Introduction
The hospitality industry is ever changing. In the past, the industry is traditionally more focused on the physical product, and now, the industry has entered the era of a consumer-led brand focus. As consumer attitudes and behaviour changes faster than ever before, consistent delivery of brand promises is critical, and experience dimensions and unique product designs will identify a successful brand. The hospitality industry in emerging markets are growing immense; with the growth of middle class in India and China, the demand for business and leisure travel is increasing. It is predicted that by 2015 the share of global tourism GDP will be from the mature hotel market to emerging markets less than 5%.
In this report, a selected hotel company, Home 2 Suites by Hilton, was planned to take the liberty of enter an emerging market, Christchurch. First, through several types of internal and external analyses to evaluated the feasibility about the hotel company and the emerging market. Next, designed and established various market growth strategies for the hotel company to confirm the growth of sustainable and efficient in the emerging market. Last, established an action plan to use those growth strategies developed.
Background of Home 2 Suites by Hilton
The selected hotel company is Home 2 Suites by Hilton, it is a budgeted style hotel and it is owned by Hilton. The hotel is a mid-range long-stay with innovative spirit and pay attention to the choice of value travellers and offer spacious suites with modern design and the state of the art technology. There are 212 hotels and the main service countries are the United States of America and Canada.
Global Hospitality Markets
In the 21st century of development of the hospitality industry, it is very related the growth and stability on economic and the safety of the country that is the reason of the government’s support such as the policies about the investment of the foreign investor is so important for the hospitality industry. Nowadays, most people are like to travel and want to enjoy a luxury holiday so most of the hotel are the resorts style to suitable the customers’ needs and satisfied their requirements. Besides, most teenagers like to be a backpacker to travel so budgeted style hotel are suitable for them. These two-different travel style are the trends in recent. Furthermore, most of the travellers like to go to the emerging markets to travel because they think it is novel. Therefore, the global tourism and hospitality industry is expected to have a substantial growth in emerging markets and more than the mature hotel market performance.
Global Emerging Markets
The definition of emerging markets usually refers to low-income or middle-income countries that have recently experienced rapid economic growth. Before the 20th century, the tourism market was mainly concentrated in the United States of America, Europe and other countries of the development countries. But in 21st century, many new developing countries emerged because of signed different trade unions for example “One Belt One Road”, “BRICS”, “APEC (Asia-Pacific Economic Cooperation)” to provide better conditions for international trade, improve people’s lives, education, health, technology, military, etc. to make their country stronger and wealthier. The rise of emerging trade zones such as the BRICs (Brazil, Russia, India and China) tends to change the natural balance of the market, namely, "emerging consumer markets will be for the transition economies (Central and Eastern Europe) and developing economies Contribution "(Asia and South Asia).
Christchurch, The Emerging Destination
New Zealand is one of the country that related the hospitality and tourism industry rapid growth of economic in recent years. New Zealand Tourism Board in the TRENZ 2014 data show that by the number of tourists in Europe and the United States and other significant growth in the number of tourists, by the end of 2014, New Zealand will receive more than 2.78 million visitors throughout the year, an increase of 6.1%.
Christchurch is the third largest city in New Zealand and the first big city in Canterbury in the South Island. There are many sightseeing spots in the Christchurch for example, Hagley Park, Botanic Garden, Canterbury Museum, International Antarctic Centre, etc. so Christchurch are attracted many tourists to visit in recent year.
Macro Environmental Analysis
PEST Analysis
A PEST analysis was carry out to further consider the political, economic, social and technological environment of the world and Christchurch of New Zealand to achieve the company's best performance. A detailed analysis will help Home 2 Suites by Hilton to improve the effectiveness of strategic planning to meet the company's goals and minimize any errors and risks that may occur when taking risks into new markets.
Political
New Zealand is a member of the World Trade Organisation (WTO). Its tariff schedule is based on the Harmonised System (HS) of coding while custom valuation is based on the free on board (f.o.b.) value of imported goods. Most goods can be freely imported.
