DB FPX 8415 Assessment 3

Introduction

The sudden outbreak of the COVID-19 pandemic in 2020 struck different industries worldwide and left some businesses even now trying to redo their operation strategy just to survive the days now. The leisure and hospitality sector was, without any question, the hardest-hit sector when the pandemic first occurred. Economic and global disruption brought by the COVID-19 pandemic will define the hospitality industry’s restoration process. The post-COVID business will require greater unprecedented adaptability from hotels as they develop, implement, and execute safety policies to restore customers’ confidence and drive new demand. Investors may also realize that the most opportune time to invest strategically in the industry is at the beginning of the recovery period.

Seyitoğlu and Ivanov (2020) provide a conceptual framework for designing service delivery for the hospitality industry post-COVID. The authors identify three systems for providing services within the hospitality business: human-based, robotics, and mixed. The hotel business has traditionally based all front-of-house and back-of-house on humans. Technology-mediated services such as bookings made via the internet have emerged onto the scene for the past couple of decades and more in the hotel business, among others. The hospitality business has been severely impacted by the COVID-19 virus. Hotels that once were greatly reliant on foreign labor to staff their facilities are now facing a labor shortage since such workers have returned to their countries of origin.

DB FPX 8415 Assessment 3 Company Analysis Framework 

Employees have also abandoned the hospitality industry to venture into other professions where the exchange of cash is more lucrative. Hotels have been forced to re-engineer their businesses to deliver a safer and more welcoming environment for their customers. Robotics has been replacing a lot of the work that used to be performed by human beings, but this is not possible in every market. There are some customers who need face-to-face interaction, and hotels employing robotics for front-of-house and back-of-house functions are off-putting. All of them are succeeding in implementing a mixture of human beings and robots. All three suggested service delivery systems by Seyitoğlu and Ivanov (2020) have strengths and weaknesses.

The framework suggested by Seyitoğlu and Ivanov (2020) has six sections to be utilized in designing the service delivery system (SDSD), the most relevant of which for the acquisition is “demand.” Customer security and safety needs will shape the acquisition approach and are the first facts of the acquisition model. Customer opinion and demand thinking are a necessity and a requirement for a positioning strategy of a hospitality firm (Seyitoğlu & Ivanov, 2020). Customers are placing greater significance on their health and well-being. Hotel operation in the post-COVID period will require an unprecedented degree of flexibility.

DB FPX 8415 Assessment 3 Company Analysis Framework 

Social distancing and ensuring hygiene and cleanliness at various touchpoints in the customer journey are of the utmost importance in regaining the confidence of the customers and encouraging rekindled demand. Industry 5.0 can be useful for the hospitality industry because tailored service, a well-oiled supply chain, agility, an intelligent work environment, the use of big data for real-time customer preference information, highly tailored services at lower costs, and digital enrichment can have an impact on customer satisfaction, loyalty, and perceived quality of service (Gopalakrishna et al., 2021). The hotel owners’ concern is to redesign the spaces available and streamline their operations in response to the new normal, keeping in mind the guest experience and profit optimization.

Hotel location plays a crucial role in catching tourists and determining a tourist’s decision. Location plays a central role in occupancy, room revenue, and profitability. Accommodation facilities within areas of greater population density and economic activity typically possess a high level of potential demand and take a region’s share of domestic and foreign visitor travel as a holiday or pleasure and business destination. The Southeast has the largest proportion of industry establishments, with 28.5% of locations in 2022. The West has the second-largest proportion of industry establishments, with 16.3% of locations in 2022.

DB FPX 8415 Assessment 3 Company Analysis Framework 

The Southwest, Mid-Atlantic, and Great Lakes regions contributed 14.7%, 10.6%, and 11.6% of establishments, respectively, in 2022 (Ristoff, 2022). Morgan-Eskola Hospitality Partners (ME-HP) LLC would like to open a European-style boutique hotel and spa in San Francisco, Los Angeles, New York, Chicago, and Boston, one in each city. The extent of the hospitality businesses under consideration being ready to take on the risk due to financial slack varied with the location of the businesses (Wieczorek-Kosmala, 2021).

As per the conceptual model provided by Seyitoğlu and Ivanov (2020), location will be crucial to a successful takeover and future growth. The target cities of interest for ME-HP are large urban municipalities with established infrastructure and easy access to healthcare. These appear to be good choices but should not go without further study. The location of the hotel is the second component of the acquisition model.

The third aspect of the acquisition model is the people. The COVID-19 pandemic caused hotels to close their businesses. Management was compelled to lay off employees so that they could have funds to pay their fixed expenses. Most hospitality teams now believe that they were treated as a number, a mere cog in the wheel. People who thought they were very much part of the business were often fired with what was little more than complacency (Adams, 2021). The hospitality industry is now frantic to hire staff to fill out vacant positions. While hotels are capable of committing funds to fund robots to complete most service-focused tasks, the hotels will nevertheless need people to run and sustain the robots alongside maintaining a decent guest experience.

DB FPX 8415 Assessment 3 Company Analysis Framework 

The hospitality sector must invest in its experts and create a new standard that gives them better remuneration, offers them avenues to expand their skill base by way of training and education, and reskills the professionals to prepare them for their other positions within hospitality operations. The industry should regard this as an opportunity to invest significantly in the individuals who operate it by developing enthusiastic professionals by providing them with unbelievable skill sets and the chance to earn money and treat guests with pride. The hospitality sector has to shift its operational mindset, beginning from its foundational elements (Adams, 2021).

