Strategic Alliance in Hospitality Sector

This report discusses the strategic alliance between Hilton and Playa hotels and resorts in the hospitality sector, including the advantages and disadvantages. It also explores the importance of strategic alliances in the global marketplace.

Running Head: STRATEGIC ALLIANCE
0
Strategic Alliance
Strategic Alliance in Hospitality Sector
(Student details :)
3/30/2019

Understanding Science 1
Contents
Case Study Analysis: Strategies in Globalised Hospitality........................................................2
Introduction................................................................................................................................2
Case Study Analysis...................................................................................................................2
Introduction to chosen strategic alliance................................................................................2
Country Entry and Entry Modes............................................................................................3
Importance of Strategic Alliance...........................................................................................3
Advantages of Strategic Alliance...........................................................................................4
Disadvantages of Strategic Alliance and chosen partnership................................................5
Conclusion..................................................................................................................................6
References..................................................................................................................................6

Understanding Science 2
Case Study Analysis: Strategies in Globalised Hospitality
Introduction
This report is based on a case study analysis focused on entry strategy and strategic alliances
in international business. Strategic alliance is the international business strategy which has
introduced for competing within the global marketplace. Out of all kinds of the global
alliances this paper will discuss about strategic alliances within tourism and hospitality
management sector. In this context, strategic alliance is the international business strategy
where 2 or more firms share resources as well as business activities.
The report has identified an international hospitality strategic alliance as Hilton with Playa
hotels and resorts. With the help of country entry modes, importance of strategic alliance,
advantages as well as disadvantages of Strategic Alliance and the selected case study
partnership will be covered within this case study analysis. In this way, this paper is going to
discuss how the strategic partnership has helped them creating better brand recognition over
different continents (Weaver, 2017).
Case Study Analysis
Introduction to chosen strategic alliance
In order to be strategic within the international business market in globalised hospitality
sector, Hilton has been strategically allied with the Playa hotels and resorts to create a
landmark expansion of the hospitality company’s resort portfolio. On 17th September, 2018
an announcement by the Hilton marked expansion within the all-inclusive space for globe’s
leading hospitality company (Business Wire, 2018). In this context, Hilton and Playa are
having combined initial plans of opening 8 additional all-inclusive resorts by the year 2025.
Hence, the new relation with Hilton considerably expanded Playa’s entire addressable
business market as well as allowed Playa to hugely increase the total number of resorts it can
operate within each continent’s market. Thus, this strategic alliance within hospitality
industry is enhancing both organizations’ capability to potentially grab additional
management contracts as well as business transactions (Enz, 2009).

Understanding Science 3
Country Entry and Entry Modes
The all-inclusive portfolio of Hilton and playa will grow with the enhanced commitment to
world-class hospitality within the Caribbean and Latin America. The reason behind the
chosen country area by this strategic alliance is that Hilton and Playa are having initial
business plans of opening 8 extra all-inclusive resorts together by the year 2025 and hence
target market for such expansion was to be selected strategically (Business Wire, 2018).
Therefore, Latin America as well as Caribbean both areas are the best suited for these all-
inclusive resorts and hotels as public and millennial generations living at both places own
changed and luxurious hospitality demands. In this way, through fulfilling these demands of
the public of both of the countries the strategic alliance can grow within the international
business like nobody other (Buhalis & Crotts, 2013).
Moreover, from the perspective of entry modes there are four major entry modes as follows:
 Licensing entry mode
 Franchising entry mode
 Joint ventures entry mode
 Wholly owned subsidiaries entry mode (Enz, 2009).
In this context, both the Hilton and Playa have strategically allied with each other to form a
joint venture while not editing individual’s identities in this strategic alliance. In a joint
venture market entry mode, the involved firms do have an advantage of accessing local
partner’s knowledge, sharing development costs as well as business risks. In addition, joint
venture of Hilton and Playa is politically acceptable and there is no ownership restriction as
well. However, lack of control on technology, inability of realizing location as well as
experience economies and inability of engaging within global strategic co-ordination are
some disadvantages of this particular kind of market entry (Weaver, 2017).
Importance of Strategic Alliance
In this context, many strategic alliances have been formed within the all-inclusive resort
sector of the Latin America and Caribbean during the previous 6 months.to find the reason
behind this growing trend, significance of strategic alliance for the involved firms need to be
elaborated (Jelski , 2018). With the developing competitive intensity in the global hospitality
industry, new technological modifications as well as shifts within customer preferences and

Understanding Science 4
profiles are majorly fuelling innovative disruptions, new brand launches, consolidations, and
strategic alliances amid all-inclusive international market players (Harrigan, 2015).
Here, all strategic alliances in hospitality sector are being created for reaching different
organizational goals, for example all of the all-inclusive resort firms are getting benefits from
each other’s individual resources, strengths and expertise for achieving a shared business
objective (Enz, 2009). In addition, importance of strategic alliance can be seen as sustaining a
competitive edge, restrain competitive threats as well as increasing profit potential and
enterprise values. In addition, a key strategic important factor for Playa and Hilton strategic
alliance is an increased brand as well as sourcing diversification: now both brands can deliver
the best products as well as services to an increased number of guests, within more locations
(Harrigan, 2015).
Advantages of Strategic Alliance
In general, a strategic alliance enables a business for getting competitive advantage by the
access to a partner’s distinct and useful resources, comprising markets, capital, technologies,
and people. Hence, joining up with other organizations offers complementary resources as
well as capabilities, while making it possible for international businesses to develop and
expand more efficiently and speedily. In addition, strategic alliances benefit organizations
through lowering manufacturing budgets, while developing and dispersing novel technologies
rapidly (Playa Hotels and Resorts, 2019).
In the context of chosen partnership of Hilton and Playa, strategic alliance has employed to
swift up product innovation within the hospitality industry. Moreover, in this era of rapid
technological revolutions within global markets Hilton and Playa have allied together for
attaining growth objectives’ of both the organizations (Jelski , 2018). From the perspective
of strategic agreement of Playa and Hilton, they have executed an agreement offering a
framework for the joint working within the all-inclusive segment. In addition, the chosen
strategic alliance is able to have 8 additional Hilton all-inclusive resorts by the year 2025
(Jelski , 2018). Moreover, Hilton hotels and resorts are having no presence within the
following international markets:
 Punta Cana, DR
 La Romana, DR
 Cancun, Mexico
 Riviera Maya, Mexico

