University of Oxford

Recent Development In The Hotel Industry

Abstract:

This paper analysis recent development in the hotel industry that aid in the gaining of competitive advantage and creating value to investors and customers, one of the methods used to promote their business undertaking is through e business through the use of the internet.  The hotel industry has gained advantage through the development of internet website and this helps boost its market size.

The business environment today has experienced continuous change, this change has been characterised by more complexity in the transactions and relationships, and the increase complexity has been as a result of increase information access and the increasing access to information due to the growing technology ands the internet.

A business is usually empowered by information and the resources they usually seek out to meet their wants and needs. Due to the increased complexity there is need acquire competitive strategies and skills to gain competitive advantage over business rivals, in the past the only skills that were required in the hotel industry was excellent guest services but now all these has changed and more competitive strategies have emerged over time.

Introduction:

Competitive advantage is the advantage of a firm over its rivals, this advantage allows the firm to generate higher sales and also retain more customers than its rivals, the advantage include the cost, products, distribution network and customer support provided, when a firm posses competitive advantage it is in a position to generate great value for its stake holders and that the more sustainable the competitive advantage the more it becomes difficult for rivals to neutralise these advantages.

There are two forms of competitive advantage as described by Porter and they include differential advantage and comparative advantage, differential advantage involves a firm creating products and services that differ from those provided by its rivals and these products are seen as better by the consumers, comparative advantage refers to the low price of a firm’s products and services provided to consumers for the same quality of products and services.

Michael Porter also provides business strategies that firms can use to gain competitive advantage over their rivals, the use of these strategies are evident in all industry and some of the key strategies he highlights include differentiation strategy, cost leadership strategy, differentiation focus strategy and cost focus strategy.

There has also been an emergence of new and unique needs of the consumers in the hotel industry, the needs of the consumers over time have moved from the brand to the price and finally the value, consumers now are interested to try out new things for the purpose of fulfilling their distinct preferences and tastes, this has led to competitive firms to adopt to the changing business dynamics to gain competitive advantage.

Labour is one of the important resource in any business, hiring of highly talented labourers will ensure conducive environment in the workplace and therefore there is need for firm to nurture and also to retain these talents as a way of gaining competitive advantage, there must also dbe a focus on deriving value through this talent management strategy, this strategy focuses on building a talented workforce and a self motivated and committed labour force. Change management is also a key to the success in the hotel business, the business must adapt to change in the market, this involves the introduction of new processes, enhancing team work and increasing productivity and the profitability of the business undertaking, the hotel business must therefore be flexible and positive toward change and not resist change because such resistance may result to distractions toward a successful future.

Employment of skilled labour is also an important factor to consider, these skilled employees are to perform such actions as budgeting, financial analysis and forecasting, this helps the business to analyse the root cause and the possible solutions to any problem facing the business, skill required include sales skills and marketing skills, ability to formulate competitive business strategies by implementing the best strategies that succeed in the business undertaking, Charisma is also an important skill required by the hotel and it is an effective strategy that is required in order to differentiate the hotel services and facilities because this emphasizes benefits and features of the hotel in a way that creates value to the customers.

E business:

Application of  Internet in business is a recent major trend adopted by many industries, according to Wagner (2001) there are over 400 million computers that are in more than 400 thousand networks communicating all over the world, as a result the internet has become a very powerful and convenient for business communication, marketing and new opportunities. Small firms in the hotel industry are now able to compete with other larger firms by simply having better presentation on the internet through their websites. The internet allows the firm to offer competitive prices, advertise its products and also services all over the world.

This communication provided by the internet between the service and product provider and customer enhances businesses opportunities by making transaction much easier and cheaper where consumers can buy the products and services over the internet. According to Schulze (1999) the internet also offers an opportunity where consumers can make the right decision with the information provided and also offers an opportunity where consumers can shop online.

According to Deegan (2003) online booking has increased rapidly in the recent past where in 1999 total online booking amounted to 1.1 billion dollars and in 2002 this increased to 6.3 dollars, the availability and ease of online booking has increased the frequency of travel internationally and locally and as a result the increased demand for hotel products and services.

Through the internet the hotels offer competitive prices to consumers and also offer promotions to consumers, through the aid of the internet the consumer is able to compare prices and also the product and services offered and as a result the hotels gain competitive advantage.

The hotel industry has also initiated flexibility whereby they are currently able to offer more brands and also negotiable price cuts schedules, hotels now offer more rooms at different prices that are very competitive. The ability of a hotel to be in a position to offer online purchase and delivery of products and services has also provided them with competitive advantage. Further many hotels also offer services such as advance car hiring, air ticket and travel packages which are very attractive and convenient to consumers.

The main challenge to the e business practised by the hotels is that some customers are afraid of giving away their personal information such as credit card information which is a security concern, the other disadvantage of the internet booking process is the speed of delivery of goods and services and also the reliability of these services, booking and other processes require some time to process and also may be unreliable to consumers and therefore this might turn to be inconvenient to the customer and the business.

