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  1. 1. 35 The Value Adding Manager Environmental Analysis Exercise – Task Environment Overviewofexercise to be completed The purpose of this exercise is to guide the learner through the environmental scanning effort in a step-by-step process. More specifically, the learner will be asked to evaluate the forces driving change in the hospitality industry as identified by an analysis of the task environment of the organization. Objectives ofexercise Upon completion of this exercise the learner shall possess a comprehensive understanding of the task environment. This includes a careful look at competitors, suppliers, regulators, and the customer. Potential competitors and substitute products are also analyzed along with identifying the industry wide critical success factors,and value drivers. Task to be performed The following tasks should be performed in the sequence suggested. The forms are provided as a guide to assist in this process. 1. Analysis of the task environment by completing all the forms attaching to this exercise. Criteria for evaluation: 1. Executive summary: Using your analysis of the task environment along with the descriptions of the forces driving change as identified in the reading materials and your prior analysis of the remote environment provide an evaluation of this immediate environment of your organization. This should be a narrative of no more than three typewritten pages. In this narrative you must identify what you consider to be the most important issues that face your firm from this environmental category. You must be able to link these issues with the forces that you identified in your remote analysis. 2. A thorough description of your company’s business and financial performance 3. A thorough description of the domain your firm is competing in. This includes the geographical market, and customer targeted.  You must be sure to relate how the customer, supplier, regulator, and competitor are impacted by the forces you identified in your remote analysis. Be sure to conduct a comprehensive review of the causal analysis with respect to all the factors in the remote environment on the customer. Key trends must be identified.  You must provide an assessment of what you consider to be probable new competitors that may result from the forces in the remote environment. The same holds true for possible substitute products that are available. Key trends mustbe identified.  It is imperative that the critical success factors necessary to compete successfully in your domain must be defined and understood. You must not only describe them in detail but must compare how your firm performs against each of its competitors on each factor. Special emphasis should be directed toward knowing whether your firm leads the industry or is in some other follow-on position. Key trends must be identified. 4. You must be able to identify the key value drivers that operate at your domain level and what quantitative and qualitative information is available to help you understand these drivers. Key trends must be identified. 5. A thorough explanation about relationships among forces driving change and external and internal value drivers 6. A thorough description and estimation of industry demand and supply
  2. 2. 36 Part II: Task Environment Industry Value Drivers Analysis In the section of Industry Value Drivers, many important factors are found which are major factors directly influencing the profitability of a hospitality enterprise. For instance, industry labor cost and travel expenditure and other factors are included. These drivers are industry wide and affect all firms more or less equally. They can be considered as important indices that will ultimately affect the organization and therefore must be tracked and forecasted. In the relationship worksheet part, hotel industry/task environment value drivers that can be affected by external drivers are described based on the three important factors which are included in the external environment analysis. In this part, the relationship between external and industry value drivers are found and discussed. For example, fiscal policies like tax rate can affect customers’ travel expenditure and such change can have influence on the occupancy rate and the whole tourism market. The decreasing trend about the exchange rate of U.S. dollar and the National Travel and Tourism Strategy are encouraging international tourists and workforce to come to America. The occupancy rate and the market can also be benefit from those policies. At the same time, labor demand, labor cost, retaining skilled employees, cross-culture training and the requirement of sustainable development are becoming big challenges to hotels. Industry Segment Analysis and Porter’s Five Forces Industry Critical Success Factors consist of those variables which are a must for survival for the industry components. For the hotel industry, few factors have been identified as the survival kits for hotels: 1. Customer service: Hotel industry being the service oriented industry has to focus on quality of service offered to customers. Upscale and midscale hotels are in better position than low-scale hotels in terms of quality service. 2. Advertising/ Social Media: Social media has been rising as one of the main sources of advertising tool for the industry to carry out sales and marketing approach reaching millions of customers. 3. Customer Loyalty program: Loyalty program is ranked fourth among reasons why customers select a particular hotel. 4. Some of the other critical success factors of hotel industry are hotel chain, amenities, imitation and central reservation system. Porter’s five forces analysis assist in visualizing the position, strength and weaknesses of the industry associated to five aspects: 1. Threat of new entrants: High competition, large hotel chains, high capital investment requirements create barriers for new entries, whereas, low government and legal barriers, availability of leasing facility through real estates may encourage new entries. Hence, the industry possesses medium entry barrier. 2. Power of buyers: The factors that provide power to the buyers are high competition among the hotels, large portion of price sensitive customers, easy access to the hotel information and low switching costs. 3. Power of suppliers: Hotel industry suppliers have low bargaining power because of high no. of available suppliers, easy substitutes, and low switching barrier to another supplier. Executive Summary
  3. 3. 37 4. Power of substitutes: The power of substitutes are fairly low, however, it is expected to increase due to easy access of information to customers, competitive prices and personal service offered. 5. Rivalry among competitors: Higher rivalry among competitors brings benefits to the industry through quality o service, product differentiation and better deals for customers. In summary, despite the industry is mature and has high competition within, it enjoys favorable growth due to expected increase in international tourist arrivals and domestic travel. Overall Supply and Demand Demand in Hospitality Industry The actual demand (number of customers) in the hotel market place in America over the past five years is described in this part. Affected by the economic recession between 2008 and 2009, the whole industry in US was attacked too. It started a trend of resurrection in 2010. After the policy of National Travel and Tourism Strategy was announced in 2011, the situation of US tourism started going back to an acceptable level. Based upon the forces identified in the general analysis and value drivers in the internal and external environment analysis, the future demand in five years is predicted in this part too. The phenomenon of population growing seems to be a consistency trend in many years, so tourists arrivals for business and leisure activities will increase. On the other hand, as discussed in the industry analysis part, the exchange rate of US dollar is in a process of decreasing and other currencies in some countries like China are becoming relatively strong. So the cost of goods and services are relatively cheaper in America and especially tourists from other countries would be able to travel cheaply. The factor which is playing the most important role for America’s tourism is the NTTS plan, such strategy sets a goal of drawing 100 million international visitors by 2021 and it has many specific policies being implemented for the goal. After the prediction of increasing trend and the analysis of customer number between 2004 and 2012, a regression is done to predict the demand for the year between 2013 and 2017. Supply in Hospitality Industry Based on the data of total hotel rooms in the U.S., supply in the hospitality industry is increasing yearly from 2008 to 2012. In 2008, there are total of 257,012 hotel rooms, 263,952 rooms in 2009, 272,398 rooms in 2010, 277,846 in 2011, and 294,517 in 2012. The growth rate of hotel rooms changed from in 2.7% 2008, 3.2% in 2009, 2.0% in 2010, 0.6% in 2011, to 3.5% in 2012. Moreover, from 2004 to 2006, during the three years, growth rate for total hotel rooms in the U.S. wasn’t exceed 1%. That means the supply side is getting recovery in the current years. Marriott &Its Competitors The Marriott International Inc. is a world operator, franchisor and licensor of hotels,, corporate housing properties and timeshare properties under numerous brand names at different price and service point. Its vision is to be the #1 hospitality companies in the world. Its properties consist of 53% franchise, 44% managed, 2% leases contract, and less than 1% franchised by unconsolidated joint venture.
  4. 4. 38 Throughout the project, InterContinental Hotels Group (IHG), Hyatt Hotel Corporation (H), Starwood Hotels & Resorts Worldwide Inc (HOT) were chosen as major competitor because they were three major companies that not only has the scale to compete but also grow aggressively and develop brands that follows the trends of the new lifestyle segment. InterContinental (with 85% franchised, 15% managed and less than 1% own and lease) is the biggest hotel corporation in the world in terms of the room numbers. Moreover, the brand “Hotel Indigo” is the pioneer brand in the new “lifestyle segment” of the industry. Just like many other hotel companies, IHG is very aggressive on expanding its operation by increasing properties at multiple market, it would always been the most influential player of the hospitality industry. Hyatt (with 53% managed, 24% franchised, 22% owned) is one of the few hotels that has mentioned and emphasis its competitive strength in the annual report. There are 7 major strengths such as Hyatt is a recognized world class brand, who has deep culture and experienced management team, and who provide high quality service in selected market…etc. However, they are also the only hotel group that focus and invest heavily in innovation. Example includes eliminating de-personalized service, creative approach provide healthy food and beverage option to guest…etc. Being innovative is really critical to performance of a hotel. Starwood hotels, (48% managed, 46% franchised, 5% owned) is one of the few companies who focus on relative small segments; in this case: high-end segment. They also diversify the market in developed worlds. Their financial statements indicate their corporate strategies really work well. Financial Ratio Analysis Evaluating the financial ratios in liquidity, leverage, activity/ efficiency, profitability, growth and operation ratio, the performances basically positively correlate with the industry performance. Marriott is not the company that has the best performance among competitors, we believe it’s because they are operating in too many segments; therefore, could not maximize its operating efficiency. Overall speaking, Hyatt is the company that has the best performance on financial ratios, due to its efficient performance. Branding strategy for Marriot Based on our analysis, we proposed that branding strategy is one way Marriot International can do to overcome the future uncertainty and diversity in hospitality industry. Based on National Travel and Tourism Strategy, the tourism inbound market is going to increase in the following 10 years. Most new customers in the market will come from foreign countries to improve new hotel demands. Providing more hotels becomes a strategy for hotel brands. Additionally, Asian visitors are part of the main target market considered in National Travel and Tourism Strategy. Since lifestyle hotel brand is an increasing concept in hotel brand, what is the concept of lifestyle in Asian customers’ mind? It’s an opportunity for Marriot International to think about create a lifestyle hotel brand for Asian visitors in the U.S. On the other hand, diversity and other minority issue in future American society should also be considered. Structure of family, races, and generation are all possible factors to create new hotel brands. For example, in our first project, we mentioned that LGBT is an increasing market should be concerned by hospitality industry. This year, there is one Gay hotel opened in New York City to serve the segment. Segment of hotels are no longer simply use how many services will be provided. Style and other differences can also be a powerful segment for planning hospitality branding.
