Contemporary Hospitality Management - Gaviota Tourism Group - Case Study Example

Contemporary Hospitality Management Table of Contents Table of Contents 2 Introduction 3 Overview of the Company 4 SWOT Analysis 5 Strengths 5 Weaknesses 6 Opportunities 6 Threats 6 Global Hotel and Tourism Industry 6 Emerging Markets 7 Difference between Developed and Emerging markets 7 PEST Analysis of Chosen Emerging Market 7 Political Factors 8 Economic Factors 8 Social Factors 8 Technological Factors 9 The Strategies of Gaviota Tourism Group 9 Porters Generic Strategy 9 Cost Leadership Strategy 9 Differentiation Strategy 10 Focus Strategy 10 Ansoff’s Matrix 10 Justification of Strategy 11 Practical application of Strategy 11 Conclusion 12 Reference List 12 Appendices 15 Appendix 1 15 16 Introduction The International hotel industry is considered as a mature industry which is marked by the intense competition. Increased market share comes at a rival’s expense (Irs, 2014). During 1980’s there used to be extensive amalgamation and acquisition between non-hotel and hotel companies. Most of the companies are selling precise brands towards getting back to their main business. Another trend which occurs in hotel industry is the paperless stock systems. In most of the instances, ordering, deliverance, imbursement, and stocking are commenced and completed by information which is captured by examining equipment with little involvement of human resources. Some hotel chains used to sell their ownership to the foreign investors though still keeping control. This provides them with the capital which was required for further growth. The classifications of regular American Hotel are: commercial hotels, conference centres, airport hotels, economy hotels, residential hotels, suite hotels, casino hotels, and resort hotels (Irs, 2014). The hotel industry varies from privately owned businesses to major global groups with more than six lakh room (Irs, 2014). The international hospitality industry involves the organizations or companies which provide accommodation and food to the individuals. It covers broad range of locations, jobs, activities, as well as economic brackets. The hospitality industry involves four sectors which are beverage and food, recreation, lodging, and tourism and travel. The travel industry moves people to different places while tourism industry offers with services which promote vacations and travel (Teare and Olsen, 1992). Overview of the Company The Gaviota Tourism Group (Group de Turismo Gaviota) is founded in 1988 having situated in Cuba. It is the company with the dynamic expansion in the monarchy of the tourism industry in Cuba; present in major travel destinations and is also working progressively for the expansion of the country. As of today, the Gaviota Tourism Group runs total 52 facilities amongst villas and hotels, with 19,214 rooms in function, with more than 650 million of yearly sales and also an average annually development of the hotel portfolio of 12.4%. The growth rate of this hotel industry will stay at a point of 20.3% yearly, ending with more than 4,000 rooms every year, therefore doubling the figure of guestrooms which is estimated to reach 46,000 by 2017 (Gaviota, 2014). For more than 26 years of the hotel excellence as well as the professional offer is designed towards “Live Naturally” make the Company the right preference for the tour to Cuba. The company offers amazing nature sites, warm beaches, history, culture, attractive tours, event, and incentive travel organized by Gaviota Tours travel which is the agency of Gaviota Group (Wtmlondon, 2014). The company has big arrangement for growth beyond the next several years, along with 2 new hotels which is for the upcoming winter season as well as thirty new hotels with the 15,000 rooms by 2018. Each year over than 1 million of Canadian used to visit Cuba and over half of them have the benefit of their services. At present, the company owns 54 hotels with twenty-four thousand rooms, thereby signifying more than one third of the total capacity of the country. Global hotel chains such as Iberostar, Melia International, Occidental, Riu, Blau, Hotusa, Blue Diamond, and Pestana resorts run around 87% of the product of Gaviota hotel. Gaviota also runs its own lodging and housing business with 3,485 hotel rooms athwart the island. The future plan of the Company includes opening a new hotel in Varadero with four hundred and seventy rooms, which is to be supervised by Ocean Hotel chain. Moreover, in the year 2016, they have another new plan with opening of 827 rooms. Infrastructure including new marina tools, nautical facilities, and transportation facilities will grow correspondingly to match with the growing demand of excursions and transfers, and nautical trips (Travelweek, 2014). SWOT Analysis The SWOT analysis involves the investigation of weaknesses, strengths, threats, and opportunities and investigates both, external and internal factors of the company (Best, 2009). A marketing strategy could be developed through the use of corporate strengths and avoiding the corporate weaknesses in order to enable the company to take advantage from the future prospects with regards of threats. The SWOT analysis of Gaviota Tourism Group is discussed below: Strengths The strengths of this company are good and high accommodation; diversity in tourist destinations, good services of transport, manpower cost is low so it provides good margin for the company. Gaviota Tourism Group is an excellent destination for tourist therefore; it pulls more customers and has the potential to