A SWOT Analysis of Le Meridien Barbarons Hotel

Abstract

One among the famous hotels in Seychelles, the Le Meridien Barbarons Hotel and Spa has, a few

years ago, been acquired by the giant Starwood brand. Starwood Hotels & Resorts Worldwide,

Inc has other famous hotel brands such as the Sheraton, the St. Regis, the Westin, the Four

Points, et al. These hotels are found all over the planet and they total up to 1000 units comprises

of various sizes and standards.

The Le Meridien Barbarons Hotel is a three star accommodation and service unit located on the

west coast of Mahe Island in the Seychelles exotic tropical islands‟ destination. It offers the best

competitive rates of its genre and targets groups, families and businesses market segments. With

that in mind, this hotel has a high potential demand for its services. It has been exploring and

exploiting these segments profitably up to now as per its strengths and opportunities. Parallel to

that, there have also been difficult times as per its weaknesses and threats. This hotel has

managed to navigate its way through its business environment by facing the many changes that

influences the micro and macro environments of organisations.

This study is a snapshot of its current methods and strategies of management effectiveness and

efficiency. It portrays how this hotel is facing its internal and external business environments so

that it can generate profits and continuity within the hotel industry of Seychelles. In the

management vocabularies; this report is a SWOT analysis of the hotel in question.

Table of Contents

Introduction

The Le Meridien Barbarons Hotel

Organisation Structure

Business Environment

PESTAL analysis

Analysis of LMB Internal Attributes (strengths & weaknesses)

Analysis of LMB External Conditions (opportunities & threats)

SWOT Analysis Structure of LMB

Conclusion & Recommendations (goal & strategy formulation) 12

References

Appendices

Introduction

Any analysis of an organisation or business entity is recommended to begin by using the system

thinking approach towards it. This would help understand the organisation‟s system

interrelationship between its different components or departments within. Its application is

known as systems analysis and the important tool for this analysis is the systems thinking.

“System thinking is a way of helping a person to view systems from a broad perspective that

includes seeing overall structures, patterns and cycles in systems, rather than seeing only specific

events in the system” www.systemsthinker.com, 2010. It is also defined as

“Systems thinking is a way of understanding reality that emphasizes the relationships among

a system's parts, rather than the parts themselves” www.systemsthinker.com, 2010. Both the

definitions highlight the fact that system thinking is the understanding of the system on the

whole including all the parts of it and the relationships they maintain with each other.

Likewise this report is in line with emphasizing students of the hospitality management to

understand and use the system theory and approach for analysing hotels‟ structure, operation,

performance, etc. Important part of systems thinking is the analyzing and evaluating of the

SWOT and PESTEL. This report focuses on both. In the same spirit, the data gathered for the

study have been sourced out by going to the subject hotel. It is to be noted that the management

of the Le Meridien Barbarons Hotel and Spa (LMB), was not cooperative. Statistical data was

not given, thus a quantitative analysis has been difficult if not impossible. The qualitative system

approach of the study has been mainly conceptualised and realised through personal observations

and questions on site.

The PESTEL analysis which is necessary to be conducted before the SWOT so as to understand

and absorbed the internal and external factors of the organisation is outline in the preliminary

part of the report together with a detail introduction of the hotel. The organisation structure in

line with decision making is also featured in the first part of the study. The SWOT evaluation is

explained and discussed in the second part.

Le Meridien Barbarons Hotel and Spa

In 1972 Air France launched Le Méridien as a extension of its business ventures to support its

growing airlines in many destinations around the world. From 1972 to 1994, Le Meridien had 21

Hotels opened in Europe, Africa, and Middle East. In 1997, Meridien was sold by Air France.

Up to date Starwood owns 1000 hotels including 120 luxury & upscale hotels in over 50

countries. Starwood Hotels acquired Le Méridien in 2005 and the following year, Le Méridien

transitioned into Starwood systems and standards.

