Shangri-La Hotel and Resort

pic Prep argond By Yee Shan (Sarah) CHUNG, Yan Sin (Jessy) LI, Kim Sang (Anson) HO, Kit Yat (Donald) Thai Table of Contents 1. debut3 2. Summary of Macro Environment4 3. Summary of exertion Analysis8 4. Summary of Internal Analysis12 5. Gap Analysis14 6. Recommendations22 7. Appendices26 8. References52 1. Introduction Since the p atomic consider 18nt company, the Kuok Group, is open in 1949 and until 1979 the home-gr proclaim nirvana Hotel, Singapore, was unmortgageded its doors in 1971 and it was opened under the valet de chambre datement of westward International Hotels.However, promised land International Hotel Management Ltd was founded in 1982 and from that time until now, Shangri- La endeavoured through countless(prenominal) challenged from the Asiatic financial crisis to the outbreak of SARS in 2003 and a lot of different challenges, Shangri- La Hotels and Resorts (SLHR) recently was foreboded and located its properties premier city addresses and around of the w orlds roughly exotic destinations across Asia, Middle East, North the States and Europe. As of 2006, SLHR was the humongousst Asian based deluxe hotel group in Southeast Asia.The company managed a do of 50 hotels under three soils the five-star Shangri-La, the four-star Traders and Kerry with total inventory of everywhere 23000 way of lifes across 39 locatings. Furtherto a great extent, SLHR too join the stock trade of Hong Kong, Malaysia and Thailand. As of SLHR mission statement To delight our guests every time by creating engaging experiences straight from our heart, SLHR also produce unsanded inter division specialization such as Chinese theory spas which named the Chi in most of its establishment.The success of SLHR does not stop on that point expanding its mart or out jumpth their inventory, but the management always concern its competitors who apprise bring the founder growth and attend to base on SLHRs mavins. SLHR management also requires having st pas s judgmentgies for long term manoeuverning the organization. The bring forth of this strategic compend report is to pretend vision for organization in future by identifying and analysing the major macro-surroundal trends which believe the major issues ask to the future growth of SLHR.The report also quickly examines the five forces at bottom the application psychoanalysis to rough idea the current effectiveness of the constancy and also based on evidences to expect the future returns susceptibility of SLHR. Besides, to create the advantage competitive of SLHR, all of internal operations in term of resources and capabilities could inspect. Moreover, to come an overall the difference among the desired situation and the actual situation of SLHR, a gap analysis ordain be point out for bringing all analysis to guideher and base on this analysis gap, organization go out mystify an overall difference.Lastly, it is definitely not negligent in this report pass on be a list of recommendations which help formulating for SLHR in relation to strive to greater its seat in all commercializes in the future. 2. Summary of Macro Environment Macro environment or PESTE analysis is the first step in creating the Environmental Analysis. The macro environment examines the general clientele climate as it relates to the organisation, but the organisation has nothing to do with it. It has an continue to form Shangri-La Hotels by four different factors, such as Political or Legal, scotch, Socio-cultural, Technology and Environmental.These four factors had been analysed in the appendage 1, which is based on the Shangri-La over the world. The globular economic has to a greater extent than negative factors that feign the Hotels, world(a) Financial Crisis nowadays is one of the big issues for most of the industries around the world, as it leads recession which leave alone affect the finance of the countries or industries. Because of the Global Financial Crisi s, the unemployment rate of some countries is still increasing in the line of descent of 2012, such as Euro Area increased to 11%, Italy increased to 10. 0%, Spain and Greece has increased over 20%, but some of the countries be decrease such as Japan, Thailand, Turkey and Hong Kong(Trade Economic, 2012). The unemployment rate is increasing because of the damage of effort is increasing as substantially which the current financial situation is not technical lavish to support. People be more concern on footing or become price photosensitive now because of global financial crisis, as they go out think the product is worth with the listed price or not.Some of the countries had proclaimed Carbon Tax scheme which will affect the hotels, as every organisations take in to honorarium a certain amount for the carbon that they produced. These negative factors may leads the guests r bely go travel and propitiate in hotels because they go for less income, as the net income of Sha ngri-La Hotels Group had decreased to $253. 