Hotel Companies Success: The Example of Lowry Hotel

Introduction

It can be stated that the organizational forms and the development strategies of hospitality companies are connected to a number of intriguing, but nevertheless little-studied questions of contemporary theory of strategic management. Nevertheless, it can be stated that there is a growing interest among hospitality industry management toward the concept of “strategy and practices of strategic management in their efforts to anticipate change and adapt to the challenges they face” (Wood and Brotherton, 2008, p.165). The interest in the characteristics of managing companies in the hospitality industry, the most important part of which is the hotel sector, can be defined by a number of factors, among which the development of international hotel chains in Europe can be separately outlined. Another factor in the hotel industry can be seen in its high fragmentation (Wood and Brotherton, 2008, p.165). The diversity of hotel types and hotel companies can be seen through a differentiation based on the star system, the number of bedrooms and suites, and other criteria. Accordingly, another global characteristic of the hospitality industry can be seen in hotel chains, which are represented in the form of independent organizations of the hotel complex.

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In that regard, the present report provides an analysis of a hotel company, representative of the aforementioned characteristics – the Lowry Hotel, a Manchester hotel belonging to the Rocco Forte Collection hotel chain.

Historical Background

The history of the Lowry Hotel can be traced back to the history of the hotel empire built by a hospitality dynasty that once owned more than 800 hotels and 1,000 restaurants, led by Charles Forte (World Business, 2007). The previous company, Trust House Forte was led by Rocco Forte, the son of Lord Forte, for less than four years before being taken over by the British TV Company Granada in 1996. Having the Rocco trademark, Rocco Forte started rebuilding the empire, although changing the philosophy followed in the previous company. With the newly established Rocco Forte Collection, the philosophy has changed, where the chain, represented currently with only 13 hotels outlines the individualistic approach toward each link in such chain.

The Lowry Hotel was among the hotels that Rocco Forte built, rather than bought, where “Sir Rocco Forte decided to undertake a design and build program where every element of that program had been detailed, clarified and agreed prior to commencement of building” (Ingram and Ransley, 2000, p.246). With each hotel being individual, both in name and direction, the strategy of the company outlined several common elements, which can be seen in the following:

  • The highest quality of accommodation, facilities and services (Rocco Forte Collection, 2010b).
  • A unique sense of style, inspired by the city in which the hotel is located.
  • Location in major European cities.
  • The focus is on service delivery.

Specifically, for the Lowry Hotel, it can be stated that the focus on service and the sense of style were among the key characteristics considered in building and managing the hotel. With a cost of £30 million, the hotel was opened in 2001, being recognized as Manchester’s only five-star hotel (Hotel Management Network, 2010a). Additionally, the hotel is the only hotel in Manchester that was awarded the membership of The Leading Hotels of the World (Hotel Management Network, 2010a). The hotel has 165 bedrooms, 9 function suites, a 100-car parking capacity, and 2 restaurants. Additionally, the hotel’s management pays particular attention to the training of the staff, where all of the hotel’s staff “undergo a comprehensive training program when they join the company to ensure they understand the philosophy of The Rocco Forte Collection. Such philosophy is dedicated to ensuring… [that visitors] have the best possible experience (Rocco Forte Collection, 2010b).

Environment Analysis

It can be stated that the environmental analysis of the Lowry Hotel would typically represent that of the industry in general, excluding specific factors that shall be outlined. In that regard, the latter might help identify the source of the competitive advantage of the hotel, specifically because despite being part of a family of 13 hotels, the hotel was distinguished through a number of prestigious awards including “England for Excellence Large Hotel of the Year 2004; Condé Nast Traveller Hot Hotels (May 2004); and one of the 32 Coolest Hotels in the World, Condé Nast Traveller (April 2002) (Rocco Forte Collection, 2010a). Accordingly, such analysis will enable identifying the external and the internal forces influencing the company specifically, and the industry in general. The identification of the external forces can be implemented through conducting a PESTLE analysis. PESTLE (political, economic, socio-cultural, technological, legislation and ecological) might provide an insight into the threats and the opportunities that the industry might be facing (Partridge and Sinclair-Hunt, 2005, p.77). A description of PESTLE analysis can be seen in Appendix 1.

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The summary of the analysis of the external forces confirms the statement of a favourable environment for growth in the hospitality industry. The increase almost in double digits from 2000 to 2006 in international brands development make the growth a global trend, which in the context of Europe can be seen in affiliation to hotel brand chains (Olsen and Zhao, 2008, p.42).