LMBH closed its doors in 2004 and after a one year renovating construction project reopened as

a 4 stars + hotel now part of the Starwood group. It has in total 124 rooms categorized as Suites

(4), Superiors (38), Deluxe beach front (11), and Standard garden view (71). The hotel consists

of two main restaurants; the Mangrovia (Buffet) and the Cocoteraie (A la carte). There is a

Tapas/Sandwich bar and a main bar (Le Patchoulie) attached with the lobby.

The Le Mangrovia Restaurant is open from 7 to 11 am for Buffet breakfast and from 7 to 10 pm

for Theme night Buffet dinner. The price is 45 euro per person excluding 10% service charge.

The La Cocoterai Restaurant is located at the pool side. It offers a la carte Creole special & Grill

for lunch, and, an a la carte fine dining experience for dinner. All prices includes 10% service

charge.

The rooms‟ rates per night on B&B are 325 Euros for Standard garden view, 360 Euros for

superior ocean view, 425 Euros for Deluxe beach front view and 495 Euros for Suite. The rates

given exclude the 10% service charge. HB can be included at 45euros + 10% per person.

The core mission statement of LMBH is regulated and the Starwood group and most of the

objectives alike. The training manager provided the two main mission points they focused a lot

upon. These are to provide to their guests not only a great stay but also an active discovery that

they themselves control. Their stay must inspire them to be creative by giving them a new

perspective. That LMBH creates for the guests feeling of personal growth, enrichment and a

sense of community and affiliation beyond delivering a beautiful design, an accommodating

room and a comfortable bed.

Decision Making

Quality and timely decision making is essential for the success of any firm. In fact, how and

organisation chooses to design its decision-making rules are one of the most fundamental aspects

of its internal design.A firm‟s ability to make good decisions is particularly important in the face

of increasing global competition, and the greater uncertainty from exposure to more competitors

and a greater number more markets that this brings, Brickley et al (2004).

The decision making strategy of the LMB is as per its Organisation Structure (OS) portrays; it

identifies a balance of power within the executives personnel or the management segment and

the junior authorities within the structure. There is both a flat and tall tendencies within the

structure. This would suggest that the decision takings can be both centralised and decentralised.

It is obviously reasonable to assume that these two are used systematically and contingently as

per situations arises. This is helpful in deciding upon the most effective solutions to solving

major and minor problems respectively, and to yield maximum benefits from the globalised

product markets and from the internal potentials. As a member of the Global Starwood group,

the centralise aspect of LMB‟s OS reflects the corporate‟ management system. It is a mean of

having a contingent control over its various hotels‟ market outlets.

Business Environment of the LMB

Business covers complex activities of industry and commerce involving organizing production,

delivering product to customer with ultimate objective of profit maximization. Business

Environment consists of factors that have a bearing on the business, such as the strengths,

weaknesses, internal power relationships and orientations of the organisation; government

policies and regulations; nature of the economy and economic conditions; socio- cultural factors;

demographic trends; natural factors; and, global trends.

PESTEL Analysis

Political and Legal factors:

In Seychelles there exists a strong socialist political regime and a planned economy that is

gradually being transformed into a more free type of market. This dictates a mixed type of

economy which means the government still holds major control over the tourism industry. The

political power is tested through an every five year contest decided by the citizen. The next

election is due in 2011 which gives LMB one more guarantied year of the macroeconomic

stability it is enjoying. It should be noted that the government of the day offers many

opportunities through concessions and minimum policies and regulations for hotels. This is

enjoyed by LMB as an opportunity. As a small island state, there is a scarcity of labour to sustain

the many hotels, thus as a threat LMB has to import foreign labour increasing cost. The

Seychelles Company Law of 1995 is the framework for the current legislation on corporate

governance locally. Under the Company Law, a company is a separate legal entity in which

Directors represent the company. Seychelles belongs to the Indian Ocean Island state tourism

destinations below the line of equator which offers an ideal climate for the growing world tourist

market demand. In this group there are countries like Mauritius, the Maldives, Reunion,

Madagascar, Rodrigue which are direct competitors. Indirect competitors are Sri Lanka,

Malaysia, Vietnam, Thailand, Singapore, Myanmar, Cambodia, etc. Indirectly it affects LMB by

minimising its potential customers though marginal.