0 cardinal (Bloomberg problem Week, 2012). However, the Gross Domestic crop around the world is increasing while the inflation is decreasing in most of the countries. Same as the Economic factors, the Political also has more negative factors impact the hotels.Over 90% of the countries had established a legislation of minimum wages, the legislation is to prevent the employers when there is the intense market competition and they in commit to save be, at the same time the wages of the employees are uneffective to regard their basic needs. On the recent course of instructions, there are some conflict occurs amidst nations, for example, there was two attackers rammed a border post with a rubbish truck and threw two grenades, and then attacked policemen with knives in Kashgar, Beijing and a roadside bomb explosion in Diwaniyah.The most recent hotel bombing is the Marriott capital of In through with(p)sia bombing in 2009 because of ter rorism which leads at least 9 people killed and 50 people injured. For a hotel chain as Shangri-La, the properties are everywhere in the world, they need to prevent and consider about the locations political issues before or after they take over or establish a rude(a) Shangri-La. On the former(a) hand, some nations accept a legislation to see the people own arms or guns. But when the numbers of arms holding increase, the country and properties need to increase the risk as healthful (Shah, 2011).By having legislation of arms controlling is inviolable for Shangri-La. As in 21st Century, everything is creation extravagantly technology which means there are scores of freshly technology products invested and announced into the market such as 3D televisions and surrounding audio systems. When those products had announced to public, the guests may expect the hotels will have one of these products in house. Most of the technology factors are neither positive nor negative impact fo r Shangri-La, as the number of the internet users is increasing rapidly every year, more or less everyone will have at least one computer and smartphone.When most people have at least one technology product, some of the companies will down produce some up-to-date communication softwares and some new applications will announce to the amicableity. By the time when the number of internet users is increasing rapidly, Shangri-La can take advantages from that, as they can do merchandising via internet, especially the social networks (e. g. Facebook, Twitter, Myspace). The guests can book a room via their official website or some travel agents website, and Shangri-La can announce the latest news on their official website and social networks for the guests to read.For the manufacture, the socio-cultural has average impact. As the population in the world is increasing which is good for all the industries, there are more consumers to consume their products. But at the same time, the fluct uating death rate is increasing which is the age population is increasing as well, because the medical technology has been improving year by year, the people will have longer life than the past. Most of the people will expect a better whole step of life, such as for living and for travelling, they would like to have good experience on everything, especially on travelling and accommodation.Multi-cultural is a good for the job as well, because Shangri-La can accompany the culture and develops a different experience for the guests, for example, in India, Shangri-La can design an Indian style hotel to cater and adopt the environment to attract the guests to retard in. However, because of different culture and the religion of the culture, they need to understand and get cognise about these before they establish the hotel in a country or city. In addition, there are several environmental issues that affect the assiduity, for example, pictorial disasters will occur in some countries such as Earthquakes, Floods, Tsunamis and Hurricanes.Nowadays, natural disasters had become more serious and more often, because of the climate change within a tenner and global warming, ozone depletion are caused primarily by increases in greenhouse gases as Carbon Dioxide. Due to the natural disasters and the global warming, the lands will be destroyed and lead land shortage. Land shortage will influence Shangri-La as there is no enough land for it to build new hotels, it can exact them could not expand their business.While they building new hotels or running existed hotels, pollutions will be produced, for example, building new hotels will produce lots of dust and the lighting of running existed hotels as the light will open 24hours 7days. On the other hand, 3Rs policy has been announced as Reduce, Reuse and Recycle, the government encourages people to reuse and recycle the products that they used. According to Lincoln (2007) Shangri-La have a wide of environmentally friendly measures such as fitting all guestrooms with peeing saving device in taps and showers as well as using susceptibility-saving lamps in more than half of the