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Choosing Hotel Location Report (Assessment)

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Updated: May 25th, 2019

Several factors are put into consideration before any business enterprise or entity is established. Among them is the physical location. Hotel industry, like any other business activity has to put this factor ahead of all other factors if indeed any tangible gains are to be realized out of the business. The place where a hotel is located will determine several other things including sales volume, customers, profitability and long-term survival in the industry.

It is evident that a convenient place to up a hotel should consider factors such as commercial areas, recreational grounds, airports among others .These factors can maintain good customer base as well as attracting more new customers. There has been always a controiversy on whether it’s more beneficial to put up a hotel where there are other similar hotels or away from such businesses.

One theory argues that by creating a business venture close to the competitors geographically, an entrepreneur can obtain posive externality from economic and institutional environments. In contrast, it is disputed that by locating business venture far away from its competitors, the firm will avoid localized competition and earns itself competitive advantage. Because the two theories seem to be o great importance, it’s good to consider the two in some aspects while putting up a hotel business.

In most cases, it’s rare to establish a business without competitors, in other words almost all business entities operate under perfect competition characterized by product homogeneity, many sellers and buyers and above all buyers and sellers are price takers. Therefore it is important that while opening a new hotel location, one should bear in mind that there are other existing similar businesses and one should not make decisions that to some extend will affect the operations of other investors.

One aspect which can clearly indicate he interruptions of other firms operations is the product priced in other competitors which include pricing of various goods and services including market’ local room rates offerd by the hoteliers. Therefore, one should come up with sound decisions which will not negatively influence the existing market’s room rates (Magnini & Honeycutt, 2003).

The world has become a global village and the survival for the fittest is the ultimate goal for every investor. Because of the competitive nature of the hotel industry, every one involved in the business strives very hard to get his/her own share in the market place.

For this reason, it’s very easy for one to resort into unfair practices such as making the prices of your products lower than those of your competitors. The prices of commodities should directly proportional to the Quantity and the quality of goods and services offered, therefore, once a new hotel is established it to avoid unfair competition, it should offer almost similar services at the same prices with the other competitors.

Alternatively an entrepreneur might opt to provide better and superior services than the existing competitor at the existing market rate. As a manager of a hotel, one should be able to determine critically the value and price of a hotel location in setting room rates (Bull, 1994).

As pointed out later, the pricing of rooms in a hotel is dependent on several factors. For instance several studies have found out that hotels located in the3 cities or near some facilities like airports tend to be expensive than those located away from such prices. An entrepreneur might be operating two hotel facilities offering similar services under different geographical regions but the pricing of the rooms is not the same. This is due to prevailing conditions and environments under which these two entities operate.

It is therefore important to conform to the existing practices oaf the other hotel operators so as to avoid rivalry in the business. However in the process of ensuring that one does not influence the market’s local room rate, profit maximization goal should be fulfilled through ensuring that a firm does not underpriced its products otherwise losses would be incurred and even the firm will be kicked out of the business at its initial stages of operations(Cho, 2003).

Most important is that quality rather than quantity is more valued in hotel industry, so when pricing the rooms they should be priced according to their quality and this will help maintain harmonious working environment among other different players in the industry.

Any customer in need of a certain good or service would want to get it more conveniently and at a very convenient place. The two most important goals to fulfill while running up a business are profit maximization and customer satisfaction.

However, the former is dependent on the latter since no income generation without first satisfying the customers. So the most important issue to consider while putting up a new hotel is where the customers would find it more appropriate to enjoy their services. While putting up high-rise hotels in city areas, it is imperative to bear in mind the problems which come across with this decision to the local population and the tourist such as huge traffic congestion and escalating pollution.

In most cases, the burden for improving and dealing with these problems is left in the hands of tax-payers. While pursuing the principle of self interest I business ventures, public interest should be taken care of so as not to make profits at the expense of harming the general public(Shoval & Cohen-Hattab,2001).

The other important feature to consider while selecting location for a hotel is the demographic characteristics of the target population. Different groups of people have different needs. For instance, there is no logic to open up a Chinese restaurant in a place where the people available don’t consume Chinese foods.

Besides, there are some people with their own taboos and customs which prohibit them from consuming certain foods like in the case of Muslims who don’t consume pork, therefore you should not locate a hotel in a Muslim invaded community if at all you know your hotel businesses offer pork related products (Bull, 1994).

Another important issue to put in consideration while selecting a new location for hotel development is the social and economic class of the surrounding population (Chou, Hsu & Chen, 2008). A five-star hotel cannot be situated in a rural set up consisting of primitive dwellers or small towns with low income earners and whose integrity and ability to spend in such hotels a re questionable. The services and facilities offered should match the social class of the people being targeted (Yoon, Chen & Gursoy, 1999).

Security is another critical issue that cannot be ignored while setting up a hotel. Public order issues including the possibility of fire outbreak, theft and robbery can influence the customer base in a given physical location. Hotels are not only national but international facilities which attract customers across the entire globe.

