SWOT analysis and marketing strategy for a hotel - case study

A comprehensive overview of the opportunities and threats, as well as the strengths and weaknesses of the enterprise, allows for a fairly precise determination of the company's position in the environment and relative to its competitors, making it easier to formulate future action goals.

SWOT Analysis of ABC Hotel

The results of the analyses of the global and competitive environment, as well as the resources, condition, and capabilities of ABC Hotel in terms of its strengths, weaknesses, opportunities, and threats, are presented in a synthetic form in the following SWOT analysis.

SWOT Analysis for ABC Hotel

STRENGTHS

• Leading market position
• Well-known brand
• Good market knowledge
• Central city location
• Complementary services
• Good relations with travel agencies
• Loyal customer base
• Qualified staff

WEAKNESSES

• Hotel rooms in need of renovation
• Large number of small-sized rooms
• Low-standard bathrooms
• High wear and tear on machinery and equipment (frequent technical issues)
• High fixed costs and low profitability
• Lack of service facilities related to additional guest attractions
• Weak and unprofitable food and beverage services
• Lack of motivational instruments
• Lack of market research and effective marketing

OPPORTUNITIES

• Economic stabilization of the country
• Promotion of Poland abroad
• Increasing domestic demand associated with Poland's entry into the European Union
• City's location near the border
• Attractive tourist region
• Construction of highways and international roads
• Rising income of the population
• Potential entry into new markets or serving additional segments
• Finding a strategic investor

THREATS

• Particular sensitivity to recession
• Low standard of living of the population
• Entry of new domestic and foreign competitors
• Unstable demand dependent on various factors, strong seasonal fluctuations
• Increasing sales of substitutes
• Rising quality demands from customers
• Unfavorable demographic changes
• Lack of tourist attractions in the region off-season

The analysis of ABC Hotel allows it to be classified into a strategic situation type of WEAKNESSES-OPPORTUNITIES.

Weaknesses

The most critical weaknesses include the declining standard of hotel services, especially the rooms needing renovation (complete replacement of equipment), the poor condition of the bathrooms, and the hotel corridors. This standard cannot be improved given the poor technical condition of the machinery and equipment (frequent technical malfunctions) and the lack of financial resources for investments, particularly with high fixed costs and low profitability. Weak food and beverage services and the absence of service facilities related to additional attractions (such as a swimming pool, recreational, and sports facilities) are significant drawbacks given the increasing demands of customers. Another area of weakness is marketing and sales. The lack of market research prevents the creation of offers tailored to specific customer segments, and the currently weak marketing, in terms of effectiveness, hinders sales growth and better utilization of the hotel's facilities. The lack of employee motivation in this area undoubtedly contributes to the insufficient effort in customer acquisition.

Strengths

The most important strengths include the hotel's significant market share in the regional market and its well-known brand. The company's market extends both domestically and internationally, with a dominant German market. The hotel is well-known there, enjoys a good reputation, and has good relations with travel agencies. An advantage is also the company's experience gained over seven years of market presence, a steady circle of loyal customers, the attractive location of the facility (city center), a wide range of complementary services, and a well-qualified staff (including a new management team full of ideas, aware of the need for change, and oriented towards development).

Threats

The main threats stem from the nature of the tourism industry. It is particularly sensitive to recession (any signs of recession are felt first by tourism businesses), characterized by unstable demand dependent on various factors and its seasonality, yet there is still a need to maintain facilities year-round. Threats also arise from the low standard of living of the population. The lack of tourist attractions in the region (especially off-season) makes foreign tourists choose destinations with a more diverse offering (e.g., in another province). Demand for ABC Hotel's services (in the domestic market) is further limited by the existence of attractive substitutes, such as foreign tourism, vacations in resort centers, or agritourism (gaining popularity especially among foreign guests). Additionally, there is growing local competition, which will in the future cause a potential client outflow from the hotel and demographic changes – particularly the decreasing number of "senior" Germans, who have emotional ties to these areas.

