Introduction
The purpose of conducting this study will be to examine the impact of globalization with particular focus on the international hotel industry. Globalization is defined as the process of integrating the economies, financial markets, cultures and societies of various countries through the use of global communication and trade networks that exist around the world.
Globalization is also defined as the integration of local, regional or national economies into the international economy used by the rest of the world to conduct activities such as foreign investment, trade and money transfers (Sharma and Morrissey 2007).
The driving forces of globalization around the world include technological factors where the introduction of new technological innovations within the international market drives globalization, economic factors where the economic growth of various countries around the world affects the rate of globalization and also political, socio-cultural factors where government and societal systems determine how the process of globalization will occur within various industries. In recent times however, the term has also come to include various factors such as language or communication barriers and the circulation of national ideas, (Bhagwati 2004).
In general, globalization affects the world in various ways one of which is the industrialization of countries where the introduction of global markets that are able to foster worldwide production have been able to ensure that consumers are able to access various products and services within the international market. The emergence of international trade across borders has also been a strong indicator of globalization as well as the emergence of global financial markets.
Financial markets have contributed significantly to consumers being able to access borrowing facilities across international borders without necessarily having to revert to the home market. Another aspect that signifies the impact of globalization is the economic market where a common market that allows traders and sellers to buy or sell goods has enhances the interconnectedness of trade thereby increasing growth of international trade around the world (Pan and Donato 2007).
The job market is also a strong indicator of globalization in the world as increased levels of competition within the labour market signify the strength of both national and international economies. Increased levels of competition ensure that workers are able to gain competitive salaries and wages which are now less dependent on the success or failure of national economies in the world.
Other aspects that are used to provide an indication of globalization around the world include the political context where government policies are developed to foster globalization activities as well as competition amongst countries when it comes to the production of goods and services. Ecological factors are also important indicators of globalization especially when they are used to explain the global environmental challenges that are taking place around the world as a result of global warming (Croucher 2004).
Impact of Globalization
In the past few years, the international hotel and hospitality industry has been impacted by globalization and the various effects of globalization that exist in the various faucets of international industries around the world.
Some of these effects have been notable from the fields of technology where the revolution of information technology and the introduction of various innovations have contributed in a significant way to globalization while the growth of economic integration has played a major role in the integration of suppliers within the international trade networks.
The intensified competition especially within the hospitality industry has also contributed to the effects of globalization where the emergence of newer and innovative hotels creates a complex business landscape that is mostly influenced by the goings on of the global market. According to Brotherton (2003), many hotel managers are faced with the challenge of maintaining a competitive advantage against their rivals within the same industry to ensure for their profitability and survival.
The impact of globalization in the international hotel industry has been both positive and negative where hospitality managers have been forced to invest in knowledge economies to balance their exploration and exploitation activities.
The positive side of globalization is that hotel managers are forced to engage alternative modes of coordinating their production and transaction activities for the benefit of their employees and clients while at the same time ensuring that they make strategic decisions which will be beneficial for the survival of the company in the dynamic hospitality market (Gross 2008).
The negative side of globalization is that managers and marketers working within the hospitality industry have to keep on changing their tactics to ensure their products and services remain relevant to the changing consumer markets. In the event re-branding or re-stratification efforts fail, the hotel might lose its identity and image amongst its clients and also loss its position in the industry as a provider of various hospitality services and products (Brotherton 2003).
One of the impacts or effects of globalization on the hospitality includes the aspect of asset evolution where hotels and companies operating within the international hospitality industry are able to liquidate their assets so that they can be able to meet the expectations of their shareholders and investors.
Asset evolution impacts on the hospitality industry where hotels and companies are forced to maintain a bottom line-growth thereby sustaining the level of competition that exists within the industry. As mentioned earlier, the technological environment has played a major role in globalization and it therefore affects the activities and functions of the hospitality industry where hotels are forced to turn their assets and properties into more flexible hotel operations.
This is meant to improve efficiency and effectiveness in many international hotels especially in the field of customer service that deals with room bookings, hotel reservations and cash payments. The labour market which is one of the strongest indicators of globalization has also impacted on the international hotel industry where the supply and demand of skilled and professional labourers determines the general growth of the industry (Pan and Donato 2007).
The international hospitality industry requires professional hospitality managers who possess the necessary skills and knowledge that will be used to capitalize on opportunities within the industry for the hotel’s advantage.
The labour market ensures that a company is able to gain professionals who will adapt business operations to the changing economic realties in the global context. Government regulations have played a major role in the globalization of local, regional and national economies around the world where the liberalization of world markets determines the amount of international trade that will be conducted in various countries.
Government regulations impact on the international hospitality industry where hotels are allowed some freedom when it comes to selecting the forces that will reduce business transaction costs as well as production costs that have continued to increase with fluctuating global economies (Kumar 2008).
Key Influences driving Globalization in the Hotel Industry
One of the major driving forces of globalization in the hospitality industry is cost effective methods of doing business where competitors are driven to operate across borders in search of cost effective and efficient methods of conducting hotel operations. Hotels that operate within the international industry have began to realize that the larger they grow in size, the fewer costs they will incur when it comes to producing goods and services for their customers.
Many managers have also began to realize that operating within the international hospitality market increases their profit margins which means that the company is able to attract more investors and shareholders willing to invest in the company. Diversifying operations into the international markets allows many business managers to tap into tourist markets that have not been explored by the local and national hotel industries (Brotherton 2003).
Another key influencing factor that drives globalization within the hospitality industry is global competition which has continued to increase over the past decade as more and more tourism and entertainment consumers become internationally oriented rather than national, local or regional consumers of hotel products/services.
A continent that has exploited fully the globalization process taking place across the world is Europe where many of the countries that fall under the European Union have created tourism industries that are focused on the needs of both the international and local consumer.
