Hospitality Management and IHG: SWOT and PESTLE Analysis

This report discusses the background of the hospitality industry and tourism sector, along with SWOT and PESTLE analysis of InterContinental Hotel Group (IHG). It also covers emerging markets and business strategy for IHG.

INTRODUCTION
Hospitality management can be defined as practice that is used to manage hospitality
sector. This industry mainly deals with hotels, restaurant, resort, motels as well as other
hospitality functions (Kaushal and Srivastava, 2021). Whereas, management can be described
as the ability of an individual that manage staff, services and other functional department of the
firm.
The present report will discuss about the background of the hospitality industry and tourism
sector. Furthermore, the study is based on InterContinental Hotel Group (IHG) that is work
leading hotel company that provide their customer with various hospitality services.
Along with this, the report will discuss about the SWOT analysis that can be explained as
strategic tool that allow organization in identifying strength, weakness, opportunity and threat
that will company in improving the performance. In addition to this the study will discuss about
the pestle analysis that helps organization in investigating about the external factor that will
affect the business in positive and negative way.
Lastly, the report will throw light on emerging market where firm can expand their
business as well as business strategy that will help in developing the firm.

MAIN BODY
Hospitality industry is a broad sector that includes business tourism, travel, lodging and
beverage. It may be argued that this industry is mainly serving their customer with various
hospitality services for running their business. whereas, tourism sector can be explained as the
industry that provide the customer with travelling services such as desired destination, industrial
sites and particular location that customer wants to visit. This sector is a part of hospitality
industry as it run hand in hand with each other.
Moreover, the hospitality industry helped in increasing the overall economy of the
country subject in this study (China) by attracting large customer from various other countries.
(Goryushkina and et.al., 2019). It creates positive and negative impact on the GDP of the country
and helps in developing the remote area of the state. Furthermore, this industry has helped in
growth of UK due high investment in 2018 that has contributed in enhancing the key
performance value of the country. The overall performance of London was much higher than UK
itself such as average room rate of United Kingdom was GBP 87 whereas the rate of London was
alone 150 in 2018 (Hospitality growth of UK., 2020).
In addition to this, the occupancy rate on of UK was 6% lower than
London that was 84%. However, the profit over per room for London itself
was 124 that have made it a highest contributor in the hospitality sector of the
UK. Moreover, the demand of this industry has been increasing this areas
and investor are willing to invest more in this sector despite of Brexit that was
the biggest threat for this industry. However, in 2020 there was a huge
downfall in hospitality industry due to pandemic that has negatively affected
the overall of revenue of this business. Along with this, the overall GDP of
the country was also reducing that has affected the productivity of the
nation.
Basis London ( in percentage) UK ( in percentage)
1. Average room rate 87 150
2. Occupancy rate 84 6

The Brexit and Covid -19 has affect affected the market area of the United Kingdome by
reducing the International traveller that has contributes in the drop to overall tourism sector. As
well as it has reduced the leisure travel across the world that has resulted in lowering the overall
all visitor of the nation that has negatively affected the economy of the country (Brown,
Liñares-Zegarra and Wilson, 2019).
Background of IHG
The present report is based on IHG that is one of the leading brands in the hospitality sector.
IHG stands for InterContinental Hotel group is a British multinational hotel industry that
provides their customer with quality and luxurious services in order to run their business.
Moreover, the company was first founded by Juan Tripe on 15 April 2003. The headquarter of
the organization is located at Denham, England UK. Along with this, the key people of the
company are Patrick Cescau and Keith Barr is presently the CEO of the company (IHG
hotel.,2021). IHG is a public limited organization that deals in various brands such as
InterContinental Resort, Crown Plaza, Even Hotel and Holiday Inn Express as well as Indigo
hotel that contributes in increasing the overall revenue of the firm.
Furthermore, the company is serving their services World Wide with the headquarter in
many countries that has resulted increasing the sales of the firm and helped in maintaining the

