The Tourism Industry remains one of the cardinal pillars of the Maltese Economy lending 23.7 % of the labour market. Over the past 40 old ages the uninterrupted growing of the Industry has been a conducive factor in encouraging local concern work forces to increase the figure of hotels on the island therefore making healthy competition, peculiarly in the Five Star section. However, despite the structural differences, each hotel faces the same environmental forces. Therefore, the key to survival prevarications with the schemes implemented to derive competitory advantage.
This study examines how each of the assorted Forces has shaped Corinthia Palace Hotel & A ; Spa ‘s concern determinations. In this assignment, The Director of Finance Claire Mifsud, and The Director of Gross saless Karl Schranz, give their positions on the macro and micro environmental forces that relate to Porter ‘s Five Forces Model.
Section 2 – Company History
At the stamp age of 20 three, Mr Alfred Pisani saw a window of chance to enable him to come in the hotel industry. Three old ages after buying a 1920 private abode so called ‘Villa Refalo ‘ , the Pisani household began to run this belongings as the ‘Villa Corinthia Restaurant ‘ ( IL-Haddiem, 1968 ) . His dreams of going a hotelkeeper coupled with concern acumen led him to seek ways to spread out the household concern. When he became cognizant of an chance to have a soft authorities loan, he engaged the services of architect Dom Mintoff, who drew up the programs for a 152 sleeping room hotel which was to be amongst one of the first 5 star hotels holding full conference installations. Mr. Pisani ‘s sheer finding and vision, drove him to show a concern program which convinced The British Collonial Government to present him a loan of 1.2 million US dollars. The hotel building undertaking commenced under the supervising of architect Dom Mintoff and Four old ages subsequently, in June of 1968, Mr Pisani held the official gap ceremonial in the presence of, outstanding society figures such as the so Minister of Education, Culture and Tourism, Doctor George Borg Olivier, His Excellency Duke of Edinburgh and renowned histrion Roger Moore ( IL-Haddiem, 1968 ) .
This expansive ‘Boutique ‘ manner hotel is located near the official abode of the Official Residence of the President of the Republic of Malta and the San Anton Botanical Gardens. This hotel has since gained an first-class repute and has been given many esteemed awards in the Global Travel and Tourism Industry with the most recent being that of ‘Malta ‘s Leading Hotel ‘[ 1 ]in the 2010 World Travel Awards. The current General Manager, Mr. Rota, acclaims the hotel ‘s success to its Trademark Maltese Hospitality. This cordial reception is besides the Unique Selling Point ( USP ) of the ‘Corinthia Brand ‘ .
2.1 Company Mission Statement
‘Our Mission is to supply our invitees with the workmanship of attention ‘
2.2 Research Methodology
The information to run into the aims of this assignment was gathered from the undermentioned beginnings: –
I conducted a series of interviews with Key Management members who are instrumental in explicating concern schemes for the Company, viz. , Ms. Claire Mifsud, Director of Finance at The Corinthia Hotel and Spa and Mr. Karl Schranz, Director of Gross saless at Corinthia Central Gross saless Office who were besides given questionnaires to finish.
The 2nd agency was in footings of Desk Research through assorted media beginnings.
Section 3 – Definition of an Industry
‘The Oxford English Dictionary ‘ compendious description of an ‘Industry ‘ is: –
‘a peculiar signifier or subdivision of economic or commercial activity ‘
Snapshot of the Tourism Industry in Malta
3.1 World Tourism Benchmarking
There is a wealth of information available to help the Business Sector to measure the viability of the Tourism Industry. One medium used by the Corinthia Palace Hotel is the study published by ‘The World Travel and Tourism Council ‘ . The study uses Set Indices which may be valuable to determine an Industry ‘s attraction and future economic potency. However, as Malta is a Small Island Destination, competition must besides be measured from a planetary position of touristry.
3.2 Tourism ‘s Economic Performance on the Island
Harmonizing to the World Travel and Tourism Council 2010 study[ 2 ], Travel and Tourism contributes towards 19.4 % of the Maltese Islands GDP ( EUR1,151.4 million ) with a forecasted addition of a farther 3.6 % by 2020. Export Net incomes from International Visitors is expected to harvest in the part of a‚¬ 777 million, with a forecasted growing to a‚¬ 1443.4 million by 2020. Currently, 23.7 % of the Labour Market is employed in Industry Related Occupations and it is anticipated that this will lift to 28.9 % by 2020. These statistics substantiate the theory that Travel and Tourism will stay one of the cardinal engines for growing in the Maltese Economy.
