Contents at a Glance

Introduction
Investigate hospitality within the travel and tourism industry
PI
Classify hospitality outlets in a travel and tourism context
Explain the interrelationships between hospitality and wider travel
and tourism organisations
P2
Describe the level of integration within the hospitality sector
Explain the implications of integration to the hospitality sector
Explain how integration has affected a hospitality organisation
Explore the design, development and operation of hospitality outlet
P3
Develop a rationale for the project clearly justifying decisions linked
to target market
Design the interior and exterior of a hospitality outlet
Explain the operational requirements of the proposed hospitality
outlet's organisational structure in relation to human resource
allocation.

References

Words: 2500

Introduction

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Hospitality Management refers to many different areas of Tourism; it is essentially the
aspects of travel and tourism which reflect on hotel management, restaurants and different
holiday destinations. This assignment will focus on the inter-relationships between
Hospitality management and Tourism, as well as looking at the integration between the two
fields.

P1

The basic function of hospitality is to establish a relationship or to promote exchange of

goods and services, both material and symbolic, between those who give hospitality (hosts)
and those who receive it (guests) [...] (Lashley and Morrison (eds.), 2000:19).

In order to classify Hospitality outlets in travel and tourism, firstly you would need to
examine the different tourist destinations which hold well known hotel chains,
restaurants and catering services. According to Carrerssearch.com, the online source
for hospitality, In the UK hospitality and catering outlets dropped marginally in 2008 to
262,134 establishments, down from 263,053 the previous year.

Hospitality outlets which have been seem to be successful and expand in certain destinations,
are usually those placed in popular tourist destinations and attractions. Those placed in
destinations such as Paris, Hollywood, Cancun or New Zealand are likely to do well and have
large tourist credibility.

Many Hospitality companies use leisure venues which include hospitality, that they undertake
in order to progress within the industry and to reach a wider market. The different outlet
include, in leisure venues;

Casinos
Night clubs.
Theatres.
Theme parks
Attractions.

In travel venues the outlets would include;

Airports.

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 Rail stations.
Aeroplanes.
Trains.

The free standing Hospitality venues are the traditional outlets such as;

Hotels.
Holiday centres.
Cruise ships.
Bars/ Restaurants.

The three Domains in the Hospitality industry formulated by Conrad Lashley and Alison
Morrison consist of, the social domain in this case refers to the interactions of people and the
services provided, as Hospitality is about the interaction and relationships between them and
their consumers this domain would suit this notion more so then the other two.

The second domain is referred to as the Private domain, this is essentially reflecting on the
free standing outlets as it establishes the relationships of hospitality with their consumers
through food based elements, in this case restaurants, bars and food chains.

The third domain is the Commercial domain is seen as the business side of the hospitality
industry. This refers to how the service or business in promoted to their consumers. It is also
credited as not being an acceptable generalisation, such as the two other domains.

The interrelationships between Hospitality and travel and tourism organisations are
specifically that the tourism industry attracts the consumers to different destinations
around the world, by means of promotion and marketing. Whereas, the Hospitality
aspect of this is they provide the leisure and comfort for the consumers, within hotels,
restaurants and transport.

The Tourism aspect is the demand and the Hospitality is the need, it is the relationship
element which links Tourism and Hospitality, as Hospitality allows the consumers to have a
satisfaction and it delves into creating loyalty between the organisation and consumer which
otherwise would not exist.

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Many Travel and Tourism organisations have global connections with Hospitality services in
order to offer deals and services to consumers travelling to those destinations. To provide the
best service for their consumers often travel organisations would help promote Hospitality
services within their own company to spread the word about different companies they are
associated with. As building relationships with Hospitality venues allows them to establish
relationships between themselves and their clients.

For example, in order for organisations to attract more people to their holiday destinations
they would employ a variety of hospitality outlets, whether it is a hotel, restaurant or casino.
This is usually done in expanding tourist destinations where an improvement has been seen in
the amount of tourist each year. This has been the case for certain destinations where casinos
and hotels have been the centre of the tourist attraction, and have created more room for
development in those places as well as increased wealth, such as in Las Vegas, America. The
Hospitality outlets have become the attractions, which has generated more money for the
tourism organisations and expanded their tourist income.

P2
There are two specific levels of integration within the Hospitality sector, which are;
The Horizontal integration and Vertical integration. Horizontal integration is the
emergence of several different aspects or firms into one main management.

However, Vertical integration is the opposite as it refers to a supply chain with more than one
management that produce several different products or services that are combined.

The way this is integrated into the Hospitality business is by different organisations within in
the travel and tourism industry formulating in several different companies being placed under
one management. If you focus on vertical integration this would mean smaller companies
such as an airline company merging with a tour operator, in order to expand the business and
within hospitality create new relationships with different clients.

This could also be done through smaller companies in growing countries combining with
larger, well known organisations to create a name for themselves and to expand within the
tourism industries.

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 Usually organisations would use horizontal integration rather than vertical integration
as they would be taking over one type of product or service and not several under one
control. It would be more likely for problems to occur with vertical integration as
although it would all be less than one organisation there are still different areas of the
company which have their own management, so it is harder to have an over view of
the entire organisation, in terms of cost, promotion and the general outlook.