As Seychelles enjoys a stable political environment the hotels operates in a comfortable

environment benefits them both economically and politically. This compliments the enjoyment

of investments on an international playground with brands such as Starwood thus, Le Meridien,

Hilton, the Bayan Tree and the Constance group. This has brought major economic gains for the

country because of its political preferences.

All countries have laws and regulation that governs business so that it has a coneatrol of what is

happening in the business environment. Some laws are beneficial to parties concerns and some

may create discomfort in their business environment.

Economical factor:

Seychelles is considered as a developing country. Due to the government policies and treasure of

national resources, the GDP growth has been increasing rapidly from last few years. The NSB

Statistical Bulletin August 2010 shows an increase in the Bed Occupancy per night from

previous years, from 24.3 to 33.7 in thousands. Visitor arrivals have increased by 6% from 2009

in contrast to the first three months of 2010. This is an opportunity for LMB. Seychelles has

exclusive tourism resources such as beautiful beaches, all year warm climate, rich marine fauna

and flora. It is among the most expensive tourist destination on earth. Exchange rate Seychelles

Rupee (SCR) per US dollar ~12.50 (2010) compare to SCR08.00 in 2000. The tourism sector

and hotels provide major source of income for industrial production from 12.3% in 2000 to

14.6% in 2010, thus the government encourages through attractive laws and regulations, all to

invest in the local industry. Increase in hotels is evident and that means increase competition for

the LMB. The scale of economies and the scope of production have increased progressively, and

the base of technology also improved as well. An international competitive have mutually

increased in this industry affecting the macro environment. Then within the country the

government allowed schemes for the training, development and empowerment of the people in

this sector, increase local specialisations and skills. This leads to the LMB business

improvement.

The hotel contributes towards the economic benefits of the country, not only towards the tax that

the government receives or the employment made, but also what economist called the multiplier

effects. The LMB believes in a policy of buying locally, in doing so helps generates the

multiplier effects within the micro economy. In simple terms it means that the LMB creates other

small businesses to operates and prosper, it creates jobs for families, it excites the economic

activities within the country, etc. As part of an international group LMB is among hotels that the

profit is leaked is out into countries of origin. This is what economists described as leakages in

the system. In addition to that, the lack of specialists (especially managerial human resources) on

the local market, LMB has to import them thus leaking more earnings.

Social factor:

Seychelles has a small population increasing at a slow rate, currently estimated at 85000 of

which a significant number lives in foreign countries. The workforce when removing pensioners

and scholars can be estimated at around 40000, thus importation of labour is essential. Females

are roughly equal to males which mean lesser potential workforce. The above suggest a very

high labour cost. Essentially above 95% of its populations are literate. 3.6% of their GDP is

spent on education. This country has a rich diversity of cultures and social behaviours inherited

from their multiracial background, thus flexible to workforce diversification. As the biggest

employer, the tourism industry potentially employed 16.7% of the country’s manpower, NSB

Statistical Bulletin (2010)

The LMB participates actively in corporate social activities and has a dedicated in service

training program for its employees. The hotel promotes different incentives to educate and

motivate all employees. Besides donation to several orphanage villages, the hotel contributes and

hosts several activities that benefit the society in general. LMB has a large intake of STA

students every year for practical trainings; this, in return benefit not only Le Meridien hotel but

the Seychelles tourism industry in general.

In service training is a must at LMB as Starwood the parent company stresses on it and has a

dedicated program. Cross exposure common practice in the hotel and in return the hotel can

identify potential staff for promotion.