  5. 5. 39 Company Analysis This information helps to understand the company’s business model, market, and financial conditions. Provide a description of the following: a. Primary business Marriott claimed itself as a worldwide operator, franchisor and licensor of hotels, corporate housing properties and timeshare properties under numerous brand names at different price and service points. Marriot own very few of the lodging properties, but have invest more effort and expertise on managing, franchising, and licensing. Marriott also operate, market, and develop residential properties and provide service to home/condominium owner associations. b. Organizational goals: vision, mission, or/and strategic objectives The vision of Marriot is “to be the #1 hospitalitycompanies in the world. “ It purpose, value, strategy, and success measurements are as follows:  Purpose: open doors to a world of opportunity for our people, customers, owners & franchisees,investors, business alliances and communities.  Value: put people first, pursue excellence, embrace change,act with integrity, and serve our world.  Strategy: next generation travelers, brand distinction, portfolio power, technology leadership, owner preference,global growth  Success measurement– Customer loyalty, corporate profitability and growth are the measurement Marriot used to evaluate its success. c. Properties (number of units by brand, location (states/domestic/international), and ownership structure (company owned, franchised, joint venture, management contract,etc) The following table details the number of Marriott units by brands for both U.S. domestic level and international level with its ownership structure. To summarize, 53% of the properties are franchise, 44% are management contract, 2% are lease, and only less than 1 % is franchised by unconsolidated joint venture. Company-Operated Franchised / Licensed Other Brand Properties Properties Properties U.S. Locations Marriott Hotels & Resorts 138 184 — Marriott Conference Centers 10 — — JW Marriott 14 7 — Renaissance Hotels 38 40 — Renaissance ClubSport — 2 — Autograph Collection — 17 —
  6. 6. 40 The Ritz-Carlton 39 — — The Ritz-Carlton-Residential 29 — — EDITION — — — Courtyard 282 523 — Fairfield Inn & Suites 3 664 — SpringHill Suites 34 251 — Residence Inn 134 463 — TownePlace Suites 29 171 — Timeshare (2) — 50 — Total U.S. Locations 750 2,372 — Non-U.S. Locations Marriott Hotels & Resorts 135 35 — JW Marriott 29 3 — Renaissance Hotels 54 20 — Autograph Collection — 5 5 The Ritz-Carlton 39 — — The Ritz-Carlton-Residential 3 — — The Ritz-Carlton Serviced Apartments 4 — — EDITION 1 — — Bulgari Hotels & Resorts 2 — — Marriott Executive Apartments 22 1 — AC Hotels by Marriott — — 80 Courtyard 59 49 — Fairfield Inn & Suites — 13 — SpringHill Suites — 2 — Residence Inn 4 16 — TownePlace Suites — 1 — Timeshare (2) — 14 — Total Non-U.S. Locations 352 159 85
  7. 7. 41 Grand Total 1,102 2,531 85 (Source of Table, MAR 10K) d. Financial Performance: Ratio information for hotel companies is retrieved from Our primary company is Marriot International, Inc. Industry average is calculated by averaging ratios of Marriott International, Inc. (MAR), InterContinental Hotels Group (IHG), Hyatt Hotels Corporation (H), Starwood Hotels & Resorts Worldwide Inc (HOT), Choice Hotels International, Inc. (CHH), and Wyndham Worldwide Corporation (WYN). Period of investigation is from 2007 to 2011 due to some unavailability of key ratios of companies. Moreover, throughout the report, all information regarding MAR, IHG, H, and HOT are retrieved from company’s annual report and SEC 10K filing. Category Ratio 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 Evaluation of your company’s financial ratios Marriott Industry Average (Strength, Neutral, or Weakness)& Reasons Liquidity Current ratio 1.24 1.33 1.25 1.35 0.52 1 1 1.4 1.4 1.2 Current ratio measures company’s ability to meet short term obligation as its due, if the ratio is too high it means the company has too much cash on hand and not using it efficiently; if the ratio is too low the company might has risk of missing the debt obligation. The best ratio may be close to the industry average. MAR's current ratio is evaluated as NEUTRAL, because it has stayed close with the industry average, and most of the time it's slightly higher, meaning they are able to meet their short term debt obligation with little extra cash for otheroperation use. Leverage Debt to equity 1.95 2.16 1.96 1.7 -2.33 4.8 1.3 2.8 1.7 1 Debt to equity ratio measures the proportion of equity and debt the company is using to finance its asset. Hospitality firm usually use more debt than firm in other industry because its inexpensive and it's easy to obtain. However, using too much debt would increase firm's interest obligation, and increase the firm's risk. The industry has a trend of decrease the use of its debt, to reduce the risk, but due to the financial crisis the economy is not performing well and causing the low occupancy rate of hotels, so many hotel has increased their debt for hotel renovation during the period of early recession. and try to lower it later. MAR's debt to equity ratio is evaluated STRONG because MAR in this category has lower debt to equity ratio on average than the industry, but still using a fair amount of debt, means MAR is utilizing its capital efficiently by taking advantage of characteristics of debt and has on average lower risk than the industry.
  8. 8. 42 Activity / Efficiency Asset Turnover 1.45 1.44 1.3 1.38 1.65 0.9 0.9 0.8 0.8 0.9 Asset turnover measures how the company's asset is making money. The higher the ratio, the more money the asset is making. In this case, MAR has always outperformed the industry for the last five years, indicating strong efficiency of the company. Profitability Gross profit margin 15.1 12.6 11.3 12.6 10.4 36.7 36.3 31.9 33.9 34.6 Gross profit is the very first measure of the firm's profitability, calculating by sales revenue deducting by the cost of goods sales. MAR's Groff Profit Margin is evaluated as WEAK, because while the industry whole industry has an average of over 30% gross profit margin, MAR only has a little over 10%, due to their higher cost of delivering better quality of service. Return on assets 7.94 4.06 -4.11 5.42 2.66 11.6 6.3 5.9 9 9.3 Return on asset measure the how much money return the company's asset is generating, the higher return the better. MAR's return on asset is evaluated as WEAK, because not only the return is always much below the industry's average, but on 2008, while the industry is earning 6.3% return, MAR is at - 4.11%. Growth Year over Year Sales Growth % 6.83 -0.85 -15.3 7.18 5.35 9.5 1 -15 5.8 7.9 MAR's sale's growth is evaluated as NEUTRAL. MAR has similar growth with the industry, even though the number shows they are not growing as much as the average industry, but MAR does has a steady rate, and after the 2008 financial crisis, it was able to adjust its strategy in response for the market, then maintain the growth to later on. Year over Year Net Income Growth % -0.48 -1.96 -2.32 -0.57 1.88 0.45 -0.40 -0.74 1.10 0.48 Net income is the amount of pure profit that the company is making. The higher the net income the better. MAR's net income growth is evaluated as WEAK, because MAR’s net income growth has much higher variation than the industry average, which indicates higher uncertainty and risk. Operation Operating Margin 9.15 6.1 -1.39 5.94 4.27 -7.5 155.1 87.6 26.3 3.4 The operating margin is a good indicator for firm's profitability and operating efficiency. MAR's operating margin is evaluated as STRONG, because even the ratio seems quite low, MAR has a much stable operation margin comparing to the whole industry, which also indicates the firm has high control over its operation so unsystematic risk is lowerits shareholders.