The level of integration has risen in the hospitality sector as where destinations are becoming
more popular and desired by people, larger organisations are jumping on the band wagon and
using their Brand or company to support it.

One organisation may take over a hotel chain, restaurants and casinos, all under the same
company but still have different management for each. This would be the same as one
company but different Brands under their control.

An example of the integration, specifically looking at horizontal integration would be

if an airline took ownership of a chain of hotels in different destinations, such as Las
Vegas but also had contracts with other airlines and did maintenance for them.

Integration works more effectively when you have two different areas of the tourism industry
integrated, such as an airline company joining with a travel provider. This allows the
company to branch out into different fields and attract new customers to their company. It
also is a good way for them to promote their brand within the other fields brand, as it can
reach a broader consumer, then just their current customer.

The implications of integration in the hospitality sector would be the organisation which has
many different firms under their control, will find it harder to manage all aspects of those
firms. As with vertical integration those firms would be under one organisation but would
still be controlled by different outlets. This would create problems for the whole organisation;
especially if a major problem arises within one specific sector then the whole organisation
would have to go under crises control in order for it not to tarnish the whole reputation of that
brand as well as the whole organisation.

Integration has and can affect a hospitality organisation because if more than one company or
firm merges then the whole organisation is credited as the main organisation which is in

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control. So for example, if Easy Jet and Ryan air which are both known for having affordable
flights to destinations across Europe, decided to merge and one company starts to decline it
would affect the other company also, and would ruin their reputation.

Although integration can be efficient and effective and has its positive points, that does not
mean that there would not be any negative effects due to one management being put in place
for two different brands or companies.

P3
For this section the focus will be on looking at a hotel as part of the hospitality sector,
the target market for this would be dependent on the destination of the hotel, as this
could reflect on the costs and how much money people would spend to stay there, the
type of holiday destination it is. Whether it is in the central of a town surrounded by
historic building for people who enjoy site seeing, by the beach, or allocated in the
busiest restaurant and bar area.

If designing a hotel and marketing it, then it is important to take into consideration many
different factors such as price being the main criteria. People are always looking for the best
deals and offers, so having a hotel which is affordable, in a good location that has a good
rating.

The target market chosen would be both male and female, middle class people possibly with
families, as many people are tend to travel in groups or with families that have children it
would be important to have a family based facility on the premises and offer activities and
resources for people of any age to enjoy.

Many airlines offer deals for family trips and holidays so offering that same service in a hotel
business would be both beneficial to airlines who want to promote their business in your
hotel and beneficial to the hotel company who would build a report with different clients and
airlines and attract their consumers as well as new clients.

When looking at affordable but clean, good, well-managed hotels then they usually fall under
the classification of 3 Stars, which is the average for many hotels. Especially now that people
are on a tighter budget they are watching where they spend the pennies much more than
before. So any way they can save money is essential, and by providing them with a good

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service and many different facilities in the hotel but at a good price then there would be no
second guessing.

For this hotel the exterior would have to coincide with its surroundings, which means
everything which is seen on the outside of the hotel including the hotel itself has to reflect the
location and destination itself.

If this hotel and company would succeed as a franchise and having a chain of hotels located
in many different destinations then it would be best to keep the exterior look of the hotel
traditional and classy.

In this case, the building would be like a set of apartments with possibly 5 stories
high, but unlike many hotels it would have up to 3 or 4 separate buildings surrounding
each other. To separate it from other hotels and nearby hotels, then allowing it to have
separate buildings which are not as high as many other buildings would give it a
family feel and the feel of being in a luxury small village. As it would be surrounding
a swimming pool, with the reception as soon as you arrive into the mini village,
closed by large gates.

A playground would be allocated nearby for children to enjoy, surrounded by bars and a food
area outside for people to have their breakfast, lunch and dinner. There would also be small
paths with flowers and grass on the sides leading you to different areas of the village resort.

Now moving to the interior look of the hotels, as they are different compartments and
buildings, each room would have one level, with a balcony. Giving it a very tropical feel with
a variety of flowers surrounding the buildings, which would have a red shade in order to
stand out from nearby hotels. The top of the building would have small roofs to give the feel
of a home away from home feel, almost like a hut style look.

Holiday resorts are becoming more popular in recent years so to create a similar type of look
would be effective and different compared to the competition.

There are a variety of organisational structures to be identified before looking at the

specific one that works best with this particular hospitality outlet.

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They include; Pre-bureaucratic structures, Bureaucratic, Post-bureaucratic,
Functional structures, Divisional structures and the Matrix structure. The Pre-
bureaucratic structure i best used for smaller organisations, in order to solve
smaller problems. It is useful as it can help control the companys growth and
development.

Bureaucratic structures unlike pre-bureaucratic structures are suited more for

larger organisations rather them smaller companies.

Post-bureaucratic structures are similar to Bureaucratic structures, although they

have their own significance. Post-bureaucratic structures tend to adopt decision
making policies which involve conflict strategies.

Functional structures divide different tasks into specific categories, these involve;
marketing, information technology, research and customer service to name a
few.

Divisional structures are broken down into three specific areas; product, market
and geographic. The organisational is often organised into different divisions,
based on the three areas.

