Four seasons hotel langkawi malaysia

Executive Summary

Strategy

Four Seasons generally operates as a hotel management company, although it includes fractional ownership in its Residence Clubs and earns most its income through its management operations as of 2005 (Four Seasons, 2005). The Four Seasons’ mission statement reflects its core values as offering exceptional experience as a “premier luxury hospitality company” while implementing strong financial planning and ethical treatment of their guests, customers, employees, and other stakeholders (Four Seasons Holding Inc, n.d.). While the company maintains properties in both urban and rural locales, the Langkawi, Malaysia resort is located on a picturesque archipelago surrounded by numerous historical, cultural, and natural attractions while providing seclusion for its guests. From 2000 to 2003, there was a global depression in tourism due to world health and political instability across the globe (Four Seasons, 2005). The company also had acquired long-standing management contracts with the Regent hotels and was managing its Kuala Lumpur property in 2005 (Four Seasons, 2005). When the resort opened in 2005, it was still publicly traded, although both Bill Gates and Prince Walid bin Talal’s Kingdom Holding Company were major shareholders at the time (Segal, 2009).

The company’s overall entry strategy includes accepting capital investments only to retrieve “long-term management contracts in key destinations” (Four Seasons, 2005, p. 15). As stated by the company, “Owners of properties that we manage are contractually responsible for funding the capital requirements of the properties, including guest room and common area renovations, and for maintaining capital reserves to fund ongoing annual maintenance capital expenditures required by the management agreements” (Four Seasons, 2005, p. 16). The company initially entered Malaysia with its contract with the Regent hotel in Kuala Lumpur. While this hotel is no longer listed on its website, it served as its initial entry to the country. Overall, its entry strategy and continued business in the country is both in keeping with its typical practices and delivers the advantages of a non-equity strategic allowance that allowed the company to gain experience in managing properties within the country.

Four Seasons does face steep competition for luxury hotels based in exotic locations in Malaysia. The Datai Langkawi is offered in the same area, with similar options (The Datai Langkawi, n.d.). There is also the Guyana Eco Resort in Borneo that offers picturesque packages to explore marine life and surrounding landscape (Guyana Eco Resort, n.d.). These options may not carry the name recognition of the Four Seasons brand, but both offer attractive packages at a fraction of the cost when searching booking websites.

Structure

Four Seasons Hotels Ltd. Organizational Chart

Four Seasons Hotels utilizes a relatively flat organizational structure for its management team. The advantages of this system for this multinational hotel giant are that it allows them to strategically manage each of the sectors of their operations with a direct president of vice president, based on geographical region or by overall function. Each region: Americas, Europe/Africa/Middle East, and Asia Pacific has different challenges whether politically or economically, so by having a head of every area in which the company operates, it allows them autonomy to operate as a “mini-CEO” in some regards. There are fewer lines of management that can clutter the message or delay construction of properties and relationships with their partners. Four Seasons is also able to have one dedicated expert, the respective Presidents of Continental Hotel Operations, who is responsible for their own team of financial analysts, marketing staff, and hospitality consultants. As the company grows its property portfolio in each region they can also expand their staff under each of the regional presidents. Four Seasons Hotels has a long-term strategic focus on promoting their senior managers from within the ranks of the company and fostering growth internally (Four Seasons Press Room, 2016). Compared to other organizational structures, the flat organizational chart allows for greater adaptability and efficiency, eliminating “two manager” scenarios and also encouraging independence of managers. This structure helps prepare the future leaders of the company, as their policy is to promote from within, rather than seek external senior leadership, whenever possible.

Management

Four Seasons Hotels Ltd. is a Canadian-based international hotel chain with over 101 Four Seasons properties along around the world, with revenues upwards of $4 billion annually. The company has had some management issues in the past, particularly during the economic downturn that began in 2008, which led to them to sell majority of their ownership to ????. The founder, Isadore Sharpe, opened his first hotel in 1961 (Executive Leadership, 2013). One issue to mull for the Four Seasons brand is that while the company has a large international presence, they are not a publicly owned entity and are privately held; this may restrict their financing options. “The company is in a disadvantageous position as compared to publicly-held companies in terms of raising capital. Publicly-held corporations have a greater financial flexibility in funding organic and inorganic initiatives” (Four Seasons Hotels Inc. SWOT Analysis, 2015). The company also has several threats in the form of other major hotel players (Hilton, Marriot, Starwood, etc.) who are also operating in dozens of countries and tourist destinations such as Malaysia. “Although Four Seasons is a broadly recognized status symbol within the hotel community, other hotels may hold even higher status for niche segments” (Catrett and Lynn, p. 6, 1999). The company does retain control of its brand and does not license or franchise their name out to other builders interested, so in that capacity the management of any new properties is tightly controlled, as well as the hiring and control over who works and leads the property ( Eng, 2016). However, the company’s typical deal structure with builders and developers is such that Four Seasons does not actually own the building, “[Four Seasons] operates them on behalf of real estate owners and developers… Four Seasons participates in the design of the property and runs it, with nearly total control over every aspect of the operation, from the number of bell staff to the thread count of the sheets” (Segal, para. 5, 2009). While the company does not have the size or scale of its chief competitors, it is able to take between 3-5% of all profits from its nearly 100 properties. Additionally, the principal owners of each property are responsible for the upkeep and must fund reserves to cover emergency expenses. The company maintains strict control over operations, and the brand has enough leverage to dictate processes and ensure there is consistency across all of their buildings, as one real estate developer stated: “They train your employees, book your bookings, they do everything. They make it clear that it is in your best interest to not oppose their plans” (Segal, para. 13, 2009). Four Seasons does not have subsidiaries or mid-level hotel brands under their umbrella; however they exercise precise control to create the best experience for their guests, no matter which property they inhabit.

