Situational Analysis of Accor Hotels - Case Study Example

Accor hotels Name Institution Accor hotels Table of contents page number Introduction……………………………………………………………………………………3 1. Statement of analysis…………………………………………………………………………3 2. Situational analysis……………………………………………………………………………3 2.1external analysis………………………………………………………………………3 2.1.1. market/industry……………………………………………………………4 2.1.2. Macro………………………………………………………………………5 2.1.3. Competition………………………………………………………………..6 2.1.4. Customers………………………………………………………………….6 2.1.5. Key success factors…………………………………………………………7 2.2. Internal analysis………………………………………………………………………7 2.2.1. Company……………………………………………………………………8 2.2.2. Financial analysis…………………………………………………………8 3. SWOT analysis…………………………………………………………………………………9 4. TOW’S matrix………………………………………………………………………………13 5. Core problem/challenge…………………………………………………………………….14 References……………………………………………………………………………………15 Introduction Accor hotels are a French group of hotels. Its headquarters is in Paris, and it owns 3600 hotels on five continents (Russell Arthur Smith, 2011). It represents several brands that range from budget lodgings to luxurious accommodation sites in exotic locations. It is a hospitality and tourism sector industry founded back in 1967. The CEO of the hotels is Sebastian Bazin and it operates on an income of approximately euro 536 million. The employees are approximately 160000 in number. 1. Statement of level of analysis Accor groups of hotels are composed of multiple SBUs (Gerard Burke, 2010). They dwell in provision of products and services to its customers and maximizing on profits. The SBU’s are part of the main corporation that is located in Paris, France. Each SBU is responsible for its own profitability, with a set out plan, competition analysis and creative marketing campaigns to attract more customers across the five continents. These strategic business units are responsible to the parent corporation. 2. Situational analysis 2.1 external analysis 2.1.1market/industry To view the definition, size and growth structure, industry’s life cycle is used. It analyzes the life cycle of Accor groups of hotels in a global view. As a result, the lifecycle shows how an industry has grown and predict an appropriate growth rate in future (Woodside & Martin, 2008). Phases of the life cycle of the industry I. pioneering phase Back in 1967, Paul Dubrule and his co-founder Gerald Pelisson founded the SIEH group of hotels. By then, the industry was characterized by low demands for the services and high starting costs. They recorded a few number of customers then due to the fact that they were at the initial stages of starting the business. Thus, the business was still young and small. II. Growth phase After a short period of time, the business began to grow. First in 1974, the co-founders launched an Ibris brand. Later they acquired the Coutepaille and mercule brands (Sak Onkvisit, 2009). They continued to expand and changed its name to Accor groups of hotels in 1984. This time round, the hotels were characterized by some competition, and their sales accelerated. They had successfully survived the first phase, and were beginning to recognize the growth of their sales. III. Mature phase of growth At this phase, the group of hotels began experiencing stiff competition from their competitors. As a result, their profits began declining and they had to come up with a strategy to prevent the business from falling in the process. Thus, in 2010, they sold forty-eight of their hotels to come up with 367 million euro to liquidate some of their real estate plans. The intended sale occurred in the next three years cutting any debt they had by euro 282 million (Scheyvens, 2012). IV. Stabilization phase In this phase, their growth remained at an average level. Their return on profits is stabilized despite the competition they face. This is one longest phase for the industry considering how far the industry has come. Their market at this phase is wide considering the number of their SBU’s. It has the most number of hotels in all price brackets across the five continents. As a result, it attracts customers from all walks of life, thereby stabilizing its return on profits. It also has some creative strategies to ensure its competitive advantage against its competitors. V. Decline phase Considering that the groups of hotels still attract more number of customers, they are still in the stabilization phase. The group comes up with new strategies every now and then to ensure that they maintain their customers (Stevens, 2012). 2.1.2 Macro Using the PESTn analysis enables an analysis of the current position of Accor groups of hotels in relation to the external environment. Political factor The groups of hotels operate in 140 countries since it is the largest group of hospitality in Europe (Afuah, 2014). Thus, it is influenced by the political and also the legislative conditions of all these different countries. The company was not affected by the reduced level of good relation with EEC and other countries. They get and give favors through various business channels they work with throughout the world. Economical factor It is a profitable business venture with a registered increase of 5.7 % of profits each year between 2006 and 2012 as compared to the 3.7% increase for the whole market (William Winston, 2013). Economic factors concern the group of hotels since they affect the demand, cost and profits. One of the most influential factors on the economy is acquisitions of other chains, merger and also the demerger. It increased its stake in Orbis from 40.58% to 45.48% at a cot of euro 42 million. Their financial report improved around that year the acquisition was made. Socio-cultural