Effectiveness of the Business Strategies of Crowne Plaza Hotel

Introduction

Effectiveness of the Business Strategies of Crowne Plaza Hotel will be evaluated in this report by applying different theories and models. The tourism industry has become one of the key sources of economic growth across the world, and countries take significant steps to foster their tourism industry and become economically stronger. In this report, the background of the international hotel industry has been analysed to show the factors and facts of the global hotel industry. Crowne Plaza Hotel has been selected to apply different types of theories to the hotel. The background of the hotel is also provided in this report. SWOT analysis has been conducted to identify the strengths, weaknesses, opportunities and threats of Crowne Plaza Hotel. It will assist the hotel company in utilizing its strengths and opportunities to generate revenue and prevent weaknesses and threats to make its competitive advantage stronger. Sri Lanka is the emerging market that has been selected in this report for Crowne Plaza hotel to enter and capture a huge amount of customers in the new country. Ansoff’s growth matrix, Porter’s generic strategies and Nykiel’s fourteen hotels’ strategic growth have been applied to Crowne Plaza Hotel to find out the effective strategies which will ensure outstanding revenue for the hotel and increase profitability. The practical application of the selected strategies has been also evaluated in the last part of the report.

You may also feel interested to read below blogs:
Tourism strategies for Broadstairs coastal area
External and Internal Environment Analysis of Nando’s
Business strategies of Bang & Olufsen
Importance of HRM Practices to Business Strategies
Effectiveness of the Business Strategies of British Airways

Background of the International Hotel Industry:

The international hotel industry is considered the part of travel and tourism industry. The value of the global hotel industry was 147.57 billion U.S. dollars in 2018 (Global News Wire, 2019). The industry contributed about 8.81 trillion U.S. dollars to the global economy in the year 2018 (Statista: 1, 2020). The industry is going very fast and is forecasted to reach 211.54 Billion US dollars within 2026 with a CAGR of about 4.6% (Global News Wire, 2019). There are 630.3 million customers who visit hotels to enjoy accommodation facilities, food or other facilities (Statista: 3, 2020). Europe is the country with the highest hotel rate an occupancy rate was 72.4 per cent in 2018 and Asia Pacific have the cheapest occupancy rate for the last 5 years (Statista: 2, 2020).

Background of Crowne Plaza Hotel

Crowne Plaza is a hotel chain in the UK that serves services across the whole world. Headquarters of the company is in Denham, UK. Crowne Plaza Hotel provides hotel and resort services in 60 countries of the world (Linked in, 2020). The hotel chain has 427 hotels globally, with 119,565 open rooms and 91 hotels in the pipeline (InterContinental Hotels Group, 2020). It has employees more than 10,000 (Linked in, 2020). Crowne Plaza hotel generated revenue of 4.3 billion US dollars in 2019 (Statista: 2, 2020). Sheraton Centre, Coast Hotels & Resorts, Doubletree Hotel, Westin Company and others are the competitor of Crowne Plaza (Zoom info, 2020).

SWOT Analysis of Crowne Plaza Hotel:

SWOT refers to strengths, weaknesses, opportunities and threats and SWOT analysis analyses the factors of an organization (Pettigrew, Thomas, and Whittington, 2002). SWOT analysis of Crowne Plaza Hotel will help the company to identify its strengths and weakness by which they can ensure proper utilization of the strengths and opportunities to ensure higher business growth. By identifying weaknesses and threats, Crowne Plaza hotel can take effective initiatives to prevent weaknesses and threats, which will make sure that the hotel will be more successful in future.

Strengths: Crowne Plaza Hotel ensures high returns that maintain the flow of investment. For instance, the hotel chain paid 642 million pounds to shareholders from sales which ensures the flow of investment, and the hotel chain becomes able to earn more profit through expanding business (Reuters, 2020). The hotel chain has services in 61 countries of the word that huge presence in tourist destinations ensures higher revenue for the company (Linked in, 2020). Customers get luxury hotel service from Crowne Plaza Hotel, which makes customers highly satisfied with their services, and it ensures repurchase of their services. Customers can book the services of Crowne Plaza Hotel through IHG® App (IHG Hotels & Resorts, 2020). It has made the booking process easy and the demand for hotels has increased.

