Page 68 - Stakis Consolidated Teaching Note

Stakis' dependence on real estate values was and is high. If
a slump in property values were to occur it would affect

Land and Estates' profits as well as company equity and

financing capacity. The sale of S&N's hotel chain signalled
the downturn in the hotel market with values plummeting

rapidly making the feasibility of a sale, at a reasonable

price, almost impossible. Allied to this was the lack of

control and some confusion and friction at board level
caused by the poor assumptions about the costs of

Country Courts. It may be that ego and emotion had a role

to play in their evaluation and development leading to the

group having six new hotels which struggled to earn a
return on their cost. Finally, a host of management issues

and problems were beginning to manifest themselves,

including, significantly, losing sight of hotels profitability.

At this point a PEST Analysis should be undertaken. This

would show the new strategic thrust of Stakis (See Figure

5) increasingly lacking synchronisation with the rapidly
deteriorating trading conditions in the environment.

Figure 5 PEST ANALYSIS

POLITICAL/LEGAL ECONOMIC/ENVIRONMENTAL

Gaming Act : increased costs Stockmarket crash - less
new entrants restricted
disposable incomes
White Paper-Caring for People Increasing interest rates
increased nursing home demand more expensive borrowing
Libyan bombings : fewer tourist Tighter lending restrictions
and middle east gamblers

SOCIO-CULTURAL TECHNOLOGICAL
Increasing ageing population Eurotunnel

Reduction in holidays/breaks Advancing Technology
developments for operational
control