Phillip July 22, 2024 No Comments

DB FPX 8415 Assessment 3 Company Analysis Framework

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Capella university

DB-FPX8415 Strategic Decision Making

Prof. Name

Date

Introduction

The onset of the COVID-19 pandemic in 2020 impacted industries across the globe and left several businesses still trying to rethink their operations strategy to sustain in today’s times. The Leisure and Hospitality industry, by far, was the hardest-hit industry at the beginning of the pandemic. The economic and global disruption that resulted from the COVID-19 pandemic will impact how the hospitality industry recovers. The post-COVID operation will require unprecedented versatility for hotels, as they develop, implement, and manage safety measures to restore customers’ confidence and generate renewed demand. Investors may also find the most suitable time to make strategic investments in the industry is early in the recovery period.

Seyitoğlu and Ivanov (2020) present a conceptual framework of the service delivery design in the hospitality industry, post-COVID. The authors identify three service delivery systems in the hospitality industry: robotics, human-based, and mixed. The hotel industry has historically utilized humans for all front-of-house and back-of-house operations. Over the past couple of decades, technology-mediated services, such as online reservations, have become commonplace in the hotel industry, among many others. The COVID-19 pandemic wreaked havoc on the hospitality industry. Hotels that once relied heavily upon international labor to staff their operations are now faced with a lack of labor as these individuals have moved back to their native countries.

DB FPX 8415 Assessment 3 Company Analysis Framework

Laborers have also left the hospitality industry to work in other fields where the cash flow is more lucrative. Hotels have been forced to rethink their operations to create a safer and more welcoming environment for their customers. Robotics have been replacing several of the tasks that were once performed by humans but this doesn’t work in all markets. Some customers prefer face-to-face interactions, and hotels utilizing robotics for front-of-house and back-of-house operations are not appealing. Some hotels are using a mix of both humans and robotics. There are advantages and disadvantages to the three service delivery systems proposed by Seyitoğlu and Ivanov (2020).

The framework proposed by Seyitoğlu and Ivanov (2020) comprises six sections that apply to the service delivery system design (SDSD), with “demand” as the most relevant section applicable to the acquisition. Customer safety and security expectations will inform the acquisition approach and are the first facts of the acquisition framework. Understanding customer perception and considering demand are compulsory and essential for a hospitality firm’s positioning strategy (Seyitoğlu & Ivanov, 2020). Customers are placing a higher emphasis on their health and safety. Post-COVID hotel operations will require an unprecedented degree of versatility.]

DB FPX 8415 Assessment 3 Company Analysis Framework

Social distancing and ensuring hygiene and cleanliness in various touchpoints throughout the customer’s journey are critical to restoring the customers’ confidence and generating renewed demand. Industry 5.0 can be useful for the hospitality industry, as personalized service, an efficient supply chain, agility, a smart work environment, the use of big data for up-to-date information of customer preferences, highly customized services at a lower cost, and digital enhancement can impact customer satisfaction, loyalty, and perceived service quality (Gopalakrishna et al., 2021). The priority for hotel owners is to re-imagine the existing spaces and streamline their services in response to the new normal while keeping the guest experience and profit optimization in mind.

Hotel location is crucial to attracting tourists and influencing a tourist’s decision. Location is crucial for occupancy rates, revenue per room, and profitability. Establishments in the hotel industry that are in areas with larger levels of population concentration and economic activity typically show a high level of potential demand and represent a region’s share of domestic and international visitor travel as a business or pleasure and holiday destination. The Southeast holds the highest share of industry establishments, accounting for 28.5% of locations in 2022. The West is the second-largest share of industry establishments, accounting for 16.3% of locations in 2022.

DB FPX 8415 Assessment 3 Company Analysis Framework

The Southwest, Mid-Atlantic, and Great Lakes regions represented 14.7%, 10.6%, and 11.6% of establishments, respectively, in 2022 (Ristoff, 2022). Morgan-Eskola Hospitality Partners (ME-HP) LLC is interested in opening a European-style boutique hotel and spa in San Francisco, Los Angeles, New York, Chicago, and Boston, one in each location. The degree of financial-slack-driven risk preparedness of the examined hospitality businesses was contingent on the businesses’ location (Wieczorek-Kosmala, 2021).

Building on the conceptual framework presented by Seyitoğlu and Ivanov (2020), location will be critical to a successful acquisition and future profitability. The cities of interest for ME-HP are major metropolitan areas with established infrastructure and readily available healthcare. These appear to be suitable choices but should not go without further investigation. Hotel location is the second facet of the acquisition framework.

The third facet of the acquisition framework is the people. The COVID-19 pandemic forced hotels to shut down their operations. Management had to lay off staff to ensure they had the money to cover their fixed costs. Many hospitality teams now feel they were viewed as a number, a mere cog in the wheel. Those who thought they were crucial to the business were often let go with what felt like ease (Adams, 2021). The hospitality industry is now scrambling to find people to fill their open positions. While hotels can invest in robots to perform many service-oriented activities, they still need people to operate and maintain the robots and create a positive guest experience.

DB FPX 8415 Assessment 3 Company Analysis Framework

The hospitality industry needs to invest in its professionals and develop a new set of standards that provides them with increased wages, creates opportunities for them to increase their skill sets through education and training, and re-skilling these professionals to prepare them for their other roles in hospitality operations. The industry must see this as a time to invest highly in the people who run it by cultivating passionate professionals by giving them unbelievable skill sets and the opportunity to make money and serve guests with pride. The hospitality industry needs to change its operating mindset, starting from its core foundations (Adams, 2021).