The Matrix structure usually involves different aspects of organisational aspects

which are linked together, which forms the interaction of different people within
the company, for example, a product manager would report to a manager in a
different field of the company.

The operational requirements of this hotels organisational structure would be to focus on the
Divisional structures and the Matrix structures as they relate to the other organisational
structures as well as delve into their own specific fields. For a hospitality outlet it is important
to represent areas such as product, market and geographic, into the companys main criteria,
which is what the Divisional structures offer.

It is important to focus on the consumers demands and needs, when looking at the
organisational structure and Human resource management then peoples individual as well as
group characteristics are just as important.

According to the book, Human resource management in the hospitality industry: An

introductory guide, written by Michael J. Boella and Steven Goss- Turner, to achieve and

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improve the performance of an organisation especially in the hospitality industry they need to
specify two elements.

Identifying both individuals and groups weaknesses and strengths so that weaknesses can
be corrected and strengths developed and built upon.

Secondly, Identifying each individuals hopes and aspirations so that, where these do not
conflict with the organisations objectives, they can be satisfied.

A major factor in the organisational development would be commitment as it is important

for a company, in any field to be committed to what it values, offers and promotes, in order to
give full satisfaction for their consumers.

Overall, integration can be a positive improvement for a company especially in tourism and
hospitality but it can also have negative effects. Hospitality and Tourism work well with each
other as the tourism aspect promotes the holidays and the destination; it is the business side of
the field. Whereas, the hospitality aspect of this is the relationship between the consumer and
business, and generally builds the brands loyalty with the consumer.

Hospitality Management

What is Hospitality?

Kindness in welcoming strangers or guests is called hospitality.

Its a massive industry encompassing all form of transport, tourism,

accommodation, eating, drinking, entertainment, recreation, and other activities.

So, Hospitality industry consists of a large number of different types of business

and each one giving its own means of income generation.

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Types of Business:
Hotel

Self-eating accommodation

Guest homes

Restaurants

Bars

Tourist resort

Gyms.

Nature of Demand for Hospitality Services

Demand may be change with the change of tourist flow, tourist motivation, taste
& preference, govt. action, special events, festivals general economic condition &
so on.

Economical, political and environmental changes including natural calamities,

terrorism & wars, world wide diseases in epidemic form SARS, madcow, cholera,
etc can also affect hospitality industry.

1986: 25% fall of tourist from North America to UK for fear of Arab reprisal
due to Libyan bombing.

1991: fall of 22% American visitor to UK for war &consequent recession.

1991: 21.5% dropped in Malaysia due to gulf war.

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Nature of Income (UK experience)

Main Product
Room/accommodation hires constitution around: 45%

Subsequent earning Product

Food & Beverage sales (restaurants, coffee shop, room services, etc)
34%

Beverages (hard) 14%

Shop rentals 1%

Minor operating reports like telephone, 5%

Others laundry, leisure 1%

Hospitality Management System

Labour intensive industry

The management system is name as we find in other services organization. But

because of so many products are within management system is quite
complicated. (Its a team work)

In Hospitality industry an effective management system, according to

Blanchard (author of the one mnt. Manager) comprises:

a. Acceptability: everyone has to be dear one.

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 b. Data system: Performance analysis

c. Feedback: From customer to employees so that they can improve

(monitoring system)

d. Recognition: Good performance must be awarded.

e. Training:

Supervisors are there to report on performances of employees graded are:

U (Unsatisfactory)

S (Satisfactory)

E (Exceptional)

For good performance, modification is need. Secondary motivation elements

are memories. Following are improved.

1. Need to approval

2. Need to belong

3. Need for achievement purpose

4. Interest in the task

5. Pride (feel proud what he is doing)

For ensuring this Management needs to:

1. Developed staff oriented policies & incentives

2. Appropriate salaries & incentives.

3. Helpful & friendly supervision

4. Congenial & friendly working environment

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 5. Understanding of individual personal life

6. Proper recognition of status.

7. Job security

According to Mckinsey & co, 7 elements are required for successful

performance strategy

1. Objectives : What org. wants to achieve

2. Structure : Human & physical resources needed to achieve

objectives

3. Systems : Methods to use to achieve objective compatible to

human &

physical resources

4. Skill :knowledge & info- required for human recourses &

training

to fill any gap

5. Staff : Employee number along with experience & skill

6. Style :Type of operation & how it wants to be perceived by

customers.

7. Values : Overall image by enhancing customer satisfaction,

staff

loyalty & satisfaction

Organization Structure:
The organization is mainly marketing oriented Organization. Organization
structure on the basis of marketing fundamentals:

Functional departments

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 Marketing Executives

Departmental Executives
Departmental Executives
Departmental Executives

Regional Management

For world chain Hotels

Each region is self sufficient marketing structure

Product line Management

Food & Beverage

Conference & Banqueting managers

Restaurant Manager

Rooms Manager

Marketing Management

For the customer groups example Holiday package marketing, Meeting,

Seminar etc

Different Position to Manage the Integrated Operation:

1. Marketing Director (Sometimes manager)

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 2. Sales Director: In big organization apart from marketing director, there is
sales director, All activities relatives to sales & developing & contacting
corporate customer groups including travel agents, tower operators

3. Operations Manager: Looking after customer from moment he/she makes

a booking Operations Manager is often know as accommodation
manager too.