  9. 9. 43 Competitive Environment (or Task/Industry Environment) This environment is immediate environment surrounding a firm. Segments of the competitive environment include Competitors/Potential Entrants, Customers/Buying Groups, Suppliers, and Substitutes. 1. Domain Provide a thorough definition of the domain in which your firm competes. This should include a description of the key competitors, geography and other variables that serve to carefully define the environment in which you compete. Domain Definition Variable Summary of Variables Geographic Market Regardless of The American market, Asia, Europe, and Middle East & Africa are also geographic areas where Marriott compete with competitors. MARRIOTT INTERNATIONAL, INC. (NYSE:MAR) is a leading lodging company with more than 3,400 lodging properties in 68 countries and territories. Evolving diversity and inclusion goals to support global growth is a business imperative for Marriott. Approximately 36 percent of room pipeline and two-thirds of our 42,000 rooms under construction are outside the United States. To support this rapid growth, the company has opened new development offices in Africa, Brazil, and India which are all staffed by local professionals who fully understand the cultural norms and practices of their respective markets. Global regions: Asia In China, Marriot’s largest market outside North America, the company aims to more than double its presence to 120 hotels by 2015. In India, Marriot expect to grow from 12 to 100 hotels across seven brands by 2015. Global regions: Europe Marriott has 180 hotels in Europe, and plans to double its presence by 2015, fuelled by a joint venture with AC Hotels in Spain, Italy and Portugal, increasing sales focus in Russia, and agreements to open new hotels in France, Germany, and Poland. Global regions: Middle East & Africa As Marriot grows, our community ties deepen, aligning with issues that are important to the people who live where we operate hotels all over the world. In international markets like the Middle East, growing wealth is creating more travelers and providing greater new hotel development opportunities. Industry Segment There are 6 segments in Marriott’s hotel brands. For each segment, brands of Marriott face different competitors. 1. Iconic Luxury Focusing on the diverse tastes of the upscale and luxury guest, with lodging experiences ranging from treasured landmarks to adventurous retreats. Target market: guest who has the means and desire to experience only the finest, guest who enjoys genuine care and comfort 2. Luxury Brands Promising an extraordinary guest experience that is keenly focused on the distinct needs and expectations of the upper
  10. 10. 44 high-end guest. Target market: Sophisticated, self-assured travelers who seek a hotel experience that embodies confident sophistication without pretense 3. Lifestyle/Collections Brands Engaging sophisticated travelers with energetic environments, imaginative dining and highly attentive service. Target market: customers who are rich and young and are novelty seekers; customers who are intellectually curious, fun loving, inspired, adventuresome, exuberant, engaged; younger traveler looking for a cosmopolitan hotel in a great city location; travelers who seek independent, high-personality destination hotels 4. Signature Brand Among the most trusted names in the hospitality industry, Marriott expertly caters to the spectrum of needs of business and leisure travelers as well as those planning meetings and events. Target market: customers who seeks balance between work and travel, time with family, friends and colleagues, and pursuing interests that calm and rejuvenate 5. Select Service Cost-conscious and purposefully designed to accommodate a broad range of guest categories, with an eye towards providing environments that are efficient, comfortable and convenient. Target market: smart business travelers; lifestyle traveler in the upper moderate tier; business travelers across North America 6. Extended Stay Brands Spacious suites and rooms with superior efficiencies designed to accommodate guests with the comforts of home while on travel for longer periods; Target market: Upscale frequent business travelers and extended stay business travelers; guests who at ease for the long haul, with thoughtful spaces for both working and living; traveling corporate executives
  11. 11. 45 1) Geographic Market Area *The “List all the geographic sources of your customer by level of business volume generated”, “What is the average geographic distance your customer must travel to receive your products and services?” and “What is the most frequent mode of travel used by your customer?” are deleted in this project for these three questions not fit the case hotel company for some reasons. First, Marriot owns more than 10 hotel brands with different target and location for each brand. It’s not a single-brand hotel with customers from a specific region. Besides, diverse locations and brands of hotels make “level of business volume generated” not meaningful. Second, geographic distance is efficient to analyze restaurant industry rather than hotel companies with several brands at different segments. That is, long and short geographic distance can be an advantage based on different target market and segment of the hotel brand. a. International tourists of main regions (U.S. Travel Association, Country Summary Prediction China With a 1.5 billion person population and soaring GDP growth, China is a fast-growing market for inbound travel to the United States. Chinese travelers visited the U.S. in substantial numbers in 2011, and forecasts project strong growth will continue. More than any other travelers to the U.S.,Chinese spent the most on American goods and services per visit in 2011. India Indians traveling to the United States continue to spend at a high rate. India’s average visitor spending in 2011 was higher than all other countries, except for China. Improving realGDP and exchange rates should improve future arrivals and spending amounts by a greater margin.
  12. 12. 46 Brazil With a population of nearly 200 million and a GDP exceeding $2 trillion, Brazil is a particularly ripe market for travel to the United States. Brazilian travelers visited the U.S. in strong numbers in 2011, continuing a five- year trend of positive growth. These visitations continue to have a significant impact on the U.S. trade balance with Brazil. Canada The U.S. is the most popular international destination for Canadian travelers. Approximately 63% of all Canadian residents traveling internationally visited the U.S. in 2009. Mexico The U.S. is the most popular international destination for Mexican travelers. Approximately 87% of all Mexican residents traveling internationally visited the U.S. in 2009.
  13. 13. 47 UK In 2009, the U.S. received a total of $11.4 billion from U.K. visitors, a decrease of 31.6% compared to 2008. $8.8 billion was spent on travel while in the U.S.,and $2.7 billion was spent on international airfare. Total spending, including spending on international airfare, per U.K. arrival to the U.S. averaged $2,931 in 2009, a decrease of 20.0% compared to 2008. Japan 2,918,268 residents of Japan visited the U.S. in 2009 representing a 10.2% decline from 2008, the fourth consecutive annual decline and the lowest number of arrivals from Japan since 1988. Monthly arrivals for November 2010 were 265,615, about 14% better than arrivals for November 2009, and year to date through November 2010 has shown a 17% improvement over the same period of 2009. Germany A total of 1,686,825 residents of Germany visited the U.S. in 2009 – a 5.4% drop from the 2008 total. Monthly arrivals for Nov 2010 totaled 113,175, about 1% higher than November 2009 arrivals. Year-to-date arrivals through November 2010 are 2.9% higher than for the same period in 2009. Looking towards the end of 2010, arrivals are expected to increase by 1.1%, for a total of 1,705,000 visitors.
  14. 14. 48 France A total of 1,204,490 residents of France visited the U.S. in 2009, a 3.2% decline from the 2008 total of 1,244,000. Despite the decline, 2009 arrivals from France represent the second largest number in history. Monthly arrivals for November 2010 totaled 86,234, 25% higher than November 2009 arrivals. Year-to-date arrivals through November 2010 are 12% higher than for the same period in 2009. Looking to the end of 2010, arrivals are expected to increase by 2.0%, for a total of 1,230,000 visitors. Australia A total of 723,576 residents of Australia visited the U.S. in 2009, a 4.9% increase from 2008. Total Australia arrivals in 2010 are forecasted to increase by 18%% to 854,000. Monthly arrivals for November 2010 totaled 80,809, an increase of 15.1% compared to November 2009. Through the first eleven months of 2010, arrivals from Australia were up 24.8% compared to the first eleven months of 2009. Italy A total of 753,310 residents of Italy visited the U.S. in 2009, a 3.4% decline from the 2008 total of 779,463. Monthly arrivals for November 2010 totaled 57,670, about 22% higher than November 2009 arrivals. Year- to-date arrivals through November 2010 are 12% higher than for the same period in 2009. Looking to the end of 2010, arrivals are expected to increase by 5.7%, for a total of 795,000 visitors.
  15. 15. 49 South Korea A total of 743,846 residents of South Korea visited the U.S. in 2009, representing a 2.1% decline from 2008. Monthly arrivals for November 2010 totaled 80,737 for an increase of 63% compared to November 2009. Year to date through November, arrivals have improved 53% in 2010 compared to the same period in 2009. Looking to 2010, arrivals are expected to increase by 31%, for a total of 975,000 visitors. b. Insert a map of your geographic market area in this space Hotel brands Major location Map Europe Asia America Europe Asia
  16. 16. 50 America Europe Asia Europe America Europe Africa Asia Europe
  17. 17. 51 America Europe America Europe Asia Africa Oceania America Europe Asia Oceania America
  18. 18. 52 America America Europe Asia America America Europe Asia
  19. 19. 53 2) Industry Segment Analysis a. Industry/Segment Critical Success Factors Using key words familiar to you, list the critical success factors for this industry segment Describe in more complete detail what each of these success factors are and how they are measured. Additionally, be sure to indicate the key trends occurring in eachand link to significant value drivers. Sources Industry leader and describe why you believe this is the case Customer Service Hotel employees are the first and last impression of the property to the customers and are responsible for providing excellent customer service. The main commodity of the industry is the service. It is a critical success factor for the industry to survive and grow in the market. Customer service is measured through Guest Satisfaction Score or Mystery shoppers. According to American Customer Satisfaction Index (ACSI), a national economic indicator of customer evaluations of the quality of goods and services, ACSI scores of hotels are on continuous rise since 2007. Market Matrix revealed that Guest satisfaction with hotels had shifted upward in the second quarter of 2011 with Upper Midscale Hotels and Luxury Hotels posting the biggest gains. http://www.hotelnewsre 4Trends___Guest_Satis faction_with_Hotels_E dged_Upwards_in_the_ Second_Quarter_of___ __.html http://www.hotelnewsn 096/Comparing- customer-satisfaction- across-sectors hotel-guest-satisfaction- scores-dip- 161500794.html According to the J.D. Power press release, Ritz-Carlton has secured the highest guest satisfaction score in the luxury category for the third year in a row, Hilton Garden Inn and SpringHill Suites in the upscale category, Holiday Inn in the mid-scale full service category for the second year and Homewood Suites in extended stay category. Ritz- Carlton scored the highest score (864/1000) in any brand or category, according to USA Today. The overall hotel industry score is 757/1000) in 2012 which is 7 points lower than in 2011. Advertising/ Social Media The role of advertisement is inevitable in any industry. It is one of the best and effective ways of reaching to the customers, creating the image and making the service/product’s existence known to them. With the advancement in technology, advertising is not limited only to TV, newspaper or radio but also different online sources like company websites, social medias like Facebook, twitter, online blogs and mobile. The effectiveness of advertisement can be measured by the percent of the customers it touches. Word of mouth also creates additional chain reaction among customers which is basically free advertising. Based on the research by Coyle Hospitality Group in 2012, 86% of the respondents (restaurants and hotel companies) use social media for sales and marketing activities; 89% use Facebook, 63% use social media to improve customer loyalty, 44% have a dedicated social media staff and more than 50% plan to increase the social media http://www.bighospitali Reports/Marriot-tops- list-of-World-s-10- Best-Hotel-Chains-in- terms-of-online- performance m/2010/10/01/future- of-display-advertising- is-the-hotel-industry- ready/ http://www.coylehospit According to the report, conducted by global brand analyst Heardable, Marriott hotel chain topped the list with the highest scores which was based on the chains’ online presence, mobile readiness, social network participation and search engine optimization (SEO).