Opportunities

Despite serious threats, there are significant opportunities for the survival and development of ABC Hotel. These are related to the improvement of the country's general economic situation, the opening of borders after Poland's accession to the European Union, and the liberalization of the airline market. Additionally, government support in promoting Poland internationally is an opportunity. There is also the construction of highways and international roads passing through the region and the utilization of the city's location near the Russian border (Kaliningrad Oblast), leading to expanded economic contacts with Russia. The hotel's future also depends on the potential to enter new markets (Scandinavia and Benelux countries) and serve additional segments (e.g., incentive tours). It is also anticipated to attract a strategic partner or for ABC Hotel to join an international hotel network.

Strategic Analysis

The juxtaposition of opportunities, threats, strengths, and weaknesses of ABC Hotel not only allows for the assessment of the company's strategic situation but also highlights which internal factors are strategic and need improvement. These primarily include the standard of hotel services and marketing. The number one barrier is high costs and the lack of internal funds for investments.

Aware of the current situation of the company and the changes that will occur in the environment in the near future, the hotel management has set strategic goals to be achieved over the next five years. These goals include:

• Maintaining the leading position in the region by improving the quality of services offered;
• Expanding the geographical scope of sales in the domestic and international markets, resulting in a 5% higher occupancy rate each year;
• Increasing revenue from sales by 10% to 15% each year;
• Improving the economic situation by reducing the level of costs.

These goals are complementary, as actions aimed at reducing fixed costs and improving service quality, along with intensive marketing directed towards new and existing markets, are intended to increase sales and expand the hotel's service offerings.

The realization of the strategy is feasible due to the improved financial situation of the hotel. Systematic economic analysis showed that not all areas of the hotel's operations are profitable. Particularly, the food and beverage services have been recording a significant deficit of about 600-700 thousand PLN annually. Previous attempts to improve this result have been unsuccessful, mainly due to excessive competition in the market. Therefore, the hotel management decided to remove food and beverage services from the organizational structure and assign the management of hotel dining to a specialized company, "Dobra Kuchnia." It was believed that this company, with its extensive experience, local market knowledge, good reputation, and loyal customer base, would be able to manage the food and beverage services with greater agility, efficiency, and effectiveness, also benefiting hotel guests.

This move will significantly reduce the hotel's fixed costs ("Dobra Kuchnia" will take over all food service employees, who currently constitute almost half of the staff), while also providing a steady income from the lease of kitchen and storage facilities, two restaurants, and a bar. Thus, ABC Hotel enters into a strategic alliance with its former competitor. The extensive activities conducted by "Dobra Kuchnia" (city diners, wedding catering, and event services) will not negatively impact the service of hotel guests, as a properly crafted contract will ensure they are given priority and that other hotel orders are fulfilled first. The owner has already pledged to improve the quality of dishes, diversify the menu, change the tableware, redecorate the restaurants, and offer 24-hour room service.

Further actions aimed at improving the financial situation are related to the acquisition of Hotel XYZ, located in the same building as ABC, starting from the new year. This hotel primarily served guests visiting XYZ company. The spaces previously occupied by XYZ, including about 30 hotel rooms, will be renovated and also leased out. These spaces are intended to house offices—representatives of various companies or a branch of a bank. The decision to convert some hotel rooms into offices was made after a thorough analysis of the hotel's occupancy rates. There is no longer demand in the region for such a large hotel, especially with the ever-growing competition—average annual occupancy is 46%, while the peak monthly occupancy reaches 80%. However, it should be noted that these actions need to proceed swiftly, as two large office-shopping centers are already under construction in the city.

The funds obtained from such activities and the potential reduction in the rental fee that Hotel ABC pays to its parent company (ongoing negotiations) are expected to become developmental capital, leading to all necessary investments aimed at improving the quality of hotel services and maintaining the four-star rating. The decision to pursue a product development strategy (image enhancement) stems from increasingly frequent critical reviews from hotel guests regarding the offered product. Product development is primarily focused on modernizing hotel rooms (possibly combining smaller units) with new arrangements and higher-standard equipment (e.g., stylish furniture, mini-bar, hairdryer, telephone with internet connectivity in each room) and complete renovation of bathrooms, including the replacement of all plumbing systems. Additionally, the corridors on the floors require renovation, including the addition of flowers, wall art, and lighting. Attention must also be given to lighting (energy-efficient), air conditioning, elevators, the telephone exchange, and parking facilities. A swimming pool (to be located in the former laundry area) and recreational facilities will fill the gap in the hotel's offerings. These actions will undoubtedly result in a significant increase in service quality and attract new customers to the hotel. Individual guests, particularly those arriving for leisure with their families, will appreciate the room comfort and infrastructure conducive to active recreation.