3.3 Tourist Performance
At the clip of fixing this assignment, the National Statistics Office had non yet issued the official statistics for 2010. However, in a imperativeness conference held in January 2011, the Parliamentary Secretary for Tourism, Mr. Mario De Marco, estimated that the entire figure of Tourists was estimated to be in the part of 1.3 million[ 3 ]. This equates to a 0.1 million addition on 2009 figures[ 4 ].
During the first 11 months of the 2010, Cruise Liner Traffic reached a sum of 467,142 riders[ 5 ], nevertheless merely 3 % of riders ( 14,441 ) landed in Malta. Therefore despite the fact that about half a million sail riders visited the island, really few stayed in hotels overnight. Harmonizing to the Domestic Market, the local penchant is to shack in Four Star Hotels and statistics show that during the month of November, the 5 Star section produced a sum of 9,638 bed darks.
3.4 Corporate Accommodation Constitutions on the Maltese Islands:
There are a sum of 158 adjustment constitutions on the Maltese Islands[ 6 ], 15 of which are classified with a 5 Star Rating. Renowned International Hotel Brands such as Hilton, InterContinental, Kempinski Resorts, Radisson and Starwood Hotels presently compete for the same market. The two longest established 5 Star Hotels on the island are The Phoenicia and The Corinthia Palace Hotel and Spa. During the month of October, the 5 Star Hotel adjustment grade yielded an mean tenancy of 73 % .
Section 4 -The usage of ‘PESTLE ‘ to scan the Broad Environment for drivers of alteration.
There are legion features or strategic elements that may act upon the life rhythm of the local touristry industry.
‘One administration, moving independently, may hold really small influence on the wide environment: nevertheless, the forces in this environment can hold a enormous impact on the administration ‘ ( Enz, C.A, 2010 ) .p16[ 7 ].
Consequentially, in today ‘s local concern scenario, if one was to see this statement it confirms the school of idea that administrations within the touristry industry, will confront troubles when seeking to pull strings the wide environment.
However, harmonizing to ‘The rule of Enactment ‘
‘organisations do non hold to subject to the bing forces in the environment ‘ . ( St.John, Harrison,2010 )[ 8 ].
A high per centum of local hotelkeepers have opted for Management Agreements with Internationally Renowned Brands. Such scheme allows local operators to capitalize on the Brand Marketing and Existing Customer Base to pull concern, nevertheless, Corinthia Palace Hotel has evolved its ain Brand. This strategic determination was taken as a agency to distinguish from other hotels by offering reliable ‘Maltese Hospitality ‘ . This in itself is believed to make a competitory border over the International Brand Names which presently operate on the island, viz. , Hilton, Inter Continental, Marriot and Starwood Hotels. These yearss travelers are far more discerning and many seek new penetrations into the local civilization, as apposed to a reproduction of International Hospitality.
Through successful ‘Backward Integration ‘ the Corinthia Brand has eliminated significant parts to Third Party Management Companies by organizing its ain alone Brand Identity. Furthermore, in contrast to most local operators, the company has been able to perforate the International Tourism Industry by offering Management Contracts to abroad operators in the Industry.
The undertaking of mensurating fight is full of complexnesss as there are legion forces at drama. Therefore, it is of paramount importance to hold a thorough apprehension of both the possible menaces and the chances available. This will so supply the footing for which a company responds to Trends and Influences by incorporating its resources to accomplish a strategic advantage on its rivals.
Constantly, local houses viing within the Tourism Industry, have similar resources available to them and each one is challenged by similar forces. Therefore, it is safe to presume that most will prosecute similar schemes. Making the company that best acclimatises itself to the wide environment more likely to be successful. Under the current scenario, the well coined phrase ‘The endurance of the fittest ‘ could non be more appropriate for hotels viing within the same industry.
Despite being one of the older Five Star Hotels on the island, The Corinthia Palace Hotel still competes good with the newer belongingss. It appears that clients tend to choose for older belongingss where Customer Service is at the optimum. The Corinthia Palace Hotel has achieved worldwide acclamation for its high degree of service and presently holds the World Travel Award ‘Malta ‘s Leading Hotel ‘ . This esteemed award is a great award to the Industry as it is believed to be the equivalent of the ‘Oscars ‘ . Such acknowledgment is an first-class selling tool as given the pick, most possible clients would prefer to remain in a reputable hotel.
4.1 PESTLE Analysis – Positions of the Financial Controller
An interview was conducted with the Financial Controller, Ms. Claire Mifsud who provided an penetration as to how the company conducts a Situational Analysis of the Broad Environment. Harmonizing to her Corinthia uses a PESTLE Analysis Template which define the undermentioned six countries that form the context of its operation: –
The forces listed supra significantly act upon both the industry and the administrations that operate within it.
