There are three factors which determine the entry strategy for any hotel into international markets which are control of the hotel, commitments of resources and level of risk diversification. The entry strategies available to hotels include complete ownership, franchises, management contracts, joint ventures, strategic alliance and forming a consortium.
The entry strategies adapted by Shangri-La hotels for various international locations include sole-ownership, management contracts and equity participation in the form of joint ventures or strategic alliances. These strategies vary from location to location depending on the specific environment of the host countries. The company operates sole-ownership hotels in countries where the gain on real estate is higher and the hotel operations are profitable and have a good potential for growth. In countries where a significant level of risk is involved the company opts for other options such as management contracts where direct ownership of real estate is either not possible or not viable for the company. The hotel chain uses joint ventures in areas where the cost of doing business and the cost of capital is quite high or in locations where there are certain property ownership constraints.
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