Weakness: The weakness of Crowne Plaza Hotel is it has a poor information security system (). Therefore, the hotel chain cannot maintain the security of confidential information, which creates risk for the hotel chain because competitors can steal significant information. They cannot find significant information easily when it needs and consume too much time to find out the required information. The position of Crowne Plaza Hotel has slipped to 3rd position globally because of giving less focus on customers’ demand. It created customer dissatisfaction and rated a lower rate to the hotel.

Opportunities: The number of international tourists is 1.4 billion and tends to increase more in future, which creates good opportunities for Crowne Plaza Hotel (UNWTO: 1, 2019). The hotel chain will get more customers in future, and the increased travellers’ number will bring higher revenue for the company. The disposable income of people is also increasing, which will encourage people to travel more. As a result, Crowne Plaza Hotel will get more customers.

Threats: COVID-19 has decreased the number of international tourists by about 22% in 2020 (UNWTO: 2, 2020). If the disease does not stop spreading, the number of tourists will fall by 60%-80% (UNWTO: 2, 2020). As a result, Crowne Plaza Hotel is not getting international travellers, which decreased the profit level of the hotel chain for 1st quarter. The hotel chain will face a huge loss if the disease spread more and the amount of the loss will be huge which will be the toughest to overcome.

Background of an emerging tourism market:

Tourism Market of Sri-Lanka

Sri Lanka is one of the emerging tourism markets and travellers number is increasing in the country. The country is called ‘Pearl of the Indian Ocean’ because of its beauty of the country (The Travel Magazine Ltd, 2018). The green landscape of the country, rich cultural heritage and lush attract travellers from across the world toward their country. China, Britain, Russia, India and Australia were the top 5 countries from where tourists visited Sri Lanka the most. There 167,000 Chinese tourists visited the country in 2019 (XINHUANET, 2020). Sri Lanka earned 4.4 billion U.S. dollars in 2018 through their tourism sector (XINHUANET, 2020). The Dambulla Cave Temple, Yala National Park, Arugam Bay, Sigiriya and Polonnaruwa and many other areas are the main tourist attraction of Sri Lanka (Travel Triangle, 2020). The government of Sri Lanka will introduce a systematic program to have more travellers in the country. The country forecasts to capture 10 million tourists annually within the next 5 years (XINHUANET, 2020). Sri Lanka’s tourism sector can earn about 10 billion U.S. dollars by getting more travellers within the country (XINHUANET, 2020). In 2019, 1.9 million tourists visited Sri Lanka, which refers to the vast opportunity for Crowne Plaza Hotel (XINHUANET, 2020). Therefore, the hotel has targeted Sri Lanka as the emerging market to enter and ensure higher profitability by capturing many more new customers in the country, both international customers and Sri Lankan customers.

PEST Analysis of Crowne Plaza Hotel:

PEST refers to political, economic, social and technological and PEST analysis indicates the influence of the factors on a company (Ioannis, 2013). PEST analysis of Crowne Hotel is evaluated beneath:

Political Environment: Political environment analyses the influence of political factors within an organization (Tribe, 2016). Crowne hotel will be able to take initiative to interact with the influence of Sri Lanka’s political factors. Sri Lanka is a socialist republic country, and government controls all the society’s movements (Azmat, and Zutshi, 2012). It seems that the government of Sri Lanka will interfere in the business operations of Crowne Plaza Hotel. As a result, the hotel has to maintain all the rules and regulations to keep the government satisfied and avoid higher government interference in their business operations.

Economic Environment: It analyses the influence of economic factors on the business operations of companies (Olsen, 2004). Crowne hotel will be able to be prepared to face the influence of the economic factors of Sri Lanka by analysing the economic environment. The tourism factor of Sri Lanka contributes $3 billion to the Sri Lankan economy (TRT World, 2019). It means that Crowne Hotel will be able to operate their business because the government have made a tourism industry-friendly culture to get economically stronger. As a result, the hotel will utilize the opportunity and will ensure its success.

Social Environment: Social environment refers to the impact of social factors on an organization (Olsen. West, Tse. 2008). It will help Crowne hotel to handle the impact of the social factors in Sri Lanka. Sri Lankan people follow their culture strictly, and hotels have to operate their business after considering the culture of the country (Nurunnabi, 2015). Crowne hotel has to respect the culture of Sri Lanka to execute their business in the country and understand the culture to present it to the customers to increase customer satisfaction.

