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Diploma in Travel and Tourism
Unit Number and Title
Unit 12 Hospitality Provision in the Travel and Tourism Sector
Travel and tourism sector is one of the biggest industries. In terms of total revenue and earnings in foreign exchange it is the largest industry. It has also provided lots of job opportunities for people from various fields. It is the sector with largest number of employees (Sheldon, 1986). Disposable income of people has increased and this has been one of the major reasons behind the growth of travel and tourism sector. People go from one place to another for business interests, family holidays, recreation etc. Economy of any country depends a lot on this sector. It is the biggest sector in major industries and it has been growing with the fastest rate if we compare it will all the other industries. In 2009, 9.4 percent of the world’s GDP was coming from this sector and this sector generates around 8.2 percent of the world’s employment. Because of the economic slowdown in 2009 there was a slight decrease in the growth of this sector but after 2010 this sector has grown continuously and future expectations are also much more from this sector. Other industries like retail, hospitality, travel which gets affected with the growth and decline of tourism industry. We will discuss the relationship between the hospitality and travel and tourism sector and we will also discuss how integration in travel and tourism sector can be helpful for the sector.
Integration is the strategy in microeconomics and marketing management used by the organizations for growth and management control. There is a common owner for the organization who is integrated through the supply chain. Organization acquires the organizations which are there in the supply chain of the organization. When a company starts producing the product which is used in the manufacturing of final product comes under the integration strategy. For e.g. in the 1920s Ford company stopped buying steel from the suppliers and started manufacturing its own steel. Integration also brings the monopoly in the market and this monopoly is called vertical monopoly. Organizations have been following this concept from a long time. It is not just about acquiring your suppliers but acquiring the competitors is also a part of integration. Reducing the cost and increase in profit are some of the reasons behind integration. Integration is also used to achieve economies of scale and economies of scope. There are two types of integration which are as follows:
Vertical integration:When an organization buys another organization which is operating in the distribution channel of the organization is called vertical integration (Klein, 1978). If Thomas Cook buys TAJ hotels it will be an example of vertical integration.
Horizontal integration:When an organization working in a sector buys another organization from any other sector to expand the business is called horizontal integration. Thomas cook got merged with AG group it was an example of horizontal integration and it was the turning point for Thomas Cook.
Both the strategies are helpful in increasing profit and reducing operating cost for the organizations.
Integration is not straightforward in hospitalityindustry because it is the service industry and to integrate with any organization in service industry instead of a manufacturing organization is very different. It requires different strategies. Huge research has to be done before integration to find out its implications. It also requires lots of money. In the hospitality industry it has some implications on both the organizations. First I will talk about vertical integration i.e. when the two organizations from the same industry integrate with each other. For e.g. integration of Thomas Cook and Make My Trip is an example of vertical integration. It can impact the branding and positioning strategies of both the organizations. Both the organizations might have different way of positioning themselves in the market after merging which position strategy they should choose is one of the biggest challenges (Cousins, 2006). It will impact the faith of customers in both the organizations and choosing the wrong branding or positioning strategy can impact the business and reputation of both the organizations very badly. A complete market research and study is required before entering into integration. Competition in the market will get impacted and it will become difficult for smaller organizations to survive in the market if any two market leaders join hands. With the help of their core competencies two market leaders will be able to provide better services at lower prices as compared to other organizations in the market. Other organizations might have to leave and sell off their businesses.
Other issues like discrimination in the workplace can also arise because integration will lead to workforce from two organizations to work together. There will be people from different race, religion, caste, sex etc. Working with someone new and someone from different area is not easy. It can create conflicts between the employees in the organization. Language problems can also arise. There should be strict policies against any discrimination and there should be proper training sessions to make employees comfortable with the new employees. It has also become possible to integrate with someone from some other industry or with someone from other country. Globalization and improvement in travel and technology has encouraged this process. Technology and travel has made it possible to do business with anyone and anywhere without even going to that place. Deciding on the marketing strategies will also be one of the major challenges.
There is always a reason behind any strategy adopted by the organizations. It is possible for bigger organizations to take benefits of the integration strategy because they have capability of spending money to take benefits from the integration strategy (Wu, 2004). Some of the benefits from the integration strategy for the organizations in hospitality sector are as follows:
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There is a huge opportunity and potential in the hospitality business. We need to have proper business plan to enter into this market. I have a plan to enter into this sector and location will be India. India is the second most populated countries and there is huge potential of this sector. I will discuss the entire business plan further.
