The Globalization of the Hospitality Industry - Term Paper Example

Globalization of the Hospitality Industry Executive Summary This report aims at understanding the globalization of the hospitality industry. It mainly focuses on the Chinese market, and the establishment, growth and penetration of the Hilton International hotel chain in China. The report looks at the main strategies applied in gaining a huge Chinese customer base, and the adaptation in the Chinese culture. The operation of the Hilton Hotels and Resorts in china is looked at from the marketing perspective, establishing its future prospects and analyzing its past through a series of challenges and calculated steps of investment. The data that has been analyzed was collected from reliable books and relational databases that contain information on tourism and hospitality. This report is a product of the extensive reading of books, journals, eBooks and reliable internet sources that provide information on the hospitality industry in China. Hotel reviews are also important in determining the extent to which a hospitality company should improve its marketing skills so as to capture the best executive clients. The findings of the report indicate the increase in the demand for hotels in China, enticing the Hilton Hotel to strengthen its market boundaries within China. Contents Executive Summary 2 Contents 3 Introduction 4 Overview 4 The Business Issue 5 The Hilton Hotel 5 Strategies Applied by the Hilton Hotel in China 6 Data Presentation and Analysis 8 Conclusion and Recommendations 15 References 16 Globalization of the Hospitality Industry Introduction Overview The world is no longer considered a vast planet full of complexities that are difficult to achieve or contain. It has been virtually reduced to a small village that can be managed from a central position. This globalization has affected the hospitality industry since the Second World War. This effect has been in terms of movement of people across the globe for either leisure or business-related activities. The tourism industry has grown over the years, diversifying in what it has to offer. It contributes to the development of the hospitality industry across the globe. There is a proportional increase to the number of international hotels with the increasing number of tourists touring the world. This increase is a resource that can be exploited for its foreign exchange. Many countries rely on tourism as an export product, thus a major source of income. The hospitality industry is one of the largest employers in the world. Its operations range from hotels to accommodation and provision of social amenities. The global creation and spread of hotel chains has been influenced by the increasing need for hotel services across the world. One of the main functions of the hospitality industry is to bring people together in the global village. Thus, this industry is the key to the globalization of international business. Hospitality companies, therefore, must be ready to face the ever-changing global market and its outcomes. They must be up to the task of keeping up with the trends in this industry for the sake of their future survival. They should also be aware of their competition in the global arena, and the strategies they should apply to stay afloat, failure to which they will fail to dominate, or even be relevant in this international market. Some of the strategies that international hospitality companies apply consider the competition and how best to counter it. These strategies ensure that the market attack they launch is lethal to their competition. This requirement pushes them to apply some of their existing competes that they have proven to be successful. These strategies include having sales and marketing programs that fully capture global economies of scale. Moreover, the international expansion is carried out with a common product and brand position. Employees are trained across borders to ensure their efficiency in the new market. For this launch to be successful, the hospitality company should also have organizational structures that allow global delivery of services with local operational control (Kaye (Kye-Sung) Chon, 2010) The Business Issue All hospitality companies with an intention of going international need to think and plan in terms of a global market. A lot of competition is rising in Asia, and especially the oil-rich Arabian Countries that are transforming deserts into areas of international tourist attractions. Globalization will eventually touch nearly all aspects of the hospitality industry. Increasingly, products, customers, employees, management processes and sources of funds will be in competition for across the international boundaries. If the Hilton Hotel in China is caught off-guard, it will be eliminated from the competition (Dalay, 2009). The Hilton Hotel The Hilton Worldwide, commonly known as the Hilton Hotel, is one of the most successful international hospitality companies. It has more than 50 outlets in China alone, running them under different names that are registered under them. The number of Hilton hotels and resorts in China is growing fast (Dodgshun, 2011). This international company had planned for 100 Chinese hotels and resorts by the year 2014, although this is yet to be achieved. Such a target indicates the viability of the Chinese market. This market is one that can bring returns in terms of billions of dollars for them to invest with so much passion and vigor (Still, 2010). Strategies Applied