Strategic Options for Hotels and Tourism Company: Oman Hotels and Tourism Company - Case Study Example

Strategic options for hotels and Tourism Company: Oman Hotels and Tourism Company (SAOG) Name: Lecturer: Course: Date: Table of Contents Table of Contents 2 Introduction 3 Background: Oman Hotels and Tourism Company (SAOG) 3 External management strategies 4 Buyer management strategies 4 Supplier management strategies 4 Managing new entrants and substitute products 5 Internal management strategies 7 People management 7 Delivery Systems management 8 Management of physical assets 8 Service Design 8 Knowledge management 9 Delivery system management 9 Moment of truth management 9 Strategic Advantage Profile 10 Conclusion 10 References 11 Introduction Oman Hotels And Tourism Company (SAOG) is a joint-stock company that engages in hospitality and tourism business in the Sultanate of Oman. The company operates two business segments. These include the hospitality segments, which provide food, rooms and related services and beverages, and secondly, the investment segment, such as investment in associate and subsidiary companies. As a luxury and upper class brands of hotels, Oman Hotels And Tourism Company make up the generic brands of Oman Hotels. These subsidiary hotels cover resorts, business destinations, palaces, and landmarks (Oman Hotels 2012). Oman Hotels has created strategies that have enabled the company to achieve tremendous growth in Oman. This paper explores the strategic options for the hotels. Accordingly, it examines the background of Oman Hotels and Tourism Company (SAOG), external management strategies, internal management strategies, and lastly strategic advantage profile. Background: Oman Hotels and Tourism Company (SAOG) Oman Hotels and Tourism Company (SAOG) is a parent company to Al Wadi Hotel, Al Falaj Hotel and Ruwi Hotel, all of which operate in the Sultanate of Oman. It also manages outside restaurants, as well as invests in associate companies, such as Al Batnah Hotels Company and subsidiaries, such as Al Sharqiya Hotels & Tourism Company SAOC and Sur Plaza Hotel. The hotels are situated strategically in major towns in Oman, namely Sur, Sohar and Muscat (Markets.ft.com 2014). The company strategies have ensured steady growth. In 2013, the Group realized revenue of RO 7.33 million, which marked 6 percent growth from the RO 1.66 million of the previous year. External management strategies Buyer management strategies Oman’s travel and tourism industry is competitive industry with relatively low switching costs (World Travel and Tourism Council 2014). Oman Hotels Company used brand innovation in the industry to promote its attractiveness and to retain customers through price, quality and particular target age group. The strategy is in line with Khare and Khare’s (2010), who suggested that buyers in the travel and tourism industry tend to be price-sensitive, except for the premium market. Oman Hotel integrates both quality differentiation and cost leadership strategies. This is since there are many customers, who however small in size, the buyer power is reduced because the impact of losing a single customer poses minimal threat to the hotel. Still, since Oman relies heavily on the tourism industry, reduced number of holidaymakers, as well as the number of travellers implies that the buyer power increases, since the customers are provided with more options at low prices. The company has also improved the value-add for customers from their independent physical assets, service designs and additional aspects of the value chains. It has also incorporated switching costs in the luxury, upscale and upper upscale segments through the Oman Hotels Company’s loyalty program, which stretch across various premium segments. Supplier management strategies Within the context of travel and tourism industry, suppliers in the industry are viewed as property owners, real-estate companies and developers, training and management service provider, architects and ICT equipment suppliers. This implies that the hotel is over-reliant on suppliers. Hence, the suppliers have higher bargaining power (Hitt et al 2014). In managing its suppliers, the Group’s fair dealing and professionalism practices have enabled the company to gain the position of being a favoured brand among various local and international vendors. This has enhanced Oman Hotels Company’s ability to leverage the hotels’ position as a large chain that can squeeze maximum discounts out of the vendors, as well as enable them attain appropriate value from the suppliers (Loke et al 2009). Managing new entrants and substitute products As proposed by Van Oijen and Hendrikse (2002), company uses diversification strategies and strategic alliances to manage the competition from new entrants and substitute products. As a result, it has a wide presence across Oman, as well as deals in catering, restaurants, and luxury-serviced apartments. The substitutors for the services are only competitors in various segments. Hence, where Oman Hotels compete with Ubar Hotels and Resorts SAOG, the restaurant would compete with