The hospitality industry is a rather unique industry considering that its driving forces are mainly constant. This industry mainly relies on tourism and the global economy for its prosperity. There are, however, other factors that affect the industry and thus influence the trends and these include their specific target market’s demographics, income bracket, lifestyle and expectations in terms of the services that they receive from the hotel (Yang, 2009). As such, some of the major industry trends that can be noted in this industry include:
It may be noted that most, if not all, major players in the hospitality industry have over the past few years been growing significantly. This is mostly because the global economy is rather stable and more people have the disposable income that allows them to travel internationally. With this growing demand, most hotels have seen the need to either expand their facilities to accommodate more guests at a time, or to venture further afield into new markets in order to tap into the growing potential of the hospitality industry. With more travelers, and more reasons for traveling, the industry is really picking up and becoming one of the most lucrative investments in the global economy.
Initially, the high-end travelers were mostly either business or leisure tourists. This meant that the hotels only had to mold themselves to cater to these two target markets that mostly comprised of upper and upper middle-class families. Today however, there are so many reasons for traveling and the traveler demographics seem to be undergoing a continuous evolution. Most of the travelers even embrace multiple reasons for their travels, meaning that virtually everybody has the ability to travel today unlike in the past. In order to benefit from this trend, hotels have had to embrace some level of flexibility in their arrangements (Riley, 2012). Rather than constantly expecting to cater to single travelers, most hotels today are more open to hosting entire families in some cases. They have created bundle packages that allow groups of people to book and pay for cluster accommodations at a discounted rate in most cases. The idea is to have a package that can benefit each and every type of customer in order to make the hotel attractive to the customers. With the growing aging population as well, the need to cater to senior travelers is also becoming clearer in this industry as more hotels try to appeal to this set of clientele in their marketing communications by featuring aspects that could concern a retiree on holiday.
All companies are presently embracing technology as a marketing aspect because the customers are all engrossed in the technological advancements that make their lives more convenient. This means that in order to survive, these companies have had to embrace the technological wave and adapt in terms of having an online presence, accepting electronic payment instead of insisting on cash, and offering services like Wi-Fi within their premises. These are all, however, considered industry basics for the hospitality industry. Companies today have to live up to the expectations of a continuously tech-savvy target market that expects and indeed demands convenience. It can be noted that online and mobile bookings, along with other interesting innovations like being able to check or lock a room via a smartphone have become benchmarks in the industry as well. Customers not only find this high-end technology fascinating but also greatly convenient (Vision Critical, 2014). This explains why most of the hotels that have embraced technology extensively are able to gain more customers. More hotels in the industry are thus seeking to endear themselves to their customers as well by offering convenience through technological innovations that suit their customers’ needs and expectations. Social networking is also increasingly being embraced as a means of communication between hotels and their customers.
For bookings, feedback, inquiries and even simple updates on the offers and discounts of the hotel, the customers are increasingly finding it convenient to make use of social network accounts like Facebook, Twitter, and Google+ among others. This explains the impressive social media presence of this industry (Ng, 2013). The increased availability of information online means that people are likely to know how good a hotel is by simply browsing through online review sites such as Yelp and TripAdvisor. This explains the need for these hotels to not only treat their customers well in order to avoid bad reviews, but also to be online in order to respond any unfortunate situations that may have resulted in a bad experience for a customer. In a bid to offer customer loyalty, most hotels are also allowing their customers to sign up and open accounts that they can access and manage from various locations and on various devices. They are thus embracing the concept of the Internet of Things, which means that people will generally be expecting to have unlimited access regardless of their location.
These accounts are thus used to make bookings, claim discounts, interact with the hotels, and even interact with other customers. It can also be appreciated that customers are increasingly relying on travel websites to offer reviews and recommendations on the hotels that they have stayed in. This means that hotels either have to partner with these travel websites or find a way to ensure that they get positive reviews. Another major trend is with respect to the kind of amenities that these hotels offer their clients. The need for flat screen TVs and free Wi-Fi, hot showers, a variety of entertainment options, and air conditioning all play a great role in determining how the customer will rate the facility. As such, the industry is moving towards fulfilling customer expectations by making these features the standard.
