Factors that impact global hotels industry

Red Carnation is an luxury Hotel chain which offers quality services  like accommodation, tours, food and dine, spa and beauty, cruises across the UK and the Channel Islands, Ireland, South Africa, Switzerland and the USA, and a country gastro-pub in Dorset. The Hotels came into existence in the year 1950 in South Africa and later the company expanded to other locations. The company core values are to consistently provide their customers with the best quality of products and services. Through its strong core values and qualified employees the hotel has become one of the luxury brands of hotel. The company in order to expand its customer base is thinking to explore the opportunities for international expansion. This work carries out analysis of the hotel market and recommends an international market for the hotel group to enter in the year 2019. This work also develops an appropriate international marketing strategy for the hotel.

The major factors that impact the global hotel industry are as follows:

Economic factor:  the total expenditure by consumer on hotel accommodation is directly related with GDP performance, thus economic downfalls naturally have the most common and expanded effect on the hotel industry. In the period of recession a consistent pattern is reflected by the Old trends across numerous regions (see Figure 1) (Alegre et al 2012).

                                                                   

If the price sensitivity starts high then it means low in demand, tenancy ranks also becomes low and hoteliers reduction prices to attempt to secure bookings. Recessions can create many problems to hotel industry, it leave the industry at a risk and vulnerable conditions to further disturbance from secondary shocks, as established by effect of the Arab Spring.

Political Unrest & Terrorism: Trouble to hotel industry performance mainly concentrates on locations directly facing political chaos and demonstrations. Terrorist attacks can affect the hotel industry globally because the foreign travelers are afraid of these terrorist attacks and threats by the terrorist groups. On the other hand mainly the local and regional travelers can not discouraged by these types of threats and incidents. But due to the security reasons and safety of people of their country the government can’t allow their people to travel in such conditions.

Pandemics: The international hotel industry is also affected by diseases such as swine flu, Ebola and SARS because of these diseases the government of many countries cannot allow peoples of that country in which the viruses of these diseases is spread. For Example in 2009 due to swine flu Mexico City verified a 50% decline in tenancy of the visitors (McGuire 2015).

Technology: many new and effective technologies are introduced in the hotel industry and it affects much organization in hospitality. If new software related to the hotel industry is not being used by the companies then competitors will take benefit and they create problem in sustain. These new technologies and software’s are very useful in hotel booking facilities and tour management. They are very useful in the rapid growth of the company (McGuire 2015).

Internal business environment of Red Carnation hotel

Changes in law and Tax rates: international hotel industry is also affected by tax rates and changes in law. There is no control of hospitality industry on the government rules and regulation regarding their workings and tourism department (McGuire 2015).

The Red Carnation hotel has 17 luxury boutique hotels and spas in South Africa, United Kingdome, Ireland, Channel Islands, Switzerland and USA. The company emphasizes on the values of giving warm and consistently excellent services to the customers, Value, respect and support their staff and shareholders, and to be equally responsible for the development of sustainable environment (The Red Carnation Hotel 2017).    

The Porter value chain analysis for the company is as follows:

In bound logistics: The company has sound partnership with their suppliers and take proper care in providing excellent quality of food and beverages, laundry services, cleaning and other services. Inventory control, stock requisitions, back of the house storage and distribution, transport facilities are all maintained to ensure that customers are feeling respected and satisfied.

Operations: the hotel hires talented employees and trains them so that they are able to prove the best kind of services to their customers. The operations of the company include the process from support at the customer desk, hotel services support, management control, online support, marketing people, and the actors are the highly trained employees.

Outbound logistics: These are the services and the final products like room services, spa services, and pub services offered and distributed to the different guests at the different outlets of the company.

Marketing activities: These includes the fair marketing practices through print and digital media, internet, with discount offers and detailed list of services to get customers for hotel services, for spa, for pubs, for conferences etc. (Jha 2010). The Hotel stands by its offer and always charges as quoted in the advertisements.

Services: The hotel offers quality services with memorable experiences. The operational philosophy is that no request too large and no detail too small. The colors of the room, the fabric used for décor, bed covers, and furniture all are designed in order to make the customer stay a memorable one. Regular information on the travel sites, best places to visit is provided to the customers by company blogs (Guillet  2011). The company makes use of IT based technology to deliver quality services with accuracy in less time to their customers. Company also displays its strong corporate social responsibility by participating in socio environment events and programs. The employees of the hotel are trained such that they offers  attentive, personalized services, fine food, the ready smiles, and attention to detail of each customer needs of diverse international customers.

