Strategic analysis of the Holiday Inn hotel franchise

Porter's Model Of 5 Forces

PEST Analysis

Value Chain Analysis

The paper is an analysis of the Holiday Inn Franchise. The paper will start giving an introduction of the franchise and its success followed by the main body which will include the objectives and values of the hotel as they stand today. The management functions, planning and organization of the hotel will also be discussed here followed by leadership styles, SWOT analysis, and Porter's model of 5 forces, PEST Analysis and the value chain analysis. This will be followed by conclusions and recommendations on the future aspects or growth potentials of the hotel

Holyday Inn is the part of InterContinental Hotels (IHG) and is one of the most prominent brand hotels. It has a global reputation to provide best quality services, value and comfort. It has one of the world's largest networks of hotels which include a total of 238,440 bedrooms and 1301 hotels in different parts of the world and 315 more hotels are on its way. More than 100 million visitors prefer to spend their nights every year in the Holiday INN franchises, globally (Supplementary Information, 2009).

Holiday Inn, in 1963 came into long-term contract with the Gulf Oil Corporation. In this deal it was decided that Holiday Inn would be accepting Gulf Credit cards for the charges of food and accommodations, at all its hotel which are in USA and Canada. In return for this they would be establishing services stations on the premises of most of the properties of Holiday Inn, particularly the ones which are near major highways. We can still see many old Holiday Inns, including those which are not the part of the chain, have those same services stations still intact today, whether they are operating or closed. There are only a few services stations in eastern parts of U.S. that are still operating but hardly any of them are Gulf outlets. In the year 1973, this strategy of payment of food and lodging through Gulf credit card was copied by many competitors and oil companies. Due to oil crisis of 1973 those agreements ended with disappointment. The agreement between the Gulf and Holiday Inn came to an end in the year 1982 (Supplementary Information, 2009; The News and Courier/Evening Post, 1990).

For almost twenty years Holiday Inn Corporation could not operate in the location of Niagara Falls, Ontario because the name Holiday Inn was already used by the local hotel. This hotel was there from the early 1970's and was using similar logo as that of the Holiday Inn. The directory of Holiday Inn Corporation mentions that this hotel was not part of Holiday Inn system. The domain holidayinn.com was also owned by that hotel, which made the Holiday Inn Corporation to forcefully use another domain name i.e. holiday-inn.com. But in 2006, a settlement was made between the IHG and the owner of Niagara Falls, Ontario hotel which resulted to acquisition for both the domain Holidayinn.com and the hotel by IHG system (Supplementary Information, 2009).

In 1960's and early 1970's, in Myrtle Beach, South Carolina Holiday Inn hotels was just called as Holiday because there was a motel, located in that area, already with the name of Holiday Inn. In the year 1973 the name was challenged by Holiday Inn, Inc. In U.S. District Court for South Carolina (Florence Division). Since Holiday Inn of South Carolina had franchised the name from Stand Development Corporation, so a counterclaim was filed by Holiday Inn of South Carolina against Holiday Inns, Inc. The claim went in favour of Myrtle Beach hotel and it is still operating with the name of Holiday Inn, however, they have to use a different font (InterContinental Hotels Group, 2008; Holiday Inns, Inc. v. Holiday Inn, 1973).

Main body

Objectives:

Achieve excellence in quality and provide customers with best quality products (Lollis, 2007).

Holiday Inn Values:

• Respect and value people in general and its customers

• Communicate clearly and openly

• To have honesty.

• Committed to achieve their goals (Lollis, 2007).

Management Functions:

• Planning

• Managing

• Coordinating

• Leading (Lollis, 2007)

Planning:

Long-Term Plan:

Two of the most important long terms plans for holiday inn are to earn a high reserve ratio and to become a leading hotel franchise (Lollis, 2007).

Short-Term Plan:

Courteous, caring, friendly and best quality service to its customers is one of the short-term objectives of Holiday Inn and to make customers feel welcome (Lollis, 2007).

For the purpose of achieving long as well as short-term objectives, the overall plans are formatted in advance. Executive managers are ones who are concerned with the plans related to financial matters (Daily News, 1990). Middle level and different employees are involved in decision making and short-term planning because they play a very important role for the achievement of the desired objective (Lollis, 2007).

