Starwood the Threat of New Essay

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Hotels such as Starwood will often deal with major institutional suppliers in order to ensure that they have access to supplies, but also this allows them to enjoy economies of scale in purchasing. There are parts of the world where construction costs have soared at times due to a shortage of key labor in the construction industry, or of building materials. As a result, the hotel industry might have lower bargaining power at times over the cost of new hotels. With the focus on growth being in emerging markets, hotels usually have good bargaining power over labor because of the good jobs that the hotels and resorts provide to the local populace.

The intensity of rivalry within the industry is high. There are a handful of major players, like Starwood, Accor and Hilton that have multiple brands across different price points in the industry.

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These companies tend to compete globally. The product is perishable in that a night where the room is empty is revenue that can never be recovered. This intensifies competition, as does the high bargaining power of buyers. The firms in this industry have loyalty programs, tie-ins with the programs of airlines, and they compete both on price and quality, including the newness of the facilities. Competition for good locations is also intense, as the right location can make a significant different in the ROI of a hotel. The only mitigating factor to the intensity of the competition among major hotel firms is that the industry is highly diffuse, with tens of thousands of independent and small company operators also competing for the same customers.

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