Hotel And Hospitality Industry Marketing Essay

Published Date: 23 Mar 2015

Hotel and hospitality industry is dynamic industry which changes fast with times. All the industry stake holders and business people have to be sharper and well prepared to keep them with the pace of changing environment. It is one of major industry on its outreach all over the world. In hospitality sectors decision makers have to go with proper tools to make their decisions. One of the most effective a popular business tool for industry analysis is porter five forces analysis. It was coined by Michael Porter. In this assignment we are going to study the brief history background, methods and its utilization in hotel industry. We will try to find what porter five forces are and how to use them for better understanding and analysis of happenings in hotel industry.

Back Ground of Hotel industry

The hotel industry consists of profitable business where people can stay in their time of need either for some work of for some holiday. During the 1920s this industry got a major increase and demand. Growth in world economy supported this industry to grow fast. Though the depression in 1930es slightly brought break to its expansion. Many hotels survived in this time of major crash as they were successful in starting hotel chains.

In mid twentieth century these industries start for a new change when demand for affordable cheap and healthy lodging was increased. This introduced new trend of motels business in the market. This new motels business competed better way with hotels till1960s, up to this these motels had a growth period with their size and facilities. To cover the business gap hotel industry made innovation of motor hotels. Stay at motor hotels was bit costly and it did not attract the business. By year 1970 hotel s start chains and they expand through franchises and thus industry was over extended. In 80s hotel industry made a boom once again by controlling their costs. Furthermore there was concept of new lodging ways like suite hotel. All the major runners in business started a diverse way to make more progress.

1990s was new era with better focus on commercial ways and advertisement. In recent years this industry taken new measures like reduction in wages, debt control, low interest rate financial investments and low rate area for installations of new venues. There are some major players like Hilton Hotels Corp., Marriott International, Trump Hotels & Casino Resort, Starwood Hotels & Resorts Worldwide, Promus Hotel Corp, Host Marriott Corp, Red Roof Inns, Inc. and MGM Grand Inc., These hotels performing well and making me than 30 billion dollar in industry alone in USA.

Background of porter five forces

There is always an interest by the academics and researchers in knowing the forces which impact performance of an organization or business. Many ideas and new models appeared in late 1970es and early 1980s these were focusing mostly on competitive advantage that any business can have over its rivals in same industry.

Harvard professor Michael Porter came with his idea of five forces analysis that according to him are always faced by any industry while doing business these are internal and external forces. Businesses have to get the understanding all dynamics in the market. Porter (1980) himself defined these forces that make competition and lead to competitive environment for a business. There is always rivalry existing between firms and also there is constant threat of new rivals in the market. Similarly suppliers and buyers also have impact. Porter's Model makes outline of five important elements shaping any industry.

Features of Porter five forces

Porter's five forces model simply identifies five factors that are most important and the formation of industry in order to identify it attractive for new entrants, or as a means to formulate a strategy for competitors in the industry.

There is continuing interest in the study of the forces that affect the organization, especially those that can be harnessed to provide a competitive advantage. There were many ideas and models that have emerged during the period from 1979 to the mid-1980s (Porter, 1998) on the idea that competitive advantage comes from the ability to get a return on investment that was better than the average for the industry sector.

It also tells that five forces analysis sees the factors outside any industry that affect the nature of competition in business within the industry. These things affect on profits of any business. If we go into the definition made by Porter (1980a) it says about forces which affect directly on competition, and it also considers that this competitive environment is created due to interaction between various forces.

Main Aspects of Porter’s Five Forces Analysis

As suggested by Porter forces which can affect the performance and behavior in any industry. These are included following forces :

Competition between sellers in market.

the customers power in the market.

Suppliers power in dealing on to the sellers.

Threat of new entries.

Threat of any substitute for buyers .

Force one: Rivalry among Sellers

It is intense competition to control the market and get more customers among the sellers. They use every tool to attract customers to them. It is main power in the industry where everyone facing tough competition. It is likely high in many of those industries in which a threat of new alternative products and is constant.

