POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

CASE ANALYSIS in REPORT FORMAT

THE PROBLEM WITH OPERATIONS PERFORMANCE

The Penang Mutiara (InterContinental Penang)

As part of the requirements in

OPERATIONS MANAGEMENT AND TQM (BUMA 20093)

Submitted by:

______________________

BSBA HRM 1-4N

Submitted to:

Prof. Bonifacio P. Echauz

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NAME OF THE COMPANY

The Penang Mutiara, which will soon be renamed as InterContinental Penang, is

a resort located on the beachfront of Teluk Bahang, Malaysia, which is 30 minutes away
from the second largest city in Malaysia — Georgetown. It was previously considered as
one of the most luxurious hotels in Asia where notable guests stayed such as Sultan of
Selangor and Malaysia’s former prime minister, Tun Dr. Mahathir. Although it is still
abandoned until today, it is set to reopen in 2025 under a new name. Originally, the hotel
had 438 hotel rooms and staff count of 1,500; once it is reopened they will expand it to
accommodate more guests which will feature 355 rooms and suites, up to three
bedrooms, a private enclave of six villas, three (3) swimming pools, five (5) restaurants
and bars, 1,000 square meters of meeting and event space, and the brand’s world-
renowned Club InterContinental Lounge offering views of the Straits of Malacca. (IHG
Hotels & Resorts, 2022)

BRIEF HISTORY OF THE PENANG MUTIARA

The Penang Mutiara was built in 1987 and opened in September of 1988 under the
management of Tradewinds Corporation Berhad. Since then, they have been serving
guests with exclusive hospitality; until it was closed for renovation on March 27, 2006,
and the reopening date was delayed. Up to this day, the hotel remains abandoned. It is
set to reopen in 2025 after IHG Hotels & Resorts, one of the world’s largest luxury hotel
chains, and Tradewinds Corporation Berhad had signed a deal to revive the resort under
a new name. (Yeap, T. 2022)
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SITUATIONAL ANALYSIS

• 6 PESTLE Model:

➢ Political Factors: The hotel's operations and growth can be influenced by

government regulations related to tourism, hospitality, and employment. Any
political instability or changes in government can impact the hotel industry in terms
of visitor numbers, business environment, and investment opportunities.
➢ Economic Factors: The overall economic growth of the country, as well as regional
economic factors, can affect the demand for luxury hotels like The Penang Mutiara.
➢ Sociocultural Factors: The hotel's services, amenities, and marketing strategies
should align with the local culture and preferences to attract both international and
domestic guests. Understanding the demographics of potential guests, such as
age groups, income levels, and travel preferences, helps in tailoring services and
marketing campaigns accordingly.
➢ Technological Factor: Maintaining a strong online presence, utilizing social media,
and implementing effective digital marketing strategies are essential for attracting
guests and maintaining competitiveness.
➢ Environmental Factors: The hotel should consider the potential risks associated
with climate change, such as extreme weather events, considering they are
located beachfront. Therefore, they must implement appropriate measures for
disaster preparedness and mitigation.
➢ Legal Factors: The hotel needs to comply with employment laws and regulations
related to wages, working hours, health and safety, and employee rights. As well
as protecting the hotel's branding, intellectual property, and proprietary information
is crucial to maintaining a competitive advantage.

• Porter’s Five (5) Forces:

➢ Threat of New Entry: High, due to significant capital requirements, economies of