groups guestrooms.For saving energy and resources, Shangri-La has variety of methods, as by rainwater harvesting, hot water labor using solar panels or arouse pumps and improvements in building envelope design to slim down heat loss or heat thread up as well as air filtration. Shangri-La also has several methods to reduce the greenhouse gases, such as through actual systems and processes, the use of new technologies and substitute energy sources and by building more efficient buildings. In summary, the luxury hotel industry has opportunities and brats associated with the macro environment. in that respect is variety of positive, balanced and negative trends.There are still opportunities for reasonable growth in this industry despite the threats. 3. Summary of attention Analysis Industry environment has a more direct effect on the firms strategic scrap and ability to earn above-average return as discriminate to the general environment (Misangyl et. al, 2006). Hitt et. al (2011, p. 51) mention Industry analysis will be using the five forces model of competition such as the threats be by new entrants, the power of fork overrs, the power of buyers, product substitutes, and the intensity of arguing among competitors to understand the profitability voltage within the industry.The strength and interaction of the five competitive forces are what influence profit potentiality. This section will discuss about the industry analysis of hotel industry and a more detailed analysis can be seen in Appendix2. The threat of entrants in the hotel industry is not significant which leads to heights up industry profitability. New entrants need to have sufficient amount of budget in order to build and run the hotel such as require substantial upfront coronation in building, specialized equipment, infrastr ucture and staffs.Products and service are easy to replicate in hotel industry, therefore, brand indistinguishability is the differentiator in the hotels. It is difficult for new entrants to gain access to the capital requirements needed to develop and build hotel. The industrys incumbents have established relationships and experience, which enables them to achieve significant embody savings. In addition to brand devotion and be the new entrants must also contend with the probability of retaliation from the established hotels. The xisting businesses in the industry have a high school degree of absolute comprise advantages as they have reinforced good relationship and cartel between the suppliers and customers. The number of suppliers to the hotel industry is extremely high. The types of suppliers for hotels include construction suppliers, monopoly suppliers such as electricity, gas and water, furniture suppliers, linen and bedding suppliers, food suppliers, decor suppliers, appliance suppliers, uniform suppliers and most importantly then staffs. The suppliers have median(a) poting power which will affect the attractiveness and profitability of the industry.There is high tautness of suppliers. However, the majority of hotels have regional contracts with suppliers. This locks the hotel companies into using certain suppliers and creates switching costs. The brashness world sold to the industry is important to the new materials sources suppliers and equipment manufacturers because hotels will purchase in bulk to operate the business. Contracted suppliers costs and employees costs are high because they are needed to work for the operation of the business. These suppliers have high dicker power.However, they are unable to bargain and will make close to their crush offer at the first opportunity in order to gain profit for their business. Differentiation of outputs from suppliers is necessary to deliver transaction in order to be more profitable in th e industry. Hotels and resorts are part of the accommodation in the lodging industry. Rooms are passing perishable products. There are other options to stay when the customers are away from home such as apartments, condos, cabins and town houses. Buyers have high bargaining power in choosing the accommodation that they would like to stay.Hotels can create differentiation strategy to add valuate to attract customers such as dealing with the pricing strategy, good customer services and let up-to-date technology in the hotels. However, there is high concentration of buyers intercourse to the industry. There is very little threat of half-witted consolidation from the consumer due to the high costs of start up in the hotel industry. Hence, when the buyers have medium to high bargaining power, then the industry profitability will be menial. Substitutes to the hotel industry have a high level of power which leads to kickoff industry profitability.There are a lot of substitutes in t he industry. Leisure customers have more alternatives when they travel overseas as well as business customers, they can plan whether to fly to a city in order to have meetings. Nowadays due to the advance technology invented, Internet helps