The cost of running a hotel is considerably high, and in order to survive some of these hotels are opting to partner with or create travel agencies that will help to generate business for them. Travelers today are barely interested in the details of their trips, since they are using great travel agents who are expected to understand their needs and focus on having them met (Riley, 2012). This means that in order to get business, most of the hotels have to be in good terms with the travel agents. Also, some hotels have had to partner with airlines in order to ensure that they are on the top of their list of accommodation options not just for their staff members, but for their customers as well. This means that in order to get good business, companies in this industry are increasingly seeing the need to have some influence on the sectors that give them their business. Owning an airline may be a tall order, although it is very possible and practical. Owning or partnering with a travel agency is, however, basic and very vital in this industry, thus explaining why most hotels work with travel agencies from all over the world to give the travelers an easier time in planning and enjoying their travels.
The world is increasingly conscious about health and wellness, with a trip abroad not being an exception if someone is keen on what they eat and generally how they live. This means that other than looking for hotels that are luxurious and expensive, most people actually appreciate a trip that will allow them to eat healthy meals and engage in physical indulgences through work out sessions or high-power excursions. Some hotels have thus embraced fitness related concepts in their product designs and thus they include balanced meals, workout rooms and other significant amenities like swimming pools and jogging tracks for their guests. In order to extend these new luxuries to their customers even more efficiently, some hotels today even sell or rent out running shoes and other sporting equipment to their customers in order to ensure that they can take advantage of the great health and wellness opportunities during their stay. Healthy but satisfying meals are also a great part of the hospitality industry that previously mostly focused on preparing high-fat, low nutritional foods. Today, hotels are embracing the need to have healthy meals planned for their customers. Considering that the customers often choose their own meals from the menu, these hotels have had to develop healthy menus that then encourage these customers to stay.
What are the Company’s Core Competencies? Does the 4-Criteria Test Reveal any Distinctive Competencies?
The Shangri La Hotels have a number of core competencies that set them apart from their competitors. Being an originally Asian organization, it can be appreciated that the hotels are founded on the Asian hospitality that often involves very impressive customer service. The company’s core values are thus embedded in this parent culture, and they continue to customize it to suit the various locales where they have a hotel. While they are thoroughly Asian in terms of the “Shangri La Way,” this company is nonetheless very good at adapting and has over the years continued to embrace the cultures within which they operate (Ng, 2013). Considering the amount of success that this company has been enjoying over the past few years, it can be noted that the main core competencies that set them apart from the rest of the industry include innovation, adaptability, employee retention, and high quality customer service.
Shangri La has been able to survive in the hospitality industry despite the dynamic customer base because the company is effective at coming up with solutions for any of the challenges they face. The highly skilled management teams in this organization consistently ensure that they are embracing best practice in their management, but they do not shy away from formulating their own solutions based on the situation at hand. This gives them a competitive edge because they are able to regroup and respond adequately when faced with challenges. For example, when the global hospitality industry was suffering a blow due to the global economic crisis, the hotel’s management was trying their best to keep the business running. This meant targeting the business travelers who had to conduct business even with the bad economic situation. They refocused the company’s resources to attract and impress the business clients who were having to go around the globe in order to seek out ways to make the situation better, and in so doing the company was able to remain profitable even when the rest of the industry was languishing in poor economies.
This company’s ability to formulate new products that suit their target markets with so much ease and speed sets them apart from their competitors (Ng, 2013). Most companies in the hospitality industry rely on industry standards in terms of their product design and pricing strategies. It may be noted however that this organization particularly relies on the market to come up with these decisions. They also follow industry standards in most cases but they recognize the significance of giving their customers what they want. During the holidays for example, they offer more family packages since they expect families to be traveling together. This allows them to be among the best options for any traveling family that needs high quality accommodation away from home. The company is thus generally known for rising to the occasion whenever they have to, and this mindset sets them apart in the global hospitality industry.