The analysis of the internal factor in the company can be seen through the investigation of the resources of competitive advantage. In that regard, the theory of strategic management outlines the resource-based approach, in which firms are “administrative organizations and collections of physical, human and intangible assets” (Foss, 1997, p.208). Within the boundaries of the industry, the uniqueness of the company’s results can be seen through the protection of their natural advantages and capabilities. Considering the historical background of the Rocco Forte Collection, it can be assumed that the dynamic capabilities approach is the most appropriate in this case. Such an approach “seeks to provide a coherent (and evolutionary) framework for how firms develop competitive advantage and maintain it over time” (Teece, 2008, p.73).

In such an approach, the protective mechanisms are mostly of organizational origins such as the trajectory of the firm’s development, wherein in terms of capabilities, the latter can be evident in management routines, processes, and the culture of the company. The aforementioned capabilities can be distinguished, and cannot be sold or bought without acquiring the company or one or more of its departments. Such logic of strategic management can be confirmed in the hotel sector due to the specifics of the competition in the industry of hospitality and the provided product.

Accordingly, the internal analysis of the company can be seen in outlining the critical factors that contribute to the company’s success. In terms of the resource-based view, the factors outlined can be seen in the following:

  • Experience, gained from managing a hospitality empire.
  • The Forte brand
  • The company’s unique organizational development curve.

Additionally, effective strategy execution implies identifying the set of critical factors. One of the tools that can be used for these factors is a model commonly known as McKinsey 7-s. This model considers the following factors as crucial for strategy implementation, which is strategy, structure, systems, staff, skills, style/culture, and shared values. The application of these factors to the case of the Lowry Hotel can be seen in Appendix 2 (Robert, 2005).

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Accordingly, the SWOT analysis of the company might include the following points, based on the internal and the external analysis, see Appendix 3.

Current Business Level Strategy

It can be seen that the company’s strategy which is expanded over all the hotels under the Rocco Forte Collection brand is the brand portfolio strategy. In the hotel context, such strategy implies the expansion toward new markets at the expense of differentiating the brands and offering and focusing on hotel groups bearing such brands. In the case of Rocco Forte Hotels, the strategy implies a network of different concept hotels. The stake is on the creation of unique hotel networks consisting of relatively small 5-stars hotels. Each hotel under the brand is a guarantee of the highest quality of service, having an inimitable individuality, and reflects the characteristics of the country or the region. In that regard, the hotel might have an ultra-modern (in design and architecture) hotel or a hotel that kept the historical appearance of an antique building, and which reflects its history and atmosphere of a particular period as well as the history and the flavour of the city in which it is located. In Rocco Forte, there is no identical hotel, where the client traveling Europe has the possibility of being absorbed into the atmosphere of the country of visit. Therefore, each hotel in the network becomes a distinctive brand. Looking at the Lowry Hotel, it can be seen that the stylistic were chosen of modern style, in which the location “in the heart of one of the most comprehensive transport systems in Europe and serviced by one of the world’s fastest-growing airports” is reflected in the modern style of the Hotel.

Recommendations

The recommendations for the Lowry Hotel in particular and Rocco Forte Collection, in general, can be related to the issue of branding. The diversification of the brand portfolio is a working strategy, as far as the luxury sector is concerned. Nevertheless, the problem of the customers not relating to the brand of the parent company can be seen in adding to the current elements of the brand, which currently has only the high quality of service delivery, other elements that might include collaborative marketing campaigns, mutually strengthening the different brands within the Rocco Forte Collection. Additionally, by maintaining the highest quality of the service, the company might be able to keep the individuality of each hotel, giving the customers the ability to recognize that each hotel within the network belongs to the Rocco Forte brand.

Conclusion

It can be concluded that the strategy chosen by Rocco Forte Collection and implemented in the Lowry, is giving its results, considering the awards received by the hotel. With the quality of service being an essential element of the hospitality industry, the initial focus of the founder enabled the company to position itself within a distinct niche despite the competition in the industry within the European continent. Nevertheless, with the individuality of each hotel, the visitors might not be able to connect the expectations of the quality to the parent brand. In that regard, it is suggested in this paper that the brand of the Lowry Hotel should have additional elements to enable a more distinctive association with Rocco Forte Collection.

References

ANTONY, J., ANTONY, F. J. & GHOSH, S. 2004. Evaluating service quality in a UK hotel chain: a case study. International Journal of Contemporary Hospitality Management, 16 380-384.

ATHIYAMAN, A. & GO, F. 2003. Strategic choices in the international hospitality industry. In: BROTHERTON, B. (ed.) The International Hospitality Industry: Structure, Characteristics and Issues. Butterworth-Heinemann.

CARBON TRUST. 2010. The Lowry Hotel. Web.

FOSS, N. J. 1997. Resources, firms, and strategies : a reader in the resource-based perspective, Oxford ; New York, Oxford University Press.