She perceives that the Maltese Government recognises the fact that Tourism is a cardinal subscriber to the Maltese Economy and hence continues to put and work closely with stakeholders within the industry. This twelvemonth the authorities has awarded The Malta Tourism Authority a sum of 35 million Euro for 2011[ 9 ]. The chief vision for 2015 is to advance the Maltese Islands as a Unique Mediterranean Destination[ 10 ], therefore the logical thinking behind the significant investing to better the merchandise.
Through the European Social Fund, the Malta Tourism Authority is puting in a three million Euro plan to better the accomplishments of those presently working within the Industry. The Advance Training Tourism Leaders Program[ 11 ]is being offered free of charge, to both employers and directors in the industry. The purpose of this plan is to heighten the Current Skill Set and to make a Culture of Innovation. As the Group Training Manager, I can unwrap that seven directors working at the Corinthia Palace Hotel are presently taking this Diploma Course.
When asked what perceived barriers had been identified by the hotel, Ms. Mifsud referred to the authorities ‘s stronger stance to aline with European Regulations, peculiarly in countries such as Health & A ; Safety and Environmental Issues. Bing an older belongings, significant investing is required to conform with some of the ordinances. The forecasted economic recovery is more hushed than that of other little economic systems[ 12 ]. Ms Mifsud so expressed her concern on intensifying operational costs and stated that the 2 % addition of VAT on adjustment and the budgeted cost of populating addition bear a great influence on profitableness. She besides remarked that presents, concern clients require their suites to be an extension of their offices when going, hence, equal engineering has become a norm instead than an accessory service. Hence, in order to stay competitory and run into the client ‘s demands extra investing in this country is required.
Section 5 The Broad Environment.
Forces within both the Broad and Task Environment are critical determiners for Strategy Formulation for any administration. However, the nucleus of a Firm ‘s Task Environment is formed by its interaction between the undermentioned three cardinal stakeholders and their impact on the market topographic point: –
All modern-day administrations, irrespective of type of Industry, face forces that can significantly impact profitableness.
‘If a steadfast understands these forces, so it can develop a concern degree scheme that allows the concern to either take advantage or protect itself from these forces, which in bend allows the house to be systematically profitable. ‘ ( Ahlstrom.D, 2009 )[ 13 ].
5.1 Swot Analysis
An internal audit provides an chance for a company to hold a greater apprehension of the capablenesss and restrictions of its resources. Such information will supply a platform from which Operational Strategy will be focused.
The identified strengths and failings of the hotel are as follows: –
The location of this hotel has the possible to pull the undermentioned ‘niche markets ‘ .
The close propinquity to the Presidential Palace makes it the ideal location for Diplomatic Deputations.
Its distant location and propinquity to the National Stadium is besides cardinal selling point to pull Foreign Football Teams who come to Malta for Training Camps and Official Matches.
Bing close to the Malta Fairs and Convention Centre offers possible for concern in suiting delegates who are take parting in big graduated table forums.
Global Repute for Excellent Service
This belongings enjoys 20 % Repeat Business which is amongst the highest on the island. This repute is besides achieved on a local degree as there is a high per centum of locals who frequent the Food and Beverage mercantile establishments.
Hotel suites are much more broad than the newer five star belongingss on the island. In 2009 all suites were refurbished to optimal status. The hotel offers great value for money when one considers the degree of service offered. The clients remarks posted on Travel Review sites such as ‘Trip Advisor ‘ are really positive.
The Athenaeum Spa by Algotherm has now established itself as one of the best Medical Spas on the island.
Unlike many of the other hotels, the Corinthia Palace is non dependent on one Nationality or Market Segment and hence a drastic bead in one of these countries will non do ruinous effects.
The chief meeting suites are little in terrible demand of renovation as they are inferior to what the competition is offering. This may be a conducive factor why some Destination Management Companies direct Group Business elsewhere, which causes ‘opportunity cost ‘ state of affairs for the hotel when holding to decline concern that exceeds the capacity required.
Unlike all the rivals there is non Loyalty Program in topographic point to honor clients for their trueness to the company.
Investing is required to wholly renovate the chief kitchen as the current construction non adequate for the volume of work being produced presents.
Executive Lounge Facilities
Unlike all the five star hotels within the same Competitive Set this hotel does non hold an Executive Lounge. Most corporate clients seek this installation as it provides an extra country, where they can carry on their concern and entertain their clients.
In order to mensurate the potency of an Industry most companies use the model of Environmental Understanding as established by the Economist Michael Porter.