Companies often have to decide between sticking to a particular corporate culture and becoming adaptable when they have to operate within a new cultural dispensation. In order to be competitive in the hospitality industry, Shangri La has opted to be adaptable without necessarily forgetting their parent culture. This adaptability is what makes them stand out amongst the other Asian-based organizations in the hospitality industry that have been trying to use their Asian concepts of service in the North American market, but with disastrous results. The definition and thus expectations of service in one culture may not necessarily match those of another culture. This means that in order to serve a wide number of customers and cultures, the organization has had to be able to adapt to the culture in which they operate. The impressive aspect of their adaptability however is in the way in which the company’s employees are able to understand and accommodate the various customers by using their cultural competence and making the experience as personal and relevant as possible. This sets them apart, as it assures all of their customers of a great experience regardless of where they are from and which location they are in.
Companies that have such a detailed corporate culture often have to invest heavily in their employees. This is mainly because it takes a lot of time and resources to cultivate the particular concepts of the Shangri La Way to the level that the organization upholds, and that the customers appreciate. Without a high degree of employee retention, the company would be unable to sustain their high service quality since training new employees every now and then would hurt their financial performance greatly (Vision Critical, 2014). This company has a great system of employee relations, with an especially attractive career growth program that allows employees to climb the corporate ladder as they gain more experience and become more proficient in their positions within the hotels. It can thus be appreciated that they are able to retain most, if not all, of their best employees. With such an impressive organizational knowledge pool, it can be appreciated that the organization is able to maintain their growth streak and continue satisfying the customers without posting extraordinary operational expenses with respect to the training and induction of too many new staff members on a regular basis.
In the hospitality industry, a good quality rating implies that the organization is reliable in their service delivery and that they can be depended on to perform well. The Shangri La hotels are impeccable and especially appreciated for their quality in hospitality. They follow “Shangri La Hospitality,” which is simply a philosophy that enables the organization to ‘delight’ their customers at all times. The idea here is to ensure that everything done by the organization ends up impressing their customers. As such, it can be noted that the Shangri La hotels’ management team is keen on ensuring that the basics of the Shangri La Way are adhered to. This explains the numerous training modules that the employees have to go through within this organization. The organization continues to emphasize on the Shangri La Care system in order to ensure that their customers always receive the best in quality.
Other than this, it can also be appreciated that the Shangri La Hotels have, within Asia and beyond, mustered the art of blending in without losing their bottom line. The company’s branches in other parts of the world continue to pay homage to their Asian roots without neglecting the culture and customs of the countries where they are operating. This is why in some hotels the service team might be more reserved and quiet while in other locations they are friendlier and more sociable. Generally, it is the social constructs that determine the conduct of the employees within that particular location. The organization has seemingly appreciated the concept of cultural competence and they are using this to improve the ratings of their service quality (Maritz, Pretorius & Plant, 2011). As such, customers generally expect to receive the best service in whichever Shangri La Hotel they check in to. Other than the polite employees and lively ambience that the hotels are able to offer their clients, they also endeavor to make their service delivery very fast and efficient. The company also trains the employees on how to recover from a mistake without ruining the customer’s experience at the hotel. The idea here is to foster a good relationship with a customer even in the face of a wrong move. This allows them a consistent redemption and thus prevents souring their customer loyalty records.
The distinctive core competencies here are thus adaptability and the high employee retention levels. These two make the Shangri La Hotels rather unique and superior to all of their competitors in Asia and beyond.
The past three years have been especially lucrative for this organization, seeing as they have been posting increasingly great results. In 2012 the company had total revenues of more than $2 billion while in 2013 they were able to earn an additional $2 billion and then $2.1 billion in 2014 (Vision Critical, 2014). This means that even with the ongoing expansion and limited tourism potential, the company continues to have a booming business as one of the trendsetters in the hospitality industry. With hotels in some of the most coveted tourist and business destinations in the world, it can be appreciated that the company continues to make great steps in their financial situation, thus creating a very promising future. Regarding their profitability, it can be noted that the company has been consistent in its gross profit seeing as they posted nearly $1.2 billion in 2012, $1.17 billion in 2013 and $1.2 billion in 2014 (Vision Critical, 2014). For three consecutive years, the company has been able to remain reasonably profitable in their global operations despite the fluctuations in global economy, the prevalence of financial crises and the general challenges within the hospitality industry.
