Threats and Opportunities of Hotel Market in Vietnam - Research Paper Example

STRATEGIC HOTEL MANAGEMENT ISSUES Modern tourism and hotel industry is influenced by demographic characteristics, technology, market segmentation, vocation resorts, national economy, travel patterns and types of investments. The target country is Vietnam. This country proposes great opportunities for a hotel operator thus hides some threats and risks. Technology itself is almost always taken as an exogenous factor in economic analysis. Opportunities include increased population and improved economic conditions of the country, direct investment and technological change. Still, Vietnam has high inflation rates and old legislation dangerous for a hotel business and the market in general. . Also, management must decide whether it wishes to skim the market or penetrate it deeply. In such cases, the major challenge is to ensure that each of the channels makes sense on economic grounds. Flexibility and risk mitigation techniques will help a hotel operator to obtain a stable market position in Vietnam. Table of Contents 1. Abstract 2. Table of Contents 3. Introduction 4. Opportunities and Threats for the Hotel Industry In Vietnam a. Opportunities b. Threats 5. A Plan for an Individual Hotel Operator 6. Threats and Opportunities of Hotel Market 7. Conclusion 8. Bibliography 9. Appendices Introduction Following Rutherford, a tourism industry is influenced by political, social and economic factors of a particular country. Using the case of the USA, it is possible to say that "among the country's living patterns. People and industry have moved from the so-called rust belt to the sun belt. The explosion of technology and information-based companies has concentrated human endeavor in technological corridor" (Rutherford 2006, p. 1). The country selected for analysis is Vietnam. In today's transformation from the industrial to the postindustrial era, managers devote much energy and time on each firm's strategic posture. Taking advantage of new opportunities and deflating threats may be the essence of strategy, but changes in strategy do not just happen automatically. Strategy depends on a firm's ability to identify emerging patterns in the business environmentand to act accordingly on time. Strategy design depends on learning or, more precisely, on institutional learning. Opportunities and Threats for the Hotel Industry In Vietnam Opportunities and threats will be analyzed in terms of demographic characteristics, technology, market segmentation, vocation resorts, national economy, travel patterns and types of investments. Modern Vietnam (south and North), can be characterized by productivity, unemployment, and corporate restructuring preoccupying industrialized society, causing anxiety to firms unprepared to deal with these problems. Thus, as a developing country, Vietnam proposes opportunities for a hotel business (DeFranco and Noriega 1999). Opportunities Opportunities in Vietnam are connected with young population and huge investments in business, technological developments and modernization processes. Since 60 percent of Vietnam's population is under the age of 25, it is no surprise that hotel chains are also quick to make moves in Vietnam. Experts agree that the Vietnamese market holds tremendous potential over the long term. It may be two decades before Vietnam reaches the level of economic development found in Thailand today. Meanwhile, the country's location in the heart of Asia and the presence of an ample, low-wage workforce are powerful magnets for foreign companies. Overall FDI peaked at about $3.1 billion in 1997 after rising steadily since the early 1990s. Investment pledges totaled $1.48 billion in 1999, down dramatically from $4 billion in 2004. U.S. investment in Vietnam has lagged well behind that of other countries (VIETNAM: Economic Policy Analysis, 2006). Technology is still underdeveloped by local companies and international corporation invest heavily in this sphere of business (Dittmer 2001; see appendix 1,2). Threats The population is very poor, with 2005 annual per capita income of only about $350. However, urbanites with savings estimated at $1 to $2 billion comprise one-quarter of the population. The infrastructure is undeveloped: Only 10 percent of roads are paved, electricity sources are unreliable, there is less than one telephone per 100 people, and the banking system is undeveloped. The Communist Party of Vietnam (CPV) is struggling to adapt to the principles of a market economy, and the layers of bureaucracy, built up over decades of communist rule slow the pace of change. Part of the problem was the "currency contagion" that had gripped Asia since mid-1997. Asian countries that had been major investors were scaling back their activities in Vietnam. In January 2000, for example, the regulatory environment improved with the enactment of an enterprise law that streamlined the process of setting up a business; a stock market was also opened (VIETNAM: Economic Policy Analysis, 2006; see appendix 3,4). A Plan for an Individual Hotel Operator The priority for SAPA HOTELS, a Vietnam hotel operator, is to invest in technology and the Internet in order to attract international tourists and businessmen. Taking advantage of new opportunities and deflating threats may be the essence of strategy, but changes in strategy do not just happen automatically. Strategy depends on a firm's ability to identify emerging patterns in the business environment and to act accordingly on time. Strategy design depends on learning or, more precisely, on institutional learning . It is a commonplace belief that experience is the best teacher; indeed, it is usually easy to learn from experience. Those who try to teach experience share such beliefs. "The speed with which information is accumulated, stored, manipulated, and transferred is such that today most travelers expect that the hotel rooms they rent will allow them to be as productive as they are in the office or at home" (Rutherford 2006, p. 2). Adding full-time workers to a fully loaded operation for the sake of maintaining breaks and regular hours may violate all the productivity principles of our Western micro-specialist paradigm. Yet, excess