Hospitality and tourism industry is one of the world`s largest and fastest growing industry in today's time and is recognized as world`s number one industry. Hospitality industry is all about offering warm service to someone who seeks for a help at a strange or unfriendly place, which includes receiving and entertaining a guest with goodwill. The hospitality industry is a broad category of service industry which includes; lodging (Hotels), event planning, transportation, cruise, restaurants, theme parks, catering, inn, resorts or clubs who make abilities of treating guests or tourists. In today's time, Hospitality industry is being considered as an billion dollar industry which is mainly liable on availability of leisure time and disposal income by the tourists.
According to World Travel and Tourism Council tourism travel and tourism report 2011, Hospitality industry is a major growth industry. Today across the globe, there are near about 12.7 million hotel rooms, including - USA - 4.9 million, Europe - 3.9 million, Asia & Middle East - 3.9 million. Near about 1.3 million new rooms are under development in Middle East and Africa which compromises 7% of existing worldwide room stock. (World Travel and Tourism Council, 2011)
Source: World Travel and Tourism Council
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According to World Tourism Organization UNWTO, there are currently 1 billion international tourist around and by 2013, international tourist are expected to reach 1.8 billion with an average increase of 3.3 % every year... Global travel has increased by 3% in 2011 compared with 2010, as now the share of hospitality and tourism industry to the global GDP has reached to 9.1 % with the value of about US $6.3 trillion. Among the various regions, Europe has registered the highest growth in arrival of international tourists with 79.5 million, with a growth of 3 % prior to last year. (World Tourism Organization UNWTO, 2011)
Source: World Tourism Organization UNWTO
Significant Issues Faced by Entrepreneurs in Hospitality Industry
Excessive or Unnecessary Regulation
Creating a business environment is conducive to entrepreneurship & creating an enterprise requires a range of reinforcing and supportive policies and laws designed by government agencies by respective countries. These specific laws can hinder business growth or may prevent new entrant from getting into sector. One entrepreneur must recognize its business as a bureaucracy regardless of looking an enterprise as a free ride. This lack of knowledge about certified laws applied by government is one of the biggest limitation imposed on entrepreneurs. (Adrimag, 2004)
In order to overcome this barrier - it's important that entrepreneurs have to cope with laws and regulations and they need to have knowledge about these laws such as - certification laws, liabilities laws, labor laws, tax laws, etc. in order to get over with this constraint.
Creating an enterprise is not an easy task whereby it demands a lot of legislation work and most importantly market research of the country whereby the enterprise is being setup. Mostly in any country, culture is developed due to religion. Thus, entrepreneurs needs to have better implementation and adaption about the place.
E.g. Language barrier is the most common barrier whereby most of the entrepreneurs faces whenever they are about to establish any business overseas. If the entrepreneur is facing this difficulty then it exhibits the difficulties in complete integration of the entrepreneurs and enterprises especially for micro and small enterprises.
Religious, social and cultural factors are important for the entrepreneur to consider as unless these barrier are overcome, a successful new product may end up due to inadequate reach in the market.
Capital: One of the biggest challenges faced by entrepreneurs is to raise capital. A lot of entrepreneurs fails to market their ideas to financers. To certain extent, they are often unable to develop a captivating marketing plan for their ventures. Without such plan, it's difficult for them to attract investors for their ventures.
Labor: Another challenge which entrepreneurs are facing is availability of quality labor in hospitality industry. As its feasible this industry is labor intensive whereby labor shortage are most difficult challenges noted by entrepreneurs.
Hospitality sector is always been a big time contribution by Human workforce and looking over to the increased competition its mandatory for entrepreneurs to provide job satisfaction to them which makes them loyal towards the organization and thus it's easy to retain them as well. This can also be done through by provide numerous advantages and benefits to the employees
Always on Time
Marked to Standard
In this section, entrepreneurs are facing challenges of coping with the pace of technology is difficult and quite expensive.
E.g. Today high ratio of customers are going towards e-commerce - which means selling, buying and distributing product and services through internet. In hospitality industry, mostly customers book their room through internet which means hospitality industry cannot afford not being connected over internet as it may led their occupancy and sales level down.
It's important for any entrepreneurs to keep up with the technological advancement as it had a great impact over this hospitality industry. If any entrepreneurs fails to get cope with technological advancement then it may led their business downwards and creates a win-win situation for their competitors.