by the Hilton Hotel in China To analyze the strategies applied by the Hilton Worldwide company so as to successfully infiltrate the Chinese market, a number of factor have to be considered. These factors include the strategies that this company applied and their success rate. It is also important to identify the kind of employees they took up, considering the low supply of hospitality experts in China. The market trends in the various cities of China are also important in determining customer preferences and likings. Identifying with what the customers need creates a good starting point as one gets to know what to avail and what to discard. China, being one of the most populated countries in the world, has a very huge customer base. The Hilton Hotels concentrate on their five-star status and therefore need to be at per with the standards associated with this status. This level of relating to customers means that they should have identified China as a key tourist attraction. In analyzing the hospitality industry in China, therefore, requires knowledge of the number of tourists coming in during particular times of the year and the average length of time they spend in this amazing country. Their main attraction to China is also key in identifying the best locations to strategically place the hotels (In OFallon, 2011). To add to these strategies, it is important to note that China is a country with unique cultures that have been preserved over several millennia. The hotels being put up in China have to adapt to these cultures to avoid local conflict and to attract more tourists. A company willing to invest in China must respect the fact that competition is real. This country is huge and has a vast population that can sustain the hospitality industry in terms of employees and customers. Therefore, a hospitality company should have an impact that will attract the attention of other key players in the same industry. For the Hilton chain of hotels has such an impact in China, the source of which is strategic planning and marketing, in addition to having a world-famous brand. Any tourist to china has probably heard of the Hilton hotel back in their country, or has even visited one (Jagels, 2010). This makes it easier for the Chinese branches to get clients, as long as they place themselves in strategic locations and create the awareness of their existence in this huge market. Most of the data used and analyzed was from journals, eBooks and relational databases found in EBSCO. This source is known for up to date and reliable data on businesses and corporations. It was easy to identify the hospitality trends and changes, and to compare them with the past occurrences in this industry so as to come up with a comprehensive report on the globalization of this hospitality industry. The operations of the Hilton Worldwide Company in China are outlined in various journals and reports, giving an insight into the strategies applied and the techniques used to ensure success. Other reliable sources of information include the hotel’s website in regards to its penetration of China, the average number of clients and the annual revenue reports provided to determine whether there was an improvement or decline with the increasing number of competing hotels (Okumus, 2014). The analysis of data was done by the use of Microsoft Excel. This analysis involved the creation of comparison tables to determine the changing trends in various hospitality aspects such as number of tourists visiting China per year over the last decade. Graphs were plotted for ease of interpretation. These line graphs are essential in displaying trends without and little or no calculations are required to understand their slopes (International Conference on Tourism and Hospitality between China and Spain, 2015). Data Presentation and Analysis There has been rapid growth in China’s Hotel Industry which has seen the creation of 2.5Million hotel rooms and a market worth of $44billion. However, the rooms per capita is still 4 despite the high growth in this industry. With the increased penetration of big hotels, it is expected that the rooms per 1000 capita will reach 8 in the near future and a statistical prediction of $100billion has already been made for the industry. This makes China one of the most viable markets for global hotel operators. Travels to China increased in the previous decade as shown in figure 1, in comparison to other countries: Figure 1: Comparing tourist arrivals. Adapted from Euromonitor International (2010 a), from http://www.portal.euromonitor.com Some of the big names in China’s hotel industry include the popular Hilton Hotel. There has been an increase in the number 4-star and 5-star hotels in the recent years reaching the figure of 2,214 and 658 respectively. The major cities hosting this hotels include Shanghai, Chengdu, Hong Kong and Beijing. There are government plans to increase the growth of the hotel industry and to concentrate more resources in this sector other than the manufacturing sector. The said plans involve the development of the tourism industries and its promotion on an international scale. There has been an increase of ratings for 4-star and 5-satr hotels which were at 14.2% and 17.1% respectively in the year 2008. In the same year, the Olympic Games held in Beijing, saw a rapid increase in star-rated hotels within this city. This number rose in the following year. There has been a 9.3% growth in the hotel industry within the 5 years preceding 2014 and this industry grew