Four Season Hotel Analysis

Amy Huboi TIP- four-spot Seasons Resorts and Hotels The caller-out that I attain chosen for the theory in practice report is the quaternary Seasons Resorts and Hotels. The society is du completelyy listed on the New York striving Exchange under the ticker emblem FS and it is listed on the Toronto Stock Exchange under the ticker symbol FSH. The confederation originated in Toronto, Canada all over forty years ago when owner and CEO, Isadore Sharp, opened up the premier quartet Seasons hotel. His fantasy was to create a chain of sumptuousness hotels that clear upered excellence in table divine service and amenities.The hotel soon has sixty-four properties in twenty-nine countries. The majority of properties ar held under the 4 Seasons and regent(postnominal) hotel markers. The society has a wish established branded share willpower properties and tete-a-tete lobbys. My personal interest in this company is a result of my husbands employment at the intravenous fee ding Seasons Aviara over the last nine years. I read a bun in the oven seen first hand how this company takes immense pride in their staff and their well- being.The company in any case has extensive training for employees and yields many benefits, such as promotions and management training programs. The company has been extremely victorious throughout the years because of their loaded focus on specific market segments and their needs. The company has utilized in(predicate) strategies, which have aided in their financial success and stability when other competitors have failed or taken a loss. Chapter 1 Mission Statement and Values The four Seasons has created a accusation and values statement that encompasses the companys monishminations, beliefs and principles.The mission statement has been highly- unquestionable to serve as a trackting point for the companys overall military control strategy. It is alike meant to be a ancestry of guidance for quartette Seasons emplo yees. Their mission statement incorpo evaluate four cardinal attributes of the company who we are, what we believe, how we behave, and how we succeed1. The quadruplet Seasons main purpose is to provide the finest prodigality accommodations to their guests. The companys goal is to be regarded as the beat out in hotel and resort management.The quaternity Seasons believes their employees are their most vital assets. The tonicity of the employees is paramount for the company in their obtainment of organizational objectives. quartet Seasons believes it takes a unified and cooperative employee effort to satisfy the guests needs and to achieve success in the application2. The company has developed the philosophy that individuals (employees and guests) should be treated fairly, ethically, and respectfully. four-spot Seasons has adopted the gold Rule, which states Do unto others as you would have others do unto you3. This has become the underlying foundation for the iv Seasons c ompany culture. Although the quartette Seasons wants to be known as the leader in the prodigality hospitality persistence, they have a strong belief that the pursuit of this objective should not overshadow their eminent ethical standards. The overall financial goal of the company is to earn a fair and reasonable profit in found to protect the investments of all stakeholders4. quadruple Seasons excessively focuses on long-term strategies, which ensures profitable growth. Chapter 2 Porters Five Forces ModelRisk of meekness by Potential Competitors Low The companies in this specific fabrication offer clients a eminently separate point of intersection. The luxury hotel assiduity has superior brand faithfulness among their customers. This can be justified by the agio price customers are spontaneous to pay for a hotel get on. According to Karl Huboi Once a guest experiences luxury hospitality they will neer settle for anything less5. The lastence of strong brand loyalt y is difficult for unexampled entrants to break unless they offer a superior service, which can be quite addressly.It is difficult for in the raw entrants to pretend access to the capital requirements needed to develop and build a luxury hotel. It can greet over $200 million to build a new luxury hotel and this does not include the damage of employees and marketing6. The industriousnesss incumbents have established relationships and experience, which enables them to achieve profound cost savings. In addition to brand loyalty and be the new entrants must similarly contend with the probability of retaliation from the established hotels. Rivalry Among formal Companies HighThe luxury hospitality industry is fairly concentrated. There are approximately 10 separate competitors of the quad Seasons. The hotel companies are Accor, Fairmont Hotels, Hilton, Hyatt, Millennium & Copthorne Hotels, Orient-Express Hotels, Ritz-Carlton, Starwood Hotels and Resorts, Thistle Hotels and Wy ndam7. The level of diversity among the companies is medium to low because the majority of the companies provide similar types of high quality service. The high cost of grammatical construction, furnishing and servicing the hotels in the industry create high fixed costs and high exit barriers.In addition to monetary costs the companies similarly have strong relationships and bonds with employees, investors and guests, which are difficult (financially and emotionally) to divest. As a result of the economic downturn in the last few years