Opportunities and Challenges for Shangri-La Qinhuangdao in Mainland China - Case Study Example

Opportunities and Challenges for Shangri-La Qinhuangdao in Mainland China Table of Contents Introduction 3 Discussion 4 SWOT Analysis 5 Strengths 5 Weaknesses 6 Opportunity 7 Threat 7 Marketing plans 4P’s 8 Place 9 Promotion 10 Product 12 Price 13 Conclusion 13 References 15 Introduction Shangri-La based in Hong Kong is a premium hotel, with over 88 hotels. The hotel has a strong brand name in the hospitality sector and thus, is trying to expand its venture in Mainland China. Shangri–La initiated its operation for more than 30 years from the present day. The objective of the hotel is to provide customers with an experience that enriches culture and provides superior acts of hospitality. In the contemporary era, Shangri-La is regarded as one of the luxurious hotels with its wide range of operations. The mission of the hotel is to provide customers with excellent experiences in various exotic locations (Shangri-La International Hotel Management Ltd., 2015). One such location that the business is planning to expand is Mainland China. The hotel is leading the chart with regard to expansion and growth in the Asian region. When talking about the company profile, it is worth mentioning that the hotel is well inspired from the novel of Lost Horizon. The hotel in order to expand in the international market maintained transparency and followed the international standards or policies to meet the global legal requirements. The hotel expanded its venture to enhance profitability and showed a steady growth as well as profit in the years of progress. However, when analysing the profit of the hotel, it is observed that the profit started to dip since the mid of 2013 and dipped the most in the year 2014. Therefore, to enhance its position in the market, the hotel decided to establish its hotel in Qinhuangdao Mainland China ensuring the policies related to International hotel standards. Qinhuangdao is a new destination selected for expansion, as it is exotic in location for it is situated near the port. From the report published by Bloomberg (2015), it is observed that the hotel is unable to expand although the sales of goods have increased. However, the net income for Shangri-La declined from US$392.3M USD to US$180.9M. To overcome the losses, the hotel decided to expand its venture and provide customers with the services expected by them for a better growth opportunity (Bloomberg L.P., 2015; Dow Jones & Company, Inc, 2015). The government regulations have a considerable impact on the health of the hotel, as the motto of the hotel is to provide quality services to customers by maintaining transparency in the operational activities and meeting customer needs. Moreover, as a background for the losses suffered by the hotel, it is observed that the policies implemented by the government regarding the ban of luxury items affected the performance of Shangri-La to a considerable extent (Donovan, 2014). In other words, it can be stated that due to the measures of the Chinese government against the use of luxury items have lead to the reduction in the hotel profitability. The government implemented various anti corruption regulations that affected the business and helped them to incorporate business in Qinhuangdao for the hotel to regain its status and profitability (A.T. Kearney. Inc, 2013). The paper therefore intends to elaborate the growth of Shangri-La in Qinhuangdao in Mainland China by reflecting a marketing plan based on an analysis of the market. Discussion The objective of the hotel is to meet the needs of the customers by providing quality services, exotic location for people to relax and spend time with the near and dear ones. Managing supply chain and sustainability for increasing efficiency of the hotel is another important aspect. With regard to the policies of the government and maintaining of the international standard, it is worth mentioning that the hotel needs to work effectively for maintaining sustainability and profitability. Shangri-La operates with the aim of encouraging people to visit the hotel and experience the exotic services. The hotel provides various luxurious services to attract customers, but the government policies as stated earlier affected the growth of the hotel in the long run. However, to enhance the effectiveness and expand business at large, Shangri-La needs to identify its strengths, weaknesses and implement marketing plan to increase efficiency of the hotel to attain profit. Before implementation of plans, it is expected that the hotel analyse its environment, so that it is able to understand its present situation. In this context, a SWOT analysis can be conducted on Shangri-La to have an in-depth knowledge about the operations. The key aim of the hotel is to establish a new hotel in Qinhuangdao and earn profitability (Shangri-La International Hotel Management Ltd., 2013). SWOT Analysis Strengths The major strength of the hotel is its brand value that it has created since long. It has over 30 years of experience in the market of China. Therefore, it is in a better position to understand the needs of the customers and provide quality services. Another, aspect of Shangri-La is that it is targeting a market or segment wherein people will enjoy their leisure time and exotic locations. Shangri-La is one of the leading luxurious hotels and provides facilities to customers with quality. The brand is known for its well-trained staffs and amenities provided with excellent quality enhancement. Global recognition for services and efficiency in meeting with the policies as well as corporate sustainability can be regarded as important strengths for the hotel. Shangri-La provides online facilities, which in itself is the strength for the hotel in the present competitive era (1Shangri-La International Hotel Management Ltd., 2015). When considering the aspect of opening a new venture in Qinhuangdao Mainland China, it is worth mentioning that this