SWOT Analysis / TOWS Matrix for Choice Hotels (United States)
Based on various researches at Oak Spring University , Choice Hotels is operating in a macro-environment that has been destablized by – increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs, talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, banking and financial system is disrupted by Bitcoin and other crypto currencies,
geopolitical disruptions, increasing energy prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Choice Hotels can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Choice Hotels, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Choice Hotels 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 Choice Hotels can be done for the following purposes –
1. Strategic planning of Choice Hotels
2. Improving business portfolio management of Choice Hotels
3. Assessing feasibility of the new initiative in United States
4. Making a Hotels & Motels sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Choice Hotels
Strengths of Choice Hotels | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Choice Hotels are -
High brand equity
– Choice Hotels has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Choice Hotels to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
High switching costs
– The high switching costs that Choice Hotels 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.
Strong track record of project management in the Hotels & Motels industry
– Choice Hotels is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Learning organization
- Choice Hotels 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 Choice Hotels is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Choice Hotels emphasize – knowledge, initiative, and innovation.
Innovation driven organization
– Choice Hotels is one of the most innovative firm in Hotels & Motels sector.
Sustainable margins compare to other players in Hotels & Motels industry
– Choice Hotels has clearly differentiated products in the market place. This has enabled Choice Hotels to fetch slight price premium compare to the competitors in the Hotels & Motels industry. The sustainable margins have also helped Choice Hotels to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Choice Hotels is present in almost all the verticals within the Hotels & Motels industry. This has provided Choice Hotels a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Training and development
– Choice Hotels has one of the best training and development program in Services industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Ability to recruit top talent
– Choice Hotels is one of the leading players in the Hotels & Motels industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
Superior customer experience
– The customer experience strategy of Choice Hotels in Hotels & Motels industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Analytics focus
– Choice Hotels is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Hotels & Motels industry. The technology infrastructure of United States is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Ability to lead change in Hotels & Motels
– Choice Hotels is one of the leading players in the Hotels & Motels industry in United States. Over the years it has not only transformed the business landscape in the Hotels & Motels industry in United States but also across the existing markets. The ability to lead change has enabled Choice Hotels in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses of Choice Hotels | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Choice Hotels are -
High dependence on Choice Hotels ‘s star products
– The top 2 products and services of Choice Hotels still accounts for major business revenue. This dependence on star products in Hotels & Motels industry has resulted into insufficient focus on developing new products, even though Choice Hotels has relatively successful track record of launching new products.
Ability to respond to the competition
– As the decision making is very deliberative at Choice Hotels, in the dynamic environment of Hotels & Motels industry it has struggled to respond to the nimble upstart competition. Choice Hotels has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Products dominated business model
– Even though Choice Hotels has some of the most successful models in the Hotels & Motels industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Choice Hotels should strive to include more intangible value offerings along with its core products and services.
Interest costs
– Compare to the competition, Choice Hotels 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.
Lack of clear differentiation of Choice Hotels products
– To increase the profitability and margins on the products, Choice Hotels needs to provide more differentiated products than what it is currently offering in the marketplace.
Workers concerns about automation
– As automation is fast increasing in the Hotels & Motels industry, Choice Hotels 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.
Compensation and incentives
– The revenue per employee of Choice Hotels is just above the Hotels & Motels industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High bargaining power of channel partners in Hotels & Motels industry
– because of the regulatory requirements in United States, Choice Hotels is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Hotels & Motels industry.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Choice Hotels supply chain. Even after few cautionary changes, Choice Hotels is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Choice Hotels vulnerable to further global disruptions in South East Asia.
Slow to strategic competitive environment developments
– As Choice Hotels is one of the leading players in the Hotels & Motels industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Hotels & Motels industry in last five years.
Employees’ less understanding of Choice Hotels strategy
– From the outside it seems that the employees of Choice Hotels don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Choice Hotels Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Choice Hotels are -
Better consumer reach
– The expansion of the 5G network will help Choice Hotels to increase its market reach. Choice Hotels will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Choice Hotels can use these opportunities to build new business models that can help the communities that Choice Hotels operates in. Secondly it can use opportunities from government spending in Hotels & Motels sector.
Use of Bitcoin and other crypto currencies for transactions in Hotels & Motels industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Choice Hotels in the Hotels & Motels industry. Now Choice Hotels can target international markets with far fewer capital restrictions requirements than the existing system.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Hotels & Motels industry, but it has also influenced the consumer preferences. Choice Hotels can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Building a culture of innovation
– managers at Choice Hotels 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 Hotels & Motels industry.
Developing new processes and practices
– Choice Hotels can develop new processes and procedures in Hotels & Motels industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Learning at scale
– Online learning technologies has now opened space for Choice Hotels to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Manufacturing automation
– Choice Hotels can use the latest technology developments to improve its manufacturing and designing process in Hotels & Motels sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Choice Hotels can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Choice Hotels is facing challenges because of the dominance of functional experts in the organization. Choice Hotels can utilize new technology in the field of Hotels & Motels industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Leveraging digital technologies
– Choice Hotels can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Loyalty marketing
– Choice Hotels 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.
Creating value in data economy
– The success of analytics program of Choice Hotels has opened avenues for new revenue streams for the organization in Hotels & Motels industry. This can help Choice Hotels to build a more holistic ecosystem for Choice Hotels products in the Hotels & Motels industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Threats Choice Hotels External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Choice Hotels are -
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 Choice Hotels in the Hotels & Motels sector and impact the bottomline of the organization.
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. Choice Hotels needs to understand the core reasons impacting the Hotels & Motels industry. This will help it in building a better workplace.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Choice Hotels will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Regulatory challenges
– Choice Hotels 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 Hotels & Motels industry regulations.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Choice Hotels can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Choice Hotels prominent markets.
Environmental challenges
– Choice Hotels 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. Choice Hotels can take advantage of this fund but it will also bring new competitors in the Hotels & Motels industry.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing wage structure of Choice Hotels
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Choice Hotels.
Easy access to finance
– Easy access to finance in Hotels & Motels industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Choice Hotels can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Shortening product life cycle
– it is one of the major threat that Choice Hotels is facing in Hotels & Motels sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Choice Hotels in Hotels & Motels industry. The Hotels & Motels 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 Choice Hotels.
Consumer confidence and its impact on Choice Hotels 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 Hotels & Motels industry and other sectors.
Weighted SWOT Analysis of Choice Hotels Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Choice Hotels 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 Choice Hotels 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 Choice Hotels 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 Choice Hotels 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 Choice Hotels needs to make to build a sustainable competitive advantage.
