Harvard Case - Hotel Latvia: Sell Out, Hang Out or Partner?
"Hotel Latvia: Sell Out, Hang Out or Partner?" Harvard business case study is written by Stephen Grainger. It deals with the challenges in the field of General Management. The case study is 10 page(s) long and it was first published on : Jan 28, 2015
At Fern Fort University, we recommend that Hotel Latvia pursue a strategic partnership with a reputable international hotel chain. This partnership should focus on leveraging the chain's brand recognition, operational expertise, and access to global distribution channels while preserving Hotel Latvia's unique identity and local charm.
2. Background
The case study revolves around Hotel Latvia, a family-owned and operated hotel in Riga, Latvia. The hotel faces a crossroads as the owners, the Berzins family, contemplate their future. The hotel has a strong reputation for its personalized service and traditional Latvian hospitality, but it struggles to compete with larger, international chains in terms of marketing reach, operational efficiency, and guest experience. The family is considering three options: selling the hotel, maintaining its current independent status, or partnering with an international chain.
The main protagonists are the Berzins family, who are deeply invested in the hotel's legacy and its contribution to the local community. They are torn between preserving their family business and ensuring its long-term sustainability.
3. Analysis of the Case Study
Strategic Analysis:
- SWOT Analysis:
- Strengths: Strong local reputation, personalized service, unique Latvian character, loyal customer base.
- Weaknesses: Limited marketing reach, lack of international brand recognition, potential for operational inefficiencies, limited resources for expansion.
- Opportunities: Growing tourism in Latvia, increasing demand for authentic experiences, potential for partnerships with international chains.
- Threats: Competition from larger international chains, economic fluctuations, potential for political instability.
- Porter's Five Forces:
- Threat of New Entrants: Moderate due to increasing tourism and potential for new independent hotels.
- Bargaining Power of Buyers: Moderate as tourists have various choices, but loyal customers appreciate Hotel Latvia's unique offerings.
- Bargaining Power of Suppliers: Low as the hotel relies on local suppliers for most services.
- Threat of Substitute Products: Moderate as tourists can choose alternative accommodations like Airbnb or guesthouses.
- Rivalry Among Existing Competitors: High due to the presence of larger international chains and other independent hotels.
Financial Analysis:
- Hotel Latvia's financial performance is not explicitly detailed in the case study, but it's implied that they are struggling to compete with larger chains in terms of profitability.
- A partnership with an international chain could potentially improve financial performance through increased revenue, operational efficiencies, and access to global distribution channels.
Marketing Analysis:
- Hotel Latvia lacks the resources and expertise to effectively compete with international chains in terms of marketing reach and brand awareness.
- A partnership could provide access to the chain's marketing infrastructure, expertise, and global distribution networks, significantly expanding the hotel's reach.
Operational Analysis:
- The hotel's operations are likely less efficient compared to larger chains.
- A partnership could bring in best practices and operational expertise, leading to improved efficiency and guest experience.
4. Recommendations
Strategic Partnership with an International Hotel Chain:
- Identify Potential Partners: Research reputable international hotel chains that align with Hotel Latvia's values and target market. Consider chains with a strong presence in Europe and a commitment to preserving local character.
- Negotiate Partnership Agreement: Secure a partnership agreement that allows Hotel Latvia to maintain its unique identity and local charm while benefiting from the chain's brand recognition, operational expertise, and marketing resources.
- Implement Partnership: Integrate the chain's operational best practices and marketing strategies while preserving Hotel Latvia's distinctive character.
- Monitor and Evaluate: Regularly assess the partnership's performance and make necessary adjustments to ensure its long-term success.
5. Basis of Recommendations
This recommendation is based on the following considerations:
- Core Competencies and Consistency with Mission: The partnership aligns with Hotel Latvia's core competencies of personalized service and local charm while leveraging the strengths of an international chain to address its weaknesses.
- External Customers and Internal Clients: The partnership will benefit both external customers through improved guest experience and access to global distribution channels, and internal clients through enhanced operational efficiency and career development opportunities.
- Competitors: The partnership allows Hotel Latvia to compete more effectively with larger chains while maintaining its unique selling proposition.
- Attractiveness: The potential benefits of the partnership outweigh the risks, including increased revenue, improved operational efficiency, enhanced brand recognition, and access to global markets.
6. Conclusion
A strategic partnership with a reputable international hotel chain presents the most viable option for Hotel Latvia's long-term sustainability. This approach allows the hotel to leverage the strengths of a larger organization while preserving its unique identity and local charm.
7. Discussion
Other Alternatives:
- Sell Out: This option would provide immediate financial gain but would result in the loss of family ownership and potentially compromise the hotel's unique character.
- Maintain Independence: This option is risky as Hotel Latvia would continue to struggle against larger chains without access to their resources and expertise.
Risks and Key Assumptions:
- Risk of Cultural Clash: The partnership could lead to cultural clashes between the Berzins family and the international chain.
- Risk of Loss of Control: The Berzins family may lose some control over the hotel's operations and decision-making.
- Assumption of Successful Integration: The partnership requires successful integration of the chain's systems and processes while preserving Hotel Latvia's unique character.
8. Next Steps
- Conduct Due Diligence: Thoroughly research potential partners and assess their suitability.
- Negotiate Partnership Agreement: Develop a comprehensive partnership agreement that addresses key issues such as brand identity, operational control, and financial terms.
- Implement Partnership: Integrate the chain's systems and processes while preserving Hotel Latvia's unique character.
- Monitor and Evaluate: Regularly assess the partnership's performance and make necessary adjustments to ensure its long-term success.
This strategic partnership will enable Hotel Latvia to thrive in the competitive hospitality market while preserving its unique identity and contributing to the local community.
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Case Description
Three friends have followed their entrepreneurial dream to build a five-star hotel in Liepaja, a seaside city in Latvia. After a few early profitable years, the hotel is struggling, due to the massive downturn in the Latvian economy as a result of the European Union financial crisis and slow recovery. The hotel has declined from generating an annual profit to now making a loss or barely breaking even. On several occasions, the co-owners have considered selling up while they can still break even. With the European Union showing signs of recovery, business confidence is returning and the future is starting to look up. The co-owners must decide whether to put all their struggles behind them, retain the ownership of the hotel and look forward to the potential days of profit that lie ahead. Alternatively, they can move in an almost opposite direction, by selling up and moving on. What strategic direction will produce a successful outcome?
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