Finance and Accounting

While the actual owners of the hotel have to bear the financial risk of operating the hotel, provide funds for global sales and marketing of the Four Season brand, reservations and up keeping, Four Season charges a 3 percent fee of the gross and about five percent of all profits for running the operations (Segal, 2009).

As a privately held company incorporated in Canada, Four Seasons is not required by law to display its financial statement to the public. Therefore it is hard to determine which accounting standard Four Seasons follows, as Canada offers its privately owned, international businesses two main options for reporting:

1. International Financial Reporting Standards (IFRS)

2. Accounting Standards for Private Enterprises (ASPE)

Many MNE in Canada comply by the IFRS, as it is the internationally accepted and often thought of as the most credible standard (MaRs, 2014). While IFRS is an international standard, which has the ability to cover large and complex business operations, it still has not been accepted in the United States.

In addition, Malaysia just recently (November 2011) issued a new accounting standard for international enterprises operating in Malaysia, which is equivalent to the IFRS (Deloitte, 2016).

In conclusion one would assume that Four Seasons uses the IFRS as a standard for all hotels it is operating. Even though a large part of it’s business is done in the United States, which as mentioned before does not accept the IFRS, a majority of the hotels are operated in countries that do.

Another issue to consider is the exchange rate between the Malaysian Ringgit (MYR) and the Canadian Dollar (CAD). The Malaysian currency has dropped since 2014 from 2.8 MRY/1CAD to over 3.4MRY/1CAD in 2017 (XE, 2017). A decrease of almost 30% in less than three years in currency directly reflects a 30% decrease in revenues for the Canadian based company. However, as most payments are made in USD, the exchange between USA and CAD has been fairly stable, and operations in Malaysia are financed in MRY, the exchange rates might act as a buffer for a devaluating local currency.

Marketing

Malaysia continues to see tourism growth “registering a hike of 3.7% from January to June of 2016, compared to the same period in 2015” (Tourism Malaysia, 2016). According to Tourism Malaysia, Asian nationalities made up 31.3 million of the tourists who entered the country in 2016. Europe, Pacific, and Americas composed the remaining 1.4 million visitors in 2016. The average tourist spends RM 2,544.90 per person (Tourism Malaysia, 2014). These are important factors for marketing teams to consider when evaluating the overall marketing standardization approach for Four Seasons.

According to Birnik & Bowman (2007), “clustering/regionalization strategies seek to standardize the marketing mix, to a substantial extent, across clusters of similar markets. This strategy would thus yield a range of heterogeneous market clusters but with a higher degree of marketing mix standardization within each cluster” (p. 307). Four Seasons has adopted an approach in which global standardization makes sense for the overall brand, but regionalization of some marketing mix elements occurs. Marketing mix elements are often referred to as pricing, brand, promotions, and advertising, along with additional outlier elements as deemed necessary to incorporate (Birnik & Bowman, 2007, p. 307).

The first marketing mix element evident for Four Seasons is its pricing matrix. Four Seasons’ rooms, services, and amenities are all on the high-end of the price spectrum globally and fairly standardized. This is not surprising given that Four Seasons is identified as a luxury brand.

The second marketing mix element that is evident is the company’s high equity luxury brand, which is globally standardized. The brand theme and messaging is promoted on the “Four Seasons” mobile application and on all of Four Seasons’ social media platforms (Facebook, Instagram, Twitter, Google +, and Pinterest). Also recognized as part of the brand is the company’s high-end service culture. Four Season’s “About Us” introduction, tells a customer all they need to know about the experience they will have with the company.

“Times change, but our dedication to perfecting the travel experience never will. Our highly personalized 24-hour service, combined with authentic, elegant surroundings of the highest quality, embodies a home away from home for those who know and appreciate the best. As the company has grown from a single hotel to 104 in 43 countries, our deeply instilled culture, personified by our employees, continues to get stronger. Over more than 50 years, our people have built an unrivalled depth of reliability, trust and connection with our guests – a connection we will steadfastly uphold, now and always” (Four Seasons, 2017).