Section 6 Porter ‘s Five Forces Model
In March-April 1979, Professor Michael. E. Porter, published an article in the Harvard Business Review, titled ‘How Competitive Forces Shape Strategy. ‘[ 14 ]. In this article he wrote:
‘Competition in an industry is rooted in its implicit in economic sciences, and competitory forces exist that go good beyond the constituted battlers in a peculiar industry. Customers, providers, possible entrants, and replacement merchandises are all rivals that may be more or less outstanding or active depending on the industry. The province of competition in an industry depends on five basic forces. The corporate strength of these forces determines the ultimate net income potency of an industry. ‘
This article formed the footing of ‘Porter ‘s Five Forces Model. ‘ This ‘user friendly ‘ theoretical account is now widely employed by many administrations to explicate the house ‘s concern degree scheme. Corinthia Palace Hotel is no exclusion. Key strategic determination shapers within the company usage this theoretical account during their concern planning procedure to stand for their analysis of the kineticss of the competitory construction and how the combined strength of these forces influence the Maltese Tourist Industry. Strong forces will propose lower monetary values and higher costs, whereas weak forces suggest the reverse.
6.1 Bargaining Power of Customers and Suppliers
‘Informed clients become sceptered clients ‘[ 15 ]( Dubrin,2008 ) .
Tendencies show that a high per centum of travelers book their travel agreements straight through the cyberspace. Budget air hose sites such as Ryan Air and Easyjet, supply a ‘one halt store ‘ that is accessible around the clock. Nowadays, jobbers such as travel agents are bit by bit being eliminated. The cyberspace has accelerated the power of this competitory force. Customers now have an advantage over the administrations, as they are able to carry on economical hunts of the web from the comfort of their ain place. This provides them with ample chance to compare rates and later buy the best trades.
Since gap, the hotel has witnessed alterations in engagement channels. Customers are more likely to book straight through the cyberspace. Price wars with rivals are prevailing, nevertheless despite this, Corinthia ‘s pricing scheme is based on past public presentation and forecasted demand. Much focal point is placed on safeguarding Gross Operating Net income and as the company is apposed to cut downing rates, added value is offered alternatively. During my interview with Mr. Schranz I asked who has the strongest purchase when negociating rates with providers. His answer indicated that the key to successful dialogue is to make a ‘win win ‘ state of affairs giving them equal purchase.
6.2 Threat of New Entrants
Harmonizing to Slocum et Al[ 16 ]the phrase ‘New Entrants ‘ refers to the comparative easiness with which new houses can vie with constituted houses.
Over the past 40 old ages the figure of companies runing 5 Star Hotels has risen well. Empirical informations issued by the National Statistics Office of Malta indicates that in 1996 there were merely six Five Star Hotels runing on the Maltese Islands. Today, some fifteen old ages subsequently, the sum of five star hotels has about tripled increasing to fifteen. The high concentration of upscale hotels on the market, has made it indispensable to make barriers. Recent Government Regulations, Capital Requirements and Rising Operating Costss are forecasted to impact profitableness. Such conducive factors may postpone new entrants in the hereafter.
During my interview with Director of Gross saless and Marketing, Mr Karl Schranz, he revealed that he does non imagine any other Five Star Hotels come ining the market this twelvemonth. He farther elaborated that in his sentiment the industry does non necessitate more 5 star belongingss.
‘The industry has seen an detonation of Five Star Room Stock on the market in the last 5 old ages. There is a excess of Hotel Rooms in low season due to the seasonality of our concern. On the other manus, all five star belongingss run at really high tenancies from May till October. In my sentiment, it all boils down to market forces. When market conditions permitted and when it was extremely executable for other hotels to fall in, most local and foreign concern work forces invested to a great extent in the Hotel Sector. ‘
6.3 The Menace of Substitute Products or Servicess
Administrations that provide services that adequately substitute those offered by rivals within the same industry are considered as a menace to those viing within the same industry. In the local context, substitutes to Five Star hotels can be identified as either the Chartering of Yachts or Opting for a Cruise. However, with high degree of handiness offered by budget air hoses, emerging tourer finishs poise a bigger menace to the industry. Central and Eastern European finishs are offering similar merchandises at more competitory rates. However, if one was to see the high concentration of natural catastrophes or inauspicious conditions conditions many states have late experienced many travellers may be influenced by Malta ‘s more agreeable clime. Furthermore, political instability in emerging finishs like Tunisa may besides postpone travelers to take alternate finishs.