Typical foreign tourism in this region currently exists mainly due to visits from German groups. These are mostly elderly people born in these regions, visiting in their later years places to which they have sentimental ties. However, it is important to recognize that these are individuals of advanced age. Therefore, consideration must also be given to other target groups. In this regard, special emphasis should be placed on further expanding the German market. With such a modified product, further market penetration will occur by renewing old and establishing new contacts with German travel agencies, primarily through participation in specialized trade fairs and direct promotion. Supplementing the trade fairs will involve identifying new agencies by diligently reviewing press, studying industry catalogs and online information, and quickly contacting them with the hotel's offer. Travel agencies, tour operators, and booking portals are the best forms of distribution and promotion, as they advertise Polish tourism products in their industry catalogs and websites. The main element of the pricing strategy will be full price flexibility—individual negotiations with contractors, along with promoting free accommodation services for the tour guide or driver and every 21st person in the group. This aims to guarantee an increase in group stays. Individual German tourists will also be targeted with periodic advertisements in travel supplements of national newspapers and general and specialized magazines, such as those focusing on camping, water tourism, and cycling.

Such market penetration requires entering new geographical areas. Particularly attractive for Hotel ABC are the markets of Scandinavia, the Benelux countries, Russia, and the United Kingdom. Here, however, assistance from local authorities is essential to promote the region as a destination for leisure (including active recreation) and visits to interesting local areas. An individual approach by the hotel to foreign markets is costly and often unjustified; therefore, Hotel ABC should be promoted as part of the region. Marketing efforts will focus on: presenting its offer to the 50 largest tour operators in Europe, participating in international trade fairs in England, Russia, Sweden, and Austria, strengthening cooperation with foreign tourist information centers, and advertising the hotel in industry catalogs and guidebooks. Attracting new travel agencies must be supported by offering attractively priced stays for groups. The goal is to increase the number of sold overnight stays by capturing tourist groups that have previously bypassed the city and presenting Hotel ABC as an ideal resting place on the way to the still popular Masuria region among foreign tourists.

In attracting customers, the hotel will not neglect domestic buyers. Preparations are underway for participation in national hotel and tourism fairs in Warsaw, Poznań, and Gdańsk.

However, the majority of marketing efforts are focused on serving the conference and training segment, which has not been fully utilized so far, as this form of travel is currently the most profitable. It is worth noting that Hotel ABC has been listed as a branded conference offer. In its offer directed at this segment, Hotel ABC showcases the complementarity of its product (conference rooms, accommodation, catering, conference equipment rental, and organizational support) with the addition of various accompanying events. The hotel's lodging and conference services will collaborate with the catering services of "Dobra Kuchnia." The product will be promoted through participation in specialist conference venue fairs in Warsaw and direct sales—individual visits directly to interested companies in Poland or travel agencies that organize conferences, training sessions, and conventions. In exchange for directing guests, they will receive special group rates. The sale of conference packages will be supported by presenting a reference list of companies that have already used the hotel's services. The value of this program increases with the trend of incentive travel. The expected outcome of these activities is an increase in the number of organized conferences, and consequently, an increase in hotel occupancy, especially during the off-season.

On a local level, Hotel ABC, as a company supporting the region's economy, will strive to actively participate in local community events. It will organize entertainment and cultural events and possibly provide sponsorship. Keeping the public informed about hotel events will be done in close cooperation with local media. Special emphasis will be placed on monitoring events in the region that can significantly contribute to improving service sales.

The presented SWOT analysis and marketing strategy assumptions are a general part of a broader study conducted twenty five years ago by the author for a specific hotel. All company names in this summary have been changed.