Major Issues in the Hospitality Industry - Dissertation Example

Major Issues in Hospitality Industry Business Report Reference The business report is prepared to generate awareness about the two major factors and issues that significantly impact the tourism industry in the contemporary times: Changing demographics and their impact on travel trends: and Global emerging markets. Introduction The process of globalization has changed the dynamics of the business across the world. The International Society of Hospitality Consultants (ISHC) had brought out latest report on the changing paradigms of tourism trends where ten major factors were identified that had significant impact on the hospitality industry. The emerging new trends in the hospitality industry have become important issues that must be studied to improve and improvise the business outcome. Indeed, the recent times have seen the sedate and traditional tourism venturing into the quarters which were hitherto beyond the boundaries of imagination of the common people! The competitiveness has brought in a new fervour in the industry and new ideas and innovative approach has become essential part of business strategy to meet the challenges of the time. ‘An increasing globalization and the emergence of new tourist destinations worldwide have created a changing nature of competition’ (Nordin, 2005). Changing demographics and emerging new global markets are two vital factors that would be studied for their impact on the hospitality industry. Discussion Changing demographics and their impact on travel trends The demographic imperatives are strong agents of change in the evolving societies and have huge impact on the market. The demographic changes vis-à-vis population size, age distribution, gender ratio, income group etc. have powerful impact on the economy and consumption behaviour of the consumer. An in-depth knowledge of demographic trends is an intrinsic part of market strategy. Kotler et al assert that in the changing global scenario, demographic compulsions significantly impact market position and need to be taken into consideration in a company’s market strategy (Kotler et al, 2007). The new trends in the hospitality industry is increasingly moving away from the baby boomers to GenX primarily because the gizmo friendly young people in the age group of 18-35 seem to have growing buying power. They are also more adventurous and display a lifestyle that is more inclined towards tourism destination that is different and satisfies their changing demands. Tourism can be broadly defined as ‘the total number of persons who travel, or wish to travel, to use tourists’ facilities and services at places away from their places of work and residence’ (Mathieson & Wall, 1989, p39). To understand the changing behaviour of the public vis-à-vis travel destination, attraction etc. and the ability to forecast the same has become essential in the changing times (Witt & Witt, 1995). The various determinants for the burgeoning demands for tourism are primarily driven by the changing leisure behaviour of the people. Emerging new global trends Globalization has dramatically changed the lifestyle of the people. It has brought in new dimension of work culture and an inherent competition that is both invigorating as well as stressful. It has become apparent that this cut throat environment in the life of the professionals is having adverse effect on their health as well as affecting their performance in the work area. Multinational companies and big business houses have started making efforts to provide requisite outlets to relieve them of the stress. The awareness about issues and things specially related to people, health and environment, that has prompted entrepreneurs and agencies to come up with tour plans which would be multi-purpose and satisfy people’s needs. This special interest tourism provides a challenging and often interesting mix of entertainment and therapy that successfully rejuvenates the person as a whole. ‘The scope of providing new attractions to feed the insatiable appetite of the tourist is never ending’ (Holloway p 205) which has prompted and encouraged tour operators to experiment with wide ranging ideas with impunity for the success of such packages. It is true that leisure time is the main factor for the promotion of tourism but with the widespread interest that it has generated amongst the population in the growing times, it has also emerged as an industry with huge potential. It has become important for government and private developers both because of its contribution to the economic welfare of the local economy. Thus, study of the risks and prospects of the region have become important imperatives for SIT products. Bull et al. also affirm that leisure has greatly contributed to the diverse activities, including recreational and tourism activities of the people (Bull et al., 2003). .Vanhove (2005) has enumerated the five most common economic variables that affect tourism demand are: income levels; population; relative prices; exchange rate; and personal preferences of consumer tastes and travel costs. The people are motivated and driven by the new economic euphoria and technological advancement that has made it easy for the consumer to satisfy their changing requirements for new tourism destinations offered in a packaged deal. Indeed, advent of new technologies has revolutionized the communication, bringing forth a host of new ideas and opportunities in the field of tourism. ‘In the tourism industry, more and more tourist service providers rely on the internet as a key communication tool that is enabling them to save costs and increase the number of customers’ (ICT, 