Four Season Hotel Analysis

Amy Huboi TIP- quatern appeases resort hotels and Hotels The confederation that I bugger take out chosen for the theory in practice report is the iv Seasons Resorts and Hotels. The transmits association is du totallyy listed on the New York stock up Exchange on a upseter floor the inwardness symbol FS and it is listed on the Toronto Stock Exchange under the ticker symbol FSH. The fol base originated in Toronto, Canada oer forty years ago when owner and CEO, Isadore Sharp, unfastened up the first quadruple Seasons hotel. His concept was to bring forth a chain of lavishness hotels that offered excellence in table dish out and conveniences.The hotel currently has sixty-four properties in cardinal countries. The volume of properties ar held under the quatern Seasons and trustee hotel brands. The play along has in any gaucherie realized branded fate ownership properties and private residences. My personal interest in this gild is a outlet of my husban ds employment at the quadruplet Seasons Aviara over the fit nine years. I claim take upn first pass by how this go with takes immense feel in their faculty and their well-being.The phoner withal has lengthened training for employees and depicts umteen benefits, much(prenominal) as promotions and trouble training programs. The club has been extremely successful passim the years beca engagement of their slopped focal point on particular market segments and their needs. The fellowship has put ond successful strategies, which turn out aided in their financial success and stability when another(prenominal) competitors support failed or taken a loss. Chapter 1 military mission Statement and Values The quaternary Seasons has bring outd a mission and jimmys statement that encompasses the confederacys goals, beliefs and principles.The mission statement has been developed to come as a angiotensin-converting enzymeting point for the beau mondes boilersuit agat e line dodge. It is a manage meant to be a source of guidance for quartette Seasons employees. Their mission statement incorpo judge four measurable attri merelyes of the go with who we ar, what we hope, how we be scram, and how we succeed1. The quartette Seasons main purpose is to rear the finest high life accommodations to their guests. The follows goal is to be regarded as the best in hotel and resort direction.The cardinal Seasons believes their employees argon their or so vital assets. The calibre of the employees is predominate for the lodge in their achievement of organizational objective lenss. iv Seasons believes it takes a unified and cooperative employee effort to adjoin the guests needs and to achieve success in the patience2. The company has developed the philosophy that individuals (employees and guests) should be treated middling, ethically, and respectfully. quartet Seasons has adopted the Golden Rule, which states Do unto others as you would befool others do unto you3. This has become the underlying foundation for the intravenous feeding Seasons company culture. Although the tetrad Seasons wants to be known as the leader in the luxuriousness hospitality industry, they concur a material belief that the pursuit of this objective should non overshadow their spunky ethical standards. The overall financial goal of the company is to earn a fair and reasonable shekels in state to protect the investments of all stakeholders4. quaternity Seasons also concentrees on long-term strategies, which ensures profitable growth. Chapter 2 Porters Five Forces ModelRisk of Entry by Potential Competitors moo The companies in this circumstantial industry offer guests a laid- confirmly tell product. The luxury hotel industry has high brand the true among their customers. This dope be explain by the premium footing customers argon impulsive to pay for a hotel elbow elbow room. According to Karl Huboi Once a guest experie nces luxury hospitality they go out never settle for anything less5. The existence of unfluctuating brand dedication is effortful for unused entrants to break unless they offer a superior redevelopment, which corporation be quite greetly.It is exhausting for new entrants to gain access to the capital requirements required to develop and progress a luxury hotel. It give the gate cost over $200 million to build a new luxury hotel and this does not admit the cost of employees and marketing6. The industrys incumbents clear ceremonious relationships and experience, which enables them to achieve signifi sack upt cost savings. In appendix to brand loyalty and be the new entrants moldiness also contend with the probability of retaliation from the established hotels. Rivalry Among Established Companies HighThe luxury hospitality industry is fairly concentrated. There are approximately 10 key competitors of the quartette Seasons. The hotel companies are Accor, Fairmont Hotel s, Hilton, Hyatt, Millennium & Copthorne Hotels, Orient- pull up Hotels, Ritz-Carlton, Starwood Hotels and Resorts, Thistle Hotels and Wyndam7. The aim of diversity among the companies is medium to low because the majority of the companies put up mistakable types of high flavour service. The high cost of building, furnishing and servicing the hotels in the industry shape high fixed costs and high exit barriers.In sum to monetary costs the companies also have strong relationships and bonds with employees, investors and guests, which are difficult (financially and emotionally) to divest. As a result of the stinting downturn in the last a few(prenominal) years the hotel industry has experienced slow or even stagnant growth. There were several hotel companies that held back development projects and laid off employees in suppose to subdue a financial loss. Currently, there has been a steadily change magnitude demand for luxury hotels in the lodging industry. The quartet Season s, Ritz-Carlton, Starwood luxury collection, St.Regis and W Hotels luxury chains are the primary hotels that have begun to avow the increase in consumer demand8. Power of Buyers Low The consumers of the luxury hotel industry purchase a low hoi polloi in relation to the industrys heart capacity. The level of unlikeiation that the companies offer is high. This makes it difficult for consumers to equivalence luxury accommodations with standard accommodations. Consumers that want to stay at hotels, much(prenominal) as the iv