  20. 20. 54 activities within next year. Google has predicted that the display advertisement in 2015 will include smartphones/mobile as number one screens for digital brands to engage users, 75% of the web ads will be shared, discussed, subscribed to and recommended in social media. social-media-trends-in- the-hospitality-industry/ Loyalty program for customers More people are selecting to stay at hotels which offer loyalty programs. Loyalty programs now rank fourth among reasons why customers select a hotel. Hence, it is necessary to improve the benefits tied with the loyalty program. According to the, loyalty programs can be evaluated by a measure called “loyalty program effectiveness”. This measure collects the percentage of persons choosing hotels based on their loyalty program membership. In 2002, 32% said the loyalty program was the key factor in choosing the hotel which increased to 37% in 2007. Compared to 2010, 2011 saw an increase of 5% in elite members in loyalty members. Customers will continue to use loyalty programs with anticipation of increase in the customer enrollment in such loyalty program in future. Hotel brands are constantly improving and adding features in their loyalty programs and will continue to do. m/alliance/flights/board ingarea/post/2011/10/L oyalty-Traveler--- Hilton-HHonors- ranked-highest-loyalty- program- effectiveness/556161/1 According to the USAToday, in 2011, Hilton HHonors ranked the highest loyalty program effectiveness, followed by Marriott and Starwood. Marriott Rewards had topped the list in 2009 and 2010 but the score decreased in 2011 leading it to the second position. Hotel Chain Market is almost saturated for the hotel industry in the United States and the only place the hotel chains can grow is beyond the United States. Many hotel chains have extended their services and properties around the world including franchising, merging and acquisition. They are the main players of the hotel industry making the market entry and survival of the independently owned small hoteliers too difficult. The size of the hotel chains is measured by the no. of rooms or properties acquired by the group. New regional hotel chains are emerging especially in Asia and in Europe: 7 Days Group in China, European based Accor group in Southeast Asia. http://www.tourism- largest-hotel-groups-of- the-world-news1988 http://www.hospitalityn 10/154000431.html Intercontinental Hotel Group has been the largest hotel group in the world since 2004 with over 600,000 rooms in total. It includes Holiday Inn Express, CrownePlazza, Staybridge Suites and Indigo boutique hotels. Amenities Along with the room to stay, customers require additional amenities in the hotels. Parking, pool, restaurants, duty-free shops, salon, fitness center, room service and internet are some of the features customers look at while choosing a hotel to stay. The industry can also be segmented based on the amenities provided and these services offered provide a base for the hotel to determine the selling price. Amenities offered can have a significant impact on customers to drive the business and win customers’ choices. For example, according to hotel-guest-satisfaction- scores-dip- 161500794.html http://www.cntraveler.c om/daily- traveler/2012/04/hotel- Many hotels are offering specialty service to the customers of different categories and are trying to lure those customers. Luxury hotels will top the list with the best and most amenities offered in general. However, different categories of customers may rate and regard hotels based on their amenities requirements fulfilled.
  21. 21. 55 ABC News, guest satisfaction score was higher for those hotels who offered free internet than that of hotels who charged for internet in 2012. Business travelers will target such hotels with free internet. However, leisure travelers may have different need of amenities like swimming pool, suites,late check-outs. Some of the new amenities being offered which is creating a trend in the industry are paperless check-in, wireless concierge (twitter), check-out from TV screen, butler service, baby care, pet walker and others. amenities-perks-trends- hot-list-2012 Imitation Product differentiation is the concept for the industry to create competitive advantage over the competitors. It provides uniqueness to the hotels and strengthens their sustainability. It is also an art of capturing new target market (customers) who are looking for new lodging experience other than mere known hotel chains. In an effort to maintain their product differentiation feature, many hotel chains use unique strategies and provide peculiar services to attract the specific segment of customers. However, quick imitation of such strategies is often common and vital for other hotel chains if they want to compete for that segment of customers. If the hotel chains fail to do so, they won’t be able to capture that new market and lose those customers. For example, a new rising trend being embraced by the hotel leaders are boutique hotel chains under their hoods. Big chain hotels understood what customers are being attracted to quickly establish their version of boutique hotel. Marriott has Edition, IHC has Hotel Indigo, Hyatt has Andaz and Starwood has Element and Aloft. Another unique segment introduced by Marriott is Autograph Collection which lets independent hotels that meet certain criteria could effectively share benefits of being in the Marriott family without actually carrying the Marriott name. These hotels also get to maintain their unique personality, name and style. http://www.hospitalityu magazine_Detail.asp?I D=503 http://boutiquelodging. /15/what-is-a-lifestyle- hotel/ Hotel Indigo, the world’s first global branded boutique, is the leader of lifestyle hotel segment. Since its inception in 2004, it has experienced great success and rapid growth. The concept has been quickly imitated by other major hotel chains to compete in this new segment. Central Reservation System Reservation system is one of the essential focal point of distribution channels of the hotel industry. It also assists the hotel brands to manage all of their online marketing and sales, where they upload heir rates and availabilities. It also acts as an information center for other intermediaries (travel agencies) to see. Many large hotel chains have their own CRS facilitating customers to book the hotel rooms based on their needs and convenience. According to the research done by in 2012, 57% of the total hotel booking was made on the internet. The study also wiki/Hotel_reservation_ systems http://www.hotel- reservation-system/ http://www.marketingti According, an online survey service, Priceline has been voted as the best third party online booking site with a total score of 9.23 out of 10, followed by with 8.75 score and with 8.65 score. The review was based on website features, hotel information, reservation process and help and support.
  22. 22. 56 showed that 65.4% of the total online booking was done through hotel brand websites (e.g. and third party websites were used by 19.5%. With the rise in online booking including through Smartphones, CRS is adapting mobile friendly booking engines, apps and integrating software in their system to accommodate the growing tech savvy customers. has revealed that, in 2012, almost half of the mobile hotel bookers surveyed would book the hotel after leaving home and on the road. According to, percent of same day hotel reservation made from a smartphone was 65% in 2012. These are the customers who make last-minute booking and the no. continues to rise in future trends-on-mobile-hotel- bookings/ http://hotel-booking- services- review.toptenreviews.c om/ http://www.statisticbrai hotel-booking-statistics/
  23. 23. 57 b. Porter’s Five Forces Analysis Industry Forces Describe new entrants, buyers/buying groups, suppliers, substitutes, competitors of your industry Evaluate the strength ofeach Porter’s five forces for your industry Explain the reasons for the strength Sources Threat of new entrants Economies of Scale Hotel chains may enjoy higher economics of scale compared to the independent hotels due to centralized reservation system, central management teams, acquisition of raw materials, and production and labor utilization. Presence of economies of scales also brings absolute cost advantages to the industry which brings the benefits of low cost of operations and low service/ product charge. Capital requirements Building or investing in a new property usually requires high capital. Hotel industry generally has high sunk costs which again demands large capital amount up front. If a hotel decides to leave the market, the high sunk costs can’t be recovered on time increasing the risk to entry. However, capital intensity can be reduced with the negotiation of a franchise, lease or management agreement with hotel builders, owners and rest estates. Access to distribution channels The principles of channel distribution for hotel industry differ from those used for manufacturing goods. Such channels have to act to bring customers to the consumption site/producers to consume product/service. Industry leaders generally have their own distribution channels (partially or completely owned), sell through management and marketing contracts, franchising and intermediaries (tour operators, travel agents and specialty channels). Such intermediaries are often controlled by the major players limiting the access to independently owned lodges. Government and legal barriers The hotel industry doesn’t have a strong government Threat of new entrants is medium in hotel industry. Because of high competition with large hotel chains, high capital investment requirements and difficulty in building up image against the established hotel chains, the hotel industry enjoys lower threat of new entrants. However, low government and legal barriers, increase in use of online booking (reducing the need of traditional distribution channels) and leasing facility available through real estates may make it easier for new entrants to enter the industry and survive. Hence, due to the presence of both strengths and weaknesses, the hotel industry possesses medium entry barrier. IBIS World Industry Report Hotel and Motel in the US http://clients1.ibisworld.c om/reports/us/industry/d efault.aspx?entid=1661 i/Economies-of-scale http://www.marketing91. com/absolute-cost- advantage/ i/Distribution-channels
