In recent times, hospitality industry is often considered as the most well-known area where people can have leisure, fun and other related activities. These activities are often associated with hospitality within hotels which are further diverted to travel and tourism. This essay explains tourism and hotel industry and firms competing within the same. It highlights various micro and macro factors affecting industry and organizations industry. Research work is done on a hotel company namely Britannia Hotels which endeavors to enter into an emerging economy namely China (Bosselman, 2013).
Britannia Hotels is one of the largest privately owned chains in the UK and acquires a total of 47 hotels across country operating with a total of 1393 employees across its network (Pizam, 2012). Essay conducts SWOT analysis of company and also attempts to understand PEST factors affecting Chinese market and company’s operations. Major purpose of essay is to analyze and understand factors affecting new market entry by hotel and discuss the same with respect to company and market analysis tools. Utilization of these tools will be discussed while highlighting their implications on hotel within an emerging economy.
According to International Tourism (2011), global economy often presents a set of threats and opportunities for businesses competing in a variety of industries. Hotel and tourism industry is known as a varied and highly viable. Competitors are quick-service restaurant chains, travel agents, and high-end luxury hotels and tourism firms offering clients an enormous range of choices. Industry has been undergoing rapid revival and following a crucial period due to the time of recession. It is also known that tourist arrivals have continued to grow with increase in global per capita income as well as improvement in sentiment of consumers. Over past half decade, travelers travelling to some emerging markets such as Asia and South America have considered as the factor for driving growth in industry (International Tourism, 2011). These emerging economies are now accounting quite greater share as compared with past decade. Industry is expected grow bigger over the 5 years to 2019 as the global economy keeps strengthening (Abu, 2012).
Sector of travel and tourism has known to develop into an industry with a yearly direct, indirect and induced impact on worldwide economy of around 605 trillion US Dollars. On the other hand, hotel industry on global basis has known to generate between 400 and 500 billion dollars approximately as each year’s revenue. Comparative geographical location of a nation as well as better convenience of travel to other nations can be considered as one of the significant factors that affect levels of hotel and tourism industry (Jauhari, 2014).
Global hotel and tourism is known as extremely labor intensive and is also a major employment source around globe. It is considered as one amongst world’s top job creators that require distinct skills degrees while allowing for quick entry to workforce for migrant, women and youth workers. It has also accounted in 2014 about 34% of the world’s services of export. In 2015, industry’s global economy is estimated to account for more than 250 million jobs which is equivalent to about 10 per cent of overall jobs available direct and indirect on globe. Estimation made by United Nations World Tourism Organization (UNWTO) states that industry is capable of creating 296 million jobs in by 2019 for global economy (Costa, 2014).
Chon (2013) stated in 2013 that in 2014, industry is expected to generate around 11 per cent of total GDP which directly accounts for about 4.2 per cent of GDP as a whole. Investments in industry is estimated about 10.2 out of total as it will create more than 7 per cent of the EU’s GDP itself, with around 10 million jobs. If services associated with industry such as agriculture and manufacturing depending on demand of travel are also taken into account, tourism has capability to generate directly about 12% of total GDP of the EU while employing 14% of workforce (Chon, 2013).
Above findings of author is supported by Phillips (2014) who stated in 2014 that global hotel and tourism industry has captured the pace of growth which has recovered from last recession and is not set to grow higher with consistent degree until next recession. Thus, it can be said that global hotel and tourism industry is capable of generating great amount of employment in global economy and can be considered for expansion in employment level in even those countries that are suffering from underemployment (Phillips, 2014).
