Hospitality Business in the Global Context

Executive Summary of Anantara Hotels, Resorts and Spas Competitive Force Analysis

This case study analyses the expansion of Anantara Hotels, Resorts and Spas in Australia. It highlights the viability of expanding this hotel and resort in Australia. This study takes into account the five competitive forces of Porter's model. To determine the feasibility and the potential profitability of expanding the Ananatara Hotels, Resorts and Spas, these main five competitive forces and the factors within those forces are used. The major determinants that enable the hotels to differentiate themselves are quality of service and the location for the target market.

Table of Contents

Introduction

Rationale

Porter’s Five Forces

Conclusion

References

Introduction to Anantara Hotels, Resorts and Spas Competitive Force Analysis

Australia is considered as one of the most attractive tourism destinations around the world due to its extraordinary climate and charming environment and surroundings (Ma et al. 2016). Australia is recognized as world’s tenth largest tourism generator as it generates US $31.5 billion revenue from the tourism industry (UNWTO 2013). Most of the international visitor mainly Chinese visitors are attracted to Australia’s tourism and hospitality industry, due to world-class beauty and nature, safe environment, good food and wine and most specifically diversified culture which is famous among Chinese travellers (Tourism Australia 2015). The travellers from around the world love the Spa and Recreation facilities as they visit and travel to different destinations. As Anantara is the luxurious resort and spa providing excessive recreation facilities in Thailand, commencing Anantara in Australia will promote the spa industry economically by providing luxurious facilities to the travellers.

Anantara Hotels, Resorts and Spas is the luxurious brand hotel of an international hotel owner, operator and investor ‘Minor Hotel’ (Minor Hotel 2020). It is firstly opened in 2001 in Thailand’s historic seaside retreat of Hua Hin, which was later expanded across the world to cosmopolitan cities, lush islands, desert sands, heritage destinations, uncharted beaches and contemporary resort destinations (Anantara Hotels, Resorts and Spas 2020). Anantara Hotels, Resorts and Spas is mostly opened in Asian, Middle East and some European countries however it is not yet commenced in any city of Australia. Although, Anantara is not opened in Australia, other brands of Minor Hotels like Oaks, Avani has been opened already. Anantara operates as a chain hotel providing luxurious accommodation and amenities for leisure and business travellers (Owler 2020).

Anantara has been operating with 968 employees and has generated $179 Million revenue. As hospitality industry is the leading fastest growing industries around the world, there is competition among various hospitality industries. Likewise, the competitors of Anantara are Best Western, Marriott, Cinnamon Hotels & Resorts, Banyan Tree, Six Sense and Choice Hotels (Zoom Directories 2020; Owler 2020). Anantara of various destinations have won many awards in the year 2015. Conde Nast Traveler USA awarded Anantara Golden Triangle Elephant Camp as Top 25 Resorts in Asia. Similarly, Qasr Al Sarab Desert by Anantara was awarded as 2015 Top Resorts in the Middle East. In addition, Conde Nast Traveler China has awarded Anantara Hua Hin, Anantara Chiang Mai and Anantara Kihavah Maldives Villas as the 2015 Gold List. Besides that, Anantara Hotels & Resorts was also awarded as 2015 Best Hotel Chain by National Geographic Traveler Awards Russia (Minor International 2016). Not only that, Anantara Hotels, Resorts and Spas has been successful in being honoured as top eight at the World Spa Awards. It has become successful in earning World’s Best Hotel Spa awards for the year 2017, 2018 and 2019 continuously (Australasian Leisure Management 2019).

Rationale of Anantara Hotels, Resorts and Spas Competitive Force Analysis

The service industry of Australia consists of 70 per cent of the gross domestic product. This industry dominates the economy. The industry comprises of tourism, health care, education, media and entertainment. Australia is taking major steps to be sustainable like funding is done for research and development into renewable energy technologies and energy efficient techniques. The beautiful natural landscape, rainforests, coastal areas and red deserts of Australia makes it the most desirable destination for travel. It was noted that beautiful sandy beaches, the great hospitality of Australians, unique flora and fauna and top class food and wine of Australia attracted more than 7 million tourists to Australia in 2017. All this adds to the gross domestic product of the economy and provides employment to more than one million people. The large numbers of visitors are from China, Japan, United States, Singapore and Great Britain.

