Hotel and Resort Industry in Egypt - Case Study Example

Supervisor Hotel and Resort Industry in Egypt By December, 2008 TABLE OF CONTENTS 0 Introduction 0 Introduction Today, business environment has increasingly become more turbulent, chaotic and challenging than ever before. To survive, it is vital that a firm can do something better than its competitors (Wonglimpiyarat 2004:1). Globalisation has not only altered the nature and the intensity of competition but has had to dictate and shape organisations in terms of what consumers wants, how and when they want it and what they are prepared to pay for it (Hagan 1996:1). Kanter (1995:71) on his work of “Mastering Change” argues that success in the present day business is not for those companies that re-engineer the way they do things, or for those fixing the past. According to Kanter (1995) such an action will not constitute an adequate response. This is so because success is based on an organization’s ability to create, rather than predict the future by developing those products that will literally transform the way the world thinks and view it self and the needs (Kanter 1995:71). Through an environmental analysis will understand how a firm’s competitive position is affected by different forces. More and more companies are engaging in corporate social responsibility reporting, which helps major stakeholders to better understand how the company interacts with its society. (Sacconi, 2004). This essay uses the PESTLE framework to analyse the hotel and resort industry of Egypt. There after, attention is shifted to another analytical model, the SWOT matrix. 1.1 Environmental Analysis of Egypt : LAYOUT OF THE PESTEL FRAMEWORK The PESTEL framework can only be used to look at the future impact of environmental factors and that this impact might be different from the past. Thus, an understanding of how the factors in the above framework may drive change is only a starting point (Johnson et al. 2006).There is a need for an understanding of the key change drivers and Looking at the PESTEL framework shown above one can observe that the hotel and resort industry of Egypt is affected by all the environmental factors in the framework. Under political the industry will be affected by both taxation and social welfare policies. Given the fact that consumer’s income is dependent on government taxation policies, it is evident that take home income might either increase or reduce depending on the taxation policies adopted by the government at anyone time. In addition, government spending is greatly affected by its taxation policy. The political environment of Egypt is very stable, though there are some opposition. Today Egypt is seen as an emerging economy in the Middle East. This has attracted lots and lots of foreigners into major cities in Egypt thus boosting tourism. An open and energetic market situation is necessary for hospitality enterprise. Government policy is the key factor for established an excellent investment environment. Related the Egyptian government has favourable policies with respect to the tourism market, many government policies are propitious to tourism and hospitality industry. Because Egypt is a famous tour country in Africa, the cradle of civilisation with its famous mommies and pyramid history, so government pays more attention on the tourism and hospitality industry. First, the government set up Tourist Bureau to expedite the tourism and hospitality, in country, it have municipal tourism commission and hotel association affiliate to Tourist Bureau. And these government organization have some functions: Responsible for the drafting and declaration the investment plan of tourism development capital, and lead the public investment on tourism industry and foreign capital utilization; Responsible for the survey and plan of tourist resources; Supervise and oversee the order and service quality of tourist market and so on(Egypt Tourist Bureau,2006). In addition a new system of hotel ratings have been introduced inline wit international standards. This new system will not only aid tourists in their selection of accommodations, but the hotel industry in Egypt as well. It will eliminate the phenomenon of lowering prices as the only means of competition Economic factors, these include interest rates, taxation changes, economic growth, inflation and exchange rates. For hospitality enterprise invest a new location, the economic factor is the main factor related the productiveness and development of the new hotel. For Egypt, it has good economic growth situation, last three years before 2008, the total GDP had a good develop trend, the every growth rate beyond 10%, and this means a high growth rate. But from the figure, also can find some implied anxiety, the growth rate from 15.7% in Quarter 1 of 2006 decline to 14.6% in Quarter 1 of 2008, this means the speed of the develop is gradually to slow. This direction cannot avoid, because the economic recessionary appear in worldwide at recently years. Focus on the tourism and hospitality industry, Egypt has larger numbers of tourists and the foreign tourist’s more than domestic tourists. This shows Egypt has sufficient tourism market to support hospitality industry. Another part is about tourism revenue, the revenue increased every year, this means in Egypt the tourism industry gain a good achievements and the develop momentum is continuance. These also advantage for foreign hotels like Ritz-Carlton. The social factors : social trends can impact on the demand for a firms products and the availability and willingness of individuals to work. Egypt is a famous country and have large number tour points in center of its major cities. So the tourism is popular and familiar in social life of Egypt. Commonalty are welcome the tourism and hospitality develop in Egypt with major festival and event about tourism, for example World Leisure Expo to be held in Egypt soon. The social atmosphere is very fit. The tourism and hospitality industry develop in country. Another social factor is about education and industrial structure. Tertiary education level and above accounted for 14.92% of the population of Egypt total population ( Country Report 2007). This means hotels like the