brand image of the frim in the competitive market. In addition to this, the aim of the company is
to wider their organization and increases the satisfaction of their customer by serving the great
quality of the services. As the company has global presence and have established their hotels in
prominent countries along with this the firm wants to expand and reach the local communities so
that it is able to cover the local market. That will result in enhancing the productivity of the firm
as well as it will be able to face the external and internal threats of the business environment.
(IHG hotel.,2021). Moreover, the organization wants to enter into new market areas so that it
increases their sales and revenue such as company has decided to penetrate in the market area of
Bali and Kula Lumpur as these areas are the new location that will contributes in development of
the frim.
Swot Analysis of IHG
SWOT analysis is a strategic tool that helps organization in identifying the internal strength
as well as external threats that can affect the organization growth in the competitive business
environment. In others words, it is a business technique that help the organization in identifying
the strengths, weakness, threats and opportunity related to the business completion and project
planning (Longhurst and et.al., 2020.). Moreover, this tool will help the company in investigating
the current and future potential. The SWOT analysis of IHG has been mentioned in details
below:
Strength
 Brand Image: IGH has good brand image international marker that contributed in
attracting more and more customer that has contributed in increasing their sales.
Along with this, the organization have highly skilled worker that has lead in
satisfying the customer as well as helped in improving the performance of the firm at
competitive market.
 Expansion programme: Another strength of the organization is their expansion in
the new area of the market. That has contributed in increasing the revenue of the firm
as well diversified the risk in the market its operates.
 Strong Marketing: Along with this, the company marketing strategies of
collaborating with small and medium hotel has allowed the company in advancing
their technology that has contributed in supply of the resources (Cui Allan and Lin,

2019). Beside this organization have successful record of making the innovative
product and services that has allowed the company in increasing the satisfaction of
their customer as well as increase the loyalty for the firm.
Weakness: This are the areas in which organization can improve by making strategy in
order to improve the overall business performance of the firm in the competitive environment.
Such as the company days’ inventory are higher as compare to the other competitor. That has
leads in increasing the overall operation cost of the firm as well as had negative effect on the
finance of the company (Morrow and et.al., 2019). As there is rapid change in the technology in
this sector the organization has to make more investment in order enhance the vision of the firm.
Furthermore, the advance technology is necessary in order to expand their business in the new
area of market. In addition to this, the company has to increase their profitability ratio so that it
can sustain in the external business environment and maintain their position in the key market
area. Moreover, the organization has face the issue related to the product segmentation that has
been the major issues in the growth of the firm.
Opportunity: This factor allows the organization to identify the various opportunities that
are available in the external and internal market. That will contribute in improving the
performance of the firm. Such as organization can take advantage digital marketing this will
allow firm in attracting more and more customer that will increase the sales of the organization.
As well as company can make use of data analytical tool that will allow the firm in knowing the
taste and preference of their consumer (David, Creek and David, 2019). Thus, company can
make product according to their needs it will contribute in building a healthy relationship with
them. Along with this, organization can follow the market new trends as it will help firm in
creating a great revenue channel.
Threat: This factor will allow the organization in identifying the threats related to the
external business environment that will damage the overall growth of the company. Moreover,
the company is facing issues such as high competition and pandemic that has resulted in
lowering the profitability of the firm (Wang and Wang, 2020). Along with this, rapid change in
consumer buying behaviour has also been great threat to the organization.

Emerging markets:
An emerging market economy is of developing nation that is becoming more engaged with
the global markets as it continues to grow. In this context china is emerged as global economic
superpower in the recent years. Its is evaluated as its growth is due to its movement from
agricultural to manufacturing production. Various manufactured goods in UK come from the
China. The growth is mainly due to reasons such as it has created the best opportunities for the
business to set up as it has good infrastructure present in country. Moreover, it has good supply
of highly skilled labour and also labour are available at very lower costs that helps in carrying
out the manufacturing process on large scale.
PESTLE Analysis
Political:
Though the country has good trade relations with other countries but its dispute in US
and South China countries may affect the political stability. Hence, it may be difficult for the
quoted firm to invest in business environment where there is instability (Corban and et.al. ,
2019). Moreover, political factor would be helpful only when proper strategies and long term
marketing plans are developed. Also, investors have chance to have low labour costs that will
allow earning large amounts of profits.
Economic:
Inflation, employment, interest rate etc. are factors that come in economic aspects. In
context of China, IHG group can easily expand into this country as labour can be made available
at lower costs than other countries that will ultimately help to earn maximum profits (Anser and
et.al. , 2020). Moreover, China inflation rate is moderate and stable that will help the quoted firm
to earn economies of scale. Further, this factor can create negative impact as China interest rates
are higher than usual countries.
Social factors:
Factors such as cultural aspects, health consciousness, age distribution etc. also affects
the operations of the business. In context of IHG that is expanding into China there is growing
concern for health problems and so more people prefer consuming organic and healthy foods.
The quoted firm can also introduce various organic foods items in resorts and hotels so that