The Company has a brand image of luxury services. It offers numerous types of services like hotel accommodation, services, Spa services, cruise services, spa services, journey tour services, weeding management and venues, conferences and meeting venues etc. The company brand image is reflected from the hotel design and décor (The Red Carnation Hotel 2017).   

The company has highly skilled and qualified employees. The company considers its employees as the main drivers of success and thus gives them respect and positive working environment. Due to this the company has been in the top 10 list of 100 best companies to work for the past three years (The Red Carnation Hotel 2017).   

The company relies on IT infrastructure and makes use of latest technology to ensure that the operations of the company are accurate, faster and more effective for the customer point of view. The company makes use of internet and social marketing for attracting customers (Geetanjali. 2010)

The company is becoming weak due to the management system imbalances caused by extension of the business.

The company has its presence in very limited company where the competition in the international market is high. There are other dominant players like Hilton, Marriott etc. in the international market.

The company still has lesser customer awareness related to the organization and the services.

The company has sound experience and a business image. Thus, with the support of employees the company can slowly expand its presence in other international markets.

The company should increase its presence even in already operational countries like USA and Switzerland.

The company should make use of its sound IT infrastructure to enhance the quality of services and customer awareness.

The Hotel faces threats from the decline in the customers due to high rate of substitution of customers.

The recent attacks of terrorism and diseases like swine flu have decreased international tourism in some countries. This shall have huge impact on the company revenue. Moreover there are many top luxury hotels that have decreased prices to attract more customers in such tough times. This has increased the competition and this may result in decreased revenue.

12 C	China	France	Nigeria	Thailand
Country	The GDP growth rate is 6.7%. Inflation rate is 2.0% (Trading economics 2017) Fastest growing middle class	The GDP growth rate is 1.2%. Inflation rate is 0.18% (Tradingeconomics 2017) Top consumer of luxury market.	The GDP growth rate is -1.5%. Inflation rate is 16% (Tradingeconomics 2017) Low consumer of luxury market	The GDP growth rate is 3.3% Inflation rate is 4.2% (Tradingeconomics 2017) Has growing consumers of luxury market.
Culture	Power distance score is 80. Individualism score is 20. Masculinity 66 Long term orientation 87.	Power distance score is 68 Individualism score is 71 Masculinity 43 Long term orientation 63	Power distance score is 80. Individualism score is 30. Masculinity 60 Long term orientation 13.	Power distance score is 64. Individualism score is 20. Masculinity 34 Long term orientation 32.
Concentration	56% of the population lives in urban. The average age of people of china is 36.2 years. The population of China is 1.39 billion comprising to 18.47% of world total population (Tradingeconomics 2017)	80% of the population lives in urban. The average age of people of France is 40.1 years. Population of France is 66.9 billion (Tradingeconomics 2017)	48% of the population lives in urban. The average age of people of Nigeria is 18 years. Population of Nigeria is 186 million (Tradingeconomics 2017)	50.3%of the population lives in urban. The average age of people of Thailand is 24 years Population of Thailand is 69 million (Tradingeconomics 2017)
Choices	The luxury market is seeing a tremendous growth with more liking to Western products. Product quality and branding are the main strength (Wassener 2010).	The luxury market is huge in France and people pay here for quality services (Wassener 2010).	The luxury market is limited. Due to high inflation rates people find daily used prices to be high (Wassener 2010).	The luxury market is expanding due to huge number of international tourist (Wassener 2010).
Consumption	The Hotel industry is promising with a growth resulting $45 billion revenue (Zhang et al 2012).	Due to terrorist attacks the tourism market has decreased a bit to $18.18 billion (Zhang et al 2012).	The international hotel industry growth is projected to increase. The current market revenue is $39 million (Zhang et al 2012).	The Hotel industry is promising with a growth resulting with $2.8 trillion revenue (Zhang et al 2012).
Communication	52.2% of the population is connected via internet (Crampton 2011).  It has 2000 newspaper type and 3000 television stations	86.4% of the population uses internet. It has 86 newspaper type and 584 television stations	46 % of the population uses internet. Country has over 100 newspapers and 2 Television stations.	43% of the population uses internet. country has 34 newspaper and 5 Television stations
Capacity to Pay	In the long-term, the China Disposable Income per Capita is projected to trend around 6253USD (Tradingeconomics 2017)	Disposable Income per Capita is projected to trend around 425836 USD (Tradingeconomics 2017)	Disposable Income per Capita is projected to trend around 60427 USD (Tradingeconomics 2017)	Disposable Income per Capita is projected to trend around 260299 USD (Tradingeconomics 2017)
Currency	Country uses exchange control mechanisms for the currency	Country uses European Exchange Rate Mechanism	Exchange control system is still not appropriate	Access to Exchange control mechanism.
Commitment	Country has strong subsidy system and blocks many foreign products.	Country is more famous for its tour and luxury products.	Country is seeing a positive growth in luxury market but the trends are slow.	Country is seeing a positive growth in luxury market.
Channels	Country has 500 airports and 7 sea ports. Strong emphasis on infrastructure development (PressReference 2017)	Country has 475 airports. Country has strong Rail route, Sea route and world class infrastructure (PressReference 2017)	Country has 30 airports and the infrastructure for road and transportation still needs huge investment and development (PressReference 2017)	Country has 38 airports and the infrastructure still needs to be developed (PressReference 2017)
Caveats	For international market presence Joint venture or foreign invested enterprise (FIE) such as a wholly foreign owned enterprise is permitted (Zhou et al 2015).	For international market it is best to go for multi-franchise or joint ventures (Zhou et al 2015).	Companies and Allied Matters Act looks over the investment in international market (Zhou et al 2015).	The country imposes a Foreign Business Act which monitors foreign investment (Zhou et al 2015).
Contractual Obligations	The business laws are to be followed.	Tax issues, trade mark registration, protection etc.	Tax, information technology, trademarked rules	The challenges are related to  tax issues, human right issues and land office guidelines