The third marketing mix element that is evident for Four Seasons is its promotional approach. The company often promotes “Experiences” at its resort locations. Though the promotions offered are specific to the country in which the Four Seasons location resides, as a standard, the type of experience is always unique. For example, Four Seasons Langkawi promotes UNESCO Geopark adventures, a Mangrove and Eagle Safari, a Raja & Ratu Couples Ritual, and water sports experiences that are unique to the culture of Malaysia and the Langkawi region (Four Seasons, 2017).

The fourth marketing mix element that is evident for Four Seasons is advertising. The Four Seasons has a very comprehensive social media presence. Each resort location has an integrated and individual social media presence used to advertise current events at each location, highlight unique and extraordinary experiences at each location, and easily access other social media outlets pertinent to each location. This speaks to the marketing regionalization approach noted above: globally standardized but locally tailored.

In addition, Malaysia as a whole is currently pursuing promotional tourism efforts. Malaysia Tourism was recognized at the “3rd World Media Festival Tourism Awards, winning two intermedia-globe Gold TOURISM awards and a Silver TOURISM award in the categories of ‘Advertising: TV Commercials’” (Malaysia Tourism, 2015). In conjunction with Four Seasons Langkawi ‘s comprehensive social media presence, this only helps Four Season’s marketing efforts, especially with plans for expansion in the country.

Human Capital

The company’s international mentality appears polycentric, as its corporate headquarters employs parent-country nationals while employing a mix of ethnocentricity and egocentricity at the local level (Four Seasons, n.d.-1; Four Seasons, n.d.). Supporting its human capital is a core focus of the Four Seasons’ mission statement that includes a promise to treat its employees and its finances ethically to provide them long-term benefits and prosperity. The corporate executive team is mostly homogenous, as there is only one female on the team. However, local management teams are both gender and ethnically diverse (Four Seasons, n.d.-1).

Another key concept circulated by executive management is the golden rule: WHICH IS?? Implementation of the Golden Rule by Isadore Sharpe prompted a round of executive force terminations as employees decided to leave the company due to its new policy (Solomon, 2013). While this temporarily left a hole in the executive team, Four Seasons grew to become a well-respected organization for internal and external stakeholders, and the company continues to value its employees through comprehensive benefits packages and preference for promotions (Four Seasons, n.d.-2).

Ethics, CSR

The Four Seasons has a commitment to ethical culture. The corporation “has earned an enviable reputation internationally that is built, in part, on commitment to doing business in a manner that complies with applicable laws and is and is perceived to be consistent with the highest ethical standards” (Four Seasons, 2017). The company has adopted a code of business conduct and ethics that was vetted and approved by the Board of Directors and upper management. It reflects “the most current assessment by Four Seasons of external and internal risks of bribery and fundamental standards that Four Seasons expects those who provide services to and for it - including employees, contractors and agents - to abide by when acting on behalf of Four Seasons” (Four Seasons, 2017). The code also states the company “will not use third parties or intermediaries to engage on its behalf in unethical practices that would be prohibited under applicable law – including the Bribery Act – if undertaken by Four Seasons” (Four Seasons, 2017). The Four Seasons does not specifically define their code for a specific country. Rather the company “expects that all parties and intermediaries that it engages will conduct themselves accordingly when acting on behalf or for the benefit of Four Seasons” (Four Seasons, 2017).

Four Seasons’ corporate social responsibility program, termed “Living Values” is comprehensive with a three-prong approach: sustainability, building communities, and advancing cancer research (Four Seasons, 2017). The first of the living values addresses sustainability, including “engag[ing] in sustainable practices that conserve natural resources and reduce environmental impact. As importantly, sustainable tourism will enhance and protect the destinations where Four Seasons operates for generations to come” (Four Seasons, 2017). For example, at the Four Seasons location in Langkawi, the company engages in ecotourism and eco-sensitive practices. The company houses three naturalists that run regular safaris by boat into the UNESCO Geopark close to the Langkawi location, to ensure that each trip is conducted with care and contributes to the overall understanding of the importance of ecosystem to the area (Four Seasons Press Room, 2016).

The second of the living values addresses building communities, including “being a responsible and caring community partner by having a positive economic impact and supporting community goals, both within and outside the hotel. We engage in innovative training and mentoring programmes [sic] for young people, support those in need, and celebrate the diverse cultures where Four Seasons operates” (Four Seasons, 2017). For example, as a member of the International Tourism Partnership, the company has been involved in the Youth Career Initiative, in which the company hosts a number of program participants at their global locations (International Tourism Partnership, 2017).

The final living value addresses advancement of cancer research. The Four Seasons supports “both local efforts and broader campaigns whose goal is the eradication of cancer. Through the collective efforts of the company’s hotels worldwide, Four Seasons annually raises significant funds and awareness for cancer research” (Four Seasons, 2017).

References

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