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I'd like a SWOT analysis of Element Hotels
Hello! Thank you for your request for a SWOT analysis of Element Hotels. My research focused on Marriott International. Marriott International acquired Starwood Hotels and Resorts in September 2016. A research paying particular attention to Marriott International was, therefore, more likely to provide an overarching SWOT analysis of Element Hotels. The short of it is, Marriott International has developed over the years adding various strengths to its portfolio reducing its weaknesses. There are key opportunities available to Marriott and negative trends that may affect it as well.
To retrieve the necessary information I relied heavily on internal reports by Marriott as well as industry rankings, reviews, and awards. I also made extensive use of industry-wide trends that particularly referenced Element Hotels. Below, you will find a deep dive of my research.
STRENGTHS
1. Diversity and brand differentiation.
Marriott is a massive global lodging company with nearly 6000 hotels in 120 countries. Marriott's vast reach is one of its inherent strengths. Marriott is able to cater for the greater part of market segments in the hotel space. They have also differentiated their brands to be able to profit from the most lucrative of these market segments. Marriott's brands are classified as luxury brands, premium brands, longer stay brands and select brands.
2. High employee ratings.
Marriott International ranked #33 on the Fortune 100 Best Companies to work for. This high emotional investment by employees in the company may account for the high productivity in Marriott International. In 2016, Marriott was also named company of the year for Latinos to work for in the United States by Latina Style Inc.
3. High guest ratings.
Guest ratings are available on TripAdvisor pages for various Marriott International properties. Marriott Hotels receive adulatory reviews and rankings on TripAdvisor. Ratings are on a scale of 1-5 and range from 4.0 to 4.8, with an average of 4.5, for Marriott properties. 141 different Marriott International lodging properties were also awarded Gold and Silver badges by U.S. News & World Report | Best Hotels. These rankings are based on awards and recognition, hotel class and guest ratings.
4. Ecological consciousness and sustainability.
There is increasing need for hotels to go green. By going green, hotels are saving money, strengthening their brands, and winning over eco-conscious customers. Most importantly, though, they leave a lighter carbon footprint. Marriott is very conscious about the environment. Marriott has pledged 20% reduction in energy expenditure and greenhouse emissions by 2020. Their commitment to sustainability is also shown by their use of recycled plastics to make uniforms.
5. Investment in research and development.
Marriott makes investments in Research and Development in order to stay ahead and develop new procedures. The company is actualizing its futuristic vision through R&D developments like the pop-up innovation lab launched in 2017. R&D at Marriott is focused on creating unique spaces, revitalizing its food and beverage program and development of tech-centric beverage concepts.
6. Culinary excellence.
Food is one of the principal elements in a hotel. One of Marriott's strengths is the acclaim they've earned globally for their culinary prowess. Ritz-Carlton Hotel Company, managed by Marriott, was awarded seventeen Michelin Stars in 2016. Michelin Stars are a hallmark of fine dining quality. These stars are very significant in the industry. Gordon Ramsay cried when his New York restaurant lost both its Michelin Stars.
7. Client engagement.
A survey by Brand Keys shows that Marriott International's Ritz-Carlton is America's favorite luxury hotel. This is attributed partly to the engagement it offers its customers. Its staff is tasked with anticipating needs of the customer well in advance. The added benefit of unique events offered by the hotel make its customers even more loyal.
WEAKNESSES
1. Sub-par rewards system.
Marriott offers it's customers a pretty comprehensive rewards system. This reward system, however, has some glaring disadvantages when compared to the reward systems of Marriott's competitors. First, reward points expire after two years of inactivity. Rooms at high category hotels also cost a large number of points. It's also a longer and harder climb for customers who want to reach the top-tier membership levels as compared to the
Hilton HHonors program.
2. Brand dilution.
While the immense size of Marriott International is an inherent benefit in terms of diversity and differentiation, it also poses some strategic challenges. Marriott International has a very complicated brand architecture which may result in strategic challenges in protecting brand equity. Consolidating brands almost guarantees better brand efficiency from a management vantage point. Continued expansion into emerging markets poses a greater risk of brand dilution and some sort of brand streamlining may be required in the future.
3. Over-reliance on luxury brands.
About 40% of the demand for hotel rooms comes in the price segment of $75 -$90. This is the largest addressable segment, and it may pay off for Marriott to focus some its attention and investments towards these low-cost hotels. Midscale and economy hotel chains also record higher annual percentage growth in occupancy at 2% while high-end hotels have less than 1% growth. The projected future of this market makes moving into this market now a good strategic decision.
OPPORTUNITIES
1. Low-cost brands.
As shown above, low-cost brands form the largest market segment in hotel brands. They also registered a 6% increase in revenue per available room in 2016. Marriott developed the brand Moxy, as a brand skewed more towards affordability. More investments of this sort should help Marriott take better advantage of his market segment.
2. User-Generated Content.
User-Generated Content is becoming more and more invaluable as a marketing tool. A report by L2, a New York consultancy firm shows that luxury hotel brands that feature UGC in their Instagram posts, see 6 times more interactions per post than brands that do not. Sourcing more than half of brands post from UGC also generates 2.6 times higher engagement. UGC is a new way to use Facebook, Instagram and Twitter to market brands more effectively.
3. Millennials
People in their late twenties and early thirties travel more frequently than those who are over 35 and are 23% more interested in traveling abroad than their older counterparts. This makes these 'older' millennials a prime target for brands in the hotel space. Millennials also operate under completely different rules of engagement from older generations. Hotel brands like Marriott International need to engage and lure this blooming market.
4. Technology and the Internet of Things.
Hotels will almost always have to leverage technology to improve customer experiences. Marriott International brands cover sufficient ground in using technology. However, technology is constantly improving and hotels need to keep up. 2017 Travel and Hospitality Industry Outlook by Deloitte says that "we are on the cusp of an explosion in the adoption of IoT due to the proliferation of connected devices and because costs and technological barriers are coming down." Marriott needs to keep experimenting with technology like key-less check in and robot concierges to enhance customer experiences.
THREATS
1. Nationalism and parochialism
The hotel industry is bound to lose when governments restrict travel to their countries. Arne Sorenson, Marriott chief executive, says that nationalism poses a greater threat than terrorism. Barriers to travel like the EU visa waiver scheme, which may require UK citizens to pay a fee to visit the rest of Europe, are detrimental to the hotel industry and to the economy as a whole.
2. Terrorism
Arne Sorenson also acknowledges that when terrorist events happen, leisure business quickly pulls away from the market. The Paris attacks, for instance, resulted in 25% drop in business in Marriott properties and cost hoteliers in Paris about 270 million Euros. This threat is amplified by the expansion of Marriott to 120 countries, some of which are politically unstable and at a high terror risk.
3. Airbnb
Though benign, the threat posed by startups like Airbnb to hotels is real. Millennials who are projected to account for nearly 50% of spending on business flights by 2020, may be inclined towards Airbnb for the distinctively unique experiences they offer. Airbnb has only caused a slight disruption in the market but serves as a warning that similar developments in future may cause bigger ripples in the market.
CONCLUSION
To wrap it up, Marriott International has many strengths and markedly fewer weaknesses. The strengths include diversity, high ratings, investment in R&D, culinary excellence and sustainability.
Key weaknesses are sub-par reward systems, brand dilution and over-reliance on luxury brands. Opportunities include, low-cost brands, User-Generated content, millennials and technology. Finally, the chief threats are nationalism, terrorism and startups like Airbnb.
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