HOTEL MANAGEMENT NETWORK. 2010. Lowry Hotel. Web.

HOTEL MANAGEMENT NETWORK. 2010. Rocco Redux. Web.

INGRAM, H. & RANSLEY, J. 2000. Developing hospitality properties and facilities, Oxford; Boston, Butterworth-Heinemann.

OLSEN, M. & ZHAO, J. 2008. Handbook of Hospitality Strategic Management, Butterworth-Heinemann.

PARTRIDGE, L. & SINCLAIR-HUNT, M. 2005. Strategic Management, Select Knowledge Limited.

ROBERT, S. K. 2005. How the balanced scorecard complements the McKinsey 7-S model. Strategy & Leadership, 33, 41.

ROCCO FORTE COLLECTION. 2010. The Lowry Hotel – Manchester : Factsheet. Web.

ROCCO FORTE COLLECTION. 2010. Rocco Forte Collection : The Company. Web.

TEECE, D. J. 2008. Technological know-how, organizational capabilities, and strategic management: business strategy and enterprise development in competitive environments, New Jersey, World Scientific.

TRI CONSULTING. 2010. TRI Hospitality Consulting -2010 & 2011 UK Hotel Market Forecasts. Web.

WOOD, R. C. & BROTHERTON, B. 2008. The Sage handbook of hospitality management, Los Angeles, Sage.

WORLD BUSINESS. 2007. Hotel heir Forte rebuilds family empire. Web.

Appendixes

Factor Description Impact
Political This factor refers to the political facilitation or hindrances through tourism policies. In the UK such factors can be seen through stringent government spending policy expected after the elections (TRI Hospitality Consulting 2000) The political force is generally favourable to the industry, where the indirect negative impact can be seen through spending policies.
Economical Growth in room occupancy all across Europe is an important indicator, where occupancy is expected to double in the next year. The latter is directly correlated with total revenue performance in the UK industry. In provinces the expected decrease in consumer spending power is also anticipated, which combined with rising unemployment is a significant economic force. Additionally, [g]rowth forecasts for UK GDP are between 1.0 and 1.5 percent in 2010” with a “0.8 percent increase in inbound visitor figures this year” in Britain (TRI Consulting, 2010). The high turnover of the industry is a favourable factor, although the metropolitan areas are implied in this context.
Sociological The quality of service represented through a skilful workforce can be seen as an important force, specific to the UK hotel industry in general, where “Service quality is a growing concern for many service firms in the UK” (Antony et al., 2004, p.380). Service quality is a known issue negatively influencing the hotel sector in the UK. The lack of a skilled workforce can be attributed to such factors.
Technological Such a factor might imply the usage of information technologies in the industry, where several elements such as internet access, electronic reservations became a must in the sector. No significant impact is expected.
Legal The facilitation of travel within the boundaries of the European Union can be seen as a crucial force influencing the industry. No significant impact is expected.
Environmental Pollution and industry capacity control concerns (Athiyaman and Go, 2003, p.143) contribute to the government regulating the industry and the sustainability initiatives by hotel management. Pollution policies, energy awareness can be seen as influential in a negatively and positively, according to the policy of the company.

Appendix 1: PESTLE Analysis

The Factor Description
Style An essential element in Rocco Forte Collection and Lowry Hotel is mostly related to management and corporate culture represented through the philosophy of the company.
Skills The skills factor is mostly represented through the experience of managerial positions in the company.
Systems Centralized system of management, in which the main activities such as marketing and promotions are governed from headquarters.
Structure The structure of the company resembles that of a flat hierarchy, providing greater responsiveness and control.
Staff Emphasis on training, with staff being an essential element of the company’s philosophy (Rocco Forte Collection, 2010b).
Strategy Brand portfolio. Differentiating hotels under the same brand.
Shared Value The main focus of the company’s vision is the high quality of service delivery, justifying the price tag (Hotel Management Network, 2010b). Additionally, the Lowry Hotel implemented an energy awareness program into its working practices, having environmental sustainability among its priorities (Carbon Trust, 2010).

Appendix 2: McKinsey’s 7S

Strengths Weaknesses
Internal
  • Experience
  • Reputation
  • Strength of the brand
  • Service quality culture
  • The differentiation of the brand does not relate to the parent company (Hotel Management Network, 2010b).
  • The lack of long-term strategy, other than adding brands to the portfolio
Opportunities Threats
External
  • Expected growth in room occupancy in Europe.
  • Expansion to other continents.
  • Competition within the same niche
  • Decrease in consumer spending
  • The switch of consumers toward lower-class hotels.

Appendix 3: SWOT

Hotel Companies Success: The Example of Lowry Hotel
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