SHANGRI-LA HOTEL & RESORT

EXECUTIVE SUMMARY

Shangri-La Hotel was started in year 1971 with the first deluxe hotel in Singapore which
is inspired by the legendary land featured in James Hilton’s 1933 novel, Lost Horizon. The hotel
also regarded as one of the world’s finest hotel ownership and management companies with over
85 hotels and resorts throughout Asia Pacific, North America, Middle East and Europe.
However, in this case study and report the focus will be mainly about the Shangri-La and Resorts
which located in Malaysia only.

Shangri-La has three major brands under its family; Traders, Kerry and Jen. Traders Hotels
are the practical choice for both business and leisure travellers which located in the business hubs
of Australia, Asia and the Middle East as it cater to savvy and passionate travellers who appreciate
smart functionality and getting things done. It is perfectly designed to have vibrant yet professional
environment to complement guests at work, rest or play. While Kerry Hotels is a new five-star
brand in Shangri-La family which was launched in Shanghai and Beijing in 2011. Kerry Hotels is
designed with the vibe of spirited style and a careful attentiveness that bestows a sense of
individuality to all guests which focus on bringing a luxurious stay and inspirational experiences
to the guests. However, in Hotel Jen which is a rebrands of the existing Traders focuses on delivery
the quality, comfort, convenience and value. This hotel was inspired by a virtual persona, Jen, a
professional hotelier and all-time lover of life, travel and discovery.

The Shangri-La Hotels (Malaysia) Berhad, SHMB which is an investment holding

company, continually honoured worldwide recognition for their extraordinary service and Asian
hospitality. As an example, when in year 2015, Shangri-La Hotel Kuala Lumpur was named the
Top Hotels in Malaysia, Top Hotel Romance, Top Luxury Hotels and Top Hotels for Service by
Trip Advisor Traveller’s Choice Awards and this hotel also once again be as one of the best eco-
friendly hotels in Asia by winning the ASEAN Green Hotel Awards 2014-2016 for the fourth time
running.To adapt in the challenging operating environment, SHMB determined to build their
strong marketing capability and cost performance while driving services and products
improvement. Their strategies in improving the financial performance and operational
effectiveness by the reinforcement of leadership position and competitiveness within the industry
by maintaining and enhancing the quality of its portfolio through on-going capital investment
programmes, underpinned by product and service innovation, while maintaining unrelenting focus

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on delivering the highest standards of service to guests.Thus, by applying the right strategies and
sustaining competitive advantage initiatives, SHMB is truly competent enough to overcome the
hurdles in this new centuries. SHMB needs to continually use strategic planning in order to be
successful in the competitive industry of hospitality.

Shangri-La Hotels (Malaysia) Berhad current position and performance.

Shangri-La Hotel is a world class deluxe Asian hotel chain which provides services and
places for business and leisure travellers according to its Asian standards of hospitality. Shangri-
La Hotel provides customers with a number of excellent services. More specifically, guests may
enjoy high quality room services and resort, facilities such as sauna, Jacuzzi gym, lounge and pub.
Moreover, the hotel chain also provides different and unique products like, The Spa at several
hotels and resorts. Through its high quality services, Shangri-La receives international awards and
recognition from prestigious publications and industry partners.

Shangri-La Hotels (Malaysia) Berhad is always struggle to chase the success even that the
industry has develop extremely fast that have make the industry become more competitive and the
struggle have result them to get award from worldwide recognition for their excellent service.
Based on Conde Nast Traveller which is a luxury and lifestyle travel magazine, Shangri-La Hotels
is one of the gold list properties in Asia. Shangri-La Hotels also was been awarded as Best Luxury
Hotel in Malaysia by Trip Advisor Travellers Choice Award in 2015. Shangri-La Hotel (Malaysia)
has winning the ASEAN Green Hotel Awards in 2008, 2010, 2012 and 2014. In 2014 also the
Shangri-La Hotel had collect Kuala Lumpur Mayor’s Tourism Awards.

Shangri-La Hotel (Malaysia) Berhad disclosed that in the twelve months to 31st December
2014, the hotel registered a marginal increase in revenue to RM 513.679 million from RM 511.225
million reported in 2013. Net profit attributable to shareholders for 2014 fell by 39% to RM 79.340
million, compared to last year that earned RM 130.367 million. Earnings per share for 2014 were
fall down at 18.03 cent compared to 2013 that was 29.63 cent. For the dividend, Board of Directors
were recommended a final single-tier dividend of 9 cent per share together with the interim single-
tier dividend of 3 cent per share paid in November 2013, brought the full year dividend for 2014
to 12 cent per share.