scale, and brand reputation. However, if the market is experiencing high demand
and the barriers can be overcome, there is a potential threat of new entrants. The
Penang Mutiara's strong brand image, customer loyalty, and high-quality services
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act as a deterrent against new competitors, although new boutique hotels or luxury
resorts could still emerge as competition.
➢ Supplier Power: Moderate, due to the availability of multiple suppliers in the market
such as suppliers in the hotel industry include various entities such as food and
beverage suppliers, furniture and equipment manufacturers, and service
providers. However, if the hotel relies on specific suppliers for unique services or
products, those suppliers may hold more bargaining power. The hotel's purchasing
power, long-term relationships, and ability to switch suppliers can mitigate this
force.
➢ Buyer Power: Low, The Penang Mutiara, being a luxury hotel, tends to attract high-
end customers who have a greater willingness to pay for premium experiences.
However, if there is a decrease in customer demand or an increase in the
availability of comparable luxury hotels in the region, buyers may gain more
leverage.
➢ Threat of Substitution: Moderate, the hotel's ability to differentiate itself through
unique amenities, personalized services, and its prime location can help mitigate
the threat of substitutes. Additionally, building brand loyalty and providing
exceptional customer experiences can reduce the likelihood of customers
switching to alternatives.
➢ Competitive Rivalry: High, the Penang Mutiara faces competition from other luxury
hotels and resorts in the region, both established and emerging. Factors that can
intensify competitive rivalry include pricing strategies, service quality, location,
marketing efforts, and customer loyalty programs. The hotel must continuously
innovate, differentiate itself, and maintain high standards to remain competitive
and retain its market position.
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VISION, MISSION, MAIN OBJECTIVE, AND CORE VALUES

The Penang Mutiara’s mission, vision, main objective, and core values are
unavailable due to the lack of online presence and the absence of their website.

ESTIMATED TIME SETTING & VIEWPOINT AND SOURCES OF DATA

Due to the lack of online presence of The Penang Mutiara, the data gathered for
this case analysis is limited. Most of the sources of data are from business and travel
articles, which were all updated in 2022 after IHG Hotels & Resorts announced the hotel’s
reopening.

CURRENT SITUATION OF THE PENANG MUTIARA

As mentioned previously, The Penang Mutiara is closed until its reopening in 2025.
Presumably, they are currently renovating it to fit necessary standards to push its grand
reopening. Most of the employees, former guests, and owners are rejoiced to know that
the 5-star hotel is set to be reopened and are planning to reunite once its opened.
(Hyperlocal, 2022)

STATEMENT OF THE PROBLEM

How can The Penang Mutiara, soon to be renamed as InterContinental Penang,

regain its prominent standing in the hotel industry despite it being closed for 16 years
without sacrificing additional loss?

CAUSES OR SYMPTOMS OF THE PROBLEM

1. The abandonment of the hotel for 16 years which resulted in loss of revenue and
depreciation of the infrastructure and facilities.
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2. Ineffective marketing strategies.

3. Uncertain recognition from guests that the hotel will have the same quality of
accommodation and service after its reopening.

SWOT ANALYSIS

• Strengths:
➢ Prime Location: The Penang Mutiara enjoys a strategic location in Penang, one
of Malaysia's most popular tourist destinations. Its proximity to key attractions,
such as historic George Town and the beautiful beaches, gives it a competitive
edge.
➢ Luxurious Facilities: The hotel boasts world-class facilities and amenities,
including spacious and well-appointed rooms, exquisite dining options, a state-
of-the-art spa, and extensive recreational facilities. These offerings provide
guests with a luxurious and memorable experience.
➢ Exceptional Service: The Penang Mutiara prides itself on delivering exceptional
customer service. Its well-trained and attentive staff go the extra mile to ensure
guests' needs and expectations are met, providing a personalized and
unforgettable stay.
• Weaknesses:
➢ Price Point: The Penang Mutiara's luxurious offerings come at a premium price,
making it less accessible to budget-conscious travelers. This could limit its
potential customer base and affect its market share, particularly during times
of economic downturn.
➢ Limited Accessibility: While the hotel's location is advantageous, it may pose a
challenge for guests who rely on public transportation or prefer to explore the
city without using private vehicles. Limited accessibility options could be a
potential drawback.
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➢ Competitive Landscape: Penang has a thriving hospitality industry with