4. Sales promotion Manager

5. Direct Mail manager: Maintain a database customer and keep contact .

relationship network manager

6. Telemarketing Manager: In support to direct main manager.

7. Product ling manager: According different products of the Hotel : Food &
Beverage, conference & Banqueting restaurant entertainment, leisure
etc.

PLANNING

Planning is an integrated approach. The first thing that we have to know is

what we are offering --- what our customers want.

Planning must be need based. The need may vary from customer to customer.
It is not possible to cater the needs of all customers in a property. Therefore,
the first job in marketing plan is to target the specific segment of the market.
The core service remaining same, the extent of hospitality services may vary as
per the real need and psychological needs of the customers :

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 Core services

Core services turned into Hospi- tality concept

Auxiliary services added to Hospitality services

Marketing strategies relating to hospitality products :

The followings are the key issues that should be addressed to develop
marketing strategies :

1. Consider companys goal and mission

2. recognize financial, physical and human resources available

3. analyzing SWOT

4. develop and target most appropriate customer-mix

5. set marketing budget

6. develop strategies for each element of marketing mix

7. out line detailed operational tactics

8. change as necessary

From a micro viewpoint marketing plan for a large property with a complexity
of product lines requires separate sets of strategies for :

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 - the property as a complete entity

- each product line and item

- each target market

However, apart from the strategies in relation to marketing mix elements,

Positioning strategy is very crucial for the hospitality business.

Position is creation of DAB, meaning, difference, advantage, and benefit.

Positioning is what people think, know, feel, or believe about a place or product
or establishment.

Hence a difference between a Four-star and Five star hotel can

often be no more than a public perception, usually a strategic
position created by the management.

Therefore, positioning is the imagery that has been created in the minds of
the customer.

The major forms of positioning :

- the physical presence of the place : where it is and how it looks

from outside. Design. paint, sign, decoration, street, surroundings
etc are the components of physical presence. These are known as
Exterior Physical Evidences.

- First impression is said to be lasting. So attractive and tasteful

exterior evidence is very important.

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 - Interior design layout, fittings, decor etc

- Recommendations the pass-on value of word-of- mouth

promotion probably the strongest means of gaining customer
heart. It has been seen that about 85% of customers come from
pass-on recommendations.

- Publicity is another strong tool for positioning. Media reporting of

any events, visiting celebrities stay etc are also important and
effective tool.

- Advertising, brochures, other publications may create positive

impression in the minds of the customers.

- The Attitude and appearance of the staffs are long lasting tools for
positioning.

- Prices and value offerings sometimes may also create an image.

- The ambience - music, noise, smell etc also can create a positive
and negative image.

- Name, slogan, symbol or logo may also contribute to increase the

desired position of the property.

The Steps in Strategic Positioning :

- Target the customer mix you want.

- Find out what they expect

- Develop the services and products or facilities to meet the need

and want of the target customers

- Develop a staff commitment

- Build a sustainable positioning strategy.

Pricing Strategy :

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In a hotel, it is the room rate which sets the pricing levels for the rest of hotels
products. Presently hospitality industry is a fiercely competitive and sensitive to
economic conditions. Consequently, the relationship between rates and
occupancy has to be finely tuned.

Price fixation in perfect market entails the following equation :

Price = Operating cost + Capital recovery cost + Profit + Forecasted number

of customers.

But hardly we get a situation which may be termed as a perfect market.

The Hospitality Industry normally follows the following Pricing methods :

- Target profit pricing : fixation of price based on average occupancy

which is expected to provide adequate return.

- Perceive-value pricing : based on value or benefits offered.

- Going-rate pricing :

- Price ranging : separate prices for different types, sizes and decor.

- Value-added pricing : discounting the existing services and

facilities coupled with going rate.

- Price Skimming : high profile positioning. Skimming is taking

cream of the market before the competitor comes.

PRICING OBJECTIVE :

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The objectives are usually :

- survival

- profit maximization

- increasing market share

- quality leadership

- capital recovery.

PRACTICES WITH PRICING STRATEGIES :

(1) offer prices differently on different days and at different times

of the year. Rates may vary to attract different customer
segments, such as, tour wholesalers, large companies,
conference organizers, and frequent travelers.

(2) Developing Holiday packages such as, a three day stay at the
property combined with sight seeing tours or a special interest
package.

(3) Special discounted rooms negotiated with tour wholesalers,

travel agents, tour operators, and sometime even with the
transport companies, for example, the airlines.

(4) Business travelers are the most frequent visitors and users of
hospitality services. Special incentive rates are generally
negotiated. Additional attractions such as secretarial
assistance, computers, fax photocopying meeting rooms, video
conferencing and language translator facilities are offered to
the business travelers.

(5) Another variant strategy is to enroll in a special club which

provides not only discounted prices to the members, but also
discounts with participating stores, airlines, car hires etc.

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 SECTION : 2 : Hospitality Services Strategies

According to Philip Kotler : A service is any act or performance that

one party can offer to another that is essentially intangible and does not result in
the ownership of anything. Its production may or may not be tied to a physical
product.