Entrepreneurs Level of Activity in Hospitality Industry
Level 1 : Performing Entrepreneurs Activities - (Before Ventures Starts)
Develop a Business Plan: The hospitality entrepreneurs either goes for short-term or long-term business plan development. In this plan, entrepreneur will describe the business mission, vision, goals and objectives in such a way that it can be achieved. A well written business plan lays out the best pathway and growth strategy for the business. Business plan communicates:
What resources will be needed to implement the vision
What type of skilled staff is needed who will help executing vision
Which path to take in order to accomplish goals. (Entrepreneurship, 2012)
Preparation for Starting up an Enterprise & Implement Business Plan: In this step, Entrepreneurs plan activities for starting up the enterprise. Now, there are many forms of starting up any business whereby any entrepreneur needs to decide upon: to establish its own company - By medium of taking any company`s franchisee or taking over any existing organization.
Formulating any business requires administrative work that is required to carry out by entrepreneur such as registering of company with tax authorities, health department (Acquiring grades depending on the hygienic level), acquiring GST or Value added Tax (VAT) number relevant to different countries where business is being established.
The last step to look on is to look out for business space - whether to buy or lease out business space.
Market Analysis: As we have discussed earlier, it's important for entrepreneurs to do market research in order to get adequate market reach to promote the business. Market analysis is all about collecting relevant information about potential customers, buying behavior of customers, competitor analysis and various other data. Entrepreneur's gathers information about Political, legal, demographic and social culture developments in order to look for opportunities and threats facing by the enterprise.
Innovate the Business: According to Fredrick & Kuratko, "Entrepreneur is an innovator or develop who recognizes and seizes opportunities, convert those opportunities into workable/ marketable ideas: add values through time, effort, money or skills and assumes the risk of competitive marketplace to implement these ideas." With the help of market analyses, entrepreneur innovates within the business and analyzes opportunities and threats based on market analysis. Entrepreneurs points out possibilities for improvement and formulates proposals for implementing improvements, investment, new production method in order to improve market position for the organization. (Frederick H. H. & Furatko D. F., 2010, p.39)
Budget Forecasts: The entrepreneur will determines the financial policy of the business; all entrepreneur need to estimate how much cash they need to cover expense until the business starts making profit. For this task, the best tools are - statement of financial position, statement of financial performance, estimates and budgets are developed. In hospitality industry, especially in f & B department; Managers are asked to develop selling price of food items which are going to be in food menu. So based on that selling price and profit margin are determined.
Determining Purchasing and Inventory Policy: In this section, entrepreneur decides which product to be purchased in order to deliver respected service to the customers. In above section, entrepreneur develops budget and make it available, then as per suitable with management purchasing and supply policy is developed.
Establish External Contacts: Entrepreneur maintains external contact with customers, suppliers to build his profitable network. This external contacts are helps to obtain information about:
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Competitors in the market
To establish relation with other suppliers, distributor to attain best possible price for items that are needed to buy
To attracts customers and make them aware of new product which is going to be offered.
Level 2 : Managing the Business (After Venture has Started & Helps in Growing Venture)
Monitor and is Responsible for financial Administration and Registration: In this section, Entrepreneur organizes financial accounting process of the business. Either entrepreneur perform financial recording according to prescribe by the law or delegate this task to another department (Accounting Department) and get involves into giving instructions and managing them. This action entails according to the type of establishment is setting up- For small organization usually entrepreneur do its own and for large organization there is a division created whereby that department handles all the financial matters - from recording, maintaining of receipts- to- paying taxes to the govt.
Monitoring Financial Accounts Includes:
Periodically checking of financial information
Assigning budget to employees
Monitoring outstanding invoices and prepares payments
Creating annual statement of records
Monitor the Inventory: Entrepreneurs needs to monitor the inventory regularly in order to cover up the normal sales. As the business has just started so usually, sales are predicted according to the business plan. Running out raw materials that are crucial to sales means increased in operating cost as well lost in sales and cost increases up as in some situations in emergency, you may end up buying high price product. (Entrepreneur, 2006)
Recruitment and selection of Employees: Here entrepreneur holds job interviews with candidates in order to recruit them and to determine whether they are suitable for the job and company as well.
Providing Information to Employees: Usually new hires are selected in terms of looking over their background such as - Qualification, Experience and Skills and so on to perform the job. However, Orientation process enables new hire to become successful in the workplace more quickly and enable them to get along with each other as a team. Moreover, Entrepreneur can share information regarding which issues are affecting business - Any legal issue, technological development, whereby employees can provide solutions to these issues. (Marcus, 2012)
Assigning Task to Employees: Entrepreneur plans and allocates activities within the company by creating operational schedule and duty roaster. Employees are assigned tasks depending on their skills, trait and ability; how effectively and efficiently they can perform the desired task.