brand image and sales are maintained (Manoharan and Singal , 2017). Also, according to the
social culture prevailing in China themes of the hotels can also be designed to attract large
number of customers from outside regions. Further, programmes according to the cultural
aspects can also encourage customers to spend quality time in resorts during festive seasons.
Technological:
Technology is linked to the innovation and China is country where there is continuous
development in this field. Also, Chinese market is developed with its internet usage. With the
use of e-commerce platform the quoted firm can discuss various schemes, offers, shares pictures
of its resorts and hotels so that information can be provided easily to all its potential customers
(Reilly, 2018). Moreover, with the use of IHG mobile app the individual can manage it stays,
book rooms at lowest rates, check account status, redeem rewards, enjoy exclusive offers etc.
sitting in any part of the world. This factor may negatively impact as China is having bad online
payment system that does not provide security to its users and hence it may create problems for
the IHG and discourage pre booking of various hotels.
Legal factors:
Changes in laws, rules and regulations by the government may create negative impact on
the expansion policy of the firm. In the recent times China has made restrictions on the
investment from the foreign companies and thus it may create problems for the quoted firm to
start new lines of resort in these areas (Goh and Okumus , 2020). Moreover, the government
does not allow the formulation of free market policies that is also demerit for IHG to introduce
any innovative schemes in the chinese market. However, there are chances that import tax would
be reduced that will help the firm to import goods at lower costs that will be benefit factor in the
future.
Environmental:
China is concern with amount of pollution that is spreading in the country after the loss of
biodiversity and cases of water, air pollution, industrial waste etc. Hence, chinese government is
taking number of initiatives to limit the deforestation and environmental challenges that it is

facing. The quoted firm therefore can develop hotels and resorts that preserve the natural
resources by planting more trees around hotels, using less pollutant vehicles using eco-friendly
products that can be easily recycled and much more. Hence, this factor can be positive only when
firm uses sustainable business practices that will not cause any future problems.
Hotel strategy to be used to enter into the market
Porter's generic strategies: describe how company gains competitive advantage across the
chosen market scope. There are four types of porter strategies that is
 Cost leadership where firm aims to become the lost cost producer in the industry. Also,
sources of cost advantage may be different depending upon the structure of company. In
context of IHG, to be low cost leadership in particular Chinese market it needs to identify
all sources that will lead to cost advantage so that it is able to command prices
accordingly.
 Another one is Differentiation where company wants to be unique in its industry other
than its competitors. It takes one or more attributes from many buyers and uniquely
positions itself to meet those needs. IHG group can be different from through introducing
unique services that are different from the competitors.
 Other one is Focus where segment of group in the industry is targeted. Here, the needs
of particular group are closely identified so that best services can be offered.
 Moreover, it can be either cost focus or differentiation focus depending upon the goals
and objectives of the firm. Hence,IHG can develop strategies for Chinese market so that
best of services and experience can be generated with minimum costs to attract maximum
potential customers.
According to this, the quoted firm would use differentiation strategy so that it can set out
from its competitors and stay ahead in competition (Krupskyi and et.al., 2017). For this
purpose proper research and development need to be done so that needs can be identified and
accordingly services can be provided.
Ansoff matrix: model where the firm uses various tools to analyse the strategies that can
be used by the firm for future growth and development. It also consists of four types such as
market penetration in which focus is to increase existing market sales of product in existing

market. Product development where new products are introduced to existing market. Market
development in which new markets are entered with existing products and diversification
where new market is entered with new products (Šmugović and et.al., 2021).
The IHG group using the Ansoff matrix can use diversification policy so that new services
can be offered to new Chinese market. Moreover, according to the type of culture and choice of
food they consume, better services would be offered that will help in building great customer
satisfaction and experience.
Nykiel’s fourteen hotel strategies undertake various growth strategies such as assessing
enhancement opportunities. It helps to maximize the value for the organization and hence the
firm will be expanded into particular market by identifying the strengths and weakness.
Moreover, this strategy is good for the hotel industry so that different options will help to create
sustainable source of income and also suggests ways through which one line of hospitality
service to another. Nykiel’s fourteen hotel strategy the hotel industry can set extraordinary goals
and analyse options that can be used for either
 Horizontal expansion where IHG will expand from one line of hospitality sector to
another to gain competitive advantage.
 Geographic expansion where quoted firm will grow from small radius to large
geographical area.