to $47.7billion. The 2010 Shanghai expo created a surge of tourist within the country. The same was the case during the Guangzhou-Asian games (Pizam, 2010). The marketing strategy used by the Hilton Hotels to conquer Chinas market is evident in the Huanying program. This program was launched in 2011 in a bid to attract Chinese customers as well as retain them in this 5-star hotel. The main aim of the program was to create an environment that felt like China such that, being in the hotel made the Chinese feel as if they were at home. A key element of this program was its name which is derived from the Chinese meaning of welcome. This program has been implemented in China and beyond. People who travel from China to other countries get to experience the Chinese culture in the Hilton Hotels. This ensures that when they return to China, they will seek the services of Hilton Hotels and will encourage their friends and international business partners to choose from one of the many Hilton Hotels and Resorts when they visit China. The Hotel can take advantage of local tourists, whose number has been on the increase as seen in Table 1. Table 1: Table of domestic tourism in China. Adapted from Euromonitor International (2013 b), from http://www.portal.euromonitor.com Figure 2: Increasing tourist numbers in various parts of the world. Adapted from Euromonitor International (2013 c), from http://www.portal.euromonitor.com Figure 2 above shows the increasing trend in the number of tourists visiting various parts of the world. A key point to note is the numbers in Asia, including China, which are on an exponential rise. One of the key aspects that ensures maximum attraction of customers in China is the provision of amenities that the Chinese way of life. These amenities include the design and finishing of the rooms and environment, the meals served and the entertainment provided. The attendants working in these Hotels also give clients a Chinese feeling by their mode of dressing and the respectful bows they give, similar to those of the Chinese. These techniques are all part of their adaptation strategy to ensure they keep their Chinese consumers happy. China is very competitive in terms of the hotel industry and the Hilton Hotel has to be unique so as to deepen its roots in this country. As a way of reaching customers, the Hilton Hotel uses the internet to advertise its products, packages and locations. In fact, it provides maps to each of its branches, making it easier for customers to find their way. It also avails the hotels booking services on an online platform, making it easier for customers to make reservations even before they get to China. The Hilton Hotel website is written in various languages, including English and Chinese. Another marketing strategy used by the Hilton Hotels is building and maintaining a close relationship with their customers. This relationship involves knowing their preferences and creating custom packages that apply in all the Chinese Hilton Hotels. This relationship is mostly created through the Guest Loyalty Program that runs a worldwide clientele. It ensures that customers are not just the regular people who walks in, use their services then leave but also those that build a lifetime relationship with the hotel. The hotel tracks their customers through their profiles, identifying their ethnicity and unique preferences. As such, they are able to identify the most suitable locations in which they can establish new hotels. These locations are mostly in major cities and beach fronts (Hartman, 2012). Hilton has had to adapt to the Chinese culture so as to balance its brand expectations with the Chinese cultural norms. The rapid growth of the Hilton chain of hotels in China requires an understanding of the local culture so as to provide the best products and services for their guests. To ensure this success and to get a competitive edge, the Hilton Hotel provides an experience that is unforgettable. Top of the art customer care is another strategy applied by the Hilton Hotel. They ensure that customers are fully satisfied, providing transport services, to and from the international airports found in China. Dealing with guests professionally ensures that they prefer the Hilton Hotel to other hotels whenever they re-visit China (Sturman, 2011). The Hilton Hotel trains its employees with a global perspective thus, people working in Hilton Hotels in other parts of the world can be moved to China and still function effectively. This kind of training creates all-rounded manpower that can be applied in whichever market the Hotels are launched. This strategy enables the Hilton chain of Hotels adopt faster than other competing hotels in the Chinese market. Another strategy applied by the Hilton Hotels in gaining the largest scope in China is the implementation of global marketing and sales programs. This hotel has a group of statistical experts that analyze markets and their trends. They assist in the planning of marketing and create an international understanding of markets. This strategy was applied in China and took into account the Chinese population consisting of the young and rich people. This consideration was in line with the companies objectives of providing the best hospitality services for the rich. Developing a comprehensive marketing plan was necessary in determining the time and location at which these group of Hotels would start their operations. Branding and positioning are essential aspects that should be put into consideration