Inter Continental, Starwood and Accor: AComparative Analysis Essay

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Introduction: The current trend in globalization has encouraged and challenged the Hotel Industry, to take steps towards more internationalization, to meet the needs of the changing demographics, increased traveling and synthesizing of geographical boundaries and cultures. The expansion of boundaries has forced the company to change the strategic vision so that they come up with effective and appropriate strategic operation and guideline to meet their target and secure their place on the international scene.

This requires intensive and in-depth study of the renewed corporate business and operational strategy. The three dynamic companies adopting this rigorous endeavor are Accor Hotels Group, InterContinental Hotels Group and Starwood Hotels & Resorts Worldwide,. These three companies have made their mark on the International scene adopting effective strategy and marketing to meet the unique needs of their operation sensitive to needs of the country in which it has merged for expansion of its business.

Hotels Background: InterContinental Hotel Group is a multinational company which operates several hotel brands, has its headquarters in Windsor just outside Greater London. It is the largest hotel company by number of rooms. InterContinental Hotels Group, according to the source of hotel industry, the number of hotel rooms in Europe are 6,550,000 and Americas are 6,500,000 but only 355,000 in Middle East, 485,000 in Africa. Moreover, as the 2008 Olympic Game will be held in China.(InterContinental Hotels Group,2007)

            Accor Hotel Group is the worlds fourth largest hotel group, with more than 4094 properties. It is European leader in hotels and tourism, and global leader in corporate services. It operates in 140 countries with 168,500 employees by 2005. Accor is also one of the global leaders in tourism, travel, casinos, restaurants and the provision of corporate and public institution services. It offers to its individual and corporate clients nearly 40 years of expertise in its two core businesses: Hotels and Services. (About Accor,2006)

Starwood Hotels and Resorts Worldwide is one of the worlds largest hotel and leisure companies, with more than 845 properties in some 100 countries. It started in 1930, formed by the real estate investment firm Starwood Capital in USA. In 1993 it changed its focus to hotel industry business. In 1998 Starwood  purchased ITT Corporation, the Casino Hotel Group a company seven times its size. (Starwood Hotels & Resorts Worldwide, Inc.,2007)

Location Strategy: Location strategy is integral to the operation of the hotel management and performance. The category of the hotel determines its location, so that the facility can get competitive advantage and full opportunity for business growth and expansion. The three companies InterContinental, Accor and Starwood are international companies with their hotels based worldwide at different levels of scale addressing the need of different category of customers.Customer is essential to the hotels aiming at internationalization. The hotel group makes sure that there are enough customers in the market when they decide to select the location.

The hotel companies must conduct researches which are called feasibility study, which includes market feasibility, financial feasibility and investment feasibility.   The main costs for the Hotel companies are land cost, labour cost and energy cost.  When one hotel makes location decision, it should take these costs into consideration. The characteristic of a particular region plays an important reason for a companys expansion. These characteristics include big events such as Olympic Games.

For example, 2008 Olympic Games will be held in Beijing and 2010 World Expo will be held in Shanghai China. The business climate and the brand image of the hotel also affect the location strategy, along with transport and communication aspect. It is impossible for a location to have all factors which reach optimistic point, so the decision is made based on the comparison of the advantage factors and risk factors influencing the hotels choice of region or country for international growth. The successful location will have advantage factors influence which can cover the risk factor influence. (ppt. IHG)

IHG focuses on expansion of various branches in China, based on the factors mentioned above. According to the annual report 2005, at the end of 2008, Intercontinental will build about 160 hotels in China. As the 2008 Olympic Game will be held in China, there is huge demand for hotel service, on another hand, the government has taken steps to introduce policies which are of benefit to foreign hotel corporations. The government incentive plays an important role in location selection, from the early 80s, China has opened its market and reformed its economic structure.