the hotel industry has experienced slow or even stagnant growth. There were several hotel companies that held back development projects and determined off employees in order to avoid a financial loss. Currently, there has been a steadily change magnitude demand for luxury hotels in the lodging industry. The Four Seasons, Ritz-Carlton, Starwood luxury collection, St.Regis and W Hotels luxury chains are the primary hotels that have begun to witness the increase in consumer demand8. Power of Buyers Low The consumers of the luxury hotel industry bargain for a low volume in relation to the industrys total capacity. The level of eminence that the companies offer is high. This makes it difficult for consumers to compare luxury accommodations with standard accommodations. Consumers that want to stay at hotels, such as the Four Seasons, are willing to pay the higher premium because they value the service.When the quality of the service is high the buyer usually has low price originator. There is very little threat of backward integrating from the consumer due to the high costs of startup in the luxury hotel industry. Power of Suppliers Medium The number of suppliers to the hotel industry is extremely high. The types of suppliers for hotels include furniture suppliers, linen and bedding suppliers, nutriment suppliers, decor suppliers, appliance suppliers, and uniform suppliers. The handiness of substitutes is generally high, exc ept when supplies are developed exclusively for hotels.For example the Four Seasons uses specially made Bulgari and LOccitaine products in their hotel bath fashions. The Four Seasons as well as has mattresses made specifically for the hotel rooms. In instances like these hotels can become dependent on specific supplies. The majority of hotels have regional contracts with suppliers. This locks the hotel companies into using certain suppliers and creates switching costs. Supplier advocator is slightly reduced by their reliance on the hotel industry, especially in the case of uniform and food suppliers9. Power of Substitutes LowThere are substitutes for lodging, such as camping, hostels and motels, but none of these offers the service and amenities that luxury hotels provide to their guests. This is the main reason why there is a low threat of substitutes to the luxury hotel industry. Overall, the luxury hotel industry can be relatively profitable due to the low threat of new entran ts, low power of buyers and low threat of substitutes. Chapter 3 Building Blocks of Competitive Advantage There are four building blocks that create a agonistic advantage for companies superior efficiency, superior quality, superior innovation and superior customer responsiveness.Each of these factors can contribute to increasing the consumers perception of quality and decreasing the companys cost structure10. The Four Seasons Hotels strives to achieve superiority in each of these components thus accepting them to maintain an advantage over their key competitors. At the Four Seasons employee productivity is the main measure of efficiency. The company has developed a rigorous interview process to ensure the hotel hires employees that match the Four Seasons criteria. Four Seasons requires that their employees have strong moral values, teamwork mentality and high quality work ethics11.The Four Seasons has in any case developed extensive employee training in order to only develop the employees skills and traits. The company believes in empowering their employees in order to shorten the process when dealing with problems. This gives the employees a sense of importance and pride at work regardless of their experimental condition at the hotel. The Four Seasons also provides full benefits and other perks, such as comp nights, in order to further generate employee satisfaction, productivity and to cognize the guests experience12.The superior quality of the Four Seasons experience is measured by the guests perception of service and value. A key indicator of the consumers value for the Hotels service is the achieved daily room rates (ADR). If a guest perceives the quality and value of the Four Seasons to be high then he/she is willing to pay a higher room rate. The companys overall ADR has increased by 4. 3% in 2003. This was above the average ADR for the luxury hotel segment. The high quality of the Four Seasons service/product is also reflected in the numerous pillages and accolades they have received.Several of the Four Seasons have achieved the five diamond status, which is a prestigious award given by the American Automobile Association (abdominal aortic aneurysm). In 2004 the company had 19 properties that were awarded five diamonds13The Four Seasons has also dominated many surveys and polls, such as Andrew Harpers Hideaway Report. In 2003 the company had over 13 hotels listed on the top fifty of the Harpers Hideaway Report14. The Four Seasons has been a pioneer in developing innovative standards in the hotel industry15. They were the first U. S. ompany to include bathroom amenities, like shampoo, bathrobes, hairdryers and cost mirrors in their hotel rooms16. The Four Seasons provides 24-hour room service, overnight dry cleaning, shoe shining and fitness centers. The hotels also put up specialty meals for guests who prefer low fat meals or who have dietary requirements. The innovation of these standards has created and strengthene d brand loyalty among guests who value these types