This report examines the external environment surrounding Fairmont Hotels & Resorts Inc. over the next five years to determine if the outside world will either assist or hinder the company in realizing its mission.

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Table of Contents

  1. Introduction                                                                         2
  2. Fairmont Overview                                                                 2
  3. PEST Analysis                                                                         4
  1. Political Factors and Trends                                                 4
  2. Economic Factors and Trends                                                 6
  3. Social Factors and Trends                                                 7
  4. Technological Factors and Trends                                         8
  1. Porter 5-Forces Analysis                                                                10
  1. Existing Competitors                                                        10
  2. Potential Competitors                                                        11
  3. Substitute Products                                                        13
  4. Customers                                                                        14
  5. Suppliers                                                                        15
  1. Conclusions                                                                        16
  2. Bibliography                                                                        18

  1. Introduction

Often a firm’s success or failure, or the degree of either, is not under its direct control. A well managed firm can fail while a mediocre firm can be highly successful simply by being in the right industry or geography at the right time. It is therefore important not only to examine a firm’s management, products and track record but also the external factors affecting its success.

This report examines the external environment surrounding Fairmont Hotels & Resorts Inc. over the next five years to determine if the outside world will either assist or hinder the company in realizing its mission. First, this report will provide an overview of the company’s operations, structure and goals. Second, it will use PEST Analysis to examine the effects on the firm by the macro-economy, followed by an analysis of the industry environment using the Porter 5-Forces Model. Finally it will come to a conclusion as to whether the external environment will have a positive or negative effect on the firm and to what degree.

  1. Fairmont Overview

Fairmont Hotels & Resorts Inc. is one of North America's leading luxury hotel and resort management firms. Its portfolio consists of luxury and first class hotels in Canada, the United States, Mexico, Bermuda, Barbados and the United Arab Emirates. Fairmont manages 39 distinct city center and resort hotels such as The Fairmont San Francisco, The Fairmont Banff Springs, Le Château Frontenac, and The Plaza in New York City. It holds a 100 percent interest in Delta Hotels, Canada's largest first class hotel management company, which manages and franchises a portfolio of 39 city center and resort properties in Canada. In addition to hotel management, Fairmont holds an approximate 36 percent investment interest in Legacy Hotels Real Estate Investment Trust, which owns 22 properties.

Over the next five years Fairmont is looking to expand in revenue and profitability through several strategies. First, with a presence in only 10 of the top 25 U.S. markets, it is looking to partner with owners or acquire luxury hotels in primary cities and resort destinations throughout the U.S..  It is looking to expand internationally by launching new hotels or acquiring existing properties. Through Delta Hotels, it is looking to expand its first class resort portfolio in Canada. Besides increasing its portfolio of properties, it is also looking to increase revenues at existing properties by renovating to increasing available rooms and branching off into related services. An example of this is its newly launched Spa brand, Willow Stream, setup to service customers at its resort properties.

It is clear that Fairmont management’s focus over the next five years is to grow the company’s assets and revenue. A number of factors in the macro-economy and hotel industry stand to assist and hinder the company in achieving these goals.


  1. PEST Analysis

The PEST Analysis looks at the external environment in terms of the political, economic, social and technological factors and trends that will affect the firm over the next five years.

  1. Political Factors and Trends

There are several political factors that will affect Fairmont’s success over the next several years primarily related to the environmentally sensitive locations of some of its key properties.

The Fairmont Chateau Lake Louise is situated in Banff National Park and thus is subject to restrictions and reviews by the Canadian Federal Government and pressures from environmental lobbyists.  All property expansions are subject to government approval and even the amount of water the property can withdraw from Lake Louise is subject to permit. Although all legal efforts by the Environmental Investigation Agency to stop a $65-million conference center development have failed, this is a source of ongoing legal costs for Fairmont and may yet slow the development of the property. Already the project has taken 10 years to get Federal approval, significantly impacting its revenue potential over the next five years. The Siksika First Nation and the Mountain Parks Watershed Association are also currently attempting to quash the hotel’s water permit which was renewed in March for an additional 10 years. Although it is unlikely for the permit to be withdrawn or adjusted, the fight is a source of legal cost for the firm and presents a small risk that the new conference facility would be unusable. While these environmental issues are an expense for the firm they also serve to protect the firm from competition. Fairmont has already battled through to the point where its expansions are approved, whereas any new competitors attempting to build in the area would have to go through the same lengthy approval process. One of the arguments for allowing Fairmont to proceed with the development hinged on the fact that the Fairmont expansion was on already disturbed land, replacing an existing building. This suggests that brand new developments in the area might not ever get approved. Thus, the Fairmont Chateau Lake Louise and Fairmont Banff Springs Hotel (also in Banff National Park) are protected from new competitors for at least the next five years.

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Fairmont’s Delta operation is also affected by environmental challenges. A proposed $70 million development at Sun Peaks resort is in jeopardy due to land claims by local native bands for the property. Not only might this add significant cost to the project to settle the claims but the native groups have called for a boycott of Delta Hotels by other native organizations which may cause a small loss in revenue until the issue is settled.

In a country where so many vacation destinations are nature-oriented, the protection of these resources is a significant concern for those competing for ...

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