Independent hotels versus chain hotels

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Abstract

In the last year there was an economic downturn all over the world and so the occupancy rate was readily decreased. This helped the independent hotels to bring down their prices and survive well in the market and cope up with the economic downturn, (Fields, 2007). The competition between the independent and chain hotel is growing and each of them is trying to survive in the economy. There are different types of strategies that are used by independent as well as chain hotels. An Independent and chain hotel operates in an environment which is competitive and has a number of layers. Globalization has created number of jobs & boost the investment of countries for variety of fees as globalization takes hold in the worldwide hospitality industry.

Key factors: hotels, strategies, marketing, opportunities, competitive, globalization, economic slowdown.

Introduction

Now in 1990s the hospitality industry has truly become an international industry & is speedily becoming a global industry. In terms of size as well as global influence it ranks second. The hospitality industry is a sector where there are comparatively low barriers to entry & also there is a limited scope for economies of scale. This article will discuss about those strategies, opportunities, marketing and who will survive in the slowing economy. The hotels are divided into different types but they are broadly classified into independent hotels & chain hotels.

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Independent hotels: Independent hotels are the hotels that are owned and managed by itself, means by an individual or a group of few people. It does not allow any other proprietor to use that brand name. Independent hotels are likely to operate in single or limited number of market probably may be with limited services or product. They have a large number of debtors owing to the fact that they are more likely to extend credit and thus may be seen more vulnerable to cash flow problems. Number of independent hotels has a multifaceted range of accommodation, food, beverage & leisure products, with a variety of price bundles & relatively large number of employees. These hotels deliver heterogeneous marketing offers & so it would be very difficult to provide an unconditional guarantee. Independent hotels are likely to face greater uncertainty regarding market. Storey (1994) also argues that even if independent hotels are unlikely to invest in research, they are more likely to respond to the niche market. For example, Burns (1996) points out that, the financial constraints which are imposed on these hotels implies that the strategic options are circumscribed by the availability of capital. Independent hotels mostly attempt to narrow down the purpose of their activity in a single short statement that represents the 'vision' or the 'mission' of the organization, (Hannagan1995, p.121).

The organizational issues as well as the strategic issues of small firms are clearly and fundamentally different from those of the large chain firms. "We cannot define a caterpillar and then use the same definition for a butterfly" similarly is the difference between large chain and small firms, as said by Penrose 1959.

Strategies for small firms to grow continuously

Burns (B: 3:pp.40-8) has suggested four options for the growth of small independent firms:

  • Remain with existing product or service: but look an enlarged market. This strategy is with low risk but it suffers from limitations regarding growth.
  • Develop the product or service
  • Develop its market by opening new branches
  • Combine product development with market development:- it deals with moving into an unfamiliar market & products, is considered as a high risk strategy.

The Independent Hotel Strategy:

An independent hotel mostly emphasizes customers and products not on methods of production. They mostly concentrate on the non-pricing elements of the marketing mix, such as satisfying a small or national market, quality and needs. They do not normally keep or hold personal details of the guest except the normal regular mailing list of the customers. independent hotels are more product oriented than larger firms, as they are more concentrated on product not on market. Their is greater internal consistency in the small firms motivation and actions, as the power is exclusively with a single individual or a group of people. They provide appropriate and successful products

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Generally as considered by Burns (B: 3), for small firms, the most appropriate approaches are those which concentrate on market more than product development because it takes low risks.

In citing the work of Covin & Slevin, Stanworth & Gray argues that small firms to operate successfully, the strategic posture as well as organizational structure need to be very different regarding the issue of changing behavior depending on the changing conditions.

  • Strengths: They are closely concerned with the guests and the service quality is well-maintained. They have good knowledge of international market. As the decision making process is relatively shorter they can easily adapt the changing trend of customer needs & wants and thus offers more specialized & individualized products.
  • Weakness: They have a limited customer base. They don't have specialized expertise in marketing and hence they cannot benefit with the economies of scale. Due to limited resources the marketing strengths cannot be fully capitalized.
  • Opportunities: They have a good scope of operations in the local or national market. They can quickly react to customer needs and so new concepts & activities can rapidly introduced, thus opportunities can be capitalized.
  • Threats: Independent hotel are slow and responsive but they are very complex and slow (Noble and Griggs, 2005). They have a limited access to capital and also the business expertise. The marketing skills are not necessarily count & the employee skill is also limited (Gaedeke & Tootelian, 1992).

Chain hotels: During 1980s, many hospitality firms got engaged in expansion apart from their national boundaries in many forms such as master franchising agreements, joint ventures & strategic alliances. For example in Europe, Britannia, Accor hotel, Elite hotel and many such chain hotels operates.

According to Hamel & Prahalad (1985), in key foreign markets the international chain hotels have a distribution system which helps them in cross subsidization strategies, world scale volume and international retaliation. They also state that the business go global because there is minimum quantity required for cost efficiency which is not available in the regional market/ home market.

From the hospitality & tourism operating the key players have persuade major repositioning &product development strategies. The development of Courtyard by the Marriott hotel group invented the use of new researches & products development techniques. Marriott with the courtyard brand successfully expanded to more than 200 hotels from just 3 test hotels.

Yip (1989) says strategies change as a firm enters internationally. To remain successful chain hotels need to develop total worldwide strategy in 3 basic stages; first to develop core strategy which serves as a base to be able to sustain in competitive advantage, secondly internationalized the core strategy through adaptation and expansion of activities internationally. Lastly as the international strategy is combined across countries, globalization occurs. There are different forces which are behind the industry globalization, they are, market factor, cost factors, environmental factors and competitive factors.

Chain hotel Strategy: Pg 93 there are different strategies which are employed by multinational or chain hospitality firms, but they mostly contribute to at least three of the generic strategies which are as follows:

  • Exporting a core technology that has been well developed in their home country/market. Example: - Accor, Marriott.
  • The

Bibiliography and References

  • http://www.hospitalitynet.org/news//4043200.html
  • http://jvm.sagepub.com/cgi/content/abstract/7/1/63
  • whitla paul, Davies Howard , Walters GP. Peters (2007). Global strategies in international hotel industry. International journal of hospitality management.
  • Johnson, G & schools, K( 2002) Exploring corporate strategy, (6th addition)
  • Go ,F & Pine, R(1995) Globalisation strategy of the hotel industry