Strategic alliances in the hotel industry: a case study of Sarova Group of Hotels
Strategic alliance is flourishing in the hospitality industry. However, the pace of research has not kept up with this evolving phenomenon. Past studies on alliances focused mainly on manufacturing and high technology industries and predominately in Western countries. There has been little attempt to explain and understand the strategic alliances formed in the hospitality industry in Kenya. The objective of the study was to establish the motivation for the formation of strategic alliance and to establish the factors that determine the success rate in strategic alliances by the Sarova Group of Hotels. The research methodology used was a case study. The study sought to have a thorough understanding of the phenomenon from the perspective of Sarova Group of Hotels. The data was gathered through interviews with three respondents who were involved in the formation and management of the alliance. Content analysis was used to analyze the information gathered. The findings revealed that SGH realized that they could not cost cut their way into growth and prosperity, because there is a limit to how much you can grow earnings by improving margins. As such, alliance was seen as one of solution for accessing those capabilities. The alliance was formed with an aim of entering the two properties Saltlick Game Lodge and Taita Hills Game lodge into an alliance with Sarova Group of Hotels. The findings of this study revealed that the success rate of alliance formation is found to be positively impacted by pre and post alliance formation factors. The study also revealed the motive that lead to the formation of strategic alliance: transaction-cost motives; resource-based motives; strategic motivations with regard to competitive position of the firm; learning objectives; and motives relating to risk reduction, new market entry, and first-mover advantage. The research findings show that the highest ranked motive of strategic alliance are “knowledge sharing; cooperative learning and embedded skills”, followed by “improving performance. This fact leads to some interesting findings with the lowest ranked being “adjusting to environmental changes”, followed by “reduced financial and political risk”, and followed by “entering new markets”. The major challenges faced by the alliance are; conflict management among the employees who were not ready for change, differences in target market, image, culture, pace of work and management styles. The study recommends that organizations need to adopt strategic alliances as a policy to strengthen their competitiveness and increase their efficiencies. For hotels which do not have the experience of strategic alliance formation, understanding the motives for alliance formation found in this study may arouse their appreciation of adopting alliances as one of their business strategies and help them enjoy the benefits which alliance may provide.