With reference to Porter (1990) the internet has resulted into a reduction in information asymmetry and this means that currently consumers can collect information easily regarding hotel products and services, This reduces the customers cost of searching for information, it has also reduced the transaction costs involved in the process and therefore the competitive hotels are using the internet to promote their services which are at very competitive prices due to low transaction costs.

The occurrence of disintermediation in the hotel industry has also aided in gaining competitive advantage, according to Williamson (1999) disintermediation involves giving directly to the consumers the required products and services, this means that consumers are directly connected to the producer, and as a result there has been a reduction in costs through the elimination of intermediaries and because the price is the determining factor in decision making this promotes hotel services providers who provide competitive prices.

Williamson (1999) also states that there has been reintermediation, this involves the emergence of new intermediaries, and successful hotels have hired intermediaries who perform the duty of matching the buyer to the producers, the new intermediaries perform the duty of providing information about the company also boosting confidence about a company.

Michael Porter business strategy model:

Porter provides a four business strategies that firms use to gain competitive advantage, these strategies are applicable to any industry and therefore they are also useful in the understanding of the success of hotel industry competitive advantage, these strategies include differentiation, cost leadership, differentiation focus and cost focus.

  • Differentiation strategy:

This type of strategy involves the selection of a criterion which is used by the consumer in the market, the firm then positions the business in a unique manner to meet this criteria. This strategy mostly used the strategy of charging premium prices for the product offered and in most case the prices reflect the high production cost or value added features that are provided to the consumers. Differentiation therefore is the charging a price that covers more than the production costs of a firm, for these reason consumers will have a reason to prefer the product produced by a firm over the other less differentiated products in the market.

This strategy has been widely used by the hotel industry whereby the price charged on the products and services they offer is far much higher than the production cost involved, however the consumers will prefer the services and products because they believe the high price is a sign of value.

  • Cost leadership strategy:

This is another strategy suggested by Porter. The cost leadership strategy involves the firm becoming a low cost producer in the hotel industry, this is because the driving force of consumers in a standardised market is the price and low priced products will therefore be highly demanded, most of these hotels using these strategies will occasionally offer discounts of products and services offered in order to maximise their sales level and by doing so the hotel will increase the market share in the industry.

  • Differentiations focus strategy:

This strategy involves concentrating on only one or a few targeted market segment, this strategy is aimed at meeting the needs of specific market segment consumers and because other firms in the industry concentrate on the broader market the hotel firm that adopts this strategy is likely to gain competitive advantage, therefore consumers will demand more from this firm due to the fact that the firm meet their wants and needs.

  • Costs focus strategy:

This strategy is similar to the differentiation focus strategy in that its focus is on a given market segment, therefore the firm will seek to achieve the low cost advantage in the industry in given market segment.

Other factors:

The niche market:

This involves the strategy of focusing on a certain market sector, this involves providing a product that is not being offered by other mainstream producers, the niche market is in most cases referred to be addressing a narrow group of potential consumers, the niche market arises when the demand for a certain product is not met by any supply in the available market, example opening a French hotel in the united states which will cater for the French origin consumers and the hotel only French delicacies. However this market is only available to small businesses and therefore the choice depends on the possibility of fast growing and accessibility of the consumers. Hotels that have concentrated on the niche market have been successful and gained comparative advantage over other hotels.

Labour productivity:

Labour is one of the important resource in any business, the hiring and the recruitment activity is a major factor in the success of any business, the hiring of highly talented labourers will ensure conducive environment in the workplace and therefore there is need for firm to nurture and also to retain these talents as a way of gaining competitive advantage.

Competitive advantaged hotel have focused on deriving value through this talent management strategy, this strategy focuses on building a talented workforce and a self motivated and committed labour force, these businesses offer monetary and compensational package that have offered extrinsic motivation to yield a result focused workforce. Team work has also been encouraged and this has been achieved through offering support and also dealing with the workers in a persuasive manner and in a polite manner.

Change management:

Success is also dependent on the adaptation of business to change in customer’s needs, investors and also the market; therefore in order to increase business opportunities the businesses must harness all the creative energies from all stake holders who include investors, owners, staff and customers. This strategy involves keeping the employees engaged in earning, the introduction of new processes, enhancing team work and increasing productivity and the profitability of the business undertaking.

Therefore the hotel business must be flexible and positive toward change and not resist change because such resistance may result to distractions toward a successful future. Adaptation of new technology is also an important factor in the determination of success, all this adds up to the development knowledge and better understanding of stake holders wants and needs

Special labour skills requirements:

There must be the employment of financial skills to undertake such important analysis such as budgeting, budgeting, financial analysis and forecasting, this helps the business to analyse the root cause and the possible solutions to any problem facing the business, other skill required include sales skills and marketing skills, ability to formulate competitive business strategies by implementing the best strategies that succeed in the business undertaking, another moist important skills is the ability to run during business fluctuations periods, There must also be a creative innovative culture in the business that involves the turning of ideas into cash.