Various activities are in place at the hotel to motivate their staff, such as monthly and yearly staff

award, be a guest program, transportation and free meals. A major incentive the hotel has

adopted is the introduction of service charge and yearly bonuses given to all staff.

Even with all these incentives, LMB are faces strong competition to keeping its valuable staffs.

Recently with the completion of Ephelia Resorts, manpower decreases considerably, this in

return has put a negative impact on the hotel. The question is what has generated such movement

of the staff? It was difficult to find as we were not able to get access to a proper statistical survey

to prove our hypothesis. The management also did not provide it.

Technological factor:

Seychelles has a poorly developed transportation system. Tourist usually travels by expensive

taxis. There is an international airport, with water ways and inter air ways linking most of the

115 islands. The international communication is slow but reliable; the government is working on

linking through the fibre optic cable system. The country is relatively not too far behind the

world technological advancement, thus LMB enjoys the benefits of such.

Environmental factor:

Due to its geographic location, Seychelles is free from all types of natural disasters. There are

evidently no major natural disasters. It enjoys a rich ecological system as a main resource for

tourism. The LMB is no exception to that; it enjoys a beautiful beach in a peaceful and quiet

area.

Seychelles has strict environmental laws that protect its territory, fauna and flora. The hotel has

to comply with all these rules and regulations that are in place. The country has a good reputation

toward the protection of its environment with almost 50% declared has protected parks.

This has set limits to which LMB has to comply with regards to its expansion project to the

property making it more attractive with added value.

LMB has a superb beach front view but with a reef barrier close to its beach, this has made

swimming difficult for guests. Even in cases that the hotel would like to create any artificial

swimming area the law prohibits them from doing so.

It is the responsibility of LMB to keep its coastal vegetation and all its vicinity clean at an

acceptable standard. LMB participates actively in maintaining the marshes and mangroves

protection program surrounding the hotel. The hotel contributes in maintaining of the wet lands

that surround its property.

The hotel has to comply with all the environmental issues that include solid wastes and waste

water that it generates. Even if it is a costly program, a considerable amount of their budget goes

towards waste removal and waste water treatment. The hotel has recently invested a substantial

amount of capital towards a new waste water treatment plant that is more environmentally

friendly. Wastes should be disposed as per the environmental laws that are in force. Any breach

of these regulations will result in penalties or strict action taken against them by the government.

Key finding and analysis:

Seychelles‟ tourism investment climate is ranked attracting in the international comparisons.

Micro- and Macroeconomic instability is still viewed as the biggest obstacle, followed by

corruption in the local economies. Other major obstacles include labour scarcity, low

specialisation rate, tax administration favouring larger foreign corporate bodies and ignoring the

local entities which can help in the multiplier effect benefits, high costs of financing and unstable

labour regulations, high costs of living and uncertainty of the „indigenous productivity‟. The

PESTEL analysis is a macro scanning from LMB‟s perspective. The factors have indirect

impacts on hotels in the country. LMB can yield both threats and opportunities from them.

SWOT Analysis of Le Meridien Barbarons Hotel

This analysis identifies and analysesStrengths andWeaknesses within LMB, as well as

Opportunities and Threats revealed by information gathered on the external environment. It is

use to develop plan affecting various internal and external factors, and maximises the potential of

the strengths and opportunities while minimising the impact of the weaknesses and threats. It can

be used when developing strategic plan or planning a solutions to problems. Analysis of the

external environment is vital for it is uncontrollable by managers and affects the hotel. They can

be the culture, economy, health, sources of funding, demographics, etc, of the Seychelles. The

internal analysis examines capabilities of LMB hotel by analysing its strengths and weaknesses

especially within the management areas. The external analysis looks at the main points in the

environment, and identifies those that pose opportunities and those that pose threats or obstacles

to performance.