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Shangri- La Hotel & Resort financial performance by using financial ratios.

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Strengths and Weaknesses of Shangri- La Hotel & Resort. (Using SWOT analysis)

Strengths

i. Industry Leader and a well-established brand name

Shangri-La Hotels and Resorts operate under five brands with 85 hotels and with an overall
room inventory of almost 40,000 rooms. Brand is very important for every business as it helps to
internationally recognized for its luxurious hotels and resorts. Shangri-La hotels is said to be an
aspirational brand to the public. Besides, the leadership and management skills of Shangri-La
hotels is well known for its fine and tuned management that is capable enough to run the whole
corporation. It helps Shangri-La hotels provide great and excellent service for every customer.

Next, Shangri-La hotels also has a very wide spectrum of hotels in Asia Pacific operating
under the Shangri-La Asia group and it also known as five star luxury hotels across Asia Pacific,
North American, Middle East and Europe. In Asia Pacific especially in countries of Singapore and
Malaysia Shangri-La hotels and resorts is the market leader.

ii. High Quality and Get Awards

The high quality service of Shangri-La hotels also attracts a large number of repeat
customers which form a loyalty between them. In addition, another strength of Shangri-La hotels
is its five-star venture that won numerous awards including the leading spot as the Top Asia Hotel
in Malaysia, Best Luxury Hotel in Malaysia by the 2012 Trip Advisor Traveller's Choice Awards
and World Luxury Hotel Award's Global Winner in the Best Luxury Business Hotel and Best City
Hotel category 2011. These awards build up a branded image for Shangri-La hotels and reputation
in the hotel field. Not only is that, Shangri-La hotels also the leading corporation on its line of food
expertise in various cuisine from eastern to western. Many customers visit Shangri-La hotels are
mostly due to the delicious and relaxing restaurants. Clean and tidy of the hotel rooms are the main
reason of customers likes to visit Shangri-La hotels as they always satisfied with the environment.

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iii. Visionary Forecasting and Implementation

In the financial year starting 2016, it was decided that the company will reposition and
renovate its profit making hotels and resorts. It was predicted that it will cause adverse effects to
operating profits in the year 2016. Visionary forecasting and decision making was a key reason
that group overlooked the short term financial implications and had a goal of making long term
profits.

iv. Corporate Level Strategy

The strategy that being implemented by Shangri-La hotels is strategic growth into markets
that can support the long term goals of the company. As they will build properties in those areas
of the world that have greatest possibility to provide above average returns. Shangri-La hotels alsp
developed their high growth business model. This is important, because this basic strategy would
allow the company to be able to realize a gross profit margin.

Weaknesses

i. Inadequate of staff with Qualifications

One of the weaknesses is the inadequate of staff with qualifications as Shangri-La only
hires personnel with skilled expertise and the draught for manpower. This may affect the shortage
of workers and influence the performance of the hotel.

ii. Expensive

The concept of Shangri-La is outdated and does not appeal to younger generation. They
rather go for hotels such as Hard Rock Hotel or G Hotel.

Next, the maintenance cost is too high to handle as Shangri-La's hotel and resort must be
excellent to its quality for accommodation. This will increase the expenses of Shangri-La hotels
and thus the price of the hotel room will also increase. It will lose a great number of customers,
who cannot afford to pay the services.

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iii. Limited to Asia Pacific

Shangri-La group is primarily limited to Asian markets only so when the global brands
plan to enter the markets it can lead to competitions because the visitors coming from west would
prefer that brand of hotels. Shangri-La hotels also primarily positioned as the hotels giving best
Asian hospitality experience which limits their reach in Europe and American countries.

Opportunities

i. Can expand their growth

As economy of Malaysia had improve steadily nowadays and tourism sector is growing
and booing in the recent years making the demand for hotels to increase significantly. Economy
of the country will directly enhance the tourism sectors, thus service industry such as hotel will be
attractive. Besides, online market is one of the opportunities that help the growth of Shangri-La
hotels as it ranks No.1 in the Trip advisor website. The technology also helps Shangri-La hotels to
attract customers as it is kind of marketing and promotion strategy.

ii. Job Opportunity

Partnership with international airways, KLIA, is one of the opportunities that more
foreigners will be able to visit Asia. This in return increases the occupancy in hotels. Besides, as
the steadily growth of economy had increase the job opportunities in Malaysia and this will occurs
the lack of human resource. Thus, the lack of human resource will encourage expatriates to come
and work in Malaysia. These are the upper class people and usually require hotels for their choice
of stay.