of services and attention to detail. The Four Seasons has made an unwavering commitment on providing stiff service to their guests17. Uncompromising service is more than a paper strategy, it has become the defining competitive inequality for Four Seasons18. The power that the company gives to their employees allows them to quickly and efficiently handle the most unusual requests. This enables the company to come about the guests expectations of consumer responsiveness. Chapter 5 Business-Level Strategy The Four Seasons has developed their business strategy base off the concept of differentiation. They provide their guests with a distinctive and curious level of service.Their customer focus is primarily business travelers, corporate groups and leisure travelers. Although the hotels generally attract certain clientele the Four Seasons policy does not allow for discrimination and believes all guests deserve the same exceptional ex perience19. The company has created a strategy that focuses on four important components. The Four Seasons concentrates on small to medium sized luxury hotels20. This allows hotel management to entrapively tend each hotel and provide the guests with more intimacy. The hotel company also concentrates on hotel management services instead of hotel possession. oversight service is one of the Four Seasons main distinctive competencies. The company has established partnerships with investors who provide the backing for hotel development. The investors receive ownership in the hotels while the Four Seasons takes sole responsibility for managing the hotels and resorts. Approximately, ninety to ninety-five percent of the companies earnings are a result of the management fees21 The company currently has majority ownership in only tierce properties22. Another component of Four Seasons strategy is their golden rule philosophy.The company believes it is important for every level of employee to participate in treating others fairly and respectfully. This principle creates an atmosphere, which facilitates a positive work environment and adds to the guests experience. The Four Seasons has also identified their uncompromising service as some other component of their strategy and as their distinctive edge against competitors23. The companys knowledge and background in creating unique experiences for customers provides the Four Seasons with pricing power thus giving the company an advantage over rivals. Chapter 6 Mature IndustriesThe hotel industry is a mature industry. There are several different types and sizes of hotel companies, but the grownupr companies generally dominate the industry. The luxury hotel segment focuses more on non-price competition to deter new entrants, such as market penetration, product development and market development. The Four Seasons concentrates on increasing their market share and continuous growth by developing new hotels in different regio ns. At the end of 2004 the number of Four Seasons properties will have reached 70. The company president, Isadore Sharp, hopes to have a total of 100 properties by 201024.The Four Seasons has also begun to expand into new niches or markets with product proliferation. In 1997 the company opened its first luxury vacation ownerships (timeshares) at the Four Seasons Resort Aviara in Carlsbad, California. The company believes this is another way to reach and satisfy guests who value the quality of Four Seasons experience. The Four Seasons Residence Club experience will bring an exclusivity, privacy, luxury and service level never before available in the vacation ownership arena25. They have also opened up residence clubs at the Scottsdale, Jackson Hole, and Punta Mita properties.In addition to the fractional ownership reckon the company has also developed private residences in Jackson Hole, San Francisco, Miami and Scottsdale. The luxury hotel segment rarely uses price-based competitio n, such as price signaling or pricing games. These types of tactics can drive down room rates to a level that is not profitable for any company in the industry. This is not the goal in the luxury hotel segment. Many companies, like the Four Seasons, want to create superior value so they can justify the premium room rates. The Four Seasons does not believe in using pricing games as a strategy to deter entry.It against their policy to cut prices as a competitive federal agency. This strategy is warranted by the fact that the hotels attract guests based on the product not the cost26. Chapter 7 Technical Standards There are many established standards or specifications that must be upheld for a hotel to be classified as a luxury accommodation. These standards are also important in the selection of hotels to be deemed a five diamond or five star establishment. According to the AAA the factors to be considered when judging a hotel are its age, size, architectural design and appeal. In ddi tion the AAA bases its assessment on the guests overall impression of the establishment27. It is important for luxury hotels to follow these criteria and to receive superior evaluations because these ratings intrusion the hotels credibility among consumers. There are also other specific features that hotels must have in order to achieve five star or five-diamond status. Some of the examples are valet service, 24 hour room service, live flowers and plants inside the rooms and premises, real wood detailing, fine art work, fitness centers, minimum