The Four Seasons Hotels is a chain of hotels with an international presence in major cities of the world. The hotels target various hoteliers through a comprehensive provision of services that range from hotel meals, accommodations, conferences, meetings and seminars, catering services, parties, among other hotelier products.
This Literature Review focuses on six branches, which include Dublin, Sydney, Singapore, Istanbul, Jakarta and Milano. All the mentioned hotels are either located in the Middle East or Europe. These listed continents have a robust economy that might not wallow to changes in the world economic climate. I am going to analyse how the recession affected the Four Seasons chains of hotels. The recent world economic meltdown that almost saw the collapse of some of Europe’s economies such as Greece and Spain also negatively impacted on the economies of the above-mentioned host nations of the Four Seasons chains of hotels. The recession effects were felt even at the level of the branch hotel management and operations. I am going to illustrate that the Four Seasons Hotels were affected in whole and that the sample chosen does not mean that the recession hit only the six. In addition, it is still scanty to know which of the hotels were affected the most. The sample chosen is merely representative.
The effects of the recession have been pronounced all the hotel businesses. From an external perspective one can attempt to explain the changes in the following factors. One, governments have become more lean and practise austerity in spending. This has affected the hotel industry the Four Seasons included in various ways. One of the ways is the reduced servicing to government. For instance, the annual reports from 2009 to 2012 indicate a decline in government consumption of the hotel products. This can be seen in reduced seminars and conferences held courtesy of the government. In addition, some governments have raised taxes and now charge higher taxes on the hotel revenues. This has had two effects, one the hotel assumes lower revenues due to reduction in government spending and two the revenues incur more taxes in the character of the increased tax rates. Another effect that can be traced to government austerity is the reduced currency in the market. The overall amount of money in the market has reduced even among consumers. This has compelled the consumers to themselves adopt austerity measures. It is evident that any austerity measure by a citizen would boil down to lower spending. In lower spending the cadre of products that suffer in the list of citizens are the luxurious products. Unfortunately, most of the products produced by Four Seasons are merely luxurious.
The worst hit segment in the hotels is the tourism segment. The Four Seasons hotels have consistently served tourists providing the accommodation and hotelier services. With the recession, tourism activities have effectively reduced. This has occasioned situations where the sales revenues have remarkably changed. Tourism dynamics have worst hit the American and European tourists. In fact, in the melee of recession, Chinese citizens have effectively become the leading tourist consumers and spenders. The typical American citizen has assumed second position. In addition, in overall the amount spent in tourist activities has reduced. This has also seen revenues deep in the Four Season Hotels. The dynamic can be explained in the austerity measures taken by the citizens across the world. In the Four Season Hotel at Jakarta, Indonesia for instance, the following has been the revenue trend since 2007: 2007$ 13538, 2008 $ 15814, 2009 $ 16460, 2010 $ 18140 and 2011 $ 26137. It is imperative to appreciate that on the surface the figures reflect a consistent increase in the values. However, with the effects of inflation and the comparison of numbers handled, one appreciates that the net changes have posited reductions. In the overall, the hotels have been compelled to adopt lower pricing, provide a diversified range of products to the market, among other changes in order to hold the market. This has also been occasioned by tough economic times, which focuses more on the production rather than services industry. This is to say that the effects of the recession have been more adverse on the service industry where coincidentally Four Seasons Hotels falls within.
It is worth noting that some of the changes can be traced to the recession effects. First the hotels declined in revenues and were coerced into marketing in a bid to capture a new target market that was less affected by the recession. This finally led to the launch of the digital technology innovation in the hotels. This innovation is primarily aimed at capturing the new market of information technology savvy clients who are less affected by the recession. This approach should be read in light of the recession effects, which had reduced the disposable income hence spending capacity of the traditional targeted market. Thus instead of focusing on government consumption and the traditional American market, the hotels have focused on the blossoming Chinese market and other growing economies that need the hotel services in their daily engagements. In addition, the concentration of tourism related services has been reduced. This has been replaced by consumption in the restaurant and outside catering services. The latter two occur in higher volumes can be classified under the category that is less affected by the recession. Some of the marketing products introduced by the digital technology include the following: mobile commerce in which I-Pad and cellular phone services have been integrated in the services of the hotels and the social networking through features such as twitter, Facebook, Instagram and pinterest have been incorporated in the hotel marketing approaches.
