The Impact of Globalization on the International Hotel Industry

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Table of Contents

Introduction
Key influences that drive the international hotel industry
Barriers when operating across borders
Suggestions on how to avoid barriers to international hotel industry
Conclusion
References

Introduction

Globalization has opened a wider market for goods and services; the hospitality industry is one beneficiary of the enlarged global business market; however, it has to suffer challenges brought about the global business environments.

Increased international cooperation, technology, international trade, and development of communication channels are the main pillars that support globalization and have an effect on the international hotel industry (Dicken, 2003).

When venturing in an international market, managers should ensure they have developed an effective market entry strategy, and improve the strategies to assist the company get a competitive edge in the foreign market.

International hotel industry can be discusses from the angle of domestic hotels that have the capacity of serving international customers or those multinational companies in the hotel industry which ever the approach, the effects of globalization are the similar (Effron, Gandossy and Goldsmith, 2003).

This paper discusses the influence that globalization has had on the international hotel industry; it will look into both key influences that drive international hotel industry and the barriers that the industry faces when operating across borders.

Key influences that drive the international hotel industry

There is some evidence from both small and large economies of the benefit of globalization; the hotel industry stands to benefit from an increased market resulting from human movements facilitated by globalization.

There should be no assumption that the effects of globalization is a phenomenon of late, however in the eighties, there were some international diversity of hotels, some of the oldest hotels that were involved in the exercise included Hilton Group of Hotels, Kempinski Hotels, and Starbucks.

However, in the recent past, the diversity has reached to a place that some hotels are earning over fifty of their incomes from international branches. When human beings are moving to other countries, either for business purposes, tourism, international organizations meetings, trainings and education: the people moving have to look for places to live; this is an increased business in the industry (Egger and Buhalis, 2008).

Globalization has brought about economic integration that has promoted corporation among nations, when there is corporation, multinational hotels can exploit business opportunities in countries. Managers in the industry have been exposed to a number of cultures, markets, and business opportunities where they find a line it improve their businesses or increase their current level.

For example, with globalization, Kempinski Hotels has seen a market potential in the United Arabs Emirates and it is developing its luxurious services to the country; the net results will be an improved business for the hotel and higher returns to stakeholders (Kotler, Bowen and Makens, 2003).

Other than the improved business, globalization has brought higher quality materials and products to the hotel industry in the move to improve markets and create a niche (different companies have their unique way of creating a niche market).

For instance, with globalization, European and American coffee and tea companies have been able to access some top coffee, tea produces, produced in east African countries like Kenya and Uganda; with such products that are offering better service, and unique tastes, the companies are able to improve their economic gains.

One company that has been noted to greatly benefit from high quality products is Starbucks in Europe; the company has supplier connection with some of the world’s best coffee producers (Jeannet, 2001).

Globalization has resulted to the growth of the tourism industry; the tourism industry is one of the fastest growing industries; the industry is growing in domestic and international tourism. Developing countries are continually realizing the potential they have and developing programs to cash in from the sector.

The result is an increased demand for hospitality industry services like hotels; as tourisms move to different places, they need food, accommodation, recreations and other services offered by hotels.

The tourism industry is having a positive effect on the industry in two main ways; it has led to the development of new hotel facilities and has increased the sales and revenue of the existing hotels (Lockwood and Medlik, 2001).

International trade has been facilitated by globalization; there is facilitated flow of information, labor and capital across borders. When business executives move from one place to another, they need to be fed and accommodated; this is business to the hotel industry.

On the other hand, with facilitated flow of capital, the multinational hotels can diversify their businesses to other countries leading to growth and competition in the industry; with increased competition, services and products offered will improve as hotels toil to get a large share of the market (Webster, 2000).

The hotel industry is pushed or pulled to invest in the international arenas as a strategy of efficient and cost effective methods of doing business; with large operation base, the companies are likely to benefit from economies of scale with the net effect as a reduced cost of doing business.

The approach with diversity builds into the management’s skills and experiences and they can have borrowed ways or strategies of business that might have a positive net effect on the business.

Another major in the same line of reducing the cost of operation that has made hotels to move across different countries is because of increased domestic competition (Hartline, Wooldridge and Jones, 2003). The domestic companies are saturating the markets making those hotels with the capacity both in human and capital diversify their operation in the international markets.

Globalization has also assisted the move to blue ocean management strategy, under the strategy, companies are looking for green markets where they can operate their businesses with minimal competition, and the net effect is to have an improved economical gain (Hooley and Saunders,1993)

Some companies are being “saturated” in the domestic markets; they are reaching a point where they are operating at their optimal rate that an increase will likely result to a loss. In such situations, the companies look forward to have other markets where they can enjoy economical gain to the company.

The solution to this is offered by the benefits brought about by globalization. The flexibility that comes with globalization as far as services and products delivery is another factor that has motivated hotels to diversify their operations to other countries. They need to have global/international brands; they are attracted by allure of global brands (Roberts, 1998).

Barriers when operating across borders

When operating in different countries or across the board, the hotels likely to face a number of challenges.

When operating internationally, managers are faced with strategy issues; they get the challenge of having strategy that can be accepted across the board; different environments need different management styles and skills, to know the exact method that can yield best result in a specific country is a challenge to managers in international arenas (Kandampully, 2002).

For example, in the management pyramid structure, employees will find themselves answerable to management who might not be in the same country like the country they are operating. The reporting and accountability issue can result to management issues across the hotels.

When operating in different countries, financing of businesses especially to companies operating in other countries other than the country of operation is a challenge. Banks and financial institutions are not willing to finance projects that are initiated by these multinationals; they consider them as high-risk engagements, thus financing them becomes a challenge (Novelli,2005)

When operating in the international arenas, hotels face the challenge of managing diverse workforce, they find themselves with people of different cultural believes, and attitudes who form their human capital.

