Shangri La Hotel Ltd Case Study-Report2

Company Perspectives: The name Shangri-La was inspired by James Hilton's legendary novel Lost Horizon. A tranquil haven in the mountains of Tibet, Shangri-La casts a spell on all who resided there. Today, Shangri-La stands as a synonym for paradise. And even though mythical in origin, the name perfectly encapsulates the genuine serenity and service for which Shangri-La Hotels and Resorts have come to be recognized. Key Dates: 1971 : Robert Kuok extends interests into property and hotel development, building his first hotel in Singapore. 1981 : Kuok establishes a second hotel in Kowloon, launching the Shangri-La brand, and entering direct hotel management. 1982 : The company incorporates as Shangri-La Hotels & Resorts. 1984 : The company opens its first Shangri-La hotel in Hangzhou, China. 1989 : The mid-range Traders Hotel brand is launched, with the first site in Beijing. 1995 : The company establishes publicly listed Shangri-La Asia, which acquires the Kuok-owned hotel properties, and then goes public on the Singapore and Hong Kong Stock Exchanges. 1996 : Shangri-La Asia buys 15 hotel sites under development in China from the Kuok-owned companies. 1997 : Shangri-La Asia acquires Shangri-La Hotels & Resorts, creating an integrated hotel ownership and management group. 2005 : Shangri-La Asia announces plans to add 15 new hotels in China, five hotels in Europe, and hotels in North America, in order to reach a total of 100 hotels by 2010. Company History: Shangri-La Asia Ltd. is the Asian region's leading and fastest-growing luxury hotel group. The company, part of Malaysia's Kuok Group, operates 45 hotels throughout Asia. In 2005, the company also began a drive into the European and North American markets, including the launch of construction on its first European hotel, in London, expected to be completed in 2009. The company also has opened its first hotel in the Middle East, in Dubai, and in the Maldives. Mainland China, however, forms the heart of the company's empire, with more than 20 hotels in operation, and at least 15 more expected to open before 2010. Shangri-La is unusual among international hotel companies in that it owns a significant proportion of its hotels; of the hotels under the group's management not wholly owned by the company, most are owned by other companies in the Kuok Group, and especially by Shangri-La's own major shareholder, Kerry Properties Ltd. Shangri-La hotels primarily operate under the luxury, five-star Shangri-La brand. The company also operates a smaller number of mid-range, business-oriented Traders hotels. Listed on the Hong Kong and Singapore Stock Exchanges, Shangri-La remains a tiny part of the Kuok business empire. Nonetheless, founder Robert Kuok holds an active interest in the group, and has stated his desire to see Shangri-La reach 100 hotels in his lifetime. In 2004, the company posted revenues of $726 million.

SHANGRI-LA HOTEL LTD STATEMENT OF THE PROBLEM How does Shangri-La Hotel maintain its level of service quality standards in hotel industry as it expands into new markets?

OBJECTIVES: Long-Term Objective: To expand the Shangri-La brand globally and explore opportunities to operate hotels gateway cities and key resorts around the world. Short-Term Objective: To maintain its reputation as a leading hotel in the Asia-Pacific lodging industry.

SWOT ANALYSIS  Strengths • Uncommonly high service standards • Awards and recognitions received • Remarkable hotel features and facilities and amenities offered • Strong brand name and company reputation  Weaknesses • Losing market share to rivals • Failure to understand cultural differences • Higher overall unit costs relative to rivals  Opportunities • Gain market share in North America & Europe • Increase presence in China & Asia • Relaxed travel restrictions • Rising urban incomes • Operational efficiency due to building design.  Threats • Loss of employees to rivals • Increase in the cost of labor • Current economic situation

AREAS OF CONSIDERATION 1. Company Strategy Shangri-La Hotel is adopting the generic competitive strategy of focused differentiation strategy targeting narrow market segment or market niche. Advantage: The company’s strategy of investing in relatively unknown areas had placed it in a strong position to profit. Disadvantage: The risks associated with a differentiation strategy include imitation by competitors and changes in customer tastes. 2. Actual Choice of Locations Shangri-La takes that the actual physical location chosen for a hotel would be extremely important to the success of its operations. Shangri-La saw potential in developing its position in lesser-known and smaller cities. Advantage: In this way, the company’s properties became first – and often only – luxury hotel in a given area. Many of these cities nonetheless had populations of five million or more, and represented important industrial growth areas. Disadvantage: 1. Aggressive marketing programs should be considered and these will incur an additional cost. 2. Shangri-La has to make a careful assessment of costs. The ideal location would be one where costs are minimized. 3. Competitive Pressures The big threat on expansion of other hotels are started to pop up especially western hotels. Advantage: Since competition is concerned, Shangri-La will improve its product and quality service to retain the loyalty of its customers and will consider offering more services compared to competitors. Disadvantage: In order to maintain the loyalty and satisfaction of customers, difficulties in retaining customers is very alarming, the same also with the loyalty of its employees to stay with Shangri-La.

ALTERNATIVE COURSES OF ACTION 1. The Friendliness and Efficiency of Hotel Staff Company training is the most important thing that needs to be considered of. Training program for Shangri-La let their workers experience all types of job before they appointed to the next upper position. Advantage: These will guarantee excellent quality product and service to customers with a well-trained and well-experienced and customer-oriented management and staff. Disadvantage: Some employees are taking advantage of the training offered by ShangriLa. After attaining extensive training, other employees are pirated by other companies. 2. Renovation and Expansion In its continuing efforts to provide a higher quality of service to the guests and to enhance the hotel’s performance, several renovations and expansions have been done. Advantage: These will encourage more customers to choose and avail the services offered by Shangri-La. This means that Shangri-La is giving priority and uncommon comfort and services to its customers. Disadvantage: Renovations may affect the service quality of Shangri-La because some of its accommodation and entertainment outlets are under constructions and improvement. And this will consider an additional cost for Shangri-La.

RECOMMENDATIONS  Product Differentiation – Hotel  low to high quality hotels to increase market share  provide more service to hotel  accommodate casino, restaurants, entertainment, tourist attractions – Merge local hotels  Local hotel with low star rating – Gain market share – save construction cost