factors They provide excellent services to their customers by using seven languages by making use of the online graphics. As a result, the number of customers who book with them is high due to various social changes. The company focuses more on such demographic changes like the aging population, and an equal number of both male and female workers. They believe in the equality between the two sexes thus adding to their advantage in the socio- cultural context. They focus more on their employees by encouraging them to engage in social advancement. They are also involved in promotion of various cultural beliefs and practices of individuals worldwide thus, promoting their respect of cultural differences between individuals of various cultural backgrounds (James H. Myers, 2011). Technological factors They make use of advanced technology due to the level of customer satisfaction that follows it. They have the following technology: online hotel bookings and up-to-date systems of information. They also allow customers to use electronic media cards as mode of payments. Natural environment The groups of companies are often affected by the natural disasters in the various continents it has its branches in. typhoons and floods affect their business in that some customers fear booking into some of their hotels in certain times of the year. As a result, they count huge losses in such instances (Koontz & Weihrich, 2012). 2.1.3 Competition Accor faces stiff competition from other hotels including Starwood hotels and resorts and intercontinental hotels group. Thus, it has to come up with a strategy to deal with competition using the porter’s generic strategies. These strategies include differentiation, overall leadership on costs and the focus. A cost leadership strategy is one that attracts customers in all segments of the industry by offering the lowest prices possible. Differentiation strategy is where a firm may use other attributes to attract customers other than price. For instance, a company might provide quality products and services to its customers to gain a competitive advantage against its competitors (Drake & Fabozzi, 2012). Focus strategy occurs when a firm uses one or more segments. Accor uses the focus strategy. It provides the highest quality products and services at commendable prices. As a result, it maximizes on profits and reduces on costs at the same time maintaining their customers’ satisfaction. This strategy enhances their competitive advantage. 2.1.4 Customers The customers of Accor depend on the 6W’s. Who: they attract customers from all walks of life since they provide hotels and lodgings based on all the three classes. Thus, each individual is able to book themselves into the hotels depending on their status in the society. What: they also attract customers based on the services they provide. Most customers require quality products and services at commendable prices. The hotels provide that thus attracting most customers against their competitors. When: the time of operation is also crucial. Since the hotels operate on a 24/7 basis, they attract most customers who might have night shifts and travelling might inconvenience them. The fact that customers can check in at any time is an advantage. Where: the hotels operates across five continents thus they attract customers from across the five continents. As a result, they maximize on profits gained. Why: the hotels attract customers due to the level of quality services they provide, and considerable fee. As a result, they ensure customer satisfaction thus maintaining their customers against competition. How: the hotels maintain their customers by coming up with creative ideas on satisfactory services to enhance customer’s satisfaction. 2.1.5 Key success factors To succeed in this industry, the quality of services provided is crucial. Customer’s satisfaction is based on the services and products provided. Secondly, the prices of the services provided are also important. Most customers enjoy quality products at considerable prices. Accor also has to establish strategies to deal with competition including coming up with unique services or products or making use of up-to-date technological advancements. 2.2 internal analyses 2.2.1 Company (4P framework) Price The pricing strategy applied by Accor has a significant effect on the levels of profits or losses maintained. The hotels set their prices according to the targeted market. That is why the company has a variety of lodgings and hotels based on the various classes of individuals in the market. Product The hotels ensures product and services differentiation depending on the prices set. For instance, services in a luxurious hotel room are of higher quality than those in lodgings. The reason is that individuals at luxurious hotel rooms pay more for the luxury than those in lodgings. They make use of promotions and branding to distinguish between the various services offered (Hales, 2006). Position The location of these hotels also offers a competitive advantage. Paris attracts more tourists in France more than any other city in France. Moreover, the hotels also have locations in five continents across the world thus amassing more customer base and attracting more profits. Promotion Accor conducts promotions to attract customers for its various services offered. They develop awareness through massive advertising in all forms of media available. They also offer public relations by donating to charity in the society, and offer discounted prices for their services and goods offered (Zink, 2008) 2.2.2 Financial analysis FY2014 FY 2013 FY2012 FY2011 FY2010 turnover in Euros 19034 18746 18069 17030 15102 occupancy level% 72 72 71 69 61 Average room rate 107 104 100 96 91 Revenue per available room 77 75 71 66 56 Gross operation income before incentive fee in Euros 5524 5538 5503 5350 3987 Gross operating profit margin% 29 30 30 31 27 Food, beverage& other revenue in Euros 6654 6426 6502 6272 6009 The revenue used has increased in the past few years and so has the room occupancy. Thus, the hotels need to increase their marketing strategy to remain in the same trend (Fridson, Alvarez, & FinancePro., 2011). 