If we analyze the definition of services we can get some specific

characteristics of service. These are :

intangibility

inseparability

heterogeneity

perishability

ownership

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Hospitality business provides a guest with a place where he feels welcome,
appreciation, relaxed, and have an enjoyable experiences. The product mix
consists of accommodation, restaurant, bars and a range of ancillary products
which vary with the establishments.

Hospitality business is a team work, employees work together jointly to achieve

the objectives of excellent guest experiences. It has a flat management
structure. So importance of a dishwasher is no less than the managing
director.

In hospitality industry, quality of services is now a top management issue. How

can we do that? There is no shortcut to it. A total quality management
concept has to be applied and practiced in a hospitality industry. In order to do
so the following steps are necessary :

(a). Establish customer needs and wants : It involves segment identification

and market analysis.

(b) Asking the customer : Very informal type of research technique of asking
the customers about their feelings, opinions, suggestions etc.

(c) Set objectives for improvement or changes : Why this change? The outcome
of the improvement or change should be assessed.

(d) Allocate tasks and responsibilities :

(e) Train staff :

(f) Remove demotivating systems and staff :

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(g) Gain commitment to the objectives and strategies :

(h) Make physical changes where necessary :

(i) Experiment with the changes :

(j) Measure and manage :

(k) Modify where necessary, measure regain :

Strategies with Catering Services :

Key concerns of restaurants will centre around menu development, analysis of

current offerings, packaging or presentation, brand decision, design and dcor,
music, and the layout.

Probably the most important decision a restaurant operator can make concerns
the type of food and beverages that will be offered. The following decisions are
important :

(a) Concept compatibility : Italian restaurant should focus o0n

dishes that target customers associated with Italian food.

(b) Quality : Quality concept is vague. But that must or exceed the
consumers expectation.

(c) Selection : The number of items on a menu is generally

unimportant. There is a tendency for many restaurant
operators to have an extensive menu so that there is
something on the menu for each one. When it occurs, order
preparation time and equipment costs increase, food cost
escalates, spoilage increases, quality suffers, labor cost goes
up, morale of kitchen personnel goes down.

(d) Hire expert and experienced cooks and chefs.

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 (e) Analyze competitors menu or offerings.

(f) Cross utilization : this is use of limited number of ingredients to

prepare several different menu items.

(g) Put importance to nutritional value :

(h) Menu design and layout : most menu starts with appetizers ,
and end with deserts or possibly with some specialty drinks.

GLOBAL HOSPITALITY MANAGEMENT : EVOLUTION & TREND

General definition of Hotels : The WTO defines :

Hotels and similar establishments . . . are typified as being arranged in rooms,

in number exceeding a specific minimum; as coming under a common
management; as providing certain services, including room services, daily bed
making, and cleaning of sanitary facilities; as grouped in classes and categories
according to the services and facilities provided.

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Interpretations may include : hotels, private hotels, residential hotels, guest
houses, boarding houses, lodging houses, bed and breakfasts, inns, pensions,
motels, youth hostels, auberges, posuadas, and so on.

Slattery et al. (1966) categorized a hotel through one of the following

definitions :

Owned

Leased which includes properties which are rented as well as sale and
leaseback hotels.

Management contracts with equity which may be seen to be a growing

trend in face of increasing competition.

Management contracts (equity free) the most common form of contracts

particularly amongst major hotel brands

Franchised hotels owned and operated by independent hoteliers and chains

who pay a franchise fee to operate their hotel under a major brand, thereby
giving access to reservation system, corporate marketing, training and
purchasing etc. Major brands that are franchise dare Holiday Inn World wide,
Accor, Marriott International, Hilton Hotels, ITT Corporation.

There are some invisible hotel companies operating with little outward
presence to public. They manage hotels under different brand names. There is
another pattern where the major activities are managed by different
companies. For example, in a brand A hotel that is owned by company X,
marketed by company Y, and managed by company Z.

The International Hotel Industry :

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 WTO reports that in terms of revenue, Europe accounted for the largest
share with 39.5 percent (around 100 billion US$), followed by the Americans
with 32 percent (81 billion US$).

Europe and the Americas again hold first and second position in terms of
hotel establishments (with 55 and 28 percent respectively).

In terms of rooms the two areas hold 45 percent and 37 percent respectively.

In terms of percent of bed capacity, Europe is having 44 percent and the

Americas are 37 percent.

Although Asia-Pacific commands only 12 percent of total hotels but due to

higher average size of the properties, their share of rooms and bed capacity is
comparatively higher at 14 percent.

Staff to room ratio demonstrates interesting intra-regional variances, with

the highest in Africa at 3.5 employees per room, the Middle East (2.5 : 1) and
then Asia-Pacific (1.7 :1), and Europe (0.5 : 1).

THE SIZE AND SCALE OF THE HOTEL INDUSTRY

Regions Revenue Hotels Rooms Tourism Employees

(US$ m) (Regd) (000) Receipts
(US$m) (000)

Africa 6,300 10,769 384 7,165 1,259

Americas 81,095 87,969 4,494 100,138 4,062

Asia- 46,259 37,148 1,701 77,242 2,862

Pacific

Europe 100,012 171,123 5,492 207,653 2,679

Total 252,904 311,744 12,249 399,448 11,317

Source : World Tourism Organization 1997.