According to Qu (2013), there are a number of trends emerging out of international hospitality industries which has laid at the same time both positive and negative impacts on cultures and lifestyles. Industry has contributed to the most in influencing lifestyles, cultures, customs and traditions, technology etc of host countries. This has affected a host country as a whole on a larger scale by polluting its natural phenomenon and overcrowding its target destinations by travelers from around the world. This has also driven in losing of traditional activities and filling up of spaces that could have been used otherwise for other recreational activities related to nature (Qu, 2013). On the contrary, an independent survey has stated several advantages of such an emergence of influenced lifestyles and cultures as industry has contributed well towards generation of employment to a considerable degree in nations. It argues that hotel and tourism industry has been known for improving lifestyles and living standards of people by having them employed and thereby increase their level of disposable income (Qi, 2014).
Britannia Hotels is one of the largest UK based hotel chains that operate with 47 hotels across country. It is known to operate in several major parts of the UK such as London, Manchester and Birmingham and nearby a number of major airport locations. It is known as a budget hotel and its prices vary with different locations around the nation. It offers a range of services to its customers such as banquet functions, conference room hiring, membership of health club etc. It is also known that the whole chain is not confined to a single theme or identity, as it has different functions and individuality with each and every hotel operating in various locations. This can be seen in diverse furnishing bedrooms with distinct themes for guests with different preferences (Hall, 2012). Estimation of hotel’s net income is around £8.138 million including various subsidiaries carrying out diverse hospitality and tourism operations in a number UK markets.
Major reasons behind choosing this hotel chain are that it is emerging in the UK markets and it significantly shows the signs of expanding into other emerging countries on globe. Organization is good at segmenting of markets through sound market research and then converting the same into target markets so that similar themes of hotels can be developed. They are later on used to position hotels into local markets of customers who prefer the same for satisfying their leisure and hospitality related needs and wants (Xu, 2013). Positioning of company is often based on target markets preferences of themes within hotel rooms so that they can be satisfied in the most appropriate manner after generating awareness among customers regarding the same. Thus, unique potential for development of such themes can be considered as Unique Selling Proposition (USP) of Britannia Hotels in industry which helps company to attract more number of customers and develop potential to compete well in markets (Zhang, 2011).
SWOT analysis concept is a structured tool for planning which is commonly utilized with the purpose of studying strengths, weaknesses, opportunities and threats of a company. With the help of this tool, hotel can understand its potential and competencies for competing well in current and future markets which would be on the basis of its strategic planning. On the contrary, this analysis technique is not considered as sufficient by Willie (2013) for issues facing companies. In the same way, this technique is not considered as sufficient by Costa (2014) for being accountable to create problems with an aim to identify alternative solutions for the same. It is because this tool is used to develop goals and strategies for a business while trying honestly and hard to accomplish them. Moreover, it cannot possibly provide alternative decisions to problems or offer solutions as it can offer lots of understanding of a business potential to grow in general condition but is not capable of being used to work well upon industrial issues (Costa, 2014). SWOT analysis of Britannia Hotel is conducted as under:
Strength – Independent survey has found out that Britannia Hotels have larger coverage in domestic market and thus, it acquires most of skilled and experienced individuals within its workforce. Its biggest strength lies within its sales and distribution channels which are spread across the UK. Company is capable of offering competent as well as lower prices to global and national customers because of lower cost of business operations. In this way, it is known to deliver quality services at the best possible prices. Company has also developed systems for training staff members in accordance with its range of services which are offered in competent prices to guests (Costa, 2014). Furthermore, company also acquires diversity in workforce which is comprised of employees from different ethnic backgrounds that makes it easier for staff to deal with customers from different countries around the world. Company also boasts of its reasonable priced hotel rooms nearby key airports’ locations which offer travelers an easy access to airports and markets around hotel locations (Costa, 2013).
Weaknesses – One of the major weaknesses of Britannia Hotels in present times is its lower priced services which sometimes do not match standards offered by other larger organizations such as Hilton and Marriott Hotels. Moreover, company is operated within boundaries of the UK and this makes it confined to it as against major competitors that are global and competing with global firms beyond natural boundaries of the UK. This has led to acquiring of lower share in market within stable customer base (Ingram, 2013). Furthermore, with passage of time and within limiting its hospitality and tourism services to markets of UK, company’s investment in research and development has dropped to considerable degree and this can be a sign of weakness as compared to other major competing firms in country (Willie, 2013).