Brand awareness is very important in the hotel and service industry because it represents a type of intangible competitiveness. Branding in the hospitality industry can build credibility and trust. It can open up new revenue channels by engaging guests to advocate for the business. Advancements in online and offline technology offer great opportunities for hotels to differentiate themselves from their competitors. The hotel industry’s unique selling proposition has to be more elaborate and go beyond the health and safety of the customers.

It must consider their experience as well. Seyitoğlu and Ivanov (2020) state there is a need for R&D, promotion, branding, and creation of an image, that helps hospitality firms to position themselves with their unique services, differentiate from their competitors, and persuade customers to buy their services (Seyitoğlu & Ivanov, 2020). Brand recognition needs to be a consideration in the acquisition process and is the fourth facet in developing an acquisition framework.

DB FPX 8415 Assessment 3 Company Analysis Framework

The hotel industry is unlike other industries, such as high-tech or equipment-intensive organizations. This industry has been confronted traditionally by a greater need for financial capital for fixed assets and human capital (Zhang et al., 2020). As a capital- and labor-intensive industry with high financial and operating leverage, the lessened demand resulting from the COVID-19 pandemic has tested the resilience of businesses in the hospitality industry. Sales revenues were significantly reduced because of the decreased demand throughout the lockdown period of the pandemic, and businesses struggled to cover their fixed costs, and faced severe liquidity challenges, and bankruptcy.

In a risk-preparedness context, high financial slack is desirable due to its buffering function (Wieczorek-Kosmala, 2021). Hospitality businesses that have a high level of financial slack-drive-risk preparedness have a better profitability and liquidity position. A conceptual model presented by Wieczorek-Kosmala (2021) demonstrates that businesses with low or insufficient financial slack holdings have consumed their financial-slack resources, and thus, the abilities of hospitality businesses to sustain the liquidity tensions that emerged after the COVID-19 outbreak are questionable (Wieczorek-Kosmala, 2021).

Financial measures, including expected revenue, growth rates, debt-equity ratio, liquidity, and valuation, are factors that contribute to a company becoming an acquisition target. The conceptual framework Wieczorek-Kosmala (2021) presents is critical for acquiring financial risk preparedness and long-term sustainability. Financial slack and liquidity are the fifth facets of developing the acquisition framework.

DB FPX 8415 Assessment 3 Company Analysis Framework

An acquisition is a component of the corporate strategy that deals with the combining, buying, and selling of companies or assets to promote the growth of the enterprise and increase shareholder value. Acquisitions can boost financial power, market share, and business activity, which allows the newly formed company to further develop and expand within its sector. Acquisitions can also provide opportunities to synergize by driving efficiencies through economies of scale. Developing acquisition criteria is essential for businesses to consider when acquiring another company.

The key to developing an effective acquisition strategy is by determining the acquisition criteria the company will use to evaluate the prospective company. Investors interested in the hospitality industry need to consider acquisition criteria including: access to a multiskilled and flexible workforce, being part of a franchising chain, receiving the benefit of word-of-mouth recommendations, proximity to key markets, ability to adapt quickly to new technologies, and the ability to control stock on hand. These are key success factors in the hotel industry according to IBISWorld (Ristoff, 2022).

Morgan-Eskola Hospitality Partners (ME-HP) LLC can ensure they are making the best possible decision with their potential acquisition, by using a decision-making framework. ME-HP can use a multi-criteria decision-making framework to make fact-based decisions. A structured, transparent, and consistent decision-making framework for asset management decisions involves people, process, governance, and the use of decision-support tools. The model should contain a holistic set of criteria and measures, including Human Capital, Technology, Financials, Intellectual Property, and Synergies.

Reflection

A strategic decision-making framework provides a holistic view of new market opportunities that best position investors for success. Investors need to act quickly but do due diligence to avoid the cost of failure, which can be very high. An effective strategic decision-making framework provides valuable information on the size, shape, and direction of the market (i.e., market potential). Strategic decision-making is critical to setting one’s business apart from its competition.

IBISWorld projects that the hospitality industry will continue to experience growth, with particularly strong growth in extended-stay hotels, boutique hotels, spa and health retreats, and resorts segments (Ristoff, 2022). Hotels are a unique form of real estate investment because they act as a real estate investment and an operating business that operates off a service delivery system. Hospitality firms need to develop the right service delivery system design that meets both the customers’ expectations and fits the firm’s resources and capabilities (Seyitoğlu & Ivanov, 2020).

The economic fallout of the COVID-19 pandemic led to significant financial stress for hotel owners. This fallout might impact the long-term viability of many hospitality firms. Morgan-Eskola Hospitality Partners (ME-HP) LLC needs to understand the target’s market position and market forces, as well as, any legal or regulatory factors and liabilities, the company culture, the morale of the staff, brand awareness, distribution channels, and customer factors to understand the benefits of the acquisition fully. This can all be accomplished by utilizing a strategic decision-making framework.

References

Adams, C. (2021, October). Why the hospitality industry must reinvent itself as labor shortage still looms. Forbes.

Gopalakrishna, P., Haldorai, K., Seo, W., & Kim, W. (2021). COVID-19 and hospitality 5.0: Redefining hospitality operations. International Journal of Hospitality Management, 94.

Pillai, S. G., Haldorai, K., Seo, W. S., & Kim, W. G. (2021). COVID-19 and hospitality 5.0: Redefining hospitality operations. International Journal of Hospitality Management, 94, 1–11.

Ristoff, J. (2022). Hotels & Motels in the US (72111). IBISWorld.