expansion can be its exotic location, as it is identified as a port city. Luxurious services by meeting customers demand will be a major strength for the hotel to earn profitability. The location and the lack of competition are other strengths that will help Shangri-La to attain success. Providing luxurious services such as spa facility, well-designed suites and huge dining area following the needs and traditional customs will be termed to be the strength for the hotel. Moreover, the strength for the hotel can be to provide liquor to customers by abiding the policies or norms of the government. The hotel will enhance its services by applying and adhering to the international standards, so that customers are able to have value for money services and remain loyal towards the hotel (3Shangri-La International Hotel Management Ltd., 2015). Weaknesses In the present day context, the hotel is recognised to lack of traditional medical massage and leisure department. Another weakness is linked with the staff performance, wherein it can be stated that the services are not personalised, which may be a threat in the long run for Shangri-La. Lack of publicity is another reason that acts as a weakness for the company. Keeping in view all these aspects of weaknesses, Shangri-La needs to mitigate these aspects when establishing its venture in Qinhuangdao. Being in a hospitality sector, service is the main aspect for the hotel at large to meet the competition in the market. The above-mentioned weakness can be mitigated by analysing opportunities in the market (Shangri-La International Hotel Management Ltd., 2013). Opportunity Various opportunities can help the hotel to enhance its market share keeping in view the new location. As the location is near the port, numerous travellers will arrive and therefore, there is a scope for the hotel to attract customers by identifying their needs. The locution of the hotel is one of the biggest opportunities for Shangri-La. The policies of the government with regard to the tourism and trade policies are also seemed to be affecting the hotel industry. It is a fact that with increasing tourism, the hotel industry will expand efficiently to a considerable degree. The policies or memorandum between the two nations of China and France as well as China Russia can be of great opportunity for the hotel in the future. The aim of the business is to earn profitability and maximise earnings with the help of various conferences and events through which customers’ interest can be enhanced by creating opportunity for Shangri-La in Qinhuangdao mainland China (PR Newswire, 2014). The Unique Selling Proposition for the hotel in Qinhuangdao is its long history and culture. Therefore, the hotel can mix culture and technological advancement together for attaining and attracting new customers. Contextually, the aim of the hotel is to maintain environment stability and sustainability. In this context, Shangri-La can implement CSR activities for its business to enhance its sustainability in the market and improve profitability. Corporate social responsibility is regarded as the blood of a business and therefore, maintaining the legal aspects and environmental analysis can be an opportunity for the business (2Shangri-La International Hotel Management Ltd., 2015). Threat The threat in the hospitality industry is the changing government regulations and policies. If the policies changes, then they directly affects a business as was in the case of this hotel in the year 2014. However, to regain its market, the hotel is establishing a new hotel site in Qinhuangdao. The threat for the company can be the unknown location and the different needs of the customer from different background and cultures. Another, threat for the hotel can be competition from other hotels in the area. For the business to expand, it is important for the environment and economy to be supportive. However, the aspect of soft economy can hamper the hotel management and growth in Qinhuangdao. In this regard, it is also worth mentioning that due to the expansion of the tourism industry and scopes in the Chinese market, several hotels are expanding, which is leading to an increase in supply with less demand. The demand for luxurious hotel is less as compared to the supply in the market. This is one threat that can affect Shangri-La in Qinhuangdao (2Shangri-La International Hotel Management Ltd., 2015). Hence, with the help of the SWOT analysis, it has become easier for the hotel to plan its activities for enhancing its visibility in the market and earn profitability by providing quality services to the customers. For the success of the business, a proper marketing plan is to be incorporated, so that the hotel sustains in the long run and meets its objectives efficiently for success and profitability in the long run in the new market. Marketing plans 4P’s Success of a business depends on proper planning or strategic outlook regarding the progress. Shangri-La is a luxurious hotel and has its brand awareness in the market, as it is in this hospitality sector for 30 years. For the hotel to gain its market in Qinhuangdao, it is important for the hotel to plan its products and promotional activities, so that the objective of a business i.e. profitability is achieved in an effective manner. In this context, proper strategic planning is vital for the business to succeed in the long run. The objective or mission for Shangri-La is to provide its customers with extra ordinary services to create a positive impact on the economy. Performance is the key to success and it is analysed through market expansion, customer loyalty and revenue earned. In this context, when planning activities for expansion of a business with regard to marketing, the first aspect is the marketing mix. Marketing leads to providing customer satisfaction by offering quality goods and services. In the hospitality industry, the product is intangible in nature, as it is the quality services that are provided to the customers. In