numerous high-end hotels and resorts. The Penang Mutiara faces stiff
competition from established players in the market, requiring continuous efforts
to differentiate itself and maintain a competitive edge.
• Opportunities:
➢ Market Expansion: The Penang Mutiara can explore opportunities to expand
its reach by targeting new customer segments or diversifying its offerings. This
could include tapping into the growing luxury travel market, targeting specific
niches such as wellness tourism, or expanding into related sectors like event
management.
➢ Sustainability Initiatives: With increasing awareness of environmental issues,
there is a growing demand for sustainable and eco-friendly practices in the
hospitality industry. The Penang Mutiara can seize the opportunity to
implement green initiatives, such as energy conservation measures, waste
reduction, and promoting local and organic products, thereby appealing to
environmentally conscious travelers.
➢ Technological Advancements: Embracing technological advancements can
enhance guest experiences and streamline operations. The Penang Mutiara
can leverage emerging technologies such as mobile apps for seamless check-
ins, smart room automation, personalized recommendations based on guest
preferences, and data analytics for targeted marketing and revenue
optimization.
• Threats:
➢ Changing Travel Trends: The travel industry is subject to changing trends and
preferences. The emergence of alternative accommodations, such as home-
sharing platforms, could pose a threat to traditional hotel establishments like
The Penang Mutiara if they fail to adapt to evolving customer demands.
➢ Economic Instability: Economic downturns, fluctuations in currency exchange
rates, or other financial uncertainties can impact the tourism sector. A decline
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in tourist arrivals or reduced travel budgets may directly affect The Penang
Mutiara's revenue and profitability.
➢ Online Reputation and Reviews: In the digital age, online reviews and
reputation significantly influence consumer decisions. Negative reviews or
unfavorable online reputation can harm The Penang Mutiara's image and
credibility, potentially leading to a decline in bookings and customer trust.

ALTERNATIVE FORMULATION AND EVALUATION

1. Implement a Digital Reservation System

a) Advantages:
➢ Efficiency: A digital reservation system would streamline the booking
process, allowing guests to make reservations online, check room
availability in real-time, and receive instant confirmation. This would
improve efficiency and reduce the workload for hotel staff.
➢ Accessibility: Guests would have 24/7 access to the reservation system,
enabling them to make bookings at their convenience. It would also provide
them with detailed information about room types, amenities, and pricing,
enhancing their overall experience.
➢ Data Management: The system would gather valuable guest data, such as
preferences and booking history, allowing the hotel to personalize services
and tailor marketing strategies accordingly. This would improve customer
satisfaction and increase revenue potential.
b) Disadvantages:
➢ Initial Investment: Implementing a digital reservation system would require
a significant upfront investment in software development, hardware, and
staff training. This could pose a financial burden for the hotel.
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➢ Technical Challenges: Maintaining and troubleshooting the system may

require IT expertise and ongoing technical support. System glitches or
downtime could lead to customer dissatisfaction and potential revenue loss.
➢ Accessibility Limitations: Some guests may prefer traditional methods of
booking, such as phone calls or in-person reservations. Introducing a digital
system exclusively might exclude these customers, impacting their
satisfaction and potentially resulting in lost business.
2. Enhance Sustainability Practices
a) Advantages:
➢ Environmental Impact: Implementing sustainable practices, such as
energy-efficient lighting, water conservation measures, and waste
management strategies, would reduce the hotel's environmental footprint.
This would align with increasing customer preferences for eco-friendly
accommodations and attract environmentally conscious guests.
➢ Cost Savings: Adopting sustainable practices can lead to significant cost
savings in the long run. Energy-efficient systems would lower utility bills,
and waste reduction strategies would reduce disposal costs. This would
contribute to the hotel's profitability.
➢ Positive Brand Image: Demonstrating a commitment to sustainability would
enhance the hotel's brand image, attracting socially responsible guests and
potentially generating positive word-of-mouth marketing. It would also align
with global sustainability trends and attract media attention.
b) Disadvantages:
➢ Initial Investment: Implementing sustainable practices often requires upfront
investments in technologies, equipment, and staff training. The hotel would
need to allocate resources to make these changes, potentially impacting
short-term profitability.
➢ Operational Challenges: Integrating sustainability practices into existing
operations may require significant adjustments and coordination among
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various departments. This could disrupt workflow and require additional

