Essential case study

The Dart Valley Guest House and Oriental Spa business plan, 2022–26

Chapter 5: Strategy

Dick Jones has found that competition in the three- and four-star hotel/spa business in Devon is of medium to high intensity (see Chapter 4), with the main risk being that the spa goes the way of a fad. But what of Dart Valley’s competitive standing in this market and how might that be improved with the funding for the proposed Phase II development?

Dick is a former management consultant and appreciates that his findings are best rooted in research and analysis, as set out in Appendix A of this book. He rolls up his sleeves. He scans the Web, talks to people he knows in the Spa Business Association, reviews notes and literature from the UK Spa & Wellness Conference he attended the previous year and examines the Spa Industry Survey Report for Great Britain & Ireland sponsored by VisitBritain.

He compares this research with his own experience and discussions with customers at Dart Valley over the past three years and concludes that the main purchasing criteria for customers of spa services are these: the effectiveness of the treatment (customers must feel that the treatment has done them good); the standard of the premises (preferably clean, hygienic, spacious and with a relaxing ambience); and, of course, price.

He knows that customers also consider the range of facilities provided important, from hot tubs to swimming pools, saunas to Jacuzzis, and believes that, as they become more savvy, they will place greater emphasis on the range of treatments provided – as shown in Table 5.1.

He then translates these customer purchasing criteria into key success factors (KSFs) – see Table 5.2. He finds that the winning provider of spa services will have highly skilled and experienced therapists, quality premises, a positive, upbeat culture, a tight control of cost – and a broad range of treatments.

Finally, he allows for the two extra KSFs of market share and management factors and carefully computes the weighting to each factor, making sure they sum to 100%.

He is now ready to rate the Dart Valley offering against these KSFs. He is mildly surprised but proud to find that Dart Valley’s overall competitive position in spa services in the South Devon area comes out as favourable to strong, or 3.5 on a scale of 0 to 5 – see Table 5.3 for the Dart Valley results (and Appendix A on the methodology for how ratings are calculated).

The Palace, a grand institution in Torquay, with 250 rooms and a full suite of spa, swimming and aquatic facilities, emerges top, of course, but not that much further ahead. Dick believes that his team of therapists is more skilled and more enthusiastic than the team at The Palace, thanks to the personal care taken over their recruitment and motivation by his wife, Kay. He also believes that the sense of personal space and relaxation, not to mention Dart Valley’s extraordinary views atop the river, is in contrast to the somewhat cramped and overpopulated feel at The Palace’s spa.

Not far behind The Palace is the Torquay branch of the national Fit4U chain, a slick operation focusing primarily on its fitness suites and courses, but with an impressive set of spa facilities added on. Good as they are, Dick doesn’t believe they match the standards of excellence and ambience at Dart Valley.

There are a number of other competitors in the Torquay area, but they tend to fall a little behind The Palace and Fit4U, certainly in terms of range of facilities. One other spa offering stands out, however, and that is Smugglers’ Cove, a top-of-the-range boutique hotel perched above its own cove in the South Hams. It claims to offer ‘spa’ facilities, but, in reality, there’s a treatment room and a sauna and that’s it. But guests are truly pampered there, and one or two of Dart Valley’s excellent freelance therapists also work there, so it ranks as a credible competitor, albeit in its luxury market niche.

Dick knows that little of this analysis, and certainly none of these figures, will find their way into his business plan (we will see later on what will go in). But what the exercise has given him is analysis in depth and thinking in depth, findings rooted in research. And balance.

Dick has shown to himself that Dart Valley is a credible player in the spa services business, with its strong points not overexaggerated and its weaker points not glossed over. This must shine through in the plan.

Even more importantly, the analysis has provided a construct for framing the project at the heart of his business plan, the proposed Phase II development of 16 more rooms plus a swimming pool. The final column of Table 5.3 indicates that Phase II could render Dart Valley the leading spa operator in South Devon, thanks to:

• ■increased market share, hence spread of message
• ■greater contribution to overheads, hence lower unit costs
• ■broader range of facilities, not far below that offered by The Palace.

Dick now reproduces the analysis above for Dart Valley’s other two main business segments – accommodation and catering. For the purposes of this book, we need not go into similar detail, but suffice it to say that Dick’s conclusions are similarly encouraging.