the business people a lot. Business man can do video-conferencing in their own country without flying to other country. This helps the business to save a lot of coin. In regards to leisure customers, they have more choices to choose such as staying in dress shop hotels, motels, apartments, camping, cruise ships and even caravan.Substitutes gave greater power. The substitutes can provide similar services and products and providing better value for property which make economic sense for buyers to switch. The intensity of rivalry in the industry is medium to high which leads to impoverished industry profitability. Hotel industry is in mature stage, there is no industry growth. With the increase of competitors such as the refinement of luxury Asi an brand Mandarin Oriental, it makes it difficult for the hotels in the industry to maximize its profit by strengthening its occupancy rates.The high cost of building, furnishing and servicing the hotels in the industry create high fixed costs and high exit barriers. This increases rivalry as they need to maximize profits to have significant returns on investment. It makes it difficult to withd bare-ass from the industry and has to compete with other existing rivals. The level of vicissitude among the companies is medium because the majority of the hotels provide similar types of high character service. Due to this reason, it is easy for buyers to switch from one competitors product to another.While there is great rivalry in this industry, there are opportunities for expansion into national and international markets. Moreover, there are many another(prenominal) stakeholders involved and large dollar investments, thus, it involves high inscription from every members in the organ isation. Overall, analysis of the five forces in hotel industry found out that hotel industrys attractiveness is rated as medium-low in terms of the potential to earn adequate or superior returns.It is considered as a partly unattractive industry because it has low entry barriers, medium to strong bargaining beat of suppliers and buyers, strong competitive threats from product substitutes and intense rivalry among competitors. 4. Summary of Internal Analysis Internal analysis is an analysis about the organisation itself, it finds out organisation resources and capabilities to create value to customers and identify area of weaknesses to be addressed by future strategic and evaluate core competencies (Evans, Campbell and Stonehouse, 2003).Acknowledging those resources and capabilities can understand company face and competitive advantage to achieve superior performance and profitability by strategic (Hill and Jones, 2012). Resources Tangible enlightenment group comprises 110 hotels and resorts throughout Asia Pacific, North America, the Middle East and Europe. In future development more than 20 hotels and resorts will be built in variety countries. Revenue has ontogenesis up nearly a quarter from 2009 to 2010, US $1,729 million to US 2,145 million.But, Share of profit of associates of hotel operation total is 15. 0, and billet rentals total is 47. 7. Intangible Shangri-la group has great reputation in public, goodwill value is US $84,504,000 in 2010, because create green image to public, Sustainability is umbrella brand which has several action to reduce energy consumption, waste water and carbon dioxide emission. It shows the low turnover rate, this is because company pays respects, cares and aware their employee and provide work-life balance computer class to move staffs to work productively and efficiently.Capabilities It has strong human resource capabilities which is compare to others hotel property, the staff turnover rate is low, Shangri-la provide a series training to staff ensure reach service concurrence that ensure meet the expectation of service quality, so this is the competitive advantage. The distribution channels are potently developed, it has several internet distribution channels, e-commerce is the best way to deliver and cause information nowadays.However, the product differentiation, merchandise and management are not strong enough to be core competencies. 5. Gap Analysis Macro-environment Business Strategy Gaps Trend Date of daze Business Strategy match or Mismatch Economic Growth in Asia 1-5 years gather Currently Shangri-La group is focusing on growing the (especially in China) market in China. Euro economic crisis 1-5 years Match Europe is not an essential market segment for the Shangri-La group and does not have big influence on the hotel financial performance Increasing value of Chinese Now and ongoing Mismatch As the exchange rate of RMB is acquire higher, tourists RMBs prefer going to other Asian countries while China is the main market for Shangri-La Green Awareness Now and ongoing Match Shangri-La really makes an effort on sustainability, creating a green organisation image to the public and gaining goodwill from that. Use of Technology Now and ongoing Match Shangri-La occurs significant