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Industry Development :

The year 1946 saw the birth of the First international hotel chain with the
founding of Inter-Continental by Pan American Airways. Thereafter followed
Hilton and Sheraton, whose strategy was to create small pieces of American
terra firma in distant lands for the American businessmen. Dunning and
McQueen reported that eight of the top ten hotel companies were American
owned.

Diversification : Hotel corporations are increasingly diversifying into related

service industries, including health care, cruise liners, gaming and time share.
Marriott, Accor, Hyatt Hotels corp and Holiday Inns have expressed interest in
different health-related projects. Marriott has built certain life-care retirement
communities, Accor has created subsidiary Hotelia and Hyatt has two Classic
Residence projects, which are assisted-living retirement communities, giving
residents access to nursing and other support services as they grow old. Hilton,
Promus, and the Club Mediterranean are investing heavily in gambling facilities
and casinos.

Time shares, although a bit shaky phenomenon, is gradually becoming popular

in many of the countries. There are three types of timeshare fixed week,
floating weak within season, and points, which can be used anywhere at any
time subject to restrictions. There are 4500 timeshare resorts worldwide in 81
different countries. UK has the majority of European timeshare owners (some
700,000) and most of these consist of beach properties in Spain or Portugal.

Branding : Choice hotels was one of the first companies to develop a multi-
branding approach, with a range of different offerings to appeal to each price
segment. The Economist conducted a survey on brand awareness and found
that three-quarters of business travelers and two-thirds of leisure travelers are
brand conscious when choosing their hotels. Although hotel branding seems to
have some limitations, but gradually it is becoming a practice worldwide with
the regional chains, and also with chain affiliations to practice Think global, Act
global.

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Key International Players : Top 20 companies in the world remained fairly
consistent. However, some regional Brands are coming up. The top Brands
are :

US ownership

Starwood Lodging Trust (owns ITT Sheraton and Westin brands)

Cendant ( owns Hospitality Franchise Systems)

Patriot American

Choice Hotels International

Marriott International (owns Ritz Carlton)

Hyatt International & Hyatt Hotels Corporation

Radisson Hotels International

Promus Corporation (owns Doubletree brand)

Hilton Hotel Corporation

Delta Hotels

UK ownership

Holiday Inn Worldwide (owned by Bass)

Inter-Continental (owned by Bass)

Forte

Hilton International (owned by Ladbroke).

French ownership

Accor

Club Mediterranee

Societe du Louvre

Thai ownership

Dusit Thani

Japanese ownership

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 Nikko hotels

Tokyu/Pan hotels

Chinese ownership

Shangri-La

Spanish ownership

Grupo Sol Melia

Scandinavian ownership

Scandic hotels

German ownership

Dorint hotels

Kempinski hotels

Steigenberger hotels

Indian ownership

Omni hotels

The Taj group

Others

Southern Pacific (Australasia)

Four Seasons/Regent (Canadian)

During the last quarter (1970-90), there was a tremendous growth in the
industry, and there was an increase of more than 300 percent in room growth;
from almost half a million to more than 2 million.

After 90s this industry grew at a tremendously unbelievable rate. According to

the American Hotel & Lodging Association, AH&LA is having 47,584 properties,
4.4 million rooms, $105.3 billion in sales, $12.8 billion in pretax profit61.1
percent average occupancy rate and $50.42 revenue per available room
(RevPAR) in 2003.

Hotel accommodations are heavily concentrated in Europe and North America,

with Europe accounting for 48 percent of the worlds room supply and the US

9
accounting for 27 percent, Asia-Pacific 14 percent, and the African region 3
percent while Middle-East 1.5 percent.

Who are the customers? According to the AH&LA, 24 percent are on vacation,
29 percent are transient business travelers, 25 percent are attending
conferences and meetings, 22 percent are visiting for other reasons.

The typical business room night is generated by a male (71 percent),

age 35 54 (53 percent), employed with a professional or managerial position
(50 percent), and earning an average yearly household income of $83
thousand. Typically these guests travel alone (76 percent).

The typical leisure room night is generated by two adults (52 percent),
ages 35 -54 (45 percent), and travel by autos (73 percent).

Average stay : Business travelers : 40 percent spend one night, 24 percent

spend two nights, 36 percent spend three or more nights.

Leisure traveler : 47 percent spend one night, 26 percent spend two nights, 27
percent spend three or more nights.

TYPES OF

ACCOMMODATION

Non Commercial Commercial

9
Private Non-profit Institution Hotels Motels Bed&
Time-

breakfast
share

-Private -Hostels -College/ -Upscale - Resort -Upscale

-Fixed week

homes -Universities hotels

- Deluxe - Floating
week

-Midrange

-Home -Shelters -Spa & - Spa

- Points

Exchange health care

-YM/YWCA - Luxury -Casino -Budget

-Midrange

-Suite

-Meetings &

Convention hotels

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Source : Tourism Principles, Practices Philosophies. Goeldner & Ritchie. P-155.