New Zealand has been active in pursuing free trade agreements (FTAs), with bilateral FTAs signed with Australia, China, ASEAN, Singapore, Malaysia, Korea and Thailand. It is also part of the Trans-Pacific Strategic Economic Partnership (P4), the FTA involving Brunei, Chile, Singapore and New Zealand. The Trans-Pacific Partnership (TPP) and NZ-Gulf Cooperation Council FTA are trade deals that New Zealand has recently concluded but not yet come into force. Further, the country is pursuing FTAs with Russia-Belarus-Kazakhstan, India and the EU. New Zealand is also negotiating other FTAs including the Regional Comprehensive Economic Partnership (RCEP), Pacific Agreement on Closer Economic Relations (PACER) Plus and Trade in Services Agreement (TiSA)
In tourism development, the government of New Zealand are very concentrated of sustainable development so they had established “Green Policy” that to support their economy and protect the environment at the same time. In this policy, the hospitality and tourism industry must have reach some requirement in the policy for example, climate change and peak oil. Besides, the New Zealand government hope to use this policy to promote the eco-tourism to give people enjoy the unique scenery of the environment in New Zealand.
New Zealand also is the country that belong to the strong earthquake occurred in the region so frequent earthquakes. Therefore, the Department of Internal Affairs (DIA) of the government are established the Ministry of Civil Defence & Emergency Management (MCDEM) and MCDEM have a responsibility of manage the Nation Crisis Management Center (NCMC). In 2011, Christchurch was occurred an earthquake and it was one of the largest natural disasters ever recorded. The government are use all the resources and try to save the people and find some other countries such as United States of America, China, Japan, etc. join the rescue work.
After the earthquake, the government are started to rebuild the city. To rebuild a city, it needs numerous resources including the human resources and materials. In this moment, the government cannot have related on the country’s resources because it’s not enough to handle the situation so the government can establish some policy to attract the foreign company and some expert to come and help rebuild the city for example the tax concession policy for the foreign company to give the chance for them to enter the new market.
Economical
New Zealand is a service-oriented economy with almost 72% of its GDP and about 20% and 8% for industry and agriculture. The main economic industries include real estate services, professional, scientific and technical services, manufacturing, and retail and hotel accommodation.
New Zealand's economic growth has accelerated from 3.1% in 2015 to 4% in 2016. Tourism-related activities (including art, recreation and other services) and retail and hotel accommodation are major growth drivers for the services sector. The continued prosperity of the property market will help promote the development of various types of real estate services and keep the construction activities thriving. In 2017, the New Zealand economy is expected to grow by 3.1%.
In the first quarter of 2017, with the help of weak New Zealand dollar and the rapid growth of Chinese tourists, 1.1 million visitors to New Zealand were up to 4% year-on-year. Inbound tourism growth is strong, somewhat offsetting weak export performance. The New Zealand Institute of Economic Research predicts that in the medium term, tourism will surpass dairy exports and become the country's largest source of foreign exchange earnings.
Social
New Zealand has a population of about 4.69 million. Among them, 67.6% were descendants of European immigrants, 14.6% were Maori, 9.2% were Asian Americans (about 200,000 Chinese), and 6.9% were Pacific Islanders. New Zealand is a highly urbanized country with about 72% of the population living in 16 major metropolitan areas, 53% of which live in Auckland, Christchurch, Wellington and Hamilton. The official language is English, Maori. 55.6% of the residents believe in Christian Protestantism and Catholicism.
Education
New Zealand's education system is world-class, modern and responsive. It combines proven traditional principles with innovation, creativity and new thinking to create the conditions for leaders and citizens of 21st century equipment. The aims of New Zealand's educational are student-centred, it is focus on supporting students to solve problems, deal with information, work with others to create innovation and each student can develop their potential through many possible avenues, academic and / or career development.