Minor hotels are present in more than 53 countries. It has more than 530 properties and more than 35000 members today. Year after year it is growing and team members are embracing new opportunities. There are new professionals who are deciding to join the team. The Anantara hotels and resorts which is Bangkok based is expanding its portfolio since 2011. It had expanded its portfolio with seven new openings in 2011. In new and existing market, Anatarta had expanded its portfolio by 60 per cent. The rapid expansion of the company was spearheaded by the hotelier and entrepreneur William E. Heinecke. He is the CEO of the Minor Group and its subsidiaries which includes Minor International. In the Asia Pacific region, one of the largest hospitality and leisure companies is the Minor Group.

The net profit of the Minor Hotel Group is increasing on a year on year basis. The Minor Hotel Group in Thailand has seen a 28 per cent rise in net profit for the year 2015. This was attributed to the high increase in the real estate income by the sales of The Residences by the Anantara Layan Phuket. This led to the real estate of the business to increase by 30 per cent higher than 2014. The overall RevPAR has risen by 10 per cent in 2015 of the hotel portfolio.

Porter’s Five Forces

There are basically five competitive forces that influence the profitability of a company. The model of five forces of Porter is an analysis tool which takes the help of five forces of industry that ascertains the intensity of competition and the level of profitability in an industry. It is less profitable to expand the business of Anantara Hotels and Resorts in Australia if there are stronger competitive forces in the industry. If the industry has low barriers of entry and few buyers and suppliers, yet if there are large number of competitors and various substitute products, then the industry would be seen as very competitive. An industry which is very competitive, there is no attraction towards that industry due to its low profitability (Cheng 2013).

An attractive industry is where there is a higher probability to earn big profits. Such industry generally has high barriers to entry, weak suppliers bargaining power, weak buyers bargaining power, few substitute products or services and very low competition. On the other hand, an unattractive industry has low barriers to entry, strong suppliers bargaining power, strong buyers bargaining power, many substitute products or services and intense competition.

The job of evaluating the competitive position of the company in an industry is very strategic. It is a strategist’s job to identify the strengths and weakness that can be exploited to strengthen the position of the company in the industry. The five forces of Porter are very useful in formulating the strategy of a company. This is because it reveals the strength of each of the five forces in a particular industry.

The five forces are:

Rivalry: This force is the main determinant of how profitable an industry is or how competitive it is. The firms in an industry compete aggressively to capture higher share of market. This results in lower profits in the industry. Rivalry among the competitors is intense when there is large number of competitors, low customer loyalty, exit barriers are high, growth of industry is slow, products are easily substituted or competitors are of equal size (Varelas and Georgopoulos 2017).

In the case of hotels and resorts in Australia, the industry’s average growth is 3.9 per cent from the year 2015 to year 2020. The fortunes of this industry are seen as mixed over the last five years. However, the number of international arrivals was increasing over the four years 2014 to 2019 due to the depreciation of Australian dollar. It was cheaper for people to travel in Australia. Also, due to the weak dollar it was expensive for the domestic tourist visitor to travel overseas. Thus, this resulted in the increase in the demand for the services of this industry in Australia. The number of businesses in this industry is about 1673 and the market size is about 9 billion dollars.

It is forecasted that this industry would expand after the recovery of COVID- 19 pandemic. The tourists from the countries that contained the outbreak like New Zealand would support the hotel and resort operators. The long term outlook for the accommodation sector in Australia remains strong. This reflects that there would be high demand for the rooms. It is noted that in the year 2019, the demand for the rooms has risen by 2.8 per cent across the country while the supply of room grew only by 1.9 per cent. This shows that new hotels and resorts can accommodate the excess demand. The positive future prospects show that growth opportunities are created in this industry.