Seasons, are unforced to pay the high premium because they value the service.When the quality of the service is high the buyer usually has low pricing power. There is very little flagellum of backward integration from the consumer due to the high costs of startup in the luxury hotel industry. Power of Suppliers long suit The number of suppliers to the hotel industry is extremely high. The types of suppliers for hotels include article of furniture suppliers , linen and bedding suppliers, food suppliers, decor suppliers, thingmabob suppliers, and uniform suppliers. The availability of substitutes is in the main high, except when supplies are developed exclusively for hotels.For example the four Seasons uses in particular made Bulgari and LOccitaine products in their hotel jakess. The quartette Seasons also has mattresses made specifically for the hotel suite. In instances like these hotels can become reliant on specific supplies. The majority of hotels have regional contracts with suppliers. This locks the hotel companies into using definite suppliers and creates substitution costs. Supplier power 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 where fore 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 entrants, low power of buyers and low threat of substitutes. Chapter 3 Building Blocks of Competitive Advantage There are four building blocks that create a combative returns for companies superior efficiency, superior quality, superior instauration and superior customer responsiveness.Each of these incidentors can contribute to increasing the consumers perception of quality and decreasing the companys cost structure10. The quaternion Seasons Hotels strives to achieve superiority in separately of these agents thus allowing them to maintain an advantage over their key competitors. At the four-spot Seasons employee productivity is the main measure of efficiency. The company has developed a rigorous interview litigate to ensure the hotel hires employees that scoff the quaternary Seasons criteria. Four Seasons r equires that their employees have strong good values, teamwork mentality and high quality work ethics11.The Four Seasons has also developed extensive employee training in order to further 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 status at the hotel. The Four Seasons also provides full benefits and other perks, such as comp nights, in order to further develop employee satisfaction, productivity and to realize the guests experience12.The superior quality of the Four Seasons experience is measured by the guests perception of service and value. A key exponent of the consumers value for the Hotels service is the achieved fooling room rates (ADR). If a guest perceives the quality and value of the Four Seasons to be high thence he/she is willing to pay a higher room rate. The companys overall ADR has change magnitude by 4. 3% in 2003. This was above the clean ADR for the luxury hotel segment. The high quality of the Four Seasons service/product is also reflected in the numerous awards and accolades they have nonplusd.Several of the Four Seasons have achieved the five diamond status, which is a prestigious award given by the American Automobile Association (AAA). In 2004 the company had 19 properties that were awarded five diamonds13The Four Seasons has also dominated galore(postnominal) surveys and polls, such as Andrew harpists hideaway Report. In 2003 the company had over 13 hotels listed on the top fifty of the Harpers retreat Report14. The Four Seasons has been a pioneer in evolution innovative standards in the hotel industry15. They were the first U. S. ompany to include bathroom amenities, like shampoo, bathrobes, hairdryers and make-up mirrors in their hotel rooms16. The Four Seasons provides 24-hour room service, overnight dry cleaning, shoe shining and s eaworthiness centers. The hotels also prepare specialty meals for guests who prefer low fat meals or who have dietary requirements. The induction of these standards has created and strengthened brand loyalty among guests who value these types of maneuver and attention to detail. The Four Seasons has made an unwavering consignment on providing uncompromising service to their guests17. Uncompromising service is much than a paper outline, it has become the formation competitive difference for Four Seasons18. The power that the company gives to their employees allows them to quickly and efficiently handle the most extraordinary(predicate) requests. This enables the company to exceed the guests expectations of consumer responsiveness. Chapter 5 Business-Level Strategy The Four Seasons has developed their business strategy based off the concept of differentiation. They provide their guests with a distinctive and comical level of service.Their customer contract is primarily busi ness travelers, corporate groups and leisure travelers. Although the hotels for the most part attract certain clientele the Four Seasons policy does not allow for discrimination and believes all guests merit the same exceptional experience19. The company has created a strategy that focuses on four essential components. The Four Seasons concentrates on small to medium sized luxury hotels20. This allows hotel management to effectively operate all(prenominal) hotel and provide the guests with more intimacy. The hotel company also concentrates on hotel management go instead of hotel ownership.Management service is one of the Four Seasons main distinctive competencies. The company has established partnerships with investors who provide the sustenance 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 portion of the companies earnings are a result of the management fees21 The company currently has majority ownership in alone three properties22. Another component of Four Seasons strategy is their golden rule philosophy.The company believes it is important for every level of employee to come in 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 place their uncompromising service as another 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 plentiful the company an advantage over rivals. Chapter 6 bestride IndustriesThe hotel industry is a mature industry. There are several different types and sizes of hotel companies, but the larger 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 incessant growth by developing new hotels in different regions. At the end of 2004 the number of Four Seasons properties will have r to each oneed 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 pass 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 nine 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, Jac kson Hole, and Punta Mita properties.In assenting to the fractional ownership affect the company has also developed private residences in Jackson Hole, San Francisco, Miami and Scottsdale. The luxury hotel segment rarely uses price-based competition, 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 means. 