Hotel programs are subject to regulatory and public-sector agencies, but are often affected by the industry. About half of the staff employed in the New Zealand hotel industry in 2001 were only secondary or below. However, by the year 2006, career or degree qualifications increased by 10%. Also, vocational hospitality degree programmes are growth rapidly, generally agreed to provide skilled employees to meet the employers’ needs.
Technological
The transportation of New Zealand mainly to use aircraft, railway, roadway, ports and terminals. In the aircraft, the long-distance international airport are routes to Asia, North America, Oceania, and cities in New Zealand and they are location in Auckland and Christchurch. In the railway, it has a long history of developed the railway and it started at 1870 due to the geographic of New Zealand it has separate into two islands so it has North Island train and South Island train to service the people to go to different place. In roadway, the main transportation are the bus and tramcar, also it has a super shuttle in Christchurch that give people to use. In the ports and terminals, the ports in New Zealand mainly transfer from North Island to South Island and South Island to Stewart Island.
Wireless telecommunication
The wireless telecommunication technique in New Zealand have a long history started at 1987. Until nowadays, the technique is developed very mature. The total revenue of services market in the wireless telecommunication was $2.1 billion in 2011, representing a compound annual growth rate (CAGR) of 8.4% between 2007 and 2011. Market consumption volumes increased with a CAGR of 5.5% between 2007 and 2011, to reach a total of 5.3 million subscribers in 2011.
Micro Environment Analysis
The microenvironment usually includes the effects of the organization's industry. The organization must be able to analyse the competitive environment to develop a good strategy to gain a competitive advantage. In this micro-environment, it involves customers, competitors and suppliers. By using Porter’s five forces, a microenvironment analysis was implemented to make sure that the Home 2 Suites by Hilton’s influences in the hospitality market in Christchurch (Appendix A).
The definition of the Porter’s five forces model is an analysis tool that uses five industry forces to determine the intensity of competition in an industry and its profitability level. The benefit of using Porter’s five forces model can understanding the competitiveness and the fundamental causes, show the sources of an industry’s current profitability and it can provide a structure for envisaging and competition.
Competitive Rivalry
It is the main drive force is the quantities and the abilities of the competitors in the market. Many competitors are providing identical products and services it will reduce the attractive of the market.
According to the analysis of the above, I can see most of the midway hotels are operations by some locals or some hotel groups, for example, Mainstay, Kingsgate, Flag Inns, Scenic Circle Hotel etc.
Threat of New Entry
Commercial markets will attract many new entrants, they will undermine the profitability. Expect the serving officers have strong and solid barriers to entry, for example, patents, the proportion of economics, the requirements of capital or the policies of government, if not the profitability will fall to a competitive advantage.
Affording to the analysis of the above, the local government of New Zealand are promoting the film tourism vigorously that can attract more hotel developments in it. Besides, these policies can attract more famous brand hotel group use the same way to station the same target market.
Supplier Power
Evaluate the ease with which suppliers can raise prices. This is by the: quantities of suppliers of each necessary to put in; individualism of their product or service; comparative size and strength of the supplier; and the cost of cutover from one supplier to another.
From the analysis of the above, I can see the agricultural industry of New Zealand is very outstanding in the world, it is the largest sector of the tradable economy, animal husbandry is one of the mainly income of economy. In the export statistics for year ended December 2016, the total percentage of the total exports groups of livestock categories are 41.6%. The most export group is dairy cattle about 25%.
Buyer Power
Evaluate how buyers can easily lower prices. This is by the: quantities of the buyers in the market; significance of each individual buyer to the organisation; and the cost of the buyer of cutover from one supplier to another. If a business has only a few strong buyers, they are usually able to specify the conditions.
In New Zealand, it is the country that belong to the strong earthquake occurred in the region so frequent earthquakes. In 2011, Christchurch was occurred an earthquake. After the earthquake, the government are started to rebuild the city using external resources. The foreign experts and the foreign companies will consider many things when they decide to help the city rebuild for example the locations of the rebuild place and the hotel, the facilities of the hotel and the prices of the hotel. Home 2 Suites by Hilton is the budgeted style hotel and target the mid-range long-stay customers such as the business customer to stay so it is suitable for them.