Technological Environment: Technological environment refers to the effect of technological factors on a company’s business operations (Olsen. and Roper, 1998). Crowne hotel will be capable of making plans to interact with the impact of the technological factors of Sri Lanka. The technological environment of Sri Lanka is also getting more advanced, which will help Crowne to be more successful through utilizing advanced technology during the operating business in the country.

Porter’s generic strategy on Crowne Plaza Hotel:

Porter’s generic model is the set of strategies through which companies can become a stronger competitors in the targeted market (Porter, 1986). Porter’s generic strategy for Crowne Hotel is evaluated beneath:

Cost leadership: It refers to the approach in which organizations focus on reducing their costs to provide services at lower costs and attract more customers than competitors (Porter, 1980). It is one of the most effective ways of gaining a competitive advantage.

Differentiation: Differentiation refers to the strategy where companies focus on inventing unique products and services to fulfil customers’ demands that competitors are unable to meet furthermore, companies do not consider the price (Porter, 1985).

Focus: Cost focus is the strategy where companies focus on fulfilling the unfulfilled demand of customers by considering the cost and gaining a competitive advantage (Porter, 1980). Whilst focus differentiation does not consider the price. Crowne hotel can follow the strategy, and they have to fulfil customers’ unfulfilled demand, including lower price services.

Ansoff’s growth matrix:

It is the model that refers to the theories that help companies to ensure growth through directing effective ways.

Market penetration: It is the way of doing business in an existing market with an existing market though conducting new marketing strategies to increase sales in the current market.

Market development: It refers to the process of entering a new market to capture new customers of the market and increase sales through selling existing services and products.

Product penetration: Product penetration indicates the way of developing existing services and products or inventing new products or services to increase revenue.

Diversification: Diversification is the process of entering a new market with new services or products to increase revenue and become profitable. It is the riskiest strategy of Ansoff’s matrix because companies need huge investments to enter new markets with new products and services.

Nykiel’s Fourteen Hotel Strategic Growth Options

Nykiel (2007) revealed a set of strategic growth options for hospitality industries in his handbook. In the below analysis, those Fourteen Hotel Strategic Growth Options have been briefly examined with respect to Crowne Plaza Hotel. All the below strategies have been adapted from Nykiel (2007).

Strategy 1- Horizontal Expansion: Crowne Plaza Hotel can expand the business in the same value chain such as through adding services such as spas, sunbathing, sea-cruise etc.

Strategy 2- Geographies Expansion: Crowne Plaza Hotel has the option to expand the business in far geographic locations, such as in a different continent in Sri Lanka or Brazil.

Strategy 3- Product Hybridization: Crowne Plaza Hotel also has the option to expand the business to a different product line; for example, in the fashion retail industry.

Strategy 4- Specialization- Specialist: Crowne Plaza Hotel can gain specialization in a service area and can utilize the specialization to enter a new market by providing upscale development both in price and quality.

Strategy 5- Product Tiering: Crowne Plaza Hotel has the option to make more brands and products because of greater market segmentation. This might happen because a product line has become saturated, and thus the company creates a new brand for more market share.

Strategy 6- Product Re-branding: Because of product tiering, franchising or leasing, Crowne Plaza Hotel might find to the proliferation of brands. In such a situation, Crowne Plaza Hotel has the option to re-branding the product where the main intention is to inform people about the brand, quality and services.

Strategy 7- Non-Franchising: To keep stringent control over the quality and insight details, Crowne Plaza Hotel might not offer any franchisee to others to use the logo and technical key-how.

Strategy 8- Franchising: For greater growth options, Crowne Plaza Hotel can provide the rights to use the brand name, and key-how to others in exchange for fees. This is a very widely used method for growth options. But it offers less control of external operations.

Strategy 9- Brand collection: Crowne Plaza Hotel also has the option to acquire a range of less-priced brands, which demonstrates the huge potential for future growth. Such as, Crowne Plaza Hotel can purchase small cottages in emerging economies for growth in future.

Strategy 10- Management contracts: Crowne Plaza Hotel can also establish sustainable contacts with banks, and insurance companies that have a good relationship with other service providers. The reason for such a relation is to find suitable options for growth.

Strategy 11- Vertical and horizontal integration: Crowne Plaza Hotel has the option of acquiring or merging a new company in the same value chain, which is called horizontal integration, and acquiring or merging into a new company in a different value chain stage which is called vertical integration. If Crowne Plaza Hotel acquires a cottage or rainforest park in Srilanka, it is called horizontal integration. If Crowne Plaza Hotel acquires or merges with an airline company, it is called horizontal integration.