Understanding Science 5
Hence, with the help of working under this strategic alliance Hilton can have a luxurious
presence worldwide covering all above mentioned regions (Key Differences, 2017).
Disadvantages of Strategic Alliance and chosen partnership
In general, disadvantages of strategic alliances are as follows:
 When there is no certain level of honesty and trust, a strategic alliance partnership is
having no base to build upon. Thus, it is essential for both partners to set the
expectations concisely and clearly prior to the partnership formation (International
Joint Ventures & Agreements, 2018).
 In addition, cultural rattle can be one of the major challenges which involved
organizations within alliances face in recent era.
 From the perspective of disadvantages, cultural differences in strategic alliance often
cause problems while making strategic alliances work especially amid Asian as well
as Western firms.
 If there is a big failure in business, then in most of the strategic alliance cases an
organization points out the failure finger towards at the partner firm. In this context,
blaming others cannot solve any issue, but it adds to the tautness amid the alliance
partners as well as leads to alliance ruin (Buhalis & Crotts, 2013).
 On the other hand, strategic alliances can often produce in-direct expenses through
blocking the opportunity of co-operating with rivalry businesses.
 Moreover, strategic alliance firms are usually distressed from delays in solutions due
to the issues of co-ordination (Weaver, 2017).
Now, in the context of chosen partnership there is a strong probability of rising conflicts and
future business challenges. Hence, some anticipated disadvantages of the chosen partnership
can be explained as below:
 Lack of Control: when a hospitality firm align with another firm working in the
hospitality sector, then both the firms lose the degree of control on the way of doing
business. Likewise, it can happen with this chosen partnership as both are well-
established firms of international hospitality industry (Business Wire, 2018).

Understanding Science 6
 Unequal Benefits: there is no assurance that business alliance will be beneficial to
both of the firm, or which firm will get more benefits hence same is applicable for the
chosen partnership of Hilton and Playa hotels and resorts (Harrigan, 2015).
 Liability: in case, something goes wrong with one of the business alliance partner,
then both of the involved firms will be needed to liable (Buhalis & Crotts, 2013).
 Merged Reputations: when two firms form a strategic alliance, then merged
reputations issues occur due to inter-connection of the business they do.
Conclusion
In conclusion, the case study analysis has revealed that strategic alliances within the
hospitality sector have grown at an excellent rate during the past decade. The paper has
identified strategic alliance of Hilton and Playa as the source of competitive advantage for
both; hence it is imperative that international hospitality mangers know the real implications
of strategic alliance option. In addition, hospitality businesses have utilised acquisitions as
well as joint ventures being the international business strategies for entering new domestic
and global markets as well as for increasing their market presence within the previous
decade. However, joint ventures offer complete or partial control to the parental company in
the form of the benefits grown, hence they are less attractive as comparative to the strategic
alliance option. Moreover, major advantage of these alliances over any other international
business strategies is the risk-sharing. In this way, with the help of studying chosen
partnership of Playa and Hilton hotels and resorts it can be concluded that partnering
businesses benefit through sharing resources as well as risk plays an important role in
international business growth.
References
Buhalis, D. & Crotts, J., 2013. Global alliances in tourism and hospitality management.
LOndon : Routledge.
Business Wire, 2018. Hilton Announces Strategic Alliance with Playa Hotels & Resorts.
[Online] Available at: https://business.financialpost.com/pmn/press-releases-pmn/business-
wire-news-releases-pmn/hilton-announces-strategic-alliance-with-playa-hotels-resorts
[Accessed 28 March 2019].

Understanding Science 7
Enz, C., 2009. Hospitality strategic management: Concepts and cases. UK: John Wiley and
Sons.
Harrigan, K.R., 2015. Strategic alliances as agents of competitive change. Columbia: Elgar
Book Series.
International Joint Ventures & Agreements, 2018. International Joint Ventures. [Online]
Available at: http://madaan.com/jointventures.html [Accessed 25 February 2019].
Jelski , , 2018. Growing Hilton-Playa alliance benefits both. [Online] Available at:
https://www.travelweekly.com/Travel-News/Hotel-News/Growing-Hilton-Playa-alliance-
benefits-both [Accessed 28 March 2019].
Key Differences, 2017. Key Differences. [Online] Available at:
https://keydifferences.com/difference-between-joint-venture-and-strategic-alliance.html
[Accessed 25 February 2019].
Playa Hotels and Resorts, 2019. Playa Hotels & Resorts Overview 2019. [Online] Available
at: file:///C:/Users/System%2304120/Downloads/Playa%20Investor%20Overview
%202019%20v.%20FINAL%20REDUCED.pdf [Accessed 28 March 2019].
Weaver, M., 2017. Strategic Alliances as Vehicles for International Growth. London: The
Blackwell Handbook of Entrepreneurship.