Strategies Of Internationalization In Hospitality Industry Tourism Essay

Introduction to the Hospitality Industry

The hospitality industry consists of wide category of fields within the service industry that includes lodging, restaurants, event planning, theme parks, transportation and tourism industry.

The hospitality industry is a several billion dollar industry that mostly depends on the availability of leisure time and disposable income. A hospitality unit such as a restaurant, hotel, or even an enjoyment park consists of multiple groups such as facility maintenance, direct operations (servers, housekeepers, porters, kitchen workers, etc.), management, marketing, and human resources.

The hospitality industry covers a wide range of organizations offering food service and accommodation. The industry is divided into sectors according to the skill-sets required for the work involved. Sectors include accommodation, food and beverage, meeting and events, gaming, entertainment and recreation, tourism services, and visitor information.

Hospitality industries that profitably cater to the needs of customers better than the competition are more likely able to sustain competitive advantage over time.  Catering to customer needs is dominant to delivering desirable levels of customer satisfaction in the tourism industry.  The formula for executing this task is particularly fragile in tourism because of the heterogeneous and simultaneous nature of service production and consumption. 

Tourism experiences are rarely, if ever, delivered without in-depth employee-customer interactions.  Thus, tourism experiences are people-intensive on both sides of the service fence.  Additionally, tourists tend to have higher expectations for hospitality and overall levels of service quality because their context is typically more emotionally charged.  An empowered workforce is a secret to success in these unique area employees who are inspired and enabled to make meaningful and suitable decisions close to customers in order to take care of important customer needs. 

Internationalization is described as the process of expanding firm activities beyond the borders of its domestic markets. Historically, the primary motivation for internationalization among firms was the need to become more efficient. Efficiency in the context of the post-industrial revolution era is achieved when a firm becomes larger and thus generates economies of scale. Many firms searched for and found attractive markets in countries with higher market growth rates, developing consumer consumption, and growing discretionary income.

Strategies of internationalization in hospitality industry

There are several strategies of internationalization to gain more customer satisfaction n with effectively and efficiently.

The development of computer technology, communication technology, and new means of transportation all served as vital enabling forces to internationalization. Today, internationalization has become one of the key concern of firms As barriers to international trade fall down in many parts of the world, managers become aware of new opportunities in an ever-changing global environment.

For example, a uniform currency (the euro) is gaining a leading position within the European market, Eastern European markets are developing rapidly, Asian markets are opening to the world, and the world business population has reached the General Agreement on Tariffs and Trade (GATT).

International firms that consider all the elements in the geographic destination develop different strategies for each geographical market, each specially tailored for the specific market.

Eg: In the area of express delivery services, Federal Express (FedEx) dominates the market in the Americas, yet in other markets, such as Europe, FedEx is not successful, and the market is dominated by DHL.

Franchising agreements in which a franchiser grants a licensed privilege to a franchisee to do business. This may include permission to use a brand name, products, operating systems, central reservation systems, and more. Franchising is used by Hilton International as a component of its international strategy

Management contracts in which management is separated from ownership, where a company can contract the management of its overseas operation to a management team in return for a fee.

For a example: Sodehxo is one of the examples of a management contract company in the industry.

Strategic alliances in which a connection or a partnership forms between two or more companies that can assistance from greater market coverage, economies of scope or scale, enlarged visibility for the brand name or minimized capital investment. One such example is the strategic alliance between Accor and the Japanese Hokke Group

Joint venture, in which the multinational firm provides a partial equity stake to local businesses in order to secure their commitment to the agreement. Accor is actively involved in joint ventures in different Asian markets such as Korea, Vietnam, and Malaysia.

Call Center Service Recovery means Telephone based customer service is the largest customer services’ channel in both North America, and Europe (The Editors 2007).  Call centers’ customer service volume is higher than electronic mail support service.Despite this lack of acknowledgement from call centers, there is a gap between the service provided and customer expectations.