Concept or Idea behind the business plan: People in India are food lovers and it is also one of the best tourist destinations. Domestic tourism is very big in the country. There is diversity in culture, language etc. in the country. There are various tourist destinations. My plan is to open a hotel in one of the best tourist destinations. My hotel will also have restaurant facilities. I will also provide big hall for meeting and weddings in my hotel.
Target Audience: All the local and foreign tourists will be the major target audience. I will provide the luxury facilities. I will try to compete with some of the best five star hotels and restaurants. So corporate will also be one of the target audiences. It will be for the people who have higher income level to pay for the luxurious facilities offered by my organization. The four major metro cities will be my first target.
Market Research techniques: We have studied that there are two types of market research i.e. primary and secondary (Burns, 2006). In primary research we go out in the field and interact with the customers of this sector. In secondary we try to find out data through internet, magazines, newspapers etc. I will be using both the techniques. I will try to get as much data as possible from secondary research and then I will also hire a market research organization to do the consumer survey in the four best tourist destinations in the country. The location which is lacking in terms of luxurious hotels and where the inbound tourism is enough will be chosen.
Budget issues: I will first start with just a one restaurant at one location. I will provide the facility of around 500 rooms with five big halls for events and weddings. I will require around 100 Lacs in India currency. I will invest around 20 % of my money and remaining will be taken care either by loan from banks or from business partners.
Products and services: As I have already mentioned that accommodation facility will be provided with the help of around 500 rooms. All the rooms with be Air Conditioned. Five star facilities will be provided. Food and beverages will also be provided in the restaurant in my hotel. There will also be facility for hard drinks. I will also provide facilities to organize big meeting and weddings in the resort. Gaming and fun activities will also be there. There will be big swimming pools where customers can enjoy water sports. Spa, beauty salons will also be present within the hotel and all the facilities will have world class standard and premium prices will be charged.
Decisions regarding the designing, operations, marketing and human resources are very before entering into any business and especially in hospitality industry because it is a service industry. Customer satisfaction depends a lot on the ambience and the way staff members deal with the customers. Designing of my hotel will be very luxurious. All the things will be of very high quality. Five star ambiences will be provided. I will try to make my customers feel rich while enjoying the facilities of my restaurant. They just need to shed money out of their pocket and they will be treated like kings and queens. Calm and Serene Environment will be provided. They should feel homely in my resort. Employees will be playing a major role in customer satisfaction. So a proper training will be given to the staff members. Operation will be standardized so that customers can get the same service from all the employees. Receptions and waiters should have very good communication skills because they will be dealing directly with the customers. They should have very soft nature and they should be able to handle any critical issue with the customers. There should be a smile on customer’s face while leaving my resort so that they will come back next time also. I will be having four managers and around 30-40 waiters depending upon the need. I will also have three receptionists and there will a proper human resource department to deal with training, recruitment and other human resource related issues.
Both hospitality and travel industry are one of the fastest growing industries. There is a very strong relationship between both the industries. Hospitality industry is like a supplier for the tourism industry. We also discussed about the integration in the hospitality industry. It is very beneficial in reducing the cost and increasing the profit for the organization. There is a huge potential in this sector so with the help of proper research and money we can enter into this business.
Brendon, P. 1991. Thomas Cook: 150 years of popular tourism. Secker (Martin) & WarburgLtd.
Burns, A. C., & Bush, R. F. 2006. Marketing research. Globalization, 1, 7.
Cousins, P. D., & Menguc, B. 2006. The implications of socialization and integration in supply chain management. Journal of Operations Management,24(5), 604-620.
Klein, B., Crawford, R. G., & Alchian, A. A. 1978. Vertical integration, appropriable rents, and the competitive contracting process. JL & econ., 21, 297.
Morrison, A. M. 1996. Hospitality and travel marketing (No. Ed. 2). Delmar Publishers.
Sheldon, P. J. 1986. The tour operator industry: an analysis. Annals of Tourism Research, 13(3), 349-365.
Wu, W. Y.,Chiag, C. Y., Wu, Y. J., & Tu, H. J. 2004. The influencing factors of commitment and business integration on supply chain management.Industrial Management & Data Systems, 104(4), 322-333.
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