Management structure:

The organizational structure of Holiday Inn can be seen with the help of their Organization chart. The organizational structure is:

1. Centralized Power

2. Vertical Structure

3. Definitive and Hierarchical Reporting Relationships

4. Formal Control System (Lollis, 2007)

Leadership:

Through different incentive and facilities Holiday Inn inspires, leads and motives its employees (InterContinental Hotels Group, 2009).

Different facilities and incentive that they provide includes:

Incentives:

The employees of IHG can stay at IHG hotel franchises in any part of the world at very nominal prices and can also enjoy each and every facility provided (The New York Times, 1990).

An employee is always paid fairly with the amount of work he puts in, even when he has worked one minute more than his shift (InterContinental Hotels Group, 2009).

Facilities:

Facilities that employees enjoy include:

Facility for lunch

There is 1 lunch break for each employee doing a shift of 9 hours. During the shift 2 tea breaks are given (HIClubVacations.com, 2008).

Facility for locker is also provided to each employee (InterContinental Hotels Group, 2009).

This all are provided to motivate employees so that they can perform their very best (InterContinental Hotels Group, 2009).

Salaries:

Salaries are given keeping in mind the nature of the job. It also observes its competitors like Hilton and Pearl Continental while setting salaries. The salaries set are mostly more then what their competitors offer. For Example: Salaries of waiters working at Hilton and PC are given $7,000 where as in Holiday Inn the salaries for waiters are $8,000 (HIClubVacations.com, 2008).

Training Labour: Employees are given regular trainings for their specific field. A training section is conducted after 6 months for the purpose of learning and improvement in the overall performance (HIClubVacations.com, 2008).

SWOT Analysis

Strengths

Image of the company: A well-known organization, the Holiday Inn has been successful in making its name renowned all over the world (Amason et al., 1995).

Quality Standards: Holiday inn is very much conscious about its quality standards and has been successful in maintaining top quality and high standards over the years since its initiative (DeFillippi and Arthur, 1998)

Distinctive Architecture: Being the first hotel to have a swimming pool on the top of the building gives Holiday Inn the unique advantage of an innovative architectural design. Approach of high techniques and innovative designs are used when building Holiday Inn outlets all over the world (Hobday, 2000).

Weaknesses

Production cost: the changes in the administration and the structure of the holiday inn have increased its costs significantly (Forster, 2005).

Budgetary constraints: due to the constraints imposed on the budget, the advertisement has become limited (Forster, 2005).

Opportunities

Fresh packages:

The experts have predicted an increase in the market share if Holiday Inn will launch its new package with low rates (Beech and Crane, 1999).

Change in the social trend:

The people now not only demand for high quality services that are able to satisfy their wants, but the demand of having the best is also rising. The Holiday Inn has been able to fulfil these demands for its customers (Cannon-Bowers et al., 1995).

Threats:

Competitors:

The most important threat that Holiday Inn is facing is from its competitors like Hilton and PC. The business will have to face difficulty if its competitors lower the rates of their services (Polley and Ribbons, 1998).

Industrial Analysis

Porter's model of 5 forces:

The following ways shows how Porter's model of 5 forces affect the Holiday Inn:

1. Rivalry

The major factor highlighted in Porter's five forces is the competitors and Holiday Inn's competitors include Hilton and Pearl Continental Hotel as aforementioned (Turner and Keagan, 2001).

2. Threats of the new entrants:

Competitive businesses always face the threats of new entrants. This increases the competition in the market. This threat for holiday inn is not too intense nowadays. It is because the businesses globally are facing loss nowadays due to the economic recession (Turner and Keagan, 2001).

3. Bargaining power of the customers:

Holiday Inn is a five star hotel which is why there isn't much room for the bargaining power of the customers to pose much threat to the hotel and its overall rates and expenses (Turner and Keagan, 2001).

PEST Analysis

Political factor

i. The changing of the government has a significant influence on the business. There is usually a contract between the government and the hotels, which states that only those political figures and people, are allowed to stay in the hotel who have accepted the contract (Sapsed et al., 2002).

