Shangri-La Hotels and Resorts SWOT and PESTLE Analysis

Strength

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Weakness

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Opportunity

1. Reduce foreign currency exchange rate uncertainty through hedging: Shangri-La hotels and resorts group has most of its borrowing done in US Dollars and Hong Kong Dollars, so in the climate of economic uncertainty, hedging has become very important so for medium-sized loans the group has gone into interest rate swapping policies which protects the funds of the group. They are also gradually lowering their corporate debt year on year. So there is an immense scope of opportunity to bring about financial stability through the hedging policies.

2. Renovations and Re-positioning: The Shangri-La group has decided to renovate some of its older and more profitable hotels and also to re-position them. This will induce more capital expenditure from groups end which might affect the profitability in next year, but the invested is expected to give favorable gains in the long term. The new investment is done to renovate the ball-room of Shangri-La Kuala Lumpur. Also, new investment is done in form of UBN towers office building and UBN apartments which means that assuming that operational efficiency will improve as per the trend, there will be more operational profits resulting from strategic investments.

3. Olympics in Tokyo in 2020: Previously during the Beijing Olympics in 2008, sales of Shangri-La increased in China. So similarly, Tokyo Olympics in 2020 will increase the sales of Shangri-La hotels. Further, in the current year all the currency where the group has its presence have depreciated except the Japanese Yen which makes Japan a prospect for Shangri-La group to invest more for the upcoming years keeping the Tokyo Olympics in mind.

4. Collaboration with the TAJ group: Shangri-La group has collaborated with TAJ group of India to improve their combined market share in highly competitive hospitality industry. They will be starting their loyalty programs combining the Taj’s Inner Circle and Shangri-La’s golden circle reward programs.

Threat

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Political

1. Terrorism: Hospitality industry always takes a hit whenever even a small terror attack takes place in the country. With ISIS becoming increasingly powerful and increased frequency of terror attacks in the world makes the travelers uncertain about the destination countries and hence hospitality as well as tourism industry always takes a hit.

2. Political Certainty: Political certainty provides the businesses of the region with a stable climate to invest, and it spurs more corporate meetings and corporate travels. Hospitality industry is bound to incur profits whenever there is political certainty. Trade protectionist policy of President Donald Trump and Brexit were two major events that affected global businesses to a large extent. However stable politic situation in Asia-Pacific has allowed the business to flourish and trends seem encouraging.

Economic

1. Lower foreign exchange gains due to depreciating currency: Apart from Honk Kong and Japan, the countries wherever Shangri-La has its operation, their currency has depreciated against US Dollars and hence it has a negative impact on the balance sheets of the company.

2. Unfavourable global interest rates: Owing to the increased protectionist policies implemented by two major economies of world the US and Britain, global interest rates have become increasingly unfavourable, and hence capital expenditure for the plans of expansion, renovations, restructuring becomes difficult.

Social

1. Decrease in overnight corporate stays and corporate meetings: The economic uncertainty has resulted in reduced number of corporate stays which is not a good sign for Shangri-La hotels and resorts because a large share of their revenue is generated from corporate meetings and bookings done by businesses.

2. Requirement of home-like environment by customers: There is increasing trends which suggest that customers are preferring hotels which have hospitality services which give them a feel of being closer to their own house. Hence Shangri-La hotels aim to give the best Asian hospitality to their customer which increases customer satisfaction and improves brand loyalty.

The unpublished sections of the entire PESTLE / PESTEL analysis is available in the 'Complete Report' on purchase.