when formulating a growth strategy. By looking at the biggest cities in China and acquiring property on which the hotels will be located, the Hilton Hotel managed to penetrate the Chinese market. Spreading across China involved strategic planning of the most suitable locations of the Hotels. China has a long beach front and the Hilton Hotels took advantage of this fact by opening up resorts along the coastal line. These resorts are a popular tourist destination that creates a lot of income for both China and the Hilton Hotels. The increasing number of sporting activities taking place in China creates a big tourist influx. This increased population of tourists creates a big market for the hotel industry. The Hilton Hotel, having strengthened its international brand, has an upper hand in this market. This brand enables the hotel get more customers throughout the peak season, increasing their annual income. The result of this is the need to add more hotels in their already long chain consisting of more than 50hotels (Ford, 2012). Table 2 below shows the predicted tourist turnover that might benefit the Hilton Hotels. Table 2: Domestic tourist expenditure in China. Adapted from Euromonitor International (2013 d), from http://www.portal.euromonitor.com Reverse adaptation is another strategy applied by the Hilton Hotel in the Chinese market. This innovation involves the adoption of international cultures and bringing them together. This technique has been hailed by analysts since it changes the traditional norm of having to adapt to a given culture in which the hotel operate. Instead, it brings a culture to the population and teaches it to them. This strategy is evident in the Hilton hotels found in China. They accommodate the many international tourists travelling to China, giving them a taste of their own culture according to their preference. Reverse adaptation is favored by the fact that international travel has been on a rapid increase in the recent past (Endter, 2010). Tourists and business people from various parts of the world travel the globe but still want to feel as though they are in their home country. Instead of adapting to the meals, culture and way of life of the country they are visiting, they can get a feel of their country of residence in any of the Hilton Hotels. The reverse adaptation has been applied by the Hilton hotels to many other countries other than China. In these countries, the Chinese culture has been copied from China and implemented such that, travelers from China will have a feel of home when they seek the services of the Hilton Hotels in the countries they visit. This is a key factor in ensuring that Chinese customers remain loyal to the Hilton Hotel in whichever part of the world they travel. Good customer service and relations in these foreign countries makes them want to visit the Hilton chain of Hotels when they get back to China (Paley, 2013). Conclusion and Recommendations The success in the Chinese market depends on the strategies applied by the company investing in this big country. China is one of the most populated countries and therefore has one of the biggest resources in terms of people, workers and markets. The Hilton International chain of 5-star resorts and hotels in China has been successful due to the application of well-planned strategies. These strategies are skillfully crafted, giving this company a competitive edge over all other hotels (Plunkett, 2013). The hospitality industry is a growing sector of the economy. It has not been fully exploited and still requires intensive studies. These studies should be geared towards understanding the markets available in this industry and the best customer preferences that should be given priority. The eventual alignment of markets with products by players in this hospitality industry ensures the success of hotels all over the world. It is recommended that hotels, such as the Hilton Hotel, take into consideration the competition that is in the global hospitality market, and especially in China. They should understand the relationship between supply and demand. This recommendation leads to the need of employing experts who can analyze the Chinese market and its future viability. With a huge customer influx, new hotels can be established and developed. Hence, another recommendation involves adhering to government regulations that apply to the globalization of industries. Obeying the law of a country creates room for expansion and government deals, and is the first step to international success. Thirdly, the Hilton Hotel should accept the fact that competition should exist. They should engage in positive competition, and can buy out most of the competition to enhance their prospects of monopoly. References Dalay, I. (2009). Globalization and transition: Administrative, political, international strategic and economical studies. Bonn: Scientia Bonnensis. Dodgshun, G. P. (2011). Cookery for the hospitality industry. Cambridge;Port Melbourne, Vic: Cambridge University Press. Endter, C. (2010). Managing people in international hospitality & tourism industries: Approaches to managing, motivating and rewarding employees. Ford, R. &. (2012). Managing quality service in hospitality: How organizations achieve excellence in the guest experience. Clifton Park, N.Y.: Delmar, Cengage Learning. Hartman, J. (2012). Chinese Jade of Five Centuries. Boston: Tuttle Publishing. In OFallon, M. J. (2011). Hotel management and operations. 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