The Competitiveness of the International Hospitality Industry - Essay Example

?Critically evaluate the competitiveness of the international hospitality industry in the context of globalization Introduction The age of globalization has brought about changes in most industries and activities around the world. We are now living in a borderless world where the impact of physical borders has been reduced and where interactions among different nations have become more open and less restrictive. The hospitality industry has not been spared by the impact of globalization. In fact, for the most part, the hospitality industry has benefitted much from this age of globalization. The restrictions which physical borders and distance has posed in the past are no longer a significant barrier because the internet has made it possible to virtually access tourist sites and consider their prospects. The advancements in information technology have made it more convenient for hotels, restaurants, and the hospitality industry to gain access to a wider audience and a wider consumer base. With these considerations, this paper shall critically evaluate the competitiveness of the international hospitality industry in the context of globalization. A discussion on the globalization drivers shall first be laid out followed by a discussion on the following aspects: the impact of globalization, impact of transnational companies and multinational companies and deregulation, impact of globalization on SMEs, taxation and economic leakage, inequality in globalization, and the future of the hospitality industry. Body Globalization drivers The competitiveness of the international hospitality industry in the context of globalization is impacted by different factors. One of these factors includes the globalization drivers, which are mainly, cost, market, government, and competitive drivers. Market drivers for globalization are very much based on common customer needs, and are also based on global market channels and global customers (University of Kentucky, n.d). The strength of market drivers are evaluated from a range of multidomestic markets to the global market. For example, the market for specific foods or cuisines would likely find greater success in the local or domestic setting; however, the market for automobiles, computers, and hotels, fast food chains can be high on the global scale (University of Kentucky, n.d). Cost drivers are also drivers for globalization and include elements which relate to global-sized economies, including source efficiencies, production differences, high production development costs, as well as rapidly shifting technologies (Jager, 2009). The Science Initiative Group Institute for Advanced Study (2007) discusses that globalization is driven by cost which is largely based on the economic conditions of organizations. The persistent pressures on the “economies of scale, advances in technology, and increasing cost of product development are factors that are relevant in this grouping” (Summers, 2005, p. 284). The emergence of innovations adapted by those involved in the hospitality industry determines the costs incurred, and thereby impacts significantly on the call for globalization. In this case, advances in the manner of doing business, including internet availability and advertisements impact on trade costs, prompting other businessmen in the hospitality industry to consider these same innovations (Whitla, Walters, and Davies, 2007). The actions of these drivers are based on other competitors (Summers, 2005). Elements which include increased world trade, new global markets, growth of global economies, and the increased number of competitors all impact on this driver, triggering considerations of globalization (Summers, 2005). Increasing competition among corporations and businesses in the hope of winning over customer consumption preferences has also prompted many corporations to improve the marketability of their products. Current trends in most products include the digitalization trends, where most products have now shifted towards digital versions – digital cameras, online reservations, virtual tours, online advertisements, and similar online transactions (Summers, 2005). As such, businesses who have not been able to adapt to these digital features have found themselves failing in their businesses. Finally, government drivers have mostly been based on the rules of businesses in the workplace. Lower tariff rates, non-prohibitive country entry, trade blocs, privatization of state-owned businesses, and a general application of open markets have all been considered elements which have encouraged the application of globalization (Summers, 2005). For manufacturers, tariff rates, government incentives, as well as labour regulations are all reviewed when possible decisions about establishing businesses in other countries are being made. The higher support of government processes help motivate investors and considerations on potential economic benefits (Yip, 2003). Impact of globalization The competitiveness of the hospitality industry in the current context of globalization is also based on the general impact of globalization, from organizational, socio-cultural, human