Managing Global Hospitality - Essay Example

Managing Global Hospitality Inserts His/Her Inserts Grade Inserts (04, April, Introduction Global hospitality industry is growing at a good pace. The increase in holiday trends is one of the reasons of the growth. People now try to visit to different tourist destinations in their leisure time. Globalization has also contributed towards this trend and people all over the world get to see more and more beautiful destinations on television and internet. But with growth hospitality industry globally is also encountering many issues like regulations, natural disasters, high cost of service and greater competition. This has caused many global giants in the industry to look for new avenues of investment. In this essay such a giant named Shangri-La Hotels and Resorts will be discussed. The company is opening up a new hotel in United Kingdom and issues that the company will encounter in this endeavour will be discussed. The paper will also include a set of recommendations that will help Shangri-La in solving these issues. Background of the Company Shangri-La Hotels and Resorts is one of the largest hotel chains of the world. The company started its operations in 1971from Singapore but currently it has hotels and resorts in around 17 countries all over the world. The company grew in Asia at a very fast pace and right now has a significant market share in Asia. Overall the company has presence in all continents of the world except Africa. Company is also planning to open a new hotel in London in 2012 (Shangri-La Hotels Website, 2011). The company has wonderful customer service and has won many awards for of excellence. The diversity at the Shangri-La Hotels is very well known all over the world (Clark & Chen, 2007). Shangri-La Hotels are high class hotel and are catered towards the rich class and for this reason a high quality of service is maintained. The company is also planning to expand in China, Canada and India in years to come. The brand name of the company is prestigious and known all over the world. The expansion of the company is based upon the innovative practices of the company. The company is trying very hard to develop itself and to keep itself at pace with the growing world of hotels and resorts. For example with the growing use of internet gadgets Shangri-La Hotels and Resorts have started providing customers with free internet in the hotels (IT Group, 2008). Growth strategy of the company is based upon its innovation practices. Key Issue: London Hotel 2012 The company is currently trying to set up a new hotel in London which will complete in 2012. The hotel is placed at the Shard and will be a luxury hotel catering to the usual clientele of the company. But this new hotel project poses many challenges for Shangri-La Hotels and Resorts. The company is very good at managing its growth strategy but because the base of most of its operations is in Asia, cultural diversity will be an important issue that has to be tackled. Shangri-La Hotels and Resorts have a prestigious brand name and they are very well known in Asia but this project is the first project of the company in United Kingdom. This poses serious problems for the company. The brand of Shangri-La Hotels and Resorts is developed in Asia and the culture of Asia is quite different from that of United Kingdom. The service quality that is commended in Asia may not even be tolerated in United Kingdom. These cultural differences will prove a hurdle for the company. Also United Kingdom is a vast market for hotels and resorts. Any initial problem can ruin the brand name of the company. Shangri-La Hotels and Resorts should look forward to opening more hotels in UK in future. For this reason a good start is pivotal for the company. International operations have a huge impact on hospitality industry because the company has to adjust with different cultural settings (Olsen & Roper, 1998). International operations are important in hospitality business because this industry is capital intensive in nature. Big players mostly own large hotels and they have the money to expand their business to other countries. Also tourist destinations are limited in a particular geographical location and this is also a reason why international operations are almost a must for hospitality industry. When doing operations companies have to make sure that they are maintaining their brand name and preserving their image but at the same time they have to adapt to the new settings. The problem Shangri-La Hotels and Resort is facing is that they are used to working in an environment that is very different from that of London. Asia is a market where hospitality has different meaning. The collectivist culture of Asia is somehow totally opposite to that of United Kingdom. In UK people are more independent and want more space while Asian people like people around them. This simple difference can create a host of different problem for the Shangri-La Hotels and Resorts. The design of the rooms will be have to be adjusted and the whole design hotel would have to be made according to the new settings but these are not the main issues. The main problem will arise when services will be given to the customer in London. The level of service will have to be different from that of company’s many Asian hotels. The company is famous for its impeccable customer service so this will have to be maintained but at the same time space should also be given to the guests. In London people with large families won’t come to stay like that in Asian countries. Couples or individuals will visit the hotel and activities and services will have to be defined according to them and not for large families. These small differences will have to be accounted for if the company has to establish a strong name in the London hospitality industry in UK. The market of UK is very diverse and there is space for a company Shangri-La Hotels and Resorts to establish its name among the top hotels of UK and for that the first step is decisive. Another difficulty the company will have to face will be with regards to the brand loyalty. Although Shangri-La Hotels and