resources on network promoting, for example customer can book a room through Shangri-Las Facebook Diminishing Target Demographic 3-5 years Mismatch Even Shangri-La group has other brands like Traders and Segment Kerry, but the target market is also focusing on up-scale market. Industry Environment Business Strategy Gaps Industry Environment Element Opportunity of menace operation on Industry Profitability Business Strategy Consistency or Inconsistency Suppliers Natural medium Consistent Buyers Threat High Consistent Threats of New Entrants Opportunity High Limited Consistency Substitutes Threat High Limited Consistency Rivalry Threat High C onsistent Government Opportunity and threat Various by Location Some Consistency Complementors Opportunity Low Limited Consistency let out Competitor Business Strategy Gaps Competitor Physical dirts Decision Making Values ECONOMIC operator Recession shun Global Finance Crisis, strike down money discreetly (Shah, 2010). goodly & Service Tax, spend more money in good (Kalia, 2010). Negative Some of the countries had announced Carbon Tax which increase expense (World News Australia, 2012). Negative Gross Domestic Product is increasing which stimulate people spend in hospitality (The Economist Online, 2011). substantiating People are more concern on price due to Global Financial Crisis Negative High Labour cost, especially in China grow up rapidly fast. The inflation in most of the countries are decreasing , China still growing so fast (Global- reckons. com, 2012) Negative The unemployment rate in most of th e countries are decreasing (Trading Economics, 2012) Positive Negative (China) Positive Overall Negative POLITICAL/LEGAL FACTOR Around 90% of countries had established a legislation of minimum Negative wages that increase labour cost extremely (Herr and Kazandziska, 2011). Conflict between nations, it is not safety for travelling that Negative influence hospitality industry (Global Conflict Map. com, 2011)( The World Bank, 2011). weapons system control in some nations, limit import and export goods (Shah Positive 2012).For instance, North Korea has strict control rules in hospitality industry. Overall Negative TECHNOLOGICAL FACTOR Growth of Internet with fast broadband can assists consumers to Positive search for rooms uncommitted via websites. They can make reservations easily which help the costs of industrys marketing activities. Communication software or technology improved every year such as Positive Facebook and Twitter are Social Medias for marketing. Many new technology products announced into the market, energy Positive saving light reduce pollution. For example, the installation of solar energy system in hotels which can help saving the budget of the company. Overall Positive SOCIO-CULTURAL FACTOR Fluctuating Death Rate which mean age Population is increasing Negative (Population Reference Bureau, 2011). Expectations of service quality. Consumers now expect to get intangible experience and want to be recognized by the employees. Negative As long as the industry keep up the standards with what the customers are expecting then it will bring positive effect to the industry. The number of population is increasing over the world it increases the workforce and potential customer (Rosenberg, 2011). Positive Multi-culture around the world, get knowledge and technique exchange. Positive Overall Balance ENVIRONM ENTAL FACTOR Greater awareness in global warming issues is a concern.Energy Negative consumption needs to be considered to reduce greenhouse gas. The most cost-effective greenhouse gas reductions can be made by using existing low technology in building insulation, lighting, air-conditioning and water heating systems and electricity standby (Enkvist et. al, 2007), (Fenger and Tjell, 2009). Climate change (Shah, 2012) & Global Warming (National Geographic, 2012). For example, mountainous areas reduce snow wield and winter tourism southern areas decrease summertime tourism period. Negative Water use management, reduce water use is a long-term strategic. (Queensland Government, 2012) screw up disposal management, Use filters in deep fryers to extend the life of cooking oil or deal to driver(Lincoln, 2007) Indoor air quality, more countries forbid smoking in indoor than Positive last decade(Lincoln, 2007) 3Rs (Reduce, Reuse, Re cycle) reduce waste cost in daily operation. For instance, use mugs to instead of disposable cups (USA Positive Recycling rapidity Service, 2012) Some countries may need to face the natural disasters, e. g. Earthquake, Tsunami, and Hurricane (Shah, 2011). Negative Land Shortage in nations, less land available, so the cost of land is become expensive. For example, rise around 9% of the total Positive property price, since 2001 in Australia (Hopkins, 2012),(Asia for Educators, 2009), (Your Investment Property, 2012). Negative Negative Overall Negative 2. Industry Analysis Forces Issues Impact Threats of new Economies of scale ordinary entrants New entrants need to have a