Another change that has been occasioned by the recession relates to the purchases department. One major characteristic of the recession had been the runaway inflation where products have become much more expensive. Consequently, the overall costs of operations have increased even at the hotels. In the six hotels for example, they have been faced with production costs increasing by around twenty percent. This has been related to the increase in costs of individual items. For example, the cost of labour has had to increase as workers demand for higher and higher pay. In Turkey, the recession was felt by the entire industry. In the Istanbul branch, the management had to issue a ten percent pay increase in efforts to cushion its workers against the recession effects. The general wage rate in the entire world has had to increase in line with the changes in economic times. It is noteworthy that the wages and remuneration of the hotel staff has also gad to increase in line with the economic times and changes. In addition, the cost of products used in production of services has also increased. In Singapore, for instance, the effects of the recession have seen the rise in the food prices and general communication costs. This has been transferred in the production costs at the Singapore Four Seasons Hotel. It should be noted that in adverse cases, the hotels have been forces to cut down on their employee numbers as an austerity measure against expenditure on labour. In addition, the hotels have had to adopt electronic and digital marketing and reduced the expenditure spend in television commercials that would require more labor input hence higher costs. Advertising in the social media has been embraced for its effectiveness and net saving effects.
In addition, another significant change seen in the Four Seasons Hotels has been the customer relations. The recession has made the hotel industry competitive. This is ideally because with the reduced tourism activities, increased austerity measures by the consumers of hotel products, the general demand has reduced while the supply in the market has remained constant. The hotel industry being subject to dynamics of the market has felt the effects of equilibrium of demand and supply. The consequences have been manifested in a more determined and aggrieve sales system that necessarily attempts to maximize the sales. In that regard, the six hotels mentioned above have adopted the approach based on the competitive strategies developed by Michael Porter. An examination of the approach assumed by the hotels reveals a tripartite approach by the hotels. This involves three limbs which are costs leadership, focused production and diversification. This section shall briefly examine the three strategies that have been adopted to expand the market share in the face of a recession.
The cost leadership has been based on the concept of offering lower prices to the effect that competitors are beaten out of the market. Four Seasons Hotels have introduced lower pricing for their services with the intention of tapping the market segment and beating their competitors. This process has had to be implemented internally as well. In this implementation, the business has had to adopt austerity measures that cut on their overall operation costs. This has had the effect of lower operational costs. The savings have been transferred to the prices, which have now become lower. This approach is more pronounced in Istanbul, Sydney and Milano. On the other hand, the hotels have also approached the increased competition threats through focused production. In focused production the hotels have developed products intended for a definite market. The hotels have carried out comprehensive research and obtained the needs of the target markets. In reaction they have come up with products that serve those market need. The most conspicuous of this new approach lies in the digital technology introduced in the hotels. In appreciation of the blossoming information technology in Europe the hotels have introduced online transactions and integrated systems that enable interaction through social networks. In the same breadth, the hotels have become cognizant of the mundane needs of guests especially the tourists. This has seen the expansion of the tourism services to extend into areas previously left out. In addition, the hotels have adopted collaboration with airlines with the aim of increasing market share.
Finally the hotels have been compelled into diversification. Ordinarily the hotel would rely mainly on the tourism related revenues. However, with a recession that is cutting on tourism activities, the hotels have had to diversify in order to meet the new market demands and maintain relevance in the hotel industry. To this extent, the hotels have adopted conference services, accommodation of events and parties, outside catering, among other products. This approach has been informed by the need to cushion the hotel from failures of the tourism activities. As indicated before recession has effectively cut down on tourism through related austerity measures. The other hotel services such as events organization, conferences, seminars, daily restaurant services and outside catering have not experiences adverse effects of the recession. The hotels in realization of the market present in the other services have extended their products to include these service areas. In the long run, this has served to keep the business running especially because tourism is largely seasonal. In addition, the diversification has also involved merging and combining of various products. For example, the tourism package has been a product of merging several different services. These include accommodation, meals, travel advice and information, swimming, among others. This combination of services has made the products more robust and attractive to the market. This has given the company a competitive advantage over its competitors.
In conclusion, it should be appreciated that the hotel industry has been affected enormously by recession. The effects mainly touch on the consequential austerity measures adopted by the consumers of hotel products. However, as it has been brought out of the Four Seasons Hotel, the recession presented an opportunity to test the resilience of the economies of the nations. Through diversification, cost leadership and focused production economies have been able to whether the economic storm. The Four Seasons Hotels have been a perfect illustration of that economic narrative.
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