The Hotel Perennial case puts students in the shoes of Dan Jameson, founder and CEO of a boutique real estate private equity firm called EL Investments (ELI), as he wrestles with the decision of whether or not to acquire the distressed Hotel Perennial, a 194-room hotel on the north side of Chicago, Illinois. When making the investment decision, Jameson (and students) must consider various factors: What is ELI's implicit investment strategy, and what are the firm's core competencies? What are Jameson's goals for growing ELI, and how might the acquisition of the Hotel Perennial fit with those goals? What opportunities and challenges might ELI face if it decides to acquire the hotel? How much would a buyer likely have to pay for the Hotel Perennial to achieve an attractive return? In addition to containing a hotel valuation and modeling exercise, the Hotel Perennial case also exposes students to several real estate industry concepts and terminologies, including those regarding the hotel sector, equity sourcing, and distressed investing. The case material assumes that students have taken an introductory real estate finance course or have relevant work experience.
Authors :: Denise Akason, Bill Bennett, Franco Famularo
Swot Analysis of "Hotel Perennial" written by Denise Akason, Bill Bennett, Franco Famularo includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Hotel Perennial facing as an external strategic factors. Some of the topics covered in Hotel Perennial case study are - Strategic Management Strategies, Market research and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Hotel Perennial casestudy better are - – there is backlash against globalization, supply chains are disrupted by pandemic , talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, increasing commodity prices, increasing energy prices, competitive advantages are harder to sustain because of technology dispersion,
increasing transportation and logistics costs, wage bills are increasing, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Hotel Perennial case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hotel Perennial, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hotel Perennial operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Hotel Perennial can be done for the following purposes –
1. Strategic planning using facts provided in Hotel Perennial case study
2. Improving business portfolio management of Hotel Perennial
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Hotel Perennial
Strengths Hotel Perennial | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hotel Perennial in Hotel Perennial Harvard Business Review case study are -
High switching costs
– The high switching costs that Hotel Perennial has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Highly skilled collaborators
– Hotel Perennial has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Hotel Perennial HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Cross disciplinary teams
– Horizontal connected teams at the Hotel Perennial are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Sustainable margins compare to other players in Sales & Marketing industry
– Hotel Perennial firm has clearly differentiated products in the market place. This has enabled Hotel Perennial to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Hotel Perennial to invest into research and development (R&D) and innovation.
Ability to lead change in Sales & Marketing field
– Hotel Perennial is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Hotel Perennial in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of Hotel Perennial in the sector have low bargaining power. Hotel Perennial has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hotel Perennial to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– Hotel Perennial has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Hotel Perennial Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
High brand equity
– Hotel Perennial has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hotel Perennial to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Hotel Perennial
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Hotel Perennial does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Digital Transformation in Sales & Marketing segment
- digital transformation varies from industry to industry. For Hotel Perennial digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Hotel Perennial has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Superior customer experience
– The customer experience strategy of Hotel Perennial in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- Hotel Perennial is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Hotel Perennial is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Hotel Perennial Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Weaknesses Hotel Perennial | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hotel Perennial are -
Products dominated business model
– Even though Hotel Perennial has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Hotel Perennial should strive to include more intangible value offerings along with its core products and services.
Interest costs
– Compare to the competition, Hotel Perennial has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Skills based hiring
– The stress on hiring functional specialists at Hotel Perennial has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Aligning sales with marketing
– It come across in the case study Hotel Perennial that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Hotel Perennial can leverage the sales team experience to cultivate customer relationships as Hotel Perennial is planning to shift buying processes online.
High cash cycle compare to competitors
Hotel Perennial has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
No frontier risks strategy
– After analyzing the HBR case study Hotel Perennial, it seems that company is thinking about the frontier risks that can impact Sales & Marketing strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Hotel Perennial HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Hotel Perennial has relatively successful track record of launching new products.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Hotel Perennial is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Hotel Perennial can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Slow to strategic competitive environment developments
– As Hotel Perennial HBR case study mentions - Hotel Perennial takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Workers concerns about automation
– As automation is fast increasing in the segment, Hotel Perennial needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High operating costs
– Compare to the competitors, firm in the HBR case study Hotel Perennial has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Hotel Perennial 's lucrative customers.
Opportunities Hotel Perennial | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Hotel Perennial are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Hotel Perennial in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Sales & Marketing segment, and it will provide faster access to the consumers.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Hotel Perennial can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Hotel Perennial to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Hotel Perennial to hire the very best people irrespective of their geographical location.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Hotel Perennial can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Hotel Perennial is facing challenges because of the dominance of functional experts in the organization. Hotel Perennial case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Hotel Perennial to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Creating value in data economy
– The success of analytics program of Hotel Perennial has opened avenues for new revenue streams for the organization in the industry. This can help Hotel Perennial to build a more holistic ecosystem as suggested in the Hotel Perennial case study. Hotel Perennial can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Sales & Marketing industry, but it has also influenced the consumer preferences. Hotel Perennial can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Hotel Perennial in the consumer business. Now Hotel Perennial can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Hotel Perennial can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Buying journey improvements
– Hotel Perennial can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Hotel Perennial suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Building a culture of innovation
– managers at Hotel Perennial can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Sales & Marketing segment.
Loyalty marketing
– Hotel Perennial has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Threats Hotel Perennial External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Hotel Perennial are -
Technology acceleration in Forth Industrial Revolution
– Hotel Perennial has witnessed rapid integration of technology during Covid-19 in the Sales & Marketing industry. As one of the leading players in the industry, Hotel Perennial needs to keep up with the evolution of technology in the Sales & Marketing sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Consumer confidence and its impact on Hotel Perennial demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Hotel Perennial needs to understand the core reasons impacting the Sales & Marketing industry. This will help it in building a better workplace.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Hotel Perennial business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Hotel Perennial in the Sales & Marketing industry. The Sales & Marketing industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Hotel Perennial.
Regulatory challenges
– Hotel Perennial needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Sales & Marketing industry regulations.
Stagnating economy with rate increase
– Hotel Perennial can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Shortening product life cycle
– it is one of the major threat that Hotel Perennial is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Hotel Perennial, Hotel Perennial may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Sales & Marketing .
Environmental challenges
– Hotel Perennial needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Hotel Perennial can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Hotel Perennial with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Hotel Perennial in the Sales & Marketing sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Hotel Perennial Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Hotel Perennial needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Hotel Perennial is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Hotel Perennial is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Hotel Perennial is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Hotel Perennial needs to make to build a sustainable competitive advantage.