From the analysis it is clear that the promising market due to huge population, growing customer in average income to luxury class is China and Thailand. The disposable income of the people of these two countries is promising. But China has strongest GDP projection for the future and thus the consumer purchasing power is increasing (Pira  2014).Apart from it there is a huge growth in the luxury market in china. China also has strong communication and distribution channels which shall help the company to promote and ensure supply chain management properly (China ready news. 2014). In Thailand the main source of GDP is tourism and thus there are many big players which shall pose huge competition to the Hotel. In such scenario the best choice thus is China.

The entry mode for the hotel in the China would be a wholly foreign owned enterprise. This entry mode is selected from the fact that in China the current legislation for foreign franchising for international market can be either as a joint venture or through a domestic subsidiary made through foreign invested enterprise like wholly foreign owned enterprise. Going with joint venture eliminates the need of a domestic enterprise but imposes the risks like the absence of a good local partner which may lead to the lack of proper control of the franchise. Thus, going through a wholly foreign owned enterprise is the best option as it shall give the firm to hire and have local employees which shall help the hotel to supervise the business structure in accordance to the socio-cultural factors of the country. It shall help in managing business resources efficiently and can lead to brand awareness (Andreu  et al 2017). It is also beneficial in terms of tax perspectives.

Following Marketing mix’s recommended for the Red Carnation hotel in the china market.

1. Place: The Company should select a suitable place for expanding in to the china market such that the company gets good number of customers. Since the hotel offers luxury services of Cruises, wedding venues, spa and life style, the choice of the place should be near sea side. Dalian is a Chinese city bordering the sea and is a famous sight-seeing destination. This shall be an economical choice for the hotel. The hotel should come up with Chinese version of the official website (Changing minds. 2015).
2. Products: the company along with its services of accommodation, spa and health well-being, cruises, wedding venues, etc. should include facilities for yoga, and martial arts. Chinese people are known for giving priority to their health and thus love space for training yoga or martial arts. Moreover the hotel should also have the facility for cycling keeping in the socio-cultural factors of china in mind (Dudovskiy 2013).
3. Pricing: the pricing strategy should be a decoy strategy where the hotel shall offer multiple products and services with similar prices. Chinese people love to examine the services and their quality. Through this strategy they shall be able to compare the options with similar prices and select the best suitable to them which shall result in the increase of the sales of the attractive item.
4. Promotion: The number of internet users in china is increasing day by day and the Red Carnation hotel has strong IT support and uses blog and social media for attracting customers especially the Chinese social networks like Wechat & Weibo. Thus, the best strategy for promotion shall be using internet based social media and blogs along with advertisements in local newspaper and at local shops.