  24. 24. 58 and legal barriers. Licenses are required based on the different services offered such as gaming, liquor, transportation, pool. These regulations do not provide any strict barrier to entry. Life cycle stage The industry has reached its mature stage. The continuing growth in domestic tourism and business travel as well as increasing international visitors’ rate will aid in rise in demand, however, lack of product differentiation and brand image may adversely affect new properties to compete with major players. Power of buyers/buying groups Price Sensitivity Apart from luxury scale hotels, most of customers in hotel industry are price sensitive and make hotel choices based on price as one of the influential factors. To cater such customers, major players have mid-scale hotels, low-scale hotels and are capable of offering discounts, promotions time to time to lure these customers. Tech savvy customers are benefiting from the high competition in the industry to find the best price available in just few clicks. Another factor that influences the price sensitivity among customers is the economy. The industry is slowly recovering from the recession of 07/08, however customers have learnt during this time period to get most out of less money. Bargaining Power Buyers have relatively higher bargaining power because of high competition prevalent in the industry especially in areas with high concentration of hotels. Due to low switching costs, customers can easily change and choose a hotel next block whichever provides better services and deals. The power of buying groups is very high in hotel industry. The factors that provide power to the buyers in the industry are high competition among the hotels, the large portion of price sensitive customers, increase in use of technology to book/search for hotels, low switching costs for customers. These factors aid in their bargaining power to control the industry’s output. IBIS World Industry Report Hotel and Motel in the US http://clients1.ibisworld. com/reports/us/industry/ default.aspx?entid=1661 http://100percent.wikisp r+5+five+force Power of Suppliers Labor supply The hotel industry is profited with high labor supply. The job requires manual work most of the time and is less technical making job training easier. It can hire less skilled employees easily and still continues to survive. The substitution oflabor involves less effort The power of suppliers is low which is beneficial for the industry. The no. of suppliers is relatively higher and the substitutes are easily available. Due to the switching cost being low for the industry to change the supplier if needed, the bargaining power of suppliers has become low decreasing IBIS World Industry Report Hotel and Motel in the US http://clients1.ibisworld. com/reports/us/industry/ default.aspx?entid=1661
  25. 25. 59 as well. With the continuous increase in total US population, the US labor supply has been expected to rise as well. The annual growth rate in labor force (2010 to 2020) in all age is projected to be 0.7%. Bargaining power Other than labor, suppliers in the industry includes property owners, real estate companies, interior design,furnishing companies, architects, management and training service providers, housekeeping materials manufacturers and others.Due to availability of higher no. of suppliers and their substitutes,low switching cost to change the suppliers, the bargaining power of suppliers are low in the industry.These suppliers are wide and scattered due to low concentration. their influence to control the operation of the industry. Similarly, labor supply is higher for the hotel industry as it doesn’t require high tech/skilled employees to do the job. Trainings are easily available to hire and replace the labors which decrease the bargaining power of labor. oc/47349495/Porters- Five-Forces-Analysis- for-Hotel-Industry Bureau of Labor Statistics Power of Substitutes Buyer propensity to substitute Many substitutes to hotels are emerging in the market such as RV parks, bed-and –breakfast establishments, hostels, timeshare, airbnb, momand pop hotels/motels etc. With an increase in wide use of internet and other tech devices to find places to stay, buyers are easily finding alternatives for lodging which, in addition, provide them a different experience than a monotonous chain hotel. Relative prices and performance of substitutes The product/ service charge of most of the available substitutes are competitive and favorable for customers. Some of these substitutes like mom and pop motels, B&B hotels are capable of providing personalized services to the customers since their property size is small and the owners are the working staffs who have the power to make any decisions on spot. These properties are easy to operate and maintain and don’t have franchises. The substitutes are gaining popularity along with the power which can possibly affect the industry. The power of substitutes are fairly low, however, it is expected to rise as more and more customers will want to experience unique service other than regular hotel chains and the information about these substitutes will be readily available to them online. If these substitutes can integrate product differentiation and attract price-sensitive customers through effective pricing strategy, they can play a part of competitor in the industry. IBIS World Industry Report Hotel and Motel in the US http://clients1.ibisworld. com/reports/us/industry/ default.aspx?entid=1661 http://themarketplaceofli /porters-five-factor- model-and-hotel.html Rivalry among competitors Concentration Hotel industry size is large and allows multiple firms to prosper. The availability of hotels is usually high in specific areas like downtown, interstate and tourist areas giving high bargaining power to customers. Rivalry among competitors is high. Competition is fierce in order to win big market share and attract more customers. Due to low switching cost and low concentration of hotels, the customers can easily alter their choice of stay. Availability of loyalty programs can retain the customers but the industry should remember that such program is IBIS World Industry Report Hotel and Motel in the US http://clients1.ibisworld. com/reports/us/industry/ default.aspx?entid=1661
  26. 26. 60 Overall, the industry has a low-level of concentration, with the top four players covering less than 20% of the available market share in 2013. Diversity of competitors Large hotel chains have different hotel segments/scales which cater customers with various needs. These chains compete with each other based on their segments, price and proximity since the service each segment offers is diverse. Despite of few actual differences in service, the hotels have customized services to create product differentiation so that customers perceive uniqueness in their brands. Product Differentiation High end hotel segments are already taking a lead in the industry in terms of product differentiation. Though the main goal of the industry is to provide lodging to the customers, these hotels retain customers by gathering as much information about their customers as possible and try to exceed their expectations by providing customized service. Many hotel chains have introduced special segments in order to differentiate themselves with the competitors called lifestyle collections which offer unique décor and give the feel of independent boutique hotel while offering the same brand services. Customer Loyalty Customer loyalty program keeps the customers coming to the hotel brands are one of the major decision factors in choosing a hotel. Enrolling into such program is usually free and customers are inclined to get benefits from such program. Switching costs In the hotel industry, switching cost is relatively low due to lack of obligation or contract, which makes it easier for customers switch the brands without any hesitation. Customer loyalty is probably the only factor that may keep them away from competitors. not an obligation but only a measure which can be successful only if the hotel can win the hearts of customers. Fragmented structure of the industry and higher rivalry feature among competitors benefit the industry to create product differentiation, quality service, availability of wide range of services and best deals for customers. http://www.learningace.c om/doc/5318945/3fad98 b8df282a7eb2c62531e5d 74773/lodging-binitap http://boutiquelodging.w 5/what-is-a-lifestyle- hotel/
  27. 27. 61 3) Primary Competition a. Properties, Products and Services Name of Competitors Number or/and sales of units (Geographic distribution, brands, ownership) Description of their strengths and weakness InterContinental Hotels Group (IHG) As of year-end 2011, there are 3832 franchised properties (85%), 627 properties under management contract (15%), 11 owned and leased property (<1%) associate with IHG. IHG brands include Intercontinental, Crowne Plaza, Holiday Inn, Holiday Inn Express, Staybridge Suites, Candlewood Suites, Hotel Indigo, and others. IHG operate properties in many continents, including the Americas, Europe, Asia, Middle East and Africa, and Greater China. InterContinental is the biggest hotel corporation in the world in terms of the room numbers. Moreover, the brand “Hotel Indigo” is the pioneer brand in the new “lifestyle segment” of the industry. Just like many other hotel companies, IHG is very aggressive on expanding its operation by increasing properties at multiple market, it would always been the mostinfluential player of the hospitality industry. Hyatt Hotels Corporation (H) As year-end 2011, there are approximately 595 properties operated by H. 318 (53%) of the properties are managed; 142 (24%) are franchised; and 135 (22%) are owned by H. Hyatt’s brand include Park Hyatt, Andez, Hyatt, Grant Hyatt, Hyatt Place, Hyatt Regency, Hyatt House, and Hyatt Residence Club. Hyatt is one of the few hotels that has mentioned and emphasis its competitive strength in the annual report. There are 7 major strengths such as Hyatt is a recognized world class brand, who has deep culture and experienced management team, and who provide high quality service in selected market…etc. However, they are also the only hotel group that focus and invest heavily in innovation. Example includes eliminating de-personalized service, creativeapproach provide healthy food and beverage option to guest…etc. Being innovative is really critical to performance of a hotel. Starwood Hotels & Resorts Worldwide Inc. (HOT) At year-end 2011, there are 1089 properties worldwide operated by HOT, 518 (48%) are managed and unconsolidated joint venture hotels; 499 (46%) properties are franchised, 59 (5%) are owned by HOT, and 13 (1%) are vacation ownership resorts and stand-alone properties. HOT brands include St. Regis, The Luxury collection, W Hotel, Westin, Le Meridian, Sheraton, Four Point, Aloft, and Element. Unlike many of large hotel groups which try to capture customers in all segments, HOT focus on only high-end segment. They also diversify the market in developed worlds. Their financial statements indicate their corporate strategies really work well.