grow. The company has numerous excellent hotels in the region that meet the requirements of tourist and also have a good status in the market. They also do technical innovation in order to improve the experience of customer and also do the constant up gradation of the business processes. As of now, the company owns 54 hotels with twenty-four thousand rooms (Travelweek, 2014). Amplified airline activity has encouraged demand and also has helped towards improving the infrastructure. Weaknesses The scenario of internal security and social unrest hinder the arrival rates of tourists. Business operations are also affected internationally because of the different parameters and policies of Government. Moreover, the tax structure of the country also affects the company (Gaviota, 2014). Opportunities As Gaviota Tourism Group is a hotel industry so, it has a good growth potential. Demand among the inbound and the national tourists can be simply managed because of the difference in the holiday’s periods. The hotels are immense and can offer tourists with an exceptional experience. Other opportunity for the company is having the online presence such as its own website can provide the benefit of online booking of hotel and it can be advantageous for Gaviota Tourism Group. Moreover, the company has a high prospective in the emerging markets and through innovation in the customer services as well as by better utilization of digital technology, this hotel company is looking at a boom. Due to rise in the income levels, people have more funds to spend and this will enhance the leisure tourism. The tie ups of Gaviota Tourism Group with the global hotel chains provide it with more opportunities to run its business (Travelweek, 2014). Threats The threats may be the political turbulence which reduces the tourist traffic and therefore the operations of the company; and also the competition from other hotel industries. The total dependence on the foreign tourists may be risky because there are extensive fluctuations in the international tourism. The tendency for the guest hotels is also increasing and therefore the hospitality and hotel industry could be affected. Global Hotel and Tourism Industry The tourism and travel industry is regarded as one of the largest industries of the world with an international economic contribution. The global hotel and tourism industry which includes transportation, accommodation, and entertainment contributes to a large part of the economy (See Appendix 1). They have undergone a continuous recovery while the latest international economic downturn. Global hotels offer enhanced recognition and greater choice to the peoples in an increasing set of hotels which are managed by regional brands, and individuals. The international or global hotels reflect local cultures and traditions through their services and products. Selecting a Global hotel for accommodation means the tourist can be certain that they will get pleasure from the peerless service while enjoying the unique and local experience (Woodside, Megehee and Ogle, 2009). These industries are considered as the largest generators of employment in the world. Emerging Markets The emerging markets are the country that comprises some features of the developed market, although does not meet all the standards of a developed market. This includes those countries that might be the developed countries in the past or be in the future (Ulrici, 2007). The emerging markets do not have that level of strict standards and market efficiency as in developed countries but they have a financial infrastructure incorporating a stock exchange, unified currency and banks (Huang, 2007). They have a GDP (Gross Development Product) per capita less than $8,625, although it does not signify a least GDP per capita (Kvint, 2004). The emerging markets are the BRICS (Brazil, India, Russia, South Africa, and China); SLIMMA (Sri Lanka, Mexico, Indonesia, Argentina, and Malaysia); TUSCKNS (Thailand, United Arab Emirates, South Korea, Chile, Kenya, Nigeria, and Singapore) (Sauvant, 2009). Difference between Developed and Emerging markets Developed markets are those countries which are generally having the most highly developed economy with an outsized service sector (Prodan, 2013). Moreover, they comprises of highly developed markets with soaring level of the per capita income, liquidity, infrastructure such as communications and transportation, consequential regulatory bodies, and great market capitalization. The examples of developed markets are Canada, U.S., Germany, New Zealand, Australia, and Japan (Klonowski, 2012). On the contrast, emerging markets are those countries which is in the course of development and raped growth with lower level of per capita incomes as well as less matured markets than those of developed countries. Emerging markets are BRICS, SLIMMA and TUSCKNS (Sauvant, 2009). PEST Analysis of Chosen Emerging Market A PEST analysis is referred to the investigation of political, social, economical and technological factors having an effect on the business entity (Akasie, 2010). It outlines the broad business environment the company is operating within. China is one of the emerging countries and is chosen as an emerging market for Gaviota Tourism Group. Political Factors As of now, the economy of China is growing enormously. The reform encompasses motivating the growth of foreign investment, private business, employment profile, investment in industrial production, and overseas trade liberalization. In terms of the labour law, the Government of China changes the job structure