Key Strategies in Globalised Hospitality - Case Study Example

Strategies in Globalised Hospitality: Case Study Analysis (Name) (University Affiliation) The Virgin Australia and Singapore Airlines Alliance Introduction Founded in 1970 by Sir Richard Branson, Virgin Australia is part of a very big family known as the Virgin Group. Over the years, the company has achieved a good reputation among the global brand names. In fact, it is a one of best airlines of the 21st century. Since its establishment, Virgin Group has created over three hundred branded companies across the globe, and as such creating fifty thousand employment opportunities in thirty countries. The three hundred companies deal with transportation, media, space tourism operation, mobile telephony and Virgin Galactic. However, the company entered the aviation market in 2000 before partnering with Singapore Airlines due to the level of competition in the market (Virgin Australia, 2014). As such, this paper seeks to highlight the alliance between Virgin Australia and Singapore, its benefits to the airlines, its importance, analysis and evaluation of the alliance, the economies of scale and the outcome of the alliance. Further, the paper will discuss on strategic objectives of international hospitality alliances Virgin Australia and Singapore Airlines Alliance and its Importance A strategic alliance can be defined as a business arrangement between two or more companies for mutual benefit such sharing knowledge, expenses, gaining entry into new markets and gaining a completive advantage in one (Rhoades and Lush, 1997). Seemingly, companies have used strategic alliances as the main source of competitive advantages. In addition, many alliances worldwide have been formed with the objective of achieving increased economic benefit of the partnering parties. In the same light, the Virgin Australia and Singapore Airlines Alliance is a partnership between two airlines: Virgin Australia group of airlines and Singapore Airlines. The landmark agreement was signed on 7th June 2011 with the intention of establishing a long-term alliance, to cooperate on a substantial level (Morrish, 2012). The landmark agreement mandates the two airlines to first, code-share on each other’s international as well as domestic flights. Second, the agreement proposes the two airlines to offer passengers frequent flyer programme benefits and lounge access as well. Third, the alliance is supposed to foresee a coordination of schedules between Australia and Singapore and even beyond for seamless connections. Ultimately, the agreement proposes the two airlines to engage in typical distribution activities, joint sales and marketing. The alliance between these two airlines is a joint venture that will help the companies cope with competitors as well as increase their market share (Bowen, 2013) Benefits of the Alliance The alliance gives both the airlines the opportunity to compete with Qantas, especially in the corporate and government accounts. Unlike before, the Australian cooperates account is now split into domestic and international travel at the ratio of 70:30. Additionally, the Australian corporate and government clients benefit from value-added products such as access to both Singapore’s and Virgin Australia’s airlines lounges. Moreover, the clients get status recognition as well as frequent flyer points. Earlier, Qantas was the only airline that could offer both the International and domestic network services. The alliance has enabled Virgin Australia to attract a greater share that includes a high yielding corporate and government accounts. In addition, both the airlines are in a position to offer enhanced network, which gives the connection in Australia from Singapore’s large international network. Another benefit is that the Australian experts in the airplane engineering and flight attendance crew have an opportunity to get employment internationally because of their exposure and experience (Evans, 2011). Initially, the Singapore Airlines had a strong brand presence in Australia and such, its commitment to serving the international market travel has made it benefit from this alliance. From an estimated ten percent share of international travel from Australia in 2010, Singapore Airlines now enjoys a nineteen percent share (Airlines, 2013). Furthermore, the Alliance has helped the Singapore Airlines to offer attractive the connections as well as the opportunity to redeem Kris Flyer point in the Australian network. Initially, Singapore Airline could not offer the connection in Domestic Australia due to the collapse of Ansett at the beginning of 2011. The Airline had a limited interline arrangement the renowned Qantas in Australia. Additionally, Qantas never gives any Airline a partnering opportunity since it is the key competitor in international travel. Therefore, the alliance was vital for Singapore to place itself in the helm of international travel like Qantas. The alliance also helps Singapore Airlines advantageous brands services to incoming international clients that are beyond the main Australian Gateways. For instance, the alliance gives Singapore Airline brand service to passengers from Frankfurt. The alliance also enhances Singapore’s offer to Australian corporate clients with Qantas, which is its rival. In addition, the Alliance provides opportunities to the Singapore Airlines’ passengers to burn as well as earn frequent flyer points in Australia. Analysis and evaluation of the Alliance A deeper analysis to the alliance shows that Singapore Airlines nearly doubled its holding in the Virgin Australia group of airlines to 19.9%. The move to double its holding reinforces its strategy of making Asia-Pacific and Australian market its focal point. Singapore Airlines purchased an additional 9.9% percent from the virgin group thus diluting the presence of its rival Airline Etihad that owns about 9% stake in Virgin Australia airlines now. However, equity is not Singapore Airline’s main driver; the additional stake aims at giving it an edge while looking further to deepen its code-share alliance with Virgin Australia. The Singapore Airline is focused in spreading its wings across Australia-Europe market (Heracleous and Wirtz, 2012). The alliance allowed each airline to combine its strengths with the intent of fulfilling the