The Green strategy means industry perceptions and perspectives as a new market -driven business focus for gaining competitive advantages.All businesses no matter how benign or smart their operations are create some level of environmental harm. These impacts can be minimized or controlled by a adopting a well articulated firm-level green strategy. This require to green should not just be to address companywide environmental challenge but also a proactive strategy to stay on the right side of the regulation and for profitability.

Issues and impacts of internationalization on hospitality industry

Issues and impacts bring together the latest developments in international hospitality operations with the current management principles. It provides a truly international viewpoint on the hospitality and tourism industries and provides a fresh insight into hospitality and tourism management.

Internationalization is a major trend for today’s organizations. The services sector is also unquestionably becoming increasingly international in scope. A rapid Internationalization of world economy during the 1990s has increased the opportunities to export services and services are now the fastest growing part of international trade. Accelerated by their desire for growth and profit, incentives provided by the host governments, and a freer flow of capital throughout the world, hospitality organizations have discovered that their future survival and growth depend upon extending their services around the world.

The hospitality industry is thus at the very core of international business. Hospitality companies therefore need to consider the implications of the global context in which they drive and must be prepared to address the questions that occur from this rapid changing environment.

The Internationalization of business and lifestyles is characterized by communicating over huge distances in foreign languages, frequent travel to overseas countries, dealing in many currencies, and coping with a range of political and social systems, regulatory environments, cultures and customs. While these aspects of Internationalization of are easy to identify, understanding the underlying current and future trends can be analysis, however, reveals that a number of issues are reshaping the Internationalization hospitality industry, although there are clearly some complex questions that are still to be resolved:

International spreading out with general product and brand position;

Sales and marketing programs that fully capture global economies of scale;

Organizational structures that tolerate delivery of services with local operational control;

Cross-border employee training to support operations; and

Use of the world capital markets as sources of funding.

The Positive Impacts of Internationalization on the hospitality industry;

1. Exposure to different cultures: Due to the internationalization of the managers of hospitality industry, they would be able to gain knowledge of different cultures, as they get to fuse with people from different walks of life and thus, enhance their awareness.

2. Larger Market: Due to internationalization, the customer base has enlarged greatly. People travel not only for holidays, but business,

health and various other purposes too. Thus, this has increased

the market for the hospitality industry, which gets their major income

from these international visitors.

3. Boosts the economy: As visitors come in and spend money it effects to the foreign exchange of the country and it gets increase. Thus it is of

great value to the economy as internationalization helps to pump in

money into the country.

4. Technology Advancement: Since one needs to attract as many tourists as possible, hospitality organizations frequently need to

upgrade and improve their products and services.

Example: Singapore Flyer, using faster and newer technology in hotels to so

that the customer is satisfied.

5. Promotes Creativity: Organizations are continuously thinking of new and innovative ideas to draw more tourists.

6. More Job Opportunities: Due to internationalization, more visitors come into the country and thus more people will be required to serve and

cater to their needs. So, with the arrival of internationalization, there are

lot of more jobs opportunities for people within the areas which hospitality industries are located.

7. Boosts the Travel Industry: Due to internationalization more people travel around the countries. To facilitate this, the tours and travels industry require to develop as well.

People who come into the country by air, ship or land, will use

the transport services obtainable as well.

8. Variety of International Services / Cuisines: Since there are lot of diverse visitors from various cultures, traditions, cuisines, and

languages, the hospitality industry includes recipes and various

other services to cater to them. These services will be available to the

locals too, which makes it even better.

The negative impacts of internationalization on the hospitality industry;

Language Barriers: Due to internationalization, the hospitality Industry can make use of people from different countries as it is usually cheaper. They may sometimes have troubles in communicating with the customers. Many customers get quite incensed as a result of this.

Cultural Barriers: As there are people from a mixture of cultures, one needs to be watchful not to offend them.

For Example, a muslim will not eat pork one needs to make sure not serve food which contains pork. (Unless specifically asked). What’s acceptable by one culture may be frowned upon by another.

Events/Disasters in other Countries: A disaster or incident taking place in one country may affect to the country (the home country) also.

