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Diploma in Travel and Tourism
Unit Number and Title
Unit 12 Hospitality Provision in Travel and Tourism
Hospitality industry is one of the fastest growing sectors in the entire world. Local and national economies are very much dependent on this sector. In the past few decades there have been several changes in this sector. Various new services and concepts have been added to this sector. Hospitality is defined as the good-will show to the guests. It also includes reception and entertainment of visitors or strangers. Two services included in hospitality are providing accommodation to people for entire night and providing food to eat to people. These two are the basis things of hospitality but in today’s time there are some new facilities which have been added in hospitality and these are leisure and business facilities. It also includes SPA, swimming pools, and meeting, conference and marriage event facilities.
There are two types of players in hospitality industry i.e. primary and secondary providers (Olsen, 1998). Those who provide accommodation, food and beverages are termed as primary providers and others who are in some other business and also provide hospitality service as secondary option are called as secondary services. There are various companies and industries in hospitality sector. Hospitality industry is related to various other industries such as retail, aviation, travel and tourism. In this report we will majorly discuss its relationship with travel and tourism sector.
Both hospitality and travel and tourism sectors are playing major role in the country’s and world’s economy. In the past few decades because of opening of the economy and because of globalization these two sectors have seen tremendous growth. Around 10% of the world’s GDP is coming from travel and tourism sector. Both the sectors have also contributed a lot in generating employment for people skilled in various technologies. In 2009 sector saw some decline because of economic slowdown. Some other factors which impact the growth of these sectors are exchange rate and availability of credit.
There are various products and services provided by Hospitality business. Customer satisfaction is the most important thing in hospitality sector as it comes under service industry. It gives an opportunity to live better social lifestyle to various customers by enjoying lots of services provided by this sector. It is said that guests should be considered as God and host should try to satisfy each and every need of his guest. Hotels and catering are two major industries under hospitality sector. Disposable income of people has increased and they are not just limited to basic needs i.e. food, shelter and accommodation. They want to spend time outside with their families; they go to foreign places to enjoy. All these things have helped in the growth of this sector. Relationship between guest and host can also be considered as hospitality. Organizations have become host to provide service to the customers and hospitality has become one sector or business.
Travel and Tourism is the sector which is linked and related to hospitality sector. Travelling from one place to another for less than one year of a period comes under tourism. People go from one place to another for various reasons such as business trips, honeymoon trips, holidays, historical trips etc. Tourism is also divided into two categories i.e. Domestic Tourism and International Tourism (Ryan, 2000). People traveling within the same country are domestic tourists and people travelling to other countries are international tourists. Country need to have some man made or artificial attractions to increase the incoming of tourists in the country. Historical and cultural places are major source for attracting tourists. There is a need to have an organization to make rules and regulations for all the organizations working in this sector. World Trade Organization makes policies for the betterment of this sector.
Relationship between hospitality and travel and tourism sector: When customers of one sector are also the customer of other sector it means that there is huge interdependency of both the sectors on each other. If the customer is not satisfied with the service provided by one sector it might lead to change in mindset of the customer towards another sector. Let us suppose that customer is moving to another nation through a flight and he is not happy with the service provided by the travel organization. It makes him frustrated (Middleton, 2012). It creates a negative impression of the country where that organization operation. Then next step is to go to any hospitality organization to search for accommodation and food. Customer will already have negative impression about the organization because of the negative experience he had with the travel organization. Hence it shows that both the sectors are related to each other. Growth of one sector is proportional to the growth of another sector. In fact hospitality sector behaves as a supplier to travel and tourism sector. Customers who are using travel and tourism services will be needing hotels and restaurants for accommodation and food and beverages. Hence more are the customers in travel and tourism sector more will be the customer in hospitality industry.