training for staff, leading to temporary inefficiencies.
➢ Guest Perception: While many guests appreciate sustainability efforts,
some may perceive such initiatives as cost-cutting measures that
compromise their comfort or experience. Striking a balance between
sustainability and guest expectations is essential to avoid potential
dissatisfaction.
3. Establish a Customer Loyalty Program
a) Advantages:
➢ Repeat Business: A customer loyalty program would incentivize guests to
choose The Penang Mutiara for future stays, increasing customer retention
rates and generating repeat business. This would contribute to stable
revenue streams and long-term profitability.
➢ Enhanced Customer Engagement: By offering exclusive benefits and
personalized rewards to program members, the hotel can deepen its
relationship with guests. This engagement fosters brand loyalty and
encourages positive reviews and referrals.
➢ Data Collection: A loyalty program would provide the hotel with valuable
data about guest preferences, behavior, and spending patterns. This data
can be leveraged to tailor marketing campaigns, improve services, and
develop targeted promotions, ultimately driving revenue growth.
b) Disadvantages:
➢ Implementation Costs: Establishing and managing a customer loyalty
program involves costs, such as program development, software
integration, and rewards fulfillment. The hotel needs to carefully assess the
return on investment and determine if the benefits outweigh the expenses.
➢ Program Complexity: Designing a loyalty program that is attractive, easy to
understand, and effectively manages rewards can be challenging. Failure
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to create a compelling program may result in low participation rates and

minimal impact on customer loyalty.
➢ Competitive Landscape: Loyalty programs are common in the hospitality
industry, and guests may already be members of rival hotel programs. The
Penang Mutiara would need to differentiate its program to make it stand out
and offer unique benefits to persuade guests to participate.

CONCLUSION OR RECOMMENDATION

It is recommended that The Penang Mutiara (InterContinental Penang) pursues a

combination of the alternative choices mentioned above. By implementing a digital
reservation system, enhancing sustainability practices, and establishing a customer
loyalty program, the hotel can position itself for sustainable growth and resilience after its
reestablishment in the hotel industry. This approach would help the company address key
challenges, mitigate risks, and leverage its strengths to capitalize on emerging
opportunities.

RELEVANCE TO OPERATIONS MANAGEMENT

This case analysis is highly relevant to operations performance as it involves

assessing the hotel’s strengths and weaknesses, evaluating industry dynamics, and
formulating strategies to develop a structured plan for its reopening.

OPERATIONS MANAGEMENT PRINCIPLES

1. Service Quality Management: Service quality is crucial in the hospitality industry, and
it involves meeting or exceeding customer expectations consistently. The principle of
service quality management focuses on delivering exceptional customer experiences
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by ensuring that all aspects of the hotel's operations, from check-in to dining services
to housekeeping, are of the highest standard. This principle emphasizes the
importance of training and developing staff members to provide personalized and
attentive service, implementing effective quality control measures, and continuously
seeking feedback from guests to identify areas for improvement. By prioritizing service
quality, The Penang Mutiara can enhance its reputation, attract repeat customers, and
build strong brand loyalty.

2. Revenue Management: Revenue management is a key principle in the hotel industry

that involves optimizing pricing and capacity utilization to maximize revenue and
profitability. The Penang Mutiara can implement revenue management strategies to
effectively manage room rates and availability based on factors such as demand,
seasonality, and market conditions. This principle involves analyzing historical data,
forecasting demand patterns, and dynamically adjusting room rates to ensure optimal
occupancy levels and pricing strategies. By adopting revenue management practices,
The Penang Mutiara can maximize its revenue potential, optimize the utilization of its
resources, and achieve a competitive edge in the market.
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References:

Yeap, T. (2022, June 24). Long-Abandoned Mutiara Beach Resort In Penang Set To
Reopen In 2025. Penang Foodie. Retrieved from https://penangfoodie.com/mutiara-
beach-resort-penang-to-reopen-in-2025/

IHG to introduce world-renowned InterContinental luxury brand to Penang’s Glowing

Bay. (2022, June 21). InterContinental Hotels Group PLC. Retrieved from
https://www.ihgplc.com/en/news-and-media/news-releases/2022/ihg-to-introduce-world-
renowned-intercontinental-luxury-brand-to-penangs-glowing-bay

Former employees of Mutiara Beach Resort rejoice on news of the resort’s revival.
(2022). Penang HyperLocal. Retrieved from https://penanghyperlocal.com/former-
employees-of-mutiara-beach-resort-rejoice-on-news-of-the-resorts-revival/