Resorts is a very famous company but it does not have loyal clientele in United Kingdom. The company will not only have to attract customer but will also have to inculcate a sense of loyalty in them and that is very expensive because of the advertisement costs and the operational cost associated with it (Tepeci, M. 1999). Human resource will also be a problem for the company. Employee retention is a very serious issue in the hospitality industry all over the world (Iverson & Deery, 2007). In Asia and in Europe the company will have to deal with it but the problem is that the strategies for dealing with the retention problem are different in different regions. In Asia for example employee growth is the main reason of low retention and in Europe compensation is important for employees (Dr. Manhertz Jr. 2010). This difference is important for the company because it can affect the policy that the company is used to. New policies regarding retention would be needed if the company has to perform in an effective manner in United Kingdom. Retention is an important issue for Shangri-La Hotels and Resorts because they have a philosophy of training employees at all levels (Gupta, R. 2007). Another human resource issue that Shangri-La Hotels and Resorts will face is the diversity in United Kingdom. In Asia there are usually local people are employed because the earning potentials are not considered to be great in Asian countries so people do not usually travel to Asian countries in order to find a job. But when it comes to United Kingdom it is a developed country and people regularly come to UK in search of job opportunities. Because of this the work force of United Kingdom will be very diverse in nature. It will be a really tough job handle the diverse work force for the company. If they will hire a local specialist then he might not be well aware from the practices and culture of the company. On the other hand if existing managers are hired then they might not be able to deal with diversity of UK. The company will have to solve this problem in order to avoid a catastrophic loss of repute in the new market. The competitors of the company will not experience this problem because in UK diversity is very well managed in the hospitality industry (Maxwell & McDougall, 2000). Hospitality industry is a service industry and the role of employees in this industry is far greater than in manufacturing industries. A bad mistake even at a lower level can cause an expensive lawsuit for the company and can bring defamation to the brand name of Shangri-La Hotels and Resorts. There is less roam for mistakes so choosing the right people to work with is essential for the company. Any bad choices can damage the company and this is an important issue the company is facing in this new project. Cost effectiveness is a major issue the Shangri-La Hotels and Resorts will face when they start their operations in London. Labour in Asia is extremely cheap as compared to United Kingdom. The minimum wage set in Asian countries is quite low and even that is not followed to the line. This makes the work of company extremely difficult in London because they are used to providing excellent quality of service. In Asian countries their staff to guest ratio is 3 to 1! This is a surprising number but due to cheap labour and the high returns they earn in Asian countries they are able to maintain such a ratio. This ratio can only be kept in UK if the company immediately gets high valued customer which is close to impossible. This means that the company will have to lower this ratio and that can affect the efficiency of the company. Service of Shangri-La Hotels and Resorts is very good because they have a huge staff to cater to guest demands. In UK they will not have the same number of staff and this means that they will have to encourage their lower staff to work hard. This is a problem at all levels of management. The company will have to shift its policy somehow to solve this problem and this can have enormous consequences on the revenues. The economic condition of the country plays a direct role in the revenues of hotels (Kanjilal, G. 2008). The relationship is quite obvious because if the condition of the economy will be good only then guests will come to the hotels otherwise not. Economic condition of UK is not excellent at this point but the situation will improve due to the Olympics in 2012 in London. But economic conditions in UK can affect Shangri-La Hotels and Resorts and their new venture. The company comes from a region where despite of not so good economic conditions rich people earn a good fortune and they spend it in places like Shangri-La Hotels and Resorts. This will not be the case because the standard of living in UK is higher than that of Asian countries so the company will be targeting not only the filthy rich class but also the business class of UK. Bad economic conditions can surely affect the profits of this class and in turn the gains of the company. Political condition of UK is quite smooth and will not cause much concern for the company but the laws are very strict in UK. In Asian countries laws are not usually followed but this will not be the case in United Kingdom. Laws like that of minimum wage, employee benefits and environmental laws will have to be followed. This can be a point of concern for the company as it comes from a region where these laws are not paid attention. Sustainable environmental policies will be important for the company because they can themselves attract customers towards a business (Jones, P. 1999). In United Kingdom people are more conscious than in Asian countries about environmental issues. This is another area where the company will have to look into. It is basically an extra cost that Shangri-La Hotels will have to incur when working in UK. This is not the cost which they accounted for in Asian markets and still they had a dominant presence in that market. Recommendations for Shangri-La Hotels and Resorts This section will include a set of recommendations for the company with regards to the problem it is and will be encountering in its operations in London in 2012. First of all