SWOT Analysis Structure of LMB

Strengths

-Latest technological resources (internet, satellite

TV, POS, intranet, Key cards, etc)

-Has a well established Brand: 'Starwood

-Marketing is centralized at HQ

-The only large hotel with 4star rating - lower rates (average annual room occupancy: ~70%)

-Has a well established reputation

-Equipped with a standard Conference Centre

-Significant number of continuous repeated guests

-Excellent CSR programs (donations, strong interaction with community, sponsorships, etc)

-In-house incentives („2 b a Guest‟, cross exposures, service charge, monthly/annual employee

awards, monthly resto-lunch, team building activities,

-Benefits from Starwood consistent trainings & upgrading

-Plenty of space on property to exploit (expansion)

Weaknesses

-Not utilising potential human resource abilities Internal

-Poor managerial quality (too dependent on HQ

-Poor staff's performance (lack of effective control)

-Poor infrastructure/product quality & quantity

-Emerging competitors with better products as per quality & quantity

-Lacks complete managerial control/low decision making (? centralised from HQ?)

-Unreliability of staffs/unwilling and uncommitted

-Poor equipment's quality & quantity

-Needed importation of foreign labour (high labour cost)

-Poor product supplies and scarcity of quality products (freshness)

Opportunities

-Seychelles' Tourism dependency - main source of income

-STB's constant international marketing strategies

-Government's calls for partnership and supports

-STA's constant development training of human resources

-Closure of Equator and Mahe Beach Hotels

-Political stability

-Fibre optic settings soon to be materialised

-Increased flights in developed countries-high income earners

Threats

-Low frequency flights to and from western markets

-Opening of Ephelia targeting same market segment

-Ephelia's new Conference Centre

-Seychelles unstable economy - inflation

-Frequent world crisis - natural disasters, wars, financial crisis, etc

-Govt. tax invasion increases payroll (from 2.5% to 13.5%)

-Constant influx of larger hotel investments in the country

-Seychelles high cost of living - expensive for its market segment

Conclusion

As been detailed in the report, the many factors in the LMB business environment are classified

into internal from its microeconomic environment and the external from its macroeconomic

environment. The SWOT evaluation specifically identified them into strengths and opportunities

as the positive factors that can be exploited and/or developed to yielding maximum benefits and

productivity. Weaknesses and threats are negative factors that can be explored and/or disposed of

depending on the situation. Turning them into beneficial elements is usually done by using the

positive to extract their benefits. The matrix is how LMB use these strengths within the hotel to

take advantage of these opportunities in the external sphere? Secondly, how do LMB overcome

the weaknesses inside the hotel that prevent them taking advantage of these opportunities?

Thirdly, how do LMB use these internal strengths to reduce the likelihood and impact of these

external threats? Lastly, how do management plan to overcome the weaknesses that will make

these threats a reality? The answer to the matrix is theoretically simple as in translating them into

tasks for the Project Plan. This can be effectively done by the managing by objective (MBO)

approach.

It should be noted that the management of this establishment were very uncooperative and that

has made this study practically impossible. This supports the reason why the report is focus on a

more qualitative than quantitative approach.

But the management is a strongly decentralise one because therefore most of the executive

decisions are made and/or approved at the Headquarter in the USA. The two sister hotels in the

Seychelles are periodically provided with new strategies and plans for implementing in the

locations. Questions still prevails.

This hotel is located in an attracting and relaxing area with potential for growth that is not being

exploited. It is strongly recommended to any management team that take the challenge to revise

the mission statement with open objectives and try to utilise the internal factors of its business

environment to minimise the negative barriers. After all, management can only control what are

inside the organisation. Opportunities from the outside can be explored to eliminate the

weaknesses from the inside. Any managerial decision should be conducted through an analysis

of both the internal and external spheres so as to yield maximum benefits and eliminate

maximum disadvantages. The LMB hotel is no exception and it is actually not using its potential

capabilities