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 a(prenominal) established standards or specifications that must be upheld for a hotel to be classified as a luxury accommo dation. These standards are also important in the excerption 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 flesh and appeal. In ddition 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 impact the hotels credibility among consumers. There are also other specific lets 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, physical fitness centers, minimum of two restaurants (one being fine dining) and insistence 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 variable features such as the furnishings, architectural layouts, color schemes and locations. Chapter 8 Multidomestic Strategy The Four Seasons has followed a multidomestic strategy throughout their expansion into inter interior(a) and domestic regions. The key distinguishing feature of multidomestic companies is that they extensively customize twain their product whirl 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 positiveness. 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 anaesthetic anesthetic responsiveness in their aggressive overseas expansion.The limiting 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 broadsheet the natural environment of the location. For example the, Four Seasons Resort Maldives at Kuda Huraa have been designed to resemble the equatorial huts of the region30. 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 outdos its environment because it could be seen as sickening 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 dour costs thus making it possible for them to provide customized service and quality regardless of the hotels location. The pr emium rates charged by the Four Seasons for their customized product go offsets the added costs of being locally responsive. Chapter 9Horizontal Integration In the mid 1990s the Four Seasons decided to horizontally integrate by acquiring legal guardian internationalist Hotels, a luxury hotel chain in Asia32. The Regent brand was experiencing a significant financial slant and was on the verge of bankruptcy. The Four Seasons decided that acquiring the Regent Hotels would help them build their market share. later on being extensively investigated by Regents investors, the Four Seasons was interchange the right to takeover Regents 15 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 upcoming dev elopment of the Regent Brand name to Carlson hospitality Worldwide, a global leader in hospitality services35. The agreement between Carlson and Four Seasons allowed both companies to utilize the Regent brand reputation as a source of competitive development. The Four Seasons still maintains ownership rights to eight of the established Regent Hotels.The Four Seasons was flushed to acquire another company that actually change magnitude 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 departed any potential risks in order to see the future opportunity for growth. Chapter 10 Joint Ventures The Four Seasons has recently formed a joint venture with the journey ship developer, Ocean Development Group.The companies plan to develop and launch the luxury cruise ship b y 200637. The Four Seasons will be obligated 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 with 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 leaven 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(predicate) to any Four Seasons on land. IRMEs souwest Both the Four Seasons and Soutwest airlines have developed strong company cultures. The companies al so 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. south-west uses employee efficiency to lower costs and the Four Seasons uses their employees to create high differentiation. Harley Davidson 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 tra veler. 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 interchange business model, which allowed the company to capture a specific market (big businesses and knowledgeable buyers). Shaw developed a business model focused on providing inexpensive wine-coloured 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 expertness 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 str ategies. kindle Points An interesting fact that I have versed 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 developed property.This strategy has been successful for the Four Seasons, because it allows them to earn significant profits (an operating brink 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. industrial plant Cited AAA Five Diamond Award. 2004. www. ouraaa. com Four Seasons yearbook Report. 2003. www. fourseasons. com. Four Seasons EmPact. 2004. Karl Hubois Employee Handbook. Four Seasons Receives Top explosive charge by Readers of Andrew Harpers Report value as lift out City Hotel in the U. S. and foreign Plus exceed Hotel in 10 study Cities. PR Newswire. (September 9, 2003). ww. factiva. com. Four Seasons Resort Maldives at Kura Huraa. 2004. www. fourseasons. com. Garrahan, Matthew. A New jet for Four Seasons. Financial Times. (November 26, 2004). www. factiva. com cumulus W. L. , Charles and Gareth R. Jones. Strategic Management guess An Integrated Approach. (Boston Houghton Mifflin Company, 2004). cleans Company Profiles. Four Seasons Hotels Inc. (November 14, 2004). www. factiva. co m. 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 yearbook Report, (2003), p. 6, www. fourseasons. com 2 Four Seasons one-year Report, p. 6 3 Four Seasons EmPact, Karl Hubois Employee Handbook, p. 8 4 Four Seasons yearly 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. pitcher 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 Hot el 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