capacity can reduce errors caused by fatigue and save a firm a bundle (Grant, 1991). Another priority for SAPA HOTELS is to attract more investments from abroad. This strategy will help SAPA HOTELS to build new accommodations and open new hotels in other cities. To give a hint of what is to follow, the required shift is one from the calculus of short-term accounting transactions to one of computing long-term strategic implications. These implications are the consequences not of isolated events, but of the system structure underlying the cause-effect relationships among both environmental and strategic decision or policy variables. Managers have some idea of what's hooked up to what among the variables pertinent to a firm's strategic situation. This knowledge constitutes their mental models of the connections among variables as well as among variables and their consequences. Yet, the dynamic consequences or implications produced by a system's causal relationships are virtually impossible to predict through simple observation. Managers need tools to help them gauge the assumptions that underlie their mental models about the future (Guides, 2006). Threats and Opportunities of Hotel Market Vietnam introduces laws and regulations in order to support foreign subsidies and attract FDI (foreign direct investments). In order to support national economy, the governmental prevents price rises, or even to rolls them back in basic industries such as steel. Governmental involvement seems to relate price increases to the impact on inflation and increased productivity. Government has the influence to block or roll back price increases. This threat will need additional attention of hotel management and additional contingency plans. Economic situation in the country is marked by high inflation rates and low income per capita. Thus, liberalization and high level of investments can be considered as opportunities for a company to enter this country (Prahalad and Hamel 1996). Southern Vietnam has higher standard of living than the north part. For a foreign company, there are also the necessities of making long-run capital commitments, meeting the requirements of joint ventures with nationals, and the imposition of special income taxes and import duties on necessities, as well as differences in social legislation, location considerations, protection of home products, governmental attitudes and control, laws affecting labels and standards, transportation and communications problems, and the risks o inflation, currency devaluation, and expropriation. All these create many additional uncertainties to those encountered in national marketing (Hayes and Ninmeier 2006). It would be possible to capitalize on taking into account new cultural trends and increased interest to Asian countries and their culture. Inside the country, social-demographic factors suggest fast population growth and decreased mortality rates. Both in physical appearance and in most aspects of their culture-notably, their language, their traditional form of administration, and their religion, which contains elements of animism, Taoism, Confucianism, and Mahayana Buddhism--the Vietnamese show much the closest affinities of any South--east Asian people. It is the northern half of Vietnam which has the larger population, and, in spite of provisions for moving refugees to the south, this distinction is not likely to disappear entirely. Also, Vietnam attracts many international tourists from all over the world interested in unique Asian religion and values (Ray, 2007). Action Plan It order to anticipate threats, the hotel operator should pay attention to forecast and demand figures and develop a contingency plan to mitigate possible risks. Possible alternatives are aggressive advertising campaign inside the country and promotion activities in one of the European countries, lodging services for conference members and flexible bonus system for repeat clients. These strategies will help to attract more clients and create a positive brand image of the hotel operator. In order to anticipate opportunities, the hotel operator should introduce technological changes (Ray, 2007). Technological factors involve the Internet access and development of telecommunication infrastructure, new methods of doing business and information availability. Such factors as continued economic growth, increased disposable income, vigorous domestic and foreign competition, accelerating technology, automation, population decentralization, expansion, and innovation will spur the appearance of this new marketing form. The application of computer technology and the use of new analytical techniques has added greatly to the efficacy of planning activities. Conclusion Vietnam proposes many benefits and opportunities for a hotel operator thus it hides some threats and risks which should be taken into account. Increased population rates and improved economic relations with other nations, foreign direct investment and technological changes create opportunities for a hotel operator. Thus, high inflation rates and old legislation need contingency plans and risk mitigation techniques. Bibliography VIETNAM: 2006, Economic Policy Analysis. Retrieved 09 March 2008, from Bardi J.A. 2002, Hotel Front Office Management Wiley; 3 edition. DeFranco A., Noriega P. 1999, Cost Control in the Hospitality Industry. Prentice Hall; 1 edition. Dittmer P. R. 2001, Dimensions of the Hospitality Industry, 3rd Edition, Grant, R.M. 1991, "The resourced based theory of competitive advantage". California Management Review, #33. pp. 114-35 Guides, R. 2006, The Rough Guide to Vietnam 5 (Rough Guide Travel Guides). Rough Guides; 5 edition. Hayes D.K. Ninmeier J.D. 2003, Hotel Operations Management Prentice Hall; 1st edition. Introduction to Management in the Hospitality Industry, 2002, Seventh Edition and NRAEF Student Workbook Package, Wiley. Prahalad, C.K., Hamel, G. 1990. The core competence of the corporation. Harvard Business Review, May - June. Ray, N. 2007, Vietnam (Country Guide). Lonely Planet; 9 edition. Rutherford D.G. 2006, Hotel Management and Operations, 3rd Edition. Wiley, 3 edition. Appendix 1. 2. Vietnam Population Rise 3. Vietnam Dollar Value. 4. Inflation rates. Read More