resources, to economical standpoints. The organization impact of globalization can serve to influence organizations to shift their markets to a larger and more diverse customer market. The advent of globalization has entirely changed the way in which organizations and the hospitality industry performs (Peric, 2005). Some of these changes include changes in planning strategies, in leadership strategies, and in structure (Bhati, 2011). These changes were brought on because of cross-cultural differences which have become more apparent through globalization; they were also brought on due to workforce diversity and the emergence of global managers (Bhati, 2011). Planning changes by the international hospitality industry soon triggered the reassessment of organization plans and objectives, making adjustments based on cultural and workforce diversity while applying the principles of logic and the realistic review of capabilities (Bhati, 2011). Changes in leadership also led to the emergence of global managers, those who can respond to the needs of the globalized hospitality industry. These leaders displayed a geocentric mindset, cultural sensitivity, a clear understanding of corporate goals, strong interpersonal skills, and the willingness to travel frequently (Bhati, 2011). Impact of transnational companies and multinational companies and deregulation The competitiveness of the hospitality industry has also been largely dependent on the ability of corporations to make the hard decisions which relate to consolidation (Prasad, et.al., 2003). Transnational corporations have been the stronger and more profitable trend for the hospitality industry. From 1990 to the present, the hotel and hospitality industry has undergone significant changes in order to accommodate the trends of globalization. Hotels were initially started as local businesses, however, in the past twenty years, major national and international chains have been seen (Hotel Workers Rising, 2006). At present, in the US, about 75% of hotel rooms are associated with hotel chains. These corporations include household names like Hilton, Hyatt, Intercontinental, Marriott, and Starwood (Hotel Workers Rising, 2006). These corporations have remained competitive in the current context of globalization as they have successfully consolidated their hotels, expanding their coverage in as many cities, towns, and countries in the world. Due to the expansion of multinational corporations in the hospitality industry, trends towards global branding have become apparent. In effect, the popular brands Hilton or Hyatt have become the standards by which top-rated hotels and related businesses have been evaluated (Whitla, et.al., 2007). Brand loyalties and identification have also been seen as an offshoot of global branding; moreover, these popular brands have been relied on by international travellers and tourists. Travellers have been supremely assured that in most cities they would visit, anywhere in the world, there would be a Hilton or a Hyatt Hotel where they can stay and be adequately cared for (Knowles, et.al., 2004). Impact of globalization on SMEs The hospitality industry also involves the small-scale industries, such as the restaurants and the small-scale hotels, and in the current age of globalization, these SMEs are significantly struggling (Goldberg and Pavcnik, 2007). The consolidation undertaken by the multinational corporations are offering both threats and opportunities to these SMEs. Nevertheless, their long-term viability within the local tourism industry has been put at risk. In Copenhagen for example, the establishment of two major MNCs has caused pressure on local travel agencies and offerings of lower budget airlines have also added to this pressure on local travel agencies (Moekotte and Freye, 2008). Moreover, the dawn of the age of the internet has reduced the functionality of traditional travel booking agents. As a result, lesser commissions have been made available to these agents. Nevertheless, the internet has also provided a favourable opportunity for travel agencies to establish innovative techniques in drawing in customers and remain competent players in the hospitality industry (Moekotte and Freye, 2008). SMEs have also tried to expand their operations in the international scene, however, these efforts have been difficult to pursue to a more sustained success. And yet, some of these SMEs have made solid attempts towards adopting innovations and adjustments in their manner of business in the hope of increasing their competing power (Scheve and Slaughter, 2002). The SMEs who are stuck in their traditional ways have decidedly been replaced, and others which have considered high-end and innovative methods have flourished (Moekotte and Freye, 2008). The bottom line is that appropriately managed and flexible SMEs have tried to establish new and accepted market spaces and they also acknowledged the importance of combining their efforts with other SMEs in order to gain the utmost benefits or advantages in the age of globalized trade (Keller and Yeaple, 2003). Taxation and economic leakage The competence of the hospitality industry has also been significantly determined by its ability to provide tax revenues to the