Four seasons living values

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.