additional luxury full-service restaurant chains. Luxuriant facilities, such as spas and gym also serve to attract customers. Competing on pricing alone may become difficult. On the other hand, the larger companies also tend to implement loyalty schemes through provision of points system that minimizes the buyer’s power. Like other hotels in the industry, Oman Hotels is susceptible to the tourism and travel trends. In Oman, tourism and travel industry has grown dramatically over the recent years, as it offers attractive potentials to new entrants. Entry through small and independent hotels is possible. However, operating in the industry is capital intensive, which forms entry barrier for large-scale entry. Travellers also tend to bargain for lower rates while demanding high quality services. Therefore, operating in the market has substantial entry barriers. Kale and Singh (2009) suggests that the likelihood or new entrants into the industry heralds new threat of substitutes. Indeed, Omani travel and tourism industry have varied substitutes in the form of leisure accommodation, including information accommodations, such as friends, recreational vehicles and camping facilities. The substitutes may offer similar types of services, such as restaurants and spas. The substitutes also offer minimized costs to hotels and may as well undermine the hotel industry. A large number of independent players exist in the hotel industry, featured as vital competitors in the budget segment. The large-scale operators have also diversified to offer extra services, such as shops, restaurants, and casinos. Attracting and sustaining business therefore, demands that Oman Hotels has to offer services that are more complex. Its large size, however, insulates it from unpredictable market situations through geographical diversification. The exit barriers are also relatively high since most of the top tangible assets are greatly specific to the hotel industry. Therefore, Oman Hotels Company has adopted asset-light business model to fuel its expansion across Oman. Oman Hotels Company also uses strategic alliance strategies to provide complementary services. The Group operates wholly owned subsidiaries that provide value-added, as well as complementary services to the guests. The hotel engages in strategic alliances to provide major services in the luxury and upper scale segment through forming strategic alliances with other service providers. For instance, Oman Hotels has linked with Chi spa in Oman to provide customers with spa services. Additionally, to save on operation costs, Oman Hotels has formed an alliance with various chains, such as Laundry Services Oman to offer services that are non-core, such as laundry services and housekeeping. Internal management strategies The company’s internal analysis can be split into people management, delivery systems management, and management of physical assets, service design, and knowledge management, delivery system management, and decisive moment management. People management Oman Hotels are recognized for their effective HR practices and employee engagement. The training programs for the employees are particularly intended to empower the employees to be effective decision-makers, instead of just training them. The organisation’s culture also spins around customer-service that is entrenched in employees across locations and ranks. The company’s selection criteria for assessing and hiring employees are also focused on integrity and values. The strategy is to ensure that the company’s customer-centric culture is spread and entrenched despite the expanding workforce. Oman Hotel also has a Special Thanks and Recognition System (STARS), which connects the customers’ pleasure to employee rewards. The strategy is to see to it that employees become inherently motivated to take up effective customer service. The staffs at the company are drawn from across Oman, as well as internationally. The strategy is to ensure that the hotel maintains a diversified employee base. The company also has a diversification programs or training that runs for at least 6 months. Aside from giving the company an internationally name as one of the hotels that gives precedence to diversity, it also ensures a high employee retention rate. The employee training and development programs also ensure that high quality services are provided to the employees. For instance, they are trained on technical skills that ensure they understand different kinds of wines and food. Staffs are also trained to master language skills and customers personality, as well as how to handle customers from diverse backgrounds. For instance, the Oman staffs are taken through specialized training sessions that have enabled the company to attain high productivity levels and efficiencies. The company also has a policy that promotes on-the-house training of the employees. Delivery Systems management Oman Hotels Company has subservient set-off personnel and maintains excellent infrastructure for fast and reliable service delivery. It also maintains feedback forms that customers can use to communicate their concerns