Accor Hotel Group indicates diversified and balanced geographic location, which is well networked across the regions of the world. Accor Hotel Group has a clear idea of how to place their facilities properly according to the relative situation of suppliers, local customers and any other related factors. Accor has made optimal pricing strategy at each location for the individual customer (a key operational element in their business), which could help obtain the competitive advantage from the location.

The location decision for Accor is considered to be extremely crucial as it is closely connected with the balance of cost and revenue potential over a long term period.(ppt.Accor). The balanced geographic diversification estimates 480,036 rooms in 4094 hotels (June 30,2006). Worldwide location includes Europe (excluding France) 903 hotels with 26% of rooms, France 1,347 hotels with 25% of rooms, North America 1,264 hotels with 28% of rooms,

Africa and Middle East 143 hotels with 5% of rooms, Asia Pacific 268 hotels with 11% of rooms and Latin America 161 hotels with 5% of rooms.

            Starwood Hotels and Resorts are located under different brands in more than 95 countries with 145,000 employees worldwide. St Regis is centrally located in most prestigious locations, emerging markets targeting high-end leisure and business travelers. Sheraton is mostly located near airports, cities and water-side resorts. St.Regis has 12 properties in 6 countries, Sheraton has 400 properties in 70 countries, Westin has 120 properties in 25 countries, The Luxury Collection has 60 properties in 25 countries, W Hotels have 21 properties in 3 countries, Le Meridian has 120 properties in 50 countries, Four Points have 136 properties in 17 countries. Ist Element property opens in 2008 in Massachusetts and Aloft property opens in 2007.

Internationalization:  Internationalization is the increasing geographical dispersion of economic activities across national borders. A company achieves its goal of internationalization by exploiting its strengths in technological know-how, brand name recognition, and management expertise in various international markets. Advantages of Internationalization are utilization of the corporation resources in foreign investments, an added link of hotel reservation and referral systems between local hotels and international hotel chains which allows organizations to expand their operations worldwide into potentially profitable markets with competitive advantages in different international markets.

The three companies are worldwide companies which are based in United Kingdom, Europe and America. They are international brands, with strategic differences which govern their focus area related to location strategy and management strategy. The strategic operation is targeted to global expansion taking into consideration the geographic location and the operational strategy. They focus on expanding their market across the globe, in various continents. The three hotel groups are experienced players in the field of internationalization with good network, marketing strategy and brand vision to survive in the cut throat competition.

They all have the value of brand name and experience of years of exposure in the hotel business in their region. They all apply the push and pull factors to determine their strategy and operational diversification and integration. It is also important for companies to focus towards internationalization, when the domestic market is saturated and the international market offers support and good growth opportunities. The networking and technological advancement also encourages steps towards internationalization as the information and control can be monitored easily from far distance.

Configuration: The three companies are international companies, expanding and networking from the western part of the world with a vision to command and control vast and diversified geographical regions. They are name brand hotels and resorts, with targeted location addressing the needs of customers from high end, middle range and low end. They are designed to address the business and well as vacation travelers giving them choices to adjust their budget requirements. They aim to provide comfort, positive experience and good feeling.

The IHG aims to build a good network with the support of AT&T, to achieve efficient online booking, integrating access technology and introducing wireless connection for the easy access of its customers and efficient performance of its employees. Starwood Hotel and Resorts also focus on online booking, has decided on using Oracles RAC implementation. It aims at integration computer software for networking and works with Third Party Management Company.

Accor uses information technology to gain customers and has already invested and continues to invest substantial resources in achieving a leading position in the online hotel market (www.accorhotels.com). Accor started a project of building a business framework on a common IT architecture with easy integration capabilities, and selected Microsoft .NET to provide a common set of programming interfaces and commands. Accors CRS is integrated into the e-business set-up. By linking the revenue management system to the CRS booking system, Accor has developed a forecast system optimising sales, allotments and pricing strategies. (Case Study: Accor Hotels)

Affiliation: The operational format of the companies can be viewed under their policy for acquisition and merger, depending on how they want to manage their branches across border. The main format on which they work are franchised, managed or owned or leased.