2005). The globalization has made it easier for the entrepreneurs to encash the vast potential in this new emerging industry. Interestingly, SIT packages have great influence on the local tourism and that is the reason, they are becoming popular overseas. Apart from the fact that they boost the local trade and employment, SIT packages are known to take even the smallest nation out of obscurity and into the world limelight. That being the case, the travel agencies the world over, have now included such packages in their strategy and thereby adding special attraction. They have exploited this potential and have formed alliances with the local governments and agencies facilitating easy access for foreign travellers and help alleviating their woes to a great extent. The tourist industry therefore has become a great source of revenue for under-developed and developing countries. Conclusions Consumers are the mainstay of any business and therefore, efforts must be made to develop better understanding with customers with regard to consumer demands and develop appropriate product for the target population. The special interest tourism products have increasingly become popular amongst the masses. In the present market scenario a more aggressive approach to advertise its goods and services, needs to be adopted to meet the challenges of the changing time. Therefore, tourism, in the contemporary times, needs to be redefined in term of changing global values and designed towards exploring the factors that affect the success of management of the tourism business. Indeed, it is time to incorporate Levitt’s advice that organization must learn to think of itself not as producing goods or services but as buying customers, as doing the things that would make people want to do business with it as core business strategy (Levitt, 1960). Recommendations Market orientation, consumer psychology and analysis of database of customers are important part of market strategy. Analysis and identification of the changing trends of the customer requirements are important ingredients to gain leverage against their rivals. The emerging global market and understanding of consumer psychology, therefore, play a vital role in the development of marketing strategy and planning. To meet the challenges of the time, a company needs to incorporate the following modules into its overall business strategy. Poon has described special interest tourism has ‘The provision of customized leisure & recreational experiences driven by the specific expressed interests of individuals and groups’ (Poon, 1997). The exclusivity of the package has special appeal which has popularized the concept of special interest tourism (SIT). This type of tourism goes beyond the usual definition of the word and fulfils the extra demand that the body or the mind or sometimes, both, require. Tourism industry’s challenge is to provide increased value for money either through innovation–driven cost reducing changes in production and marketing processes or through product changes providing more varied tourism experiences (Weiermair, 2001). The growing demand for SIT has necessitated the need to explore new areas of public interest. The sustainability of SIT projects hinges on the new ideas which must be able to attract public interest so much so that they are willing to overcome their financial trepidations and let go of their hesitation in quest for the unknown charm which would go a long way in improving their lifestyle and adding a new perspective to their personal and professional life. Promoting the concept of sustainable development through environment preservation and conservation. Health and Spa Tourism is one such SIT project which holds long term promise of being sustainable. Health is of prime importance to every human being. It is also the one area which gets neglected on the priority basis during crisis which can either be personal or work related. The stress and the tensions of the lifestyle also contribute towards the deteriorating health statistics. The changing global climate has brought its own problems to the masses which have adversely affected the environment and consequently increased risks to the health of the individuals. The various paradigms in the lifestyle of a person have necessitated implementation of concrete steps which would ease growing threats to the health of the people. The multicultural environment has added an extra zing to the already existing challenges of the high strung modern career of the professionals. The personal health has therefore, become a priority area for the executive class and for persons who follow hectic schedules. Segmentation is a major market strategy that helps to identify prospective customers for the existing and new products of the company. Another important fact is that by focusing on the niche market, the Tourism industries can be creative in their products and services and provide the niche market with products that would satisfy their changing requirements. The growing demand for SIT has necessitated the need to explore new areas of public interest. SIT projects or packages because of their exclusivity, frequently address the current burning issue of sustainable development. Sustainable development can be broadly defined as ‘development that meets the needs of the present without compromising the ability of future generations to meet their own needs’ (Brundtland Report, 1987). Health and Spa Tourism, Nature tourism etc. are few such SIT projects which hold long term promise of being sustainable. Development of effective tools and strategy to improve and improvise business by taking cognizance of the feedback systems and regular