Hilton Adelaide: External, Industry Environment Analysis

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Introduction

Hilton Adelaide is one of the popular four star hotels located in Adelaide, in South Australia. The hotel is located in a strategic place in a region considered the heart of the city and has thus been known as one of the best and popular hotels in Southern Australia especially by eco-tourists (Malhotra, 1997). The hotel commands a fairly large market share in the region. However, increased competition from its rivals and legislative issues has been threatening its market share. Like any other form of business, hotels are faced with internal and external environment factors which generally play a crucial role in determining its operations and market share. Changing external and internal factors as a result of changes in the business world, act as forces that control business operations of a firm. The hotel has some of the best known meeting facilities, ball room and business centre in the region (South Australia.biz, 2010). Offering quality services at its recreation areas such as pool and spas have raised the hotel’s market share. However, the hotel’s management need to identify forces resulting from the external environment that are likely to influence its development.

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The hotel, which is one of the most famous four star hotels in Adelaide, has been involved in continuous analysis of any opportunities that may help in expanding and improving its market share. The hotel’s management and staff are always determined to ensure their visitors have a pleasant stay in their premises. For instance, all guest rooms have pillow menus and are designed to give the clients city views. While the internal environment is conducive and has helped the hotel rise to its current status, it is faced with a wide range of issues especially from the external environment. The hotel is located among well known theatre, business, shopping districts and dining points which offer to its potential buyers similar services (South Australia.biz, 2010). This has created a competitive environment. To be able to benefit from the expanding market especially in the tourism sector, Hilton Adelaide management need to take into account all external forces and use them in developing opportunities and analysing threats in various sectors. To analyse its industrial environment the porter five forces tool and PEST will be used. Using these analysis tools will help the hotel’s management in identifying its strengths in the competitive environment and its weaknesses which can thus help them especially when making decisions on how to improve their business.

The analysis of external industrial factors in any business involves analysing events that despite having intense control over the company’s performance occur outside the company. There is a wide range of external environmental factors that should be analysed in Hilton Adelaide hotel. Some of these external factors include competition, political interference, economy, demographics and the position in the industrial sector (Pizam, 2005). In South Australia, an evaluation on most of the external factors shows gradual change hence the reason it is important for the analysis of the current external factors by Hilton Adelaide hotel management since the information obtained can hep it in developing new strategies for the company (Malhotra, 1997). Dealing with external forces plays an important role in helping the firm’s management identify the opportunities and threats that should be addressed. In this paper, some of the external environmental factors about Hilton Adelaide hotel that will be analysed include information on competition, customer needs and behaviour, industrial outlook, economy, social environment, change in population density and other demographics, political interference and changes in technological and general environment will be analysed.

PEST Analysis

Political interference

In most states, political interference plays a key role in determining the relationship between the corporate and government. Generally, business ethics and responsibility is significantly determined by the political status of a region. According to research, political interference greatly determines a business’s development and growth. In Australia, hotel industry has been facing too much regulation from the government which has been impacting its operations negatively (Pizam, 2005). The government has been developing federal restrictions and laws which hotels in the region should adhere to. For instance, the government has developed restrictions concerning hotel supply. The Hilton Adelaide hotel management is only allowed to accept supplies from suppliers who are recognised by the federal agencies (Pizam, 2005). The development of this legislation has been considered to play a key role in the increasing of suppler power. Since the implementation of the law, only a few hotel suppliers have managed to meet the federal agencies requirements. Development of tax policy system by the Australian federal government can be considered another external force that will impact the growth of Hilton Adelaide negatively. Most of the government’s business laws and policies are created in a manner to promote consumer protection which at times comes at an expense of the business owner. On the other hand, political stability is one of the external factors that have contributed to increased number of tourists visiting the region (Malhotra, 1997). This provides Hilton Adelaide hotel an immense development opportunity since it promotes the tourism sector which Hilton Adelaide hotel mainly depends on for its buyers. Most of the tourists who visit South Australia are eco tourists thus political stability increase business opportunities for Hilton Adelaide hotel.

Economy

Increased competition among hotels in the region can be considered an economic factor that has had a negative impact to the hotel’s growth. Despite the fact that there is high number of tourists visiting the region, increased competition among five and four star hotels poses to Hilton Adelaide hotel economic threat. The management needs to be creative and innovative to capture more customers. The government is keen to promote economy development in the tourism and hotel sector thus providing the hotel with economic opportunity. In the past five years, the Australian government has recorded increased economic growth in the hospitality and tourism sectors which are the area Hilton Adelaide hotel receive its customers from (Malhotra, 1997). In addition, the increased spending by the government in promoting tourist destinations in South Australia has also impacted the hotel economic growth positively. However, high taxation in the hotel industry and poor management of exchange rates can be considered some of the economic threats facing Hilton Adelaide hotel.

Social

Modernization is one of the external forces contributing to both positive and negative growth of Hilton Adelaide hotel and other hotels in similar status. To deal with social forces especially arising due to modernization, the hotel’s management has been investing heavily in technology. Increased positive attitude by both foreign and local people about seeking better lifestyle has created business opportunities for Hilton Adelaide hotel to grow to its current status. Improved working condition in South Australia is another social factor that has been promoting Hilton Adelaide hotel (Malhotra, 1997). The government involvement in ensuring that the working conditions for all employees including in the hotel industry are better has improved their attitude towards work. Most customers visiting Hilton Adelaide hotel enjoy quality services from the staff. As a result, most of its customers leave the hotel willing to use their services again when they are in South Australia. Winning customer’s confidence is one of the Hilton Adelaide hotel internal strengths and improved working condition can be attributed to this.

