Introduction
The case study of McDonald’s Corporation entering the hotel industry has become one of the most famous among the specialists in management, hotel and tourism industries. Particularly, in 2001, the corporation opened the hotel in Rümlang, one of the towns in Switzerland. Having the name “Golden Arch Hotel”, it has been situated near the Airport Zürich-Kloten. What is more important, the opening of the second hotel happened during the same month in Lully. The head of the project was the chairman of Swiss division of the corporation, Urs Hammer. Furthermore, both he and the CEO of the corporation himself accepted the perspectives of this project, identifying it as potentially successful. The ambitions of the corporation were easily understandable due to the fact that it has become successful having operations on highly competitive and saturated market.
In fact, the Swiss division of McDonald’s has had its idea of establishing its own hotel network for a long time; finally, the Swiss CEO received a corresponding approval from the corporation’s executive board in Chicago to launch the project. In this regard, the fundamental factor influencing the approval was the fact that Hammer had had a rich and successful background in hotel industry. Having believed in his expertise and experience, the executive board hoped for a chance of advancing the activities of the corporations on a new level; however, for Hammer it was also an opportunity to rule the established hotel division of the corporation directly from Switzerland.
SWOT analysis conducted by McDonald’s
Additionally, even more promising appeared the location of the hotel near the aforementioned airport. In particular, SWISSAIR, the national airline of the country being traditionally focused on its strategy of growth using the acquisition mechanisms of smaller airline companies across the Europe. What is more important here, they used the Airport Zürich-Kloten as an effective hub for this purpose. As a result, this airport has always generated additional demand for hotel beds by all the users of airline services, including airline crews, business travellers and tourists. Furthermore, an additional opportunity for the project was the expected increase of airport’s capacity by almost half during the first decade of 2000s. Among the threats of entering the hotel market it is worth highlighting the high competition in this sector. In particular, according to the words of hotel division executive of the company “not only was the hotel competing with other four-star hotels like the Mövenpick and Hilton, but also with the world’s fastest-growing hotel group, the Accor-Group” (Michel, 2005). Nevertheless, despite this fact, he was assured of the company’s success in the hotel industry due to their service vision and business philosophy.
Considering the initial weaknesses, it is worth reminding that the design of the hotels has become not only expensive to realize, but even confusing for the visitors and guests. Still, such issues have been further improved and eliminated by the company’s representatives.
Market Conditions
Just like it has been stated previously, the market of Switzerland and Zurich, in particular, was one of the most beneficial for opening a new business, especially for a corporation like McDonald’s. The rates of hotel occupancy increased in 1999 with 73%, while they were 71% in 1998 (Michel, 2005). Nevertheless, the experts stated that the hotel industry of the country would become logically overwhelmed by significant amount of hotel project emerging each day from various hotel services providers all over the word. In other words, the market would become incapable of absorbing such amount of hotel businesses under normal circumstances.
In addition, it is worth stating that the managers of McDonald’s have forgotten examining the human resources market of Switzerland and Zurich, in particular, due to the fact that there was not enough qualified personnel for working in 4- and 5-stars hotels. Furthermore, the HR recruiting policy prioritized the domestic candidates, which were not simply willing to work as hotel service staff, realizing the low supply of specialists within the country. On the contrary, the hotel management did not want any foreigners to work for them, which created additional obstacles. Therefore, the corporation should not have focused on high class hotels and make them similar to their successfully operating restaurants – cheap, clean, popular and commercially effective. In this regard, it was a mistake not to consider the options of building cheaper hotels at first. This would have offered additional opportunities of hiring wider audiences of candidates for hotel staff and gathering wider audiences of tourists seeking for cheap but comfortable place.
Problems of McDonald’s in Hotel Industry
As for the customer experience, it has been defined as isolate from the outside world with only the Airport nearby. Moreover, the updated and modern technologies used in the hotel rooms and halls were not that appealing to the customers as they still felt alone in a large empty hotel. In addition, it has proven a bad decision to serve the menu from McDonalds to the hotel’s guests. In other words, it should not have served any food from McDonalds at all, as it targeted the rich and luxurious audiences expecting high quality food and high-level cuisine. Consequently, it appears quite logical, why the hotel’s guests tend to state the following: “We had gone to sleep in a hip new hotel, and woke up in a McDonald's” (Washingtonpost.com, 2001).
Conclusion
Summarizing everything that has been stated above, it is worth concluding that the imminent failure of McDonald’s hotel network appeared to be quite logical and obvious due to the reasons mentioned above. Instead of following the same approach as the company’s restaurants do, the hotel network tried to reach recognition from rich audiences offering them effective, sociable, friendly but cheap type of service.
References
Mcspotlight.org,. (2001). Press Cuttings - McHotel. Retrieved 15 February 2016, from http://www.mcspotlight.org/media/press/mcds/times240301.html
Michel, S. (2005). McDonald’s Adventure in the Hotel Industry.
Michel, S. (2007). The Upside of Falling Flat. Harvard Business Review. Retrieved 15 February 2016, from https://hbr.org/2007/04/the-upside-of-falling-flat
Swlearning.com,. (2003). Lamb Net News. Retrieved 15 February 2016, from http://www.swlearning.com/marketing/lamb/net_news/net_news_ch04_01.html
Washingtonpost.com,. (2001). Want Fries With That McDonald's Room?. Retrieved 15 February 2016, from http://www.washingtonpost.com/wp-dyn/content/article/2002/09/01/AR2005041500893.html
