PEST and Competitor Analysis of Hersha Hospitality Management

PEST Analysis Overview

PEST analysis is a regularly used and immeasurably valuable method for analyzing the external environment of an organization. This technique divides the general environment into four distinct areas, encompassing nearly everything that can influence an organization. These four areas are political, economic, social, and technological (Thompson and Martin, 2010). With regard to political factors, the analysis helps a company determine the kind of role that the government plays within the industry and marketplace — for example, whether the government intervenes in the customary forces of demand and supply or imposes rules and regulations. The economic factors take into consideration the conditions of both the national and international economy. Social factors account for the relevant changes expected in areas such as lifestyle, consumer preferences, demographics, cultural values, and buying patterns. Lastly, technological factors address changes in technology within the industry (Henry, 2011). The following sections apply PEST analysis to Hersha Hospitality Management (HHM) in order to understand its external environment.

1. Political

i. Government Incentives

With HHM operating in the hotel development business, the government can influence the company's endeavors through tax incentives and subsidies. For instance, according to Enz (2010), numerous cities in the United States have directly funded the development of hotels and other properties, such as lounges purposed to serve local convention centers.

ii. Rules and Regulations

Hersha Hospitality Management must ensure that it complies with the rules and regulations set by lawmakers and the government. This impacts the company not only in terms of domestic compliance within the United States but also on a global level. Another aspect involves ensuring that the company holds the legal permits required for establishing and constructing its properties. For instance, any hotel built adjacent to an airport must be situated on legally approved land (Enz, 2010).

2. Economic

i. Charges and Prices

This factor is linked to the financial dimension of the company and the broader marketplace. Key economic aspects that are likely to impact HHM include the rates charged to consumers for both limited and full services. The hospitality industry offers competitive pricing for the various packages provided to consumers.

ii. Economic Status

The hospitality industry faced a significant dip in business activity due to the economic recession. However, with the American and global economy improving, Hersha Hospitality Management is expected to experience an increase in business activity, as more consumers have capital available to spend on leisure activities such as hotel stays (Enz, 2010).

3. Social

i. Consumer Preferences

A key social factor influencing the business encompasses consumer preferences. The dining inclinations, lifestyle choices, and dispositions of people in a given market will influence marketing approaches and service decisions. The expectations of consumers may constantly change and at times exceed what HHM can readily offer, including evolving lifestyle needs and demands for personalized assistance.

ii. Competition

Hersha Hospitality Management faces intense competition in the market and industry as a whole. This is largely due to the fact that different companies offer varying packages to consumers, which can draw those consumers away. Moreover, with the constant shift in consumer preferences, the company faces heightened rivalry to grow not only its consumer base but also the revenue it generates (Enz, 2010).

4. Technological

i. Technological Innovations

In the present day, both regular and business consumers expect hotels to provide services linked to technological innovations. As pointed out by Enz (2010), this encompasses aspects such as teleconferencing and the provision of smart cards embedded with microchips for the payment of services — all with the primary purpose of ensuring that the guest experience is top-notch. In addition, hotels can implement automatic check-in systems to record consumer preferences continuously and improve service delivery.

ii. Connectivity

Connectivity is another technological element that significantly influences the contemporary hospitality industry. Consumers prefer suitability, expediency, and convenience in the services provided to them. Internet access is now a necessity for all hotels. Connectivity is critical in the sense that the hotel must ensure that phones, fax machines, in-room systems, and reservation systems are all integrated in order to increase the level of convenience for consumers (Enz, 2010).

Porter's Five Forces Analysis

1. Competitive Forces

The level of competition in the hotel industry is very intense, not only at a national level but also on an international scale. Competition is set to increase further, particularly in the fight for business travelers. However, it is important to note that Hersha Hospitality Management holds a competitive advantage, as it is one of the few large hotel companies to be fully digitized. Given that HHM provides turn-key management, asset management, and receivership solutions, it enhances the convenience of services it offers and improves its standing against rivals in the marketplace.

2. Economic Forces

On both a national and global scale, many businesses in the hotel industry have focused on being cost-effective in response to the state of the economy. This has been especially true for large hotels, as the recession significantly reduced travel and hotel spending. Nevertheless, the hotel sector is expected to grow in the coming years in line with economic recovery. This will offer HHM a strong opportunity to present its product offerings to new and existing clients.

3. Socio-cultural Forces

In the contemporary market, consumers targeted by companies such as HHM have minimal time for relaxation and time away from work. Taking this into account, the characteristics of successful products in today's market include expediency, convenience, and ease of use. In short, in the market that the company targets, if its product offerings do not generate time savings or are not easy to use, consumers will disregard them.

4. Technological Forces

In the information age, one of the key emerging technological trends involves connectivity and ease of communication. This goes beyond simply providing Wi-Fi in guest rooms and encompasses new technological advances that allow guests to connect all of their devices — such as laptops and phones — to the TV screen and use them in tandem. This requires appropriate power ports and high-speed connections. Another technological consideration involves catering not only to leisure consumers but also to business travelers. Therefore, it is essential to provide ergonomic workspaces that allow business guests to maintain productivity while away from the office.

5. Political Forces

Among the political forces likely to impact the business are the requirements for business permits and regulatory approvals.