Economic Factor

i. The increasing inflation allows only the high class people to have regular visits to the five star hotels like Holiday Inn. The value of money is falling which is rapidly increasing the status gap of the people (Sapsed et al., 2002).

ii. Changing economic conditions have a significant influence on the business activities. An economic recession slows down the business activity and profits are decreased whereas, an economic boom results in high profits (Sapsed et al., 2002).

The workforce of the hotel should be diversified

Hotel has a reasonably high reputation among its customers but as a part of the society, it should involve corporate social responsibility as part of the marketing and promotion strategy.

Differentiators:

As mentioned earlier the differentiation strategy of Holiday Inn Hotel, not like other five star hotels, has been and will continue to be focused toward luxury. Since, the differencing element is strong; to remain competitive they will need to focus on new and evolving packages of services. This may include the following:

Other then extensive menus, products that could be bought in the region of the franchised branch could be ordered from the room service.

Care taker service will be provided which will offer fulfillment of visitors needs in short notice.

According to the interests, individual surprise gifts can also be given which could include books, items, food or candy.

Core Strategy

Holiday Inn Hotel's core strategy related to marketing will be to project an image of both its opulence and permanent commitment toward its mission which would be to surprise its visitors with the luxury they will provide in the future. Within the hotel, employees will be continued to be motivated and trained using different strategies, keeping in mind the mission that the main objective is to provide the excellent service to its customers. Staff will also be involved to find new ways to fulfil unexplored needs and excite and surprise their visitors. Staff trainings will help staff to understand the main concept behind customer services and the focus when new personal are hired would be toward work place ethics and creativity.

Customer Reviews and their ratings, industrial and press review regarding Holiday Inn hotel and ability of hotel in different economic situations will also be consistently improved. Furthermore, the Holiday Inn hotel will maintain its pricing which will serve as determining measure of whether the hotel is achieving its desired goals or not.

Core Branding Elements:

Holiday Inn Hotel could potentially focus in the future on brand image that is associated with rich and dark colors, with brilliant use of light, gold and mirrors. As far as website and other marketing materials are concerned they could also be colored with rich gold and rich purple.

The Hotel should also be willing to use professional photographers to take photographs of hotel and its rooms and use actors or willing visitors to project positive images of its services.

The core message of Holiday Inn Hotel will continue to be that of luxury but one that will surprise the customer. This could be used as a tagline for different marketing and printed materials and the tagline will also be added in new business card that will be printed.

Product/Service Innovation

1. Holiday Inn could continue to propose many high-quality facilities to people as they come. By this it could accumulate customers from the top of pyramid or customers that are from the cream of the crop.

2. People, who convey their thoughts by a call, email or surf the website of Hotel Holiday Inn, the prospects, could be presented with smaller but relatively cheaper rooms so that they feel fewer obligations whenever they come for a visit.

3. Clients who have already stayed in the hotel one time will be provided with deals to have multiple stays for night, for example, after a stay of three nights one night could be made complementary.

4. Premium clients shall be those who would have stayed in the hotel for more than one time and they shall be offered entree in the penthouse which is the choice that cannot be availed by one time stay customers.

5. Champions are the customers who will reside in the hotel multiple times; they could be requested for a weekend stay free of charge if they participate in a debate to chat about the hotel. This chat could then be used later in marketing strategies.

An extensive variety of facilities and services, apart from whatever the hotel offers, could be provided with minimal additional charges and some could be complimentary. These services could consist of:

Caretaker service

Dining in the room

Free of charge gourmet continental coffee and breakfast

Lap pool inside the premises

Valet parking

Fitness centre

Business centre (if reserved and with extra fee)

Internet wi-fi (free in the whole hotel)

Restaurant and relaxing spa rooms

Bag service

Board and conference areas (with extra fee and reservation)

Price Lists

Rooms provided in Holiday Inn Hotel could be:

Queen size room could cost $200-$400 per night

King size room could cost $250-$450 per night

Deluxe King size room could cost $300-$500 per night

Extra Deluxe King size room could cost $350-$550 per night

Emperor size room could cost $400-$500 per night

One Bedroom Suite could cost $500-$700 per night

Presidential Suite could cost $600-$800 per night

Hospitality Suite could cost $700-$900 per night

Penthouse Suite could cost $900-$1,100 per night

These arrays of prices will depict the variation in the peak times of the year as well as off peak times, both yearly and weekly. These pricing ranges will be parallel to the majority of hotels. Although as compared to prices of other hotels in the surroundings, the prices will be higher but it is fairly relative to the facilities provided by Holiday Inn Hotel and is something which is rarely found anywhere.