  28. 28. 62 a. Competitors’ Financial Performance b.  Complete the following tablefor competitors  Graph the last five years of the following ratios for your firm and major competitors, and the industry in which it competes.  Describe the financial position of each competitor relative to its ability to meet its growth needs Category Ratio 2007 2008 200 9 2010 2011 2007 2008 200 9 201 0 201 1 Evaluation of yourcompetitors’ financial ratios: (Strength, Neutral, or Weakness)& Reasons Liquidity Current Ratio Competitor 1 - IHG Competitor 2 - H Among the competitors, IHG has the strongest liquidity ratio, because the number remains very stable for the last 5 years despite of the recession,indicating the efficient use of firm’s money. HOT follows, and H has the worst performance among the competitors due to its large variation. 0.58 0.48 0.4 0.49 0.67 1.53 1.62 4.02 3.63 2.8 Competitor 3 - HOT Industry Average 0.87 0.81 0.74 1.07 1.27 1 1 1.4 1.4 1.2 Leverage Debt to equity Competitor 1 - IHG Competitor 2 - H Among the competitors, H has the strongest debt to equity ratio. Due to its ownership structure,H has relatively a lot less and quite stable among of debt comparing to its competitors. HOT follows, and IHG has the worst ratio in this categories due to its largest in size. 18.9 6 - 291.37 * 9.56 4.58 1.22 0.23 0.19 0.32 0.3 0.25 Competitor 3 - HOT Industry Average 1.73 2.16 1.62 1.3 0.88 4.8 1.3 2.8 1.7 1 Activity / Efficiency Asset Turnover Competitor 1 - IHG Competitor 2 - H The assetturnover ratio between MAR’s 3 major competitors is pretty similar. None of them is especially outstanding,indicating they are all operating very efficiently. 0.48 0.55 0.51 0.57 0.61 0.6 0.62 0.5 0.49 0.5 Competitor 3 - HOT Industry Average 0.65 0.61 0.51 0.55 0.58 0.9 0.9 0.8 0.8 0.9 Profitability Gross profit margin Competitor 1 - IHG Competitor 2 - H Among the competitors, IHG has the strongest gross profit margin. As gross margin potentially means the profit % that a firm is making, H is performing exceptional well among the competitors. HOT follows, and H is about the same. 53.5 55.6 44.1 53.7 56.4 23.8 23.5 17.4 18.8 20 Competitor 3 - HOT Industry Average 28.1 26.4 21.8 22.8 23.4 36.7 36.3 31.9 33.9 34.6 Return on assets Competitor 1 - IHG Competitor 2 - H Among the competitors, IHG has the strongest return on assets. IHG was able to keep producing positive return while some firms are suffering from the recession.HOT has slightly betterperformance than H in this category. 12.5 8 7.82 7.09 9.86 16.4 4 4.34 2.75 - 0.65 0.92 1.53 Competitor 3 - HOT Industry Average 5.73 3.4 0.79 5.15 5.06 11.6 6.3 5.9 9 9.3 Growth Year over Year Sales Growth % Competitor 1 - IHG Competitor 2 - H In this category, all competitors are hit and performed the same way as the economic recession. H performed relatively stable,however is weak for the recovering; HOT has higher variation and shows strong recovering 11.1 6 5.76 -17 5.85 8.6 N/A* * 2.65 - 13.2 5.85 4.85 Competitor 3 - HOT Industry Average
  29. 29. 63 2.91 -4 - 20.2 7.62 10.9 1 9.5 1 -15 5.8 7.9 trend; IHG is about the average. Year over Year Net Income Growth % Competitor 1 - IHG Competitor 2 - H Due to the impact of the economy recession,firms are not performing very well in this category. IHG shows its capability of handling the financials rather well than other competitors. HOT follows with higher variation; H performed the worst in such category. - 0.42 -0.43 - 0.19 0.31 0.69 N/A* * - 0.37 - 1.25 - 2.53 0.71 Competitor 3 - HOT Industry Average - 0.48 -0.39 - 0.78 5.53 0.03 0.45 -0.4 - 0.74 1.1 0.48 Operation Operating Margin Competitor 1 - IHG Competitor 2 - H Among the competitors, IHG has outperformed the industry operating margin. HOT and H are performed at similar level. 26.8 1 21.74 - 0.65 26.8 4 34.8 4 10.3 9.49 1.44 3.06 4.14 Competitor 3 - HOT Industry Average 13.9 4 10.48 0.55 11.8 3 11.2 -7.5 155. 1 87.6 26.3 3.4 *The extreme number of debt to equity ratio of IHG in 2008 is due to high level of debt and small negative book value of stock holder’s equity. ** Financial information is not available for H prior to 2007, therefore, the growth rate information is not available. Financial Ratios in graphs
  30. 30. 64
  31. 31. 65 4) Target Market Descriptors 1 Criteria can include demographic or psychographic information or categories such as leisure or business traveler. Primary criteria used to describe your target market1 Describe in detail the specifics for each criterion at left. Be sure to include the size ofeach market Sample brands Income level High income *Size of each market is shown on the following tables of each hotel brand. In each table, both currently opened and pipline properties and rooms of the brand are noted. Bulgari Hotels & Resorts The Ritz-Carlton JW Marriott Residence Inn by Marriott Marriott Executive Apartments
  32. 32. 66 Primary criteria used to describe your target market2 Describe in detail the specifics for each criterion at left. Be sure to include the size ofeach market Sample brands Need for novelty Novelty seekers EDITION Hotels Renaissance Hotels SpringHill Suites by Marriott Length ofstay Long stay travelers Residence Inn by Marriott Age Young EDITION Hotels Another new brand that will be opened soon in this segment is Moxy 2 Criteria can include demographic or psychographic information or categories such as leisure or business traveler.
  33. 33. 67 3 Criteria can include demographic or psychographic information or categories such as leisure or business traveler. Primary criteria used to describe your target market3 Describe in detail the specifics for each criterion at left. Be sure to include the size ofeach market Sample brands Social class CEO, Manager,high class The Ritz-Carlton SpringHill Suites by Marriott Marriott Executive Apartments Type ofdestination Modern city, destination, historical sites Renaissance Hotels AC Hotels by Marriott SpringHill Suites by Marriott
  34. 34. 68 4 Criteria can include demographic or psychographic information or categories such as leisure or business traveler. Primary criteria used to describe your target market4 Describe in detail the specifics for each criterion at left. Be sure to include the size ofeach market Sample brands Type ofstay With family or friends, for business, for travel, for take a rest, for short-term work, for DIY life Marriott Hotels & Resorts Courtyard by Marriott Fairfield Inn & Suites by Marriott Residence Inn by Marriott TownePlace Suites by Marriott
  35. 35. 69 2. Industry Value Drivers A value driver in the task/industry environment is a major factor directly influencing the profitability of a hospitality enterprise. It would include such items as the industry labor cost, prices of raw material products such as red meat, potatoes or cleaning supplies, utilities, etc. These drivers are industry wide and affect all firms more or less equally. They can be considered as important indices that will ultimately affect the organization and therefore must be tracked and forecasted. Care must be taken to identify only the critical and relevant value drivers that will have significant impact upon the organization. Value Drivers Description and Past Trends ofFactors Causal Relationship and Outlook ofValue Drivers Source(s) Key measuresofhotel industry well-being Hotel Sales In 2011, the lodging industry generated $21.6 billion in pretax income, a 20% increase in year-over-year comparisons. Total industry revenue increased to $137.5 billion from $127.7 billion in 2010; the largest percentage change in the last ten years. Employment The hotel industry pays $194.6 billion in related wages and salaries and employs 1.8 million hotel property workers. The industry directly supports more than 7.5 million related jobs. Between 2004 and 2014, the Hospitality industry is expected to add 17 percent in wage and salary employment. By the end of 2010, the largest companies include portfolios that include more than 6,000 hotels each Hotel Sales There is an increasing trend of hotel industry sales, but we can’t ignore the economic recession. In such a climate, many hoteliers will compete on rate, but this only creates a downward spiral of price competitiveness, and more pain for the long-term growth and sustainability of hotels’ revenues once the economy bounces back. Employment The increasing of wages and salaries will increase the cost of hotels. Because such increasing trend is happening in the whole industry, hotels have difficulty retaining skilled workers because of the negative image that the industry faces.On the other hand, the industry as a whole lacks consistency and portability in training models and skill certifications. Many employers provide internal training programs for entry-level workers, which makes it difficult to monitor the content of training and the skills acquired, especially for the migrant workers. http://www.ahla .com/ px?id=34706 articles- reviews/hotel- revenue- management- and-revpar- beating-the- recession/ http://www.dole of/hospitality_pr ofile.cfm Migrant workers in the international hotel industry(Tom Baum, 2012)
  36. 36. 70 and employ more than 150,000 employees in up to 100 countries. Globally the industry is highly fragmented, with around 20 per cent of the workforcelocated within multinational enterprises. Labor Cost of the Hospitality Industry Labor Cost of the Hospitality Industry High levels of cleanliness, comfort, and convenience are based on intelligent, dedicated, and highly trained staff and those employees also need convenience, safety,and security. The wages and salaries have the same importance here. The standard industry measure of labor cost is expressed as one’s labor cost percentage. It can be computed for each profit center individually or for the club as a whole. Labor Cost Percentage = Labor Cost ($) / Sales ($) The overall industry average labor cost percentage,including all segments, is in the range of 40 to 48%. Start-ups may have much higher labor cost percentages,in some cases exceeding 100%. The importance of labor cost control Our industry is not able to mechanize the manifold and complex tasks of cleaning or maintaining a hotel. Further, hospitality and service expectations are deeply ingrained in our customers. Production and service, because of its complexity and infinite variables, is not likely to be taken over by machines any time soon, no matter how sophisticated robotics becomes. People are the most important part in our industry and the labor cost should be satisfied and also be controlled. Labor Cost Controls ( Ed Rehkopf, 2009) Labor Supply of the Hospitality Industry Labor Supply of the Hospitality Industry The number of available jobs in the USA has increased by 22 million by the end of 2011. Yet the labor force has just increased by only 17 million, according to the Bureau of Labor Statistics. The US hospitality and The influence of labor shrinking Employees are going to be hopping from one job to another and from one industry to another as never before. They will not be as efficient and effective as their predecessors were. As consumers, we are going to feel like we’re not enjoying the same standard of living that we http://www.hisp m/2006/01/hosp itality-study- labor-supply- is.html
