Introduction
Many luxury hotels and rentals around the world are managed by corporations that have assets in many different popular resorts. These businesses use their expertise to create a network of properties that offer excellent service based on high international standards. Four Seasons Hotels and Resorts is one such organisation, based in Canada and operating hotels in many famous locations as well as renting homes and residences.
However, unlike many other well-known hotel chains, it does not own these properties, which is a noteworthy aspect of its business strategy. There are also other aspects of its approach that deserve further consideration. Being a privately held company, Four Seasons is less open to public scrutiny than many other businesses. As such, the purpose of this report is to attempt a thorough investigation of the organisation’s strategy and the reasons for its success.
Situational Analysis
Four Seasons has existed for a considerable time, expanding continuously throughout most of its existence. According to About us (2020), it began in 1960 but adopted its current strategy and began developing actively in 1970, entering the U.S. in the 1980s and starting worldwide growth in the 1990s. The organisation focuses on luxury hotels and residences, providing excellent five-star service at competitive prices. It is also open to innovation and experimentation for the sake of satisfying its clients’ expectations and improving their experience. As a result, Four Seasons is generally considered one of the world’s best hotel chains, in terms of both pricing and the quality of service. Its stated orientation and the strategy that it uses reflect this tendency, highlighting a focus on the customer and the aspects that can improve their experience.
Vision Statement
Four Seasons does not have a specific and codified vision statement on its website, though it has a mission statement. However, About us (2020) provides a quote by the company’s founder that highlights the lack of a large-scale dream or goal and identifies a focus on delivering consistently excellent service. The company aims to create the best possible experience for the visitor, which they will remember and return when in need of accommodations again.
Fundamentally, this outlook is based on the idea of mutual loyalty, where the company earns the trust of its customer base by displaying commitment on its side. Regardless, there is no comprehensive view of the company’s relationship with the people who visit its hotels or its perceived role in the industry. Some aspects can be inferred from the expressions of its self-view and goals on the website, however.
As mentioned above, service is the central value of the company, and its actions are all aimed at maximising this quality. Corporate bios: Isadore Sharp (2020) quotes Four Seasons’ founder and chairman, who views the brand as associated with excellent experiences and lasting memories. The intention is to maintain this reputation in the future, as well, through maintenance of specific company culture and a particular strategic alignment that will be described below. Corporate bios: Isadore Sharp (2020) focuses attention on brand integrity, which is maintained with measures such as the transition from a corporate structure to private ownership. Four Seasons seeks to distinguish itself among the competition and attract visitors with excellent service. As a result, its vision could be framed as that of being an exemplar in that aspect of performance.
Mission Statement
The company’s mission statement is considerably more detailed than the account of its vision. Service culture (2020) defines the goal of the company through descriptions of who its employees are, what they believe, how they succeed, and how they behave. Four Seasons wants to be recognised as the chain that manages the best hotels and other properties wherever it operates. This aspect consists of a combination of excellent design and the best personal service that is based on a set of ethical values. To that end, Four Seasons prioritises employees, who work with customers and thus define the perceived service quality.
It works to ensure that hotel workers enjoy their jobs and feel pride in them while respecting their colleagues regardless of profession. As a result, the chain is renowned for its treatment of staff members and being a place where people want to work.
While quality service is the foremost priority of Four Seasons, the company remains a commercial entity. As such, its primary objective is to make a profit from its operations, whether to satisfy the owners or to expand the company and secure its future. To that end, the company balances profitability and customer expectations and tries to set fair and reasonable prices for its services. Lastly, the fourth aspect of the company’s mission statement governs the behaviours of its employees. According to Service culture (2020), Four Seasons applies a rule that it defines as “deal with others as we would have them deal with us” in this regard (para. 5). As such, the company upholds high ethical standards and tries to ensure that no problematic behaviours occur within or in its relations with partner companies.
Current Strategy
Four Seasons discloses its strategy openly, possibly due to the lack of significant competition and the challenges of entering the industry. Corporate bios: Isadore Sharp (2020) highlights four central aspects: treating others as one wishes to be treated, only managing medium-sized hotels, manage these locations instead of owning them and concentrate on service. The first aspect has been discussed above as applying to employees, but it is used across the business.
Four Seasons is committed to creating a distinctive culture and letting the people judge it instead of making similar claims to many other companies while obfuscating internal processes. The decision to manage medium-sized hotels may be related to this approach, as it is easier to oversee their operations and prevent any unethical behaviours. A small hotel may struggle to meet the high standards of the clients, and a large one is associated with significant complexity increases that make the identification of issues challenging.
