of methodology, the researcher comprehensively analyzed different sources of
information for data including accredited websites, reviewed journals, online publications,
previous researches, research databases, and books. It was found out that with a development
boom of hotels being underway in New Zealand, opportunities exist for the development of a
five-star hotel complex in Rotorua. Competition is moderate, with the market demand being high
now and is still expected to increase in the future since different customers prefer different hotels
according to their standards. The government’s policies and the economy in Rotorua are
favorable for the development of a five-star hotel complex in Rotorua, while the socio-cultural
factors and technological factors being a great advantage for the development of a five-star hotel
complex in the region. The proposed location for the hotel development at the slopes of Mount
Ngongotaha near Rotorua town is suitable as it is accessible due to good road transport systems
and minimum traffic count among other important factors. The location also possesses some
weakness including a low number of tourists, ineffective council permitting process, low
community support, low labor supplies and high costs of operating the hotel. Therefore, it was
found out that Rotorua market entry of the five-star hotel complex is recommendable and should
use innovative and product differentiation strategies as it will gain a higher market share within a
short duration. In conclusion, it is recommended that the five-star hotel complex should consider
benchmarking with the successful existing hotels within Rotorua so that it can learn more about
the environment the hotel is venturing into and the means of sustaining competition forces.
Table of Contents

HOTEL MANAGEMENT 3
Executive Summary.......................................................................................................................2
Introduction....................................................................................................................................4
Methodology...................................................................................................................................4
Market Demand Now and in Future............................................................................................5
C-PEST Analysis............................................................................................................................6
Competition Factors (Porter’s Five Forces)............................................................................6
Threat of New Entrants.........................................................................................................6
Bargaining Power of Customers...........................................................................................6
Industry Rivalry.....................................................................................................................6
Bargaining Power of Suppliers.............................................................................................7
Threat of Substitutes..............................................................................................................7
Political Factors..........................................................................................................................7
Economic Factors.......................................................................................................................8
Social Factors..............................................................................................................................9
Technological Factors..............................................................................................................10
Location Factors..........................................................................................................................10
SWOT Analysis........................................................................................................................10
Strengths................................................................................................................................10
Weaknesses............................................................................................................................11

HOTEL MANAGEMENT 4
Opportunities........................................................................................................................12
Threats...................................................................................................................................12
Discussion and Recommendations.............................................................................................12
Conclusion....................................................................................................................................13
References.....................................................................................................................................15

HOTEL MANAGEMENT 5
Introduction
The hospitality industry with regard to hotel businesses is one of the biggest employers in the
world. The hotel industry in New Zealand has attained a high status and demands high work
standards from the employees. Opportunities for employment are many in the hotel industry in
Rotorua, although they require a high level of professionalism and potential for personal qualities
in each field. New research by Williamson (2017) shows that there is a development boom of
hotels which is underway in New Zealand, with the country being in the midst of the highest
development activity levels in its history. In Rotorua, hotel development is booming with one
hundred and thirty rooms currently being constructed while three hundred and thirty-four others
have been proposed (Moriarty, 2010). The report will include recommendations on how a five-
star hotel complex can be developed in Rotorua, New Zealand, with consideration to market
demand and viability. The conclusion will show that there is a very high potential for hotel
development in Rotorua which can be tapped through the analysis of market demand and
viability.
Methodology
The paper used Secondary sources of collecting information. The sources used in the
paper include data from accredited websites, reviewed journals, online publications, previous
researches, research databases, and books. According to mutual, secondary sources of data are
information created by a person that did not participate in the event or did not experience first-
hand information. The sources are easy to collect and for analyzing the data. Collection of the
data using secondary sources saves time as compared to primary data sources.

