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Analysis of the Global Hotel Industry

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As the global economy improves, the Hotel & Lodging industry is recovering gradually, witnessing an increase in demand and profits. Demand that had slumped during recession for hotel rooms is on a rebound with recovery in economic scenario. The evolution of new emerging markets as new business hubs and changes brought about in business practices are expected to further foster renewed growth and add dynamism to the hotel industry. Though, the recovery rate is quite fast, hotels in the luxury segment are still lagging in occupancy percentage and revenues-per-room.

A number of hotelier's have lined up a pipeline of new hotel projects in order to meet the rising demand for hotel rooms and services. Many of the major players have reached a saturation point and have moved on to explore other lucrative international markets; developing countries with fast growing prospects. E.g. India is a developing country and a global business hub. It offers attractive investment propositions, for both upmarket branded premium hotels and moderate-tier/ budgeted hotels. In addition, China; the hotel sector in this country is at its prime, as the country's economy is the fastest emerging market in the world.

The industry has seen an emergence of a trend of various hotel service concepts such as, health & yoga programs, wellness & healing programs, as well as customized menus, in order to attract customers. Developing a competitive strategy is a challenging task for many hoteliers' because the sector is changing dramatically in the face of intense competition, increasing customer sophistication, and rapid technological advances.

PEST Analysis


Governments play a fundamental role with regards to policies, degree of intervention, trade and tariff regulations, taxation policies etc. The hotel industry relies on them for incentives, support and backing for their development and growth. The governments' role is pivotal in the taxation policies, as they have the ultimate authority to restructure tax policies for hotels and to encourage tax incentives so as to attract investments. E.g. Caribbean Government has increased the taxes levied on hotels which are aimed at the high spending visitors to combat increasing operating costs and bank debts (Forstmayr, 2012). While the UK government provides for better stability for hotel owners, through fewer regulations, taxation, interest rates and introduction of capital allowances (, 2010). Competitive tourism requires government efforts to fulfil basic essential factors; developed transportation, infrastructure, safety, security and sanitation, accommodation etc. Although each country faces different political circumstances, Political Stability is critical for the industry. The terror attack on Mumbai's renowned hotels Taj and The Oberoi's spread great concern amongst hoteliers due to the substantial drop in foreign travellers to India.


Economic factors comprise of interest rates, economic growth, inflation, high operating and labour costs, impact of globalisation and fluctuation in the economy. Exchange rates and disposable incomes influence the consumers' spending decisions; in times of a recession, people intend to curtail expenses and increase savings. Hotels capitalise on the affluent foreign travellers as they have the purchasing power to pay for luxury goods and services. The positive economic impacts of this industry are balance of payments (hospitality is a valuable industry to reduce a country's' balance of payments), income (salaries, profits, rent, or tax - Eg: VAT collected from consumers which goes towards investment in the economy) and employment generation (direct or indirect jobs). Negative economic issues range from dependency (some countries are highly dependent on hospitality for their income), increased unemployment (hotels are forced to downsize their staff or reduce recruitment), inflation, increased operating costs and Uncertainty and turmoil in the global economy etc.


Emergence of high net-worth individuals in the BRICS, attitude to work and leisure, lifestyle changes, population demographics, sustainable food production, safety and security are the key social indicators of the hotel industry. Hotel business is driven by consumer preferences, needs and wants. E.g. business hotels serve corporate clientele, more than free individual travellers and hence have higher number of male than female guests. To balance the demographic ratio, hotels strive to increase the ratio of FIT's and group check-ins by tying up with travel agencies. Age also influences the category of hotel selected. Young adults seek "active" hotels with entertainment, bars, restaurants, nightclubs, water sports, etc. Older tourists on the other hand look for 'passive' hotels with safe and secure activities in quieter and comfortable locations.

There is a growing need for young, skilled and motivated staff due to the aging and retiring workforce. The problem of attracting and retaining qualified workers is a global challenge due to weekend shifts, long hours of work and comparatively lower wages. The industry should focus on increasing benefits for employees and other opportunities; job enlargement through training. Also, there is an increasing pressure on hotels by informed consumers in the health aspects for better quality food produced in a socially responsible manner. E.g. Starwood recognised this, sourced local ingredients and served native-style meals in their restaurants throughout Middle East and Asia (Smith, 2012).


Hospitality management systems are well integrated tools that are efficient in helping properties to attract more guests, generate more revenue and establish improved levels of competence. Technological upgrades denote the advances and progress of a property. The technological systems used e.g. check in kiosks, must be interactive and user friendly. Central Reservation Systems like Amadeus, Galileo, Property Management Systems - for front and back office management, Point of Sale systems improve communication, efficiency and control, Energy Management Systems reduce energy consumption and Electronic Locking Systems, are the chief technological factors influencing the hotel industry. Systems like Global Distribution Systems and Computer Reservation Systems (CSRs) (CTH, 2010) assists guests with online hotel bookings. Correct utilisation of this system fosters vertical integration with airlines to offer smoother service to guests.



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