Starwood Hotel Chain Today, Businesses Grow Research Proposal

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Starwood Hotel Chain

Today, businesses grow by means of expansion. When companies grow large enough, they expand from the local environment to the national sphere, and from their they expand internationally. International expansion has a certain set of considerations that must be taken into account to promote the success of the venture. Two of the most important are governmental restrictions and cultural differentiation. The more a country differs from the company's original location, the more time needs to be invested to investigate these differences and how they can be applied to promote the company's success in the target country. Another important consideration is the health of the company's industry in the target country. These factors tend to influence the success of the company's expansion into the foreign country. Hotel chains also function in this way.

Hotel chains generally are large ventures that have at least expanded nationally. Generally, they will then seek to expand internationally as well. The tourism industry is generally healthy across the world, which makes expansion a favorable venture for many hotel chains. This is good news for consumers, as the presence of several hotel chains in a country means competitive pricing for a higher excellence of service.

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The Starwood hotel chain is seeking to expand into Russia. In order to do this, it must consider a number of factors, including those mentioned above. Russia's tourism industry is for example generally not as healthy as that of other popular destinations across the world. According to Xuequan (2010), for example, only 3% of all tourists in Russia are non-domestic, and most of these come from China. Factors that have influenced the tourism industry in the country include a lack of infrastructure, visa restrictions, and unreasonably high prices.

TOPIC: Research Proposal on Starwood Hotel Chain Today, Businesses Grow by Assignment

However, Russia's tourism ministry is reported to work on these problems, and the country is indeed becoming more popular as a destination for tourists across the world. Furthermore the tourism industry within the country itself is not unhealthy, with many Russians traveling across the country and seeking accommodation and other hospitality services. Before therefore entering this country, the Starwood hotel chain will have to fully investigate the limiting factors that could be to the detriment of its success and compare it to the more favorable factors the country has to offer.

Another important consideration is the strength of the company seeking to expand. Although Russia is a potentially difficult market, Starwood itself is has significant industry strength. It is for example the leading bidder for taking over the company Extended Stay, offering to take it out of bankruptcy (Chasan, 2010). According to De Lollis (2008), Starwood operated 900 hotels in 100 countries under brands such as St. Regis, Sheraton, Westin and The Luxury Collection in the year 2008, with plans to expand further into developing regions. At the time, 600 hotels were under construction, of which half would open in markets such as China, India and Qatar. Hence, the company does not appear to lack the prowess or energy for expansion. The only limiting factor could be the economic and industry conditions within the target country, Russia.

Aims and Objectives

Aim

The likelihood of success for the Starwood hotel chain expanding into Russia will be investigated. The aim is therefore to consider the factors that favor and disfavor such expansion into the Russian market. In order to accomplish this, three objectives have been constructed to provide a framework for this investigation. The objectives are therefore the practical pathway towards the aim of the investigation.

Objectives

Objective 1-To investigate the literature and theory behind the hotel industry, international expansion within the industry, and the condition of the Russian market. This will provide a sound basis for the comparative and practical objectives of the study.

Objective 2-To analyze the advantages and disadvantages of expanding into the Russian hotel market. The market conditions obtained in Objective 1 will be used as a basis for further investigation. In order to reach this objective, the Russian hotel market will be compared with others, and the strength of the Starwood chain will be used as a factor to determine the likelihood of its success in the Russian market.

Objective3- To analyze the condition of existing hotel chains in Russia. This information can then be used for a dual purpose: to investigate the possible competition that will be faced by Starwood; and to understand the conditions that Starwood will face when entering the market. The presence and health of existing entrants into the market are good indicators of the possibilities and potential success of further entrants.

Literature Review

A review of the literature gives important indications not only for the success of market entry into Russia and its surrounding countries, but also of strategies and traits that might best be used to accomplish this. Johnson and Vanetti (2005: 1081) for example suggest that the success of expanding companies into foreign markets tend to depend upon factors such as economies of scale, a profound knowledge of international guest requirements, well-trained personnel, excellence in management and reservation systems, as well as a strong brand name. Kayaman and Arasli (2007: 93) also indicate the importance of a strong brand name in order to promote a sense of product among customers. These are all factors that are part of Starwood's strategy in its foreign markets. Certainly the chain's experience in expansion also provides a good basis for further expansion.

Furthermore, the company's experience in its relationship with customers also provides a good indication of its potential success in the Russian market. Drohan and Foley (2009: 3) for example indicate that a hotel's relationship with its customers tends to be driven by the ability of the establishment to provide for the needs of its guests. When expanding to Russia and its surrounding environment, Starwood will therefore have to make a thorough assessment of the needs of customers in that country, as well as foreign customers.

In terms of the target environment, Russia's current tourism industry will certainly benefit from improvement action. However, this does not mean that its potential for accepting expanding chains is not significant. According to Tourism-Review.com (2010), for example, East European countries are developing rapidly and provide an attractive market for expanding international hotel chains. Moscow, Prague, Budapest and St. Petersburg are among the East European cities that have proved extremely attractive in this regard.

Mintel (2004: 30) also indicates that Russia has progressively restructured and upgraded its accommodation sector since the end of Communism in the country. Western chains such as Rezidor and Delta Capital Management will provide a good starting point for investigation into expansion strategies for Starwood. In terms of surrounding countries, Poland, Hungary and the Czech Republic have also provided a strong basis for growth in the hotel sector Mintel (2004: 28).

According to Lukyanchikov (2010), Russia's strict visa regime, underdeveloped tourism infrastructure, unfavorable investment climate, insufficient advertising as sponsored by the government, and poor quality of services remain restricting factors for hotel expansion. Nevertheless, the author also notes that the number of foreign visitors to the country has increased on a yearly basis. On the strength of this, international expansion might be feasible if the other factors can be sufficiently mitigated. A news article by Rozhov (2008) also indicates that Russia has a certain lacking prowess for international tourism, as hotels are extremely expensive. However, an expanding hotel chain can contribute towards encouraging foreign visitors, as it will increase competition and drive average room prices lower.

Bartl (1997) also promotes the potential of the Russian market for foreign tourism. According to the author (Bartl 1997: 343), the country is the largest in the world and also the most important market in the region. Because of its many natural resources and its attraction for the business tourist market, the demand is high for accommodation. There is however a low supply because of environmental and economic factors, such as the bureaucratic difficulty in securing a site for developing. Securing finance for such development can also be a lengthy and risky factor. These present significant barriers to the market.

Ovcharov (2009: 58) notes that the development of the Russian tourist industry has occurred in three stages, with the first (1992-2001) being limited as a result of sociopolitical and macroeconomic factors. The second stage (2002-2005) saw a boom in the economy and demand in the tourism market. The third stage (2005-2007) however saw a saturation of consumer demand in the tourism industry, resulting in losses in the market. The literature examined above appears to indicate a revival of the tourism market in the country. Limiting factors such as the practical difficulties in securing loans and land should however be taken into account before an attempt is made to enter this market.

Other possibilities for Starwood entail entry into the markets surrounding Russia and using these as a basis for further market entry into Russia. Hall (1999:227) for example mentions that there has been a "re-imaging" process of the Central and Eastern European (CEE) countries since their accession from the… [END OF PREVIEW] . . . READ MORE

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