Ms. Hehir

Finance & Investment

Strategic Planning: Positioning Hotels in a Competitive Landscape

By Kim Hehir, VP of Strategic Planning, The Leading Hotels of the World

For any hotel or resort to maintain its position as a leader, it must analyze its current and future operating environment, economic and market conditions, consumer and travel trends, as well as its ever-evolving competitive landscape.

Those hotels and resorts which will continue to achieve success are those which take a long term view, by establishing a clear, five-year strategic plan which should be reviewed and updated each year. Additionally, companies should produce annual operating and marketing plans which address more tactical initiatives.

Creating an effective strategic plan, and using it as a decision-making tool, will help ensure a hotel's future financial health and profitability. Elements of the Strategic Plan should include:

• Vision
  The Vision outlines what the Company strives to be. It is an emotional and visual call to arms that drives the behavior of our employees and organizational structures. Employees need to be able to understand and identify with the vision in order to provide a focus for future development and strategy. "Is what we are doing today consistent with our long term vision? If not - why are we doing it?" The vision should be used to support your hotel or resort and any of its sales and marketing efforts.

• Strategic Intents
  The Strategic Intents are broad based but clearly defined goals that guide the strategic direction of the company. These goals are based on a common understanding of success, culture, etc. and provide the framework for the Company to develop and measure actions against. For example "to grow market share and profitability."

• Strategic Objectives
  Strategic Objectives relate to outcomes that strengthen an organization's overall business position and competitive vitality. "To grow market share by penetrating new markets such as the entertainment and pharmaceutical markets." "To grow profitability by controlling marketing expenses based on specific Return on Investment thresholds.

• Key Performance Indicators
  Key Performance Indicators are significant measures used individually or in combination with each other in order to monitor how well a business is achieving its quantifiable objectives. "If a marketing program does not yield at least a 20% ROI, we will not implement"

The plan should prioritize initiatives based on the Company's goals and established key performance indicators. A SWOT analysis, trend and market review, competitive analysis as well as any other pertinent factors that will effect your business over the long term should be outlined in the Strategic Plan to support the Vision, Strategic Intents and Strategic Objectives.

Consider the following as it relates to your competitive positioning: What is the age of your property? How frequently do you refurbish and update your facilities? What are your target markets (and are they maintainable)? Which markets would you like to attract or expand into? Are your sales, marketing and distribution strategies effectively yield managed? What types of properties are opening that will compete with you (i.e. many hotels today are beginning to compete the new condo-hotel product)? Which are succeeding and why? What are the developing trends that may affect your business (i.e. spa, wellness)? What sort of ROI can you expect by capitalizing on those trends?

While these questions may seem obvious, they should all be considered when developing an effective Strategic Plan.

One of the key factors in developing your plan is your knowledge and understanding of current and evolving trends - on both the local and global levels - and how they impact your hotel.

Taking a broad view, the hotel industry is fortunate in that we are seeing a solid rebound in travel over the past four years - international and domestic crises notwithstanding. Trends that are fueling this growth include - the increasing popularity of family travel, an upsurge in the demand for spas and wellness-related programs, a growing interest in cultural or learning vacations, the need for consumers to spend their wealth by creating unique experiences (through travel) as opposed to spending their hard-earned dollars on inanimate objects that anyone can purchase, like a new car.

Once a hotel is able to attract a guest, however, it is more important that ever to retain that customer. Ensuring, at a minimum, that certain every-day conveniences are available is imperative. For example, one trend in particular that has emerged is the veritable explosion in the area of personal communications technology. The need for customers to be constantly "plugged-in" no matter where they are in the world - whether its on the beach, the ski-slopes or even on a Silverseas cruise ship or a trans-Atlantic Lufthansa flight. Only in the past few years have the ultra lightweight laptop and Blackberry come into existence. The majority of today's business travelers find these devices indispensable. Staying connected with upgraded Internet access is crucial for many of your guests, and this is just as true for the leisure client as it is for the traveling executive. The Leading Hotels of the World, for example, has added a new quality standard to their inspection process this year: WI FI connectivity in the public areas of their hotels. Think back five years ago when a modem internet connection may have been a luxury.

As these new trends emerge, your competitive landscape constantly changes and shifts. Hotels are competing, now more than ever with competitors they never would have dreamed of just a few years back. For example, internet companies such as Expedia are now squeezing profit margins and are competing with traditional, more lucrative hotel distribution channels. From a consumer perspective, the needs and demands of travelers today differ greatly from what they were five or ten years ago. The ability to gauge these demands, and adapt your operations to meet them, will help ensure your future success.

Correlative to this, it is necessary to maintain flexibility in today's environment. It is essential to cultivate a mindset of adaptability in both operations and strategy.

Taking The Leading Hotels of the World, Ltd. as an example, a changing environment dictated a total shift in our business model.

For decades, our organization operated as a reservations-generating company, with proprietary information technology that - while it served our internal needs quite well - did not have the capabilities to interface effectively on a global scale. With the evolving demands of international business, this needed to change.

It also had become evident that the standard hotel representation model was not viable for the long term and that our growth as exclusive organization limited profitability. We recognized that we were in an ideal position to develop new businesses and opportunities that would offer additional value and service to our member hotels and beyond. Thus it became necessary for us to make fundamental transformations to our structure and strategy.

"To become the preeminent provider of products and services to luxury hotels and to the luxury marketplace" was set forth as the vision for our organization. We determined that, in order to excel, and maintain our position as a recognized industry leader, we must develop new business lines that would reflect that vision and serve as our guideline going forward.

With this as our vision, our goals are to increase revenue streams and enhance brand equity by forming strategic alliances with other service providers in the luxury marketplace to serve our base clientele (the 430+ Leading Hotels) as well as other luxury hotels and hospitality companies.

To date, The Leading Hotels of the World, Ltd. has formed ten new businesses which have increased Net Operating Income for the company on average by 80% year over year since inception of the Joint Venture concept in 2000. This year's increase in profitability will be 89%

These examples offer a solid illustration of how the successful development and execution of our company's strategic plan has helped us to continue to succeed in today's competitive marketplace. You, too, can realize measurable benefits by taking the following steps:

By undertaking these steps, and implementing a Strategic Plan, you will not only be able to build awareness of your property but will stay ahead of the competition, with first-to-market advantage. This will generate additional revenue while helping you increase market share and build guest loyalty.

The hospitality industry is perhaps one of the most personal, at its most basic, providing travelers with a place to sleep - "putting heads in beds." A well-designed strategic plan will enable your hotel to effectively put the optimum number of those heads in your beds.

In summary, strategic planning determines where your company will go over the next three to five years, how it is going to get there and how you will assess the achievement of your goals. Oftentimes in hotel operations, we become so preoccupied with immediate issues such as guest complaints and maintenance issues that we lose sight of our ultimate objectives. That is why developing a strategic plan is a virtual necessity, to keep an organization focused in order to ensure its long-term profitability and ultimate existence.

Kimberly Moffitt Hehir is Vice President of Strategic Planning for The Leading Hotels of the World since. She manages joint ventures and ancillary businesses and acts as liaison between each department within Leading Hotels of the World. She is responsible for sourcing and evaluating new business opportunities which yield a substantial return on investment, deliver value to the shareholders, enhance member benefits, and will achieve the company's overall goal of becoming an all-inclusive provider of goods and services to the luxury marketplace. Ms. Hehir can be contacted at 212-515-5630 or khehir@lhw.com Extended Bio...

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