Implements Legal Regulations: Here business complies with taxation, insurance and legal regulations that are relevant with the business. Entrepreneurs develops in-house rules and give instructions on certain rules that are needed to follow by every employees. Rules may include like:
Regulations in terms of safety
On working Condition
Monitor, Evaluates and Improves Processes: Entrepreneurs monitors and evaluates staff`s operational activities by observing whether the work is resulting in the desired quality level or the work is progressing according to planned schedule. In same way, entrepreneur will monitor problem / issues faced by the employees in order to complete their task and provide them adequate solution or suggestions to improve their efficiency level of doing work.
Placing and Tracking Advertising: Entrepreneur places different medium of advertisement in order to promote the business. It is important for the business to be recognized by their targeted market, which is crucial for survival of business. Promotion can be done through various means like: (Suttle , 2012)
Conducting Survey: The elusion dream of business success comes with the imagination of satisfying their profitable customers. Thus, entrepreneur surveys customer satisfaction in order to know about their wishes and needs of customers to acquire whether customers are satisfied or not. Collection of information can be either be done by e.g. Feedback form, survey, structures questionnaires. After the information has been obtained entrepreneurs can implement changes according to what customer's desire and bring more changes and innovation in product and service they are offering to their customers.
Factors Influencing New Venture Success
The Success of any venture goes through three different stages: - Pre - Start, Start- up and Post - Start. The pre- startup phase goes with an idea of venture and close when the doors are open to the public. The Start-up phase begins with the sales activity and delivery of product and services to the customer, and ends when the business is established and the last post - start phase lasts until the venture is terminated and enterprise is no longer In control of entrepreneur. Our mainly focus is on Pre - Start and Start - up phase which contributes four factors which influence new ventures success explained below :
Uniqueness: One of the critical factor in success of new venture is that ability of business to grow with new challenges. New venture often begun by an entrepreneurs who has unique marketable product or service, which tends to attract investors for funding to create such new business in the market.
Investment: Sufficient funding for a new business is crucial in terms of lead it towards success. Insufficient funding to new business is one of the main reason why new business fails in the market. Whenever new business takes place in the market it's predictable that business will not be having steady clients, ongoing transaction of sales and brand will not be highly recognizable. Thus, sufficient funding is must for new business. (Charles G., 2012)
Finding Proper Niche: New venture risk is affected by customer availability; therefore a new venture should create its own niche in the market or industry. This factor should play into the strength of the venture and minimizes the weakness. Mostly, developing a niche market mainly depends on how unique your product or service in terms of serving your niche. Many ventures do mistakes by targeting largest possible market and ending up with excessive marketing cost whereby it's incurs expense. (Charles G., 2012)
Product Availability: Another factor for venture success is 'Product Availability' right from the point when venture open its doors to its profitable customers. It's feasible to say that sometimes ventures faces this problem as their product or service is still under development and they need further improvement. Thus, it's important for the ventures to look upon these factors critically in order to provide satisfaction to the guest right from the point when they open their doors to the public. (Frederick H. H. & Furatko D. F., 2010, p. 306)
Characteristics Associated with Entrepreneurs
Another factor contributing to venture success depends on the entrepreneur's characteristics which are explained below:
Discipline: Plenty of definitions explains that - without creativity and innovation entrepreneurs can`t get anywhere whereby it's not truth - One thing all entrepreneurs need is 'Discipline' that no entrepreneur can be successful without it.
Opportunity Orientation: Entrepreneurs realize that every event and situation is a business opportunity. Ideas are constantly generated about is workflows, efficiency, people skills and potentially new business. Entrepreneurs like to acquire good understanding before developing any strategy.
E.g. Entrepreneur advertising on social networks - Facebook and twitter to expand business and target their potential market.
Persistent Problem Solver: Entrepreneurs must see problems as new challenge not as obstacles.
Risk - taker: Entrepreneur is also known to "Calculated Risk- taker". A risk situation occurs when one is required to choose between two or more alternative situation. Risk situation involves potential gain or loss. Entrepreneur likes to take realistic risks in order to be successful. (Hritesh , 2012)
Innovative and Creative: Seeking for new ways of doing and solving problems is the hallmark for the entrepreneurs
Gets Along With Others: Entrepreneurs are more interested in getting involved with people (External); who supports their business and employees (Internal); who helps in acquiring business goals and objectives. They understand that managing people is like key to success. Teamwork is vital for them.
Self - confident: It is necessary for the entrepreneurs to be self-confident whereby they need to have faith in themselves and then trust others.
E.g. In expanded business - entrepreneur's needs to give empowerment to their employees in other way we can say entrepreneur delegates his authority to staff in terms of seeking cooperation from the staff.
Communication Ability: An entrepreneur needs to have good communication skills and must possess with good quality communication skills whether it's in written or oral form.