Assessment of Hotel Industry's Competitiveness - Essay Example

Running Head: Assessment Of The Industry’s Competitiveness Using Porter’s Five For Analysis And The Level Of Corporate Social And Environmental Responsibility (CSR) Activity In The Hotel Industry. University Name Question One The hotel industry in he UK has been achieving tremendous growth year after the other, recent reports indicates that revenue per available room (revPAR) has doubled in terms of growth in the entire hotel industry. A survey that has been conducted by Deloitte in the year 2006 has indicated that revenue per available room in the UK has achieved a 4.4% growth. London, specifically has achieved a higher growth of 16.8%. This was a notable improvement since the industry managed to reach it’s peak in growth from the year 2000. Aberdeen achieved a very impressive growth of 15.1% making it to be ranked the fastest in growth for the hotels that are outside London. It’s faster rate of growth was associated with North Sea oil industry’s business demand particularly in the weekdays. With a growth of13.9%, Belfast was ranked number two in terms of revPAR growth for those hotels that are outside London. However, compared with Edinburgh the rates of the two hotels industry was still very low a thing that made Edinburgh register the highest rates for those hotels that are not within London. The realized growth has been due to the increased competitiveness demonstrated by the UK hotel industry. The assessments will employ Porters five forces analysis in the determination the competitive power of the UK hotel industry. These forces are: - Competitive rivalry Threat of new entry Threat of substitution Supplier and Buyer power (Michael, 1998) Competitive rivalry Though facing stiff competition from its competitors, for example, the hotel industry in the US, the industry still emerges the winner since the intensified competition does not amount to a loss of revenue in its part. Any threat of market share reduction as well as hotel’s margin erosion is compensated by its three sources of revenue. Being the world’s largest lodging company, the industry operates prestigious and popular brands in the hospitality industry thus gaining competitive advantage since more customers will join the company while the old ones will be retained as a result of its strong brand. The hotels strategic international locations for instance London ensures easier accessibility by customers across different parts of the world. (Michael, 1998) The industry’s emphasis on developing a strong brand that remains a salient factor in determining the number of customers a business organization will have. Most customers will prefer a choice of brand rather than a choice of location an idea that UK industry banks on. Their facilities are well developed with modern buildings and highly skilled services in conference facilities, extended stay lodging, timeshare and select service lodging. (Michael, 1998) The industry have mechanism of fighting the cost offered by its competitors this ensures that they remain in the market and do not loose customers switching costs may either involve increasing or decreasing costs depending with the rates in the market and the available number of customers. However, various hotels in the industry are always loyal to their customers, the continued customer loyalty gives them competitive advantage over its competitors. This ensures that the hotels do not loose its customers to the competitors pegged in the customer’s loyalty, buyer switching costs and continued fixed costs offered to the customers alongside its corporate social and environmental responsibilities. (Michael, 1998) Threat Of New Entry The cost incurred in setting up such a big industry may be too high for most investors from the other regions of the world, this makes them shy away from starting similar business which gives UK industry a competitive advantage. Time required to start up a hotel and establish a wider customer base is also long thus adding to the competitive advantage of the hotel. The industry enjoys large economies of scale following its wide expansion since there is a chain of hotels in the UK. The benefits of economies of scale will include reduced cost of inputs and also curtailed transportation costs this will translate into high profits that placing the industry ahead of others in terms of profitability. The industry has got various sources of revenue i.e. through managing and franchising of hotels, time share and hotel ownership these gives the industry a competitive advantage since it is also most assured of generating incomes in the three areas. (Michael, 1998) Technologically advancement in the industry has been carried out very effectively a thing that ensures customers are retained while other join year after the other. This has ensured continued competitive advantage. For example, the on Q system enhances client’s interaction while in the hotels. The industry has adapted a well-organized geographic representation across Europe ensuring that each region has a hotel giving the mileage in competitive advantage. Cost of their accommodation services and meals do not keep fluctuating a thing that ensure a good customer base. The industry maintains durable and strong barriers to its market entry. This is because they maintains high quality services which most of the competitors in the hotel industry may fail to achieve. This in return locks more investors across the globe who might be interested in hotel industry. The competitive prices offered by industry will easily discourage new entrant since the hotels enjoy a large economies of scale with assured profitability. New entrants might be forced to highly price their products thus failing to capture a good number of customers the resultant effect being low profitability and eventually the closing of their business. (Michael, 1998) Threat Of Substitution Products and services offered by these hotels are of high quality and at the same time compliant with the modern advancement in technology for example, on Q system, which facilitates client’s interaction. It is therefore very hard for the customers to find close substitutes to the services offered by the hotels, which includes high quality meals and highly specialized staff. This ensures that the customers do not weaken its powers through substitution thus strengthening its competitive advantage. (Michael, 1998) The cost of change may turn to be too high for the customers hence discouraging them from substituting the industry with one of it’s many competitors. Buyer Power According to Michael (2000) the power of buyers is very important in determining the competitive advantage of various business organizations over the others. If the buyer is too powerful he might tend to dictate the prices for the industry a thing that may not auger well with the companies profitability. On the other hand weak powers of the buyer may strengthen the operations in the business increasing its proceeds thus a stronger competitive advantage. UK hotel industry has a very wide customer base most of whom are tourists from every corner of the world who tour the UK, places