  37. 37. 71 leisure industry has grown by 2.1 million jobs between 2002 and 2012 (17.8 percent) which represents a faster increase than the 14.8 percent job growth for all industries. The United States can maintain a fairly brisk growth in its labor supply over the next 50 years without any change in its current levels of fertility, immigration and labor force participation. Even if the United States fertility rate were to fall from 2.1 to 1.8, the USA labor force would continue to grow, although at a considerably slower rate after 2015. once had. In the USA, the tourism product- service is the country’s top export. Tourism and hospitality services consist of a heterogeneous collection of firms and employees that provide a memorable and pleasurable experience for both domestic and international visitors. When labor shortages impact the transportation, lodging, food service and attraction companies, there are fewer employees left to deliver the high-quality service or experience. Therefore, the quality of the service suffers. Poor service results in negative experiences and visitors decide not to return. http://www.hosp ws/4025796.htm l Travel Expenditure Travel Expenditure Expenditures on travel for pleasure declined sharply in response to the recent recession, and had not yet fully recovered by 2011. In 2008, the first full year of the recession, consumers reported expenditures that were almost 3.5 percent lower than those reported in 2007. Reported expenditures declined another 9.8 percent in 2009, the year the recession officially ended. Although expenditures increased modestly (2.1 percent) in 2011, and more robustly (5.5 percent) in 2012, they were still lower than their 2007 peak. Travel Expenditure An important item to consider is that the expenditures described so far represent the average for all consumer units, whether or not they travelled. To get a better idea of whether changes observed in expenditures reflect a change in travel patterns, as opposed to a change in something else (such as prices for travel), the percentage of consumers who reported spending money on travel is useful. Customer Preference Customer Preference In hotel industry, customer Customer Preference Knowing a customer’s preferences may help http://www.hyk r-experience-
  38. 38. 72 serviceisn’t just about reacting to what the customer wants. Anticipating a customer’s needs is as important as reacting. Knowing and understanding your customer’s preferences before they pay allows you to create an even stronger experience. Some hotels have a way of tracking their guests’ likes, dislikes and requests based on their past hotel stays. A server at a restaurant recognizes a guest and asks if she wants the “usual.” Our business should know what our customers like – and dislike. In other words, we should know customers’ preferences. sales, you must also look at this as a customer service opportunity by adapting to these likes, dislikes and any special requests a customer might have. Adapting to customer preferences is about giving the customer what they want, the way they want it, and being easy to do business with. And, that has everything to do with creating “Customer Amazement.” 2/customer- preference/ Energy saving Situation of Energy saving Competitive Advantage Sustainable design will encourage community support and facilitate and streamline permit approvals. It may allow developers to stay ahead of regulatory demands. It may even reduce the risks of litigation, liability and even such disasters as fires and floods. Sustainable design allows hotel facilities to differentiate themselves from the competition. They are able to gain increased market share by targeting environmentally-conscious guests.A sustainable hotel facility has a higher value to both customers and investors. Customers will demand environmentally-friendly and resource-efficient accommodations, and investors are often willing to pay a substantial premium to be part of a development with social responsibility. The potential for greater market share and increased profits also add to the asset value. Energy- Efficiency and Conservation in Hotels- towards Sustainable Tourism(Dav id Rezachek& Paulina Bohdanowic z) http://www.g reenthehotels .com/eng/Bo hdanowiczC hurieKallhau geMartinacH
  39. 39. 73 While providing a significant boost to many local and national economies, the hotel industry constitutes one of the most energy- and resource-intensive branches of the tourist industry. The energy use varies substantially between different types of hotels, and is affected by hotel size, class/category,the number of rooms, customer profile, location, climate zone, as well as by the types of services and amenities provided to guests. awaii2001.pd f Social Media Social Media In 2010, Facebook announced it had over 500 million users; in the same year,Twitter reported 75 million users. On average,consumersspend more than 5.5 hours per day participating on social media Websites. Through online communities, companies allow consumers to becomeinvolved, directly or indirectly, in creating new products and brands. Overall, the popularity of online communities has heavily influenced many firms’marketing activities in recent years. Social media present a golden opportunity for the hospitality industry to make greater contact with its customers, with an ultimate goal of developing a partnership for brand growth and development. One great potential advantage of social media is that guests are willing to share information about their likes and dislikes. By using appropriate analytic methods, hoteliers can get a sense of what guests want generally and how they react to the hotel specifically. http://www.h arch/chr/pubs /roundtablepr oceedings/ro undtable- 15500.html International Tourists International Tourists With an additional 39 million international tourists, up from 872 million in 2011, international tourist arrivals surpassed 930 million for the first time in history in 2012. Demand held well throughout the year, with a stronger than expected fourth quarter.By region, Asia and the Pacific (+7%) was the best performer, while by sub-region South-East Asia, North Effect given by International Tourists Themajority of international tourism still takes place withinthe developed world,in recent years tourism todeveloping countries is becoming a significantphenomenon.New destinations are increasing their market share, even in America, more states and cities are becoming popular to International tourists who pull up the demand and supply. http://media. /press- release/2013- 01- 28/internatio nal-tourism- continue- robust- growth-2013
  40. 40. 74 Africa (both at +9%) and Central and Eastern Europe (+8%) topped the ranking. The United States ranks first in receipts and second in arrivals which means that the market of United States will be stable relatively. Worldwide Events Worldwide Events Worldwide Events like the Olympic Games and the world exhibition will provide a boost to retailing and tourism. Big events are super advertisements for countries and regions. The effect given by them will continue for a long time to attract tourists. Worldwide events can attract more tourists and investors. Those events will increase the demand of labor and rooms. So hotels should put recruitment and construction into consideration. Even though those processes will take more costs, but they are still profitable for the whole industry. http://www2. /event
  41. 41. 75 3. Relationship Worksheet: General/Remote and Task/Industry/Competitive Environment Relationships among forces driving change and external and internal value drivers. Each cell should reflect your analysis of the key trends occurring for each value driver and its relationship to each force. Force driving change as identified in the remote analysis External value drivers in remote environment External value drivers in task/industry environment Internal value drivers Government’s Fiscal Policy One of the key drivers in external environment that would impact the hospitality industry is government’s fiscal policy. Especially during the recent period that the economy is in the process of recovering from the recession, all policies in the stimulus package should have some impact to the overall environment. Cutting tax and give tax return is one of the ways to increase money supply that allow company and the public own more disposable income.Based on the multiplying effect, increased cash flowing can effectively motivate the economy, because an initial dollar in the market would create much higher value. Tax Rate Over the past 40 years, federal revenues have ranged from nearly 21 percent of gross domestic product (GDP) in fiscal year 2000 to less than 15 percent in fiscal years 2009 and 2010, averaging 18 percent of GDP over that span. Most of the revenuesabout 82 percent in 2010come from the individual income tax and the payroll taxes used to finance Social Security, Medicare, and the federal unemployment insurance program. Other sources of revenues include corporate income taxes, excise taxes, estate and gift taxes, all together about 13 percent of revenues in 2010. Exchange Rate/ Currency Position US dollar position is relatively weak over the past four years to other major currencies, such as Japanese Yen, Chinese Yuan, and the EURO. Only the EURO stays relative volatile, US dollar continuously depreciate to Chinese Industry Value Drivers about Tax Rate 1. Corporate Tax Rate U.S. corporate taxes that were actually paid (the effective rate) fell to a 40 year low of 12.1 percent in fiscal year 2011. The U.S. both taxes its corporations less and raises less in revenue from corporate taxes than its foreign competitors. Such falling trend is still happening right now and it did affect many industries include hospitality. 2. Travel Expenditure Higher consumption tax rate may lead customers to deduct travel expenses, including meals and lodging. Lower tax rate may have the opposite effect. Industry Value Drivers about Exchange Rate/ Currency Position International Tourists Over the last 4 years, as the consequence of financial crisis, one of the U.S. stimulus policies was to depreciate the US dollar relative to Corporate Tax Rate affects Tax Expense Overall tax expense is mostly related to the Federal Corporate Tax Rate. If there is a lower tax rate, tax expense will be lower and hotels can higher operating expense to make the management more effective and service more satisfied. Occupancy Rate and Sales go with travel expenditure and number of International Tourists If the taxes rate is increased by government’s policies, customers will think about the expenditure of traveling, especially in the period of economic recession. They may cut the cost of traveling or cancel travel plans. Such effect given by taxes will affect hotel’s sale and occupancy rate. When U.S. dollar is weaker than other main countries’
  42. 42. 76 Yuan and Japanese Yen. other currency. When U.S. dollar is weak, other currency are relatively strong, cost of goods and services are relatively cheaper in the U.S. and especially tourists from other countries would be able to travel relatively cheaply, and it should help the overall U.S. economy. For instance, the salary level of China is increasing every year which means that purchasing power of Chinese people is very strong. There is a large number of Chinese people have the will to travel abroad, especially travel in the U.S. because of the lower exchange rate of U.S. dollar. currency. People in those countries will have the incentive and ability to buy American goods and services. The travel market will be expanded in that situation and the sales and occupancy of hotels will increase due to the U.S. dollar’s weakness. Aging and Diversity of U.S. Population Increase in the number of immigrants, extending life expectancy rate, better health care facilities and rise in health consciousness are some of the factors adding to the rise in the U.S. population growth rate. Population increment can impact almost every aspect of the nation including economy, ecology and socio- cultural. As population rise, environment is first aspect to be affected. The overall impact of population increment is huge and upon the lack of U.S. Population growth rate and Age Distribution There has been an increase of 9.7% in U.S. population last decade. After considering the migrants, in 2011, the total growth rate was 0.96% and in 2012, the total growth rate was 0.9. As of February 07, 2013, the total U.S. population is 315,290,147. The U.S. population has continued to grow older with average of median age over 40 years. Compared to 2000 census data, 2010 saw the highest increase in the 45-64 age group i.e. 31.5%. The second highest increase percentage is of 65 years and over with 15.1% whereas 18 to 44 age group has 0.6% of increment followed by 2.6% of increment in Labor Demand As the domestic population and migrant population are growing, the market of every business needs to be expanded, also the hotel industry. Big market does need large number of domestic and minority employees. Labor Supply The US hospitality and leisure industry has grown by 2.1 million jobs between 2002 and 2012 (17.8 percent) which represents a faster increase than the 14.8 percent job growth for all industries. On the other hand, to the extent that the migrants tend to be of working age, population growth in the urban areas will have an immediate -- as opposed to a lagged --effect on labor supply growth. Different Preference for age groups Labor Cost Based on the increasing of labor demand and market expansion, labor cost such as wage and salary and compensation will be increased. The competition of retaining skilled employees is a new trend of our industry. Room Demand When the market is being expanded due to the growth of population, more rooms and branch hotels must be constructed in different regions in the U.S. Steps for age groups Many hotels and catering establishments are adapting