Technology

Technology advancement in the hotel and tourism sector has impacted Hilton Adelaide hotel positively. The hotel has embraced the use of technology in various sectors such as in accommodation, making reservation and other hotel deals (Pizam, 2005). The hotel’s management has been able to use advanced technology in creating guestrooms pillow menus, one of the factors attributed to high market share by the hotel in the region.

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Porter’s five forces tool

Supplier Power

The hotel is located in a region that is popularly known as a tourism attraction. The popularity of the region as a tourist destination has increased the number of hotels in the region offering similar services. Increased rivalry among the hotels has promoted the increase of supplier bargaining power especially because the region has limited hotel suppliers. Some of the rival four star hotels contributing to the increase in suppliers bargaining power include the blue lake Holiday Park, Ceduna Tourist Park, desert cave hotel and best western Southgate motel (Malhotra, 1997). Due to increased competition among the hotels in South Australia, suppliers for cleaning, promotion materials, food service equipment, technology and maintenance have been increasing their supply cost due to increasing competitive demand (South Australia.biz, 2010). The hotel’s management has been analysing ways through which they can regulate their suppliers’ power since it has in the past years been affecting its rates and marketing strategies. One of the hotel’s policies is to promote the delivery of outstanding services and experiences of its guest’s thus increasing supplier bargaining have been affecting its business negatively. To be able to meet its objectives the hotel management need to develop strategies in which they can regulate the supplier power. Increased competition among the hotels in the central business area continues to raise the suppliers bargaining power. The hotel suppliers have moved a step further by forming organizations which have been boosting their bargaining power (National Library of Australia, 1998). Hilton Adelaide’s management has recorded increasing supplier power especially in the technology sector. As a result of increased demand for these services by other hotels, the hotel’s bargaining power has been reducing.

Competitive Rivalry

As a result of the increasing number of five star hotels in South Australia such as Intercontinental Adelaide, Stamford Grand Adelaide and Seibel Play ford Adelaide among others, most four star hotels such as Hilton Adelaide are facing competitive rivalry. To attract more buyers, these five star hotels have been providing reduced and special rates to its clients thus affecting the marketing strategies for low status hotels. Most of the five star hotels are located in the heart of Adelaide thus interfering with the advantages Hilton Adelaide used to enjoy because of its strategic location (Malhotra, 1997). To survive in the competitive environment Hilton Adelaide management need to device new marketing strategies. In addition, the management needs to invest in improving the quality of its services.

The threat of substitutes

Excellent customer care services, well appointed guest rooms and its strategic location are some of the business opportunities that helped the hotel experience quick growth in the past years. However, as a result of increasing competition and creation of new hotels around Victoria Square and its surrounding environs, the hotel is gradually experiencing substitute threat. Most of the Hilton Adelaide hotel competitors have invested in providing to its customers services that make them feel more comfortable (Southaustralia.biz, 2010). For instance, the competitive hotels have fitted well equipped fitness centres and other relaxation facilities. Competitive hotels such as Intercontinental Adelaide offer services such as currency exchange, tour services and meeting facilities as a special package thus have been recording increased number of customers. On the other hand, Hilton Adelaide has in the past year been struggling to maintain its customer share due to increased rivalry among hotels(Pizam, 2005). For the hotel to retain its hotel status, it needs to invest on how to deal with problems arising from these external factors which continue to increase substitute threats.

The threat of Entry

Competition from already established hotels has been lowering Hilton Adelaide entry process especially into the modern business hotel. Competitor hotels provide customers with subsided prices thus making it hard for Hilton Adelaide to operate within its desired capacity. However, the management has been able to handle partially this problem by creating special rates during promotion or peak season (Pizam, 2005). The hotel management has qualified staff to ensure the customers who visit the hotel enjoy quality services. To overcome the threat of entry the hotel’s management has invested heavily on technology advancement especially to ensure the quality of sleep and food services is improved.

Buyer Power

Unlike in other regions in the world due to increased competition by the hotels and high supplier power, the buyer power is high. In addition, the buyer power has been raised by the government’s tax system review and the implementation of the intellectual property law. Increased rivalry among fourth and five star hotels continues to increase the buyer’s power (Malhotra, 1997). In addition, increased technology has boosted buyer’s power since it has made it easier for potential customers to find great deals and compare rates with other rival hotels within the region through the internet.

Conclusion

Political, economic, technological and social factors are the main external factors affecting Hilton Adelaide business performance (Malhotra, 1997). These factors are mainly affecting the hotel’s market share negatively. Technological and economic changes in the external market can be attributed with the negative business experiences the hotel has been faced with in the past years. Increased technology for instance has boosted buyer’s power since it made it easier for potential customers to find exceptional deals and compare rates with other rival hotels within the region (Pizam, 2005). To be able to maintain its level in the business ladder the management of Hilton Adelaide hotel need to develop strategies for addressing these external factors in order to convert them into business opportunities (Malhotra, 1997).

List of References

  1. Malhotra, R., 1997. Encyclopaedia of hotel management and tourism. India: Anmol Publishers. 3796 pages.
  2. National Library of Australia, 1998. Australian national bibliography. Australia: National library of Australia press.
  3. Pizam, A., 2005. International encyclopaedia of hospitality management. Butterworth-Heinemann press. 685 pages.
  4. Southaustralia.biz, 2010.Tourism. SA: Department of trade and economic development press.

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