Opportunities – Britannia hotel chain can make best use of available opportunities in markets by expanding its operations to new and overseas markets. Besides that, while carrying a reputation of affordable and budget hotel, company can have wide variety of opportunities for the purpose of increasing profitability and efficiency in business operations. UK has emerged as one of the major business hubs for multinational companies and that there is an opportunity for company to conduct range of business conferences and meetings at its banquets and board/meeting rooms (Dodson, 2011). They can significantly be used by company to gain popularity in markets for business purposes as well. In this way, overall brand image of firm can be enhanced by adding this feature as one amongst its unique selling propositions (Zhang, 2011).
Further, Olympic and other similar games in the UK can also provide significant opportunity to Britannia Hotels for generating major amount revenue within short period of time. From last recession period, economies of many countries have been improving at a great pace and this has increased disposable income of customers who are adopting more activities tourism and travel into their lifestyles and attitudes. This serves as an chance for company to offer competitive and attractive offers in terms of hospitality and tourism in the UK (Ingram, 2012).
Threats – There are various threats which a company can be impacted of and they can change major decision making of a firm. Britannia Hotels can be affected of threats in terms of terrorist attacks in a country which may reduce the number of tourist leading to less room bookings. Political disturbance also has a negative influence on operations of hotel as it can result in downfall of major cash cow activities of company in markets (Cheung, 2012). Laws (2013) argues that changing trends can have both positive and negative impacts on a hotel as it can be easily affected by changes in lifestyles and preferences of guests coming to stay in hotel rooms. Major governmental reforms can have negative impacts on competitive activities of firm and this may even require in modifying significant business decisions in industry (Laws, 2013).
Emerging economy in which Britannia Hotels is supposed to enter is China and its GDP US$17.632 trillion with 7.2 per cent growth in 2014. It has a labor force of over 790 million with 4.1 per cent of employment. It is known as the socialist market economy which is world’s second largest by nominal GDP and world’s largest in terms of purchasing power parity according to the estimation of year 2014 by IMF. It is also called as the globe’s fastest growing nation with growth rates averaging 10 per cent over the 3 decades. Tourism has also expanded greatly in China since the commencement of opening and reform (Costa, 2014). China is known as the third most visited nation on globe. WTO estimation for 2020 states that China will become the most visited country among tourists as well as among the largest for travelling overseas. Nation’s growing economy has also contributed well in travel for business. In 2013, the country’s inbound visits accounted for 5 million on business visas which is expected to grow about 8 per cent by 2016. Hence, this emerging economy has a great potential for Britannia to expand its hotel and tourism business operations in China (Phillips, 2014).
According to the independent study conducted in Chinese economy for conducting international hotel and tourism business, it is revealed that there is a great potential for hotel businesses for carrying out various hospitality and tourism activities to boost revenue and to drive more visitors to visit country. Chinese culture majorly influences international hotels which often tend to develop such a theme that is representing and complementing to Chinese heritage and customs. There are a number of cities which are renowned for historic and old heritage of nation.
Also musicians from country have been popular for attracting more number of tourists from around the world (Allin, 2013). There are famous tourist sites that have potential to generate sound revenue for hotels around them and Britannia Hotels could be one among them.
Considering strengths of organization, Britannia Hotels is capable of developing vast network throughout major cities of China which will be beneficial both for supply chain operations as well as human resource management. There is an island known as Hawaii of the Orient where Britannia Hotels can expand its business with an aim to attract beach lovers and provide related hospitality services to them bound by Chinese tradition (Eccles, 2012).