From an industry perspective, it can be appreciated that this organization has been able to scale to greater heights in terms of their performance in the past three years. The prospects of company started out as relatively stagnant but uncertain, but in the third year it showed significant improvement in the total revenue and gross profits. If anything, this is a sign of the company’s stability in a market that is characterized by stiff competition and very dynamic perspectives amongst the customers. With such a demanding external environment, the Shangri La Hotels must be appreciated for their great growth. It may not have been easy to post such impressive profits while undertaking an expansion into unfamiliar territories. The locations of its hotels are predominantly in Asia, and it is clear that their European and American ventures were more experimental than not. The success that they have so far managed to garner thus goes to show their determination and understanding of the market within which they operate. This demonstrates that the company continues to have a bright future provided they keep up the “Shangri La Way” and ensure that their customers continue to be satisfied with the quality and efficiency of the service and management teams.
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The company seeks to satisfy their customers each and every time. This means that they strive to give the best in service and ensure a great experience for all their customers, whether new or returning.
The vision is to be the first choice, not only for their customers but also for the shareholders, employees and business partners. This means that they intend to improve not just their service delivery but also their employee relations, financial performance and business processes.
Shangri La is especially known for great service that is based on the virtues of “respect, humility, courtesy, helpfulness and sincerity.” These are the main factors that inform the company’s core values which involve aspects like customer loyalty, decision making and leadership drive among other things. The general idea of the company’s guiding principles is to ensure that the company is moving in the right direction in terms of their growth and expansion, not only for the company but also for the employees and the customers. Having established the company’s strategic vision, it can be expected that the company should be evaluated based on this vision and their guiding principles. A balanced scorecard include financial aspects, customer focus, internal business processes and the company’s learning and growth as discussed in the paragraphs that follow.
Finance as a main component of the balanced scorecard, and mostly focuses on the company’s value to the shareholders. This is usually about how the company is working towards improved financial stability. Shangri La’s financial performance is determined by their ROI (Return On Investment) which in this case mainly focuses on the organization’s investment in their employee training using the Shangri La Way philosophy of Shangri La Care, their Cash Flow, their Return on total Capital Employed which in this case would consider the construction, opening and managing of the numerous lucrative locations all over the world, and their financial results.
The company’s objectives on this front include attaining higher revenue, higher gross profits and sustainability in the very competitive hospitality industry, and as such the measuring factors would be an increase in the revenue and gross profits. To accomplish these, the company has been very consistent in implementing the Shangri La Way that strengthens their distinctive core competencies for better business operations all round. The efficient marketing strategies have also been especially helpful in ensuring that the company is not only famous but also celebrated for all the right reasons, in this case being the art, hospitality and culture of their parent society.
The customer segment on a balanced scorecard then focuses on the company’s value to their customers. The main question here is how really important is the company to the customers? Some companies are never important enough to their customers, thus resulting in loss of customers to other competitors. In order to make the company important and invaluable to the consumers, the Shangri La team must be able to find ways of measuring the efficiency of their delivery performance, the quality of their overall performance, the prevalent customer satisfaction rate, the company’s percentage of loyal consumers in the market and the customer retention rate for the company. All these measurable are very important if the company is to claim a large market share. The set objectives here thus include customer satisfaction, good customer reviews and extensive market awareness. The measures would then be an increase in market share and brand recognition since the aim here is to reach out to more customers. For Shangri La, this is being accomplished through initiatives like the recovery process in customer care training, which seeks to regain the customer’s confidence after bad mistakes. The company also focuses on offering personalized customer services and adhering to the adaptable company culture to ensure that everyone gets what they want and expect.