of twain restaurants (one being fine dining) and pressing services28.These standards make up the dominant design for each Four Seasons Hotel. This means that every hotel that is built must adhere to certain specifications that have been established by the industry. The differences that do exist among the hotels are seen in varying features such as the furnishings, architectural landouts, color schemes and locations. Chapter 8 Multidomestic Strategy The Four Seasons has followed a multidomestic strategy throughout their expansion into international and domestic regions. The key distinguishing feature of multidomestic companies is that they extensively make both their product offering and their marketing strategy to match different national conditions29. This strategy is also feasible when the company is not reliant on cost reductions for maximizing profitability. In the luxury hotel industry it is necessary to modify certain aspects when entering the global market. The Four Seasons has maintained the highest levels of local responsiveness in their aggressive overseas expansion.The modification of the hotels for different regions is often reflected in the hotel design and in the service features. When the Four Seasons builds hotels they always take into account the natural environment of the location. For example the, Four Seasons Resort Maldives at Kuda Huraa have been designed to resemble the tropical huts of the r egion30. The Four Seasons also considers the size of the hotel when entering a new location. It is important to not build a hotel that over scales its environment because it could be seen as offensive to the community.The Four Seasons is also conscious of blending the local culture in with the service features of the hotels. For example each hotel offers cuisine that is unique to its location31. The Four Seasons has been successful at transferring their distinct corporate culture and core standards to each hotel it manages. The company is not overly concerned with lowering costs thus making it possible for them to provide customized service and quality regardless of the hotels location. The premium rates charged by the Four Seasons for their customized product offering offsets the added costs of being locally responsive. Chapter 9Horizontal Integration In the mid 1990s the Four Seasons decided to horizontally integrate by acquiring Regent International Hotels, a luxury hotel chain i n Asia32. The Regent brand was experiencing a significant financial burden and was on the verge of bankruptcy. The Four Seasons decided that acquiring the Regent Hotels would protagonist them build their market share. After being extensively investigated by Regents investors, the Four Seasons was sold the right to putsch Regents fifteen properties33. The acquisition allowed the Four Seasons to become the dominant company in the luxury hotel market worldwide34. After the Four Seasons became listed on the New York Stock Exchange and the Toronto and Montreal Stock Exchanges in 1997, the company decided to sell off the Regent brand. The Four Seasons sold only the rights to future development of the Regent Brand name to Carlson Hospitality Worldwide, a global leader in hospitality services35. The agreement betwixt Carlson and Four Seasons allowed both companies to utilize the Regent brand reputation as a spring of competitive development. The Four Seasons still maintains ownership ri ghts to eight of the established Regent Hotels.The Four Seasons was fortunate to acquire another company that actually increased their overall value and market share. Traditionally it is difficult for firms to successfully horizontally integrate because of the difficulties associated with merging company cultures and accurately estimating the benefits of integration36. The company was able to look past any voltage risks in order to see the future opportunity for growth. Chapter 10 Joint Ventures The Four Seasons has recently organise a joint accident with the cruise ship developer, maritime Development Group.The companies plan to develop and dunk the luxury cruise ship by 200637. The Four Seasons will be responsible for managing the cruise ship. The concept for the cruise ship is similar to the ResidenSea, which provides its guest with the atmosphere of home while at sea. The joint venture is beneficial for both companies because they can share the risks and costs associated wi th the development and marketing of the cruise ship. The business venture also allows each company to focus on providing their specific assets and capabilities that will enhance the success of the project.The Ocean Development Group will own the cruise ship and will be responsible for the cost of development. The Four Seasons will use their distinctive competencies in management service to operate the hotel under their name. The company will use their skills in customer service to create an atmosphere that is comparable to any Four Seasons on land. IRMEs SouthWest some(prenominal) the Four Seasons and Soutwest airlines have developed strong company cultures. The companies also view their employees as their most important asset.Both companies believe that productive and loyal employees are a source of efficiency and profitability for the company. Southwest uses employee efficiency to lower costs and the Four Seasons uses their employees to create high differentiation. Harley Davidso n Both Harley Davidson and Four Seasons focus on