The companies which have largest market share in the Hotels and Resorts in Australia industry comprises of:

AAPC Limited
Event Hospitality and Entertainment Limited
Marriott International Management Company
Hilton International Australia Pty Limited
Holiday Inns Holdings (Australia) Pty Limited

The competition among the hotels and resorts is high. The hotels and resorts are updating themselves to differentiate it from others. The higher expectations of visitors are leading to new developments such as service automation, on demand technology and mobile devices used as door keys.

Threat of New Entrants- Barrier to Enter: In hotel industry, the high capital and fixed costs lead to high entry barriers. There are combined factors of high entry costs, limited supply of suitable locations and economies of scale that restrict the new entrants. This high entry barrier is an attractive factor for the Anantara Hotels, Resorts and Spas to expand in Australia.
Supplier Power: There is low level of indirect pressure on competitiveness from this force as hotels are not significantly subject to the bargaining power of their suppliers. Labor and experienced trained personnel are the only supplier that exercises power over any company. This is in great demand in the hotel industry.
Buyer Power: This force becomes acute when the buyers of hotel rooms are concentrated. The bargaining power of the buyers differs significantly within the industry. This is due to the different target group of the hotels. For example, if tour groups become more concentrated, then the profit margins will decrease as they will be price sensitive.
Threat of Substitute Products: A hotel operator can compete with others on the basis of a modern, luxurious and comfortable hotel. Also, it can compete on the basis of its quality of service and its location whether situated in a convenient and popular location. However, the threat of substitute products is not major in the hotel industry. It depends on the strategic group that the company is focusing, that is, whether upper or lower groups are targeted.

Conclusion for Anantara Hotels, Resorts and Spas Competitive Force Analysis

The hotel industry is basically characterised by high capital costs as well as high fraction of fixed cost as compared to total costs. These high costs require that the outset if the project must be managed by using cost effective resources for construction, equipment for furnishing and pre operational expenses and finance. In order to benefit from the economies of scale, the hotels are built to an optimum size. The intensity of rivalry is high in this industry in Australia. However, the growth rate is also high in this industry. The high demand of rooms also pushes to expand the company in Australia. The threat of new entrant is not too high as this industry requires high capital and fixed costs. The unique services provided by the Anantara Hotels, Resorts and Spas would increase their bargaining power. Also, the availability of skilled employees, managers and updated technology would lead to less threat from the substitute products. These five forces help to conclude that the quality of service and location of the company would lead to earn higher profits after expanding the company in Australia. The company can maintain a permanent cost advantage over the potential competitors in higher strategic groups for a sustainable business strategy over the long term.

References on Anantara Hotels, Resorts and Spas Competitive Force Analysis

Anantara Hotels, Resorts and Spas 2020, ‘About us: Anantara believes Life is a Journey’, https://www.anantara.com/en/about-anantara

Australasian Leisure Management 2019, ‘Anantara hotels, resorts and spas receives top accolades at world spa awards’, Ausleisure,

https://www.ausleisure.com.au/news/anantara-hotels-resorts-and-spas-receives-top-accolades-at-world-spa-awards/

Cheng, D.S., 2013. Analyze the hotel industry in porter five competitive forces. Journal of Global Business Management, 9(3), p.52.

Minor Hotel 2020, ‘About us’, https://www.minorhotels.com/en/about-us

Minor International 2016, Company Profile Information as at 1Q16, Corporate Information, http://mint.listedcompany.com/misc/presentation/20160518-mint-company-profile-1q2016-02.pdf

Owler 2020, ‘Anantara’s competitors, revenue, number of employees, funding and acquisitions’, https://www.owler.com/company/anantara?pendo=kUUes6C7jD_rqETPliseSRbPjmA#overview

Tourism Australia 2015, China Market Profile,

http://www.tourism. australia.com/documents/Markets/Market_Profile_2015_China.pdf

UNWTO 2013, UNWTO Tourism Highlights 2013 Edition, http://www. e-unwto.org/doi/pdf/10.18111/9789284415427

Varelas, S. and Georgopoulos, N., 2017. Porter’s competitive forces in the modern globalized hospitality sector–the case of a Greek tourism destination. J Tour Res, 18, pp.121-131.

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