The Hotel Industry Evaluation 1.Evaluate the hotel industry (you can use Porter’s Five Forces Model as a conceptual tool) The threat of the entry of new competitors: Constructing an hotel is at the same time not an easy task and require a lot of investments. Keeping in mind the global situation where wars and terrorism is going on continuously, less investors are interested and tourism is on a decline. Hence there is less risk of new entrants as the market does not offer much return. The threat of substitute products or services: In Hotel industry there are few key players who rule this industry and control its standards.
These chains started to set dominance over this industry on a global scale by the end of 20th century. Now amongst these luxury hotels all are substitutes for each as all offer luxury. Also the services offered at hotels like massages, spa’s, pools and gyms. With development services such as these are being opened by independent brands which can serve as substitutes aswell. The bargaining power of customers (buyers): The bargaining power of buyer is high for this industry.
The hotels charge high prices but at the same time they want their rooms occupied and for that they need customers. If the customer isn’t willing to pay that high price for rooms then the revenue for hotel’s will go down. The bargaining power of suppliers: The bargaining power of supplier is relatively low as the hotel industry deals with many services and products and they have many suppliers to choose from who will be willing to work with a reputable and luxury hotel. The intensity of competitive rivalry: The intensity of competitive rivalry is quite high between the leading hotels to reach the top spot.
Each trying to earn higher RevPAR for which each of the rival offers special services or deals are made by different kind of agents that can increase customer traffic into the hotels. 2.Do the particularities of the Russian environment alter your analysis? What are the Russia-specific factors? How do they affect your analysis? The trend observed in the Russian market do alter my analysis in many ways. The Hotel industry is fairly new in Russia and has only recently gained attention of the foreign hotel chains.
Hence there is a significant threat of new local or foreign entrant. Also the profit earned by hotels in Russia are at a far more quicker pace then in other parts of the world. There are right now only high end hotels in Russia mostly in Moscow and St Petersburg where there are few hotels hence there are less chances of other substitutes. The bargaining power of customers is fairly low because of less competition also there are no middle class hotels in Moscow because of high price of land there so consumers have to settle with higher priced luxury hotels.
The bargaining power of suppliers is low as Russia offers cheap labor also the products used by hotels have also improved quality which are being produced in Russia. 3.Given the analysis you have made, would you make an investment in this industry? Where would you target your investment? What are the barriers to your investment? I would make an investment in higher luxury hotel in Russia.
The main reason for this is that the economical condition in the world is quite unstable. The inflation rate is increasing hence investing in land would be a wise investment, also the hotel industry in Russia is giving quite high returns than many other markets in the world. The major barrier will be the purchase of land in city district which is quite expensive and much area will be required which is getting filled up at a rapid pace. Also the political instability and the wars taking place has effected tourism to some extent aswell. 4.If one were involved in the business, how could they leverage their competencies effectively and increase competitiveness in the Russian market? To leverage their competencies they should employ a mix staff i. e.
consisting of foreigners and Russians both. By doing so the local employees will learn techniques and skills of work from the more skilled an experienced work mates. Now the foreign staff is expensive so as the local employees start to adapt skills and techniques of their skilled co workers, the expensive employees can be released from their jobs and local labor can be hired who can now come under the supervision and training of the experienced staff.
This shall significantly reduce the operating costs. Also one should keep form alliances, partnerships or good relations with government employees as they get incentives by the government and also benefits. This shall make you and your business stand in a strong position both financially, operationally and socially.