DB FPX 8415 Assessment 3 Company Analysis Framework

Student Name

Capella University

DB-FPX 8415 Strategic Decision Making

Prof. Name:

Date

Introduction

The onset of the COVID-19 pandemic in 2020 significantly impacted industries globally, compelling many businesses to rethink their operational strategies to sustain themselves in today’s environment. The Leisure and Hospitality industry was notably the hardest hit at the pandemic’s onset. The economic and global disruption resulting from the COVID-19 pandemic will shape the recovery of the hospitality industry. Post-COVID operations will demand unprecedented adaptability from hotels as they develop, implement, and manage safety measures to restore customer confidence and generate renewed demand. Early in the recovery period may be an opportune time for investors to make strategic investments in the industry.

Seyitoğlu and Ivanov (2020) present a conceptual framework for service delivery design in the hospitality industry post-COVID. They identify three service delivery systems: robotics, human-based, and mixed. Traditionally, the hotel industry has relied on human labor for all front-of-house and back-of-house operations. Over recent decades, technology-mediated services, such as online reservations, have become commonplace. The COVID-19 pandemic severely disrupted the hospitality industry, leading hotels that depended heavily on international labor to face labor shortages as these workers returned to their home countries.

DB FPX 8415 Assessment 3 Company Analysis Framework

Labor shortages have also driven workers to other fields with more lucrative cash flow. Consequently, hotels are rethinking their operations to create a safer and more welcoming environment for customers. While robotics have replaced several tasks formerly performed by humans, this approach is not universally appealing. Some customers prefer face-to-face interactions, making fully robotic services less attractive. As a result, some hotels are adopting a mixed approach of humans and robotics. Each of the three service delivery systems proposed by Seyitoğlu and Ivanov (2020) has its advantages and disadvantages.

The framework by Seyitoğlu and Ivanov (2020) consists of six sections related to service delivery system design (SDSD), with “demand” being the most relevant to acquisitions. Customer safety and security expectations will shape the acquisition approach and are the first facets of the acquisition framework. Understanding customer perceptions and considering demand are essential for a hospitality firm’s positioning strategy (Seyitoğlu & Ivanov, 2020). Customers now place a higher emphasis on health and safety, requiring post-COVID hotel operations to exhibit unprecedented versatility.

DB FPX 8415 Assessment 3 Company Analysis Framework

Social distancing, hygiene, and cleanliness throughout the customer journey are critical to restoring confidence and generating renewed demand. Industry 5.0 can benefit the hospitality industry by enhancing personalized service, supply chain efficiency, agility, smart work environments, big data use for customer preference information, and providing highly customized services at lower costs. These factors can significantly impact customer satisfaction, loyalty, and perceived service quality (Gopalakrishna et al., 2021). Hotel owners must reimagine existing spaces and streamline services in response to the new normal, balancing guest experience and profit optimization.

Hotel location plays a crucial role in attracting tourists and influencing their decisions. It affects occupancy rates, revenue per room, and profitability. Establishments in populous and economically active areas typically show high potential demand and attract both domestic and international travelers. In 2022, the Southeast had the highest share of industry establishments at 28.5%, followed by the West at 16.3%, the Southwest at 14.7%, the Mid-Atlantic at 10.6%, and the Great Lakes at 11.6% (Ristoff, 2022).

DB FPX 8415 Assessment 3 Company Analysis Framework

Morgan-Eskola Hospitality Partners (ME-HP) LLC plans to open a European-style boutique hotel and spa in San Francisco, Los Angeles, New York, Chicago, and Boston. The financial-slack-driven risk preparedness of hospitality businesses varies by location (Wieczorek-Kosmala, 2021). Building on Seyitoğlu and Ivanov’s (2020) framework, location is critical for successful acquisitions and future profitability. The cities of interest for ME-HP are major metropolitan areas with established infrastructure and available healthcare, making them suitable choices warranting further investigation.