The focus on managing rather than owning hotels makes it easier for the company to expand, as it does not have to wait for new venues to be constructed or spend the resources to do so. Significant design changes are often still necessary, but they constitute a relatively small part of the task. Lastly, with the decision not to own the hotels, the organisation can focus on its central value, service, and leave building management to the owners.
With regards to this core belief, the size of the company’s hotels enables it to offer personalised treatment. A focus on luxury (2020) expresses the opinion that interior design is not as crucial to the feeling of luxury as how others treat the person. As such, instead of spending excessive sums on decorations, Four Seasons tries to refine the quality of customer interactions with its personnel.
Recent Performance
As Four Seasons became a private company in 2007, current data on its financial performance is not publicly available. However, it appears to be in the process of continuing and expanding as it has in the past. Four Seasons history: innovation meets luxury travel (2020) claims that the chain has exceeded 100 hotels owned in 2015, opening locations in Sub-Saharan Africa and Russia, in particular. From its continued growth, it is possible to guess that the business remains profitable and that its expansion efforts continue as planned or faster. It also has the resources to attempt introducing innovative services such as dedicated jet planes that transport visitors (Four Seasons history: innovation meets luxury travel 2020). The company continues to follow its strategy and improve the scope and quality of its offerings.
It can be argued that Four Seasons’ strategy is the reason for its continued success, as both have remained mostly throughout the company’s existence. The approach focuses on overall stability and expansion at a moderate speed, without risks or significant redesigns. It has worked throughout the last decade, with the business entering new markets and hitting milestones. Its experiment with planes is a sign of a continued focus on providing improved service, with the idea helping reinforce the concept of luxury. Many visitors will have the money to afford the service and choose it to improve their travel experience further. The hotel will take care of more of their needs and introduce new aspects to air travel that the discerning traveller will appreciate. As such, the new service may become popular and begin generating substantial revenue for the company, enabling further successes.
Environment Analysis
PESTLE Analysis
- Political: Low importance. Four Seasons operates in dozens of countries, and even if political factors temporarily make one nation an unpopular travel destination, the company’s business will not be damaged excessively. Moreover, most areas where the company operates can be considered politically stable and safe.
- Economic: Medium importance. The client base of Four Seasons is affluent international travellers who come to the hotel from outside the environment. However, worldwide economic recessions tend to reflect on all companies, including the chain.
- Social: High importance. Four Seasons has to open their hotels in popular destinations for its client base, as people will not visit new locations solely because a part of the chain is there. Moreover, reputation is critical to the company, as it enables the business to maintain its current customer base and attract new visitors.
- Technological: Medium importance. Adopting the latest advances in technology ahead of the competition is not vital to the company’s success. However, if any new tools enter the popular definition of luxury, Four Seasons has to begin providing them, preferably ahead of time.
- Legal: Medium importance. Regulations on hotels are generally similar around the world, and it should not be difficult for Four Seasons to adhere to them. However, there are differences between the laws of various nations that the company should study and follow.
- Environmental: Medium importance. As many Four Seasons hotels are located in resorts where people come to rest, local weather can affect the performance of a venue. However, in the long term, such factors are likely to reach an average value and stabilise performance around a new number.
SWOT Analysis
Resources Based View
Four Seasons depends on two critical resources: accommodations and services, which combine to create the complete hotel stay experience. High-quality accommodations are rare due to the price of their creation and the demand for them from wealthy travellers.
For the same reasons, they are hard to imitate, as doing so would require a substantial investment of money and time. However, they are substitutable, as one can go to a lower-quality hotel or rent a luxurious apartment for a short time, even if both options have disadvantages. Excellent service is not rare among luxury chains, as it is considered an essential part of their operations. However, it is hard to imitate due to the company’s long-standing efforts to cultivate a specific culture that will satisfy customers while keeping employees happy. With that said, it is possible to substitute Four Seasons’ service with more luxurious accommodations or an attitude aimed solely at placating customers at any cost.
Porter’s Five Forces
- Competition in the industry: low. Luxury hotel chains prioritise keeping their current visitors and having them return over attracting new audiences. Affluent travellers are a small proportion of the overall population, and most will choose the best accommodations they can afford without the need for promotion.
- Potential of new entry: low. While the history of Four Seasons serves as an example of how a new company can revolutionise the industry (Four Seasons history 2020), it is unlikely that new companies can make the same impact today. The associated costs, alongside the general lack of innovation in the industry, make competing with established luxury chains a challenging task.
- Power of suppliers: medium. Many prestigious hotels rely on specific suppliers of high-quality goods, but can potentially replace them. In the case of Four Seasons, the company will be endangered if the owners of the properties that it operates choose to end the partnership, but such an event is highly unlikely.
