Mandarin oriental hotel group

1) Introduction

1.1 Company profile and history

Mandarin Oriental Singapore belongs to the Mandarin Oriental Hotel Group which is the award-winning owner and operator of some world’s luxurious hotels, resorts and residences. The hotel first opened in Singapore in 1987 with the original name “The Oriental” and it was re-opened its door on 1 December 2004 after a multi-million-dollar renovation (The Center for Hospitality Research 2004). The Oriental was renamed as “Mandarin Oriental” on 25 September 2007 (Travel and Tourism Industry News 2007).

The Mandarin Oriental Hotel Group (MOHG) is a hotel management company which is a part of Jardine Matheson Holdings Limited. They also include some companies such as Jardine Pacific and Hong Kong Land (Appendices 1). Its headquarters is located in Hong Kong (Jardine Matheson Limited 2009). The company was listed on the Hong Kong Stock Exchange from 1987 to 1995 under the name “Mandarin Oriental International Limited” and on the Singapore Exchange on 20 February 1991 (Absolute Astronomy.com. 2009).

1.2 Report focusing

The report focuses to analyze the Singapore hospitality and tourism market which has a lot of opportunities for Mandarin Oriental Hotel upon the time two Integrated Resorts: Maria Bay Sands and Resort World Sentosa open.

2) Strategic Analysis

2.1 Internal Environment

2.1.1 Vision, Mission Statement and Objective

The Vision Statement relates to what the organization would like to achieve in the future state and visible to outside world. It should be held by possible improvement paths or employee development programmers. The Mission Statement is the chosen activities what will enable the organization to be successful. It must be different from its competitors and define the business that the firm wants to be in. Company’s Objective is specific kinds of performance and the result that the company try to produce (Appendices 2) (Thompson and Martin 2005).

Mandarin Oriental The Hotel Group’s vision is ‘being recognized as the world’s best luxury hotel group’ and its objective is to ‘increasing the number of rooms under operation to 10,000 rooms’ (Ettedgui 2009). Their mission is to ‘completely delight and satisfy their guests. They committed to making a difference every day and continually getting better in order to keep them be the best’ (MOHG 2009).

2.1.2 Hotel Resource

Understanding the firm’s resources will help to identify its strengths and weaknesses therefore the organization can have a suitable strategy to achieve its objectives. These resources include the financial resources and intangibles which is an important element for the hospitality industry. In the service sector, value depends on the “goodwill” that is built by brand name and reputation (Dobson and Starkey 1993). Mandarin Oriental the Hotel Group has a good reputation. Its intangible asset rose rapidly from US $22 million dollars to US $232.3 million dollars within 6 years from the year 2002 to 2008 (MOHG 2009).

2.1.3 Hotel Development

The MOHG has 41 hotels (operated and under development). There are 17 hotels in Asia, 14 in The Americas and 10 in Europe and North Africa and other 13 Residencesaround 25 countries. Its growth strategy is to successfully operate 10,000 rooms around the world and continuing to seek opportunities for globalization. (MOHG 2009).

2.2 External Environment

2.2.1 PESTEL Analysis

A. Political Factors

The cornerstone of any national Tourism and Hospitality policy is the requirement for political stability because of safety of hoteliers or other investors and tourists (Chon and Ph.D 2000). Singapore enjoyed a reputation for political stability. Government of Singapore also provides social welfare service for hotel industry by establishing the Singapore Hotel Association so that their members will have a discount access to all equipment and products, informed of new trends. Mandarin Oriental Hotel is its membership so that the hotel has a strong support from the SHA (SHA 2007).

B. Economic Factors

Economic factors concern the nature and direction of the economy in which a firm operates such as Business Cycles, Exchange Rate or Disposable income. Number of business traveler will decline in the recession. Disposable income also has influence on hotels occupancy such as leisure guests of five stars hotel may raise because of some discount promotions. Especially for international chain hotel – its profit may be impacted when convert from Singapore dollar to the currency set by head quarter in Hong Kong. Occupancy is also fluctuated relative to currency exchange rate. For instance, when the US dollar is low, it helps to keep Americans at home to avoid the loss on currency exchange (Chon and Ph.D 2000). Understanding the situation, the hotel chooses its target market is leisure guests (Ettedgui 2009). Exchange rate difference is hugely important to profit. Varying exchange rates mean that profits will fluctuate but it will not vary over time because the profit made on one day may become a different sum when transported to the home country of the company (Brotherton 2003)

C. Sociocultural Factors

The social and cultural environment consists of broad societal trends which affect hotel organization. The most profound social changes in recent years have been the entry of a large number of women into the labor market. Women are earning more money than the past and are remaining single longer. And they may travel more for all business and leisure purposes. It has created or greatly expanded the demand for a wide range of hotel products and services necessitated by their absence from home such as hotel with spa treatment and fitting room. This factor has a positive impact on Mandarin Oriental because it has a chance to increase their revenue through up selling its product: spa programs and yoga class (Chon and Ph.D 2000).