large orders and are not very much sensitive to prices. The number of customers is very large as compared to that of competitors. (Michael, 2000) The weak buyer power ensures that there is not strong downward pressure on the prices offered. Customers do not have the ability to substitute services offered by the industry’s hotel while the cost of charging remains too high. All these ensure that the industry enjoys competitive advantage over its business rivals. Supplier Power The hotel industry in the UK enjoys a moderate number of suppliers with the ability of substituting from one supplier to the other. The suppliers are loyal offering quality products to services. Cost of switching from one supplier to the other are not very high for the company due to its increased revenue sources a thing that ensures suppliers control in driving up prices. The analysis shows that the UK hotel industry is a competitive business in the hotel industry with its strength developing year after another partly due to its increased customer base, high quality products, strong brands and technological advancement. (Michael, 2000). The industry has adopted a modern structure that accommodates the demands and lifestyles of the customers. This has largely boosted the industry’s global status making it to fetch customers from every corner of the world. Adopting the S-C-P model in it’s management strategies has assured greater success in the hotel business thus a competitive advantage over the others. Question Two Schutz (2000) defines corporate social responsibility as a theory stating that business organizations have a duty in taking care of all their stakeholders in every phase of their operations. This implies that business ventures should be committed to make sound contributions to the economic development at the same time improving their worker’s standards of living together with those of their families and the local community as a whole. Marriott is a hospitality hotel with an international status and specializes in franchising, lodging and operating facilities. Some of its services include: times hard, conference facilities, full services lodging, select service lodging among others. Corporate social and environmental responsibility is well exhibited in Marriott international where well accountable and audited reports are produces annually touching on the company’s CSR and sustainable development issues. This in itself shows the industry’s commitment in ensuring that corporate social and environmental responsibility is well achieved. The company’s CSR is based on the company’s public relations department, department of human resources and the department in charge of business development. (Schutz, 2000) The human resources department in Marriott hotel exercises CSR during its staff recruitment. It ensures that selection is based on merit and the recruited workers are trained with a promise of job retention a thing that shows the hotel commitment in improving the staffs living conditions plus that of their facilities. The hotel integrates its members in activities such as fundraising thus focusing unity and togetherness a recipe of corporate social responsibility. The company has all measures that are necessary in managing risks in the firm it ensures that workers wear protective clothing while on duty and has a healthy unity in its compound to ensure that workers & customers who fall sick while in the hotels are well attended to. The management condones any act of corruption and other social evils. This ensures that the industry is not in any form of conflict with the media, regulators and governments regarding corporate social responsibility. (Schutz, 2000) Marriott international has strong and reputable brands, which are based on the required ethical values boost the hotel’s integrity and level of services offered. This in return ensures that the hotel is in line with corporate social responsibility i.e. the company has acquired largest players recognition in the hospitality industry across the globe. Through offering vacation and hotel package on hotels .com and Expedia. Com the hotel avails its inventory to more customers it depicts corporate social responsibility through catering for the leisure and business travellers leading to a higher occupancy rate of seventy two percent. It has the largest customer loyalty program. The hotel conserves the environment as well as taking proper considerations of health and safety of its customers, the staff and entire community. They ensure that their surrounding environment is clean and tidy with minimal activities that may lead to pollution of any kind. The management ensures that it has acquired a government licence allowing it to conduct business a thing that demonstrates which shows corporate citizenship and labour standards accorded respect. (Schutz, 2000) The company offers better remuneration packages to its employees a thing that ensures they live comfortably and are able to take care of the families. The hotel administration also extends loan services to its workers making it remain socially responsible. Other services such as insurance cover medical services among others are also offered. Marriott hotel employs the necessary techniques in ensuring that its workers are always motivated. This it does through offering bonuses to the highly effective workers. Offering free training, conducting seminars and workshops to address the issues affecting the workers, customers and the entire community. By adopting technological advancement the hotel’s prices have fallen over the years suggesting proper and efficient use of resources, which is in line with corporate social responsibility. This includes use of newly invented engines that reduces the company’s fuel consumption level thus boosting profitability as well as the corporate social responsibility. However, the labour issues are not in line with the corporate social responsibility with the hotel threatening to strike against the management interference with the union matters. (Schutz, 2000) However, compared to Hilton hotel Marriott hotel is lagging behind in it’s efforts towards achieving corporate social responsibility. On the aspect of remuneration the Hilton hotel is offering better rates than the Marriott with more programs directed towards employees motivation. On the environmental conservation issues Marriott hotel is employing fewer resources as compared to the Hilton hotels, these also includes matters relating to health and safety of it’s clients, workers, suppliers and the society as a whole. Like Hilton hotel the hotels portrays corporate citizenship through acquiring the government licence and ensuring that its business activities are within the legal spectrum. All these place the hotel on average status in terms of average corporate social responsibility activities. Reference Internet information form http://marriott.com/default.mi Michael, E. (2000): Competitive Advantage: Creating and sustaining superior performance. Cambridge, Oxford University Press Michael, P. (1998):On Competition. London, Harvard business school press, Schutz, A. (2000) Sales Promotion Essentials, New York, McGraw-Hill Read More