THAILAND

Thailand is having borders with Myanmar, Laos, Cambodia and Malaysia. The
geography of Thailand comprises four main regions. The northern
mountainous region includes many cultural ruins, temples and distinct ethnic
hill tribes set around the ancient city of Chiang Mai. The semi-arid Korat Plateau
is set in the northeast region of Thailand. Here the Mun and Chi rivers drain into
the Mekong river at the border of Laos.

The central region, Thailands most fertile and populous. To the south is the
capital, Bangkok. The southern region, which occupies much of the Malay

9
Peninsula, offers visitors the opportunity to experience outstanding coastal and
beach resort destination.

The Visit Thailand Year (VTY) launched in 1987 succeeded in stimulating annual
increases in visitor arrivals of 20 percent in the following years. But the success
of this campaign, in its hindside, had a question. A general shortage of hotel
accommodation was the experience of Thai tourism. As a result, coupled with
deliberate government tax incentive policies, there was a big boom in hotel
development in 1989.

Between 1986 and 1990 the Thai hotel sector experienced a 44 percent
increase in room availability. This resulted in an oversupply of
accommodation in the 1990s which, in combination with domestic and
international political instability, resulted in the 1991 Thai tourism slump. In
1991 international visitors arrival declined by 4 percent, and tourism revenue
fell by 10 percent.

However, in 1992 international tourist arrivals and revenue from tourism

resumed the growth pattern of pre-1991. It was observed that there was a
continued economic growth of the Asia-Pacific economies. As a result, East
Asian countries assumed greater importance as a source of tourist arrivals, at
the expense of Europe and the USA. Malaysia, Singapore, Taiwan, and
South Korean visitors provided the tonic to the hangover of 1991.

The lifting of Thai immigration restrictions in 1993, with the consequence

of creating new sources of inbound tourists, also contributed to this end.
Dramatic rise of Chinese visitors arrival was seen in 1993.

CULTURAL DIMENSION :

In December 1997, the AMAZING THAILAND tourism promotional

campaign was launched in Bangkok. This Campaign used Thai culture as a
vehicle for attracting 16 million tourists and 580 billion Baht to
Thailand in 1998 99.

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Amazing Thailand was extended over two years with cultural performances,
handicraft displays, traditional dancing and processions throughout. The
Tourism Authority of Thailand (TAT) promoted Amazing Thailand
internationally through its 17 international offices.

Many Thai festivals are linked to the Buddhist temples, rituals and the lunar
calendar. SONGKRAN, the Thai New Year celebration proved to be a great
domestic tourism component. For example, Songkran in 1998 surprised Thai
travel industry with most hotels and resorts in major provincial destinations
operating at capacity.

Cultural dimension is an important component of tourism. However, there

was a widespread concern in Thailand that Thai culture is being diluted
through tourist interaction. This concern is exemplified by the case of
PADAUNG refugees of Myanmar who were held prisoners at the Thai-
Myanmar border. Police raids in April 1998 to refugee camps exposed the fact
that Thai entrepreneurs used the girls for profit as a part of cultural
tourism attractions. The Padaung women who adorn their necks with brass-
coil up to 10 cms. They were known as Giraffe Women. The camp became
a human zoo.

More that 10,000 tourist visited the so called human zoo in 1997. The visit of
human zoo resulted in the abandonment of agricultural practices because most
male villagers became idle.

ENVIRONMENT :

Relationship between tourism and state of natural environment is

interdependent. Apart from degradation of nature because of industrialization,
in Thailand the degradation of resort destinations and beaches has been
the result of poor planning in combination with overwhelming growth rates of
tourists arrivals. Pattaya, once the queen of south-east Asias beach resort,
has been transformed from a tranquil fishing village to a 3 million annual
visitor in a span of almost two decades.

9
Ecotourism offers real possibilities for a new direction in Thai tourism. The
outstanding bird watching ecotourism resources of DOJ INTHANON
National park in northern region, was visited by 9,00, 000 tourists in 1993.
If Thailand wants tourism to play an important role in its economy, there is no
way but to develop and implement sound environmental policies.

TOURISM MARKET OF THAILAND

After the hangover of 1991 1992, Thai inbound markets continued to grow
and statistics show that about 7 million visitors visited Thailand in 1995.
Thailands National economic plan set a target for five years (1997-2001) in
the following way :

(a) increase in foreign currency income by 14 percent each year on

average.

(b) Increase in foreign tourist arrivals by 6 percent each year on

average.

(c) Increase in Thai tourists traveling in Thailand by 2 percent per year.

Growth plans include establishment of the road and railway networks

connecting Indochina, more border checkposts, streamlining visitors
formalities, and development of hotels and airports.

MARKETING AND PROMOTION

TAT was established in 1960. TAT is responsible for promotion of tourism,

collection of tourism statistics, development of plans for tourist areas,
and human resources development. The thrust of TATs promotional efforts
focus on Amazing Thailand for which a budget of 2.67 billion Baht was
initially approved. The goals included not only to achieve the targets as fixed
up by the National economic plan, but also aimed at popularizing Amazing
Thailand with a view to attain status as the Southeast Asian Tourism hub.

