Introduction
DB FPX 8415 Assessment 3 The COVID-19 pandemic outbreak during the year 2020 attacked different industries of the world and left some business houses even then trying to rearrange their operating strategy to try to survive today’s times. The Leisure and Hospitality sector was, without doubt, the most affected sector when the pandemic initially occurred. The COVID-19 pandemic will make economic and global disruption shape the hospitality industry’s recovery process. The post-COVID business will require greater unprecendented adaptability on the part of hotels, as they conceive, implement, and manage safety policies to restore customers’ trust and drive revived demand. Investors may also see that the most opportune time to invest strategically in the industry is at the beginning of the recovery period.
Seyitoğlu and Ivanov (2020) provide a conceptual framework for designing service delivery for the hospitality industry, post-COVID. The writers identify three systems for rendering services in the hospitality sector: human, robotics, and hybrid. The hotel industry has traditionally depended on human beings for every front-of-house and back-of-house aspect. Technology-enabled services, such as reservations via the internet, have emerged to the forefront in the past couple of decades or so in the hotel industry, among others. The hospitality industry was hard hit by the COVID-19 pandemic. Hotels that were formerly very reliant on foreign labor to staff their properties are now facing a labor shortage since such laborers have gone back to their countries of origin.
DB FPX 8415 Assessment 3 Company Analysis Framework
Laborers have also abandoned the hotel industry to find other professions whose cash flow is more lucrative. Hotels have had to re-engineer their businesses to offer a safer and more welcoming environment for their customers. Robotics have been replacing much of the work that was once done by humans but this is not possible in every market. There are clients who desire face-to-face interaction, and hotels that employ robotics for front-of-house and back-of-house operations are off-putting. A few hotels are adopting both human beings and robotics. Each of the three service delivery systems proposed by Seyitoğlu and Ivanov (2020) has its strengths and weaknesses.
The six sections of the proposed framework by Seyitoğlu and Ivanov (2020) to be used for the design of the service delivery system (SDSD) are applicable, where “demand” is the most relevant section for the acquisition. Customer security and safety needs will shape the acquisition strategy and are the first facts of the acquisition model. Customer opinion and demand in mind are obligatory and essential for a positioning strategy of a hospitality firm (Seyitoğlu & Ivanov, 2020). Customers are paying more attention to their health and safety. Hotel operations during the post-COVID period will require an unprecedented degree of flexibility.
DB FPX 8415 Assessment 3 Company Analysis Framework
Social distancing and ensuring hygiene and cleanliness at several touchpoints along the way of the customer are most important in returning the confidence of the customers and inducing rekindled demand. Industry 5.0 can be advantageous to the hospitality industry because tailored service, streamlined supply chain, responsiveness, intelligent working environment, utilization of big data for real-time customer preference information, highly tailored services at lower cost, and digital augmentation can affect customer satisfaction, loyalty, and perceived service quality (Gopalakrishna et al., 2021). The hotel owners’ concern is to reshuffle the spaces available and streamline their operations in response to the new normal with the guest experience and profit optimization in mind.
Hotel location plays a critical role in attracting tourists and determining a tourist’s decision. Location plays a crucial role in occupancy, room revenue, and profitability. Accommodation facilities in the industry that are located in areas with higher populations and economic activities tend to have a high level of potential demand and account for a region’s share of domestic and international visitor travel as a holiday or pleasure and business destination. The Southeast has the largest proportion of industry establishments at 28.5% of locations in 2022. The West has the second-largest proportion of industry establishments at 16.3% of locations in 2022.
DB FPX 8415 Assessment 3 Company Analysis Framework
The Southwest, Mid-Atlantic, and Great Lakes regions represented 14.7%, 10.6%, and 11.6% of establishments, respectively, in 2022 (Ristoff, 2022). Morgan-Eskola Hospitality Partners (ME-HP) LLC would like to open a European-style boutique hotel and spa in San Francisco, Los Angeles, New York, Chicago, and Boston, one in each city. The degree of financial-slack-induced risk readiness of the hospitality businesses being studied was contingent on the location of the businesses (Wieczorek-Kosmala, 2021).
According to the conceptual model provided by Seyitoğlu and Ivanov (2020), location will be key to a successful acquisition and future success. The target cities of interest for ME-HP are large urban cities with existing infrastructure and easy access to healthcare. These appear to be good choices but cannot go without additional research. Location of the hotel is the second part of the acquisition model.
The third facet of the acquisition framework is the people. The COVID-19 pandemic forced hotels to shut down their operations. Management had to lay off staff to ensure they had the money to cover their fixed costs. Many hospitality teams now feel they were viewed as a number, a mere cog in the wheel. People who felt that they were part of the business were often dismissed with what constituted ease (Adams, 2021). The hospitality industry is now racing to hire people to fill existing spaces. While hotels can spend money on robots to perform most of the service jobs, there is still a need for people to work and handle the robots as well as maintain a comfortable guest experience.
DB FPX 8415 Assessment 3 Company Analysis Framework
The hospitality industry needs to invest in its professionals and establish a new paradigm that provides them improved compensation, provides them opportunities to enhance their skill set through training and development, and re-skilling the professionals to make them ready for their other roles in hospitality operations. The sector should see this as a window of opportunity to heavily invest in the people who run it by creating passionate professionals through equipping them with phenomenal skill sets and the opportunity to earn money and take care of guests with pride. The hospitality industry needs to revolutionize its operational mindset, starting from its very building blocks (Adams, 2021).