InterContinental uses the entire three formats to expand and manage their property. The focus is more on franchising, company franchises 2,983 hotels, manages 408 hotels and owns and leases 166 hotels 408 managed hotels worldwide. In Asia they manage 95 hotels, with over 70 different owners. Majority of EMEA owners own fewer than 5 hotels 212 hotels in Americas owned by 2 large owners (Felcor andHPT).The Starwood Hotels and Resorts aims to run most of its hotels in which ownership and management is operated by the franchisees, the company owns and leases 130 locations

The diversification strategy includes gaming operations of the Aladdin Resort and Casino in Las Vegas, Nevada 2004 Acquisition of a 95% interest in Bliss World LLC, operator of stand-alone Spa facilities and owner of a beauty product business and revenues from operating Vacation Ownership Resorts -19 properties worldwide in 2006. Accor hotels corporate strategy is simply to acquire hotel chains serving the upper, mid and the lower end of the market. It is stuck to its policy of mergers and acquisition.

Accor sticks to various activities involved in the service industry. In 1997 acquisition of a majority interest in SPIC, renamed Accor Casinos, in 2001 the acquisition of Employee Advisory Resource Ltd in the United Kingdom, in 2002 Accor services acquires Davidson Trahaire, Australias leading human resources consulting firm, in 2005  WorkLife Benefits, Accor Services merges with Workplace Options, one of the countrys largest employee service providers.

Integration and Chain Developing Strategy: The corporate strategy of the three companies is focused on global expansion through horizontal integration and vertical integration. They also aim to achieve concentration and diversification.

The result of horizontal integration strategy is that IHG now operate seven hotel brands InterContinental, Crowne Plaza, Hotel Indigo, Holiday Inn, Holiday Inn Express, Staybridge Suites and Candlewood Suites in many foreign countries market. As a result of horizontal integration strategy IHG build very good relationship with its suppliers and both internal and external customers, which reduced huge cost for IHG to concentrate on its international hotel business.

Accor, has adopted a combination of the acquisition and mergers around the world. The Accor Group is continuing to grow internationally, stressing continued European expansion, but also looking to Asia and North America. Horizontal Integration achieved in 1975 by acquisition of Mercure hotels, in 1980 by  acquisition of Sofitel hotel chain, in 1983 Accor was created following merger of Novotel and Jacques Borel Intl, in 1990  Acquisition of Motel 6 chain, the US economy market leader, in 1993  Accor Asia Pacific Corporation was created following the merger Asia-Pacific with Quality Pacific Corp., in 1999   acquisition of Red Roof Inns in the US, acquisition of CGIS, Vivendis hotbusiness, including 8 Demeure and 41Libertel hotels and in 2002 it acquired 30% stake in German hotel company, Dorint AG.

In 2005 Accor decides to step up its development in China with Sofitel, Novotel and Ibis, surpassing the 10,000-room threshold in the country. Vertical integration  achieved in 1974 by  acquisition of Courtepaille restaurants and in 1982  by acquisition of Jacques Borel International, European leader in managed food services (Gnrale de Restauration) and concession restaurants (Caf Route, LArche), and world leader in the issuance of meal vouchers (Tickets Restaurant), with 165 million vouchers a year distributed in eight countries.

Starwood focuses on horizontal integration, in 1997 Starwood purchased Westin Hotels and Resorts, in 1998 Starwood acquired ITT Corporation and in 2005 Starwood acquired Le Meridian hotel brand and properties.

Innovation: In this global race of internationalization, every company has to emerge with some unique concept which makes their position different from their competitors. This requires innovation and research along with openness to adopt and merge some existing principles of operation. The three companies specialize in different areas as their focul point. InterContinental focuses on customer, Accor lays emphasis on service and Starwood gives importance to hospitality.

