BUSINESS STRATEGY: ACCOR HOTEL CASE STUDY
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Abstract
The report revolves around the recommendations for Accor since it is considering revising its strategic plan for 2007 and 2008 regarding expansion of its hotels in both existing and new markets. Accor is a leading player in the hotel industry due to its mastery of expansion strategies and strategic management. The chosen country for expansion is Turkey, due to its growing medical tourism implying potential revenue and growth for hotels and allied industries. The report justifies the recommendation as supported by PESTEL, Market Mix, and other relevant considerations.
1. Accor Company Background
Accor has grown to become a European leader in the industry with control of one of the largest groups of hotels and services around the world. In 2005, the company has over 168,500 associates in the hotel services industry worldwide as well as partners in allied industries such as transportation, food and communications. As of 2005 [Figure 1], Accor has more than 4,000 hotels distributed in various continents around the world covering different economic ranges from economy to upper scale [Figure 2] enabling the company to meet the demands of various demographic sectors of the market. The company has been in existence for thirty-five years and during this time, it was able to build a network of hotels through acquisitions and mergers, with the choice of associates depending upon the demand in the particular market being targeted for expansion. Thus, the success of the company is largely attributed to its ability to utilize market information as basis for its strategic decisions and the strong preference for direct management.
2. Strategic Direction of Accor
Generally, Accor recognizes two factors requiring close consideration in relation to industry conditions worldwide. First, is the cost of expansion and sustained operations and second is the strong competition in the industry, from both local and international hotels in a given market. In consideration of these two factors, the company applies strategies reflecting both cost leadership and differentiation ( 1980) in various markets. Cost leadership pertains to the price optimization of the company, varying according to market conditions to meet the price customers are willing to pay for the value received from the company while differentiation refers to the customized service offered to different customers. It is through these strategies that Accor seeks to achieve competitive advantage ( 1998) on a global scale.
3. Recommendations
Accor is on the way to finalizing its strategic plans for the year 2007 and 2008 based on current and forecast changes in PESTEL factors. The primary aim of the company is to expand its operations by adding 10,000 rooms every year in both established markets (Europe and North America) and emerging markets (Latin America, Africa, Middle East, Asia Pacific). The recommendations reflect upon these plans.
3.1 Country Selection for Expansion
Accor has successfully established and maintained hotel brands in Europe and North America but it has just entered the Latin American and Asia Pacific markets [Figure 3]. It is in Latin America and Asia Pacific markets or the developing medical tourism in some countries that offers the greatest promise in terms of profit and revenue for the company. In particular, the country recommended for expansion is Turkey, an existing market with 5 hotels to support the development of promising medical tourism in the country. The medical or health tourism industry in Turkey is developing with medical institutions serving more or less 15,000 foreign visitors every year requiring industry support from hotels and transportation.
3.1.1 Political Trend in Turkey
Several important trends affecting tourism and the hotel industry exist in Turkey. First is the open and democratic attitude that the country and its people have over foreign tourists and businesses reflected in the permission given to the United States for the establishment of a military base in its territory. Its close relations with the European Union and the United States create a welcoming atmosphere for visitors and business firms. Second is the fast recovery of the tourism industry after the terrorist scare that occurred since the 9/11 attack on the World Trade Centre in New York, due to the country’s support of anti-terrorism actions. Third is the pacification of the Kurdish rebel activities due to peace talks. ( 2003)
3.1.2 Environmental Trend in Turkey
Turkey is rich in cultural and heritage sites together with vast areas of rich forests. In line with the development of its tourism industry, Turkey signed the World Heritage Convention in 1983 resulting to the registration of nine cultural and natural heritage sites into the World Heritage List. ( 2006) The country has also recognized the need for sustainable tourism so that it has declared some of its forests as protected areas and the government has made progress in getting the cooperation of the local tourism hosting communities to shift to sustainable activities. ( 2006)
3.1.3 Socio-Cultural Trend in Turkey
Turkey and its people embody respectable levels of inter-cultural tolerance, especially due to its close ties with the United States and the European Union. The people’s inter-cultural understanding supports the tourism and allied industries in terms of tourist arrivals and growth of tourism-related businesses, such as hotels and restaurants. (, 2006) The cultural direction of Turkey is also to maintain its identify to the worlds as more of a Mediterranean than a Muslim country enabling it to easily recover from the terrorist scare. ( 1997)
3.1.4 Technological Trend in Turkey
Part of the European Unions plans is the achievement of a high level of technological innovativeness for its member countries. Although geographically placed in between Europe and Middle East, Turkey is an associate member of the European Union. This enables the country to benefit from technology sharing opportunities with other European Union countries and the United States that it applies in its industries. Turkey is also a growing mobile phone and internet linked country.