Hotels in countries such as France, Spain, Germany, Italy and Holland offer products that would meet the needs of both the local consumer and also the international tourist, language barriers side. The growth of the European Union has also played a significant role in the growth of the international hospitality industry in Europe where various hotels based in primal locations are able to compete on a level playing field for international customers.
While this increase in competition has been good for the industry overall, it has created a situation of critical mass where many hotels and tourism firms operate in Europe. Competition has forced many of the international hotels and firms operating within the continent to look for other areas to invest their businesses in so as to counter the effects of critical mass (Gu et al 2007).
Global brands also drive globalization within the international hospitality industry where hotels are forced to design products and services that will meet the cultural, societal, ethnic, political and technological needs of the international customer (Gu et al 2007).
Global brands differ from local brands in that they meet consumer expectations in a more diversified context while local brands meet the needs of local consumer. Globalised brands ensure that hotels operating within the international hospitality industry are able to market their services to customers who are already agents of the globalization process since they are constantly moving from one country to another.
International hotels that develop multicultural brands are able to appeal to a large number of customers who are heavily influenced by their ethnic beliefs and practices. Incorporating hints of multiculturalism also enables international tourists to experience some of the cultural offerings in existence within the host country (Kumar 2008).
Barriers of Operating Across Borders
A major barrier when it comes to establishing hotels in international countries is the organizational structure that the hotel’s management or hospitality company will incorporate in the host country. Hotels usually face an uphill task when it comes to deciding which organizational structures can be used across borders.
Hotel managers are also faced with the challenge of determining whether these structures will ensure that the business is able to operate at maximum efficiency so as to meet customer service requirements set by the industry players. Every globalised country in the world lives by certain standards and values systems so when developing organizational structures, managers have to take into account the cultural, political and social systems that exist in the host country to ensure that their business operations do not interfere with them.
Dubai which is one of the world’s most famed city for having many international hotels has been able to maintain its cultural practices where foreign countries interested in establishing hotels within the country have been forced to adapt organizational structures that take into account the predominant culture of the society in Dubai which is Islam. Employers who engage both international and local employees have to take into account their cultural differences when developing pyramid structures for management (Pan and Donato 2007).
Access to global capital presents a major barrier to hotels operating across their own borders where hotels and industry firms interested in investment options within other countries experience difficulties because of the limited investment capital allocated to hotels and the hospitality industry in general.
This can be attributed to the fact that the industry has not been fully accepted in many financial markets around the world and therefore hotel managers have to strive to demonstrate to investors and shareholders that they can be able to yield substantial gains on investment. Such a prerequisite presents a major challenge especially for hotels that wish to diversify their operations to the international market.
These hotels have to demonstrate their ability to achieve positive returns on investor and shareholder contributions on an international scale rather than on a local or regional scale. Hotels that have been able to operate within the three major financial markets in the world; New York (NYSE), the London Stock Exchange market and the Tokyo financial market have been considered to be globalised businesses within the international hospitality industry (Deresky 2008).
As a result of multiculturalism, the work ethic in the host country where the hotel intends to operate in might be different from that of the parent country where for example employees who work for a cultural country such as Saudi Arabia might have to go to the mosque for prayers during midday. Because of the high level of customers most international hotels deal with, the manager might have to develop work duties that will ensure that the Muslim or Islamic employees are not inconvenienced in any way when attending to their prayers.
Work ethics also becomes a significant factor when determining the optimum effectiveness and performance of employees within the hotel. As international hotels might deal with high multitudes of tourists especially during the peak seasons, managers have to determine the ethics and values of employees in the host country they are operating in so that they can be able to utilise these values for optimum results (Herrman and Lipsey 2003).
Recommendations
The most suitable solution that can be used by hotel managers who have decided to operate across borders will be to strike a balance between the cultural, social and political systems of both the parent and host company and also take into account the various global considerations of working in an international market.
Decentralised organizational structures will ensure that the company is able to take into account all the work aspects of the host country without compromising on the overall goals and objectives of the hotel. The access to global capital can only be remedied by business plans that have taken into consideration the international customer’s changing needs and expectations. Managers who want to establish their businesses across the border have to develop sound business plans that will draw the necessary amount of investors into the plan.
With regards to the barrier of work ethics, managers need to develop policies that will govern the operations of the international hotel in foreign countries to ensure the work values and ethics of employees have not been compromised. The study and discussion has been able to ascertain therefore that globalization has a significant impact on the operations of the international hotel industry.
References
Bhagwati, J., (2004). In defense of globalization. New York: Oxford University Press
Brotherton, B., (2003) The international hospitality industry: structure, characteristics and issues. Oxford, UK: Elsevier Science
Croucher, S.L., (2004) Globalization and belonging: the politics of identity in a changing world. New York: Rowman and Littlefield
Deresky, H., (2008) International management: managing across borders and cultures. New Jersey: Pearson Prentice Hall
Gross, M., (2008) Tourism management. New York: Free Press
Gu, J., Humphrey, J., and Messner, D., (2007) Global governance and developing countries: the implications of the rise of China. World Development, Vol.13, No.2, pp 274-292
Herrman, H., and Lipsey, R.E., (2003) Foreign direct investment in the real and financial sector of industrial countries. Berlin: Springer-Verlag Heidelberg
Kumar, P., (2008) Globalization: challenges for the developing world in the new millennium. New Jersey: McGraw Hill Publishers
Pan, Y., and Donato, R., (2007) The asymmetries of globalization. Oxford, UK: Routledge Publishers
Sharma, K., and Morrissey, O., (2007) Trade, inequality and growth in the era of globalization. Oxford, UK: Routledge Publishers