Brand recognition is very important in the hotel and service industry since it is a type of non-physical competition. Branding in the service industry can build credibility and believe. Branding is capable of opening new sources of income by having clients market the business. Off- and online technologies offer great channels for hotels to differentiate themselves compared to rivals. The hotel sector’s unique selling proposition must be more sophisticated and beyond the safety and health of the clients.
It must also consider their experience. Based on Seyitoğlu and Ivanov (2020), there is a need for R&D, promotion, branding, and image building, which supports hospitality firms to position themselves using their differentiated services, differentiate themselves from the competition, and persuade customers to buy their services (Seyitoğlu & Ivanov, 2020). Brand awareness ought to be something to be considered in the acquisition process and the fourth factor in establishing an acquisition framework.
DB FPX 8415 Assessment 3 Company Analysis Framework
The hotel industry diverges from other industries, i.e., high-tech or equipment-based organizations. The industry has been confronted in the past with a greater need for financial capital to invest in fixed assets and human capital (Zhang et al., 2020). Being a capital- and labor-intensive industry with high operating and financial leverage, the subdued demand in the wake of the COVID-19 pandemic has tested the resilience of hospitality enterprises. Sales revenues were severely constrained by the lowered demand during the lockdown period of the pandemic, and firms were unable to cover their fixed costs, and faced severe liquidity constraints, and went into bankruptcy.
At the risk-preparedness level, high financial slack is more desirable due to its shock-absorbing function (Wieczorek-Kosmala, 2021). Hospitality firms with a high level of financial slack-drive-risk preparedness have a better profitability and liquidity position. A model by Wieczorek-Kosmala (2021) portrays that firms with restricted or zero holdings of financial slack, their financial-slack resources have run out, and hence the ability of hospitality firms to alleviate the liquidity imbalances that occurred in light of the COVID-19 pandemic is questionable (Wieczorek-Kosmala, 2021).
Financial metrics, like projected revenue, growth, debt-equity ratio, liquidity, and valuation, are features that make a firm an acquisition candidate. The theoretical model Wieczorek-Kosmala (2021) offers is of prime importance in achieving financial risk readiness and long-term sustainability. Financial slack and liquidity are the fifth features of designing the acquisition framework.
DB FPX 8415 Assessment 3 Company Analysis Framework
An acquisition is one of the corporate strategies entailing the coming together, acquisition, and divestiture of companies or properties to promote business growth and create shareholder value. Acquisitions have the potential to increase financial resources, market size, and business activity, making the newly formed company grow further and expand within its sector. Acquisitions also provide the opportunity to synergize with efficiencies caused by economies of scale. Acquiring firms force companies to formulate acquisition criteria when they seek to buy another company.
The initial step in formulating an effective acquisition plan is to determine the acquisition criteria that the company will use to evaluate the target company. Investors interested in the hospitality industry need to consider acquisition considerations such as: having access to a multiskilled and flexible workforce, being part of a franchising network, obtaining the benefit of word-of-mouth recommendations, proximity to key markets, possessing the ability to adapt rapidly to new technology, and the ability to control stock on hand. These are the success determinants of the hotel sector, according to IBISWorld (Ristoff, 2022).
Morgan-Eskola Hospitality Partners (ME-HP) LLC can have the best choice in their potential acquisition, through a decision framework. ME-HP can utilize a multi-criteria decision framework to make information-based decisions. A structured, unambiguous, and frequent decision-making framework for asset management decisions involves people, process, governance, and the use of decision-support tools. The model should consist of an exhaustive set of criteria and measures, including Human Capital, Technology, Financials, Intellectual Property, and Synergies.
Reflection
A strategic decision-making framework provides a full picture of emerging market opportunities best positioning investors for success. Investors need to act fast but perform their due diligence so as not to pay the cost of failure, which can be very steep. A quality strategic decision-making framework provides valuable information on the size, shape, and direction of the market (i.e., market potential). Strategic decision-making is necessary in differentiating one’s business from that of its competitors.
IBISWorld anticipates the hospitality industry will also keep on increasing, with particular strong growth in extended-stay hotels, boutique hotels, health retreats and spas, and resorts segments (Ristoff, 2022). Hotels are a specific form of real estate investment as they are used both as an operating business running off a system of service delivery and a piece of real estate. Hospitality businesses need to develop the right service delivery system design that suits the needs of the customers and is aligned with the capability and resources of the company (Seyitoğlu & Ivanov, 2020).
The economic effect of the COVID-19 pandemic resulted in severe financial hardship for hotel owners. This effect could influence the long-term viability of most hospitality businesses. Morgan-Eskola Hospitality Partners (ME-HP) LLC should be aware of the target’s market position and market forces, and any legal or regulatory conditions and liabilities, company culture, employees’ morale, brand awareness, distribution channels, and customer factors to understand the strengths of the acquisition in detail. All this is possible with the help of 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.https://www.symplicity.com/
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.
DB FPX 8415 Assessment 3 Company Analysis Framework
Seyitoğlu, F., & Ivanov, S. (2020). A conceptual framework of the service delivery system design for hospitality firms in the (post-) viral world: The role of service robots. International Journal of Hospitality Management, 91, 1–10.
Wieczorek-Kosmala, M. (2021). COVID-19 impact on the hospitality industry: Exploratory study of financial-slack-driven risk preparedness. International Journal of Hospitality Management, 94, 1–14https://www.shrm.org/home