6.4 Existing Competition
The degree of competition is a cardinal determiner of how other hotels in the industry are likely to act. Hotels within the same Competitive Set strive for market portion. From the 15 5 Star Hotels on the island, the merely four categorised in the same Competitive Set as the Corinthia Palace and Spa are Phoenicia, Excelsior, Intercontinental and the Meridien. However, both the Director of Finance and the Director of Gross saless consider the Phoenicia as their chief rival. This is attributed to the fact that both hotels have been in competition for the past 40 old ages and that both belongingss appeal to the same markets. Harmonizing to the information provided by Mr. Shranz, the hotel ‘s mean market portion is about 10.5 % .
Karl Schranz commented as follows:
‘Price Wars are enormous in all Hotel Categories in Malta. We had managed to cut down monetary value wars significantly before 2008 when demand was in line with supply. Since more Five Star Properties opened in Malta and since the recession set in, most hotels started cut downing rates in order to bring forth progress and last minute concern ‘
As operating costs are lifting, the burden must stay on aiming specific markets that can give the highest net incomes. Although perceived as a concern hotel, leisure travelers remain the cardinal market. The Tour Operator and Leisure Segments about constitute to 64 % of the hotel ‘s market portion.
Section 7 Decision
7.1 Industry Life Cycle
As each industry evolves it goes through a sequence of stages. Factors used to determine at which stage the Industry is presently in, is by measuring both the figure of houses runing and their possible for profitableness. Desk research conducted for this assignment indicates that despite planetary economic recessions, the Maltese Tourist Industry has shown growing. Furthermore, projections for the coming old ages besides indicate growing. All in all, it appears that Tourism remains a promising Industry for the close hereafter.
7.2 Strategic Direction for the Hotel
The manner frontward for the company is to keep its high degree of client keeping rate which presently averages in the part of 20 % . This comparatively high per centum of client trueness is attributed to the General Manger ‘s high degree of client orientation in concurrence with the really high degree of individualized services. The recent award should have more conspicuously on the hotel ‘s web site, therefore utilizing this as an excess tool to market the hotel.
From a fiscal position, costs must be closely monitored and chances to bring forth income should be exploited. The hotel direction should pool their resources together to make a civilization that encourages invention. Investing in alternate beginnings of energy should be studied and the possibility of geting EU Funding explored. Investing should besides be made to upgrade the belongings seeking in order to derive a return on investings through increased room rates.
Future growing should stem from the hotel ‘s Unique Selling Point, which is the ability to offer a memorable experience. The Gross saless Team needs to take a more aggressive attack to tap into undeveloped markets and offer advanced bundles based on value. Finally, with the continued committedness to carry through the company ‘s mission, the squad must drive the Corinthia Brand Identity by offering reliable Maltese Hospitality. By concentrating on the chief precedence which is Customer Satisfaction, the hotel will non merely remain profitable but will besides stay a strong rival.
‘For many, touristry is a beginning of employment and income. The touristry industry is responsible for 5.2 % of the EU ‘s employment and histories for 5 % of Europe ‘s Wealth. It is hence a strategic sector of our economic system, confronting new challenges that ought to be kept in cheque and chances that need to be taken. With 380 million international reachings yearly and market portion of more than 40 % of planetary touristry Europe commands the place as the figure one tourer finish ‘
European Commission Vice-president Antonio Tajani-
‘Journal of the Institute of Tourism Studies ‘ Dec 2010 pg 30.
hypertext transfer protocol: //www.worldtravelawards.com/award-maltas-leading-hotel-2010
‘IL-Haddiem ‘ ‘Corinthia Palace Hotel ‘ 11 June 1968 pg 5
hypertext transfer protocol: //www.wttc.org/bin/pdf/original_pdf_file/malta.pdf
hypertext transfer protocol: //www.maltatoday.com.mt/news/national/tourist-arrivals-expected-to-reach-1-3-million-by-end-2010
hypertext transfer protocol: //www.nso.gov.mt/statdoc/document_file.aspx? id=2873
hypertext transfer protocol: //www.nso.gov.mt/statdoc/document_file.aspx? id=2928
hypertext transfer protocol: //finance.gov.mt/image.aspx? site=MFIN & A ; ref=2011_BudgetSpeech2011_English
hypertext transfer protocol: //opm.gov.mt/vizjoni-2015
hypertext transfer protocol: //gozonews.com/15934/free-programme-of-advance-training-for-tourism-leaders/
hypertext transfer protocol: //hbr.org/1979/03/how-competitive-forces-shape-strategy/ar/1
Daily Telegragh ‘Malta Centre of Excellence in the Mediterranean ‘ 16 June 2000
NSO intelligence release 242/2010 ‘ Corporate adjustment constitutions: Oct 2010 ‘ Dec 22, 2010