Global Strategy and Policy

Global Strategy And Policy

10/11/16

Miro Cuculiza

IPW1: Hotel Industry

        The hotel industry is born under the hospitality industry that is a broad industry consisting of many sectors ranging from tourism ending with the economy itself. This industries backbones consists of an excellent customer service and an economy in good standing. In all of the sectors of the hospitality industry you need a great customer service to stay with your customers, to get good feedback, therefore get more business.  Not leaving behind a good economy in which people have the availability of funds to spend in your restaurant, hotel, cruise ship, airlines and everything that includes eating and traveling. With this said we know that the hospitality industry depends on people having funds to spend. In this essay I am going to base my focus in the hotel industry and conclude with opportunities and trends that prevail in it.

        In the hotel industry competition in the context of threat for new entrants between hotels is very low, because the barriers to entry are very high. For example, for new entrants wanting to enter the luxury hotel area will be very hard because they will need to start with a good investment offering if not the same more and better services than the hotel they want to compete with. We already know that Hilton, Marriot, Intercontinental and other big ones that have hotels with more than four stars are very hard to compete with even if you are a startup and just started in the industry.

        In the hotel industry the bargain power of suppliers is very low, because the hotel staff is the main supplier in charge of the daily operations, without hotel staff it is impossible to run a hotel. When it comes to bargaining power of the customer we recall that it can be very high or very low, for example if there is a place that only has one hotel in the are the customer will not have a decision besides that hotel and there will be one price for him. In the other hand it can be very high if for example, if in that place there would be ten hotels the customer would have more choices to choose from.

        “The threats for new substitutes have been increasing with cottage, Airbnb, and other private accommodations that act like a hotel in the context of having available services like hotels do.”

        For degree of rivalry I am going to explain it with the SPC model, in which the market structure plays a big part in here because hotels ranging from 5 to 3 starts, having the five starts charging more and the three starts charging less. This is because the stars mean prestige and years of experience, so hotels compete for who has the best price and this lead to aggressive pricing. With this said we can recall that there is a low switching cost for the customers, do to the fact that they can choose from which ever hotel they want and any price that they like. So starting with a good performance of the economy and ending with a good performance of the customer service provided by the hotel staff we can recall what would be the performance of the hotel industry.