Four Seasons Hotels and Resorts Goes to Paris

1. Background

    As the world’s leading operator of luxury hotels, Four Seasons Hotels and Resorts, with 53 properties in 24 countries, is known for its “consistently exceptional service” philosophy, meaning to provide high-quality and personalized service to cater to guests diversified needs.  

    Four Seasons generally operates not owns midsized luxury hotel and resorts. The business design model of Four Seasons consists of plan, implementation, check and revise. Four Seasons adopts the “Golden Rule”--one should treat others the way he expects to be treated--to make its global management suited to the local situation. The hotel makes GM responsible for supervising day to day operations of a single property and establishes Four Seasons service standards to assure its high-level service whose culture standards made up of smile, eye, recognition, voice, clean regulations. Then the company takes use of the internal feedback management and external feedback methods to check how things are going. At last, the hotel make constant improvement to adapt to the changing expectations of customers gained from the feedback.

    The revenue increased by 22.6% from 1996 to 2000, with the operating margins ranging from 58.8% to 67.9% and revenue per room 32% higher than US competitors and 27% higher than European competitors. The consolidated revenue, however, is 14.42% down in 2001.

2. SWOT Analysis

Strengths. The story of Four Seasons Hotels and Resorts is a tale of remarkable expansion with 53 properties in 24 countries on every continent except Antarctica by 2002. Through nearly 40 years’ of successful international growth, Four Seasons had accumulated valuable global expansion experiences and have established a mature hotel opening system in different countries, which could provide valuable lessons to the opening and management of Four Seasons Hotel George V Paris. Four Seasons’ nature of diversity and singularity serves as one of its biggest strengths with diversity allowing local flexibility and enabling properties to learn across borders to fulfill Four Season’s mission while singularity guarantees the uniform standards being met. Besides, as Parisian Landmark and a high quality asset in the heart of Paris luxury, the original Georges V Hotel provides a great opportunity for Four Seasons to establish itself powerfully in the French capital.

Strong management team is another strength of Four Seasons, which was noted for its longevity, many having been at the firm for over 25 years. They are all very experienced and highly committed to this company. Also, they are comfortable in a variety of international settings. F.S. George V’s general manager has extensive North American experience as well as a deep understanding of French culture. Moreover, Four Seasons’ regional management structure supports each property to deliver and maintain the highest and most consistent service standards.

Other strengthens include Four Season’s strong brand equity and positive brand image as the world’s leading luxury hotel consistently offering exceptional personal service which leads to loyal customers and high customer satisfaction; its constant practice of “the Golden Rule” which generates loyal employees (lower turnover rate) and distinguish them above the competitors along with other competitive attractions for employees such as above normal incentives, 35-hour workweek and greater promotion opportunities.

Weaknesses. As an international hotel operator focusing on US market at the early stage, Four Seasons possesses an American oriented business culture, which is different from and sometimes even contradicted to the business culture in France. This has lead to difficulties of implementing Four Season’s organizational principles and service standards among French employees. For example, it’s hard to get French managers to take accountability for decisions and policies as in the French hierarchical system there is a strong tendency to refer things to the boss. Besides, for several Four Seasons managers, working in France required a “bigger cultural adjustment” than had been necessary in other countries with for instance, different perceptions of time between North Americans and French people. The above cultural conflicts have largely reduced the management efficiency of F.S. George V and affected its revenue performance.

Moreover, as the first hotel Four Seasons launched in France, F.S. George V also bears the weakness of a new player. One consequence of being a new market player is that most of the workforce in France did not know what Four Seasons was all about, which implies that large efforts are required to train new employees so that Four Seasons Standards can be met, especially when there is a large disparity between Four Seasons business culture and French organizational culture. Extensive training means high operational cost, which was also increased by a higher employees-to-room ration in F.S. George V than other properties. What’s more, F.S. George V has the highest price among its major competitors in Paris (the six “Palaces”) while its products are not specially differentiated from them.

Opportunities. The major opportunity for Four Seasons Hotels and Resorts when entering the French market with Hotel George V Paris is the city of Paris itself. Indeed, Paris is one of the most visited city in the world, so it gives Four Seasons the opportunity to reach thousands of new customers (3rd most visited city worldwide in 2013, MasterCard study). Moreover, the Parisian environment is very favorable to the development of the tourism industry and profitable for the tourism industry providers. At the time of the case, around 2001, the tourism industry in Paris did well with appreciable increase in the number of hotel arrivals (see exhibit 1).

Another opportunity is that the city of Paris is associated worldwide with luxury, so Four Seasons, the world's leading operator of luxury hotels, can benefit from this image and be fully credible when opening a property in Paris. Plus, in the luxury segment,  Paris is the most expensive city in Europe in terms of average hotel rates (see exhibit 2), so there is a great profit opportunity there. The socio-cultural environment present in Paris (fashion, culture, artistic, innovation) also attracts a great number of high-spending travelers in this city so this also represents an opportunity for Four Seasons to get new customers.

Finally, another opportunity for Four Seasons is to build on its long-lasting tradition of excellent customers service to compete with existing Parisian palaces, because customer service is usually one of the weaknesses of the French hospitality and tourism industry.

Threats. The biggest threat faced by Four Seasons is the complex and restrictive French legal requirements and the tough French working environment (from a North American standpoint) that have impeded the implementation of the usual Four Seasons' way of doing business and that could have led Four Seasons to fail. Indeed, French labor laws are strong and positively oriented towards employees, so employers have to cope with high taxes, the 35-hours workweek, very limited terminations possibilities, "right to light" and strong job security for employee.  In addition, French unions have a lot of power and social tensions between labor and management are the rule in France. All these aspects can threaten the steady progress of operations and the commitment of employees if they are not understood and respected.