Conclusion

Red Carnation hotel is a luxury hotel offering services of accommodation, food and dine, spa and health well-being etc. To expand its market and to gain more global present the company thus can plan to go ahead to the emerging market of China. In recent years the per capital income of the people of China has been increasing and the country people are giving importance to western products and services to show their luxury. With huge population, growing middle to luxury class people and strong economic growth the Hotel can make a best expansion of its chain into the China market through wholly foreign owned enterprise.

References

Alegre, J.and Cladera, M., 2012. Tourists characteristics that influence shopping participation and expenditures. International journal of culture, tourism and hospitality research, [online] ProQuest Central. 1031200519. p. 223-237. Available at: https://www.emeraldinsight.com/doi/full/10.1108/17506181211246375 [Accessed: 18 August 2017].

Andreu, Rosario & Claver, Enrique & Quer, Diego. 2017. Foreign market entry mode choice of hotel companies: Determining factors. International Journal of Hospitality Management. 62. 111-119. 10.1016/j.ijhm.2016.12.008.

Changing minds. 2015. Elements of Marketing Strategy, [online] Available at: https://changingminds.org/disciplines/marketing/marketing_strategy/elements_s trategy.htm

China ready news. 2014. China’s President tells Tourists to be more ‘civilised’ abroad, [online] Available at: https://chinareadynews.com/1404/chinaspresident-tells-tourists-to-be-more-civilised-abroad/ [Accessed: 18 August 2017].

Crampton, T., 2011. Social Media in China: The Same, but Different. China business review, [online] Available at: https://www.chinabusinessreview.com/social-media-in-china-the-same-butdifferent/ [Accessed: 18 August 2017].

Dudovskiy, J., 2013. Hilton Hotels Marketing Mix. Research methodology, [online] Available at: https://research-methodology.net/hilton-hotels-marketingmix/ [Accessed: 18 August 2017].

Geetanjali. 2010. International Marketing, Oxford Book Co., 97893504304022.

Guillet, B., Zhang, H., & Gao, B. (2011). Interpreting the mind of multinational hotel investors: Future trends and implications in China. International Journal of Hospitality Management, 30(2), 222-232. doi:10.1016/j.ijhm.2010.10.005

Jha, S.M., 2010. Hotel Marketing. Himalaya Publishing house. 978935024380.

McGuire, K. 2015. Top 10 Global Trends that will Impact Hospitality in 2015. [online] Available at: https://www.hospitalitynet.org/opinion/4068829.html [Accessed: 18 August 2017].

Pira M., 2014. Want Chinese Tourists? Be Friendly to Them. Caixin online, [online] Available at: https://english.caixin.com/2014-02-17/100639696.html [Accessed: 18 August 2017].

PressReference 2017. Basic Data [online] Available at: https://www.pressreference.com/Sw-Ur/Thailand.html [Accessed: 18 August 2017].

The Red Carnation Hotel 2017.  Core Values. [online] Available at: https://www.redcarnationhotels.com/about/core-values[Accessed: 18 August 2017].

Tradingeconomics 2017. Economic indicators, [online] Available at: https://tradingeconomics.com/ [Accessed: 18 August 2017].

Wassener, B. 2010. Luxury hotels are burgeoning in China. New York Times, pp. 1. [online] Available at: https://www.nytimes.com/2010/05/19/business/global/19luxury.html [Accessed: 18 August 2017].

Zhang, H., Guillet, B., & Gao, W. 2012. What determines multinational hotel groups’ locational investment choice in China? International Journal of Hospitality Management, 31(2), 350. doi:10.1016/j.ijhm.2011.05.008

Zhou, L., 2015. Chinese tourists shun package trips in favor of independent travel. South china morning post. International edition, [online] Available at: https://www.scmp.com/news/china/article/1745261/more-70pc-mainlandtourists-prefer-be-independent-travellers-report [Accessed: 18 August 2017].