Shangri La Hotels is a profitable business, as can be seen consistently in their financial results. The company is especially known for their impressive management teams and strategies, thus their position as trusted management partners for most of their foreign establishments. This means that their internal business processes are very effective. In this part of the scorecard, the main questions are: How are the processes aligned? What are the limitations of the company’s business processes? Which business processes are automated? And, which ones should be automated? The main objectives regarding the effectiveness of the operations include cost reduction, maximized return on investments and an efficient company operational expenditure.
In order to measure these objectives, the company will have to monitor their percentage reduction in operating expenses, percentage increase in gross profit, percentage increase in organizational performance, percentage reduction in operating expenses, percentage increase in gross profit and percentage increase in organizational performance (Jurevicius, 2013). The idea here is to ensure that whatever the organization is doing can be considered as the best practice in terms of organizational management. Currently, the company applies effective management in order to ensure that the business processes are accomplished effectively. In the future however, it will be more competent for the managers to consider IT based business solutions like knowledge management and DSS as ways of encouraging their especially reluctant Asian employees to engage in innovative thinking and decision-making based on taking the initiative without having to wait for management to give the green light.
Every organization has the potential to improve the way it is run and thus how it performs. In Shangri La’s case, it can be appreciated that the employees present the greatest opportunity in the company’s scope of learning and growth. As a service-based company, Shangri La has to be able to not only create but also retain the best workforce if they intend to keep up as the industry’s best. As such, the main focus on this section is the company’s hiring criteria, their current employee turnover rate, the job satisfaction trends and the training and learning opportunities that the organization provides for its employees. The defining objectives here would thus include high employee motivation and retention levels, the creation of an organizational knowledge pool and having the highly qualified workforce in the industry.
These efforts are however only as good as their outcomes and in this case, they can be measured by considering that company’s percentage increase in employee retention and their organizational learning with respect to business processes (Lockyer, 2008). Currently, the company has very detailed training and career growth opportunities that ensure their employees are challenged and motivated to work hard. In the future however, there may be a need to embrace more employee motivation techniques for the company’s benefit. For the time being, the company can focus on knowledge management and organizational learning considering that a majority of their employees are Asian, with little or no confidence in decision making without seeking management’s approval. This can be attributed to the high power distance of the region, in which the employees are more comfortable within a transactional leadership setting.
A blue ocean strategy is basically a corporate strategy that would enable the company to create a new market rather than limiting themselves to existing niches. Most companies are comfortable operating within the existing markets and dealing with competition. It has, however, been proven that a company is more likely to make significant profits if they create a new market and dominate rather than keeping to the shadows in an overcrowded one. In this situation, the challenge is that a blue ocean strategy is not as easy to come by as the common red ocean strategies, which mostly focus on surviving in an existing market and hopefully beating competition (Jurevicius, 2013). Shangri La exists within a very competitive market that has far too many competitors. Most of their corporate strategies are aimed at making them the very best in the industry, as opposed to creating a new market.
This means that the company has the opportunity to tap into the blue ocean strategies that would give them far more prestige than they have at the moment through higher profits and more global recognition in the industry. In order to create a buzz in the hospitality industry however, this company will have to develop a strategy that not only creates a new demand but also lowers the cost for the consumers. The hospitality industry has over the past few years been lacking in terms of innovation and Blue Ocean strategies thus making it a rather barren ground for this kind of ideas. However, there are at least two lucrative options that Shangri La can consider in terms their growth and market domination or in this case, market creation.
The first possible blue ocean strategy would be to create a new market by venturing into diplomatic accommodations. For example, most countries have numerous diplomats who live abroad, and in most cases these jobs are short-term as every so often a diplomat gets reassigned or moves on to other fields of work. As such, rather than maintaining households that have to be redesigned every time the company can develop private, fully managed residences all over the world specifically for the political elite.
A blue ocean strategy is judged based on five aspects. First, is the company going to create uncontested market space with the strategy at hand? In this case, the diplomats are an underutilized client base seeing as countries have to consistently pay for the new houses, new furniture and new staff to suit the needs and expectations of the new diplomat each time there is a new posting. This means that there are no companies that are tapping into this need. Currently, governments mostly look for real estate, interior design and housekeeping agencies to cater to the needs of their diplomats. With this strategy however, Shangri La will be allowing the governments to sit out of the hassle and just pay for the services rendered. The company will be able to offer some of the best residential locations, with all the required services including housekeeping and cooking if necessary. Given their history in customized service, handling specialized households should be very easy for the company. They could source for culturally competent employees in each field so as to ensure that they give the diplomats the kind of service that they deserve given their high political stature.