Threat of Substitution
If there are more alternative products on the market, it will increase the customer according to the price rise and switch to the possibility of substitutes. This reduces the power of the supplier and the attractiveness of the market.
Strategic Position of Home 2 Suites by Hilton
“Internal analysis of financial, human, physical, knowledge and learning, and general organizational resources can help managers determine a firm’s potential or realized sources of competitive advantage”. SWOT Analysis is an acronym for “Strengths, Weaknesses, Opportunities and Threats.” The purpose of the SWOT matrix is to gather, analyse and evaluate information.
Strengths
Home 2 Suites by Hilton is one of a brand of Hilton group. Hilton is a brand reputation. It is one of the largest hospitality companies in the world. Home 2 Suites by Hilton are providing the advance technology to make the customers feel convenient. Besides, Home 2 Suites by Hilton are welcome pets so the customers can stay with their pets. Also, Home 2 Suites by Hilton are eco-friendly so the customers because of the “Green Policy” established by the government to protect the environment and sustainable. Moreover, one of the hotel of Home 2 Suites by Hilton has won 2017 certificates of excellent of Tripadvisor.
Weaknesses
Home 2 Suites by Hilton is lack of brand presence worldwide with only stationed in 3 countries (United States of America, Mexico and Canada) and most of the hotels are stationed in United States of America. Although Hilton is a brand reputation, the main service area of Home 2 Suites by Hilton is stationed in United States of America and Canada these two of countries. Therefore, it’s so difficult to make travellers to know more about the information of Home 2 Suites by Hilton.
In aircraft of the transportation in New Zealand, it is only a few direct flights to other countries such as Singapore. It can make an inconvenience to the customers and give them a displeasure travel experience and it can be a reason that they may be not go to New Zealand to travel next time. That maybe indirect to decrease the turnover of the hotel.
Opportunities
In airline, most people in Hong Kong are known that are very less direct flight to go to New Zealand so most of the Hong Kong traveller must change the flight in Singapore. Therefore, Cathay Pacific will introduce a new seasonal service between Hong Kong and Christchurch from December 2017, directly linking the two cities by air for the first time and complementing the airline’s existing services to Auckland.
In the government of New Zealand, they are promoting film tourism vigorously and allocate $ 300 million in budget for the development of the New Zealand film industry. Of this amount, $ 1.8 million was used to supplement budget funds for the film horizon from 2016 to 2017, $ 6.4 million for New Zealand-made films, and $ 220 million to support international film and television production.
Threats
In New Zealand, some famous brands’ midway hotels are stationed in New Zealand already, for example, Mainstay, Kingsgate, Flag Inns, Scenic Circle Hotel etc. Also, some locals are operations homestay to give the travellers to stay overnight that can give the travellers have a chance to experience the lives of the locals.
Market Growth Strategies for Home 2 Suites Hotel by Hilton
To increase the market share as fast as it could, Home 2 Suites by Hilton has use the strength of the brand to establish the base loyal customer to make sure the competitive advantage in the market. Besides, Home 2 Suites by Hilton must to create the growth strategies appropriately to enhance the competitive position and the healthy growth of the business.
Porter’s Generic Strategy
Based on the match between the competitive advantage of Home 2 Suites by Hilton and the pursuit of market objectives, Porter's generic strategy matrix is used to determine the position of Home 2 Suites by Hilton in the market. The matrix made up of three generic strategies constitute and Home 2 Suites by Hilton will adopt the differentiation focus strategy.
The differentiation focus strategy is built around serving a few specific segments or markets in that geographic scope, and the channelling of resources into these segments with the objective of securing significant market share, which in turn can enhance long-term profitability. In the case of Home 2 Suites by Hilton, it can be use the brand reputation and few differentiators to establish the distinguish in the market because Hilton have some brand are stationed in New Zealand already to attract the luxury travel customers.