Negotiation skills are also important in the hotel business, the existence of negotiators in the hotel industry will lead to success, these skills are to be used to negotiate prices and costs and also for conflict resolution. Businesses therefore must therefore employ workers with positive attitude and with conflict management skills in order to achieve success in negotiation processes. There must therefore be effective communication skills possession in order to increase effectiveness of negotiations.

Negotiating is therefore a fundamental part of undertaking hotel business and also an opportunity for the employees to be creative and to strengthen existing business relationships, and also resolve conflicts, these skills also help the business to win contracts, customers and also other vendors, All these therefore skill have led to the success of competitive sustainable hotels by their ability to employ skilled labours to perform important activities such as forecasting, modelling and budgeting.

The use of Charisma is also an important skill required by the hotel, this is a very effective strategy that is required in order to differentiate the hotel services and facilities because this emphasizes benefits and features of the hotel in a way that creates value to the customers. Therefore there is need to initiate programs that will address customer needs. Also there is need to Develop a monitoring process that improves feedback and satisfaction of customers is the powerful way as tool in the competitive environment of the market. The hotel must strive to turn the complaints by customers into complements and this aid in the creation of a dedicated culture of products and service the hotels.

Conclusion:

Internet application in the hotel industry has resulted to competitive advantage gained by firms that adopt and utilise e commerce, this is because the internet has enabled the ease and quick exchange of information that is the key to success in the hotel industry. Possibility of delivery of services and products to the consumer online is one major advantage of the use of e commerce by the hotel industry; other services provided by the internet include inquiries, ordering online, communication and purchase.

The hotels with sustainable competitive advantage have the opportunity to capture value that will benefits both its customer through meeting the wants and needs and also stake holders, the value captured is important as that value they create and if a hotel cannot capture the value today in the activities they undertake then is will still have difficulties in generate that value in the future activities is undertakes.

Businesses are usually empowered by information and the resources they u seek out to meet the wants and needs of stake holders. Due to the increased complexity there is need acquire competitive strategies and skills to gain competitive advantage over business rivals, in the past the only skills that were required in the hotel industry was excellent guest services but now all these has changed and more competitive strategies have emerged over time.

Labour is one of the important resource in any business, the hiring and the recruitment activity is a major factor in the success of any business, the hiring of highly talented labourers will ensure conducive environment in the workplace and therefore there is need for firm to nurture and also to retain these talents as a way of gaining competitive advantage

Competitive advantaged hotel have focused on deriving value through this talent management strategy, this strategy focuses on building a talented workforce and a self motivated and committed labour force, these businesses offer monetary and compensational package that have offered extrinsic motivation to yield a result focused workforce. Team work has also been encouraged and this has been achieved through offering support and also dealing with the workers in a persuasive manner and in a polite manner.

Change management is also a key to the success in the hotel business, the business must adapt to change in the market and stake holders the businesses must therefore harness all the creative energies from all stake holders who include investors, owners, staff and customers. This strategy involves keeping the employees engaged in earning, the introduction of new processes, enhancing team work and increasing productivity and the profitability of the business undertaking, it must also be flexible and positive toward change and not resist change because such resistance may result to distractions toward a successful future. Adaptation of new technology is also an important factor in the determination of success, all this adds up to the development knowledge and better understanding of stake holders wants and needs.

Employment of skilled labour is also an important factor to consider, these skilled employees are to perform such actions as budgeting, financial analysis and forecasting, this helps the business to analyse the root cause and the possible solutions to any problem facing the business, other skill required include sales skills and marketing skills, ability to formulate competitive business strategies by implementing the best strategies that succeed in the business undertaking, another moist important skills is the ability to run during business fluctuations periods, All these skill will lead to the success of competitive sustainable hotels by their ability to employ skilled labours to perform important activities such as forecasting, modelling and budgeting.

Charisma is also an important skill required by the hotel and it is an effective strategy that is required in order to differentiate the hotel services and facilities because this emphasizes benefits and features of the hotel in a way that creates value to the customers. Therefore there is need to initiate programs that will address customer needs. Also there is need to Develop a monitoring process that improves feedback and satisfaction of customers is the powerful way as tool in the competitive environment of the market.

References:

Judd J. Rivers N. and Wagner W. (2001) creating a winning e business, Thomson publishers,

Boston

Michael Porter (1990) competitive advantage: the creating and sustaining of performance, McGraw Hill publishers, New York

Morton M. (1991) Information Technology and Organizational Transformation, Oxford University Press, Oxford

Deegan and Whinston A. (2003) the Economics of Electronic Commerce, Macmillan Publishing, London

Schulze W (1999) Strategy and Economics of Information, Harvard Business Review, 75(5) 70 to 82

Schneider P. and Perry, T. (2001) Electronic Commerce, Thomson publishers, Boston

Sheldon P. (1997) Tourism Information Technology, Oxford University Press, Oxford

Vassos T (1996) Strategic Internet Marketing, End User Computing Journal, 17 (4) 12 to 15

Vienna A. (1993) Tourism Technology and Competitive Strategies, Macmillan Publishing, London

Wagner (2001)Information Technology for Travel and Tourism, Addison Wesley,

Edinburgh

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