context of Shangri-La, it can be stated that the services provided by staffs are most vital and leads to profitability (Botten & McManus, 1999). Place Shangri-La in order to regain its financial stability has decided to establish its hotel in Qinhuangdao. It is regarded as a port city, located in the northwest coast, and hence attracts tourists. Hotel industry largely depends upon the tourism industry and therefore, location is a prime factor of planning. In this context, Qinhuangdao depicts an ecological environment, which is usually liked by people when travelling. The advantage of the hotel of Shangri-La would be its location surrounded by harbours and water bodies. As the location is exotic, Shangri-La would provide free transportation facility to its customers as a complementary service. Qinhuangdao is one of the booming economies with a strong networking channel; this is an additional point for its growth. It is a favourite location for investors because of its commercial viability. Shangri-La would offer its customers exotic views and mix the rich historic culture of Qinhuangdao with customisation of services as per the needs. Qinhuangdao is a prime location for tourists; this is an opportunity for the hotel to offer quality services to attract more and more customers. This location is rich for its historic events and therefore, tourist visits are more in this location. This is a good aspect for the hotel, as it will have customers all round the year. Moreover, it is an economic and industrial hub for which it will have regular flow of investors coming from varied region. Therefore, Shangri-La as a luxurious hotel will provide delegates with quality services and offer them banquets for meetings (Karppinen, 2011). Moreover, the services provided by the hotel will help in demonstrating culture and promote the development of urban infrastructure. The location of the hotel is one of the best strategic marketing decisions for sustainability and profitability. The location of the hotel will act as an opportunity for Shangri-La to establish its profitability by meeting the needs of tourists from worldwide and meeting the requirements of investors. This place is economically viable and hence has immense scope for profitability and sustainability for the hotel. The hotel will provide transportation facilities for the customers including free pick up and drop facility. Furthermore, the reception will be based on the cultural norms of the city, so that customers enjoy the cultural mix with sophistication in approach. Moreover, the hotel will be established near the harbours and airports, so that customer networking is good and the exotic beauty of the location can be enjoyed by people (Kotler, 2011). Promotion Success of every business depends upon its advertising and promotional activities. Although Shangri-la is a well-known brand, but as it is establishing in a new location is vital to promote it efficiently. Hotel can promote its activities through the use of local media such as newspaper and hoardings, so that people are aware of the hotel. Advertising is crucial for the business, as it helps in promoting the best aspects of the product or services to the target market. Being a brand name, Shangri-La has its own identity in the market. It is a well-established brand however, it is important to promote the beauty of the location and the exotic services that will be provided to customers. The best way to promote the hotel would be by internet and social media. Shangri-La can use online medium in order to advertise its services to attract new customers. Promotional activity is vital for the hotel to earn profitability, as it will assist in attracting customers. Advertising for the hotel can be done through its own websites regarding the opening of new site in Qinhuangdao, Mainland China. The information regarding the location and the exclusive offers will be portrayed through the official website. Moreover, Qinhuangdao is a tourist place and therefore, people from every age group would love to visit this location and enjoy their stay in the luxurious hotel i.e. Shangri-La for having quality services. Therefore, the marketing for the hotel will be through social media, so that it reaches every customer segment. The target market for the hotel is the young people and the business tycoons (Kotler, 2011). Shangri-La will promote or advertise its hotel and its services through television, radio, magazines as well as billboards. Another promotional aspect is through direct mails to the customers by stating the key features of the hotel with the value added services it provides. With the advancement of technology, promotion will also be done using mobiles by sending messages stating the features and lucrative offers. Moreover, the hotel can promote its new venture in Qinhuangdao, Mainland China through press release to make it known to various investors. Promotional strategies can also be used by segmenting the market, target audience and then positioning the product for greater sustainability in the long run. The objective of the hotel is to support the environment. Therefore, the hotel will promote the use of electric cars for its customers, so that the environment ecological balance is maintained effectively (Little & Marandi, 2003). Use of online sources such as social media that include Facebook and other media to provide awareness amid people is another important aspect. Moreover, the hotel can tie up with tourism departments, so that the customers are informed regarding the luxurious hotel i.e. Shangri-La in Qinhuangdao, Mainland China. Moreover, as a part of the promotion campaign, the hotel will try to build a strong public relation with customers to enhance the corporate image. The company has a strong image in the market due to its brand value and positioning in the market since 30 years. In this context, it is worth mentioning that promotion and advertisement is important for the sustainability of the hotel and profit earning. Increasing the