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This paper is aimed at analyzing Hard Rock Hotel and Casino in Las Vegas. More specifically, it discusses some of the external forces that the company has to challenge in its daily running. A brief background information is provided, and then the external factors affecting it. It also discusses Porter’s five forces in relation to this company. It then looks at the resources that are within its disposal and how they can be used to earn it a competitive advantage over its many rivals. A comprehensive competitive analysis is also done before the analysis of its strengths, weaknesses, opportunities and potential threats to its activities. It then proposes three recommendations before reaching a conclusion.
In many instances, the performance of a business may be hampered by forces that are well-out of their control. This simply means that the performances of a business may not wholly depend on the business management, its employees or even activities taking place within their premises. There are many cases, where external forces play a hand in the overall performance of a business. Such forces may be as a result of natural phenomena, political issues, economic aspects and the government (Infocheese). This paper discusses the external factors that affect business in the context of Hard Rock Hotel and Casino. How does the external environment affect the performance of Hard Rock Hotel?
The hotel is one of the most prestigious hotels in Vegas. It prides itself with not only offering the top notch hotel services, but also great entertainment to its customers. Remaining true to its name, the hotel throws parties and music with the rock theme. It is the ideal place for persons who love to party till the last drop. However, just like any other businesses, the property is a subject to external forces. This paper will analyze some of these forces.
Hard Rock Hotel and Casino or simply the Hard Rock, situated in Las Vegas is a property of Hard Rock Hotel Holdings, LLC. The latter is owned through a partnership of DLJ Merchant Banking Partners and Morgans Hotel Group Co. The company is also an affiliated entity. The hotel was previously owned by Hard Rock Hotel Inc., until 2007 when it was acquired by the current owners. Hard Rock Hotel and Casino is a premier destination for entertainment enthusiasts who love rock music. The hotel started its operations in 1995, and was modeled to resemble the hugely successful restaurant chain bearing the same name (LV Hotel). A closer observation of the hotel outlines how the hotel has stuck to its rock themes; having so many unique rock memorabilia. Peter Morton is credited with founding the original Hard Rock Café, way back in 1971 (Bloomberg). From then on, this brand name has achieved the worldwide recognition. The Hard Rock was named in 2008 among the top 50 brands by Advertising Age. The hotel generally targets customers between 25 and 45 (FAQ). Recently, the hotel has been receiving many accolades for having the best parties in the region (Oyster).
External Environment Affecting the Hard Rock
The world is constantly undergoing a technology revolution. Some new tools that are very much in the trend today may be rendered obsolete next month. These technological advancements cannot be ignored (KB Forum). Therefore, it is upon businesses to make sure that they update regularly to keep their customers interested. This simply means that the hotel has to upgrade its internet communication devices. For instance, most people will inquire, specify book and pay for their services online, well before they even set foot at the premises. This simply means that the hotel should enable them to do so. The hotel has to replace their phone with fax. It has to replace conventional PCs with PDAs and mobile phones. All these underline the technological challenges that the company has to face, if it’s to retain its high position (Freed, 2010).
The United States have been going through the financial turmoil in the recent years. The recession hit not only the businesses, but the people as well. During such hard economic times, people take on cost cutting measures. Most of them will cut on their leisure spending. This simply means that the hotel realizes low customer numbers as a result of this cost cutting. Therefore, the company will achieve low revenues, as compared when the economy is showing the robust growth. However, if the economy improves in the future, the company will gain from more spending by the relatively satisfied customers (HN Network).
Luckily for the United States and Hard Rock Hotel, the political climate is very much stable. Therefore, political effects are always small. However, some political decisions can adversely affect the functioning of the franchise. For instance, the casino is a very integral component for the company, but the gaming laws are constantly being changed. In most cases, these laws are passed to for the sake of the gamblers. These laws may cause the altering structure of the gaming process which may call for additional expenses. The increase in cost will reduce the profits.
In some religions, gambling is outlawed, especially among the Muslims (Sayed & Royer, 2003). This simply means that the company’s customers have been limited to religions that don’t frown upon gambling. This has reduced the number of customers, which has led to relatively lower revenues. If all cultures and religions had not prohibited gambling, it is possible that the Hard Rock would be having many more customers. Additionally, there are many sections of the society that love other genres of music apart from rock. Since the hotel and casino primarily play rock music, they may be losing some customers who love other genres, like hip hop, R n B and reggae who may prefer other places (Bachelor10). These two factors have limited the number of customers of Hard Rock. Therefore, the company has not been getting the maximum revenues. However, this situation is bound to continue, since there is no indication that these factors will change any time soon.
As it has been said, technological advancement is inevitable. Therefore, the company has to be ready to take this challenge and upgrade its services to give the customers the best experience. This can be done by having technology savvy employees that will inform the company about new advancements and will give some advice. This is the only way that they can get more customers. Another factor that will shape the company’s activities is globalization. With more and more integration, the company will have to deal with people from almost all cultures with each one of them having unique demands. Therefore, the hotel management has to brace itself for this diversity by outsourcing employees from many backgrounds to cater for the customers. Thirdly, with the social media taking on popularity across the world, experiences are shared all over. This simply means that when a customer is dissatisfied, he/she may vent their frustrations on the sites. This may turn away the potential customers. Thus, the company should strive to offer the best services to earn more customers (Hotel Marketing).
Other possible trends that may affect the hotel are the clamor for environmental cleanliness (Bearluinn). This simply means that the hotel may be forced to go green. Additionally, there may be immigration controls, rising costs of doing business and the currency fluctuations (Prospects).
