Environmental Analysis of Five-Star Hotels in Brisbane - Case Study Example

Environmental Analysis on five –star Hotels in Brisbane Name: Instructors Name: Course title: Institution: Date: Executive summary The success of both the existing and new businesses depends on several environmental factors in gauging the directions that they steer. Enviromental factors entail customers’ demands, general economic status, and evaluation of competitors. For hotel industry in Australia, environmental factors such as increased competition coupled by hard economical times have led to 1.2% decrease on annual revenues in 2010 as compared to 2009. Some of the most common hotels operating in Brisbane are of five star categories such as Rendezvous Hotel, Riverside hotel Southbank, Oak Casino towers, Manor Hotel among others. Due to the competitive environments in which they operates, the hotels offer high quality services at reduced fees of as little as AUD 180 per night stay, a factor that has enabled them attract increased number of customers as compared to other hotels in Australia. By employing Porters five forces such as barriers of entry, degree of rivalry, threats of substitutes the firm have evaluated its competitiveness both in domestic and international markets. Further, PEST analysis enables the firm to understand and the prevailing political, economical, social-cultural and technological factors such as taxation levels, ability of customers to spend among other notable aspects. The firms also employs strategic issues such as planning, implementation and enhancing the corporate cultures with an aim of implementing projects that enhance firms’ competitive levels. In conclusion, firms should carefully study the prevailing environmental conditions to allow them make strategic planning required for short and long-term profitability. Table of Contents Executive summary 2 Table of Contents 3 1.0 Introduction 3 2.0 Brisbane’s Five-Star hotels 4 3.0 Analysis of the sector using Porter’s five forces model 7 4.0 PESTEL Analysis 10 5.0 Strategic issues 12 6.0 Conclusion 13 References 15 1.0 Introduction An internal analysis is a vital step prior to internal organisation analysis and development of strategic plan in an organisation. The hotel industry in Australia represents large sector of the economy, contributing at least 20% of the country’s GDP. The industry operates in globally competitive markets thus experience tight, but progressing conditions as global economic crises improves from recent economic melt down. To experience solid performances over the years, operators in this sector have concentrated in investing in improved services, quality customer services, increased relationship between employees and the managements, adequate pricing and positioning, staff trainings among others. Although revenues from hotel industry and other hospitality industries have decreased by 4.5% since 2007, mainly due to the negative impacts of areas such as domestic and international tourism arising fro the global crises, the Australian hotel industry remains highly unchanged thus making Australian hotel industry to be one of best performers globally (Becker & Ulrich, 2008). In the year 2010, the hotel industry generated more than $ 25.6 Billion, although this represented a 1.2% decrease as compared with 2009. Currently the industry employs at least 556, 709 people and have more than 71,000 establishments across Australia. It is estimated that the hotel and hospitality industry is forecasted to increase at a rate of 4.8% on annual basis thus generating at about $45.8 billion by 2019. To achieve this, there is the need of enhancing the right business environment to attract investors, provide assistances for business development assistances among other important aspects. This paper critically evaluates environmental analysis on Five-Star hotels in Brisbane, Queensland, Australia. 2.0 Brisbane’s Five-Star hotels Brisbane’s Five-Star hotels are some of the successful hotels operating in Australia. With their elegance spaces, attentive staffs, stylish architecture among other notable aspects, the hotels make lasting impressions to the customers visiting the hotel. The hotels have stunning rooms for guests, executive rooms and suites that captures the Brisbane River and the skyline. From traditional yet highly elegant room decors to marble bathrooms, sate of art in room’s technologies, and celebrated luxury bedding packages, the hotels give innovative levels of comfort to the visitors. For dining purposes among other pleasures, one is bale to enjoy cocktails and coffee at Lobby Lounge, prior to sampling cuisines of the Petries Brasserie. Visitors are able to relax in health club and Dome Retreat Spas that provides blissful distraction. Most of these hotels also specialize in business and social meetings and events, wedding events among other functions. For example, Riverside hotel Southbank has more than 700 sq. meters of event spaces and flexible meeting, accented by river views and natural light, full service businesses and imaginative catering services (David, 2009). Some of the hotels operating under the Brisbane five star hotels include Hilton Brisbane, Sofitel Brisbane Central, Stamford plaza Brisbane, Emporium Hotel, limes hotel and Spicers Balfour Hotel. The rates for Brisbane hotels vary from 49 Australian dollar in private budgets bonzafive star Brisbane accommodations are available from as little as $ 225 in one