3.1.5 Economic Trend in Turkey
Turkey has recovered from an economic crisis in 2001 through compliance with IMF conditions to facilitate privatization, control the inflation rate, reduce its debt burden, and overall to create an atmosphere conducive to economic growth. In 2005, GDP increased by 5.6 percent and inflation decreased by .6. In relation to tourism, arrivals of foreign tourists almost doubled from 2002 to 2005 from 12.8 million to 21.2 million respectively. This numbers makes Turkey part of the ten most visited destinations in the world by foreign tourists. In 2005, the country earned an aggregate of .5 billion from its tourism activities. The increase is due in part to the introduction of medical tourism in the country. (Central Intelligence Agency, 2006) 3.1.6 Legal Trend in Turkey Turkey has a commercial legal system conducive to foreign investments due to its compliance with IMF recommendations for privatization, debt restructuring and inflation control. The country also maintains its open investment policies to encourage foreign investors. Commercial law in Turkey integrates domestic laws with European Union covenants and directives. No limitation for expansion to Turkey is seen to come from its legal policies.
3.2 Brand for Investment
Club Med brand is the most appropriate brand for expansion in Turkey for a number of reasons. First is in terms of the cost of introducing a new brand in the market. It would require less cost to expand a known brand in Turkey rather than to introduce a new brand because it would take time to get the market to accept the new brand when the demand for medical tourism facilities already exist. Introducing a new brand involves greater risks in terms of loosing existing demand to existing hotels in Turkey. Second is the close proximity between the service goals and values of Club Med and medical tourism customer demands. The brand name actually is appropriate for hotels supporting medical tourism. The service value of Club Med of offering extraordinary vacation experiences to rejuvenate the soul and live life to the fullest also apply to medical tourism.
There are already five Club Med hotels in Turkey. Accor has the option to expand the capacity of these hotels to cover demand while improving their facilities to meet the demands of medical tourism, establish new hotels equipped with necessary facilities and services and strategically placed near medical facilities to target this segment of the market. Regardless of the final decision, the primary consideration for expansion in Turkey is support for the growing medical tourism by providing an inviting and fully equipped hotel for foreign patients recuperating from their treatments.
3.3 Marketing Strategy for the Brand
3.3.1 Price
Lower price for quality medical treatment is one of the reasons for the growth in medical tourism in Turkey. This implies that the customers visiting turkey for medical reasons expect to get quality service for a lower price in all areas of medical tourism, including hotels, transportation and tourism activities. The price of Club Med hotels should be able to meet the expectations of customers.
As a management policy, every individual hotel has control over its pricing and allocation system due to the recognition that market conditions differ in various markets and the individual hotels are at the best position to determine the appropriate price and adjust their services to meet customer demands. Despite this flexibility allowed for Accor’s individual hotels, the company has established a revenue management system that links every individual hotel so that the price and service adjustments in any hotel are automatically updated in the system. This allows Accor to monitor the adjustments in its hotels and appraise its online customer service, which efficiently and accurately caters to reservations and inquiries.
3.3.2 Product
Specialized or customized accommodation and services constitutes the demand of medical tourism customers. Three demands exist for hotels catering to the tourism industry. First is fully equipped rooms and skilled service for recuperating patients. Second are network or link to the medical treatment facility and inland and air or water transportation. Third is fiduciary relationship with the hotel since some customers prefer to be discrete in their stay with the hotel and the treatment undertaken.
Club Med hotels should be able to offer these services and guarantees to gain a significant share in the growing customer pool of medical tourism. Upon reservation and during the stay of the customer, the room design and amenities should be custom fitted to the needs of the customer, including post operative facilities, physical therapy services and other support services to treatment apart from the usual comfort and pleasure offered by Club Med hotels. Thus, Club Med should be able to draw customers due to total customer satisfaction with the integration of treatment support and leisure services.
3.3.3 Place
Club Med hotels catering to the medical tourism clients should strategically place their hotels in areas at a proximate distance from health care facilities servicing foreign patients but near environmental tourism locations to be able to capture a pleasurable environment for customers to add years to their lives. By doing so, the hotel shows care for the whole well-being of their customers.
3.3.4 Promotion
Accor succeeded in establishing hotel chains around the world through market-based expansion decisions and expanding its network of partners. By establishing partnerships with health care facilities, air, sea and land transportation, and other necessary business cooperation, Club Med hotels are able to let people know of its services. Accor’s online customer care service is also beneficial in disseminating information to potential customers and providing service linkage in coordinating the various medical tourism related activities of customers.
3.3.5 Market Segments
While the existing hotels continue to strengthen their market share through the integration of cost-leadership and differentiations strategies, the new hotels or the hotel expansions in Turkey apply the focus strategy. Focus strategy refers to focusing on a narrow segment of the market and implementing either cost leadership or differentiation ( 1980). By focusing on the growing market for medical tourism in Turkey, Accor and its Club Med hotels are able to customize their service to meet the specific demands of medical tourism customers.
3.4 Method of Ownership and Finance
Accor is an international hotel corporation taking control of different hotels and brands through management, ownership through acquisition and franchising. The company’s initial relationship with Club Med hotels is through the transportation network managed by Accor. In expanding Club Med hotels to cater to medical tourism customers, Accor has the option to share in the management of the hotel, acquire or own the hotel brand, or franchise Club Med hotels depending upon the capital available to Accor for expansion. If sufficient capital is available then Accor can either franchise or acquire Club Med but it can always enter into management arrangements in case of insufficient capital available and financial contribution of Accor should be proportional to expected return.
References
Appendices
Figure 1: Accor Hotel Expansion Trend
Figure 2: Classification of Accor Services
Figure 3: Accor Worldwide Market Distribution
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