HOTEL MANAGEMENT 6
Market Demand Now and in Future
Currently, the hospitality industry in Rotorua is growing significantly with high instances
of economic activities taking place. As a result of recreational activities, lodging, food and
tourism activities, the domain of the industry has presented a huge economic avenue for all types
of opportunities. Particularly, in Roturua the demand for the hotel is significantly high with
consideration of tourism activities and recreation services that are taking place in the town. The
main customers of the hotels are domestic and international tourists. Other customers may
include domestic and international students, businesspersons and politicians. Most of the
customers need classy temporary accommodation rooms with entertainment facilities like
casinos during their stay in the town. Furthermore, the accommodation rooms of these hotels
vary in terms of social wealth classes as some rooms have higher prices than others.
Furthermore, affordable and classy rooms have a higher demand than VIP rooms.
According to Hung, Shang, and Wang (2010), the high demand rate is linked to high
prices which have led to the prices of the hotels going up. Currently, the Rotorua market has over
two hundred hotels charging from $33 for accommodation services (Kerr & Lock 2010). The
hotels still are low compared to the demand and therefore future growth of the industry is
expected to be high. For instance, New Zealand is expected to generate over 80 percent hotel
growth demand by 2025. Therefore, the marketing strategy for demand is building customer
loyalty and differentiating products to have new features which further attract customers. For
example, some hotels have invested high in innovative technologies by equipping their rooms
with Wi-Fi, infrared doors and scanners.

HOTEL MANAGEMENT 7
Competition Factors (Porter’s Five Forces)
Threat of New Entrants
Currently, there is a threat of new entrants resulting from the very strong international
interest by main global hotel operators to expand their outlets in New Zealand, with the
international chain of hotels dominating the hotel industry. Further research by Li (2018) shows
that Scenic Circle, Quest, Heritage and Accor have recently added properties to their portfolios
in New Zealand while Outrigger Hotels and Resorts has swiftly made its establishments in New
Zealand.
Bargaining Power of Customers
The hotel has three properties in Taupo, Queenstown, and Christchurch which offer a
substitute for customers thus increasing their bargaining power. In addition, AccorHotels have
announced the development of a five-star Pullman hotel which is set to be opened in Rotorua in
early 2019, in the former Zen Building on Arawa street after being awarded a hotel management
contract by Chow Group Management (Verboz, Bucak & Atay, 2013).
Industry Rivalry
Rivalry amongst operators of hotels in Rotorua has been strong in recent years, with the
hotel operators intending to secure strategic positions and also extend their brand and network
presence in the town. The presence of other established five-star hotel complexes in Rotorua
including YHA Rotorua, Treetops Lodge & Estate, Regal Palms Resort and Peppers on the Point
- Lake Rotorua increase rivalry in the industry.

HOTEL MANAGEMENT 8
Bargaining Power of Suppliers
Market demand for hotels and the tax climate has led to the construction of five-star hotel
complexes in Rotorua which has increased the bargaining power of suppliers. In addition,
suppliers have several hotels they can supply thus their bargaining power is high.
Threat of Substitutes
The increased number of visitors has increased the need for the five-star hotel complexes,
with the backpacker hostels becoming increasingly popular in New Zealand. The hostels offer a
form of substitution to five-star hotel complexes offering accommodation that is cost effective
thus mounting strong competition to other hotel suites in the region.
PEST Analysis
Political Factors
The political environment existing in a country has a great impact on the business
performance in the hotel industry around the world. In New Zealand, politics have affected the
daily lives of citizens with businesses in the hotel industry coming up with various methods to
cope with the situations of politics in the country. The hotel industry in Rotorua is highly
dependent on international and local guests, with the New Zealand government adopting
approaches determining the number of tourists visiting the country (Connell, Page & Bentley,
2009). New Zealand has over the years been attracting a high number of tourists which has been
attributed to its stable political environment. The labor party which is ruling has adopted a
political approach which has been attractive to international tourists (Scott, Gössling & deFreitas,
2008).

HOTEL MANAGEMENT 9
Economic Factors
According to Bharwani and Mathews (2012) New Zealand’s economy is highly
dependent on trade with its new and traditional trade partners including Japan, European Union,
United States, South Korea, China, Australia, among others. Compared to other nationalities in
the region, the manufacturing sector of New Zealand is relatively small, with its main economic
focus primarily being on tourism and industries like the hotel industry. The government of New
Zealand has over the years, in conjunction with the World Bank, carried out intense reforms of
the economy with an aim of doing away with barriers getting in the way of foreign investments.
The reforms have made a transformation to the country into a business-friendly country.
The average income in the country affects the performance of the hotel industry in the
country with further research by Lim, Chang & McAleer (2009) indicating the average
household income in New Zealand to be $ 67,028. The aspect indicates that the economy of the
Rotorua is good and that people in the region possess the purchasing power to purchase the
available services and products thus offering an opportunity for the establishment of a five-star
hotel complex in the town. The inflation rate in the country which stands at 0.70% was
considered to be among the world’s lowest rates of inflation (Robinson, Fallon, Cameron &
Crotts, 2016). The New Zealand dollar has maintained its strength against the leading currencies
globally. For example, the New Zealand dollar is exchanged for US$ 1.2652 (Schiff & Becken,
2011). The hotel industry highly thrives in a local currency which is strong since it mostly
handles foreign currencies. In addition, the country has the lowest unemployment rates as
compared to other countries in the region.