Ritz Carlton can obtain enough high level employees from the social environment. Environmental factors: The city has an excellent weather condition. The government has created many sight seeing locations to encourage tourism. So environmental factor become excessively prominence. The government of Egypt is very keen to the environment, protect environment and establish evanescence facility. From the awards gained by country in recent years the importance can be seen, Major cities in Egypt gained a mass of awards about environment and community development, for example, UN Prize of Human Residence, National Model City in Environmental Protection, Best tour city in Egypt etc(Honorary Titles, 2008). Good dive sites are accessible from Hurghada and Marsa Alam. Hurghada is known for surfing and kitesurfing Technological factors: new technologies create new products and new processes. For tourism and hospitality industry, the technology factors main impact by transportation and communication. The good transportation technology can increase the capability and efficiency in tourism industry. Also this project is very important for tourism; the metro can link major cities within the twinkle of an eye. Also for hospitality industry, e-booking system can raise the rates and efficiency of rent accommodation in big range. Egypt provides a favorable environment for taxes. Laws regulating the tourism industry are favorable. Hotel openings and refurbishments have taken place, mostly around Hurghada, Soma Bay and Marsa Alam. Sahl Hasheesh is a new development 10 miles from Hurghada airport. 1.2SWOT analysis of the Hotel and Resort Industry in Egypt Strengths Premium location, centre of primary target market catchments. High exposure to foot and vehicular traffic. Unique service offering to this market in Egyptian area highly recognized and admired in the world. High level of qualified resources and their professional capabilities to provide quality service to customers and business and marketing management. Exclusive club environment with all services for club members under one roof. Strong investment capital. Physical environment is high quality, contemporary and safe designed. A cool environment that customers can be proud of. WiFi enabled café and related and conglomerate activities Multisensory experience design (audio/aroma/visual) possible Haven for families, a must visit destination for researchers, business persons and the affluence. Providing the highest historical club environment and services for our customers: quality standards, passion for service Satisfying and delighting our customers through, relaxation, meaningful value, innovation of free time usage. Supporting team excellence and happiness Empowering Work Environments Sustainable Supply/ Wise Environmental Practices/ Community Citizenship 365/days business/ Celebrity endorsement Pool of cheap credit Growing position of Egypt in the middle east and Africa Growing government support and protection for tourist Weaknesses Depends highly on weather condition Rely on government and Community support Reach is limited –limited in primary target market catchment. Highly dependent on partners/alliances rather than employees to deliver the services. Risk of reduced focus by third party Potential loss of continuity from third parties if not perceived as part of the invisible team. Danger of third party seeing alliance as incremental rather than core particularly in more popular services. Opportunities Falling cost of capital Extra Increase immigration to Egypt Growing development of local football leagues Highest population growth in with auxiliary services Niche target market opportunities for affluent new and young families. Horizontal market Strategic alliances/business partners & associations. Ability to build strong membership base. Ongoing market research to database to innovate, refine, test. Greater differentiation to the target segment Threats New entrants and investors from Asia, threats of a buy out Global economy, The risks surrounding the world economy are creating uncertainty for the domestic outlook Current pressures on food and fuel prices, the recent interest rate rise, combined with the possible impact of increased credit market spreads on household borrowing costs, will have a moderating effect on consumption. Competition, local government and community services. Change in legislation According to Johnson et al (2005), the PESTEL framework can only be used to look at the future impact of environmental factors and that this impact might be different from the past. Thus an understanding of how the factors in the above framework may drive change is only a starting point (Johnson et al 2005).There is a need for an understanding of the key change drivers. See Appendix 1 In order to maintain service, quality and logistic standards, companies periodically audit their environment and compared to overall corporate performance through benchmarking. Companies that, fail to take advantage of its environment will lag behind. Today, the requirements of an organisation’s stakeholders including, customers, employees, suppliers, shareholders, government, etc are on a continuous rise. It is only through an environmental assessment that companies understand and take advantage of this. 2.0 Conclusion Environment analysis has become an important way and method in analyzing a firm position. Through an environmental analysis will understand how a firm’s competitive position is affected by different forces. More and more companies are engaging in corporate social responsibility reporting, which helps major stakeholders to better understand how the company interacts with its society. (Sacconi, 2004). It is only through environmental scanning and analysis that we can portray this better. From the foregoing caption, the Warwick Cricket Club is affected by all the factors outlined in the framework. One can conclude that major stakeholders of an organisation have increased their concern on how the activities of the organisation affect the social and environmental setting in which they operate. As a result there has been an increase in the requirements from companies. 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