Threats

i. Competition with other hotel

The threats facing by Shangri-La hotels are the competition of the business. Rival hotels
are setting up their base in Asia and lower their prices making it more competitive. Those
competitors will influence the sales of Shangri-La hotels. Guesthouses will also compete as they
provide much lower rate and affordable to all people. Low budget hotels are the competitors which

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offering lower costs of accommodation for customers to compete with Shangri-La hotels. In
addition, spreading virus and robbery cases will discourage people not travel overseas and thus
affected the business of Shangri-La hotels.

ii. Shortage of skilled manpower

Shangri-La hotels have many branches so it will increase in the cost of employee and it
also will affect the hotel revenue. They also need to uplift its performance through well embedded
training, management and leadership programme because some of they do not have the related
knowledge and skills.

The task environment using Porter’s Five Forces & PESTLE.

PORTER’S FIVE FORCES

Porter’s Five Forces Model of competitive analysis is a widely used approach for
developing strategies in many industries. It’s also evaluating the five specific factors that
will help the Shangri – La Hotel (Malaysia) Berhad to determine whether the business can
be profitable in the industry. According to Porter the nature of competitiveness in a given
industry can be viewed as a composite of five forces:
1. Competitors rivalry

Competitors is an entity which is a rival against another. In business, competitors is a company

in the same industry or a similar industry which offers a similar product or service. The presence
of one or more competitors can reduce the prices of goods and services as the companies attempt
to gain a larger market share

In this case study, Shangri-La hotels is a well-known and among of luxurious hotel in Malaysia.
Shangri-La were competing with other luxurious hotel such as Marriot, Westin, Hyat , Sheraton,
Intercontinental and E&O. when they knowing who are their competitors and what they are
offering, it can help Shangri-La to make their products, services and marketing stand out. It will
enable them to set their prices competitively and help them to respond to rival marketing
campaigns with their own initiatives. They can learn and use this knowledge to create more
strategies on their marketing.

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2. Bargaining power of suppliers

A supplier, also called a vendor is an entity that supplies goods and services to another
companies as one of the contributors to the development process on the way to the ultimate
customer. This entity is part of the supply chain of a business, which may provide the bulk of the
value contained within its products.

In this case study, Shangri-La has high numbers of suppliers to run their daily operation. They
also has corporate purchasing policy to align with their core values and incorporates to recognize
as international best practices.

3. Bargaining power of buyers

Buyers is an individual or business that purchases the goods or services produced by a business.
Attracting buyers is the primary goal of most public-facing businesses, because it is the buyers
who creates demand for goods and services

In this case study, Shangri-La has low buyer bargaining power. It makes an industry more
attractive and increases profit potential for the seller, while high buyer bargaining power makes
an industry less attractive and decreases profit potential for the seller. Buyer power is one of the
factors to consider when analysing the structural environment of an industry using Porter’s 5
forces framework.

Bargaining power of buyers are low due to a few factors such as buyer switching costs are high,
threat of backward integration is low, buyer is not price sensitive, buyer is uneducated regarding
the product, Highly differentiated product, buyer purchases product in low volume, buyer
purchases comprise small portion of seller sales.

4. Threat of new entrants

Threat of new entrants refers to the threat new competitors pose to existing competitors in an
industry. Therefore, a profitable industry will attract more competitors looking to achieve profits.
It created affects the competitive environment for the existing competitors and influences the
ability of existing firms to achieve profitability

In this case study, Shangri-La is a low threat of new entrants’ makes this industry more attractive
and it increases profit potential for the firms that already in competing within that industry. It is
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because Shangri-La is one of reputable brands and well-known hotels. Another factors are
investing in this industry need high initial capital investment that cause entity new competitors
will consider on investing in this industry.

