Shangri-La faced three key challenges in expanding its operations within and outside of Asia. First, the company entered high-wage economies in North America and Europe (Campbell and Kazan, 2008). Second, Shangri La Hotels expanded into the Chinese market, a region where front-line employees traditionally were not used to decision-making responsibilities (Campbell and Kazan, 2008). Third, competitors in the Chinese market poached Shangri-La’s staff and increased wages in the historically low-wage market (Campbell and Kazan, 2008). Thus, the hotel management had to solve a number of organizational issues in order to build an effective strategy.
Maintaining hospitality standards and providing the highest level of service to guests is of the utmost importance to Shangri-La. The main difficulty that the management faced expanding in Europe and North America was the low number of trained hotel staff and higher hourly wages. Droulers and Heffernan (2008), using the example of a hotel in Sydney, discovered that not all values available in the Asian environment could be transferred to the non-Asian market.
A number of challenges included the lack of highly qualified key executives, without whom it is difficult to maintain corporate culture. Moreover, there is a significant difference between staff wages and working hours. Asia is characterized by lower hourly rates and long working hours (Droulers and Heffernan, 2008). Such conditions imply additional costs for training and wages, which can lead to higher room prices. Thus, expansion into North America and Europe meant adaptation to the Western market, which made it challenging to convey the company’s cultural values.
Unlike in the West, the Chinese labor market has traditionally been low-waged. There is a difficulty with decision-making authority among the first-line employees. However, Shangri-La is adapting an extensive recruitment and training program to solve the problem, which the company has also implemented in France. Hayat conditions in the two countries are different; universal hospitality standards help maintain a high level of service.
Thus, hotel management prefers to hire less experienced young people who can be trained quickly and efficiently (Kozak and Kozak, 2016). Staff training programs were initially targeted specifically for expansion in the Chinese market but also adapted for all hotels in the chain worldwide (Campbell and Kazan, 2008). Thus, the unification of service standards and the training of young workers have helped Shangri-La develop the right qualities in its staff so that they become valuable members of the company’s culture.
The rapid growth of the Chinese market due to high income and low costs, including wages payrolls, has increased the number of investments. Shangri-La also found their trained staff being poached or offered higher wages by competitors primarily from other Asian hotel chains. Management is forced to develop more extensive staff motivation programs. Thus, management is forced to develop more extensive employee incentive programs, including compensation and career growth systems.
Recommend (With Justification) Some Modifications in Operations as Shangri La Expands that Will Address One Challenge Identified in Q1
Since the problem of poaching of Shangri-La’s staff is the most serious and threatening to the expansion of the company, recommendations for its elimination should be considered. The explosive growth of tourism in China has led to increased investor attention toward the development of the hotel business in the region. As noted earlier, conditions are favorable due to high incomes and relatively low costs. It is noteworthy that expansion for Western chains is difficult, as it is challenging for them to adapt to the specific Asian culture of hospitality (Wong, French and Wickham, 2017).
Thus, competition in the Chinese market has also increased significantly, mainly among Asian hotel chains. However, the hospitality industry suffers “from high employee turnover contributed by the poor image of service work” (Mejia, Wand and Zhao, 2018, p. 1). Through its motivation and training policies, Shangri-La has been able to maintain a low turnover rate in comparison with the industry average (Campbell and Kazan, 2008). However, with the expansion of the market and increased competition, the trend has been threatened, which requires new measures to be taken to effectively work with staff.
Shangri-La applies much effort to develop each employee as a valued team member, making staff turnover disadvantageous to the company. As with many Chinese hotels, they strive to recruit young employees and educate them on the culture and philosophy of hospitality (Baum, 2016). All major hotel chains have staff training programs, which makes Shangri-La’s approach not unique and insufficient (Baum, 2016). The most obvious solution seems to be raising monetary rewards and wages. However, intrinsic motivation has a more long-term positive effect on reduced turnover and employee satisfaction (Mejia, Wand and Zhao, 2018). Staff’s loyalty to the company’s values and brand philosophy is key to a stable and highly skilled workforce.
Due to the high profitability of the hospitality sector in China, competitors may offer much higher wages to trained employees. Therefore, companies that focus on staff skills development, as Shangri-La does, are at risk in the first place (Zhao, 2018). Keynon, Robinson, and Musgrave (2020) note that the main factor affecting employee turnover in the industry is employees’ satisfaction with their workplace. In particular, a job in hospitality makes people feel stressed.
This is especially true for the Chinese market since the standards of hotel chains require a high level of service and skills. Thus, in order to solve the existing problem, it is necessary to develop not only training but also the support of employees. It is also essential to improve communication between different employee levels to enable staff members to become part of the company’s culture.
In this regard, the recommendations are to increase each employee’s level of involvement in the value of the chain. It is also worth developing not only individual but also team skills so that the staff could feel more cohesive. It is also important to organize support for employees so that they feel their value for the common cause. Thus, external motivators, in the form of monetary rewards, cannot reduce turnover, while internal motivation, which increases employee satisfaction, is essential.
Critique Shangri La’s Service Model of ‘Shangri La Hospitality’ and Identify Control Systems Which Could Help Achieve Continuous Improvement
Shangri-La is committed to providing personalized service in each country that is culturally sensitive. At the same time, it delegates its long-standing values, which are challenging to combine in many countries. Management and staff need to consider the specifics of each market in which a particular hotel operates. Shangri-La has faced a number of challenges as it strives to standardize its service, which threatens the company’s development. The main difficulty is to train the staff worldwide, uniform company principles and philosophy. Therefore, the management developed a special system of employee levels and established an academy.
For luxury hotels, it is necessary to meet the needs of customers and provide high-quality service continually. Koc (2017) notes that there are several reasons for hospitality services failing. These include not listening to guest complaints, not responding to a complaint, not realizing the importance of making a decision, or focusing on an ongoing solution rather than preventing a recurrence of the incident. Thus, with Shangri-La’s philosophy of customer privilege and absolute attention to their needs, the system is effective.
However, the existence of problem of decision making among front-line employees and staff turnover is challenging. In this regard, the management needs to pay more attention to the preservation of highly qualified staff. The key to hospitality is to maintain high standards, especially for luxury hotels. Thus, staff turnover can be a much more concerning issue.
The main assessment of the hotel’s success is the level of customer satisfaction with the service provided. Pradhan and Samal (2019) note that the most crucial criterion for the hospitality sector is meeting the guest’s expectations of what he will receive. This can also be problematic for Shangri-La because they offer a unified service worldwide. However, in each country, due to cultural characteristics, there is various perceptions of certain services, so it is necessary to consider distinct features. The difference in service provided can be shocking for customers accustomed to certain standards (Chon, 2019). Sampson (2018) emphasizes the importance of local and regional skills training. Thus, when expanding the business to other continents, the model of unification does not seem flexible enough.
The control system which would help to achieve continuous improvement consists of training staff based on the country’s specificities. Since not only the mentality of the clients is different, but the characteristics of the employees also depend on geography and culture. Thus, the most important thing for hospitality is to rely on clan control (Epstein, Verbeeten and Widener, 2016). The key to effective service delivery is the transformational nature of the activity of managers, who can adapt to different conditions. Thus, it would be more rational for Shangri La to put efforts to develop management skills in higher positions. Giving decision-making power to front-line employees makes them more attractive to competitors and increases turnover. Moreover, it is much easier to develop loyalty to the company among staff with a broader range of responsibilities.
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