According to Swarbrooke (2012), PESTLE model involves analysis of factors from macro environment of a country with the help of which a company can scan various aspects of strategic management. This can aid Britannia hotel in eradicating various impacts of threats through strategic formulation of planning and management in a new market. This can be resulted into being capable as a hotel which can assess the implications of entering into a new economy for profitable business (Swarbrooke, 2012). On the contrary, it is imperative for company to carry out such analysis on a regular basis to understand the changing trends in new market economy but this requires considerable time and money. It follows collection and acquisition of larger information pool to pass through various loops in China (Peng, 2013). External environmental analysis for hotel has been conducted as under:
Political Factors – In the early 1980’s, government dismantled cooperative farming while allowing for privatization of private companies. Since then, economic rate of change has not been matched by current political changes. It is because the Communist party is still in power as well as has a sound control over people. This makes it difficult for international hotel companies to obtain freedom to operate within their standardized dimensions of business. Besides that, China has immense population and is a large country where local tourists are known to contribute well to the development of tourism in country (Lockyer, 2013). This can be a positive sign for Britannia Hotels for obtaining profitability in China.
Economic Factors – China is called as one of the world’s top exporters that allows for record amount of foreign investments. But recent 2014 study reveals that China has been going through difficult times in terms of economic growth. Authorities have been trying to shift it toward sustainable but slower rate of growth with quick development of its banking sector. In 2014, Chinese economic growth is equal to 7.4 per cent which has been considered as the slowest in 24 years. Thus, for Britannia Hotels, accumulating funds could be a bit difficult in short run, but company could still find some additional sources of development in the country because of its sustainable growth planning (Wardell, 2014).
Social Factors – With globalization in world of business, China has become one of the attractive economies for investors from foreign countries. However, differences in cultural aspects have been presenting major difficulties between Chinese and Western partners (Okumus, 2010). For Britannia Hotels to be successful, it is significant and equally crucial to understand and value long history and culture of China. Further, company needs to understand the cultural influences of visitors on Chinese customs and traditions and accordingly devise its marketing strategies for tourists (Lunocheva, 2014). It should majorly be represented within hospitality and leisure services offered by company.
Technological Factors – The rapid growth in China until 2013 has brought a great technological advancement in the country which has moved in the slower increasing rate in 2014. China is still considered as one of the fast developments emerging economies in fields of space, manufacturing, tourism and hospitality, agriculture, service, construction etc. Also country’s price competiveness is difficult for other rival countries or firms to match or beat (Conrady, 2011). It is because of the availability of cheaper labor and technological tools for conducting business operations. Country also has a high level of research and development advancement which can significantly help Britannia Hotels to understand shifts and changes in Chinese market trends. Thus, it can be said that technological aspects of country is favorable for hotel to operate its business (Kozak, 2013).
According to Somavia (2010), Porter’s model is based on the insight explaining that a strategy of corporation is supposed to satisfy opportunities and threats in external environment of organization. Competitive strategy should be based on a comprehension of structures of industry as well as the manner they change. Model explains ways in which every market and industry structure changes. Five forces are capable of determining level of competition which is associated with attractiveness and profitability of industry in a country. Analysis can be conducted with an objective to understand and control these forces in Chinese markets to improve performance of Britannia Hotels (Somavia, 2010). Statement of author has been countered by Wardell (2014) who argued that framework of model is that of chronological thinking and it is inherently static which represents present day aspects (Wardell, 2014).
It is conducted and explained as under:
Bargaining Power of Suppliers – There are huge number of suppliers in Chinese markets for various products and services. This can be beneficially for Britannia Hotels to bargain with them since international competition also makes suppliers work honestly with international firms like Britannia Hotels (Rutherford, 2010). Company can have effective relationships with them to further reduce their impacts on major market decisions.
Bargaining Power of Customers – In Chinese markets, hotel and tourism industry is considered as one of the developed industries there and thus, more numbers of international firms have entered into this industry. This has created more choices for travelers to choose among different hotels. Thus, the power of customers is high and it can be dealt by Britannia Hotels through sound client relationships as well as attractive offers to develop sound brand image in markets (Jauhari, 2014).