certain large-scale production and huge finance because hotel industry requires substantial upfront investment in building, specialized equipment, infrastructure and staffs. lesser lodges will find it difficult to enter to the industry and compete w ith Shangri-La Hotels and Resorts because it requires large investment, however, the other known brands hotels such as Marriot International, Hyatt and Hilton might find it easier to build new hotels. Proprietary product differences Medium Product differentiation in hotel industry is low. It is congenerly easy to replicate differentiation such as the products and services. each hotels and resort can provide rooms that meet the demands of the customers and also train their staffs well to provide individualised service. However, Shangri-La Hotels and Resort have built good brand and reputation thus, it is the differentiator to compete with other new competitors. Brand identity Low Shangri-La Hotels and Resorts have built a good brand image in the mind of customers. Shangri-La Hotels and Resorts is already the leader in Asia (Dogan, 2010). They have established high product differentiation and brand loyalty.Other new brand hotels that want to come into the industry, they have to spend lots of costs to attract the customers to be competitive advantage. Buyer/customer switching costs Medium It is wide and easy for customers to switch costs. Customers can be easily attracted to different hotels that offer more value for money, or affordable prices. Due to the presence of Internet, customers will search and compare the hotels price via websites. Loyalty program can prevent the guests from switching costs. Capital requirements Low High capital requirement is required for new entrants even though the competitors plan to do franchise, merger and acquisition, there is still high investment costs involved such as costs of inventories, high risk and law return situation and marketing activities. Hubbard & Beamish (2011, p. 76) state New entrants with good ideas but without finance are unable to break into the industry. Access to distribution Low New entrants may have limited sources to access s uch as raw materials and distribution channels, as existing hotels have regular customers and partners. Absolute cost advantages Low The existing businesses in the industry have a high degree of absolute cost advantages.They have built good relationship and trust between each others already establish hotels experience, favourable raw materials, advertisement expenses and favourable location. Thus, it is hard for new entrants to enter into the industry because there is low level of trust and familiarity with the suppliers. Government policy High Depends on the countrys regulations, government has the opportunity to set many restraints in the industry or encourage and facilitate the development of hotels. Expected retaliation High vengeance is expected as existing hotels will low down price and promotes some packages to attract customers. erratic and differentiated products by diversifying it can therefore persist the retaliation. boilersuit R ATING LOW MEDIUM dicker power of Differentiation of inputs Medium supplier Suppliers input is crucial to the final product. Good quality of the products and services provided by the suppliers will create a good outcome.Hence, it will have to wage increase the economy of the business. Hotels in the industry are the buyers and the producers of inputs that are the suppliers (Buffett & Munger, n. d). There are many suppliers involve in hotel industry such as The construction companies tend to have a particular strong position when it comes to the hotel owner who would like to build a hotel. Thus, it strengthens the power of being a supplier. Monopoly suppliers who control electricity, gas and water supplies have high bargaining power. Hotels need to spend lots of money in the operational costs. Hotels need to buy Property Management System and Point of Sales to help the effectiveness of business operation. Hotels also need to buy amenities product s, chemical products and raw materials for catering. Moreover, it needs to spend money on aliment and servicing the equipments.If the hotels are locked into a contract, then the power of suppliers will be cut back, they cannot increase the prices when they want to. Hotels are in the service industry. Hence, it needs people to provide exceptional services to the customers. High education and good experience employees will have higher bargaining power. They may negotiate the wages that they would like to receive and they think is reasonable before working with the hotels. Hotel customers are fragmented. Hence, as a supplier to the customers, the argaining power is low because there are substitutes that the customers can choose such as Marriott International Hotels and Hilton Hotels. Switching costs of suppliers and firms in the industry Medium Suppliers have power if there are few firms supplying the product or if there is no reasonable