  43. 43. 77 supply of their demands, there can be some serious consequences affecting the entire nation. under 18 age group. Minority Population Growth rate The minority population in U.S covered 37% of total population in 2012. Hispanic and Asian populations are the fastest growing minority groups in U.S. The Asian population increased by 3% from 2011 to 2012 while Hispanic increased by 3.1%. Age (demographic) can have a huge influence on the type of destination travelled to and the type of accommodation required. Younger adults may be attracted to more 'active holidays', orentertainment, therefore they would be attracted to accommodation that offers bars, restaurants, nightclubs, watersports and excursions, or is conveniently located to nightlife and activities. Older tourists, on the other hand, may want holidays that involve more 'passive' pursuits or more safe and secure activities. tothe needs of this growing population, including having facilities for elderly guests, such asramps for wheelchairs, and separate dining times and activities. Minority Population Problems As more and more minority groups enter the hospitality industry of the United States, managing cultural diversity is becoming a challenging issue. Many employers in this industry continue thinking that the minority workers were low skilled. But a cultural diversified environment with reasonable portion of minority employees can attract more minority customers.Language training and cross-culture-gap training are necessary and helpful to minority employees, especially to immigrant employees and expatriate managers. National Travel and Tourism Strategy In 2011, 62 million international tourists visited the United States and pumped a record $153 billion into local economies, helping to support the 7.6 million jobs in our travel and National Travel and Tourism Strategy This is a national policy proposed by President Obama in 2011. The goal of this policy is to make the U.S. as the number one nation in tourism industry and achieve 100 million international visitors by 2021. After the start of this policy in May, 2012, several strategies are Industry expansion The Strategy sets a goal of drawing 100 million international visitors by 2021, which is expected to generate $250 billion annually in visitor spending by 2012. The strategy also encourages more Americans to travel within the United States. So the market of hotel and tourism will be expanded more. Occupancy Rate The occupancy rate will increase after the NTTS happening. Training Hotel needs enough talents to serve the increasing international visitors. Training systems should be set up based
  44. 44. 78 tourism industry. These numbers make tourism America’s number one service export. That’s why the White House released a new National Travel and Tourism Strategy today, charting a new course toward making America a more attractive and accessible destination than ever before. under plan with an independent organization:Brand USA. Several policies like VISA application, business training, and industrial counseling are also generated to support National Travel and Tourism Strategy. Taken together, National Travel and Tourism Strategy is a key driver that combines several departments and stakeholders together to prosper tourism and hospitality industry in the following 10 years. Job creation Based on the NTTS, more employees are demanded and more job position will be created for the whole hospitality industry. Co-Branding Consumers in the 21st Century have become increasingly aware of the quality of the products and services they seek, especially after the NTTS was on the way, and now search for added value in these items. The philosophy behind co-branding is to generate additional market through customer awareness by forming alliances with one or more brands. on the need providing high service quality and memorable experiences. Challenges of Co-Branding Co-branding in the hospitality industry can also be difficult and complicated. Hotel management teams have to be sure that partnering with a branded food and beverage outlet, for example, will not result in direct competition with the hotel’s existing in- house food and beverage services; rather, the alliance should complement the hotel’s established amenities. Labor Supply As the market is being expanded by NTTS, more labor will be needed for the whole industry. Hotels have to prepare for new plans and standards for recruitment and training.
  45. 45. 79 4. Overall supply and demand analysis What is the overall demandand supply of the industry/segment where your firm is? a. Demand (This means number of customers or the number of rooms sold)  Describe the actual demand in the market place over the past five years and the key value drivers that affected the past demand. Spending on tourism and hotels is closely related to the economic cycle. Certainly, spending on leisure activities such as holidays tends to be one of the first things that consumers cut back in times of recession. The travel and hotel industry is further affected by reduced demand from the business sector since travel is one of the first areas that the corporate sector axes when the economy slows. Not surprisingly, the downturn of 2008–09 had a pronounced impact on the sector.Tourist arrivals for business, leisure, and other purposes declined in America by 4% in 2009 to 583million. The global economic crisis, also aggravated by the uncertainty around the A(H1N1) pandemic, turned 2009 into one of the toughest years for the tourism sector.However, there were signs of improvement in 2010, when arrivals grew by 2%. By contrast, The United States welcomed 620 million visitors in 2011, 25 million more than the year before.Fortunately, after the start of National Travel and Tourism Strategy, International tourists arrivals in the U.S. grew in 2012 and helped the total tourist number reach700 million (according to the latest UNWTO World Tourism Barometer).  Describe the customer of tomorrow and the demand in the future. This must be based upon the forces identified in the general analysis, the domain definition, value drivers and all other dimensions of the task/industry/competitive environment. 1. Under the background of population growing situation, the hospitality market will expand in the future which is a big trend for the industry. Tourist arrivals for business and leisure activities will increase in the future. 2. There were no major changes in the rankings of the first 10 destinations by international tourist arrivals and receipts in 2012. France, the United States, and Spain continue to be leaders in both arrivals and receipts. The United States ranks first in receipts and second in arrivals which means that the market of United States will be stable relatively. 3. The National Travel and Tourism Strategy sets a goal of drawing 100 million international visitors by 2021, which is expected to generate $250 billion annually in visitor spending. The policies given by the strategy will attract more visitors and the market will be expanded more. 4. When U.S. dollar is weak, other currencies are relatively strong, cost of goods and services are relatively cheaper in the U.S. and especially tourists from other countries would be able to travel relatively cheaply. The level of income in those developing counties like China is improving every year and the consumption level will be higher.Chinese expenditure on international tourism has been the fastest to grow in the last decade, up from seventh position as recently as 2008. Even during the 2009 economic downturn, tourism expenditure by China increased by 21%andChinese tourists splurged US$43.7 billion on their travels only in the United States. 5. Big events like both the 2014 Soccer World Cup and the 2016 Olympic Games will be held in Brazil, South America. Sports fans go to those events may have the possibility to be attracted by the biggest sports country in the world, America. The influences and the ‘tourism climate’ given by the Olympic Games will continue many years like the case of Beijing which affected the region of East Asia for a long time. That’s a big reason that the demand will increase in the future five years.
  46. 46. 80 6. Social media played a very important role in the last five years and it will continue to be the link between hotel industry and customers. Based on the high technical Internet development, the speed of information such as advertisement of hotels and comments given by consumers will be much higher than before. More people will get familiar with this industry and will have the will to travel in different cities or countries.  Complete the following tables based on the past demand trends and your estimation of future industry demand. After the analyzing of the increasing trend of demand and based on the tourist arrivals number between 2004 and 2013, a regression is done for the prediction. During the process of regression, the number of 2013 is deleted because it might be an outlier and the reason of being lower than 2012 can’t be found. (y = 24.433x + 449.83 R² = 0.9028) 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 (est.) 2014 (est.) 2015 (est.) 2016 (est.) 2017 (est.) Number of customers (million) 475 490 519 559 607 583 595 620 700 694 718 743 767 791 (  Graph the industry demand 0 100 200 300 400 500 600 700 800 900 2008200920102011201220132014201520162017 Number of customers
  47. 47. 81 b. Supply (This means number of restaurants, number of seats, number of hotels, number of rooms available)  Describe thekey value drivers that affected the past supply.  Awareness of sustainability and green practices  Energy saving and waste management  Social media in brand communication and customer services  Lifestyle brand becomes popular  Recovery from financial crisis  Application of technology in services and products  Estimate the supply of the industry/segment in the future. This must be based upon the forces identified in the general analysis, the domain definition, value drivers and all other dimensions of the task/industry/competitive environment. 1. Steady Growth of Overall Population inthe U.S.  Domestic tourism market will be bigger than before  Consist of the society will be more diverse  More labor supply in hospitality industry  Diverse value system and lifestyle based on diverse society 2. National Travel and Tourism Strategy  More hotels will be established  More hotel brands will be created to fit the need of international visitors  Rebranding will still be a trend in hospitality industry  Inbound market will increase in the following 10 years  More labor forces will be needed  Employee training and session plan will be a key concern of executives Supply in hospitality industry is shown in the following table. The growth rate used to predict the number from 2013 to 2017 is the average growth rate from 2008 to 2012 (2.4%). Hospitality Industry 2008 2009 2010 2011 2012 2013 (est.) 2014 (est.) 2015 (est.) 2016 (est.) 2017 (est.) Number of rooms 257012 263952 272398 277846 294517 301585 308823 316235 323825 331597
  48. 48. 82 Number of hotel rooms in hospitality in the U.S. 0 50000 100000 150000 200000 250000 300000 350000 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017