bedroom apartments at the suites in quay West. For those visitors looking for a four star accommodations, they can obtain it from $39 in five star located at Gladstone Highgate Hill. The City palms Motel is one of the Brisbane budget hotels for visitors because it provides excellent accommodation rates from AUD 69 and situated at St Fortitude valley. For those visitors who may wish to stay in executive rooms in most of Brisbane hotel can now enjoy their stay at a small fee of only $ 180 from the usual fee of $ 565, thus representing a 212% discounted offers (Kotler and Armstrong, 2006). The table below briefly indicates the accommodation charges charged by other Brisbane hotels and their locations within Brisbane. Name Location Daily charges ( Australian dollar) Stamford plaza City 255 (including tax) Rendezvous Hotel Brisbane City 176 (excluding tax) Oak Casino towers City 228 (including tax) Riverside hotel Southbank South Brisbane 145 (excluding tax) Brisbane Manor Hotel Fortitude valley 68 (excluding tax) (McCullough, 2010) From the table above it is clear that five star Hotels in Brisbane charges fairly as compared to compared to other five star hotels in US and UK, which charges up to UAD 500 for daily charges. Due to increased levels of globalization, Australia has been one of the famous destinations for most people in the world. This is due to the high funding of education centres, tourist sites, medical facilities among other sectors responsible for attracting foreigners to Australia and Brisbane to be in specific (Ellis, 2002). For instant, Brisbane boasts of universities such as University of Queensland, Griffith University and many medical centres and tourism attraction sites. As a result of this, over 30% of residents in Brisbane are foreigners from countries such as Asia, Africa, US among others (Denoon, 2000). The foreigners visits the town to seek for education, touring the country and global seminars thus making most people visiting Brisbane hotels to be foreigners from these countries. To enable the hotel interact with its customers across the globe, effectively and efficiently, it has established an interactive customer care department trough the social networking sites such as Face book, Twitter, MySpace among other notable forms of social networking sites. Through these sites, customers are able top make bookings as well as give their feedbacks concerning their stay in any of Brisbane Hotels. The success of these hotels in the domestic market has been promoted due the ability of the management to employ various environmental factors thus dictating the direction in which the firm takes. This has been done through activities such as evaluation of the weaknesses and strengths of the competitors and evaluation of the general economic conditions prevailing in Australia and other parts of the world. By evaluating these factors, Brisbane Hotels have been able to come up with innovative technologies, better ways of marketing as well as offering unique services and products to their customers. 3.0 Analysis of the sector using Porter’s five forces model Certo (2002) Porters Five forces is drawn upon IO ( industrial Organisations) economics in deriving five forces, determining competitive intensity thus the attractiveness of this firms to the market. Firms become less profitable due to poor combination of the five forces that are vital for success of any given organisation. Two of the porters’ forces focus on internal threats affective organisations, while the rest on external factors are internal. Further, three of the five forces, namely threats of the substitute products, threat of entrants and threats taking place de to established rivals are horizontal competitions while the rest are vertical forms of competitions. It is worth noting that, the porters forces have affected on the way in which Brisbane five star hotels operates mostly brought about by reduced government regulations as well as a result of increased levels of globalisation. 3.1 Threats of substitutes The degree in which substitute products create on profitability of any given industry depends on relative price to performance ratio of varied products and services that can satisfy the needs and wants of customers equally. Threats of substitutes also arise by the associated switching costs. This entails retooling, redesigning and retraining, incurred when customers switch to different products. The hotels and general hospitality industry in Australia have highly been affected by this factor. Since onset of global economic crises in 2007 coupled by recent increased costs of food and fuel products in international markets, saving for events such as holidays have decreased by more than 15% (Dobbins, 2003). The most affected countries include European countries and US, which constitutes over 25 of visitors to Brisbane and other parts of Australia. Consequently, the profitability of Brisbane hotels have decreased by almost the same magnitude as domestic and international visitors opts for homemade meals and reduced numbers of holidays (Blanchard, 2006). 3.2 Degree of rivalry The intensities of rivalry that is obvious of porters five forces to any given industry, determines extents to which value that have been created by concerned industry and dissipated through head to head competitions. The Brisbane Hotels have faced increased degree of rivalry resulting from enhanced innovations level that is one of the sustainable forms of competitive advantage. There also exist increased competitions from firms using the same strategies, raised costs of advertisements both online and offline among other factors (Kneese, 2008). 