3 SWOT Analysis strengths Likelihood Impact score S1: Accor has superior customer service 7 S2: cover different regions thus maximizing on profits 6 S3:High recall of its brand in that it covers both the upper, middle and lower scale 7 S4: its Sofitel is one of the most prestigious hotels in France 8 S5: engaged in various businesses that provide more profit for the groups of hotels 8 S6: allows customers to gain access to information through various channels 8 S7: provision of high quality services and products at a considerable price 7 weakness Likelihood Impact score W1:Availability of businesses that are non strategic making them lose their brands 4 6 10 W2:Accor hotel groups also encounter fixed costs higher 7 7 14 W3:Maintaining all its brands globally is also a problem 6 5 11 W4:Political instability and policies in countries it has its branches 6 7 13 Opportunities O1:Huge opportunities in the global market 7 8 15 O2: increased growth opportunities from mergers and acquisitions 8 8 16 O3: developing partnerships with other major firms 7 6 13 O4:Increased sales through adequate advertising 7 8 15 O5: Use of advanced technology to increase their knowledge of different languages in their country of operation. As a result, they attract more customers 9 8 17 threats T1:Fluctuations of the foreign currency 8 9 17 T2:Political uncertainties and levels of security including terrorism 7 9 16 T3:Increased competition in the tourism and hospitality industry 8 8 16 4 TOW’S matrix Internal strengths (SO) Internal weaknesses(WO) External opportunities S2 O1 use of creative strategies to attract customers in the global market W3,O5 use of adequate technology to communicate with different customers thus maintaining their brands globally S6 O5 use of advanced technological advancements to provide quality services and products to customers W3, O2 increased mergers and acquisition to enhance their growth thus maintaining its competitive advantage globally S1,S5, O4 use adequate advertising to ensure that they increase their awareness and sales to customers External threats ST WT S6, T3: provision of high quality services to deal with the competitive advantage W3 T3 Coming up with creative strategies to deal with competition globally. S6,T1: engaging in various profitable businesses thus dealing with currency fluctuations W4 T2 ensuring that their hotels are insured and they are always ready for any risk arising Problem opportunity statement 1. How can the groups of hotels increase their sales (O4) with the competition available and from the political instability in various countries (T2 T3 W40)? 2. How can the groups of hotels develop mergers and acquisition with other firms (O2) with the fluctuation of the foreign currency experienced T1? 3. How can the hotels engage in other businesses that provide adequate profits for the business S5with the increased political instability and insecurities in other countries of their operation T2? 5. Core problem/ challenge The main problem from the issues raised is how Accor can increase their sales with the competition and political instability in various countries. The main aim of any business is to make profits and at the same time to ensure customer satisfaction. Thus, increased sales of the services and products provided are important. For these hotels to increase their sales with the competitive market, they have to come up with a competitive strategy. One of them is provision of quality products and services at considerable prices (Böhm, 2009). Secondly, the hotels can ensure adequate advertising and promotions. The issue of political instability and insecurities should be a calling point for Accor to always be prepared for risks occurring. They can start by insuring their premises and employees. By so doing, they avoid unnecessary losses in cases of insecurities in different countries. References Afuah, A. (2014). Business Model Innovation. New York: Routledge. Böhm, A. (2009). The SWOT Analysis. München : GRIN Verlag. Drake, P. P., & Fabozzi, F. J. (2012). Analysis of financial statements. Hoboken, New Jersey : John Wiley & Sons. Fridson, M. S., Alvarez, F., & FinancePro. (2011). Financial statement analysis. Hoboken, N.J.: John Wiley & Sons. Gerard Burke, L. C. (2010). Growing Your Business. New York: Routledge. Hales, J. (2006). Accounting and Financial Analysis in the Hospitality Industry. New York: Routledge. James H. Myers, J. H. (2011). Market Structure Analysis, Ch 3. Chichesta: Markerting Classics Press. Koontz, H., & Weihrich, H. (2012). Essentials of Management International Perspective. New Delhi : Tata McGraw-Hill. Russell Arthur Smith, J. S. (2011). Strategic Hospitality Leadership. Chichesta: John Wiley &Sons. Sak Onkvisit, J. J. (2009). International Marketing. Philadelphia: Psychology Press. Scheyvens, R. (2012). Tourism and Poverty. New York: Routledge. Stevens, R. E. (2012). Market Opportunity Analysis. New York: Routledge. William Winston, R. E. (2013). Market Analysis. New York: Routledge. Woodside, A. G., & Martin, D. (2008). Tourism management. Wallingford, Oxfordshire : CABI. Zink, K. J. (2008). Corporate sustainability as a challenge for comprehensive management. 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