For example, the financial crisis makes less people want to spend money or travel; due to increase in terrorism some visitors get are not ready to travel to certain countries.

Seasonal Employment: During climax periods, a lot of jobs are available in some industries, but as soon as the tourists go back to their countries, the jobs get disappeared as

well. For example: Goa – India; the locals in Goa get their revenue

only during the climax season, (Dec- Feb and April – July) In other seasons,

they have no jobs and no earnings.

Growth of the Communication Technology: Due to international barriers, there has been a constant growth in the use of technology

for communication (through the internet, voice recordings). This

removes the human touch.

Developing Countries: Countries that are unable to keep up with the advancement in technology tend to lose out. Example: Africa

does not have the infrastructure or technology as yet to welcome a

large amount of foreign visitors, though it does have a lot of natural

attractions. To increase the flow, it would have to improve

conditions; otherwise tourists have a vast sea of areas to choose

from.

Increase in Crime Rate: With the increase in tourists, crimes increase too. Example: pick-pocketing, hustling, rape, smuggling.

Bad Habits: People from other countries sometimes influence the local youth in a bad way. Increase in drugs and promiscuous behavior, etc

Integration of the hospitality industry

To offer a better customer service and keep loyal client come back today’s hospitality industry require integration system. Thereby they can maintain their controls and improve their business. To have a smooth running integration system can aid organizations with a sustainable competitive advantage by improving product quality and service while reducing cost.

Good performance and a high-quality, sustainable product can also help a company to reduce the risk of conflict or problems with suppliers, governments, staff and local communities, and improve its status as a respected partner in destinations. This may mean enhanced access to key business resources such as capital, the ability to develop products to meet growing market demand, improved relationships with governments, and a motivated and loyal staff.

Eg: The computer software is a combination of various modules, which cater to the various aspects of hotel management. It including with hotel staff management, hotel reservation and hotel accounting are taken care of by the different modules in a single software unit. Many software companies have gathered more areas of hotel management into their software. All the operations like bookings, billings, reservations, check-ins, checkouts and etc, are available on screen and can do within few clicks of mouse. Therefore, taken as a whole, efficiency of the hotel staff and the management system is increased.

Clients can reserve the rooms and other services through the hotel website directly. There is no room for any third party connection in this events..

However, there are some advantages in this integration as follows;

It leads to reduction of transportation costs as the common ownership results in closer geographic proximity.

The transaction costs can be controlled if a firm acquires the other firms in the vertical chain, then one division of the same company will transfer goods to other divisions. So, transaction costs in form of transport, cost of negotiation, cost of control etc. will be eliminated. The overall average cost of the firm will decline because if the divisions are under same management control then there will be in house supply and departmental heads will determine the transfer price. An example could be pokarna granites limited. The company was established in 1991 as a partnership firm quarrying black galaxy granite in India. Transportation of granite to factories where they can be cut and polished is quite difficult. Since that time, the company has grown to a major quarrier and fabricator of stones from India and around the world.

From the very beginning, the company has believed in vertical integration. They begin with the finest raw materials, invariably from their very own quarries, assuring consistent, high quality suppliers.

If a firm purchases semi finished goods from an outside source then the work culture will be different and there are chances of dispute regarding terms and conditions of supply or if the outside supplier makes breach of contract and does not supply the goods on time then the firm can not fulfil its commitment to the third party and the goodwill of a firm will come to an end. Organizational inferences; If the supplier supplying the raw materials to a firm is big, in terms of size and structure, then it will dictate the terms and conditions. On the other hand if an in-house source is used then there will be no market variation and the supplier can not impose any unfavorable conditions.

We can split the benefits of integration into short-term or static gains and more long-term dynamic gains.

  The establishment of the Single market within Europe has led to significant gains for the participating member states. The removal of internal market barriers and the harmonization of national regulations are expected to lead to an increase in trade and reductions in cost.

Conclusion

Taken as a whole, Internationalization and integration are two major parts which leads to the growth of the Hospitality Industry and their impacts directly involve to the evolutionary change in the Industry.