Strategy 12- Singleness: Another option for Crowne Plaza Hotel for growth is to have complete ownership in all value chain stages of a product or service and enter a new market.

Strategy 13- Value Related Products and Services: Crowne Plaza Hotel can also expand the business by offering value-added products and services to make them satisfied. For example, Crowne Plaza Hotel can offer sky-diving for its Sri Lanka operations as a value-added service.

Strategy 14- Global Positioning: Crowne Plaza Hotel might face a difficult competitive situation in the expanded foreign operations; thus, the company need to make different global positioning strategies based on the market scenarios of that location.

Effectiveness of Porter’s generic strategies on Crowne Plaza Hotel:

Cost leadership: Crowne hotel can be a low-cost service provider to attract many tourists in the current market and new market of Sri Lanka. They have to focus on reducing costs to implement the strategy for the hotel. Customers will get luxury services from the world-class hotel that will increase customers’ number drastically.

Differentiation: Crowne Hotel can provide unique services to their customers to differentiate their services, and customers will come to the hotel to have outstanding services. They will pay a premium price for the unique services that will make Crowne highly profitable.

Focus: Focus will not be suitable for Crowne hotel because finding out unfulfilled demand is very tough, and the hotel may not be able to identify the unfulfilled demand of customers.

Effectiveness of Ansoff’s growth matrix on Crowne Plaza Hotel:

Market penetration: Crowne hotel can follow the strategy and conduct different marketing strategies to increase sales in the current 60 countries they have a business (Linked in, 2020). It will increase their sales in the existing market and attract new customers to Crowne.

Market development: Crowne hotel should apply market development and enter the emerging market of Sri Lanka to create new customers in the country. Even international tourists who visit Crowne hotel will visit the hotel in Sri Lanka. The strategy will make the hotel highly profitable because they will get new customers in the new country.

Product penetration: The hotel can invent new services or develop the quality of its services according to the strategy. By inventing new services, the hotel will be able to attract new customers toward them. Customers will visit more when they get more quality service from the hotels.

Diversification: It is the process by which Crowne hotel will enter Sri Lanka with new services such as; golf club. The hotel can keep golf-club in their hotels to make more customers and become highly profitable.

Effectiveness of Nykiel’s hotel strategic growth on Crowne Plaza Hotel:

 Selecting strategy 2: Geographic Expansion: Crowne Plaza Hotel’s strategy to expand to Sri Lance will provide the company with tremendous growth because this is an emerging economy and emerging tourist destination. Moreover, this is a new market for Crowne Plaza Hotel. Thus, it will be able to have ideas on the Asian market. This experience is invaluable and will help Crowne Plaza Hotel to expand its business in other emerging economies on the same continent. The drawback of this strategy is that Sri Lanka is a new market, and thus it will face many unknown challenges.

Selecting strategy 7: Non-Franchising: Crowne Plaza Hotel should not opt for franchising mainly because it will have no control over the operations, and the operational and technical key-how will be disclosed to others.

Selecting strategy 11: Vertical and Horizontal Integration: Crowne Plaza Hotel should go for vertical and horizontal integration as per the examples provided in the descriptions (merges or acquires cottage or rainforest park in Sri Lanka: horizontal integration; merges or acquires with an airlines company: horizontal integration). These strategies will provide new opportunities for Crowne Plaza Hotel to exploit the economic opportunities in the emerging market.

Conclusion

Crowne Plaza Hotel is one of the most demanding luxury hotels in the world. It has targeted Sri Lanka to enter to capture the emerging market and enhance business growth. It seems that the hotel can conduct cost leadership and differentiation strategy for the Sri Lankan tourism industry. The strategies will make sure that the customers get the best luxury services from Crowne Plaza hotel at a lower cost; therefore, travellers of Sri Lanka and other countries will purchase the services of the hotel. As a result, the hotel will get more customers than its competitors. It is expected that Crowne Plaza Hotel will have a firm knowledge of the Asian Market, which will help them to dominate the Asian tourism industry and generate more profit.

References:

Azmat, F. and Zutshi, A., 2012. Influence of home‐country culture and regulatory environment on corporate social responsibility perceptions: The case of Sri Lankan immigrant entrepreneurs. Thunderbird International Business Review.

