CHAPTER I INTRODUCTION

1.1 BACKGROUND Unlike other classes of real estate, hotels typically contain hundreds (in some cases over one thousand) of employees. Properties are reliant on the quality of management, the brand, the employees and other factors. The success of a hotel investment is heavily influenced by multiple parties, each of which may have competing and or complimentary interests in the underlying property. !n addition to the traditional interests of owner sponsors, third party equity investors, and lenders, additional comple"ity is derived from the interests of the property manager and or brand. These comple"ities can result in competing economic and operating influences that may not be common to other forms of real estate investment. 1.1.1 HOTEL SUPPLY ANALYSIS A. Huge Area Market Anal !"!# E$%n%&"$ an' De&%gra()"$ Anal !"!# # # # # # # # Population $etail %ales &ork 'orce (haracteristics )a*or +usinesses and !ndustry ,ffice %pace -ighway Traffic .irport %tatistics

S"*e an' Ne"g)+%r)%%' Anal !"!# # # # # # # # %i/e, Terrain and Physical %uitability 0oning and other applicable regulations Utilities and other services availability .ccess 1isibility Pro"imity to demand generators 2"cess 3and

Su+,e$t H%tel I&(r%-e&ent Anal !"!# # # # # # # # 4umber of $ooms 'ood and +everage 'acilities )eeting 'acilities $ecreational and $etail .menities Physical (ondition 2ffective .ge 'unctionality

B. L%'g"ng Su((l Anal !"! L%'g"ng Cla!!"."$at"%n! -otel Type (ategories5 # (ommercial

# # # # # # #

(onvention $esort %uite 2"tended %tay (onference (enter (asino +ed 6 +reakfast

-otel 3ocation (ategories # # # # # # .irport -ighway 7owntown %uburban (onvention (enter $esort

-otel (hain %cale (ategories # # 3u"ury5 $it/ (arlton, 'our %easons, )andarin ,riental, %t. $egis, 8rand -yatt Upscale5-ilton 8arden !nn, (ourtyard )arriott, (rown Pla/a, 'our Points, -oliday !nn, 9uality !nn, $amada, +est &estern, $ed 3ion # )idscale without 'ood 6 +everage5 (ountry !nn 6 %uites, -ampton !nn, -oliday !nn 2"press, (omfort !nn, 3a 9uinta, &ingate # 2conomy5 7ays !nn, 2"tended %tay .merica, )icrotel, $ed $oof, %uper :, 1alue

Place, $odeway !nn L%'g"ng Cla!!"."$at"%n! -otels.com; %tar %ystem # 'ive %tar < (7elu"e)5 These are hotels that offer only the highest level of accommodations and services. The hotels are most often located near other hotels of the same caliber and are usually found near shopping, dining and other ma*or attractions. Typical 4ational (hains5 -yatt, )arriott. # Three %tar < ('irst (lass)5 Typically these hotels offer more spacious accommodations that include well appointed rooms and decorated lobbies. They are often located near ma*or e"pressways or business areas, convenient to shopping and moderate to high priced attractions. Typical 4ational (hains5 -oliday !nn, -ilton. # Two %tar < ()oderate)5 Typically smaller hotels managed by the proprietor. The hotel is often = < > stories high and usually has a more personal atmosphere. Typical 4ational (hains5 7ays !nn, 3a9uinta !nn. # ,ne %tar < ()oderate)5 Usually denotes independent and name brand hotel chains with a reputation for offering consistent quality amenities. The hotel is usually small to medium<si/ed and conveniently located to moderately priced attractions. Typical 4ational (hains5 2conolodge, )otel ?. E-aluat"%n %. C%&(et"t"%n # # Primary5 same transient visitors as sub*ect property %econdary5 same transient visitors as sub*ect property, but under special circumstances

1.1./. HOTEL DEMAND ANALYSIS A. C)ara$ter"!t"$! %. Tra-el De&an' # # # # # (ommercial (orporate !ndividual )eeting and (onvention 3eisure 8overnment (ontract (rew

B. De&an' Generat%r Bu"l' U( A((r%a$) # # # 7efinition of )arket .rea Potential 7emand 8enerators 7emand !nterviews and %urveys

C. L%'g"ng De&an' Generat%r!# # # # # # .irports .musement parks .ssociation headquarters (asinos (olleges (ompanies (onvenient and and highway universities businesses stopping # # # # # # # (ourt houses 'estival sites -istorical attractions -ospitals )ilitary installations )useums ,ffices and industrial parks 4ational or state parks and

points (onvention centers # (ounty seats and state capitals

scenic areas $acetracks # # # $egional shopping centers $esort areas %ports stadiums