HOTEL MANAGEMENT 10
Social Factors
Various five-star hotel complexes in Rotorua are popular with both international and
local visitors to the city. The opinions of customers about the hotel services and products offered
to affect the image of the businesses. A main social factor affecting the performance of five-star
hotel complexes in Rotorua is the trends which are upcoming in the lifestyles of consumers. The
old tradition of hotels cooking any food they wanted, selling it to customers and getting away
with that has been changed by the consciousness of people with the food they eat. Therefore,
hotels have invented measures of dealing with dynamic consumers’ tastes and preferences. As
compared to other surrounding countries, New Zealand is mainly an urban country, with
seventy-two percent of the people living in towns. The presence of the high population in
Rotorua offers a five-star hotel complex additional customer to whom it sells its services and
products thus reducing over-reliance on tourists.
Furthermore, New Zealand has the youngest population among all nations which are
industrialized, with 20% of the total population in the country being 24 years old or younger.
However, by 2050, the country’s population is projected to increase from the current 4.5 to 5.3
million people (Robinson et al., 2016). In addition, the median age in the country is also
expected to range between thirty-six to forty-three years. Therefore, five-star hotel complexes
have to readjust their strategic plans to ensure that the demographic changes have been
accommodated. Moreover, the increase in population in India, China and Brazil also affect the
hotel industry in New Zealand since they are among the world’s emerging markets.

HOTEL MANAGEMENT 11
Technological Factors
The amount that customers are willing to pay for services and products in the hotel
industry in Rotorua has affected the adoption of technology which facilitates the storage of
relevant information about customers. A demand for customers to make bookings via the internet
has presented the need for automation of services by hotels in the country. Therefore, hotels have
to invest significant finances to come up with automated booking and room services. In addition,
the need for affordable energy has made it necessary for five-star hotel complexes in Rotorua to
invest more funds. Technology adoption in five-star hotel complexes in New Zealand is a major
factor which the organizational managers must consider since there is involvement of large sums
of money.
Location Factors (SWOT Analysis)
Strengths
The five-star hotel will be developed at the slopes of Mount Ngongotaha near Rotorua
town. The main factor that makes the location considerable it is accessible due to good road
transport systems and minimum traffic count. Other strengths that make the location ideal for
generating high-profit margins include the presence of Mario culture; the destination is
accessible and closes Fanon Street, high number of tourists, low competition and presence of
special features like geothermal activities. Mount Ngongotaha is close to the Fenton Street that is
associated with various attractions as it links the central business district to the mountain and to
Lake Rotorua.

HOTEL MANAGEMENT 12
The location is well equipped with good infrastructures like transports and network
system that are effective hence enabling economically efficient tourism as both domestic and
international tourism is likely to move from one destination to another and later on camp on the
hotel. Mountain Ngongotaha is also a prime natural future for Mario cultural activities. The
cultural attractions on the mountain and along state five highland include rainbow springs,
swoop, Gondola and Luge have been attracting tourism significantly (Shelford, 2018). The
competition levels in the location are very low. Furthermore, there is no accommodation near the
mountain, as investors believe the cultural activities are not the main reason why tourists come to
visit Rotorua. Furthermore, tourism development in Rotorua has concentration around natural
attractions especially around the central business district and the lake while many hotels with
great accommodations are situated along Fenton Street. Geothermal activities have also been a
key tourist attraction in the area. The development of these geothermal activities have resulted in
a high demand for tourists.
Weaknesses
However, the location also possesses some weaknesses including a low number of
tourists, ineffective council permitting process, low community support, low labor supplies and
high costs of operating the hotel. The number of tourists in the area is significantly low because
the majority of tourists prefer spending time in lakes and geothermal activities which are distant
from the location. Furthermore, the community support is very low as a few activities are carried
out near the mountain while the majority of people prefer taking their activities to the town. The
location is surrounded by many hotels, the labor supply is very low as some hotels have already
retained their professional staff by offering good reward packages to them. The distribution