D. Technology

Singapore government is focusing on technological effort though the Tourism Technology Fund which is the program established by Singapore Tourism Board what aims to accelerate technology innovation and adoption in the industry by providing financial support to technology project that would enhance visitors experience or improve business efficiency (Singapore Tourism Board 2008). The hospitality firm should take note of technology change to avoid obsolescence by technological forecasting and investment (Knowles 1996). As well as The Mandarin Oriental Hotel has strong support from Hotel Technology Next Generation (HTNG) organization. The reason is that the Mandarin Oriental Group is the Corporate Hospitality Member of HTNG (HTNG 2009).

E. Legal

Hotel Employment Law covering the Salary, Annual Leave Public Holidays and Rest Days, Medical Leave Medical Attention, Working Hours, Overtime, Transport, Duty Meals, Uniforms and Laundry, Bonus. Hotel Health and Safety are the bathroom safety, bedroom safety, Health and Fitness center, Fire Safety. The hotel need to pay a lot of attention to follow health and safety standard in order to protect all its guest and employees. Because if there is any accident happens, the hotel reputation will be impacted for long period and it is not easy to build it up again (Gray and Liguori 1990).

F. Environmental

The hotel should be participated in Waste Disposal Campaign in order to protect the environment and saving the operating cost and increase the profit margin (National Environment Agency 2002). Reducing energy costs while continuing to meet the diverse requirements of customers is challenging in the hotel industry. The Mandarin Oriental should pay attention to reduce the electricity consumption, especially in the low occupancy period.

2.2.2 Porter’s Five Forces

The nature and degree of competition included five forces: the threat of new entrants, the bargaining power of customers, the bargaining power of suppliers, the threat of substitute products or services and the rivalry among the firms. The strength of each force varies in different industry and depends on the firm’s economy of scale (Peace II and JR 1991).

2.2.2.1 Threat of new entrants

The new entrants of hospitality industry need high fix cost to invest in the location and heavy marketing costs for advertising and promotion as well as overcome the barrier of the local government policy to get the licensing. The strong new entrants of Mandarin Oriental are the two IRs where may attract all the travelers into the casino. However, this is also a chance of the hotel to corporate with them in case their occupancy is overload.

2.2.2.2 Bargaining power of suppliers

National and regional firms like Mandarin Oriental are able to reduce the bargaining power of the large supplier because of their large volume buying. There are three major of suppliers – raw material, capital market and labor market.

2.2.2.3 Bargaining power of buyers

In the hospitality industry, buyers tend to force down price and receive more service because they have more options from other competitors. Majority of individual buyer are less powerful than the travel agency whom book with the large volume annually.

2.2.2.4. Threat of substitute

Firm in the hospitality face a lot of kind of substitute that depend on the market segment they compete and the weather of economy such as the occupancy of budget hotel is higher than the five star hotels in the recession period when the entire traveler try to cut down the cost.

2.2.2.5 Direct competitors

There are four competitors around the hotel. In this case the supply has already exceeded the demand. The hotel should try to keep the loyalty guest through promotion campaign or develop a new product for new target market.

3) SWOT Analysis

Strengths

• Established brand
• Award – winning
• Great location
• Nice view

Weaknesses

• Franchise
• Capital-Intensive Business
• High variable costs of food and beverage department
• Lack of coordinating and communication

Opportunities

• Five restaurants and one bar: Improve revenue
• Thirteen meeting rooms: attractive business traveler
• New target markets
• Labor intensive

Threats

• Hotel accommodation sales is interdependent
• Supply exceeds demand

3.1 Strengths

The hotel group is well known for its legendary service and exquisite facilities. The hotel brand is already identified with good reputation because the hotel itself and majority of its sister hotels always achieve so many award-winnings from Condé Nast Traveler UK and Travel + Leisure USA (Ettedgui 2009). Moreover, its location is in Marina Centre linked to Marina Square Shopping Mall – within walking distance of Asia Pacific’s largest convention centers and only a short drive to the Integrate Resort Marina Bay Sands. Hotel Guests are also provided nice views of city, harbor and ocean.

3.2 Weaknesses

Mandarin Oriental Hotel is under chain management, the hotel also needs to follow the rules and regulations of the hotel group. The line of authority is so high so that decision making process also takes a long time. The diversity in hotel departments is a trouble resulting in a lack communication or cooperation between them such as housekeeping and front office about room status. For the F&B department, the biggest costs by far are food and pay roll. Planning and forecasting labor costs are playing an important role to maintain profitability (Gray and Liguori 1990). Five star hotels are a capital intensive such as large investments in fixed plant and equipments. And capital costs such as interested, insurance, and property taxes are fixed costs. In the low occupancy period – revenue is low but the capital and other fixed costs will continue regardless of business and must be met (Knowles 1996).