# # #

Theaters Tourist attractions &orld and state fairs

L%'g"ng A$t"-"t Bu"l' U( A((r%a$) # # (urrent .ccommodated $oom 4ight 7emand (urrent and 'orecasted 3atent 7emand5 # Una$$%&&%'ate' De&an' 0 Nature %. De&an' # # # # # .rea ,ccupancy 3evel 4umber of 'ill 4ights .lternative .ccommodations !nduced 7emand

A$$%&%'ata+le Latent De&an' # # # # Usable 3atent 7emand 'orecasted .ccommodated $oom 4ight 7emand Total .vailable $oom 4ights ,verall )arket wide ,ccupancy

1.1.1 ANALYSIS O2 MARKET SHARE3 OCCUPANCY RATE A. A-erage R%%& Rate! )arket Penetration .nalysis

# # # #

'air %hare )arket %hare Penetration !nde" Pro*ect ,ccupancy Up To stabili/ation

'orecasted )onthly ,ccupancy .nalysis # # # Peak %eason 3ow %eason %houlder %eason

B. A-erage R%%& Rate Anal !"! # # # # (ompetitive Positioning )ethod +ottom Up )ethod $ule of Thumb )ethod )arket %egmentation )ethod

1.1.4 THE PLA5A HOTEL GLODOK Pla/a -otel 8lodok is located on the @rd floor, in 8lodok Pla/a shopping center building and has a capacity of AB rooms. !t is located right in the heart of 8lodok. 8lodok are the part of CakartaDs past. The area is known as the biggest E(hinatownD since the era of 7utch rule in !ndonesia. 4owadays, 8lodok areas are known as the center of CakartaDs largest electronics. %urrounded by a large center such as 3indeteves (3T(), Pasar Pagi, 8lodok Caya, ,rion Pla/a, which is as large and famous as 8a*ah )ada Pla/a and )angga 7ua along the )angga +esar and -ayam &uruk street. 8lodok Pla/a building is surrounded by several museums and historic buildings as well as FGotaH train station, which can be reached within minutes from the hotel and

%oekarno<-atta !nternational .irport which can be reached in less than >I minutes from the hotel. The Pla/a -otel 8lodok offers simple but clean and comfortable with a warm and friendly as well as economical prices A. ROOM There are @ types of room in The Pla/a -otel 8lodok5 a. 7elu"e $oom $oom si/e5 =@ mJ %pacious room with GingGoil 7uvet bed .ir (onditioner %ofa and (offee table (ity 1iew @=H 3(7 T1 with !nternational channels &i<'i (in<room !nternet .ccess) !n<room %afe &alk<in shower (with 4ormal and -ot temperature)

b. %uperior $oom $oom si/e5 =K mJ %pacious room with GingGoil 7uvet bed .ir (onditioner @=H 3(7 T1 with !nternational channels &i<'i (in<room !nternet .ccess) !n<room %afe &alk<in %hower (with normal and hot temperature)

c. Twin %uperior $oom $oom si/e5 =K mJ %pacious room with = twin GingGoil 7uvet beds .ir (onditioner

@=H 3(7 T1 with !nternational channels &i<'i (in<room !nternet .ccess) !n<room %afe &alk<in %hower (with normal and hot temperature)

B. HOTEL 2ACILITIES The Pla/a -otel 8lodok offers competitive room rate, managed by professional staffs with facilities, such as5 =><hour front desk service &i<'i (internet access inside and outside the room) The Pla/a Gitchen $estaurant %pacious rooms with Ging Goil 7uvet bed @=L 3(7 T1 with international channels %afety deposit bo" &alk<in %hower

1./ RESEARCH PROBLEMS 1.1 RESEARCH PURPOSE This research study purpose is to find out what is the main factor that can be the biggest influence of The Pla/a -otel 8lodokDs profit. 1.4 SIGNI2ICANCES O2 STUDY +y looking from the demand and supply of The Pla/a -otel 8lodokDs data. 1.6 LIMITATIONS .nalysis of demand and supply based on the data of room available and room sold.