the company will have to rethink its business strategy. It is used to making decisions in Asian markets but now its managers will have to think according to the United Kingdom market. They will have to forget all their strategies that paid and are paying them valuable profits in Asia. The realization that new sets of strategies will be required to solve the problem the company is facing and will face when the hotel opens. Shangri-La Hotels and Resorts will have start analyzing the culture of the country. United Kingdom has a diverse group of residents so the company should identify its possible clientele and design its marketing plans and strategies according to their target audience in the country. After identification of the target market the cultural settings of this market should be analyzed and learned. A good organization always does its homework and train employees according to the type of clientele the company will have. The cultural practices of the target group should be told to the employees and this can help the company in many ways. A traditional gesture to a Scottish guest for example can make the guest feel like at home. Managers are trying to bring the culture of organization in line with that of the region or the country they are operating in (Ogbonna, & Harris, 2006). This is what Shangri-La Hotels and Resort has to do in London. They have to rethink their organizational culture and bring it line with that of their target market. Cultural problems can also be solved by hiring local psychologist and cultural experts to share their insights on the local culture of London. This can help employees understand how they will have to react to the new environment. This training should be compulsory for managers as well because even they have to learn how to motivate employees in order to elicit hard work from them. Lower level employees would be hired from London only and they have to blend in the organizational culture. Company should also hire managers that have worked for a long time in Shangri-La Hotels and Resorts and they should be employed in London initially. It was found that managers have stronger feeling towards their national culture as compared to their organizational culture (Groseschl & Doherty, 2000). If managers from London are hired then they might not understand the values of the company. It is important to understand the core values of the company because this will be thing on which marketing would be based upon. The “Asian Hospitality” tag is important for the company and that tag cannot be changed. For decreasing employee turnover rate it is vital that company tries to use strategies that are consistent with the working practices of UK. Employees in this region demand higher compensation and this is what should be offered to them. As identified before company cannot afford low employee retention because of the high training cost they incur. Shangri-La Hotels and Resorts should hire employees initially on bonds for a number of years. In this way employees can be retained for a longer time in the company but this is just required at the start of the company’s operations in London. After that this system should be repealed. Cost effectiveness is something for which the company should strive at this moment. Because employees in London will require more compensation cost effectiveness should be aimed in other areas. Simple food wastages can control cost of a hotel business (Barrington & Olsen, 1987). Small things like these will make the difference in the end so it is vital that focus should be to provide best quality but by maintaining a lower cost at the same time. Labour planning can reduce cost by ensuring that extra cost associated with labor mistakes is not incurred regularly by the company (De Franco, A. 1999). Incentives should be given to labours for handling things like glasses and plates in right manner so that to avoid any breakage cost. This small area can cause the cost of company to decrease. Cost leadership style of leadership should be followed by the company and cost effectiveness should aimed because without the company cannot earn profits at an early stage of its business. The political condition of UK is very different from that of Asian countries. Therefore lawyers should be hired and environmental experts should be used to ensure that the hotel is running in accordance with the laws of the company. As identified earlier these small initiatives can bring any company good publicity. Customers today focus on these small steps taken by the company so this should be seen as an opportunity to market the company. Economic condition of the country is not excellent at the moment but this will not largely affect the operations of Shangri-La Hotels and Resorts because its target group will be rich people. But the company will also be targeting business class target market and bad economic condition can affect that target market. The company can offer rooms at lower rates and can provide eating areas for people who earn comparatively less than the original target market of the company. This can be done temporarily to tackle to issue of bad economic condition of the country. Conclusion Shangri-La Hotels and Resorts is a well known name in the hotel business and it has a global presence. The company is opening a new hotel in London in 2012 and this paper has discussed the issues the company is facing and will face in future pertinent to this venture. The company will have to deal with the cultural differences of the people of London. Also human resource will be a problem giving a different organizational culture of the company. Political and economic condition of the company can also cause problems for the company in its venture. All these issues can be solved if the company is prepared to revamp its thinking according to the different culture of UK. All these problems can be solved by thinking like a guest in London as compared to thinking like a guest in Asia. The two markets are different and therefore different strategies are required in both markets. Bibliography Barrington & Olsen. 1987. 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