and becomes less stringent, thereby creating more opportunities for the unemployed. In terms of overseas trade policy, private sectors of the country are moving forward. The opening of foreign trade drives the overseas direct investment. The political moves can affect the number of visitors, both the visits of business travellers and tourists to a country (Guo, 2012). Economic Factors The economy of China has grown rapidly and it can be reflected from the industrial sectors. Recently, China has become the market oriented country. In many industries, the labour input has decreases because of the improvement in the labour productivity and also due to the migration of rural employees to the urban areas. Monetary policy is used by the Bank of China to decrease or increase the interest rates as well as to control the sum of money within the economy in order to attain stable economic growth (Bringe, 1993). The hotel companies in China are occupied during the peak season. Although, the situation is different when the peak season is over. Both the hotel stays as well as spa treatments fundamentally appeal to discretionary income of someone; therefore a growth in the discretionary income may become a positive factor to the hotel companies in China (Ball, Horner and Nield, 2009). Social Factors Various factors influence the economy of China including demographic variables of customers, emerging fashion in the consumer lifestyle, impact of the role models in the decision making process of consumers, and the growth pace of population. For example, the increasing number of consumers from different countries visiting China for different reasons can be termed as a significant social factor which impacts it economy. In terms of the hotel companies in China; holiday travelling is considered as an unnecessary travel therefore some people may opt to not engage in vacation travel principally where the air journey is involved (Ball, Horner and Nield, 2009). Technological Factors The industries and the Government focus on the technological effort, therefore government spend huge amount of funds on research. As the technology and internet facility moving ahead, it drives the China economy’s success. Moreover, the utilization of advanced techniques and technology can be helpful in the management of the utilization of resources like electricity and water that are the resources which are widely used in the hotel companies (Bringe, 1993). The Strategies of Gaviota Tourism Group The current strategy of Gaviota Tourism Group is to develop close functioning relationships with their suppliers and customers and also to recognize the needs of their guests in an efficient manner. Growth and continuous differentiation are two objectives of the company. As they are decided to enter the emerging markets so growth will occur by targeting the new business areas within both national and local communities. Gaviota Tourism Group decided to enter the china market. Porters generic strategy and Ansoff’s matrix is constructed for the company to enter the China market. Porters Generic Strategy The generic strategies of Porter represent the strength of the company in two vital areas of differentiation and cost advantage. Through applying these two strengths in whichever a narrow or broad scope, three common strategies result i.e. differentiation, cost leadership, and focus (Sehgal, 2010). These are referred as generic strategies as they are not industry or firm dependent. Cost Leadership Strategy It is referred to the capability of a company to have the cost of manufacturing the goods and services lower than its competitor (N. Sengupta, Bhattacharya and R. Sengupta, 2006). In order to enter the China market Gaviota Tourism Group will need to lower the cost of its services and products accompanied with improved services. As Gaviota Tourism Group is a Cuba based company and is deciding to move to the China market so, they have to change their menu according to the taste of Chinese customers. While they are entering the China market so, initially they have to keep the cost of its Chinese food low in order to attract more customers. Moreover, they need to provide excellent services at affordable cost. They can provide business essentials facilities in each room such as wireless access, internet connection, Wi-Fi connection, and can also offer simple to access conference rooms with audio-visual as well as technology needs and also catering facility for the longer meetings. Differentiation Strategy It refers to the improvement in services and products that offers exceptional attributes and perceived better than the competitors. In order to differentiate itself this company can position itself while meeting the requirements of the business customers relatively than the individual customers. Moreover, Gaviota Tourism Group can also differentiate itself from other hotel companies by positioning as a meeting or conference hotel relatively to a vacation hotel. It will help to attract more business customer. Focus Strategy This strategy focuses on a contracted segment and in that very segment endeavour to attain either a differentiation or cost advantage. In order to enter the China market Gaviota Tourism Group needs to focus on the preference and taste of Chinese customers. They need to offer varieties of Chinese dishes including rolls, noodles, cuisines, seafood dishes, chop-suey, Chinese snacks, soups, etc (Chengdurestaurant, 2013). Ansoff’s Matrix Ansoff’s matrix provides a model for considering the strategic growth that comes in four alternatives such as using the current