Shangri-La Hotels

Zhipeng Lei
Sara Strueby
Justin M
Strategic Profile & Overview
 Based in Hong Kong
 Largest Asian Hotel in South East Asia
 Differentiates itself through Asian hospitality and
quality service
 Presently competing against foreign chain hotels
 The goal is to expand into North America & Europe
 PESTEL ANALYSIS
 Political
– Older generation-health care
 Economic
– Exchange Rates
– Inflation-compensation
 Social trends
– Sustainability trends
– Older generation
 PESTEL ANALYSIS
 Environmental
– Environmental protection laws
– Rate of traveling decrease
 Legal
– Illegal entertainment
– Casinos
– Sustainability practices required
 Five Forces Model
Bargaining Power of Suppliers
(Low)
Availability of substitutes
-high

Threat of New Entrants (High.) Degree of Rivalry Threat of Substitutes

Low economies of scale (High) (Moderate)
Low product Strategic stakes –high Difference of
differentiation Product differentiation substitute products –low
Low switching cost -high Improvement of
substitute performance-
low

Bargaining Power of Buyers

(Moderate)
Switching cost are –low
Product differentiation –low
Importance of supplier input to
quality of buyers final product
-high
 Competitors
 UK-Based Intercontinental Hotel Group:
– Strategy: Variety of brands that can fit different traveler needs.
– Strength: Huge market share, high differentiations
– Weakness: Focuses many target markets
 US based Marriott Chain
– Strategy: to provide a wide variety of low quality to high quality
hotels over a large geographical area
– Strength: Huge market share, high differentiations,
– Weakness: Focuses on many target markets
 Hilton
– Strategy: provide a wide variety of low quality to high quality
hotels. Has a hotel/package for every customer.
– Strength: Resorts, suits, hotels, all seasons packages, spas, golf
courses, advertising to small and large companies.
– Weakness: Large target markets
 Value Chain

Supply Chain Services

Operations Sales & Marketing
Management

Human Resource Management

General Administration
 Resource Based View
 Tangible Resources
– Physical appeal of the hotel buildings
 Mixture of Local culture, art, and geographic location
– Physical Design of the hotel buildings
 Operational Efficiency
 Intangible Resources
– Level of service
 Services provided is not touchable, but experienced.
 Based on Asian hospitality
 Differentiates Shangri La
 Competencies & Advantages
 Core Competencies
 Combination of Service & Human Resource
Management Activities
 High Staff-to-Guest Ratio

 Competitive Advantage
 Services are Unmatched
 Efficiency & Appeal of Hotel Building Design
 Human Resource Management Support
REVENUE
 Revenue Increased from 2005 to 2006:
– Shangri-La 19.11%
– IHG -49.74%
– Hilton 83.95%
– Marriott 5.28%

– Industry average 14.65%

 Financial Ratios
– Liquidity ratios
– Activity ratios
– Debt ratio
– Profitability ratios
– Market ratios.
 Liquidity ratios
Current Ratio

Current ratio:
2
 Shangri-La

Marriott
1.5

Hotels and Industry avaerage

– Shangri-La: 1.77 1
Hilton Industry average

– Industry average: 0.83 0.5

 Quick ratio:
-0.5

IHG
-1

– Shangri-La: 1.70 Quick Ratio

– Industry average: 0.63 2

1.5
1

0.5
0

-0.5
-1
Industry
Shangri-La IHG Hilton Marriott
average

系列1 1.703995498 -0.702954899 0.599513579 0.935168739 0.633930729

 Activity Ratios
 Inventory Turnover Inventory Turnover

Ratio 300

– Shangri-La:18.58 250

200

– Industry average: 150

71.7405714 100

50

0
Industry
Shangri-La IHG Hilton Marriott
average

系列1 18.58181818 243 16.15116279 9.229304636 71.7405714

 Total Asset Turnover

– Shangri-La:1.60
 Debt Ratio & Market Ratio
 Debt Ratio  Price/Earnings (P/E)
– Shangri-La: 0.566 – Shangri-La: 31.33
 Profitability Ratios
Earnings per share

 Gross Profit Margin 1.5

– Shangri-La: 0.59 1

 Earnings per share 0.5

(EPS)
0
– Shangri-La: 0.61 Shangri-La IHG Hilton Marriott Industry

系列1 0.611430299 0.429 0.559139785 1.41 0.752392521

– Industry average: 0.75

Return on com m on equity

 Return on Common 0.5

Equity (ROE) 0.4

– Shangri-La: 0.08 0.3

– Industry average: 0.24

0.2

0.1

0
Industry
Shangri-La IHG Hilton Marriott
average

系列1 0.0789597 0.393406593 0.299633316 0.183464092 0.238865925

 Strengths & Weaknesses
• Strengths
 Uncommonly high service standards
 Low turnover compare to Industry
 Strong brand name and company reputation
 Weaknesses
 Losing market share to rivals
 Unattractive compensation packages
 Failure to understand cultural differences
 Deviating toward a global strategy
 Higher overall unit costs relative to rivals
 Opportunities & Threats
 Opportunities
 Gain market share North America & Europe
 Increase presence in China & Asia
 Relaxed travel restrictions
 Rising urban incomes
 Operational efficiency due to building design.
 Threats
 Loss of employees to rivals
 Increase in the cost of labor
 Current economic situation
 Restrictions on Travel
 Recommendations
 Product Differentiation
– Hotel
 low to high quality hotels-increase market share
 provide more service to hotel within the Chinese culture
 casino, restaurants, entertainment, tourist attractions
– Hotel Management
 Mange more hotels-vertical integration
 Chinese local hotels do not have high quality services
– Merge local hotels- vertical integration
 Local hotel with low star rating
– Gain market share
– save construction cost
 Technology Change
– Sustainable practices implemented
– Green/clean resources (energy efficient methods equipment; solar
panels)
Questions?