Brand awareness is of very high importance in the service and hotel industry due to the fact that it is a type of intangible competitiveness. Service branding can build trustworthiness and faith. It is capable of developing new sources of income through the engagement of customers in advertising the business. Online and offline technologies offer great opportunities for hotels to differentiate themselves compared to rivals. The special selling point of the hotel business must be more sophisticated and beyond the health and safety of clients.

It must also consider their experience. Based on Seyitoğlu and Ivanov (2020), there is a need for R&D, promotion, branding, and image development, which helps hospitality firms position themselves with their differentiated services, differentiate themselves from their competitors, and persuade clients to buy their services (Seyitoğlu & Ivanov, 2020). Brand awareness must be a factor to be considered within the acquisition process and the fourth component in developing an acquisition framework.

DB FPX 8415 Assessment 3 Company Analysis Framework 

The hotel industry is distinct from other industries, e.g., high-tech or equipment-intensive organizations. There has traditionally been a greater need for financial capital for fixed assets and human capital (Zhang et al., 2020). As a capital- and labor-intensive industry with high operating and financial leverage, the dwindling demand because of the COVID-19 pandemic has tested the mettle of hospitality companies. Sales revenues were severely cut short owing to the decreased demand during the lockdown phase of the pandemic, and firms could not cover their fixed costs and suffered a severe liquidity crunch and bankruptcy.

At the risk-preparedness level, high financial slack is better due to its shock-absorbing function (Wieczorek-Kosmala, 2021). Hospitality firms with a high level of financial slack-driven risk preparedness enjoy a better profitability and liquidity position. A theoretical framework by Wieczorek-Kosmala (2021) shows that corporations with scant or no liquidity holdings have had their financial-slack resources exhausted, and thus the ability of hospitality corporations to maintain the liquidity tensions that emerged as a result of the COVID-19 pandemic is in question (Wieczorek-Kosmala, 2021).

Financial metrics, including projected revenue, growth rates, debt-equity ratio, liquidity, and valuation, are areas that make a company an acquisition candidate. The theoretical model Wieczorek-Kosmala (2021) presents is more important for achieving financial risk readiness and long-term sustainability. Financial slack and liquidity are the fifth elements of developing the acquisition framework.

DB FPX 8415 Assessment 3 Company Analysis Framework 

An acquisition is part of the corporate strategy that entails the merging, buying, and selling of companies or assets to encourage business development and increase shareholder value. Acquisitions can have the power to improve financial strength, market share, and business activity, thus allowing the newly formed firm to expand further and grow in its sector. Acquisitions also provide the opportunity to synergize with efficiencies brought about by economies of scale. Acquiring businesses compels companies to formulate acquisition criteria when they wish to buy out another company.

The initial step in formulating an effective acquisition plan is to determine the acquisition criteria that the company will use to evaluate the target company. Investors who are looking to invest in the hospitality industry need to consider acquisition variables like having access to a multiskilled and versatile workforce, being part of a franchising group, acquiring the benefit of word-of-mouth referrals, proximity to major markets, having the ability to adapt quickly to new technology, and the ability to handle stock on hand. These are the success determinants of the hotel sector, according to IBISWorld (Ristoff, 2022).

Morgan-Eskola Hospitality Partners (ME-HP) LLC is able to make the best possible decision in their potential acquisition by using a decision framework. ME-HP can use a multi-criteria decision framework to make informed decisions. A systematic, explicit, and frequent decision-making framework for asset management decisions involves people, process, governance, and use of decision-support tools. The model must include a full complement of criteria and metrics, including human capital, technology, financials, intellectual property, and synergies.

Reflection

A strategic decision-making model provides an overall view of emerging market opportunities, which positions investors optimally for success. Investors need to act swiftly but do their research not to pay the price for failure, which can be very costly. A good strategic decision-making model provides valuable information about the size, shape, and direction of the market (i.e., market potential). Strategic decision-making plays a key role in differentiating one’s business from that of one’s competition.

IBISWorld predicts that the hospitality industry will continue to expand, with particularly strong expansion for extended-stay hotels, boutique hotels, spas and health retreats, and resort segments (Ristoff, 2022). Hotels represent a niche form of real estate investment because they serve as both a real estate investment and a working company that operates off of a service delivery system. Hotel and hospitality businesses should design the corresponding service delivery system that meets customers’ requirements, as well as the firm’s capabilities and limitations (Seyitoğlu & Ivanov, 2020).

Economic effects from the COVID-19 pandemic induced severe financial distress for hotel businessmen. These impacts can influence long-term viability among most hospitality business firms. Morgan-Eskola Hospitality Partners (ME-HP) LLC should be aware of the target’s market position and market forces, any legal or regulatory factors and liabilities, company culture, employees’ morale, brand awareness, distribution channels, and customer factors to understand the strengths of the acquisition in depth. All this can be done through a strategic decision-making framework.

DB FPX 8415 Assessment 3 Company Analysis Framework 

Seyitoğlu, F., & Ivanov, S. (2020). A conceptual framework of the service delivery system design for hospitality firms in the (post-)viral world: The role of service robots. International Journal of Hospitality Management, 91, 1–10.

Wieczorek-Kosmala, M. (2021). COVID-19 impact on the hospitality industry: Exploratory study of financial-slack-driven risk preparedness. International Journal of Hospitality Management, 94, 1–14.