Sri Lankas Aitken Spence Hotel Holdings Competitive Strategy And Sustainable Tourism Case Solution

Neptune hotel, located in the southern coast was a 3-star resort stretch, was the first hotel built in 1974. Following suit, Triton Hotel was built on the coastal stretch representing 5-star standards. However, the most pivotal turning point in the business acumen was depicted by the building of Heritance Kandalama, representing 5-star “concept” resort standards, in 1994. The tea factory was on similar lines of being a 5-star “concept” resort, built around the central hills of the country.

2. Main Problems

ASHH has managed to perform well during various fluctuations due to its diversity in hotel management, which is streamlined through exclusive branding that sets aside each brand as a separate product line. Following the end of March 2008, the tourist arrival took a dip way below the previously registered numbers (559,603 in ‘07) in the prior four years to about 494, 008.

Considering the operating costs, ASHH has managed to overcome such thresholds that hold pertinent impact on the profits through indigenous menus that complement the local flavour and the placement of environmental management systems to reinforce the scope of efficiency pertaining to water and fuel usage. However, the recent surge in oil and commodity prices has led to a spike in the cost pertaining to direct materials and consumables (almost 27 per cent of total expenses).

Additionally, the expansion of business in new regions including India and Oman had led to a surge in the required strength of employees to around 3,200 as compared to the previously held a number of 1,954. Subsequently, the employee payroll cost burgeoned to an astounding 14 per cent of the total expenses.

3. Internal and External Analysis

The internal and external issues pertaining to the company intend to be explained through the detailed analysis of porter’s five forces and the PESTEL model. The key to note here is the fact that ASHH incorporates its corporate strategy throughout the organization’s numerous business lines. 

i. Porter Five Forces Model

The Porters five forces model tends to complement the industry analysis utilizing a broad perspective, whereby, emphasis is placed on five aspects or forces that tend to demarcate the association of basic industry standards.

Threat of New Entrants

Threat of new entrants is relatively moderate. The tourism industry was essentially taking a shift from Europe and North America to Asia. India bears its benefit through the cloak of natural and heritage attractions. ASHH was not an exclusive hospitality entity that intended to follow suit of diversifying in India. John Keells Holdings PLC was essentially the largest Sri Lankan conglomerate, whereby its leisure arm operated nine hotels in Sri Lanka and five in Maldives. There are essentially numerous players who intend to diversify in similar patterns pertaining to ASHH. The barriers to entry pertain to the high cost associated with the building of 5-star resorts and similarly luxury villas in exclusive spots in some of the most beautiful sites.

Bargaining Power of Customers

The bargaining power of customers tends to be low. The reason for such low bargaining power may be associated with the luxury status of some of the resorts and hotels. On the other hand, places such as The Tea Factory tend to charge customers highly due to their exclusive services and experience proliferated towards the customers. Similarly, according to the case study, the poor market conditions did not delineate Heritance Kandalama but rather charged almost 15 to 20 percent more as compared to other hotels in the region.

Bargaining Power of Suppliers

Bargaining power of suppliers tends to be at a lower level when assuming focus towards food, machinery and labour. The supplier pertinent to a hospitality industry incorporates the various lands and suppliers of various utensils, and villa enhancements. Therefore, if we consider the focus towards attaining certain exclusive pieces of real estate requires a whole lot of costs incorporated. Thus, it is fair to say that the bargaining power of suppliers may be high pertaining to suppliers of land, which are essentially the most vital reasons that boost the tourists’ number.

Threat of Substitute Products

Threat of substitute products tends to be low due to the fact that the hospitality industry may not exactly be eliminated when it comes to occupational capacity. It is pertinent to the purpose of the analysis that a substitution may be assumed in between various domestic level hospitality businesses because the sentiments are known to them; such is the case with respect to the lower end hotel rooms. The factor to consider here is that the industry sells experience.

Competitive Rivalry within an Industry

This aspect of the analysis can be rated high due to the limited number of hospitality suppliers and thus, the Indian market has been much tapped by numerous countries due to their rich culture and existence of numerous widely dispersed hospitality chains already initiating their operations, which places the force to be in the league of such intricate aspects. John Keells Holdings PLC, Vallibel Holdings, and Hayleys are some of the more profound players within the industry trying to explore the prospects of India.

ii. PESTEL Analysis

The PESTEL analysis essentially tends to accommodate the external analysis with respect to six pertinent factors. These factors include political factors, economic factors, social factors, technological factors, environmental factors and legislative factors.

Political Factors

The unsatisfactory role played by the political forces in deterring the civil war that has been continuing since the past 25 years. Such a critical situation has hampered the influx of tourists, who would have otherwise visited the island country, which has been depicted as the pearl of the Indian Ocean. This is one of the prime purposes why ASHH has incorporated a latent policy. Latent policy implies the fact that its operations in Sri Lanka essentially aid the operations abroad or in other countries.

Economic Factors

The economic factors pertaining to Sri Lanka involve the relevant concepts of trade, industry compliments, and fiscal and monetary policy. The economic policy relevant to utilization of heritage sites shall be given rather carefully while uplifting the more fundamental concept i.e. Preservation of the historical essence. Additionally, trade should be proliferated to provide adequate economic balance to balance the economic factors. Such activities may perpetuate a positive image abroad which reflects nicely on the tourist’s activities number. Additionally, there are numerous focused points that may carry weight such as the lower labour cost pertaining to Sri Lanka. Green tourism is essentially a means of attaining a thoroughly systematic process of focus on ecology and sustainability commitment.