Holiday Inn Hotel could hire an expert photographer and an organization to design the following marketing tools:

Email newsletters

Letters and postcards & Direct mail

Magazine ads and newspaper

Website

Presentation given virtually

Marketing tools for the development of corporate business

The tools for marketing will be modified in the direction of the customers on excursion visits and people travelling for business purposes by creating different bunches of photographs, menu of facilities, testimonials and researches.

Similarly, virtual tour shall also be modified towards the tourist and business travellers, founded on their priorities or their concerns with the hotel or the region in general. It will be handwritten, keeping the room for communication among the concerned person and the employee guiding the customer and some time could be reserved for the question answer period.

Web Plan

The website will basically be designed to peek into a close and warm looking hotel and ambience and will aim to direct the tourist towards two fundamental measures:

To do bookings for the rooms at hotel (intended for private clients)

To set a meeting for virtual tour (meant for business or private clients)

So, the website is made to respond to the frequently asked questions raised by tourists or customers about facilities, site, prices, etc. regarding the Holiday Inn hotel in order to have full information before they visit or decide to stay.

In order to offer personalised service to the customers who would be interested in staying at the Holiday Inn Hotel and to allow straightforward and swift reservations, a web-based reservation system could also be upgraded to include virtual tours of rooms. It will confirm higher responses on the reservations made through emails along with a personal note for expressing gratitude and containing an offer to consult the customer service representative for their queries or noting their additional special requirements. Moreover, this new online reservation system will demonstrate the personalised attention given to the customers at the Holiday Inn Hotel. Additionally, it will help the hotel in reducing the cancelled reservations by the customers.

Social Media Plan

For making the presence of the Holiday Inn Hotel felt on the web, a blog titled "Surprising Luxury" will be launched. This blog will incorporate the material related to the comfort and hospitality offered by the hotel not limited to the specific accounts from the periodic newsletter being distributed through email but also including ideas from history and around the world. The blog's editor will be required to liaise with other online providers who manage similar services and hotels. A consortium with these other sites will be developed which will help in publicising the Holiday Inn Hotel on the internet. The company blog will aim to establish the status of hotel's administration as specialist on providing quality services. More related information too will be regularly added to the blog supplemented by the distribution of newsletter through email.

The methods through which marketing and customer behaviour leads will be generated include:

Publicity through National newspaper and magazines

Online marketing around the franchise's region and similar keywords on pay-per-click basis

Program for Customer referral

Discount offers for professional referral

Promotion through direct mail to try to reach out to highly affluent U.S. nationals in various cities (some 5,000 persons will be contacted through either postcards or letters once every month for half a year and then targeting another 5,000 persons)

Specialized Customer Relationship Management (CRM) software for hotels will be utilized to keep track of all the generated leads. It will be capable of importing data entered on the web and exporting information for merging in emails. Contact details, lead source with date and any other information related to the customer will be tracked by this software. There will also be provision for entering additional remarks by the customer service team on the extra facilities demanded and made available, customer liking and disliking, and any other information assessed through personal contact.

Lead Conversion Plan

Prospective customers (who have not visited the Holiday Inn Hotel but have expressed interest through some contact) will be encouraged by the following methods:

• Hotel's virtual tour focusing on the hotel's beauty, its excellent service and attractive places in and around the franchise's region for businessmen / tourists will be offered to the prospective customer at his convenience. The virtual tour will be followed by an introductory offer.

• Guidance will be provided about rates of various room categories, securing reservations, hotel policies, offered services, etc.

• Newsletter containing information about events in the region, latest facilities offered by the hotel, an article on luxury vacations and holiday packages / offer for virtual tour will be emailed once every quarter of a year.

• A discounted offer will be made to those prospective customers who have availed the virtual tour.