3.3 Bargaining powers of suppliers One of the factors affecting the hotel industry s the high costs associated when switching fro one supplier to the other. This is due to increased associated costs such as advertisement for the tenders, increased errors on goods and services supplied by new suppliers thus leading reduced services and products delivered to customers. In order to increase on their margins and higher prices, suppliers of products such as transport have integrated, thus having a higher bargaining power. For hotels operating in Brisbane, have been thus forced to stick to same suppliers offering them particular services due to high switching costs among others hindering factors. 3.4 Bargain powers of customers As a result of costumers, focused ways of running businesses, the bargaining power of customers, in most organisations, have drastically increased. To most customers, the need of reducing on their spending on tertiary expenditures such as holidays has led to buy services and products from organisations offering high quality at reduced costs. Further, customers are more prices sensitive thus buy services and products offered at low costs. As a result of this, the five star hotels operating in Brisbane are forced to give discounts as high as 200% of original costs and .incentives such like fully paid stays in the hotel 3.5 The threats of entry It is clear that profitable markets yielding higher return to the investors always attract new firms. This results to new entrants, which may ultimately lead to decreased profit levels. In some countries, some regulations put into place by the government and other stakeholders in regulating new entrants to the hospitality industry especially in the hotel sector. This is due to the great need of enhancing quality of established hotels as well as maintaining world-class customer care services, especially to five and six star hotels. The barriers based on market entry barriers and takes diverse forms thus used in preventing influx of firms into the industry when profits adjusted for cost of capital increase above zero (Wooden, 2006). In Australia, the hospitality industry is highly unregulated by the government there exist bodies such as AHA (Australian Hotels Association), which have been the main national voice of hotel industry in the country. One of the barriers of entry existing facing the hotel industry is the need of patenting and adhering to other rights, set up by the government and associations guarding the hotel industry in Australia (Morehead, 2007). This is one of the major barriers as upcoming firms are supposed to develop their own forms of products and service and not to duplicate on what already exists in the market. The other barrier facing the hotel industry in Australia is the high cost of entrant brought about by technological development. For instance, there is a great need of developing high quality means of communication, use of modern forms of advertising and marketing in the internet, social media and other forms of social communication. Australia government have also placed stringent monetary and fiscal policies to govern most of institutions, in order to fight against increasing inflations and unemployment. 4.0 PESTEL Analysis It is vital for organisations to consider their environments prior to marketing products and services offered. The environmental analysis must be a constant process to enable organisations to be strategically placing them selves on competes with firms offering similar products and services. For five star hotels operating in Brisbane and the rest of Australia, factors such as internal, micro and macro environments are considered. Macro environmental factors entails factors such as political, economical, social-cultural and technological force all important for the success of firms (Pearce & Robinson, 2002). 4.1 Political factors In Brisbane, political activities such as reduced governments as one of the austerity measures of curbing on inflation and low levels of employment as result of global economic crises, have affected the ways customers spends their resources. Despite creating enabling environments for hotels operating in the Brisbane city, levels of taxations on businesses have increased by at least 14% in the last five years leading to high operational costs in the hospitality industry. The Australian government have also set certain marketing and working relationship, such as the work place Relations among other legislation amendments Acts of 1996, all of which guides the operations of Brisbane hotels. 4.2 Economical factors Five star hotels operating in Brisbane highly considers the short and long run of trading economy. Certain economic factors, such as increased inflation rates, taxes and reduced per capita income among many neighbourhoods in Brisbane have affected the economical strength of the hotels. To curb these crises, the hotels have developed several long-term solutions such as outsourcing of services such as transport and catering services for outdoor visitors. These are just a few notable austerity measures adopted with the sole purpose of increasing profitability of the hotels in long run. Generally, the economic crises affecting international markets have resulted to reduced numbers of international visitors to hotels operating in Brisbane, thus an urgent need for the hotels to come up withy policies that will attract the domestic customers. 