The third facet of the acquisition framework is people. The pandemic forced hotels to shut down, leading to staff layoffs to cover fixed costs. Many hospitality teams felt undervalued, as management easily let go of crucial staff (Adams, 2021). The industry is now scrambling to fill open positions. While hotels can use robots for many service-oriented activities, they still need people to operate and maintain these robots and ensure a positive guest experience.

DB FPX 8415 Assessment 3 Company Analysis Framework

The hospitality industry must invest in its professionals, providing increased wages, opportunities for skill enhancement, and re-skilling to prepare them for various roles in hospitality operations. This period should be viewed as an opportunity to cultivate passionate professionals, equipping them with advanced skill sets and opportunities to make money and serve guests with pride. The industry needs a fundamental shift in its operating mindset (Adams, 2021).

Brand awareness is crucial in the hotel and service industry as it represents intangible competitiveness. Effective branding builds credibility, trust, and new revenue channels by engaging guests as business advocates. Technological advancements offer hotels opportunities to differentiate themselves. The unique selling proposition of hotels must go beyond health and safety to encompass the customer experience. Seyitoğlu and Ivanov (2020) emphasize the need for R&D, promotion, branding, and image creation to help hospitality firms position themselves uniquely, differentiate from competitors, and persuade customers to choose their services. Brand recognition is the fourth facet of the acquisition framework.

DB FPX 8415 Assessment 3 Company Analysis Framework

The hotel industry, unlike high-tech or equipment-intensive organizations, traditionally requires significant financial and human capital. The industry’s high financial and operating leverage, combined with decreased demand during the pandemic, has tested its resilience. Businesses faced severe liquidity challenges and bankruptcy due to reduced sales revenues. In risk preparedness, high financial slack is desirable for its buffering function (Wieczorek-Kosmala, 2021). Hospitality businesses with high financial slack have better profitability and liquidity positions. The conceptual model by Wieczorek-Kosmala (2021) indicates that businesses with low or insufficient financial slack struggled to sustain liquidity tensions post-COVID.

Financial measures such as expected revenue, growth rates, debt-equity ratio, liquidity, and valuation contribute to a company’s attractiveness as an acquisition target. Wieczorek-Kosmala’s (2021) framework is critical for acquiring financial risk preparedness and long-term sustainability. Financial slack and liquidity are the fifth facets of the acquisition framework.

DB FPX 8415 Assessment 3 Company Analysis Framework

Acquisitions are a component of corporate strategy involving the combining, buying, and selling of companies or assets to promote enterprise growth and increase shareholder value. They can enhance financial power, market share, and business activity, enabling further development and expansion. Acquisitions also offer opportunities for efficiencies through economies of scale. Developing acquisition criteria is essential for evaluating prospective companies.

Key acquisition criteria for investors in the hospitality industry include access to a multiskilled and flexible workforce, franchise chain affiliation, word-of-mouth benefits, proximity to key markets, quick adaptation to new technologies, and effective stock control. These success factors are crucial according to IBISWorld (Ristoff, 2022). ME-HP can ensure informed decision-making with a multi-criteria decision-making framework, involving people, processes, governance, and decision-support tools. This framework should include criteria such as Human Capital, Technology, Financials, Intellectual Property, and Synergies.

Reflection

A strategic decision-making framework offers a comprehensive view of new market opportunities, positioning investors for success. Investors must act quickly while conducting due diligence to avoid high failure costs. An effective framework provides valuable market potential information, helping businesses differentiate from competitors.

IBISWorld projects continued growth in the hospitality industry, especially in extended-stay hotels, boutique hotels, spa and health retreats, and resorts (Ristoff, 2022). Hotels uniquely function as both real estate investments and operating businesses dependent on a service delivery system. Hospitality firms must develop a suitable service delivery system that meets customer expectations and aligns with firm resources and capabilities (Seyitoğlu & Ivanov, 2020).

The COVID-19 pandemic’s economic fallout caused significant financial stress for hotel owners, potentially affecting the long-term viability of many hospitality firms. ME-HP needs to understand the target market’s position and forces, legal or regulatory factors, company culture, staff morale, brand awareness, distribution channels, and customer factors to fully grasp acquisition benefits. This can be achieved using 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.