Lebanon's hospitality sector taps into virgin boutique hotel market
The other day in my Strategic Management class we were talking about Emaar and Armani's contract of working together on introducing luxury hotels to Dubai's market, with the construction of Emaar and the designs of Armani. The introduction of a different kind of luxury hotels, called Boutique Hotels, is also under development currently in the Lebanese market. According to Lysandra Ohrstorm, a writer for The Daily Star, Lebanon's hospitality sector is spreading out to the "boutique hotel market". In her article, "Lebanon's Hospitality Sector Taps into Virgin Boutique Hotel Market", she talks about how the demand for hotel rooms in Lebanon is increasing, and how some projects are being under construction currently in different places in Lebanon.
The question that arises here is: Where do we see the strategies and the frameworks we saw in such an article? Where do Porter, Hamel, Baron, and Barney even show up? Well, I think that this article is a perfect example of strategy, or maybe I am getting better able at seeing more into articles to detect underlying strategies. First of all, I think that these boutique hotels pose a threat of entry to 5-star luxury hotels in the market, which is one of Porter's five competitive forces. The other hotels, from Porter's view, should probably come up with ideas with regards to creating barriers to entry for those boutique hotels. However, the boutique hotels are already differentiating themselves in the way they treat their customers (a point I will get back to later on) and in the view of how luxurious they are. There is too much room for competition, and I can even expect some retaliation because these 5-star chains have been there in the Lebanese market for quite a while now, and they do have the necessary cash and resources to "fight back". However, I wonder: is there a threat of substitution? According to Porter, "identifying substitute products is a matter of searching for other products that can perform the same function as the product of the industry". In that case, I would think that the Boutique hotels truly are a substitute for the 5-chain hotels, and that is why I disagree with Mr. Christian FernainŽ, the cofounder of the management consulting firm Ulysses, who has been quoted to say that the new boutiques will not challenge the market-share of bigger luxury hotels, because they are targeting a different market segment. He stated for example that these boutiques are targeting customers between the ages of 25 and 35, and that, unlike the 5-chain hotels, they are not targeting families. That much I agree with. However, part of the big market segment that the 5-chain hotels are targeting includes those customers of the ages between 25 and 35. Right? I think so. Therefore, Porter's threat of substitution also appears here.
Hamel, as usual, with his detailed framework as to where strategies appear in any market and in any company, appears again all over the article. We see Core Strategy, as the boutiques chose a way in which they want to compete. Product/Market scope appears when we see that the boutiques are choosing specific geographic locations to compete. In this case, they are competing in the Lebanese market, which is a place that Ohrstorm indicates to have "plenty of room for even more boutique hotels" and a place which she refers to as "the virgin Lebanese market." Also, the basis for differentiation shows how these boutique hotels are trying to compete in a different way from other 5-chain hotels in the market, especially through personalized customer treatment, and through the luxurious facilities that we do not see in other 5-star hotels. Their strategic resources come into our view in this article as we see that the core competencies of the firm (what the firm knows about the demand rise in the Lebanese market for more rooms) is helping them with developing a product that is valuable and unique to the customers, and what can be transferable into new opportunities. Moreover, since these boutique hotels are on the lookout for changes in demand in that market, we can sense that information and insight. These hotels are trying to collect information about the customers in the market.
Moving on to Baron, I think we see a non-market issue in several places. First of all, the drop in the tourism level in Lebanon is an issue that the boutique hotels need to consider. Politics is playing a major role in Lebanon these days, and is showing a negative effect on many companies' books. Therefore, the boutique hotels need to see who the parties of interest are in this case, and how can they get them to come to Lebanon, despite the news and the fact that there are too many political issues there. On the other hand, we see an increase in the demand for these boutique hotel rooms in Lebanon! How so? The article does not talk about that part, and was getting a bit self-contradictory in that case. However, even if demand was increasing, then there must have been some social arrangement going on. The wealth of people in Lebanon is increasing, and I don't think that this would be possible with the current situation over there. This leaves me wondering: How is demand increasing? How did these boutique hotels KNOW that demand will be increasing soon?