to the management. Management of physical assets Oman Hotels has hotels chains, such as Al Wadi Hotel, Al Falaj Hotel and Ruwi Hotel, which are located across Oman. Hence, significance is given to acquisition of properties in principal locations that ensure that the hotels can offer effective services to the customers. The hotels also possess state-of-the-art luxury spas and specialty restaurants. They display Omani collectibles and artefacts, which make it a high preference for tourists who look to feel enchanted with Omani cultures. Service Design Oman Hotels Company gives high preference to customization of cuisine and customer services based on various cultures. It is nationally renowned for its first-rate loyalty programs, which ensure high switching of costs for customers. The company also operates a travel business that ensures that international and domestic tourists can tour around Oman. Knowledge management Oman Hotel gives high importance to maintenance and consolidation of its brand. The company engages in rebranding efforts for its range of newly acquired properties in varied locations. Indeed, it is a globally recognized brand that focuses on provision of truly Omani luxury experiences to the tourists through emphasis on traditional Omani values of treating guests with respect. Oman Hotels Company also used the social media, such as Trip Advisor and Facebook, to combine customer loyalty programs and to pass information on its range of services and bookings. Delivery system management In order to ensure that the bookings and reservation are easy and convenient for the guests, the hotel ensures easy online booking through its websites. It also operates a 24-hour hotline for hotel booking to ensure that the staff can make reservations for the guests conveniently. The company seeks to provide refreshing, relaxed, and contemporary services in eight key zones: meet, unwind, hangout, stay, explore, workout, work and enter to ensure effective Moment of truth management Oman Hotels Company’s strategies for ensuring timely and high quality services are provided to the guests include setting up a high staff to room ratio of 1.75. The restaurant also has menus designed for to catering for particular customer tastes and preferences. It also maintains a fleet of classic and vintage cars to ensure luxury experience for its guests. Strategic Advantage Profile Integrating the above analysis, the SAP for Omen Hotels Company is indicated in Table 1. Internal analysis Competitive Strengths / Weaknesses Marketing and Distribution Strong Brand Equity in Oman Market Leadership across chains of hotels Effective loyalty program Operation across various organized segments/sector e.g. Budget to Luxury Ineffective pricing strategy of Ginger Hotels Research & Development Leadership in innovation and introduction of new services in Oman Broad insight into the Oman travel and tourism industry Penetrative industry and competitive various segments Operations Balance of power with suppliers Exceptional relationship with suppliers Across the board travel and tourism services through subsidiaries Leading room-to-staff ratio industry-wise Corporate Resources The leading player in the Oman hotel industry Build reputation for low labour turnover Finance High financial leverage compared to competitors Conclusion Oman Hotel integrates both quality differentiation and cost leadership strategies to overcome competition. In supplier management, the Group uses fair dealing and professionalism practices to gain the position of being a favoured brand among various local and international vendors. The company also uses diversification strategies and strategic alliances to manage the competition from new entrants and substitute products. Lastly, the company’s internal analysis can be split into people management, delivery systems management, delivery systems management, and management of physical assets, service design and knowledge management, delivery system management, and decisive moment management. References Hitt, M, Ireland, D & Hoskisson, R 2014, Strategic Management: Concepts and Cases: Competitiveness and Globalization, Cengage Learning, New York Kale, P & Singh, H 2009, "Managing Strategic Alliances: What Do We Know Now, and Where Do We Go From Here?," Academy of Management Perspectives, p.45-56 Khare, A & Khare, A 2010, "Travel and tourism industry yet to exploit the Internet fully in India," Journal of Database Marketing & Customer Strategy Management, vol 17, pp.106–119 Loke, S, Sambasivan, M & Downe, A 2009, "Strategic Alliances Outcomes in Supply Chain Environments: Malaysian Case Studies," European Journal of Social Sciences – Vol 9, No 3, p.371-386 Markets.ft.com 2014, Oman Hotels and Tourism Co SAOG, viewed 28 Nov 2014, Oman Hotels 2012, Oman Hotels & Tourism Company, viewed 28 Nov 2014, Van Oijen, A & Hendrikse, G 2002, Governance Structure, Product Diversification, And Performance, Erasmus Research Institute of Managem, DR Rotterdam, The Netherlandsent (ERIM) World Travel and Tourism Council 2014, Travel & Tourism Economic Impact 2014 Oman, viewed 28 Nov 2014, Read More