Strategic Planning In The Hospitality Industry Tourism Essay

The rapid development in the hospitality industry which has lead to importance of strategic planning required in order the firms can have a steady rise in the industry. The life standards of people have been improved due to globalisation which in deed contribute to the development of the hospitality industry. The diversification was a most important priority of the firms in order to utilise the high profiled customer base which they possessed .It is easy to target the customers who are in your door step and this lead to various formulation of strategic plans to target them.

Key words: hospitality, strategic planning

Strategic planning is an organization frame work of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy, including its capital and people. Various business analysis techniques can be used in strategic planning, including SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats ) and PEST analysis (Political, Economic, Social, and Technological analysis) or STEER analysis (Socio-cultural, Technological, Economic, Ecological, and Regulatory factors) and EPISTEL (Environment, Political, Informatics, Social, Technological, Economic and Legal).

Strategic planning is the official consideration of an organization’s future course. All strategic planning deals with at least one of three key questions:

What do we do?

For whom do we do it?

How do we excel?

The hospitality industry consists of broad category of fields within the service industry that includes lodging, restaurants, event planning, theme parks, transportation, cruise line, and additional fields within the tourism industry. The hospitality industry is a several billion dollar industry that mostly depends on the availability of leisure time and disposable income. A hospitality unit such as a restaurant, hotel, or even an amusement park consists of multiple groups such as facility maintenance, direct operations (servers, housekeepers, porters, kitchen workers, bartenders, etc.), management, marketing, and human resources.

The hospitality industry includes a wide range of organizations offering food service and accommodation. The hospitality industry is divided into sectors according to the skill-sets required for the work involved. Sectors include accommodation, food and beverage, meeting and events, gaming, entertainment and recreation, tourism services, and visitor information. (wikepedia n.d.)

Strategic planning for the hospitality industry

(1) The increasing popularity of strategic planning in recent times is attributed to accelerating changes in industries and economies and increasing global competition.

(2) The rapid development of strategic-planning that executives find useful. Firms that engage in strategic planning tend to have higher performance.

(3) A recent study of hotels in the United Kingdom found that business performance was positively associated with the thoroughness, sophistication, participation, and formality of strategic-planning processes.

(4) Strategic analysis the systematic investigation of a firm and its environment is the foundation of the strategic management process.

STRATEGIC PLANNING IN JACK IN THE BOX

Jack in the Box recently announced plans to open 100 to 150 restaurants combined with convenience stores over the next five years.

The stores will feature full-size restaurants and also sell gasoline and other typical convenience store items such as bread and milk. How did Jack in the Box arrive at this decision? According to the company’s CEO, Bob Nugent, an analysis of the convenience-store market indicated that there was plenty of opportunity, primarily because no individual company dominates. The largest player in the convenience-store industry which dominated the market, 7-Eleven, Inc., controls slightly over 4 percent of the market. Compare this to fast foods, where McDonald’s controls 43 percent of the market and Jack in the Box a mere 4.6 percent. Nugent also justifies his decision on the basis of research which indicates that a convenience-store customer is twice as likely to eat fast food as a non-convenience-store customer.”

(5) Strategic analysis can provide excellent information on which to base long-range decisions such as this one.

Knowledge is one of the most important competitive weapons a firm can possess.

(6) As the Jack in the Box example illustrates, detailed knowledge about a firm and its environment can be used to generate new ideas for business and to evaluate the feasibility of ideas before they are actually implemented. Strategic analysis also allows a firm’s managers to become more aware of the company’s strengths and weaknesses and to understand the reasons behind successes and failures. Knowledge about the competitive environment can help to anticipate and plan for changes and predict how competitors or other stakeholders such as customers or suppliers will respond to new strategies or other organizational activities. Strategic analysis can open up channels of communication between high-level managers and subordinates, allowing them to share ideas and perspectives. The participative process will help subordinates to accept changes more readily after decisions are made. (Harrison – April, 2003)

STRATEGIC PLANS AT FelCor LODGING TRUST

For FelCor Lodging Trust, one of the largest hotel real estate investment trusts (REITs) in the United States, a strategic planning exercise led the company to rethink its strategy. Calling itself the ” New FelCor, ” the firm has made dramatic steps toward repositioning itself. The firm business strategy is to dispose of nonstrategic hotels, including all of its Holiday Inn Hotels located in secondary and tertiary markets. After the sale, it will have lower exposure to markets with low barriers to entry.