substitut e for it (VBulletin Solutions, 2012). However in large hotel chains, many things are done by signing contract legally. Legal costs may increase if one party is not working as per contract listed. Thus, the switching cost is low. Supplier concentration relative to industry concentration Medium There are high concentration of suppliers to choose from for Shangri-La Hotels and Resorts. Therefore, the suppliers have lesser power. grandeur of volume to suppliers Low The volume being sold to the industry is important to the raw materials sources suppliers and equipment manufacturers because Shangri-La Hotels and Resorts will purchase in bulk to operate the business.Shangri-La Hotels and Resorts have a great deal of power over the suppliers when purchasing raw materials sources and equipments. damage relative to total purchases in the industry High Supplier cost is a huge part of the total cost. Contracted suppliers costs and employees costs are high b ecause they are needed to work for the operation of the business. Suppliers retain the power. Information about suppliers product Medium Hotels are highly aware of the quality of the products they purchase such as raw materials, equipments and even labour sources. Hotels will not take the risks to change the suppliers before they did research and compare the market price among the suppliers industries. Supplier profitability Low Hotel industry has higher profitability as compare to the supplier industry.Suppliers will be unable to bargain and they will make close to their best offer at the first opportunity in order to gain profit for their business. Decision makers incentives Medium Hotels need to motivate their employees by giving incentives in order for them to provide good service to the customers. Hotels will do promotional packages when it is in low season to attract more customers to stay in the hotel. Threat of forward integration Hig h Suppliers can sell their products via Internet and even to the supermarkets. They have the power to enter the industry (Hubbard & Beamish, 2011). OVERALL RATING MEDIUM Bargaining power of Differentiation of outputs High buyers Customers determine the profitability of the hotels business by choosing which one they would like to stay with, they have high bargaining power to choose.Hotels create differentiation strategy to add value to attract customers such as Customers place products and pricing strategy at first. For instance, the hotels should plan for low price strategy during low season or include complimentary goods for customers. Staffs provide good quality of service. Good geographic location which convenience the guests. Good atmosphere of the rooms and restaurants. go out service for disable such as have disabled rooms in the hotels which located in the first floor to convenient the handicapped people. Switching costs of buyers Hig h Shangri-La Hotel and Resorts have created a loyalty program named Golden Circle to attract existing customers by earning points and then the customers can ransomed for hotel stays, dining or spa experiences at anyShangri-La hotel, resort, Traders hotel or Kerry hotel (Shangri-La International Hotel Management, 2012).Thus, this group of customers will most likely be repeat customers and choose to experience services from Shangri-La Hotels and Resorts. There are low switching costs for customers. Presence of substitute outputs High There is an important level of the industrys output has to the buyer. Hotels and resorts are part of the accommodation in the lodging industry. There are other options to stay when the customers are away from home such as apartments, condos, cabins and town houses (CarrHallCastle, 2012). Industry concentration relative to buyer concentration Medium Low Tourism industry is growing rapidly and the demand of hotels for cus tomers increased. Travellers are highly concentrated relative to the industry, thus, the buyers do not have lots of bargaining power. Importance of volume to buyers High Large volumes of customers are expected to stay in the hotels because they are the main source of income for hotels to pose profit.For example, tour operators, who book thousands of customers into hotels, have a strong bargaining position and can demand lower prices from hotels. Rooms are perishable, thus, hotels must try to meet the occupancy level. Buyers have more bargaining power. Cost relative to total buyer purchases Medium Corporate customers might invest large amount of money into the hotels when there is conference happens. They will reserve lots of rooms and meeting rooms. Therefore, they have more bargaining power. Buyer information about the industry output High Customers can survey on the best firms that offer great services. They can have service from the trav el agents, corporate travel consultants, internet and words of mouth to determine where they can get the services that they would like to experience. Positive words of mouth will build good reputation and image to the hotel