Most important aspect which makes both the sectors similar is that both are service industries. Hence human touch is the most important factor for customer satisfaction in both the sectors. Employees with the similar skills are required in both the sectors. Employees in both the sectors should be amicable and friendly towards the customers. Communication skills are very important in the employees who are having direct interaction with the clients. Training and development programs are very much similar in both the sectors. Some organizations are having presence in both the sectors because they want to control entire customer experience. Customer service is standardized in both the sectors. Having presence in both the sectors is beneficial for both customers and the organizations. Transportation facility should also be smooth in the host country to attract more and more customers. Infrastructure should also be attractive. Natural attractions behave as icing on the cake. Economy of the country is also a very important factor in deciding the revenue from hospitality or travel and tourism sector. Customer comes to relax and enjoy and hence customer expects better hospitality facilities such as accommodation, better cuisines, gaming activities, spa, swimming pools etc. Customers are ready to pay extra for better facilities. Customer just wants satisfaction. Hence better are the services in the country more will be the travelers and hence more will be the business for travel and tourism sector. There are hotels for all types of customers. For rich or elite groups we have 5-star and 7-starr hotels and for middle class people also there are various small hotels and restaurants in all the major countries. Major chunk of the customers are from middle class families who go once in 5-6 months on holidays and hence number of affordable hotels and restaurants are also more in number as compared to luxury hotels. Hence both the sectors go hand in hand and there is huge future opportunity of growth in both the sectors. Organizations have understood the importance of interdependence between both the sectors. Hence bigger players try to have presence in both the sectors and provide end-to-end packages to its customers.
In this task there is need of two organization one from each sector to understand the relationship between hospitality and travel and tourism sector. Organizations which will be discussed in this part are Thomas Cook and Four Seasons Hotels and Resorts:
It is UK based organization it has huge name in travel and tourism sector. It is London Stock Exchange Listed Company. Thomas cook got merged with My Travel group in 2007 and it was turning point for Thomas cook’s financial performance. Thomas cook have operations in around 22 countries in the entire world. After merger there was great improvement in market share and revenue of the organization (Seaton, 1996). Organization was able to build new brand image. There are around 32000 employees working for the organization and it has around 22 million customers as per the latest data.
This task will discuss various services provided by Thomas cook. Example, Thomas Cook works in partnership with Marriot Hotels which is a leading name in hotel service industry and this helps to attract travelers who desire to avail holiday packages that provide accommodation and food services from Marriot hotels. Hence, both these sectors are interdependent and positively related.
Marriot hotels provide exclusive offers, discounts and services to the customers of Thomas Cook thereby mutually increasing business revenue and satisfied customer base. Marriot hotels assure valuable experience, relaxed ambience, hassle free visits to destinations, great food and cleanliness by fulfilling all sort of needs for the customers. This quality of hospitality services as provided by Marriot hotels help to boost trade and demand for the holiday packages of Thomas Cook as customers are usually assured of the brand and reliance for satisfaction and comforts.
As most of the services provided by the hospitality industry are intangible in form hence positive word of mouth from loyal and satisfied customers helps to create profits, good will of the brand and unique experiences. This interrelationship is beneficial for both hospitality business like Marriot hotels and travel and tourism business such as Thomas Cook.
An organization from hospitality industry also needs to be selected to understand the products and services provided by the hospitality sector. Organization will be four Seasons Hotels and resorts. It started its business from Canada but now it has presence in all the major countries in this world. It provides service for all types of customers from middle class families to elite group. Organization was awarded by many awards for providing best food and services and for achieving customer satisfaction. It is one of the best organizations in terms of employee satisfaction. Fortune magazine awarded the organization as one of top 100 companies in terms of employee satisfaction. Attrition rate is very less in the organization. For new recruits it is considered as best organization to work with. Organization has provided employment to around 13000 employees. It started its business in 1861 and it also believes in innovation.
It does not operate only in Food and accommodation businesses but it has other services and products which will be discussed in this task. It works in partnerships with various tour operators, airline service providers and car rental services which provide safe and relaxed experiences to the travelers. Such as Four Seasons Hotels work in partnerships with British Airways providing lodging and food to customers who have long flight journeys. Instead of waiting in the lounges at airport, passengers of BA can prefer to avail short halts at the accommodations of Four Season Hotels which also provide free pick and drop services to their guests. Four Season hotels have tie-ups with care rental services which takes care to receive and drop the passengers of BA from airport to hotel and vice versa. This increases comfort of passengers as they get relaxed ambience, food and pick-n-drop. Also, it generates business revenues and increased opportunities as partnering with big names like British Airways brings high growth and profitability along with loyal customer base.
