Global Hotel Industry Project - Assignment Example

Institute: Global Hotel Industry Project Overview According to the World Tourism Organization (WTO), tourism or hotel industryis recognized as the most competitive industry accounting to more than 40 percent of the revenue of the nation. Due to which the gross domestic product (GDP) and gross national product (GNP) enhanced with a significant extent that improved the image and reliability of the nation among others. As a result, the economic status and growth of the nation might also get enhanced that may amplify its prospect and reputation in the entire globe. This paper mainly identifies the opportunities and threats of the global hotel industry of specific region or country with the help of porter’s five forces that might be penetrated. It also includes the process by which the new entrant might position itself in a new market long with the business strategy utilized by the organization. Apart from this, it also describes the target market of the new hotel as well as the new features of the hotel. Other than this, this essay also includes the inner strengths and weaknesses of the hotel, developed at a new place or country. Discussion In order to evaluate the best location or country to enter or start up a new business on hotel industry, porter’s five forces is used. It is recognized as one of the best analytical technique for evaluation as compared to others. Porter’s Five Forces: Bargaining power of the buyers- the bargaining power of the buyers in Europe is quite high. This is because in spite of economic uncertainty, the rate of arrivals of tourists in Europe is more than 604 million in the year 2012 as compared to Middle East and North Africa. The prime cause behind it is due to political instability and economic downturn. As a result, Europe is considered as (+6) % well-known or legendary performer in the field of hotel industry as compared to many other nations. Furthermore, the intensity of tourists is quite high in the region of Europe as compared to North Africa and Middle East is due to the presence of numerous beautiful visiting places and affordable hotels with all sorts of amenities. However, in order to retain the competitive advantage and position in the region of Europe as compared to others, the new entrant need to offer varied types of extra facilities like special discounts for the business or domestic tour groups so as to retain them for a longer period of time. Only then, the profitability and reputation of the new entrant within the regions of Europe might get enhanced significantly that may amplify its demand and image. Apart from this, as the customers of this age are extremely conscious about brand, so they need to be offered high quality of services and great experience. Only then, these premium levels of customers might be retained for long run among others. Bargaining power of the suppliers- the bargaining power of the suppliers is quite high within the region of Europe. This is mainly due to the presence of numerous suppliers of raw materials, effective for the hotel industry, within the region of Europe. Moreover the capabilities and talents of the staffs and personnel engaged with the industry of Europe are quite high as compared to other regions, which is extremely essential for positioning a new entrant within an unknown market. Thus, it is the suppliers that may prove effective for new entrant to improve its profitability and total revenue in the regions of Europe as compared to many other regions (Global Hotel Perspectives, 2012). Threat of substitute products- The threat of substitute products is extremely high in this segment of hotel industry. This is because; the owners of hotel industry might develop a distinctive position in the markets of Europe at any point of time, by offering high class comfortable facilities at a competitive cost. This type of business strategy is extremely effective for any hotel for a short period of time as maximum extent of the customer’s desire for both qualitative as well as quantitative products. Threat of new entrants- The threat for new entrants is quite low as compared to many other segments. This is because; the hotel industry comprises of high capital costs, high level of fixed costs. Apart from this, the rate of capital required to develop a new hotel is also quite high and so the economies of scale is extremely high in hotel industry. This is considered as one of the prime causes that reduced the threat of new competitors in hotel industry that may prove extremely effective for the new entrant within the region of Europe. Competitive rivalry- The rate of competitive rivalry is quite high within the region of Europe as compared to North Africa and Middle East. Due to which, the new entrant need to offer inventive facilities such as coffee bar, pool bar, mini club for children’s, WI-FI facilities, balcony with terrace and many others. Only then, the new entrant might become able to attract the new customers or retain the existing ones thereby declining the rate of switchover costs. This tactic might act as a boon that may enhance its reliability and dependency over the brand among others. As a result, the competitive advantage and sustainability of the brand might get improved thereby amplifying its brand image and profitability of the organization in the market of Europe among North Africa and Middle East. Thus, from this above mentioned porter’ five forces analysis, it might be recognized that, the region of Europe might be extremely profitable for the new entrant as compared to North