follow-up. Analysis and identification of the changing trends of the customer requirements are important ingredients to gain leverage against their rivals. The market strategy should be totally focused on the needs and requirements of the people and make continuous efforts to update its products line with that of the changing public demands. Understanding of consumer psychology, therefore, plays a vital role in the development of marketing strategy and planning. The behavioural pattern of the people, in the decision making process of buying products and services, help provide important clues for preparing appropriate advertising strategies and campaigns so that maximum mileage could be garnered for the products. Market metrics are essential part of business strategy which has significant impact on the market. The industry must make efforts to use customer feedback to create, improve and improvise its market plans to suit their changing preferences thus building a sustained customer relationship that would not only retain existing customers but attract new customers. Shultz say that it is the end-users who now control the markets rather than the marketers (Shultz, 2001). While the growth and the future prospects of the business depend on the input data as they are able to divulge vital information about the products and the customers, strategic marketing through widespread appealing advertisement is a vital factor that helped to bring in new clientele. By forming strategic partnership with various stakeholders to market its products and services, the travel companies must develop and maintain their individual brand with the wider objective of establishing their credibility in the global business. Emerging markets are crucial in the era of globalization and can be defined as the new area with high income and where the demand for the product can be created with relative success. With vast diversity in values and ideologies within the social fabric in the global business environment, the company needs to formulate marketing and communication strategy in a way that would not only uphold a high standard of corporate ethics but it must be able to ensure and exhibit understanding of the cross cultural values and handle issues with sensitivity. Any strategy that is formed needs to be localized to suit the local conditions. The advertisements should conform to the format that promotes fair and ethical practices. The tourism industry is forging alliances across the globe with other various units of hospitality industries to give the best value added services to its customers. In an industry which has wide scope and opportunities, it is very important that the firm must strive to have a definite and advantageous position within the industry. In a fiercely competitive industry the firm gains that position by leveraging its strengths. According to Michael Porter, the firms’ strengths can be broadly categorized into cost advantage and differentiation. Three types of generic strategies emerge when these strengths are applied by the firm: cost leadership, focus and differentiation (Porter, 1980). Cost leadership strategy provides the particular hospitality industry or firm (hotel and tourism agency) with distinct cost advantage against its rivals. The strategy revolves around selling price of the product or service in relation to that of other firms’ product costs. The market share is gained with lower price and is always targeted towards broader market segment. Effective communication to overcome the barrier of socio-psychological paradigms is increasingly becoming a major factor in the sales and market strategy. Focus strategy involves targeting specific market segment by fulfilling their requirement with better service. This strategy normally has high customer loyalty but narrow scope and mostly relies on brand creation. ‘Brand building is needed because products are the same’ (Kotler, 2005). The brand name ensures that the product maintains a high standard of excellence at a price that a customer is willing to pay for. Burj-Al-Arab hotel in Dubai is the world’s tallest luxury and the costliest hotel of the world with world’s tallest atrium lobby. It is shaped in the form of a sail of Arabian vessel. The hotel is the landmark hotel of Dubai that offers exclusive internal and external architectural ambience and services to the select niche clientele (dubai). Differentiation strategy is focused on providing unique features to its products with value added services that gives it an edge over its competitors. The firms which implement this market strategy have the enviable position of commanding premium prices for their product exclusivity. Thomson Travel Group of UK is one of the world’s leading tour operators which has formed alliances with various hotels and resorts across the world for special interest tourism packages. It offers wide ranging holiday packages including skiing vacations on the Alps and wild African Safari and excellent spa facilities in Majorca and Maldives resulting in some long term exclusive clients. The huge diversity of destinations, tourism products and innovative approach has been the hallmark of the success of the company(Thomson Group). (2581) Reference Brundtland Report. (1987). Available from: [Accessed 22 November 2009]. Bull, Chris; Hoose, Jane and Weed, Mike. (2003). Introduction to Leisure Studies. Harlow, Essex: Financial Times/Prentice Hall. Holloway,Christopher J. (2002). The Business of Tourism. Essex.(6th ed.).Pearson Education Limited. ICT and Electronic business in Tourism ‘Sector Report No. 09’. (Sept. 2005)., Available from; [Accessed on 30 November, 2009]. 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