As to Barney, we see the question of value arising as the boutique hotels see an increase in the demand, which is an opportunity in the environment, and they take advantage of it, assuming that demand is truly expected to increase of course. What remains unknown is whether these boutique hotels will be able to respond to environmental threats in Lebanon. Thus, the question of value remains standing, especially with the current political situation in Lebanon. With regards to the question of rareness, there aren't many other competing boutique hotels in Lebanon that have the same resources or capabilities, especially that budget constraints now are severe for many companies and investors there, since not many investors are willing to invest in a place that bears that much risk.
The question that arises here is: Where do we see the strategies and the frameworks we saw in such an article? Where do Porter, Hamel, Baron, and Barney even show up? Well, I think that this article is a perfect example of strategy, or maybe I am getting better able at seeing more into articles to detect underlying strategies. First of all, I think that these boutique hotels pose a threat of entry to 5-star luxury hotels in the market, which is one of Porter's five competitive forces. The other hotels, from Porter's view, should probably come up with ideas with regards to creating barriers to entry for those boutique hotels. However, the boutique hotels are already differentiating themselves in the way they treat their customers (a point I will get back to later on) and in the view of how luxurious they are. There is too much room for competition, and I can even expect some retaliation because these 5-star chains have been there in the Lebanese market for quite a while now, and they do have the necessary cash and resources to "fight back". However, I wonder: is there a threat of substitution? According to Porter, "identifying substitute products is a matter of searching for other products that can perform the same function as the product of the industry". In that case, I would think that the Boutique hotels truly are a substitute for the 5-chain hotels, and that is why I disagree with Mr. Christian FernainŽ, the cofounder of the management consulting firm Ulysses, who has been quoted to say that the new boutiques will not challenge the market-share of bigger luxury hotels, because they are targeting a different market segment. He stated for example that these boutiques are targeting customers between the ages of 25 and 35, and that, unlike the 5-chain hotels, they are not targeting families. That much I agree with. However, part of the big market segment that the 5-chain hotels are targeting includes those customers of the ages between 25 and 35. Right? I think so. Therefore, Porter's threat of substitution also appears here.
Hamel, as usual, with his detailed framework as to where strategies appear in any market and in any company, appears again all over the article. We see Core Strategy, as the boutiques chose a way in which they want to compete. Product/Market scope appears when we see that the boutiques are choosing specific geographic locations to compete. In this case, they are competing in the Lebanese market, which is a place that Ohrstorm indicates to have "plenty of room for even more boutique hotels" and a place which she refers to as "the virgin Lebanese market." Also, the basis for differentiation shows how these boutique hotels are trying to compete in a different way from other 5-chain hotels in the market, especially through personalized customer treatment, and through the luxurious facilities that we do not see in other 5-star hotels. Their strategic resources come into our view in this article as we see that the core competencies of the firm (what the firm knows about the demand rise in the Lebanese market for more rooms) is helping them with developing a product that is valuable and unique to the customers, and what can be transferable into new opportunities. Moreover, since these boutique hotels are on the lookout for changes in demand in that market, we can sense that information and insight. These hotels are trying to collect information about the customers in the market.
Moving on to Baron, I think we see a non-market issue in several places. First of all, the drop in the tourism level in Lebanon is an issue that the boutique hotels need to consider. Politics is playing a major role in Lebanon these days, and is showing a negative effect on many companies' books. Therefore, the boutique hotels need to see who the parties of interest are in this case, and how can they get them to come to Lebanon, despite the news and the fact that there are too many political issues there. On the other hand, we see an increase in the demand for these boutique hotel rooms in Lebanon! How so? The article does not talk about that part, and was getting a bit self-contradictory in that case. However, even if demand was increasing, then there must have been some social arrangement going on. The wealth of people in Lebanon is increasing, and I don't think that this would be possible with the current situation over there. This leaves me wondering: How is demand increasing? How did these boutique hotels KNOW that demand will be increasing soon?
As to Barney, we see the question of value arising as the boutique hotels see an increase in the demand, which is an opportunity in the environment, and they take advantage of it, assuming that demand is truly expected to increase of course. What remains unknown is whether these boutique hotels will be able to respond to environmental threats in Lebanon. Thus, the question of value remains standing, especially with the current political situation in Lebanon. With regards to the question of rareness, there aren't many other competing boutique hotels in Lebanon that have the same resources or capabilities, especially that budget constraints now are severe for many companies and investors there, since not many investors are willing to invest in a place that bears that much risk.
posted by Lina Osman @ 3:50 AM
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