Ansoff’s Matrix
The Ansoff matrix can help Home 2 Suites by Hilton to determine whether the business should consider the future direction of the risks and benefits associated with each of these efforts. It is basically for the enterprise to provide four kinds of strategies to explore. This strategy is targeted at four goals, enhancing the market share of existing products, ensure the market share of dominant market through the active promotion of products, break the competition, reorganise the existing market and enhancing the level of consumption of existing consumers.
Management Contract
The hotel management contract is defined as the agreement between the management company (or operator) and the owner, and the operator provides guidance, supervision and expertise through established methods and procedures to manage the property. The operator runs the hotel, on behalf of the owner, for a fee, according to specified terms negotiated with the owner. Negotiating the terms of a hotel management contract should not be approached lightly, as it can characterise the property’s identity for decades and produce differing results for owners.
The Benefits of using the management contracts can help the company reduce investment and risk and growth rapidly at the same time. It is because the company find the local company to manage the business and most of the local company are very understanding the business environment. Hong Kong Hilton Hotel International hotel management industry is the main milestone in 1963 Hong Kong Hilton Hotel opened. The hotel is wholly owned by Hutchison Whampoa, and has signed a real management agreement with Hilton International.
Implementation of the Strategies and Moving Forward
The implementation of the strategy is necessary for the successful operation of the strategy established earlier. Developing a strategy will help companies measure their operational efficiency and identify the areas that need to be improved to keep up with any changes in industry trends.
Differentiation Focus Strategy
A differentiation strategy exists when a business distinguishes its product from its competitors with unique non-price attributes that are perceived by the consumer as better than the viable alternatives. The Wingate Inns Hotel is a good example that use the differentiation focus strategy to attract the customers to visited successfully. The hotel made its debut a few years ago by installing a free high-speed internet connection in every room. This kind of differentiation strategy helped Wingate to rapidly expand and attract value conscious business travellers, and it was well known that these guests had visited the established business such as Hampton and the Courtyard by Marriott.
Market Development
In New Zealand, there are a variety of activities throughout the year and New Zealanders are very keen to participate in these activities. Home 2 Suites by Hilton can be a sponsor to support some large international events for example, World Buskers Festival, Challenge Wanaka, etc. that can help to enhance the hotel’s reputation makes many people recognise not just the travellers, New Zealanders can through the activities more recognise about the hotel information, they can become the promoter to promote the hotel to their friends and family live in foreign and recommend they can choose to stay in the hotel when they go to New Zealand visit them.
Conclusion
After using all the internal and external factors to analysed that might contribute to the feasibility of the presume of Home 2 Suites by Hilton into Christchurch, the company will highly experience success. Home 2 Suites by Hilton is being a high technology and comfortable mid-range long-term hotel it is very suitable for the business travellers who work about some professional category such as film industry that the New Zealand’s government strongly support and the experts who help to rebuild the city after the earthquake. Also, Hilton is the mother company and it is a famous international hotel group so it has a strong financial power to support the hotel to get ready to enter the emerging market. To increase the destination image, the Home 2 Suites by Hilton can through the large international event such as World Buskers Festival, Challenge Wanaka, etc. to become a well-known international hotel brand and it will able to benefit on it.
However, the aircraft problem of transportation maybe is one of the reason that decrease travellers to go to New Zealand to travel. Also, New Zealand is the country that belong to the strong earthquake occurred in the region so frequent earthquakes the customer maybe worried it is a not save place. Furthermore, not just only New Zealand have an emerging market, Indonesia and India also is a country of emerging market so there are many competitors.
Finally, there are still have some problem that need many times to solved it but there are also have some place to attract travellers to go to New Zealand to travel for example the natural environment and it is a possible adventure to help Home 2 Suites by Hilton’s presence in the region and help push the brand.