Africa and Middle East. This is mainly due to the presence of skilled workforce, numerous tourism spots, high infrastructural facilities, multicultural tourists etc. However, the new entrant also needs to be extremely careful from the negative impacts of terrorism, economic slow-down, competitive rivalry, high dominance of existing players and many others. How would you position the new entrant into the market of Europe? What would the business-level strategy be and why? The new entrant might position itself as GenNext group of hotel offering high value for simplicity, informality, style, affordability and convenience. It might position itself as smart basic kind of hotel, affordable for all. So that it might prove effective for all customers of varying income groups and life styles. This might help the new organization to enhance its profitability and market share thereby attracting a wide range of customers. However, in order to position itself in the region of Europe, the new entrant need to offer varied types of excellent facilities like mini club for the children, coffee bar, play ground and many others at a quite affordable cost. Only then, the new entrant might become able to position itself among other existing competitors such as Albania hotel, Andorra hotel Austria hotel, Croatia hotel and many others. However, in order to improve the position and ranking of the new entrant within other existing rival players, it might implement, cost leadership strategy as compared to differentiation strategy. This is because; it is the only strategy, by which the new entrant might attract a wide range of customers of varying income groups and life styles. Apart from this, with the help of this business strategy, a new entrant might become able to offer high quality of services at an affordable price. By doing so, the new entrant might become able to amplify its profit margin and customer bases to a significant extent among others. Moreover, with the help of such type of business strategy, the brand image and reputation of the new entrant might also get enhanced that may prove effective for it in long run. Apart from this, due to the presentation of qualitative services at an affordable cost, the new entrant might create a distinctive image and equity in the market of Europe among other contenders. Other than this, due to the implementation of this strategy, the rate of switchover costs of the buyers or customers might get reduced. Hence, this strategy might increase its competitive advantage and sustainability in the market of Europe (Drummond & Ensor, 2006, pp. 131-134). However, in case of differentiation strategy, the new entrant needs to offer unique products for a target group of customers in order to retain them. But now, maximum extent of the hotels comprise of all sorts of facilities that may satisfy the changing needs of the customers. So, differentiation strategy may not prove effective for the new entrant. So, cost leadership strategy might be the best option (Drummond & Ensor, 2006, pp. 331-342). Describe what kind of hotel you will be building (or franchising) based on the business level strategy you chose? As the hotel industry of Europe is extremely booming so, it fascinates wide range of new entrants. Due to the presence of numerous large and small contenders, the industry becomes extremely fragmented, and so if any new entrant desire to enter into this market, then joint venture with the existing rival players might be the best option. This is because; then the new player might easily enhance its customer ranges and profitability in the new market without any sort of business threat or challenge. For example: if a new entrant, named Knight Frank enter the market of Europe by joint venturing with Albania hotel, then it may easily access the resources such as skilled staffs, technology, sites and many others. As a result, it might prove extremely beneficial for the new entrant to enhance its image and position in a new foreign market. Furthermore, due to high brand value and equity of Albania hotels, the position and ranking of Knight Frank might also get improved within a very small time frame. However, in order to do so, Knight Frank might be promoted as a budgeted hotel with 35,000 rooms. Among them, 25000 rooms are for budgeted customers and the remaining for premium and middle class customers. In this way, it may target the large segment of the society with varying income groups and living standards. As a result, the range of customers of the brand (Albania-Knight Frank) might get enhanced resulting in amplification of its total revenue and profit margin. Apart from this, such type of targeting might enhance the market share and equity of Knight Frank in the market of Europe that may improve its dependency and consistency within the minds of the customers among others. Moreover, by join venturing any sort of business risk or challenge might be handled or tackled very effectively and efficiently. For example: high debt or loan may be easily resolved with the help of the tactic of joint venture. For example: Formosa international hotel Corporation expanded its operations in Asia, Europe and Middle East and Carribean by joint venturing with Regent Brands hotel. Inspite of JV, acquisition is also another well-known option to expand the operations of a hotel but it may not prove effective in future era. This is because; after acquiring the hotel, varied types of conflicts might take place within the rules and regulations of the new management and the employees. This may lead to reduction of employee morale