Business
15-1 The advantages for Melia to own its hotels versus managing them for another organization.
There are various advantages that Melia can gain by owning its hotels rather than just operating them for another organization. One of the most important is that by owning its hotels, Melia will have a 100 percent ownership of the properties. Thus, the full ownership will give Melia owner the right in order to control exclusive dimensions. These dimensions are: firstly, the hotel’s daily operation such as creation of personnel schedule, hiring process and even the securement of the hotel’s supplies. Secondly, the Melia owner will have the full ownership of the physical assets and that is the property ownership as well as the maintenance involved thereof. Thirdly, the hotel’s organizational routines as well as the unstated company elements, such as the systems and culture to attain both effectiveness and efficiency. Finally, by owning its hotels, Melia owner will be able to control the codified assets like the hotel’s reservation system and its brand.
Unlike with joint ventures or managing the hotels for another organization, the Melia owner will have the advantage of gaining the hotel’s income. That is because if joint venture will be exercised in the Melia hotel’s case, there would be a need on how to divide the responsibilities as well as the contribution of assets, including the distribution of income. In addition, owning its hotels will enable both the culture and systems that flows within the organization to be used towards quality management. Unlike with just managing the hotels for another organization, the systems and cultures may be different from the system of management, which might compromise the quality of customer service. In general, the ownership of the hotels will means more responsibilities, but would also mean more income to the owner as the physical assets are duly owned and maintained by the owner himself.
15-2 The advantages and risks for Melia in its non-equity joint venture with Jin Jiang.
There are both advantages and risks for Melia for joining a non-equity venture with Jin Jiang. One of the advantages is for Melia to be able to know about the Chinese market. For example, other Spanish hotel chains’ strategy did not conquer the majority of the target market due to non-existence of the awareness about the Chinese cultures and values. Since Jin Jiang is China’s largest hotel chain, Melia’s advantage by joining them will increase the potential profit as it targets the majority of the market based on the values and cultures.
Additionally, the practice of non-equity venture with Jin Jiang will both expand and share the knowledge of each party. Thus, best practices will also be shared to one another as well as the development and integration of training, information, and even the booking systems strategies. In that case, the joint venture will not just potentially expand the managerial knowledge of Melia, but will also potentially increase its competitiveness in the industry.
Furthermore, it is important for Melia to know more about their customers. Therefore, by joining with Jin Jiang, Melia will be able to know more about their Chinese customers, which will boost its ability to further expand its business in China.
On the other hand, one of the risks would be based on the event that happened between Barceló, one of Melia’s competitors. The latter had a 10-year management contract with Shanghai International Convention Center, which was terminated by the latter after 8 months of operation. The event left some Spanish hotel owners with negative impressions that Chinese partners would break the agreement after they have learned enough knowledge from their foreign partners. However, it is a risk that may longer be threatening as it was before, but the possibilities are still present as it already happened before.