Other elements of the new business strategy are

(1) To acquire hotels in high – barrier – to – entry markets

(2) To improve the competitive positioning of core hotels through aggressive asset management and the judicious application of capital in the industry

(3) To pay down debt through a combination of operational cash flow and the sale of nonstrategic hotels. The company will become a lower – leveraged company with a stronger and fully renovated portfolio of hotels.

STRATEGIC THINKING AT STARWOOD

When Starwood thought of expanding their business to a field which is relevant and easy to attract customers .They in hotel industry and had a close association with the luxury segment customers so they thought Expansion through Diversification strategy in order use their same luxury customer base to sell their newly introduced ” Heavenly Bed “.

Westin Hotels & Resorts, with 169 hotels and resorts in more than 31 countries and territories, is owned by Starwood Hotels & Resorts Worldwide, Inc

The ” Heavenly Bed, ” first launched by the Westin brand of Starwood Hotels & Resorts, has transformed the bed, a basic feature of any hotel room, into a luxurious object of desire, enhancing the revenues of the chain and leaving many hotel operators to follow suit with copycat linens and custom bedding of their own.

The strategic process at Starwood began with consumer analysis and product testing. First, Westin conducted a study involving 600 business executives who travel frequently. The results showed that 84 percent said a luxurious bed would make a hotel room more attractive to them to enjoy the comfort. What is more, 63 percent said a “good night” sleep is the most important service a hotel can provide. Half of those surveyed said they sleep worse in hotels than at home. After testing 50 beds from 35 lodging chains, Westin developed its prototype all – white Heavenly Bed with a custom – designed pillow – top mattress, goose down comforters, five pillows, and three crisp sheets ranging in thread count from 180 to 250.

Once the product was designed and tested, the firm introduced the bed with a carefully planned marketing strategy are

USA Today ran a story on the front page of its business section.

The same day, 20 pristine white Heavenly Beds lined Wall Street up to the New York Stock Exchange in New York City.

Inside the Stock Exchange, Barry Sternlicht, the then Chairman and CEO of Starwood Hotels & Resorts rang the opening bell and threw out hats proclaiming, “Work like the devil Sleep like an angel.”

Meanwhile, at New York Grand Central Station, 20 more beds graced one of the rotundas there, and commuters disembarking the trains were invited to try them out.

Similar events were staged the same day at 38 locations across the United States, tailored to each city.

Savannah’s event featured a bed floating on a barge down the river with a landing skydiver. Seattle s event took place atop the Space Needle.

To reinforce the message, a concurrent advertising campaign asked, “Who’s the best in bed?”

AN EMERGING RETAIL STRATEGY FOR THE HEAVENLY BED

In the early stages of introducing the heavenly bed .In the first week of launching the Westin Heavenly Bed, 32 guests were interested to buy the bed. A light bulb went on. Westin executives put order cards with a toll – free number in every room. They started placing catalogs by bedsides and desks and set up a web site. By June of 2004, Westin had sold 20,000 pillows – $ 75 for the king – sized version – and 3,500 bed/bedding combos, at $ 2,965 each, enough to spread the idea throughout Starwood, with the Sheraton, St. Regis, and W lines all turning into retailers. The unanticipated success of the Heavenly Bed has spawned a new business – companies that help hotels run their retail arms. Boxport, a spin – off of San Francisco – based hotel procurer Higgins Purchasing Group, operates web sites and catalogs for several chains that now sell bedding.

In order to determine where it is going, the organization needs to know exactly where it stands, then determine where it wants to go and how it will get there. The resulting document is called the strategic plan.

It is also true that strategic planning may be a tool for effectively plotting the direction of a company; however, strategic planning itself cannot foretell exactly how the market will evolve and what issues will surface in the coming days in order to plan your organizational strategy. Therefore, strategic innovation and tinkering with the strategic plan have to be a cornerstone strategy for an organization to survive the turbulent business climate.