Force Two : The Threat of New Entry

It is not only about current rivals but there is threat of new entries always with the business. Both present and potential competitors can impact industry profitability. There is always discouragement of such new entries by all business people.

Force Three : The Threat of Substitutes

The is another threat pose by new substitute products within industry as the profitability always depends margins in price so it can make negative impact on performance. This always costs industries to make enough resources for their research and development department.

Force four : Buyer Power

Buyer try to get maximum from their investment or money it is important that buyer’s size values more in profit gains. Higher the buyers higher the profits are even with less margins. Normally this force very high especially with globalization of business.

Force Five : Supplier Power

Supply plays life line for any business so many times power supply makes your business into problems as they affect your sales. Because supply is necessary to sales without it one cannot make progress. So in industry there is always competition for getting low rates and proper supply according to demand. Where suppliers find they have chance or bargain they start utilizing it.

Nature of industry determined the nature of any competition in all industries. The powerful forces of all the buyers, suppliers, threats of entry and substitution and increase in competition can make negative impact on business. Porter five also have limits in its use. So it depend show it is being used by any of user.

Dominant Economic Characteristics

Hotel business enjoyed good times in 90es but it is now meeting with a slowdown due to overcapacity and decrease in demand. It is also going into a boom for mergers and some acquisitions. It is cheaper to have a hotel than buying building. Management of these is focusing on value and brand promotions many new measures are adopted by the businesses in recent years. .

Porter five for Hotel industry

In general the hotel industry makes good internal control of many forces as there is always margin of diversity. Government regulations power of suppliers agents in buyers gains and buyers, new entrants, substitutes are determining factors for the industry. Porter five provides details on these factors which affect strategic policy in this industry.

Power of Rivals: in hotel industry it is higher level of power of rivals. That makes business more efficient to do. The influence of external stakeholders on the company's ability to compete is partly a result of the economic power which has stakeholders. As Porter pointed out, economic power gives stakeholders the ability to extract profits or other benefits at the expense of the Company subject. For the purposes of illustration, and will touch briefly on some of these factors to Walamlae, suppliers, competitors and trade unions.

Suppliers power: There are a few of the customers with the company exposed to the risk of losing significant revenue and should be one client leave. Such a situation gives the client's economic strength. In general, customers are relatively strong, if a few or if they make large purchases. By the suppliers of the same vein, tend to be a great economic power if there is a hack only a small number of suppliers that provide precise type of commodity or service that is required. It is also a strong if there is a high level of differentiation across suppliers, or if you were not particularly concerned about the sale for you because you were not wide range of customers for them.

Buyers Power: in hotel industry buyers have more choices so they make pressure on the business to make enough compromise on prices. The industry as depends on the people who use the hotels so they some time make major compromise to buyers because there are times when this business is hit by season or some political or other element like terrorism.

New Entry Threats: In hotel the threat of new entry is towards high though government regulations support more to existing business as after 9/11 more is on regulations in hotels So some time its is not as easy to start a hotel. But on other hand it not required as much resources especially on tourists areas which generate more business.

Competitors have economic power based on their ability to compete. May be players with strong resource bases are disproportionately to be aggressive and create strong competition. It is important to determine the nature of competition in all markets, as well as the industry as a whole. Competition in some key markets hotel pricing, for example, while in other cases it may be brand differentiation. In other markets is still the key to success is to identify the characteristics of the hotel near Qaim. He called the case of companies that have multiple properties in different markets and compete often against some of the same companies in many markets, and multi-point competition. In that case, it is important to assess the effects of strategic moves in one market responses to a potential competitor in other markets.

Conclusion

Hotel industry is dynamic in its outlook and it has adjustment powers. With porter analysis we can find that there are immense pressures in this industry on the business. The entire major power holder in industry try to manipulate this industry and many factors are not as ideal as they can be like in retail business. A Hotel manger or its owner always went into continuous change to adjust the pressures of the industry. There is requirement to understand that all these forces make this industry a troubled place compares to other industries. There is ongoing focus on innovation in this industry to deal with all these forces.