presence of the hotel in the online domain is another form of promotion (Lee, 2000). Product Product is again an important aspect. In the hospitality industry, services are the most important factor of success. The well trained staff and the reception help in retaining customers in the long run for their welcoming behaviour. Quality of the hotel will be the best, as it will try to meet the requirements of the customers keeping in mind the rich culture of China. The marketing plan will be encourage the staff to perform effectively by enhancing the level of services. Designing and variety of services provided to the customers will be the USP. The customers will be provided with value added services that include Spa and other features in the hotel. The reception will be traditional in its approach, so that visitors from other nations get the feel of the Chinese culture and their ethnicity (Karppinen, 2011). Moreover, the range of product is although intangible in nature, but helps in providing quality services. Customers in the hotel will be provided with extra benefits such as quality services with complementary facilities. Variety, quality and services are the three key aspects for the success of the hotel and therefore; all these aspects will be enhanced by keeping the local values and skilled staff in views. Shangri–La will have the potential to meet customers’ needs and offer them products such as large suites and rooms. Conference facilities, executive lounge and travel desk are offered to support the customers for travelling around the place and enjoy the scenic beauty. Moreover, another aspect is that hotel will provide parking facilities along with spa, recreational and internet facilities to serve people (Karppinen, 2011). Price Price is another important aspect for the business to flourish in the competitive market. Pricing strategy for the hotel will be based on the economy of the area and the purchasing power of people. Pricing is important and is based on various aspects for the profitability of the hotel in the future. Implementation of internet facility will affect the pricing of the hotel at large. The pricing strategies that can be implemented with the use of skim positioning as it is a luxurious hotel and people will not mind to pay high for the quality products offered. This form of pricing strategy will help in creating price differentiation by providing high quality services to attract customers. Moreover, to retain and attract new customers and increase its loyalty, the hotel will try to provide discounts to customers with the loyalty card. Another aspect of consideration is the pricing strategy that needs to be competitive and different from other hotels, so that customers are attracted towards Shangri-La Qinhuangdao, Mainland China. Thus, with the help of all these aspects, Shangri-La can meet its level of profitability and achieve success by increasing its customer base and take advantage of the booming economy (Kotler, 2011). Conclusion Hotel industry faces several challenges and opportunities in the contemporary era. In this context, Shangri-La is expanding its business in Qinhuangdao, Mainland China to take advantage of the booming economy at large. From the analysis, it has been comprehended that in the hotel industry, Shangri-La has an immense experience for serving in this industry for a long time period and accordingly, it is its strength to meet the challenges and achieve goals. The functioning of the business will take into consideration the policies and other aspects, so that the business is able to perform operations with better profitability. In addition, a marketing plan has been devised with the aim of ascertaining the aspects based on which the hotel can perform its operations with a better consideration towards environmental consideration and sustainability. References A.T. Kearney. Inc, 2013. China’s Hospitality Industry- Rooms for Growth. Documents, pp. 2-9. Bloomberg L.P., 2015. Shangri-La Asia Ltd. Financials. [Online] Available at: http://www.bloomberg.com/research/stocks/financials/financials.asp?ticker=69:HK [Accessed April 21, 2015]. Botten, N. & McManus, J., 1999. Competitive Strategies for Service Organisations. Purdue University Press. Dow Jones & Company, Inc, 2015. Shangri-La Asia Ltd. The Wall Street Journal. [Online] Available at: http://www.wsj.com/india [Accessed April 21, 2015]. Donovan, T., China’s Crackdown on Corruption and Government Spending: A Timeline. China Business Review. [Online] Available at: http://www.chinabusinessreview.com/chinas-crackdown-on-corruption-and-government-spending-a-timeline/ [Accessed April 21, 2015]. Karppinen, M., 2011. Strategic Marketing Plan for a Hotel. Degree Programme of Hospitality Management, pp. 2-63. Kotler, P., 2011. Marketing Insights from A to Z: 80 Concepts Every Manager Needs to Know. John Wiley & Sons. Little, E. & Marandi, E., 2003. Relationship Marketing Management. Cengage Learning EMEA. Lee, O., 2000. Internet Marketing Research: Theory and Practice: Theory and Practice. Idea Group Inc. PR Newswire, 2014. Shangri-La Hotels and Resorts Turns 30 in China. Industry News. [Online] Available at: http://en.prnasia.com/story/archive/1268153_EN68153_0 [Accessed April 21, 2015]. Shangri-La International Hotel Management Ltd., 2015. About Shangri-La Group. Legendary hospitality. [Online] Available at: http://www.shangri-la.com/corporate/about-us/ [Accessed April 21, 2015]. 1Shangri-La International Hotel Management Ltd., 2015. Global Recognition of Excellence. Awards. [Online] Available at: http://www.shangri-la.com/corporate/about-us/awards/ [Accessed April 21, 2015]. 2Shangri-La International Hotel Management Ltd., 2015. Shangri-La Asia Limited. Sustainability Report, pp. 1-36. 3Shangri-La International Hotel Management Ltd., 2015. Shangri-La Hotels and Resorts 2013 UN Global Compact Communication on Progress. Sustainability, 2-12. Shangri-La International Hotel Management Ltd., 2013. Shangri- La Asia Limited. Annual Report, pp. 1-190. Read More