- Power of buyers: high. Travellers have a broad selection of venues that they can choose depending on their preferences and past experiences. As such, hotels have to try to offer them the best offer based on a variety of characteristics and encourage repeat visits.
- Threat of substitution: high. Many lower-cost hotels have different classes of rooms, with the best ones possibly competing with dedicated luxury venues. Moreover, apartment and house rental services exist in many popular destinations, which can provide a better experience than a high-quality hotel.
Strategic Criticisms and Recommendations
Advantages of the Strategy
Four Seasons is a highly successful company, at least on the surface level. With a large number of locations across the world and sufficient resources to continue its expansion, it is one of the world’s leading luxury hotel chains. It is also expanding its services into other areas such as villas and residences, with over 750 properties available and unique customisation services offered (Four Seasons private retreats 2020). This diversity of locations and propositions can make it challenging for other companies to compete with the business, as it can offer an alternative to anything they invent while the opposite is not true.
Additionally, with services such as dedicated aeroplanes, Four Seasons can capitalise on customer loyalty and reinforce it by providing superior alternatives to conventional travel. Overall, it would appear that the strategy initially formulated by the company’s founder has led it to success.
Most luxury hotel chains rely on the brand image to secure sales, maintaining excellent reputations so that people want to visit them. According to Hudson and Hudson (2017), Four Seasons operates similarly, following a premium pricing strategy where its comprehensive services justify high costs. As such, the company must keep its positive image as a destination where one will receive some of the best services in the world.
To that end, it tries to maintain a high quality of service and provide every guest with a personalised and pleasant experience. With its medium-size hotels, it is challenging for the company to include the same quality of additional services such as restaurants or saunas as larger competitors due to the lower potential for profit. As such, it has to find different ways of attracting customers or focus on a separate category of traveller.
Differentiating Aspects
As a result, the chain chose to appeal to customers other than people who were the usual audience of luxury hotels. As Four Seasons history: a focus on luxury (2020) describes, Sharp’s vision was one of a personal and informal hotel that would still provide every possible comfort at a corresponding price. The opening of the first such venue coincided with an increase in jet travel around the world, with businesspeople constituting a significant portion of the traffic generated in the process.
This variety of customer preferred comfort and efficiency and did not necessarily want to be treated like nobility, for whom traditional luxury hotels were designed. As such, Four Seasons suited their needs excellently, which contributed to the success of the London enterprise despite it competing with better-known and established names such as the Savoy (Four Seasons history: a focus on luxury 2020). Learning from this success, the company began designing hotels based on the same standard around the world.
In an informal environment, it arguably takes more training for the staff to respond to visitor concerns and requests correctly than in one where strict guidelines define behaviour. As such, workers became a particular focus of Four Seasons, with the company providing them with excellent conditions and ensuring that both managers and subordinates were satisfied with the situation.
Reiche et al. (2017) mention how new employees in the chain’s Paris hotel were surprised that they did not have to work more hours than prescribed by the law, unlike in their previous workplaces. As a result, the chain is often known as an excellent employer that responds to staff inadequacies by hiring additional workers rather than inconvenience current ones or the visitors. However, this tendency creates additional costs for the company, which ultimately reduce its profit margin and contribute to its low net worth.
Disadvantages of the Strategy
Despite the company’s size, its lack of ownership over the properties that it manages prevents it from growing at faster rates and achieving similar value to the competition. According to Dierks (2006), the company was sold for $3.7 billion when it went private in 2007, and its performance since then has been unknown. For comparison, #174 InterContinental Hotels (2020) lists one of its competitors, which owns the locations it uses, as having a market cap of $12.3 billion. Moreover, the low-profit margin can endanger the company during economic recessions, and it may begin losing money unless it chooses to compromise its standards.
With that said, it appears that the business is aware of this tendency and accepts it as an inevitable part of maintaining its brand. The deal that allowed it to go private was intended to enable the chain to focus on customers and be less reliant on the market, which can pressure companies to be profitable at any cost.
Over the years, Four Seasons may have changed from an innovative company to an established and inflexible one. It has been using the same strategy for nearly sixty years without significant deviations. While the approach has been successful, there may have been some opportunities for improvement and growth that the company has missed. Many luxurious hotel brands belong to larger groups that manage a variety of chains and programs, maintaining a prestigious brand while ultimately serving many different types of customer. Various loyalty initiatives reward repeated visits, but the chain does not have one.