concerned government units. The viability of a tourist attraction is often based on its ability to gain government support, and such government support can easily be forthcoming if the attraction can potentially bring in significant economic benefits (Nkurayija, 2011). Tourism can potentially bring in tax revenues and investment incomes and globalization provides a greater opportunity to explore such economic benefits. Globalization provides greater pressures for developing countries in terms of trade blocs which demand lower tariff rates for member nations. This can place such developing countries more vulnerable to declining economic trade terms (Nkurayija, 2011). For one, the stronger developed nations can enjoy lower rates of taxes which the developing countries would not be able to apply for their own citizens wanting to experience glimpses of their hospitality industry. The fact that citizens from developing nations cannot easily cross the borders of developed nations is one of the main factors why these developing nations are at a serious disadvantage against developed nations (Nkurayija, 2011). It is however important also to note that the globalized hospitality industry has provided more employment opportunities for citizens from developing nations – the chance to enjoy economic and social benefits, as well as improved capacities in previously neglected areas or regions (Bhatia, 2006). In other words, the hospitality industry creates coordinated associations among various businesses and institutions, including the construction industry, transport industry, agricultural institution, and historical institutions. Inequality in globalization The manifestation of globalization has not been equal all over the world with benefits easily experienced by developed nations, especially MNCs and transnational corporations, and difficulties and losses experienced by developing nations (Whitla, et.al., 2007). As was mentioned in previous paragraphs, reduced tariff rates which come from trade bloc agreements often serve to benefit developed nations more than developing countries (Peric, 2005). In the end, the resources of the developing countries are often depleted by developed nations in order to pursue their ends. The link between globalization and inequality has also been seen in terms of wages (Heshmati, 2003). Literature suggests that trade has had a minor impact as compared to skill-based technical change in terms of improvements in skill premium. There is an assumption that outsourcing and skills labour are interchangeable and capital equipment and skilled labour complementary (Heshmati, 2003). Globalization provides a probably explanation to the facts expressed above. Globalization helps explain the fact that inequality in earnings, especially in the decrease in the wages of unskilled workers. Most of the increases seen in wage disparities have been brought about by changes in the production, and also by outsourcing of unskilled-intensive production processes to the lower income nations (Heshmati, 2003). The hospitality industry has manifested a significant shift in the age of globalization in terms of income inequality for developing countries as wages are still offered based on their country rates, not on international rates. Unfortunately, the international rates for wages are offered at the standards of developed nations. Moreover, only urban areas seem to enjoy the benefits of the hospitality industry (Mpofu, 2008). In effect, the benefits of globalization are felt by urban regions and not to a significant extent by the rural areas where poverty is persistent (Nkurayija, 2011). Future of hospitality industry The hospitality industry will thrive well in the current age of globalization. The hospitality industry is largely based on provisions for individuals and their families various choices for leisure, travel, and entertainment. It also engages people in the multi-cultural set-up and relations (Tipuric, 2002). Globalization also supports the display of local flavours as well as tourist spots, including environmental attractions. With improved communication between countries and across continents, individuals are more sensitized to each other’s traditions and such sensitization would help promote their mutual agendas (Shaw and Williams, 2002). In relation to SMEs, for as long as they are willing to make the necessary changes and adjustments in their business dealings, they would be able to thrive well in the age of globalization (Wahab and Cooper, 2001). For the rest who are unwilling to make the necessary changes, they would be overwhelmed and overrun by MNCs and transnational corporations who are willing and who can afford to make the necessary changes in their businesses to fit the globalization trends (Meyer, 2000). References Bhati, R. 2011, Globalization, viewed 04 January 2011 from http://www.scribd.com/doc/36536831/Globalization-and-its-impact-on-organization Bhatia, A. 2006, International Tourism Management, New Delhi: Sterling Publishers, Pvt, Ltd. 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Whitla, P., Walters, P., Davies, H. 2007, Global strategies in the international hotel industry, Hospitality Management, vol. 26, pp. 777–792. Read More