Free Custom «Background and history of Four Seasons Hotel's International business» Essay Paper

The history of Four Seasons Hotels dates from 1961 when its first hotel was established in Toronto, Canada (Four Seasons website; Sharp 6). The present Four Seasons Hotels is an anecdote of remarkable expansion and innovation, which has earned the company a prestigious position among the most respectable hotel management companies in the world. The company was established by Isadore Sharp; a former architect, who was inspired by the success of a family friend’s motel that he had designed himself (Derdak 1999, p. 198). Despite his high ambitions, Sharp did not have enough finances to start the project. He approached several banks without success before he approached Eddie Creed, his brother in law and Murray Koffler, Creed’s best friend to be his partners. Each of these men contributed $150,000 (Funding Universe, 2010, p.1). This however was not enough and Sharp had to acquire $700,000 in the form of a mortgage in order to fund the completion of the 126-room hotel (Funding Universe 2010, p.1). This hotel became an instant success and laid the foundation for the vast Four Seasons Hotels known today.

 

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Four Seasons Hotels Inc. went global after the establishment of its hotel in London. The hotel, which overlooked the historic Hyde Park, was opened in 1970 and despite the earlier fears of competition from established hotels in the area (Derdak 1999, 121). It became one of the world’s most profitable hotels, enjoying an occupancy rate of 95 %.

Sharp’s attempts to develop office and residential buildings in Canada and Florida were curtailed by demands from civic officials such that in 1972, Sharp approached ITT Corporation’s Sheraton division for a partnership (Funding Universe 2010, p.1). This resulted in the establishment of Toronto Four-Seasons Sheraton. The 1,450-room enterprise was however marred by cost overruns, incongruity with city building inspectors and at one time had its liquor license was suspended (Funding Universe 2010, p.1). Further, Sharp felt that he did not have real decision making authority as the assistant manager of the property and hence decided to quit. He sold his interest for $18.5 and returned to the development and operation of mid-sized hotels targeting the luxury market (Derdak 1999, p. 120). It is in the same year that Four Seasons Hotels’ first American Property, The Clift (a hotel located in San Francisco) was purchased.

Four Seasons Hotels Inc. faced serious financial turbulence due to the increased number of hotels and properties that it was managing. By 1982, the hotel had accumulated a long-term debt approximated at $116 million (Derdak 1999, p. 121). The management retaliated by selling some the company’s assets in Toronto, Montreal and San Francisco. Further, the management of non-hotel property was transferred to a new company that Sharp, Creed and Koffler created. The debt-equity ratio was brought to a manageable level when Four Seasons Hotels was taken public in 1985; leaving Creed, Koffler with 8% stake each while Sharp retained 29 percent of the shares (Sharp 2009, p. 32). Sharp had given a condition that his shares should be entitled to twelve votes each as opposed to the shareholders’ votes, which were only entitled to one vote. This was a precaution to ensure that there were no takeover threats in the future. This was followed by rapid expansion in the late 1980s; with the company settling for prime locations in Paris, Tokyo and Frankfurt among others.

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The acquisition of a leading luxury hotels operator in Asia and Australia known as Regent International Hotels Limited in 1992 marked a significant accomplishment in the history of the Four Seasons Hotels (Derdak 1999, 125). The company formed the world’s largest luxury hotel network; owning and operating 19 luxury resorts 45 mid-sized hotels and properties around the globe. This was later followed by rapid expansion in the following years. Unfortunately, the success in the early 1990s was almost thwarted due to the accumulation of debt by the company; an occurrence that almost paralyzed the company in the mid 1990s. It is during this time that the hotel industry was highly affected by market conditions such that profitability had declined significantly. Specializing on management of hotels rather than ownership was therefore considered a better option for Four Seasons Hotels shortly after this downturn (Weber & Rossant 1997, p. 83). The company however was still undergoing difficult financial turmoil. It took the assistance of Al-Waleed Bin Talal, a Saudi Prince, to rescue the company in 1994. He purchased 25% of the organization’s stock and played a great role in the company’s penetration into the Middle East markets (Greenberg & Truell 1994, p. A14). By 1997, the company was doing exceptionally well despite the challenges (Weber & Rossant 1997, p.84).

The company was seriously hit by the September 11 attacks, which led to a collapse of the hospitality industry. This was further alleviated by the fact that the management insisted on keeping the room prices high in order to uphold the brand value; a decision that did not auger well with the owners due to the possibility of making sever losses (Glater 2009, p. B1). The financial struggle almost led to a downfall of the company and this time the management had to accept a bailout by Bill Gates, Microsoft’s Chairman and Prince Talal in 2007. The pair now possesses 95% of the company in equal shares while Sharp owns 5% (Segal 2009, p. 2). Four Seasons Hotels were further hit by the 2007-2010 world financial crisis leading to the company’s first corporate layoffs.

Four Seasons continues to expand despite various huddles that it has faced in its history. The company currently manages over 80 luxury hotels and resort; with presence in Singapore, Mexico City, New York, Berlin, Jakarta, Paris, Israel, California, Hawaii, Netherlands, Hong Kong, Berlin, Cairo, China and India among other locations. Over 50 properties are also being developed in a bid to improve their international presence. The company is highly committed to building its reputation by providing guest-focused service. The aim is to be recognized as the world’s best luxury-hotel management company while retaining brand excellence.

Overview of the Planning of Four Seasons Hotels’ International Activities

The planning of Four Seasons Hotels’ international activities is organized in such a way that well selected general managers govern properties in their areas of operation. Accordingly, they are expected to identify potential business openings and participate in bidding exercises for the management of luxury hotels and resorts in their countries (Sharp 2009, p. 59; Byrne 1998, p. 21). Their activities are further managed from the head office in Ontario, Canada. The Chief Executive Officer, Kathleen Taylor works closely with hotel and resort owners around the world to ensure that operations go on smoothly (Four Seasons website). The Worldwide hotel operations president, Jim FitzGibbon oversees the operations of the hotel through working with country managers (Four Seasons website). Four Seasons Hotels aim at identifying prime locations for business since it targets high-end customers such that their international business is solely based on the identification of luxury properties in these locations.