When people come together, each individual beliefs, values, and expectation from the other person are shaped by the communities and socialization that each individual went through, the problem comes when there was a difference in the way one beliefs which is contrarily to the believe of the others.

The beliefs are shaped by ethnicity age, cultural heritage and culture orientations; when they occur, human resources suffer from culture confusion. For example, in the Muslims culture, men have high status in the society, they are the final decision makers and women are only supposed to take instructions and orders; when a Muslim man is having a team leader who is a woman, in case of a decision that needs the stand of the team leader, the man will feel disrespected.

Hotels have to develop appropriate mechanisms to deal with the situation; getting an effective method is not an easy task (Kotabe and Helsen, 2004).

Other than having the work force cultural management difficulty, hotels face the challenge of enacting business that target populations that have cultures different than that of their country of origin. Different communities calls for different management styles, thus when operating in the scenes, they have barriers.

Political differences and legal requirements are other barriers that affects the international hotel industry; some world countries do not have stable political environments thus when operating in such places, a hotel risk wasting its investments; it also does the same at the risk of business failure and slowed growth or performance (Bryman, 2004).

Suggestions on how to avoid barriers to international hotel industry

To ensure that hotels operate effectively in the international; markets, management gas the main role to play, they should ensure that they have policies that are responsive to the needs of the population. the start point should be the choice of the country that they are likely to invest; when a country has been chosen effectively, then the company will have mitigated some barriers like political rivalry, culture of the people will have been effectively be analyzed and known for the purpose of having such policies that can reduce influences of negative culture.

To deal with culture of employees and the consumers, a company needs to have cultural intelligence programs (Ritzer,2000). Cultural intelligence is a management tool within an organizational psychology, that emphasizes that understanding or individual, group, communal and national culture enhances strategic management; it influences the capacity for a business to engage successfully in a certain environment.

According to the managerial tool, human behavior is to a large extent and element of their culture, consumer behavior, attitude, beliefs, suppliers and country of origin perception has an influence on business. Cultural intelligence thus emphasizes on the need to understand the psychodynamics in a certain target market; the understanding will assist in decision making for a successful business.

Another tool that can be implemented to ensure competitiveness in the international markets include the use of scientific management tools; these tools make use of market information to develop such effective strategies that are responsive to the needs of a certain market (Zahra, Duane I and Michael, 2000). The tools include:

Integrated supply chain management: it ensures that the materials necessary for the hotel production and goods/service provision are available at the right time in the right quality and quantity. With such a policy, the hotels will build customer loyalty.
Customer relationship management approach: CRM is a management strategy where a company operates with the customer in mind; under the policy, the customer is the most important stakeholder and all systems and approaches are made to suit his demands
Strategic marketing tools: the company should think of how it can adopt an effective marketing strategy, under the approach, the company should enact such appropriate marketing tools that are able to market their services in different countries. Hotel services can be molded to fit the demands of a certain segment of the market in this situation being the country of operation (Mercer, 1998).

Conclusion

Globalization has benefited the international hotel market however, it has brought some challenges to the industry. The main benefits brought about include increased market for services, facilitated diversification of hotels to different countries, and the diffusion of culture. When operating across the bounders, hotels face some barriers to trade that include political rivalry, cultural differences, and lack of financing.

References

Dicken, P. ,2003. Global Shift, Reshaping the Economic Map in the 21st Century. London: Sage.

Effron, M. Gandossy, R. and Goldsmith, M. ,2003 Human Resources in the 21st Century. New York: Wiley.

Egger,R.and Buhalis, D. ,2008. Ecotourism Case Studies. Amsterdam: Butterworth.

Jeannet, J. P. ,2001. Managing with a Global Mindset. New Jersey: Prentice Hall.

Hooley, G. and Saunders, J., 1993.Competitive Strategy: The Key to Marketing Strategy. New York: Prentice Hall.

Hartline, M., Wooldridge, B. and Jones, K. ,2003. Guest perceptions of hotel quality: determining which employee groups count most. Cornell Hotel and Restaurant Administration Quarterly, 1(1),pp.43-52.

Kandampully, J. ,2002. Services management: The new paradigm in hospitality. Melboune: Hospitality Press.

Kotabe, M. and Helsen, K.,2004. Global Marketing Management.New York: John Wiley & Sons.

Kotler, P., Bowen, J. and Makens, J. ,2003. Marketing for hospitality and tourism. Upper Saddle River: Prentice-Hall.

Lockwood, A. and Medlik, S. ,2001. Tourism & Hospitality in the 21st Century. Butterworth: Heinemann.

Mercer, D. ,1998. Future Revolutions, Unravelling the Uncertainties of Life and Work in the 21^stCentury. New York: Orion Business Books.

Ritzer, G. ,2000. The MacDonaldisation of Society, New Century Edition. London: Sage.

Bryman, A. ,2004. The Disneyization of Society. London: Sage.

Novelli, M. ,2005. Niche Tourism: Contemporary Issues, Trends and Cases. Amsterdam: Elsevier.

Roberts, S. ,1998. Harness the Future, The 9 Keys to Emerging Consumer Behaviour. New York: Wiley.

Webster, K. ,2000. Environmental Management in the Hospitality Industry, A Guide for Students and Managers. New York: Cassell.

Zahra, A., Duane, I. and Michael, A., 2000.

International Expansion By New Venture Firms: International Diversity, Mode Of Market Entry, Technological Learning, And Performance. Academy of Management Journal 43 (5), pp. 925-950.

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