The company claims that such programs are too nonspecific and do not make the visitor feel that their experience is being personalised, which is Four Seasons’ selling point. With that said, Hua et al. (2018) claim that loyalty programs result in substantial improvements for all aspects of a hotel’s performance. As such, the chain may be harming itself with its refusal to incorporate the initiative, especially since the customers it caters to can be price-conscious.
Generic Strategy
Four Seasons’ current approach should be classified as a focused differentiation strategy due to the factors listed above. The company appeals specifically to business travellers, offering a significantly different style of treatment to many luxury hotels. Its approach emphasises informality and service, offering personalisation instead of broad excellence. With that said, Four Seasons prefers to be seen as equal to other prestigious hotels rather than a provider that provides better value or lower costs. As such, its prices will generally be similar, except for the most expensive suites, which can reach exorbitant fees at many other locations.
The efforts to introduce jet plane services and customised residences for rent using Four Seasons’ trademark personalisation. This strategy is appropriate, as the company’s lasting success shows, but it may be possible to adopt a more suitable version.
It is likely possible for many other hotel chains to imitate Four Seasons’ approach to some degree, particularly in locations where there are no hotels managed by the chain. Overall, the degree of differentiation achieved by the firm has likely become lower since other companies recognised its dramatic success with its innovative London hotel in 1970. The other efforts that it has undertaken since then only appeal to a minimal selection of customers who are likely already loyal to Four Seasons. To attract a broader range of customers, it may be beneficial for Four Seasons to switch to a best-cost provider strategy.
The company offers a comparable experience to most other luxury chains without the need to maintain large venues and expensive decorations. As such, it may be possible for it to further appeal to its target audience by undercutting the costs of its main competitors while retaining the same level of service.
Growth Strategy
Four Seasons has hotels in most of the world’s popular destinations and resorts already along with a variety of luxury residences. New popular places tend to either emerge irregularly and slowly or lose their appeal before a facility can be constructed. As such, there is a limit to how far Four Seasons can grow with its current approach of putting hotels where its customer base goes. It can construct more than one venue at some of the locations. However, such an initiative will likely result in diminishing returns, especially if the current one is not regularly filled. Attempts to increase the numbers of visitors will have unreliable effects, as well, due to the strength of the competition. As such, Four Seasons will have to change its strategy to continue growing further.
The company’s expertise in providing excellent service can be transferred to other price categories more quickly than others’ luxurious decorations or extensive amenities. As such, it should be possible for Four Seasons to open a business branch that targets the upper-middle class of consumers. This category of the population is interested in the type of service provided at luxury hotels but cannot afford to stay there often. As such, a cheaper variety of the hotel that omits some non-essential aspects should appeal to these customers. The company can use a different brand for these venues to avoid negative associations with its leading brand. The less expensive variety is likely to receive additional recognition due to its relationship to Four Seasons, regardless, creating an initial influx of visitors that it can sustain if it succeeds.
Expected Changes
With the rise of various globalisation trends and the increasing availability of travel, the world is currently undergoing a similar transformation in its hospitality industry as that which enabled the rise of Four Seasons in 1970. According to Batabyal and Das (2019), both tourist traffic and individual expenditures are continuously rising, with service and associated services being in particular demand. With that said, this tendency is likely the result of the lower costs of transportation along with the opening of many new routes. As such, Four Seasons cannot capitalise on this trend directly in its current state.
It is trying to offer an integrated travel program, but its version is aimed at the very wealthy. It is possible that in the future, lower-cost chains will be able to upgrade the quality of their services through continued improvements and take away the chain’s customers.
Many new technological advancements also emerge, with chains benefiting from their implementation. Batabyal and Das (2019) note that Marriott International and Intercontinental Hotel Group are both adopting various new ideas such as virtual reality and robotics extensively. Four Seasons should follow suit and look for other innovations that will help it reduce costs and create further improvements in its service. The company has an advantage already with its experience in personalisation, but in the future, it will have to work to retain its unique proposition. Overall, expansion into other visitor categories and active innovation will be necessary if the company wants to continue growing. Otherwise, it may be left behind and struggle to catch up and retain or increase its customer base.
Conclusion
Overall, the strategy of Four Seasons has been successful in the past and present, with its approach of steady expansion working. However, due to changes in the environment since its creation, the company may reach the upper limit of its growth soon. As such, it may be necessary for it to change its strategic direction to keep succeeding. It should try a best-cost provider approach, as it has some differentiation but not enough to secure a significant base of loyal customers. The creation of a separate brand targeted at the upper-middle-class may also be a viable approach to guarantee future growth. Travel is becoming more and more affordable, and Four Seasons is in an excellent position to capitalise on the trend as it did in 1970.
Reference List
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