Integration is defined as the strategy to expand the business to reduce the costs and to increase the market share and revenue of the organization. Competition is increasing very rapidly in each and every sector. Organizations need to be very careful in providing ant service and in selling any product to the end users. End users satisfaction is very important (Calisir, 2004). Competition also happens on the price of the service or products. Organizations have to reduce the profit margins to be at par with the pricing offered by its competitors. Integration includes acquiring suppliers to reduce the costs of raw material and acquiring competitors to increase the market share.
There are two types of integrations i.e. Vertical Integration and Horizontal Integration
Vertical Integration: Strategy of acquiring the suppliers is called vertical integration and it is generally used to reduce the cost of raw material. For example If British Airways acquires Four Seasons Hotels and Restaurants it will be an example of vertical integration. Some other factors behind vertical integration are creating monopoly in the market or to get away from hold up problem. Forward vertical integration and backward vertical integration are two important types of vertical integration (Perry, 1997). When an organization acquires its suppliers it is called backward vertical integration and when an organization acquires the distributor channels to gain command on the distribution of the products to the end users it is called forward vertical integration.
Horizontal integration: Strategy of acquiring the smaller players in the market who can be potential competitors in future is called horizontal integration. Main motive behind horizontal integration is to increase the market share, revenue and profit (Gilbert, 1992). For example if British Airways acquire Thomas Cook Airlines it will be considered as horizontal integration. Mergers and acquisition strategy also comes under horizontal integration.
There are lots of positive and negative implications of both vertical and horizontal integration in hospitality sector. Most important implications are it helps in reducing the cost and in increasing the market share other are lots of other benefits of integration for hospitality industry which will be discussed in detail in this part. It is very challenging to implement an integration strategy. It requires lots of money, human resources and other resources. A proper research and development department is required to do complete research on the benefits and losses of integration strategy. Other challenging factor is to merge the two organizations. Both the organization will be having different positioning strategies. Let us suppose one is targeting middle class families another organization in hospitality sector is targeting elite groups by providing luxury facilities. Challenge will be to choose from two positioning strategies. It might lead to loss of larger chunk of customers. Research and development is required to do cost and benefit analysis to decide on which market will be targeted after integration. Brand image of the organizations can also get impacted. Market research will also be required to understand customer’s preferences. Major implication of integration strategy is that it leads to monopoly in the market (Campbell, 1995). Smaller players will have to quit or surrender in front of larger players because it will be impossible for them to compete with the pricing strategies of larger players in the market. Acquiring the suppliers will get raw material at lesser price and hence pricing can be reduced and benefits can be given to the customers by reducing the profit margins. Smaller players which are not ready to merge ultimately have to quit the market and look for some other business. Human resource management will be the big challenge in the merged organization. Employees will be from different cultures and structures. Employees will be from different backgrounds. So it might create conflicts to work with new colleagues. Problems of discrimination can also arise in the organization. Integration will also provide better opportunities for employees while working for bigger organization. More responsibilities and duties will improve their skills and competencies and will develop them personally and professionally.
Integration has impacts on each and every sector including hospitality industry. As discussed above it helps in achieving economies of scale and scope by reducing the cost. It is also beneficial for achieving customer satisfaction by having command on end-to-end buying selling process (Anderson, 1994). Organization in hospitality sector can take or entire customer’s experience by providing them each and everything from travel to accommodation to food. Time and money can be saved from both the sides i.e. organization and customers. Raw materials can be manufactured at lesser price as compared to buying from the suppliers. This saving can be given to the customers by reducing the cost. It will help in attracting more and more customers and in increasing the market share of the organization (Eltantawy, 2009). Travel and tourism organizations don’t have to be dependent on organizations from hospitality sector. It British Airways has its own hotels and restaurants it can take the travelers from airport to its hotels and restaurants. Customer can book the entire trip package from British Airways.
Integration also gives an opportunity to expand. Organizations can diversify in various new locations. By acquiring a competitor in new country organization can increase its global presence (Barkema, 1998). It also gives an opportunity to expand the product and services provided by the hospitality organizations. Resorts, gaming facilities, spa etc. can be provided to the customers at one place. It also helps in reviving brand name of a non-performing organization. It also helps in creating synergy between various operations in the organization.
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