A second criterion would be whether this strategy would make the competition irrelevant. While other four and five star hotels are busy competing for the travelers, this company will have invested in long-term foreign residents. In fact, their main customers will be governments and, in most cases, diplomatic ties are almost permanent, necessitating the presence of diplomats for almost eternity. As such, there will not be any need for Shangri La to focus on the competition. All they have to do is focus on meeting the needs of their customers, and making it easy for them to accommodate their diplomats in comfortable and lavish homes with the best housekeeping that they could get.
On creating and capturing new demand, there are very few hotels that consider permanent residence for the diplomats just as there are very few diplomats who can even consider residing in a hotel establishment for the whole extent of their diplomatic tenure (Penner, Adams & Rutes, 2013). Governments, as the main customers, are also very unlikely to consider accommodating their diplomats in hotels for the long-run. With this strategy however, the company would attempt to change this by making all these interested parties see the significance of the hotel managed residential arrangements compared to the current situation. Using their persuasive styles, the company should be able to create and capture this new demand without a doubt since they are the gurus in housekeeping and real estate development as well as management if the conditions and locations of their hotels is anything to go by.
The company in this case would not really be considering the cost of these establishments to them, but rather to the governments that would be their main clients. They would be lowering the cost for housing a diplomat abroad and in return, they will be able to make some good returns. This means that the strategy will enable them to break the value/cost trade off, which is another important criterion of a blue ocean strategy (Breaking News Travel, 2015). In the end, the company will be able to create a new market and benefit from it thus making them pioneers. The key aspect here will be the alignment of the company towards concepts of differentiation and cost cutting for their esteemed clientele.
The second blue ocean strategy is to consider taking over the entire travel process, from the bookings to the visa applications and travel arrangements, itinerary and even local transportation services. This would imply not just being in the hospitality industry but generally in the tourism industry as an overall player for their customers. The concept of travel has for many years given many people a hard time. There are other companies in the industry that have been getting into the other supportive industries like travel agencies in order to increase their business and ensure that they are relevant to their customers.
Shangri La already has the brand name and global presence to ensure that they have the market awareness. All they have to do is reach beyond their existing demand and reconstruct the boundaries of their current market. This would mean going back to the roots of the travel industry and establishing not only travel agencies but also airlines, bus companies and car rental services as well as chauffeur services and private accommodation alternatives in all parts of the world. The idea here is to be able to cater to all of the clientele, not just people traveling for business and leisure but also those traveling for academic purposes, sports and any other reason. The guests in this case would not even have to stay in a hotel in order to be considered a Shangri La customer. All they would have to do is decide to leave their house, and receive the company’s numerous available products and services as needed. Here, the company would be focusing on eliminating the organizational hurdles and ensuring that they are able to capture almost everyone who leaves the house to go to work, school or even the hospital and thus needs some means of transport that is offered by an organization with the ability to arrange everything including the hospital appointment.
This strategy also lives up to the blue ocean strategies criteria in that it enables the organization to reach beyond the existing demand, which at present stands at accommodation and conference facilities, by offering transportation and travel arrangements for the customers. The company would also be reconstructing market boundaries and possibly getting their competitors to expand as well into the travel arrangements and transport services in order to catch up with them. Rather than focusing on the numbers and returns, the company would be looking at the big picture which in this case is the customers and their needs and how to satisfy them. On one hand, this may seem risky for the business but as a bigger picture there is the possibility that the returns will be impressive to say the least. The key organizational hurdles in this case mostly revolve around the customers and how they get to make their travel arrangements. This strategy will enable the company to take over and with their experience, they will be able to ensure that the customers are fully catered for once they decide to travel for whatever reason.