Global News Wire, 2019. Global Hotels Market Expected To Reach USD 211.54 Billion By 2025: Zion Market Research. Retrieved from: https://www.globenewswire.com/news-release/2019/03/08/1750501/0/en/Global-Hotels-Market-Expected-To-Reach-USD-211-54-Billion-By-2025-Zion-Market-Research.html [Assessed on: 2 June 2020]

InterContinental Hotels Group, 2020. Making business travel work. Retrieved from: https://www.ihgplc.com/our-brands/crowne-plaza [Assessed on: 2 June 2020]

IHG Hotels & Resorts, 2020. IHG® App: the world of IHG at your fingertips. Retrieved from: https://www.ihg.com/content/us/en/support/mobile [Assessed on: 3 June 2020]

Linked in, 2020. Crowne Plaza® Hotels & Resort. Retrieved from: https://www.linkedin.com/company/crowne-plaza-hotels-&-resorts#:~:text=Crowne%20Plaza%C2%AE%20Hotels%20%26%20Resorts%20offer%20full%2Dservice%20hotels%20for,everywhere%20you%20need%20to%20be. [Assessed on: 2 June 2020]

Reuters, 2020. InterContinental to return $1 billion from hotel sales. Retrieved from: https://www.reuters.com/article/uk-intercontinental-earnings/intercontinental-to-return-1-billion-from-hotel-sales-idUKBRE87606Z20120807 [Assessed on: 3 June 2020]

Statista: 1, 2020. Global hotel industry market size 2014-2018. Retrieved from: https://www.statista.com/statistics/247264/total-revenue-of-the-global-hotel-industry/#:~:text=The%20retail%20value%20of%20the,billion%20U.S.%20dollars%20in%202018.&text=The%20global%20hotel%20industry%20comes,the%20global%20economy%20in%202018. [Assessed on: 2 June 2020]

Statista: 2, 2020. Hotels Worldwide. Retrieved from: https://www.statista.com/outlook/267/100/hotels/worldwide#market-globalRevenue [Assessed on: 2 June 2020]

Statista: 3, 2020. Gross revenue of Crowne Plaza hotels and resorts worldwide 2007-2019. Retrieved from: https://www.statista.com/statistics/223344/crowne-plaza-hotels-revenue/#:~:text=Crowne%20Plaza%20hotels%20and%20resorts%20generated%20approximately%204.3%20billion%20U.S.,British%20company%20InterContinental%20Hotels%20Group. [Assessed on: 2 June 2020]

Tribe, J (2016) Strategy for Tourism. 2nd edn. Goodfellow Publishers Limited. Oxford.

Travel Triangle, 2020. 17 Amazing And Most-Visited Sri Lanka Tourist Places For Your 2020 Trip. Retrieved from: https://traveltriangle.com/blog/sri-lanka-tourist-places/ [Assessed on: 3 June 2020]

The Travel Magazine Ltd, 2018. 5 emerging tourist destinations for 2018. Retrieved from: https://www.thetravelmagazine.net/emerging-tourist-destinations-2018.html [Assessed on: 3 June 2020]

TRT World, 2019. Following decades of conflict, Sri Lanka was making steady if uneven headway towards economic development. Retrieved from: https://www.trtworld.com/asia/sri-lanka-s-fragile-economy-depends-on-tourism-and-now-it-could-get-worse-26101#:~:text=Tourism%20brings%20more%20than%20%243,interest%20payments%20on%20foreign%20loans. [Assessed on: 3 June 2020]

UNWTO: 2, 2020. INTERNATIONAL TOURIST NUMBERS COULD FALL 60-80% IN 2020, UNWTO REPORTS. Retrieved from: [Assessed on: 3 June 2020]

UNWTO: 1, 2019. INTERNATIONAL TOURIST ARRIVALS REACH 1.4 BILLION TWO YEARS AHEAD OF FORECASTS. Retrieved from: https://www.unwto.org/global/press-release/2019-01-21/international-tourist-arrivals-reach-14-billion-two-years-ahead-forecasts [Assessed on: 3 June 2020]

XINHUANET, 2020. Sri Lanka receives 1.9 million tourists in 2019. http://www.xinhuanet.com/english/2020-01/07/c_138685384.htm [Assessed on: 3 June 2020]

Zoom info, 2020. Crown Plaza Orlando. Retrieved from: https://www.zoominfo.com/c/Crowne-plaza-orlando/31724907 [Assessed on: 2 June 2020]