Threat of Substitutes – In China, there are huge number of small and medium-sized lodges which are offering least prices for lodging and leisure. Thus, their power is high in markets and Britannia Hotels can deal with it by providing similar services in competing prices through employing cheap labor from the country (Peng, 2013).
Threat of New Entrants – Because of Chinese lucrative hotel and tourism market and industry, more number of bigger companies with huge capital investment potential are entering in country. This can be tackled by Britannia Hotels by developing sound relationships with customers and grabbing major share in markets through sound brand identity and awareness (Willie, 2013).
Threats of Rivalry – There are huge number of rival firms present in Chain such as Hilton Hotels, Marriott International, Four Seasons Hotels etc and they pose significant threat to operations of Britannia Hotels. They can be effectively competed by employing better and competitive strategy to earn greater market share and to retain current customers while attracting potential ones (Costa, 2014).
Strategic planning is a course of action which is concerned with defining strategy, direction and allocation of resources of business enterprise. It is also used for controlling the mechanisms in order to provide guidance at the time of implementation of strategy (Álvarez, Casielles and Martín, 2009). In recent times, there exist ranges of strategies which can be adopted by Britannia chain of hotel for the purpose of identifying amount of investment which will be required in China in coming time span of 5 to 10 years (Khan, 2012). In regard to this, Ansoff matrix is one of the most essential strategic planning models by means of which senior executives and other concerned top management officials and marketers of hotel can formulate strategies for ensuring their future growth and development. It basically comprises of four major growth strategies namely market penetration, market development, and product development along with diversification (Lashley, 2013).
As per the point of view of many scholars, it has been observed that the tactic of with the help of market penetration tactic, Britannia hotel can enhance its existing market share through attaining growth and development by means of their superior deliverability of services. But it is to be critically evaluated that for this, it becomes essential for hotel to follow another set of strategy at the time of saturation, so that it can ensure its smooth functioning in near future (Hwang and Lockwood, 2006). Novelli 2013, has argued that market development strategy will prove to be of great use for Hotel Britannia to perform exceptionally well in new market place of China by making best possible use of its strength as well as opportunities (Novelli, 2013). But on the flip side, this particular tactic is regarded as quite risky in nature especially in this case. This is due to the fact that in this management has to deal with number of problems at the time of dealing in new market place due to changes in pattern and demographic patterns there (Padin and Svensson, 2013).
On the basis of independent survey, it has been seen that hotel can cover large part of market by developing their products and services in such a manner so that it can satisfy needs and wants of service users in China. But on the flip side, it has been seen that social factors such as lifestyle pattern, demographics, taste and preference and so on keeps on changing as per time. So it will become quite difficult for administration of Hotel Britannia to modify their services and its deliverability as per taste and preference of potential clientele at regular interval of time. According to the point of view of Soultana Kapiki 2012, diversification which is the last growth strategy in Ansoff matrix is regarded as most risky strategy among all that are mentioned above. Due to this, it is also referred to as suicide cell by majority of people (Kapiki, 2012). But, it proves to be of great use for Hotel Britannia as by means of this they can diversify their existing functioning and operations into China for the purpose of covering large market share along with creating brand image on world map (Novelli, 2013).
In the similar manner, Porter’s generic strategy can also be adopted as strategic planning tool by hotel. The overall concept of this strategy is to demonstrate ways in which business enterprise pursues competitive advantage across the chosen market area. In regard to this, there exist three basic strategies such as cost leadership, differentiation strategy along with focus strategy which can be adopted by Hotel Britannia to mark its successful entry into the market place of China (Padin and Svensson, 2013). As per the point of view of many authors, it has been seen that by means of this Hotel can reduce excessive cost in future, as a result to which it will be able to draw attention of large number of potential clientele so that profitability and productivity of firm can rise up to great extent (Ladeiras, Mota and Costa, 2010). In addition to this, market share of hotel in new emerging economy will also improved with the help of charging reasonable and lower prices for their services during establishment and initial stage of hotel in Chinese market. But on the contrary, due to intense competition prevailing in hospitality sector, majority of competitors of Hotel Britannia has adopted this same tactic due to which hotel has to find out new ways for enhancing their market standing (Álvarez, Casielles and Martín, 2009).