            InterContinental has been known for its technology implementation, IHG won 2005 Baseline ROI Leadership Award for expanding and re-engineering its direct E-Commerce. It aims at providing its customers with positive online experience. Accor lays special emphasis to quest relations and innovation. One of the most innovative steps has been planting of young vines, to enrich the customers leisure experience. The relaxation aspect is reinforced by fabulous Spa facility. Starwood has been known for its innovation in the field of marketing and strategy, which strengthens its core hospitality.

Operating Results and Outcomes: InterContinental maintains key importance to the brand and is committed to providing its guests with memorable and unique experiences that enrich their live and broaden their outlook. InterContinental Hotels & Resorts is the first truly international hotel brand in the world, and quickly became the symbol of glamour, sophistication and success that years later, continue to define global travel. IHG now is the biggest hotel company around the world. IGH have more guest rooms than any other hotel company in the world thats more than 540,000 rooms in over 3,650 hotels across more than 100 countries. By the end of 2008, IHG is looking to increase the number of rooms they have by 50,000 to 60,000 on a net and organic basis. Accor aims at opening 200,000 new rooms by 2010, of which 60% in emerging market.

The expansion plan is focused on emerging markets in the Middle East, in Latin America and in the BRICs ” Brazil, Russia, India and China, which represent 50 percent of openings. Half of the investments of 2.5 billion euros between 2006 and 2010 will be committed in Europe and 44 percent in emerging markets. In 12 years, Starwood Hotels &Resorts Worldwide has risen from nothing to a major competitor in the global hospitality industry. New opportunities, such as emerging markets, new technology and communication systems and the acquisition of existing hotel brands spread worldwide (e.g. Le Meridien),  have been a positive factor for further internationalization.

Conclusion: In the overview of facts, history and the growth of the three Companies we see well defined strategy and operational mechanism which is adhered to suit the characteristics of the particular company. All the three companies cater to the needs of the customer and aim to give good feeling through their service and management. They all aim to expand their business to wider and greater frontiers across the globe. Their approach is different so is their strategy. They are unique in their vision and style of operational management. Intercontinental focuses on customer, Accor lays emphasis on service and Starwood gives importance to hospitality.

They are all big names with very fine strategic planning and promise for future expansion across borders in the international arena of competition and coexistence. Thy have made special effort to keep and maintain international standards keeping in mind the local culture and customer service. They draw customer because they are hospitable and comfortable. They cater to their international brand maintaining consistency and uniqueness. They should aim at expansion by adopting strong measures to strengthen their strategy and presence in the region in which they choose to operate.

 Works Cited

InterContinental Hotels Group,(2007), Wikipedia. 2007. Wikimedia Foundation Inc.,[Online].Available from www.en.wikipedia.org/wiki/InterContinental_Hotels_Group.Access[2007,March20]

(InterContinental Hotels Group,2007)

Overview. IHG.( 2007). InterContinental Hotels Group.[Online].Available from www.ihgplc.com/index.asp?pageid=16.Access[2007,March20]

 (Overview,2007)

 

About Accor.(2006) Accorhotels.com.au. 2006. AAPC Properties Pty Ltd . .,[Online].Available from www.accorhotels.com.au/corporate/aboutus.aspx Access[2007,March20]

(About Accor,2006)

Accor Hotel and Resorts, Australia.(2007) qldtravel.com.au. 2007.  Australian TravelWholesalers. .,[Online].Availablefrom www.qldtravel.com.au/accor-hotels-resorts.html.Access[2007,March20]

 (Accor Hotel and Resorts, Australia,2007)

Case Study: Accor Hotels.(2007) e-business watch. .,[Online].Available from www.ebusinesswatch.org/resources/documents/Case%20Studies%202004/CS_SR07_Tourism AccorHotels.pdf.Access[2007,March20]

(Case Study: Accor Hotels,2007)

Starwood Hotels & Resorts Worldwide, Inc.(2007) Answers.com. 2007. Answers Corporation. .,[Online].Available from www.answers.com/topic/starwood-hotels-resortsworldwide-inc.Access[2007,March20]

(Starwood Hotels & Resorts Worldwide, Inc,2007)

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