and attritions but JV is entirely free from such defaults. Other than this, the new entrant, Knight Frank might include varied types of new amenities or activities such as 24 hour bell staffs, high speed internet services, community hall, and rooms with terrace facilities, mini bars and swimming pools etc. By offering all these above mentioned facilities at budgeted range might prove surely effective for Knight Frank to increase its image and popularity in the market of Europe. Moreover, due to the presence all these high-profile activities at competitive range might attract a wide range of customer’s thereby declining threat of competitive rivalry. Furthermore, the range of profitability and net income of Knight Frank may not get affected at the time political instability or economic downtown. Hence, by implementing the strategy of offering numerous activities and facilities mentioned above at budgeted cost might surely improve the ranking and position of the hotel of Knight Frank to a significant extent as compared to many other rival players. Besides these, due to the presentation of numerous high-profile facilities at affordable cost, the level of consistency and dependency of Knight Frank might get enhanced within the minds of the customers that may improve its dominance in the market as well. Due to improvement of dominance, the rate of threat of existing rival players as well as new entrants might get reduced significantly (Keegan, 2002, pp. 335-356). Hence, from the above mentioned points, it might be clearly depicted that presentation of high-end services at a budgeted cost might prove extremely effective for Knight Frank in the market of Europe. Internal strengths and weaknesses The resources or skills that may be used to improve the brand image and popularity of Knight Frank are: highly spacious room facility, high speed internet services and world class meeting, conference or wedding rooms for the customers. These facilities might be promoted as optional benefits available for the interested customers at a quite mind-blowing price. By promoting the above mentioned facilities, numerous interested customers might get attracted that may increase the dominance and reputation of Knight Frank in the region of Europe among others. Moreover, by offering these facilities, the profitability and demand of the hotel, Knight Frank might also get improved (ESOMAR, 2008, pp. 223-234). Moreover, some of the facilities that may hinder the competitiveness and profitability of Knight Frank in the marker of Europe are poor maintenance culture, poor corporate culture and poor customer services. This is because; due to poor customer services and poor corporate culture, the rate of satisfaction of the customers might get reduced thereby hindering their reliability and consistency. As a result, the rate of loyalty and trust over the brand might get reduced that may decline the profitability and demand of the hotel of Knight Frank in the market of Europe. However, in order to improve the services and culture of the hotel of Knight Frank, varied types of training and developmental programs need to be organized. Only then, the inner skills and talents of the staffs might get enhanced that may improve the maintenance and customer service facilities. Only then, the image and position of the hotel of Knight Frank might be retained in this competitive market. Outline the 5 elements of the strategy The five elements of cost leadership strategy used to enhance the position of Knight Frank are stated below: Arenas: such type of strategy is active in the hospitality segment in order to attract wide range of consumers. Such type of strategy, mainly categories good customer services in order to retain them for longer period of time. Only then, the rate of switch over costs of the customers might get reduced that may enhance the rate of profitability. Vehicles: in order to achieve a high position and ranking in the market, joint venture might be the most suitable option in the segment of hotel industry. Only then, within a limited time period, a new entrant might enhance its range of customers and dominance in the market among others. Economic Logic: affordable cost for high quality of services in order to increase the range of customers. Moreover, by following this strategy, the competitive position and popularity of the new entrant might also be enhanced significantly as compared to many other rival players. Then, the profitability and demand of the new entrant might get enhanced thereby amplifying its reputation and brand image in the market. Differentiation: in order to attain a good position, the new entrant in hotel industry might offer lowest or affordable prices. By offering lowest prices for high end services might prove effective for the new entrant to retain its image and equity in the market. Staging: by expanding its chains in different regions or markets with the help of joint ventures might prove extremely effective for a new entrant in hotel industry. Only then, it might improve its ranking and position in the market among many other rival players thereby amplifying its profit margin and net income to a significant extent. This might enhance the brand image and reputation of the brand in long run. Works cited Drummond, G. & Ensor, J, “Introduction to Marketing Concepts, 2006”. New York: Cengage Learning. ESOMAR, “Market Research Handbook, 2008”. London: Sage. Global Hotel Perspectives, “Overview of the Global Hotel Industry”, 2012. Web, 2014. Keegan, “Global Marketing Management, 2002”. London: Pearson Education. Read More