What is a SWOT analysis? How does it apply to the hotel industry? The primary reason to perform this analysis is to help a hotel be able to develop a strong business strategy. A good strategy depends on knowing what of business strength happens to be, what the weaknesses of that business are, and how those weaknesses can be turned into a natural advantage.
SWOT stands for strengths, weaknesses, opportunities, and threats. The good news is that it doesn’t take much time for an analysis like this to be completed and the initial benefit is clear: you have to think about your hotel business in a brand new way. A new business should always use this type of analysis as part of their overall planning process. There is no cookie-cutter plans that will work for your business. By taking into account the SWOT information that is available, a strategy for success can be formed and then reviewed annually at a minimum.
What Are the Strengths of the Hotel Industry?
The hotel industry provides people with a safe place to stay when they are away from home. With millions of rooms on a global scale, there is always a place to stay that specifically fits a customer’s needs. From the boutique hotel to the international brand, granting the people who stay there a chance to relax prepare for a business function let everyone be able to enjoy their time away from home as much as possible.
Hotels also are a major contributor to the local economy. There might be major tourist attractions that bring people into a community, but is the hotel that has allowed people to stay there. When people stay locally, they consume goods and services locally. They will go to local restaurants, shop at local stores, and those dollars stay within the community.
What Are the Weaknesses of the Hotel Industry?
The primary weakness of this particular industry is its cost. Upper-level hotels can charge thousands of dollars per night per room. That is simply out of the price range of the average household today. This limits the demographics that can be marketed to these premium experiences. There are lower cost hotels that exist throughout the world, but lower costs will typically bring about lower services at a lower standard of maintenance.
The hotel industry also faces a unique tax structure in most communities. Many rooms have a specific tax that is charged per night when they are booked. They may also face higher levels of sales tax and other fees that other industries don’t face for their goods and services. This ultimately can put the hotel at a disadvantage when it’s competition is a bed-and-breakfast.
What Are the Opportunities of the Hotel Industry?
Every community has a specific set of attractions that make it a tempting place to visit. What a hotel can do is change the set of attractions that are available with often just a small investment. The average household won’t journey 1000 miles to go see a large ball of twine, but they will go to see the large ball of twine, have fun at a casino at or near the hotel, and dine at a two star Michelin restaurant.
Hotels also have an opportunity for year-round customers thanks to their business structure. The peak season often brings about domestic and international tourism, but the off-season brings about local tourists who wait until national or international demands have been greatly reduced. With the right business plan, a school holiday can be just as profitable as a warm June afternoon.
What Are the Threats of the Hotel Industry?
The primary threat of the hotel industry today are boutique alternatives that cater to specific customer needs. For a fraction of the cost of a hotel room, a boutique establishment can provide a higher level of personal service and attention and sometimes even a better overall room.
Local conditions also affect the hotel industry. In places where there is political unrest, tourism is going to be down dramatically. People do not want to stay in a hotel that could become the focus of a potential conflict while they are in the region. They will spend their tourism dollars in safer locations instead.
Changing economic times can also affect the hotel industry. To use the US middle-class as an example, there household wages have not increased when inflation is accounted for in 30 years. This doesn’t mean that these households aren’t taking vacations or spending money, but it does mean that hotels which cater to this specific demographic are going to have to fight with each other to get the limited resources that are available.
This Is a Chance to Ask the Tough Questions
The SWOT analysis is the chance to really dig deeper into the foundations of any business, not just the hotel business. It’s a chance for the executive team to start looking at the successes and the challenges that their business faces on a daily basis. By asking the tough questions, a business can position itself towards better profitability because it is using the data that is available to it to its advantage.
Change for the sake of change does not make sense. You need to have information in order to change policies and procedures that aren’t working for you so that they can start working for you. This is what the SWOT analysis is able to provide for hotels and any other business. In return, you will be able to create more effective strategies that give you advantages in the short-term and the long-term of your business life.
This SWOT of the hotel industry is just an example to help get you started. Consider these four categories as you examine the health of your own business or the potential of a new startup opportunity and you will be able to quickly adapt to changing circumstances because you know about the threats and opportunities, as well as your own personal strengths and weaknesses, that are currently faced.