CHAPTER II LITERATURE RE7IE8

/.1 De&an' ,n the demand side of a market, consumers buy products from firms. The main question concerning the demand side of the market is5 -ow much of a particular product are consumers willing to buy during a particular periodM . consumer who is willing to buy a particular product is willing to sacrifice enough money to purchase it. The consumer doesnDt merely have a desire to buy the good, but is willing and able to sacrifice something to get it. 4otice that demand is defined for a particular period, for e"ample, a day, a month, or a year. -ere is a list of the variables that affect an individual consumerDs decision, which called as determinants of demand5 # The price of the product # The consumerDs income # The price of related goods # The si/e and composition of the population # The consumerDs preferences or tastes and advertising that may influence preferences # The consumerDs e"pectations about future prices Together, these variables determine how much of a particular product an individual consumer is willing and able to buy, the 9uant"t 'e&an'e'. The relationship between

the price and quantity demanded is represented graphically by the demand curve below.

'igure =.B )arket 7emand (urve 4otice that demand curve is negatively sloped, reflecting the la: %. 'e&an'. This law applies to all consumers. )arket 2ffects of (hanges in 7emand5 a. (hange in 9uantity 7emanded (hanges in the price of a good lead to a change in the quantity demanded of that good. This corresponds to a movement along a given demand curve.

'igure =.= (hanges in 9uantity 7emanded b. (hange in 7emand (hanges in variables other than the price of a goodN such as consumer income, price of related good, advertising and consumer taste, population and consumer e"pectation (demand shifter)N lead to a change in demand. This corresponds to a shift of the entire demand curve.

'igure =.@ (hanges in 7emand 7emand 'unction5 .n equation representing the demand curve5 9"d O f(P" , PP , ), -,) &here5 9"d O quantity demand of good Q. P" O price of good Q. PP O price of a related good P. ) O income. - O any other variable affecting demand 7emand is linear if 9"d is a linear function of prices, income, and other variables that influence demand, the following is a linear demand function5 9"d O RK S R"P" S RyPy S R)) S R-The Rs are fi"ed numbers that the firmDs research department or an economic consultant typically provides to the manager. /./. Su((l ,n the supply side of a market, firms sell their products to consumers. %uppose you ask the manager of a firm, F-ow much of your product are you willing to produce and sellMH The answer is likely to be Fit depends.H The managerDs decision about how much to produce depends on many variables, including the following5

# The input prices # The technology or 8overnment $egulation # 4umber of firms # %ubstitutes in production # ProducersD e"pectations about future prices # Ta"es paid to the government or subsidies (payments from the government to firms to produce a product) Together, these variables determine how much of a product firms are willing to produce and sell, the 9uant"t !u((l"e'. The relationship between the price of a good and the quantity of that good supplied is represented graphically by the supply curve below.

'igure =.> )arket %upply (urve The supply curve is positively sloped, reflecting the la: %. !u((l , a pattern of behavior that we observe in producers. )arket 2ffects of (hanges in %upply5 a. (hange in 9uantity %upplied (hanges in the price of a good lead to a change in the quantity supplied oh that good. This corresponds to a movement along a given supply.

'igure =.I (hanges in 9uantity %upplied b. (hange in %upply (hanges in variables other than price of a goodN such as input price, technology or government regulation, number of firms, substitutes in production, ta"es and producer e"pectation (supply shifter)N lead to a change in supply. This corresponds to a shift of the entire supply curve.

'igure =.? (hanges in %upply 7emand 'unction5 .n equation representing the supply curve5 9"% O f(P" , P$ ,&, -,) &here5

9"% O quantity supplied of good Q. P" O price of good Q. P$ O price of a related good & O price of inputs (e.g., wages) - O other variable affecting supply %upply is linear if 9"s is a linear function of the variables that influence supply, the following is a linear supply function5 9"s O TK S T"P" S T$P$ S T&& S T-The Ts are fi"ed numbers that the firmDs research department or an economic consultant typically provides to the manager.

/.1. Market E9u"l"+r"u& . market is an arrangement that brings buyers and sellers together. &e bring the two sides of the market together to show how prices and quantities are determined. &hen the quantity of a product demanded equals the quantity supplied at the prevailing market price, this is called &arket e9u"l"+r"u&. &hen a market reaches equilibrium, there is no pressure to change the price. !n 'igure =.U, the equilibrium price is shown by the intersection of the demand and supply curves. .t a certain price, the supply curve shows that firms will produce number of products, which is e"actly the quantity that consumers are willing to buy at that price.