4.3 Social-cultural factors Segal-Horn (2002) social and cultural influences highly affect service delivery in hospitality industry. Being a metropolitan country, Australia has high number of immigrants from other countries such as Asian and African continent. This has resulted to a multicultural country where foods and religion from other cultures are accepted. This has forced the hotels to offer international services and products to cater for the wide category of people residing in the area. The births rates in Brisbane and the rest of Australia have reduced by at least 20% in the last decade due to increased costs of living, increased know how and government policies aimed at reducing the larger population. This has resulted to overall profitability of the firms, as 45% of the population in Brisbane constitutes of the aged. Further, customers visiting the hotels have become more sensitive to issues regarding environmental conservation to curb the fluctuating weather conditions prevailing in the country. To cater for these changes, the hotels have come up with activities like green packaging, planting of trees among others aimed at reducing carbon levels in atmosphere. 4.4 Technological factors The last decade have witnessed raised levels in technological know how among the customers and organisations. Currently, customers carry out their shopping activities over the internet and social media like Face book, Twitter, blogs, micro-blogs, Short messaging services and other contemporary means of marketing and communication. Technology has enabled hotels to come up with new and innovative ways of delivering their services to their customers through means such as CRM (customer Relationship Management) thus raising profitability. The Brisbane hotels have also changed the way customers interact with the hotels. For instance, customers can now be able to book via online method and enjoy discounted offers given by the hotel. 5.0 Strategic issues Wooden (2006) indicates that strategic issues helps a company to develop long-term plans thus maximizing profitability of the organisation. Strategic issues give the direction and course to follow in attaining the vision, gaols and objectives set. Healthy strategic issues answer fundamental questions such as where the goods and services be sold, to whom they will be sold to and ways of beating and avoiding competitors. For most hotels operating in Brisbane, strategic issues lie at heart of business, a factor that have enhanced sustainable growth of the firms despite the prevailing economic situations. To attain desired outputs, the hotels have generated and prioritized potential strategic issues depending on levels of their attainability and expected outputs. Three main strategic issues employed by Brisbane hotels such as Brisbane Manor Hotel are as follows. 5.1 Strategic planning and constituency Brisbane hotels have developed clear strategies, which provide the purpose and sense of direction for all activities concerning the firm. Consequently, the hotels have established valuable and unique proposition enabling them to attract and retain customers, not only in Australia but also in foreign markets. The strategic planning of the hotel has affected by the demands of fast changing world thus demanding clear organisational strategies. Further, strategic planning has enabled Brisbane hotels such as Brisbane Manor Hotel, to cater for the varied needs and expectations of the customers. To achieve this, top management have developed new strategies such as investing in modern technologies and embarking the latest CRM requirements to raise the revenues. 5.2 Strategic implementation Strategic implementations put particular business concepts into practise to enable businesses to visualize the set ideas and goals. Strategic planning is an important driver, towards attaining the organizational objectives. Most of the hotels have set implementation teams, such as employees, specialist, consultants or other professionals responsible for implanting strategic issues set by an organisation. To attain the desired outputs, Brisbane has set schedules followed within stipulated timelines. For instance, Riverside hotel Southbank hotel has come up with projects aimed at reducing on the operating costs of the firm in long run. To effect this, the implementation teams have set timelines, which is expected to reduce the hotel operational cost by at least 33% within the next ten years. This will ultimately increase the competitiveness of the firm hence increased growth. 5.3 Assessing corporate culture To effectively effect, the strategic issues affecting the firm, it is important for the hotel to asses their corporate and organisational culture. This enables the customers to associate the selves with the traditions of the organisation, a factor that enable the hotel to attract and retain high numbers of loyal customers. 6.0 Conclusion From the above, it is clear that, the environmental factors, both internal and external, affect the profitability of the firm both in the short and long run. By properly dealing with these factors such as, firms are able to compete accordingly, gaining higher market share as compared to the competitors operating in the same field. 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