The Hard Rock and Porter’s Five Forces
The Hard Rock is facing stiff competition from other hotels, such as MGM, Mandarin Oriental, Vdara, and Venetia. This simply means that it has to offer the best services in the region, if it is to have the largest cake. Additionally, there are many other hotels and casinos, with probably new ones also entering the market. This implies that the rivalry will even intensify in the future. Thirdly, there are many hotels that don’t offer the gaming services. Also, there are many casinos and gaming places that don’t offer hotel services. This simply means that the number of substitutes for all of its services is many. All these factors outline the kind of threats that the company has to deal with; it cannot afford to relax, if it’s gain a competitive advantage over its rivals (QuickMBA).
The hotel business is largely affected by the buying power of patrons. If there are economic hardships, they will be wary of spending in luxurious services. Some will cut their travels altogether. This will reduce the revenues of the hotels (Tutor2U). The company also has to depend on suppliers for their services; food, electronics, gaming equipment, swimming pool accessories, music equipment and many more. When a supplier fails to meet his obligation, the company suffers. To avoid this, the company has to have strong relationships with suppliers and distributors, a relationship that should be honored at all times. Such agreements should be adhered to by all parties. This will mean that none of its activities will be slowed down. This will ensure that it offers all its services as prescribed leading to customer satisfaction. Such opportunities will carry the company forward (QuickMBA).
The company’s main revenue generators are the casino, sale of beverage and food, and lodging. The company earned net revenues of around $162 m for the year ended in December 2009. However, the company’s losses were $211.9 m. At the time, the holding company had accrued debt of around $1.2 b. Although the latest results are yet to be published, these poor results are indicative of the 2008 downturn. It can be argued that other similar companies also made losses during this period. However, on the basis of these results only, Hard Rock holds no competitive advantage over its rivals (FAQ).
The company shares its name with unaffiliated, albeit successful, chain of restaurants. This makes it popular, and thus, it has the capacity to perform better in the future. The company’s name has become a brand, built for many years and recognizable worldwide, that will continue to attract many customers. The brand name simply gives it a competitive advantage over its competitors, who are less recognizable (Hard Rock)
The Hard Rock is located at a place having a high concentration of night clubs and eateries. It is in close proximity to Convention and Thomas & Mack Centers, University of Nevada and other hotels that don’t offer gambling. This simply means that its physical location provides it with many clients who may pass by to visit these other places and may require other services. The hotel’s collaboration with these other service providers assures it of more customers. The location of this hotel and casino gives it a greater competitive advantage over its rivals. Since there’s a little evidence to show that one of these service providers may move operations, this advantage will be sustained in the long run (FAQ).
The company employees more than 1300 workers on a full time basis and 1000 employed on as-needed basis. This is to ensure that they are able to provide services at all times. When the number of patrons is high, they can call on the more than 1000 to offer the additional workforce. This strategy simply aims at giving all the customers satisfactory service. This satisfaction attracts the patrons back and others as well. Since the strategies applied by its rivals are not yet unknown, it won’t be advisable to argue, as this gives it a competitive advantage (FAQ).
The company is specific in the services it provides (rock music parties). It also knows the impact that the brand name has on the customers. Therefore, the customers are sure about what service they will be offered. This gives it a competitive advantage over rivals who are not so specific, or who try to mix so many things at the same time that leaves patrons probably unsatisfied. It is clear that the company won’t change its stance, any time soon. Therefore, it should hold a competitive advantage over its rivals (Best of Vegas).
The typical generic strategy that the company is using is that of differentiation. On the top of the hotel and casino, the company also has a poker lounge, retail store, bars, night clubs, conference facilities, live music, beach club, six restaurants, cocktail lounges, fitness center, spa and salon. All these imply that the company has a broad focus, as it wants to attract all kinds of customers that may require the different services. Anyone visiting the place should feel at ease with any one of the services (Frommer’s).
The company faces stiff competition from other equally popular hotels and casinos. These include Wynn, Venetian, Bellagio, MGM and Vdara. All these joints offer almost the same services; they differentiate their services (Hotels Combined). This simply means that all hotel proprietors know the importance of offering diverse services. The Hard Rock is trailing the Mandarin Oriental, Signature, Tropicana, Four Seasons and some other hotels in terms of popularity. However, it can be said that the situation would have been worse had it not differentiated. Its current relative success stems from this differentiation (Trip Advisor).
Strength: the location of the hotel in Las Vegas is an advantage to the company. This is because this place is renowned for party lovers all over the US and the world. Its brand name is renowned all over.
Weakness: The hotel business is seasonal, is greatly affected by recession, and security uncertainties can hamper its operations.
Opportunity: It is also close to the famous Las Vegas Strip. Tourists visiting this place can be directed to the hotel for their stays in Vegas.
Threat: other hotels and casinos. The aforementioned bigger hotels offer the Hard Rock its greatest threat.
Because of the stiff competition, the Hard Rock simply has to offer the clients the best services. This is the only thing that will attract more customers. This is because people expect only the best, and if they are not satisfied they will go to alternative hotels. Additionally, the company has to aggressively market itself to have a chance of beating its more illustrious rivals. This may include sales promotions, advertising and public relations activities. Finally, it has to give out incentives to patrons. These may include discounts for loyal customers or those that stay for a considerably long time. This will encourage them to come again, and they may advise other patrons to seek the services of the hotel.
Hard Rock Hotel and Casino is without doubt one of the most popular joints in the area. Its location and services offer opportunities that should be exploited to the maximum. However, just like any other business, it has to face challenges, mostly from the external environment. The fact that the brand is still strong demonstrates the fact that it has not run away from the challenges. It needs to continue this way. The recommendations made are simply aimed at making the company take its rightful place at the top of the best hotels and casinos in the region.