'igure =.U )arket 2quilibrium E;$e!! De&an' Cau!e! t)e Pr"$e t% R"!e !f the price is below the equilibrium price, there will be e"cess demand for the product. E;$e!! 'e&an' (called a shortage) occurs when, at the prevailing market price, the quantity demanded e"ceeds the quantity supplied, meaning that consumers are willing to buy more than producers are willing to sell. !n 'igure =.:, at a price of VI, there is an e"cess demand equal to ? goods5 (onsumers are willing to buy B= goods (point c), but producers are willing to sell only ? goods (point b). This mismatch between demand and supply will cause the price of good to rise. 'irms will increase the price they charge for their limited supply of goods, and an"ious consumers will pay the higher price to get one of the few goods that are available. .n increase in price eliminates e"cess demand by changing both the quantity demanded and quantity supplied. .s the price increases, the e"cess demand shrinks for two reasons5 # The market moves upward along the demand curve (from point c toward point a), decreasing the quantity demanded. # The market moves upward along the supply curve (from point b toward point a), increasing the quantity supplied. +ecause the quantity demanded decreases while the quantity supplied increases, the gap between the quantity demanded and the quantity supplied narrows. The price will continue to rise until e"cess demand is eliminated. !n 'igure =.:, at a price of VU the quantity supplied equals the quantity demanded, as shown by point a. !n some cases, government creates an e"cess demand for a good by setting a ma"imum legal price that can be charged, called price ceiling. !f the government sets a ma"imum price that is less than the equilibrium price, the result is a permanent e"cess demand for the good.

'igure =.: %hortage (ondition E;$e!! Su((l Cau!e! t)e Pr"$e t% Dr%( &hat happens if the price is above the equilibrium priceM E;$e!! !u((l (called a surplus) occurs when the quantity supplied e"ceeds the quantity demanded, meaning that producers are willing to sell more than consumers are willing to buy. This is shown by points d and e in 'igure =.A. .t a price of VA, the e"cess supply is : goods5 Producers are willing to sell B> goods (point e), but consumers are willing to buy only ? goods (point d). This mismatch will cause the price of goods to fall as firms cut the price to sell them. .s the price drops, the e"cess supply will shrink for two reasons5 # The market moves downward along the demand curve from point d toward point a, increasing the quantity demanded. # The market moves downward along the supply curve from point e toward point a, decreasing the quantity supplied. +ecause the quantity demanded increases while the quantity supplied decreases, the gap between the quantity supplied and the quantity demanded narrows. The price will continue to drop until e"cess supply is eliminated. !n 'igure =.A, at a price of VU, the quantity supplied equals the quantity demanded, as shown by point a. The government sometimes creates an e"cess supply of a good by setting a minimum legal price that can be charged, called price floor. !f the government sets a minimum price that is greater than the equilibrium price, the result is a permanent e"cess supply.

'igure =.A %urplus (ondition 4ow we know that equilibrium is determined in a competitive market and also government policies such as price ceiling and price floor affect the market. 4e"t, we can use supply and demand to analy/e the impact of changes in market condition on the competitive equilibrium price and quantity. The study of the movement from one equilibrium to another is known as comparative static analysis. Throughout this analysis, no legal restraints, such as price ceiling and price floor, are in affect and that the price system is free to allocate goods among consumers. 'igure =.BK shows the change in demand, demand increase, shifting demand curve to 7B and intersect with supply curve at a new point (red point). !n this instance, the market price rises from PK to PB and the equilibrium quantity increases from 9 K to 9B.

'igure =.BK 2ffect of change in demand

'igure =.BB shows the change in supply, supply increase, shifting supply curve to % B and intersect with demand curve at a new point (red point). !n this instance, the market price decreases from PK to PB and the equilibrium quantity increases from 9 K to 9B.

'igure =.BB 2ffect of change in supply

/.4. Ela!t"$"t The quantity demanded of a good is affected mainly by5 changes in the price of a good, changes in price of other goods, changes in income and, changes in other relevant factors. 2lasticity is a measure of *ust how much the quantity demanded will be affected by a change in price or income or change in price of related goods. 7ifferent elasticities of demand measures the responsiveness of quantity demanded to changes in variables which affect demand so5 B. Pr"$e ela!t"$"t %. 'e&an' < measures the responsiveness of quantity demanded by changes in the price of the good =. In$%&e ela!t"$"t %. 'e&an' ; measures the responsiveness of quantity demanded by changes in consumer incomes.