5. Threat of substitute products

The threat of substitution in an industry affects the competitive environment for the firms in that
industry and influences those firms’ ability to achieve profitability. The availability of a
substitution threat effects the profitability of an industry because consumers can choose to
purchase the substitute instead of the industry’s product. The availability of close
substitute products can make an industry more competitive and decrease profit potential for the
firms in the industry.
In this industry, Shangri-La has high risk threat of substitute because substitute product is
available on market. Customer still can choose hotels or homestay programme to stay in. There
are 219 homestay are registered under ministry of tourism. It also requires of low capital and low
maintenance fees to setup a homestay. Thus, nowadays there are online platform such as
booking.com and airing to choose and book online. Customer can always compare the price and
services provided.

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PESTLE

PESTLE analysis, which is sometimes referred as PEST analysis, is a concept in

marketing principles. Moreover, this concept is used as a tool by companies to track the
environment they’re operating in or are planning to launch a new project/product/service
etc. The companies use the PESTLE analysis as a framework or tool to analyze and monitor
the external-environmental. Each alphabet of PESTLE refers to political, economic, social,
technologies, legal and environment.

1. Political Factors
Political are the external factor that impose requirement on Shangri-La Hotels
(Malaysia) Berhad (SHMB). These are one of the elements of the PESTLE analysis
consider the effect of government action on companies’ remote or macro-environment.
Political factor that affect SHMB is tax exemption. SHMB get tax exemption by
government because of their pioneer status.
They also provide Investment Tax Allowance (ITA) for new hotel construction or
renovation. Starting from 1st April of 2015, Malaysia introduces and implemented 6% of
Good and Services Tax (GST) to replace the 10% Sales Tax and 6% Services Tax. GST
can enhance the capability, effectiveness and transparency of tax administration and
management.

2. Economic Factors
The economic factor that relate to SHMB is exchange rates. Due too many foreign
tourist arrive at Malaysia, the exchange rate become increase. Moreover, due to rising
household income, educational level the lifestyle and customer buying behavior the
average monthly income of Malaysian household rose from RM5000 in 2012 to RM5900
in 2014. Because of inflation in Malaysia unemployment rates increased from 0.1% to
3.2% in February 2015.

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3. Sociological Factors
One of the social factors that can relate is SHMB known as five stars luxury hotels
in Malaysia. Because of the socialization SHMB was named top hotel in Malaysia, top hotel
for romance, and top luxury hotel and the hotel service by trip.
In order to fulfill the demand by Malaysian, Shangri-La is a strong implement and
ensures the highest level of food safety and on managing food safety risk under the Shangri-
La Food Safety Management System (SFSMS). SFSMS is the system that covering the
receiving, preparing, cooking and serving of food items and safeguard against any the
cross-contamination of products.

4. Technological Factors
These factors pertain to innovations in technology that may affect the operations of
the industry and the market favorably or unfavorably. This refers to automation, research
and development and the amount of technological awareness that a market possesses. The
changes of technology may affect the operations of the industry and market favorably or
unfavorably.
Furthermore, people nowadays can used more social media such as websites,
Facebook, Twitter and mobile application to survey and book the hotels due to advance
technology. Recent survey of Trip Advisor shows that 93% of Malaysian travelers used
online resources to plain their trip. Good transportation infrastructure also important in
tourism as airline industries plays a key role in hotel business development.

5. Legal Factors
One of the legal factors that can relate to the SHMB is environmental management
system (EMS) helps to identify and address the immediate and long-term impact of the hotel
operations on its local environment. Moreover, SHMB need to practice sustainability as
there are different laws and rules different countries in Asia.
Malaysia was known to have great diversity of ecosystem. Malaysia created the
National Biodiversity Policy 1998 as the one of the important local agenda of Department
of Environment. Thus, the quality environment is a key asset for the tourism areas.

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6. Environmental Factors
These factors include all those that influence or are determined by the surrounding
environment. This aspect of the PESTLE is crucial for certain industries particularly for
example tourism, farming, agriculture etc. Factors of a business environmental analysis
include but are not limited to climate, weather, geographical location, global changes in
climate, environmental offsets etc. The surrounding environment influence the business
operation especially tourism industries.
Tourism industry will affect the ecosystem. Water pollution, air pollution, waste
problems, deforestation, soil erosion, species endangering and natural disasters are the
common issues associated to unethical business conducts. Furthermore, Malaysia regularly
has haze problem where the Air Pollution Index (API) reached almost 746. Shangri-La
hotels and resorts using the new environmentally friendly CFC free high efficiency chillers,
guestrooms electronic control systems, high efficiency lighting, water saving flush system,
other water saving devices and water purification system.

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