Strategic decision-making is crucial for hotels to continue growing. If you are wondering where to start, look no further than the traditional SWOT analysis for hotels: this tool is key to understanding your business, relative to the competition. Performing a SWOT analysis focuses your attention beyond immediate needs and enables you to take strategic action for your hotel business.
This blog explains what a SWOT analysis is and how you can perform an effective SWOT analysis of your hotel, including key examples and tips.
Table of contents
What is a hotel SWOT analysis?
The traditional SWOT analysis focuses on its abbreviated components: strengths, weaknesses, opportunities, and threats. These can quickly be divided into internal (strengths and weaknesses) and external factors (opportunities and threats).
A common visual layout when summarising a SWOT analysis to others is on a 2×2 grid, although this has been criticised for causing condensed highlights, leading to shortcuts in thinking. Ideally, a SWOT analysis of your hotel strikes a balance, neither appearing too condensed nor taking the form of a long list or essay. Action-focused statements are a key element in achieving this balance.
Hotels make the strategic task of performing a SWOT analysis particularly interesting: for one, the product is made up of brick and mortar, service, and a wide range of intangibles relative to the competition. Thankfully there is a growing amount of information at the fingertips of hoteliers thanks to hospitality technology. Hotel commerce platforms provide detailed forward-looking and historical information that has never been organised in a more absorbable way.
What are the benefits?
A sound SWOT analysis is the starting point for your hotel’s strategic actions and as such can fulfil many uses. Depending on your priorities, you can perform a SWOT analysis of the hotel industry, a multi-hotel portfolio, or a specific hotel in its local market. Performing a SWOT analysis can help you and your team:
- Uncover unexpected courses of action as a result of focusing on both external and internal factors
- Span attention across all parts of a hotel operation, including decisions on facilities as well as pricing and distribution
- Move from insights to strategic action in a guided manner
- Unite different functions around the bigger picture, highlighting interdependencies
Anyone who needs a clear path to action, from general managers to revenue generating or teams of subdivisions, will find their time spent on this analysis rewarded with valuable insights and a clear course of action.
How to perform a S.W.O.T analysis at your property (with examples)
Internal Factors: Strengths and weaknesses
As you take account of your hotel’s strengths and weaknesses relative to the competition, ensure to include anything that comes up, but it’s vital to not judge what is brought forward. This is about taking stock and being specific. Avoid two-word descriptions and use your metrics and results such as ADR, RevPAR, percentage of direct bookings and performance relative to your comp-set as starting points.
Using the example of a SWOT analysis of a 5-star hotel, a strength may be its city centre location close to sights and with an in-house spa, while a weakness may be low brand recognition and lower ADR relative to the local competitor that is part of a global chain.
Need to know more about competitive analysis? Read our full guide here.
External Factors: Opportunities and threats
When taking inventory of opportunities and threats to a hotel, you can use a model such as PESTEL to ensure all aspects of the business environment are considered and organised. Using PESTEL, you will list opportunities and threats across the political, economic, social, technological, legal and environmental surroundings. Again, at this point do not judge any points raised and just take note. These are factors that affect everyone in your market.
Continuing with the example of a 5-star hotel, an opportunity may be a doubling in leisure market demand since the city featured in a movie, while a threat may be an increase in third-party distribution costs.
Build action-focused statements
Once the above lists are complete and reviewed as a whole, a broader picture emerges. This is when you can move beyond the 2×2 grid that was mentioned earlier. Instead of making your SWOT analysis a one-slide highlight, let it guide you through strategic discussions and decisions. Harvard Business Review recommends doing this by completing their template sentence that relates external and internal factors:
“Given the condition of [external factor], our ability to [internal factor] leads to our recommendation that we [recommendation].”
In the previous example of a 5-star hotel, this may translate into: “Given the condition of an increase in leisure market demand, our ability to compete well due to location leads to our recommendation that we raise prices in line with the competition.” Another recommendation may be “Given the condition of an increase in third-party distribution cost, our ability to include our in-house spa service in a rate leads to our recommendation that we create a spa package offer only available directly on our website.”
Tips to improve your hotel business strategy with a SWOT analysis
Consider external factors first
Since environmental factors are the same for your competition, it has most recently been argued that external factors should be considered and listed first. By moving on to the internal factors afterwards, there is familiarity across the working team with the context every competitor is operating in and an opportunity to highlight internal areas you may otherwise have overlooked. This is a way of moving away from a pure diagnosis, and towards generating ideas.
In order to improve your hotel SWOT analysis you have to be specific in labelling your findings: “price” does not mean much as an opportunity, as it could be the opportunity to lower costs or increase the price. Specifically, in hotels, price or rate is relative to days of the week, market segments and compared to specific comp sets. Ensure you bring this level of clarity with every point listed.
Be clear: what does success look like day to day
Hotel operations are monitored daily, so as you define recommendations and strategic actions, take time to include what these will translate into in your daily and weekly stand-up meetings. Will there be new regular updates? Should actions lead to the achievement of a new goal for occupancy or ADR? As you consider the hotel business intelligence that you review, know how the team is monitoring progress. There is an element of change to any new strategy or action that can be managed smoothly, especially with the involvement of team members from the start, when building the SWOT analysis.