@. Cr%!! ela!t"$"t %. 'e&an' ; measures the responsiveness of quantity demanded by changes in price of another good Pr"$e ela!t"$"t %. 'e&an' .ssume that the price of coke increases by B W. !f the quantity demanded consequently falls by =KW, then there is very large drop in quantity demanded in comparison to the change in price. The price elasticity of coke would be said to be very high. !f quantity demanded fall by K.KBW, then the change in quantity demanded is relatively insignificant compared to the large change in price and the price elasticity of coke would be said to be low. 2conomists choose to measure responsiveness in term of percentage changes. %o (r"$e ela!t"$"t %. 'e&an' which is the degree of responsiveness in changes in quantity demanded to changes in price is calculated by using the formula5 W (hange !n 9uantity 7emanded W (hange !n Price

8raphical presentation for price elasticity shown by picture below5

'igure =.B= Price elasticity

Perfectly inelastic 5 9uantity demanded does not change at all as P changes, 2 O K. !nelastic 5 9uantity demanded changes by a smaller percentage than does price , X2X YB Unitary elasticity 5 9uantity demanded changes by e"actly the same percentage as does price , X2X O B 2lastic 5 9uantity demanded changes by a larger percentage than does price, X2X Z B Perfectly elastic 5 +uyers are prepared to purchase all they can obtain at some given price but none at all at a higher price , 2 O infinity In$%&e ela!t"$"t %. 'e&an' The demand for a good will change if there is a change in consumers[ income. !ncome elasticity of demand is a measure of how much the quantity demanded of a good responds to a change in consumersD income. 'ormula for measuring income elasticity of demand is

In.er"%r g%%'! are goods for which an increase in income leads to a decrease in the demand for that good, or vice versa. !t is any goods whose income elasticity of demand is lower than /ero <XE X = >?. N%r&al g%%'! are any goods whose income elasticity of demand is greater than /ero <XE X @ >?. 4ormal good are goods for which an increase (decrease) in income leads to an increase (decrease) in the demand for that good. 2"amples of items with a high income elasticity of demand are holidays and recreational activities, whereas washing up liquids tends to have a low income elasticity of demand.

'igure =.B= !ncome elasticity Positive !ncome 2lasticity can be divided into @ categories5 B. !ncome inelastic 5 =. Unit income elasticity5 @. !ncome elastic 5 X2yX Y B (7d rises by a smaller proportion as P) X2yX O B (7d rises by e"actly the same proportion as P) X2yX Z B (7d rises by a greater proportion than P)

Cr%!! ela!t"$"t %. 'e&an' The quantity demanded of a particular good varies according to the price of other goods. . rise in price of a good such as beef would increase the quantity demanded of a substitute such as chickenN ,n the other hand a rise in price of a good such as tennis racket would lead to a fall in quantity demanded of a complement such as tennis ball. (ross elasticity of demand is a measure of how much the quantity demanded of one good responds to a change in the price of another good. The formula for calculating the cross elasticity of demand for good is Q5

Two goods, which are !u+!t"tute!, will have a (%!"t"-e cross elasticity. %ubstitutes are goods for which an increase (decrease) in the price of one good leads to an increase (decrease) in the demand for the other good. !t is any goods whose cross elasticity of demand is greater than /ero <XE;X @ >?.

Two goods, which are $%&(le&ent!, will have a negat"-e cross elasticity. (ompliments are goods for which an increase (decrease) in the price of one good leads to an decrease (increase) in the demand for the other good. !t is any goods whose cross elasticity of demand is greater than /ero <XE;X = >?. The cross elasticity of two goods which have little relationship to each other would be /ero e.g. a rise in the price of cars of BKW is likely to have no effect (KW) change on the demand for tipp<e". /.6 PAST RESEARCHES Cack (orgel and Camie 3ane on their research about F Hotel Industry Demand Curves e"tend previous work on understanding hotel demand by focusing on the demand curve. %pecifically, attention is directed toward the slope of the curve indicating the relationship between average daily rate and the number of rooms sold < the price elasticity. Price and income elasticity are considerably larger for higher quality hotels, as indicated by the chain scale in which they operate. 2lasticity tends to increase with data disaggregation. -igher elasticity is generally found for individual chain scales and cities compared to the nation. The e"pected direction of the relationship between hotel demand and each economic variable. 'or e"ample, as .7$s increase, consumers purchase fewer hotel rooms, hence the negative sign. .s income and employment increase, consumers have greater abilities to purchase hotel rooms, hence the positive direction of these relationships. .ki -iro %ato (=KB@) on his research Detecting Demand Supply: Situations of Hotel Opportunities: An Empirical Analysis of apanese !oom Opportunities Data analy/es the availability of room opportunity types collected from a Capanese hotel booking site, he characteri/e demand supply situations of room process at each region with both room availability and average room rate. The average room rate decreases in terms of the room rate increase with respect to the room availability in some districts. This is evidence that the theory of demand and supply is not always satisfied in Capanese hotel industry.