providing their customers with a highly differentiated product/service. The companies have also developed strong brand loyalty among their customers by providing a unique experience and by being responsive to customer needs. Airborne Express Both companies have not developed extensive advertising campaigns (i. e. TV ads).Airborne Express has avoided this because they want to avoid attracting certain customers (like non-business shippers). The Four Seasons does not advertise on a large scale because they do not need to appeal to the general public. Their customer focus is only on specific market segments, like the business traveler. It would be a waste of resources for both companies to participate in mass marketing because of their customer focus. Dell & Shaw The Four Seasons, Dell and Shaw have all developed strong business models, which have added to their profitability and allowed the companies to experience significant advantages. Dell developed the direct selling business model, which allowed the company to capture a specific market (big businesses and knowledgeable buyers). Shaw developed a business model centre on providing inexpensive wine by mass marketing. This allowed the company to realize economies of scale and lower cost savings. The Four Seasons has developed a business model that is based on providing differentiated service by focusing on their expertise in hotel management services instead of hotel ownership.Coke & Pepsi The Four Seasons key competitor is the Ritz-Carlton, but unlike Coke and Pepsi the companies do not participate in competitive pricing and marketing strategies. Interesting Points An interesting fact that I have learned from doing this report is that the Four Seasons main business focus is in providing hotel management services. I was unaware that they only had majority ownership in three properties. I also did not realize that they had several different investors for each devel oped property.This strategy has been successful for the Four Seasons, because it allows them to earn significant profits (an operating margin of 53% in 2003) through the use of specific skills and assets38. Another interesting thing I have learned is that the Four Seasons was able to maintain profit levels well above their competitors throughout the past economic downturn. The company refused to lay off employees and cut room rates (which is important to my husband and I) when several other hotel companies made significant cutbacks to decrease their overall costs.The Four Seasons believed that lowering cost and service standards would ultimately have an adverse effect on the companys reputation and established brand loyalty. This strategy has allowed the company to retain their status and to earn higher ADR than their competitors. Works Cited AAA Five Diamond Award. 2004. www. ouraaa. com Four Seasons yearly Report. 2003. www. fourseasons. com. Four Seasons EmPact. 2004. Karl Hubois Employee Handbook. Four Seasons Receives Top Billing by Readers of Andrew Harpers Report Rank as trump City Hotel in the U. S. and Abroad Plus Best Hotel in 10 Major Cities. PR Newswire. (September 9, 2003). ww. factiva. com. Four Seasons Resort Maldives at Kura Huraa. 2004. www. fourseasons. com. Garrahan, Matthew. A New Spring for Four Seasons. Financial Times. (November 26, 2004). www. factiva. com knoll W. L. , Charles and Gareth R. Jones. Strategic Management Theory An Integrated Approach. (Boston Houghton Mifflin association, 2004). Hoovers Company Profiles. Four Seasons Hotels Inc. (November 14, 2004). www. factiva. com. Huboi, Karl. Interview with Four Seasons Employee. (December 1, 2004) Warson, Albert. Hotels are Hot. mortgage Banking 65. (October 1, 2004). www. factiva. com. 1 Four Seasons Annual Report, (2003), p. 6, www. fourseasons. com 2 Four Seasons Annual Report, p. 6 3 Four Seasons EmPact, Karl Hubois Employee Handbook, p. 8 4 Four Seasons Annual Report, p. 6 5 Karl Huboi , Interview with Four Seasons Employee, (December 1, 2004) 6 Karl Huboi 7 Hoovers Company profiles, Four Seasons Hotels Inc. (November 14, 2004), www. factiva . com. 8 Albert Warson, Hotels are Hot, Mortgage Banking 65, (October 1, 2004), www. factiva. com. 9 Karl Huboi. 10 Charles W. L. Hill and Gareth R. Jones, Strategic Management Theory An Integrated Approach (Boston Houghton Mifflin Company, 2004), p. 6 11 Karl Huboi 12 Karl Huboi 13 Four Seasons Annual Report, p. 11 14 Four Seasons Receives Top Billings by Readers of Andrew Harpers Report Rank as Best City Hotel in the U. S. and Abroad Plus Best Hotel in 10 Major Cities, PR Newswire (September 9, 2003), www. factiva. com. 15 Four Seasons EmPact, p. 7 16 Four Seasons EmPact, p. 7 17 Four Seasons Annual Report, p. 8 18 Four Seasons Annual Report, p. 8 19 Karl Huboi 20 Four Seasons Annual Report, p. 7 21 Matthew Garrahan, A New Spring for Four Seasons, Financial Times (November 26, 2004), www. factiva. om. 22 Four Seasons Annual Report, p. 7 23 Four Seasons Annual Report, p. 7 24 Matthew Garrahan 25 Four Seasons EmPact, p. 8 26 Matthew Garrahan 27 AAA Five Diamond Award, (2004), www. ouraaa. com. 28 Karl Huboi 29 Charles W. L. Hill and Gareth R. Jones, p. 272 30 www. fourseasons. com/maldives/index. html. 31 Karl Huboi 32 Four Seasons EmPact, p. 8 33 Four Seasons EmPact, p. 8 34 Four Seasons EmPact, p. 8 35 Four Seasons EmPact, p. 8 36 Charles W. L. Hill and Gareth R. Jones, p. 304 37 Hoovers Company profiles 38 Four Seasons Annual Report, p. 12