It should be noted that provision of hotel services is one component of tourism for a given country and tourism income constitute a significant percentage of country’s Gross Domestic Product. All the major international hotel facilities should be located in safe and secure places so as to attract foreign tourists and customers.

This area should be terror-free zones and that explains the reasons why the tourism industry in peaceful countries keeps on growing at a very high rate. The reasons attributed to this are two, one so many investors are willing to venture their businesses in these nations and two too many foreigners are attracted to these nations (Cox & Vieth, 2003).

Running a successful hotel industry is a big challenge. That is why brilliant managers with high thinking and reasoning capacity coupled with critical thinking are recommended to run these businesses. And this is where the strategic management comes in. as a manager I my local area if I were to run a hotel, the first thing is to do through marketing research to establish very well the nature of the groups of people around the area(Liu & Var,1986).

But before going into that, looking at glance, majority of the people are local community groups majority being low-income earners and afe medium income earners. There are no complex needs required to be formulated to satisfy these people therefore few things would only require to be implemented. In such an area like this, a huge percentage of the people do perform odd jobs, others are jobless and few have got formal jobs (Urtasun, 2006; Lindberg & Johnson, 1997).

As a result establishing expensive hotel facilities will be wastage of funds and misuse of resources. These people are mostly taxi drivers, traders, constructors etc. these people despite their low incomes are heavy consumers only that their expenditure is mainly on inferior and cheaper goods and services. Therefore providing better services than the ones being offered by the existing market players will be an important decision (Huang & Stewart, 1996).

The other characteristic feature of the people in the area is that it is inhabited by many drunkards and immoral groups of people. Carelessness and irresponsibility is the dominant feature of the people in the area. The results associated with these can easily be observed. After too much drinking, threes people need accommodation during the evenings and night.

Besides these drunkards, there are so many commercial workers therefore making the demand for lodgings very high (Culligan, 1990). Therefore, setting up a hotel facility with so many lodgings to cater for these people will be more profitable. In addition a better pricing methodology will need to be adopted so as to make the accommodation more affordable.

The nature of services provided will be very much determined by the kind of staffing and human resources available. Local people can be well pleased when served by the people they know better, therefore employing local people will retain huge customer base to some extend. In such situations there is no need for complex staffing as some customers might need to be approached using local language they can easily understand.

An important thing to note about these groups people is that they are of different ethnic groups and you cannot identify a particular community of group to be your customer. Therefore the services should vary accordingly so as t accommodate each and everyone in the given area. This will vary in form of foods, drinks offered as well as the entertainment (Johnson & Vanetti, 2005; Chen, 2001).

Management of a hotel in an isolated area requires a different approach from managing a hotel in a place where other hotels are located. This is because such a facility will not enjoy the benefits of positive externalities enjoyed by the one located in the city or central business district of a given nation.

High quality service delivery should be given the first priority since there are no other similar surrounding facilities (Brougham & Butler, 1981). There has always been a principle of differentiation which emphasizes on the concept of cluster concept which is as a result of behavior of consumers asking for quotations. In the process of minimizing the transportation costs incurred when the consumers are seeking market information, several hotels will always engage in cluster concept (Bachleitner & Zins, 1999).

A newly established hotel in an isolated area cannot enjoy all these benefits and therefore as a manager Ione should formulate and implement decisions on how to access the consumers and provide them with relevant information. The first strategies should be geared towards making the customers aware of the products available and win their confidence.

This might involve massive expensive advertising which need to be an international one since the hotel is interested in both domestic and international customers. In the event that the hotel in isolation is in a place with limited support facilities such as banks supermarkets, a manager can make steps to liase with the concerned managers or directors of these facilities to initiate the bringing up of the same. This is because they play a very crucial role as far as attracting the customers is concerned (Andriotis, 2005).

The efficient running, smooth control and coordination of operations in an hotel as well as maintaining experienced staff and human resource management team is a very crucial requirement to ensure the existence and also deal with challenges associated with increasing competition.

The manager should apply the principle of professionalism and all the departments should be headed by the experienced professionals (Teye, Sonmez & Sirakaya, 2002). The emergence of a new hotel into the market may lead to several outcomes such as new guests moving into the newly established property and leaving other properties and decline in rates offered by the other competitors as a result of new entrance into the market(Egan, Knowles, & Bey,2000).

Launching of training programmers for the employees both existing ones and the already existing work in hotel industry has been widely used in order to improve service delivery and help the new hotel compete fairly in the global market. This helps in bringing up competent staff hence ensuring superior services.

Delegation of duties, right a correct channels of communications are some of the other principles that should be observed while managing the resources of an organization. Management decisions will determine the firm’s future and in the event that such decisions are not well made the firm might very easily be eliminated from the market. Also as a manager you should be able to predict what the proportion of foreign customers might be (Weaver & Lawton, 2001).


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