9
Amazing Thailand promotional efforts were coordinated through 22 domestic
and 17 international TAT offices. In 1997 the TAT requested an additional
budget of 1.13 billion Baht. However, the tourism experts are of the opinion
that TAT spent too much on promoting tourism overlooking the
degradation of Thailands natural and cultural attractions due to over-
promotion and under management of tourism resources.

9
HOSPITALITY INDUSTRY IN INDIA

Hotels in India are categorized into two types : approved and unapproved
hotels. The Ministry of Tourism grants approval to hotels at the project stage
and classify them into one of the star categories. This approval status is
voluntary; but only the approved hotels can avail of various incentives, import
license, and other benefits from the govt. Majority of the hotels are of
unapproved type.

The emerging tourism and hospitality industry in India mainly could be

attributed to :

- Strong domestic travel trend

- Positive economic growth

- Good investment opportunity.

The following sections will try to analyze the growth and development of Indian
hospitality industry.

India periodically conducts an All Indian hotel Industry survey. The analysis is
done mainly on the results of such a survey. The survey presents a study of
1065 hotels having 74,112 rooms across various cities of India. In the survey it
was found that the average number of rooms per hotel is 62 percent(2004-
2005).

Occupancy : As of occupancy rate, Visakhapatnam was the market leader

registering 81 percent. Bangalore achieved the second- highest occupancy at
80 per cent. All India average occupancy rate was 64 percent. In one year
(over 2003) occupancy rate increased by 6.5 percent, but at the same time

9
average room rate increased by 27 percent. Occu8pancy rate ranged between
46 percent to 72 percent. Average range of rates (for five-star and one-star
hotels) had a greater spread from Rs 5,500 to Rs 643.

Revenue : All India average revenue per available room (RevPAR) was Rs 2170
in

2004-05. Rooms revenue is the most important source of hotels overall

profitability. Average profitability for the five-star hotels was 58 percent; and for
four-star, it was 60 percent. All India hotels of all categories represent 57
percent profitability on total revenue. House profit (gross operating profit after
deducting franchise and management fees) as a percentage of revenue,
increased 41 percent in 2004-05 from 35 percent in 2003-04. Rise in revenue
collection was mainly due to two reasons : (i) increase in occupancy, and (ii)
increased average rate. Revenue Per Available Room (RevPAR) growth was
higher in case of four-star hotels (42%), and an All Indian RevPAR growth was at
35 percent in 2004-05.

All India average revenue per hotel has grown significantly from Rs 9.15 crore
in 2003-04 to Rs 11.49 crore in 2004-05. (?). All India average Net Income
(income before depreciation, interest payments and taxes) per hotel increased
from Rs 2.8 crore in 2003-04 to Rs 4 crore in 2004-05.

Expenditures : Departmental expenditure consists of direct cost (raw

materials for running the hotel services); operating expenses are differently
maintained. Operating expenses include energy, administrative and general
expenses. Total Departmental expenses as a percentage of total revenue was
31 percent in 2004-05. Departmental expenses showed a declining trend over
previous years; and so as the food and beverage expenses. In 2004-05, total
departmental expenses as a percentage of total departmental revenue
declined over the previous years. It may be because of the reasons of
increased room rates, and use of technology in hotels.

Maximum utilization of energy management systems continues to be in the

five-star deluxe categories. The average energy cost POR was Rs 762 in 2004-
05 ( in 2003-04 it was Rs 758). The heritage hotels gained the maximum
benefit of energy management system. Decrease in energy cost of heritage
hotels was Rs 499 in 2004-05 over Rs 637 in 2003-04.

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Foreign occupants : Percentage of foreign visitors increased over the last
year. Of foreign visitors, 16 percent was from UK, 13 percent was from USA,
and France provided 7 percent.

However, the most important segment for the Indian hotel industry is the
domestic travelers who had a share of 78 percent in 2004-05 but the domestic
segment showed a marginal decline over recent past years.

Average Stay : All India average stay of a business traveler has increased
from 2.0 days to 2.4 days. There is also marginal increase in average stay by
the foreign visitors in Indian hotels.

Average monthly occupancy was highest in the months of :

December : 72%

November : 68%

January &

February : 66%

The month of July is seen to be most dull month in terms of tourist arrival.

Mode of payment : Use of Credit cards is gradually increasing as a method

of payment for the services in Indian hotel industry. Almost 47 percent of the
payments are done by Credit cards at five-star hotels. Visa was the most widely
used credit card by the hotel guests (42%), followed by Mastercard (37%).

Promotion : Print advertising was the most popular media used by the Indian
hotel Industry with 92 percent using print media for promotion. However, 83
percent of the hotels also used direct mail. Radio advertising featured as the
least utilized media at 8.4 percent. All five-star hotels are using there own
websites.

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 References

Internet: Available: http://www.thetourismcompany.com/topic.asp?topicid=24. Last

accessed 2010.Hospitality and Catering outlets. Available:
http://www.caterersearch.com/Articles/2010/05/06/317292/number-of-hospitality-and-
catering-outlets-industry-data.htm. Last accessed 2010.British Hospitality Association.
Available:http://www.associatedcontent.com/article/120970/functional_divisional_and_m
atrix_organizational.html?cat=3. Last accessed 2010.

Books: Lashley, C. Morrison j, A (2001). In Search of Hospitality. Butterworth-

Heinemann.