market for current product; finding new customer for existing product; using current market for new product; and finding new customers for new product (Partridge and Sinclair-Hunt, 2005). Current market for current product: The existing market for Gaviota Tourism Group is the Cuban customers to whom Cuban foods such as croquetas roll; bunuelos; tamales; tostones; and picadillo are offered at hotels (Cubanfood, 2014). They offer their products at affordable price to draw more customers. New customer for existing product: It will be difficult for the company to penetrate the new market for existing product because the taste and preference of Chinese people is very different from the Cuban customers. However, they can offer a combo of Cuban food and Chinese food which will be preferable to the Chinese customers. Current market for new product: To attract the Cuban customers they can offer the common dishes which suits to the customers of both the country. In this way the company can attract customers of both the countries by providing them food which is preferable to them. New customers for new product: In order to penetrate the Chinese market the company have to do modification in its menu thereby adding Chinese dishes which suits to the Chinese customers. They can also provide holiday package to the random Chinese customers on a lottery basis. Justification of Strategy The cost leadership strategy will provide the company with good image as they will lower the cost of its products and also add some new dishes to their menu accompanied with improved services. They can provide business essentials facilities in each room such as wireless access, internet connection, Wi-Fi connection in each room at affordable price. The differentiation strategy will help the company to do more innovation in its services and products and therefore will pull more new customers. Focus strategy will enable the Gaviota Tourism Group to make the dishes according to the preference and taste of Chinese customers and thus help to gain more profit. By constructing Ansoff’s matrix, the company can decide on how to penetrate the market with existing and new products. Practical application of Strategy By applying the Porter’s generic strategies and by constructing Ansoff’s matrix Gaviota Tourism Group can have more customers from both Cuba and China. When the company will pull more customers then it will be able to construct more hotels with the revenues gathered from the large number of customers. As of now, Gaviota Tourism Group owns 54 hotels with twenty-four thousand rooms, so after 5-10 years it can have total of 70 hotels with 3000 rooms. This can happen because the product of Gaviota Hotel Group is already run by the Global chain so; it provides more opportunities for the company to have its growth and success. Conclusion The report aims to provide an overview of International hotel industry. The Gaviota Tourism Group is a well established company which offers the customers the facility of excellent food and accommodation. SWOT analysis of the company has been carried out in order to know the strengths and weaknesses and what opportunities it has in the emerging market. PEST analysis of emerging market i.e. China has also been carried out to know the influence of different factors on the country. By applying the Porter’s generic strategy, the company can differentiate itself from its rivals and can also have the cost advantage. Thus, it can have more number of hotels in the near future. Reference List Akasie, G., 2010. Accounting Essentials: Concepts, Terms and Meaning. United Kingdom: AuthorHouse. Ball, S., Horner, S. and Nield, K., 2009. Contemporary Hospitality and Tourism Management Issues in China and India. United Kingdom: Routledge. Best, N., 2009. CIMA Official Learning Systems Test of Professional Competence in Management Accounting. United States of America: Elsevier Publication. Bringe, J., 1993. East Asia: Regional economic integration and implications for the United States. 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Partridge, L. and Sinclair-Hunt, M., 2005. Strategic Management. United kingdom: Select Knowledge Limited. Prodan, I., 2013. The effect of weather on stock returns: A comparison between emerging and developed markets. Hamburg: Anchor Academic Publishing. Sauvant, K.P., 2009. The Rise of Transnational Corporations from Emerging Markets. United Kingdom: Edward Elgar Publishing Ltd. Sehgal, V., 2010. Supply chain as strategic asset. England: John Wiley & Sons. Sengupta, N., Bhattacharya M.S. and Sengupta, R.N., 2006. Managing change in organizations. New Delhi: PHI Learning Pvt. Ltd. Statista., 2014. Statistics and Facts on the Global Tourism Industry. [online] Available at: [Accessed 19 Dec 2014]. Teare, R. and Olsen, M.D., 1992. International Hospitality Management. England: Logman Publishing. Travelweek., 2014. Gaviota Group to add 30 new hotels in Cuba by 2018. [online] Available at: < http://www.travelweek.ca/news/gaviota-group-add-30-new-hotels-cuba-2018/> [Accessed 18 Dec 2014]. Ulrici, V., 2007. Bond Valuation in Emerging Markets. Germany: Josef Eul Verlag. Woodside, A.G., Megehee, C.M. and Ogle, A., 2009. Perspectives on cross-cultural, ethnographic, brand image, storytelling, unconscious needs, and hospitality guest research. United Kingdom: Emerland Group Publishing. Wtmlondon., 2014. World Travel Market: Group de Turismo Gaviota. [online] Available at: < http://www.wtmlondon.com/Exhibitor/Grupo-de-Turismo-Gaviota-SA> [Accessed 18 Dec 2014]. Appendices Appendix 1 (Source: Statista, 2014) Read More