 Product hybridization where product range is expanded to broad range of services by
the IHG.
 Specialization in IHG group will be associated with upscale of both pricing and service
offered.
 Product tiring where IHG group will deal with forces that are associated with population
growth, demographic and economic changes etc.
Other in the Nykiel’s fourteen hotel strategies for the IHG group may include franchising,
brand collection, management contracts, product re branding, non-franchising, singleness,
global positioning , value realted products and services, brand collection etc. depending upon
the goals and objectives it needs to achieve in the future.
The quoted firm will use geographic expansion for entering into various regions of china market
From the overall strategic models it can be said that IHG should implement differentiation
strategy services that will help in better profit margins and allow business to compete in different
ways. Moreover, the firm will create high quality services. Similarly, with use of Ansoff
diversification strategy the quoted firm would easily implement and prepare contingency plan
to address issues that are most likely to be affected in the future (Taqi , Ajmal and Ansari ,
2018). Also, it will help to make informed and effective marketing decisions for the overall
organization. Moreover, this tool is helpful when applied in corporate strategy level rather than
the marketing department of any business. Hence, implementation in better way by the quoted
firm would lead to great height of success in hospitality sector.
From the above chosen strategies in all the three models is essential for quoted firm to
enter into a market where there is large population that requires variety of goods and services in
lower prices so that better customer experience can be achieved. Differentiation strategy will
allow customer to encounter various unique services that they have never heard of in any of the
hospitality sector before. Also, with right diversification policy new markets can be explored by
the quoted firm that will help to generate more revenue for the firm. Further, geographic strategy
would be helpful for the firm to improve the brand image and value so that firm can set and
modify prices in the future as it would be able to gain market leadership.

Practical application of strategy – 5 and 10 years ahead
“IHG is committed to provide True Hospitality services for betterment. it’s simple but strong
purpose is centred on creating royal and memorable customer experience and, respecting,
recognising and caring for people”
IHG company is planning to expand in the new market of China. In order to make their
expansion successful company will take necessary actions related to the budget, promotion
activity etc. Moreover, by successful expansion company can increase their revenue, market
share, customer base, positive image in the market. Moreover, company will invest huge amount
on research and development team through which, it can get the information about the needs and
wants of the China people (Kuo, Fang and LePage, 2021). Further, company will establish strong
relationship with the customer by connecting and engaging with the help of social media, Email,
SMS. Likewise, it will provide new information about the new product and services, discounts
and offer. Moreover, company will also provide training and development programme to their
employees to adopt new culture and analyse their requirement so that unique experience can be
created.
Moreover, company will prepare budget for sales, purchase, cash etc. to determine long
term expenses and profit. This will also help in evaluating break-even point and future sales of
the company. In addition to this, company also will take loan from the bank with the low interest
rate for managing working capital. Moreover, company will look forward to adopt different cost
saving strategies such as cut down financial expenditure, optimum utilization of resource etc.
Company will adopt new technology in direct booking, cross promotional sales, designation
marketing, reward to the guest (who visited more than one time), revenue management etc. IHG
will also use greeting method in order to make memorable experience of the customer. Company
will change their organization structure as per the china social and cultural environment (Nair,
2019). So that company will apply strategies like hire new talent, strong team building, training
and development session etc. to make their working environment flexible.
Moreover, sales strategies such as discounts, offers etc. will help to increase the number
booking at any point of time. In 5 to 10 years long term strategies, company has decided to
reduce the rate at the initial stages of the expansion so that large number of people can feel and
enjoy the high quality of services. Further, as time goes it will charge the nominal prices by
analysing their competition in the market. In addition to this, company will also look forward to

keep some margin for the future expenses in their budget. so that any uncertain event will take
place, company can recover it. Company will also adopt different motivation and encouragement
techniques which will help to build positive working environment at the workplace. Moreover,
IHG will apply promotional techniques which include discounts, offers, social media updating
etc. So that it can reach to the large number of customer base. In addition to this, company will
provide high quality of services, nutrient food, hygiene work place so that people can enjoy royal
experience. Organization will maintain their relationship with the customer with the help of
digital mode (Phansaita, 2019). So that customer requirement can be identified and make the
changes according to it. For making high profit and positive brand in the market, business will
opt customer satisfaction strategies which include the best quality of services, reduce the wastage
of resources, nominal price, respect, ethical practices etc.
CONCLUSION
From the above report it has been conclude that IGH is in stable position in the
competitive market. Whereas the hospitality management is the study of the hospitality sector. In
simple words, it is the process of managing the staff and services of this sector in order to run
the business. Furthermore, the study has also summarized about the background of the
hospitality sector such as it contributes in increasing the overall economy of the country.
Moreover, the study has summarized about the SWOT, PESTEL analysis that will help
company in identifying internal strength and external threats that can create a positive and
negative effect. Along with this, the report has also depicted about the Strategic planning of the
company. In addition to this, the study has also analysed about Nykel fourteen strategy that will
help organization in making the appropriate goals for the business.

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