Dick can now put into words, wrapped up into just three to four pages of A4, what his analysis of competitive position has concluded, namely as follows:

• ■Dart Valley has come from nowhere to be a credible competitor in its niche.
• ■It has done so, on the one hand, by:
  • –offering the overnight visitor an experience somewhat out of the ordinary – clean, crisp, comfortable accommodation spiced with a hint of the Orient, with stunning views over the Dart Valley
  • –offering the diner the choice of traditional European fare or home-cooked, delicately spiced oriental cuisine, with the same lovely views
  • –creating a spacious, relaxing environment, a high quality of therapy and a culture of service and enthusiasm in its spa services – factors that counterbalance the limited range of facilities offered compared to leading local competitors.
• ■And, on the other, by:
  • –keeping a tight control over overheads.
• ■Dart Valley has become a serious competitor in this industry as evidenced by its occupancy rates, having achieved room occupancy by year three of operations of 71%, well above the average for guest houses, countryside establishments or Torbay as a whole (see Chapter 4).
• ■Completion of the two-phase strategy could make Dart Valley the leading provider of spa services in the Torbay and South Hams area, not in terms of scale or market share, but in terms of competitive position, hence profitability.
• ■Strategic risks are low – Dart Valley will offer in Phase II more of the same successful formula of Phase I and it seems unlikely that this concept, so successful so far, will become dated or of lesser appeal over the next five years.

Dick will proceed to assess the resource implications of this strategy in the next chapter. Before that, however, he cannot resist comparing what he has written in Chapter 5 with what he would have written four years earlier, when starting up the venture. For Phase I, he had used a mortgage plus the proceeds from the sale of the family home in southwest London as finance – and he had never got round to writing a business plan for himself as the backer (though it might have been a useful exercise).

He finds that much of what he has written in 2022 would have been the same as in 2017. He had researched the spa services market in depth at the time, so his findings on customer purchasing criteria and key success factors would not have changed much in the interim – only perhaps in the weighting attached to, for example, the range of treatments offered.

The main difference would have been in the use of tense. In 2017, his plan for the new venture would have been in the future tense throughout. The first three bullet points above would have been virtually identical four years earlier, except that they would reflect aspirations for the future, not the factual present.

Thus, the first two bullets would have read:

• ■Dart Valley should be a credible competitor in its niche by 2022.
• ■It will do so, on the one hand by:
  • –offering the overnight visitor an experience somewhat out of the ordinary – clean, crisp, accommodation spiced with a hint of the Orient, with stunning views over the Dart Valley
  • –and so on.

Things have worked out pretty much as planned, which gives Dick a feeling of great satisfaction and indeed optimism that Phase II will be worthy of securing a backer.

Essential checklist on strategy

Your chapter on strategy will stand out from 9 out of 10 other business plans due to its underpinning in research and analysis. Your backer will appreciate this thoroughness.

Very little of the research you undertook when following the guidelines in ­Appendix A of this book will find its way directly into this chapter. But it will be there indirectly. This chapter will be just three to four pages long, but it will radiate latent power. The impression will be conveyed to your backer that each statement is rooted in either fact or rigorously supported judgement.

Derive your firm’s competitive position coherently:

• ■Demonstrate your understanding of customer purchasing criteria in key business segments – make cursory but pertinent reference to research you have done on this, with further detail as appropriate in an appendix to your plan.
• ■Demonstrate likewise your understanding of key success factors.
• ■Set out objectively your assessment of your firm’s competitive position – lay out the sources of competitive advantage in each key segment.

Explain how your firm’s strategy will improve performance over the next few years:

• ■Which of the generic strategies you will deploy.
• ■What steps will be taken to strengthen competitive position in key segments, by building on strengths and/or working on weaknesses.
• ■How your firm will boost its strategic position by optimising its portfolio of business segments.

If your business is a new venture in an existing market, set out why you have a sufficiently distinctive angle to survive in the early stages. If you are creating a new product or service, demonstrate how you will find ready buyers, in the right quantities and at the right price.

Finally, alert your backer to the key strategic risks your firm may face and how you intend to mitigate them. And, conversely, highlight the strategic opportunities that may be there for the taking, which will represent the upside to your plan’s forecasts.