3.3 Opportunities

There are a lot of opportunities to improve their revenue from food and beverage department. The hotel provides variety kinds of cuisine from Western to Asian, from the oriental to the influence of modern flair. These restaurants attract both in house and outside guest as well. Specially, its meeting rooms and conferences facilities also can bring to the hotel large amount of profit from all the events activities (Mandarin Oriental Singapore 2009). There are new target markets in hotel industry: female business travelers (Chon and Ph.D 2000) and family market with children (Questex Media Group 2009). The hotel has an opportunity to catch up a new chance by designing a specially products and service for them. Nowadays, students are more interesting in Hospitality and Tourism programs. Employees are more qualified and have specialized knowledge in particular department so that the productivity can be raised higher.

3.4 Threats

The hotel revenue is influenced by the guest selection of destination. The hotel must establishing the best hotel imaged and reputation though providing the unforgettable service for recently guest or some advertisement activities. There are another four 5-star hotels around the Marina South area: Marina Mandarin Hotel, Ritz-Carton Millenia Hotel, Pan Pacific Hotel and Conrad Centennial hotel. In this situation, the supply has already exceeded the demand, especially the occupancy of 2008 was lower than 2007 9% (Mandarin Oriental International Limited 2008).

3.5 Implication

Mandarin Oriental Singapore has an advantage with its reputation and the strong support from its associations. However, it still needs a better plan in order to improve the occupancy for the next year.

4) Strategic Challenge

4.1 Strategy Issue

An issue is that business woman (Chon and Ph.D 2000) and family market are a current target markets in hospitality (Questex Media Group 2009). Furthermore, Singapore will attract a large number of leisure and business visitors whom may bring along their family and friends at the time when the 2 IRs open. Therefore the hotel should target on those markets, especially focus on families with children.

4.2 Justification

Nowadays, women are earning more money than in the past and travel more. Therefore the hotel should pay more attention on the female guests like make up new promotion in order to up-selling its product such as yoga class or spa programme. According to the report of the Family Travel Forum’s FTFc, hoteliers need to pay more attention for a short break family market, especially for family with children. After five years studied the family vacation market, the report concluded that “just-for-kids” amenities are more important with family vacationers because if the kids aren’t happy, no one’s happy. Kid’s satisfaction plays an important role in the repeating of guests whom are their parents. FTFc discussed that hoteliers are investing more in family amenities such as kid-themed family suites, children’s programs and welcome gifts such as in U.S and Canada. Especially in luxury hotels, hoteliers are able to charge for at least some of their kid-pleasing amenities (Questex Media Group 2009).

5) Strategic Options

5.1 First Option: Market Penetration

Woman business travelers are growing rapidly, the hotel should design more products what are suitable for female guests such as low-calorie and low-carbohydrate menus. As well as increase the service quality of spa and fitness center by offer special training course for employee in order to improve female guest’s satisfaction.

5.2 Second Option: Diversification

Kid’s satisfaction is key successful for hotel industry now because it plays an important role in the repeating of their parent at the accommodation so that the hotel should have new target market – younger guest market. According to a 2009YPartnershipreport, 43% of U.S. adult travelers took one or more trips with kids in 2009, up from just 26% in 2000 (Family Travel Forum 2009).

5.3 Third Option: Alliance

The hotel has a convenience location with a walking distance to a large convention in Singapore – Asia Pacific Convention. Therefore, it should seek a chance to corporate with the convention centre to increase the occupancy of business travelers and make use of all the hotel’s meeting facilities.

5.4 Selected Options and Justification

The chosen strategies will be the Market Penetration and Diversification. The both strategies can help the hotel increase its profit and the profit can last longer. For the alliance strategy, it sounds attractive but the hotel’s room rate which is offer to the convention center must be lower than normal rate as well as lower than other competitors around the convention center such as Pan Pacific Hotel and Conrad Centennial hotel. When the hotel successfully applies the alliance strategy the occupancy may raise but profit may be negative grow and only can last for a short period. Market Penetration and Diversification strategies what are aimed to female travelers and family with children are more possible. Upon the time that the hotel can reach the guest satisfaction, they have already achieve a long – term profit in the loyally programme. However, the two strategy are required more efforts and capital investment in implication stage such as training programme course or re-designed the hotel room like family suites with kid – theme.

5.5 Detail of the selected of Option

5.5.1 For Woman business traveler

• Hire more female employee because female travelers may afraid of sexual harassment.
• Provide training course for employees, especially in spa department to improve the level of satisfaction.
• Design a special promotion to up selling the hotel facilities such as yoga class.
• Offer more low fat products in mini bar and restaurant menu

5.5.2 For Family with children market

• Develop web-based information for families. Examples of categories that would be appropriate for a family friendly website are: fun for young families, colorful events
• Up-selling parents and grandparents on spacious, decorated family suites vs. decorated double rooms.
• Offering children more and better fee-based services, such as spa treatments and cooking classes, once reserved for adults.
• Design a menu for kid with smaller portion and funny food decoration.
• Offering family-focused guidebooks to promote commission-generating tours and attractions in their area.

6) Reference

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