important gaps networks that had been long neglected. The network gaps where Virgin Australia network coverage in Asia and Singapore Airline network in Australia. The partnership created an integrated international as well as domestic network that increased passenger numbers on both the airlines’ service. For example, Singapore Airlines is in a position to offer travel services from all locations throughout its international network to tourist or commercial destinations in Australia. On the hand, Virgin Australia has been benefiting from increased passenger service feeds on its local customers (Simons, 2012). Just like Qantas, the alliance is in a position to offer a comprehensive domestic and international network to the Australian air travel. Through the alliance, the Australia is promoted as a tourist destination globally. Consequently, the Australian Tourism and Australian economy at large is promoted since passengers get to see for themselves the beauty in Australia. The Outcomes from the Alliance The alliance is a big success since both the airlines have been able to access new markets thus making their brands popular worldwide. The venture into the new markets has made the companies to increase their annual revenues due to its popularity. Moreover, the alliance has made the airlines to charge fair prices as well as maintain high service quality thus getting more customers. Accordingly, the alliance has increased its competitiveness due to the introduction of frequent flyer and classic lounge products thereby attracting more international and domestic international passengers (Brogden, 2007). The Australian and other international passengers have more choices unlike before where they had Qantas only thus benefiting the two airlines. Passengers can now access the critical Asian market with ease. The alliance has introduced new connections between Australia, India and China thus clients can exploit on the new business trips that the alliance offer at a fairer price and better quality of services, which in turn profits the two airlines. Furthermore, the alliance, both the Singapore and Virgin Australia enjoy increased passengers in their routes. In effect, the increased passenger rates have increased load factors and reduced costs per seat sold (Li, 2013). Moreover, the increased passengers’ rate has helped the airlines to enjoy lowering operating costs as well as increased efficiencies. Thus, the airlines enjoy more profitability since the cost of operation and brand advertising has been lowered. The alliance has as well reduced the connecting services costs that were experienced before due to the code-shares, which have enabled the lowering of flight inventory. Ultimately, the airlines can expand their international network without undertaking large capital expenditure (Brueckner and Whalen, 2012). The leading Hotels of the World, Ltd Many international hospitality organizations often form alliances with other organizations both local and internationally with the intent of penetrating into new markets as well as strengthening their brands (Long, 1997). The main motivation behind the alliances involves exposure to local knowledge as far as legal-political environment is concerned and expand local service capacity simultaneously. In that light, the Leading Hotels of the World, Ltd was established in 1928 with the aim of proving a luxury hospitality consortium to the clients. Owned by Hotel Representative, the consortium has over four hundred hotel and resorts across eighty countries globally. Under this alliance, respective hotel members benefit from new markets thus increasing their market shares both domestically and globally. Moreover, the member hotels benefit from using limited financial investments in their businesses. The other benefit of economies of scale that member hotels get is the sharing of financial risk through joint investments in property such as buildings, vehicles and even subs business entities (Long, 1997). . References “Singapore Airlines 5-Star Airline Rating of Product and Service Quality.” Skytrax. March 2013.Retrieved 27 August 2014. Airlines, D. (2013). Developing and implementing CRM programs: The Delta experience. Cockpit resource management, 421. Bowen, J. (2013). Airline hubs in Southeast Asia: national economic development and nodal accessibility. Journal of Transport Geography, 8(1), 25-41 Brogden, S. (2007). Australia's two-airline policy. Melbourne University Press; London: Cambridge University Press. Brueckner, J. K., & Whalen, W. T. (2012). The Price Effects of International Airline Alliances*. The Journal of Law and Economics, 43(2), 503-546. Evans, N. (2011). Collaborative strategy:: an analysis of the changing world of international airline alliances. Tourism management, 22(3), 229-243. Heracleous, L., & Wirtz, J. (2012). Strategy and Organisation at Singapore Airlines: Achieving Sustainable Advantage Through Dual Strategy. In Energy, Transport, & the Environment (pp. 479-493). Springer London. Li, M. Z. (2013). Distinct features of lasting and non-lasting airline alliances. Journal of Air Transport Management, 6(2), 65-73. Long, P.E. (1997). Researching tourism partnership organizations: From practice to theory to methodology. In P.E. Murphy (ed.), Quality Management in Urban Tourism, pp. 235 251. London: Wiley & Sons. Morrish, S. C., & Hamilton, R. T. (2012). Airline alliances—who benefits?. Journal of Air Transport Management, 8(6), 401-407. AIRLINES, E. (2013). Submitted to. TN RAO COLLEGE OF MANAGEMENT STUDIES A GLOBAL/COUNTRY STUDY AND REPORT ON UAE & COMPANIES, 20. Rhoades, D.L. and Lush, H. (1997). A typology of strategic alliances in the airline industry: Propositions for stability and duration. Journal of Air Transport Management, 3(3), 109 114. Singaporeair.com, (2014). Singapore Airlines - About us. [online] Available http://www.singaporeair.com/en_UK/about-us/ [Accessed 25 Aug. 2014]. Simons, M. S. (2012). Global airline alliances-reaching out to new galaxies in a changing competitive market-the Star Alliance and Oneworld. J. Air L. & Com., 65, 313. Virgin Australia, (2014). Virgin Australia | Book flights & holidays with Virgin Australia. [online] Available at: http://www.virginaustralia.com/au/en/ [Accessed 25 Aug. 2014]. Top of Form Read More

 

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