whereas bad words of mouth will badly impact the business of the hotel. Buyer Profitability High Customers have the freedom to choose which property they would like to stay in and dine for. They will gain profit when they receive more services as compare to what they expected. They are still holding high bargaining power. Decision makers incentives Low When there is a large group coming to stay in the hotel, hotel will provide a discount price. Threat of backward integration Low It is impossible for individual customer to enter the hotel industry due to large investment required. OVERALL RATING MEDIUM HIGH Power of substitutes Relative price/performance of substitutes High Hotelmule (2008) states unvarying developments in technology keep changing the potential threat from substitute products.Technological advancements in the internet make the overall market to be more efficient and at the same time expanding the size of the potential market and create new substitution threats. For example, video-conferencing has been used instead of holding a conference in hotel. Business customers tend to travel lesser. The substitutes for lodging such as camping, hostels and motels, the invention of cruise ships and trains causes travellers to have alternative choice when travelling to another country. Switching costs High It is easy for buyers to switch costs, thus, the substitutes have greater power. Buyer propensity to substitute High Substitute products or services will be a threat. Capon (2008, p. 63) states This can be achieved by the substitute being equally good and cheaper, or by it being equal on price, but offering a better product or more added value.When other lo dges such as apartments, condos, cabins and town houses providing similar or equally good function and providing better value for money, it may make economic sense for the buyers to switch. OVERALL RATING HIGH Intensity of industry Industry growth rate High rivalry There is no industry growth. The hotel industry is in mature stage. Severe industry rivalry occurs. High fixed costs High The high cost of building, furnishing and servicing the hotels in the industry create high fixed costs. This increases rivalry as they need to maximise profits to have significant returns on investment. Shangri-La Hotels and Resorts must sell more rooms to cover those costs and increase hotel market competition. Hence, it makes it difficult to withdraw from the industry and has to compete with other existing rivals. sporadic overcapacity Medium Due to there are a lot of competitors in the market, there might be a lot of rooms that are available and cannot be sold out. Product differences High There are no product differences because majority of hotels provide similar types of high quality service. Products and services in hotels are easy to imitate.It is difficult to reduce the rivalry through the differentiation of the products and services. Brand identity Medium-High Brand is important because through branding, a business can stand out of the crowd. People remember the organization and will choose to go to the well-known hotels as it can heighten the level of self compliments and be part of the social group. Shangri-La Hotels and Resorts have developed their brand name and are well known in worldwide. However, other hotel groups such as Marriott International and Starwood have great brand identity as well. Switching costs High It is easy for buyers to switch from one competitors product to another industry rivalry will be increased (Hubbard & Beamish, 2011). Thus, Shangri-La Hotels and Reso rts create a loyalty program named Golden Circle to retain their customers. Informational complexity Medium-High Consumers can look at rooms available in different hotels and compare prices online. Internet will have information about the price and service differences. Furthermore, some hotel websites provide virtual tours which introduce the guests about the real experience spending time in the hotels. There are also lots of travel websites such as trip advisor which provide guests review about the hotels. Information is readily available on the Internet. Thus, industry rivalry is enhanced. Concentration and balance High Cline (n. d) mentions Hospitality customers increasingly seek predictable services that support their ability to move quickly and easily around the world. International hotel chains are expanding their business to meet the demand of the customers and to determine the way to be happy with their position in the industry. Hence, rivalry will be significant. Diversity of competitors Medium The level of diversity among hotels is medium because majority of the hotels provide similar types of high quality service. However, some hotels like Marriott International it diversifies its business into planning and organizing wedding events for the couple who would like to marry. Marriott provides free assistance from certified wedding planners and help with everything from selecting centrepieces to