Differentiation strategy can provide assistance in making products and services of business enterprise unique in nature so that it can be easily differentiated with that of its competitors existing in market place. In this course of action, hotel has to decide upon one or more attribute so that on the basis of that strategy can be framed (Ladeiras, Mota and Costa, 2010). But it is to be critically evaluated that it requires ample amount of flexibility which is to be nowhere to be seen in this particular segment. Many authors have argued that in focus strategy they have to focus on target market so that services can be designed by keeping their taste and preference in mind. However, in new emerging market of China it is quite time consuming to determine target market at initial level, as it requires extensive market research (Álvarez, Casielles and Martín, 2009).
On the basis of analysis of both Ansoff matrix and Porter’s generic strategy, Ansoff matrix is regarded as one of the most suitable strategy for Hotel Britannia in order to enter into new market place of China. The major reason behind this is that it is developed for ensuring future growth rate (Use Ansoff’s Matrix to Identify Your Growth Strategy, 2012). In the similar manner, it comprises of four growth strategies which tends to fulfill the entire basic requirement which will be required by business enterprise in gaining competitive edge against competitors in Chinese market. By means of this, Hotel Britannia can develop new market as well as set of services in coming time period of 5 to 10 years. In regard to this, first and foremost reason for complying with this particular strategy is that with the help of this hotel can promote and sell more of the same things to same customers at many times (Kapiki, 2012). Market penetration is regarded as simplest way to grow in expanding market and in order to develop new market; hospitality sector can find alternative uses for their existing range of services. In order to diversify in the market place of China, management of Hotel Britannia can take advantage of its core competency along with strength to attain desired outcomes without posing any difficulty (Khan, 2012).
In addition to this, by means of this brand loyalty of customers towards hotel can be enhanced in near future so that it will prove beneficial in enhancing brand loyalty in the minds of customers in China. Apart from this, this tends to encourage customers more frequently to avail services of Hotel Britannia at regular interval of time (Lashley, 2013). On the basis of survey, it has been seen that with the help of help of diversification strategy of Ansoff matrix, hotel can diversify its range of services in near future so that it can satisfy needs and requirements of concerned parties (Hwang and Lockwood, 2006). Last but not the least, it will also provide assistance in development of market and services in such a manner so that maximum satisfaction can be provided to service users. Other than this, failure of Porter’s generic strategy is also accountable for adopting of this tactic. This is because of the reason that it is quite confusing in nature which can lead negative outcomes in long run, as a result to which catastrophic results can be faced by Hotel Britannia in coming years (Khan, 2012).
By attributing the facts from above mentioned report, it can be rightly articulated that in order to carry out detailed evaluation of market analysis, Britannia hotel can make optimum utilization of range of strategic models. It has been seen that in recent times, hospitality sector has attained exceptionally good rate of growth as a result to which hotel can enter into new emerging economy of China in order to improve its market share and standing. SWOT analysis has proved to be of great use in eradicating chances of weakness and threats with the help of its strength and opportunities available within market place. Conditions in terms of political, economical, social and technological that are prevailing in market of China can be easily determined by means of carrying out PEST analysis. As a strategic planning model, Hotel Britannia can adopt Ansoff matrix as most suitable strategy so that it can diversify into new market place by developing its services in such a manner that it can satisfy needs and wants of end users. By means of this, hotel will be able to formulate strategy along with creating loyal customer base in the market of China.