Introduction
The influence of technological innovations, new developing markets, globalization, and the elimination of borders has significantly increased the priority given to information on changing consumer expectations, thus making companies productive. The rapid shift created by the aspect of civilization has compelled organizations to adapt to the changes. The hotel industry is complex, rapidly changing, competitive, and dominated by uncertainties that require businesses to identify potential threats and opportunities (Yadegaridehkordi et al., 2020).
Hotels should, therefore, assess their external surroundings appropriately to respond to customers’ shifting needs and adapt to the marketplace conditions. However, adjusting to the external environment and realizing long-term productivity in hospitality enterprises requires that managers and other stakeholders develop certain approaches. This paper evaluates the main financial and non-financial aspects and opportunities and threats in the hotel industry using various strategic models.
External Factors Affecting the Hotel Industry
Economics
The main economic management policies that influence the hotel industry in the marketplaces include monetary and fiscal policies. The latter involves government taxation, borrowing, and spending that impact both the level of development, economic activity, and growth of aggregate output, employment, and demand (Yadegaridehkordi et al., 2020). An increase in the policy’s implementation will benefit low-income households and regulate the rate of corporate tax for small-medium-sized businesses. Consequently, there will be investment allowances for hotel corporations that intend to expand their operations to new markets.
Similarly, monetary policy encompasses interest to regulate the rate and level of growth of collective demand. The central banks manage monetary regulation by controlling interest rates, thus impacting a firm’s cost capital and economy (Yadegaridehkordi et al., 2020). Therefore, changes in the regulation influence the economy’s future movement by presenting relevant information about corporate earnings and potential economic conditions.
Population
Demographic change has a significant influence on travel requirements in the hospitality business. Due to such variations, consumer preferences and cultural trends are also impacted; thus, hoteliers should adapt to remain productive. For instance, the shift in the United States in 2015 saw the Baby Boomers owning sixty percent of the state’s wealth and accounting for forty percent of the expenditure (Richard, 2017). Since the generation is evolving to retirement, the increased opportunities and relative affluence make travel desires of significant importance.
Furthermore, there is increased migration of persons to smaller towns and cities, thus creating more sub-cities. By 2050 suburbs are expected to have their busy town centers, which will influence the heartland restoration (Richard, 2017). The immediate airport centers are also likely to experience changes as millennial university graduates are flocking to cities such as Portland, Baltimore, and Louisville (Richard, 2017). The millennials’ disposable income is also expected to grow over the subsequent years, thus making more hospitality services as they travel to various destinations for business and leisure. Therefore, both local and international hotels should adjust their strategies and operations to satisfy the consumers’ changing population demographics and travel profiles.
Legal
Another external factor that organizations within the hospitality business are significantly affected by is the law’s changes. The supervisory surroundings in the hotel industry occasionally shift, thus influencing how restaurants, airlines, and hotels conduct their operations(Richard, 2017). For instance, a variation in the tax act that increases fuel pricing will impact the industry and tourism costs. Furthermore, with the New York Department of Labor has adopted and implementing the new Hospitality Industry Salary Act, hotels and restaurants will be compelled to replace individual wage orders (Richard, 2017). The changes were instigated by the wage union, thus causing a significant shift in the current industry traditions.
Technology
The introduction of new technological innovations also affects various organizations in hospitality. If current technology is not adopted and implemented by hotels, competitors with modern tech-creations will take over; thus, it will be difficult to adapt and sustain the business. For instance, one of the sectors growing concerns in the technological industry is the adoption of software used to control hotel booking and tour facilities (Robin, Pedroche and Astorga, 2017). There has been a growing trend where consumers prefer using their devices, such as phones and computers, to make hotel bookings than actually being present. Consequently, the preference change has seen some hotels lose clients to their competitors with existing booking software.
Recommendations
The hotel industry may face challenges during extreme economic difficulty, leaving it upon the business community’s continuous backing. However, the appropriate response can lead to stability, survival, and success. Banks, state governments, and other financial institutions should involve the industry’s stakeholders during the formulation of fiscal and monetary policies (González-Torres, RodrĂguez-Sánchez, and Pelechano-Barahona, 2021).
The move will provide an opportunity for the industry players to present their ideas and contribute to the formulation of policies that will help boost the business despite the changing economic uncertainties (González-Torres, RodrĂguez-Sánchez, and Pelechano-Barahona, 2021). Moreover, the management should be forward-thinking in how extreme economic events are handled by considering their pricing, enhancing consumer loyalty, and offering extensive inducements above competitive charges that will attract clients.
The signing of ATRA (American Taxpayer Relief Act) in 2012 significantly influenced the hotel industry as it gave incentives for investment in fixtures, furniture, and equipment (FF&E), develop new commodities, and recruit (González-Torres, RodrĂguez-Sánchez, and Pelechano-Barahona, 2021). Therefore, companies’ ability to implement section 179 bonus depreciation and expense deduction can significantly impact their ability to accelerate tax deduction and release capital required for expansion (González-Torres, RodrĂguez-Sánchez, and Pelechano-Barahona, 2021).
The act presents an incentive for potential development into an empowerment market, allowing for the expansion of various hotel operations to new markets (González-Torres, RodrĂguez-Sánchez, and Pelechano-Barahona, 2021). While the act provides a reason for commercial growth and recruitment, it does not offer solutions to all the threats faced by players in the tourism industry. Furthermore, hotel managers and stakeholders should focus on significantly investing in technological innovations to enable them to meet current consumer preferences. Companies within the hospitality industry can achieve this by benchmarking and conducting research and development activities to identify new technologies, thus improving their service quality and marinating their competitive advantage.
Moreover, various markets experience legal changes which affect business operations within their environments. Therefore, stakeholders in the hospitality industry should focus on markets whose laws and policies favor hotel businesses’ productivity (Serra-Cantallops et al., 2018). The managers can further focus on corporate social responsibility to prolong their existence in foreign markets. Finally, the growing demographical change will have impacted the corporations’ operations in the business sector as the demand for more hotels and restaurants has rapidly increased (Serra-Cantallops et al., 2018). Managers can address the concern by setting aside capital for expansion to new markets where there are potential growth and future success.
Conclusion
Hotels require information to maintain their daily operations and establish new strategies for the future. Therefore, they should develop systems to gather relevant data, apply it to various functions of the business, and generate responses and solutions to the shifts occurring in the marketplace. The hotels should focus on enhancing their premises and introducing new products that will differentiate them from their competitors.
Despite the hospitality industry sustaining a good brand and services compared to other business sectors, managers should improve their organizational culture and leadership styles. Attracting new consumers while retaining existing customers should also be their primary focus and can be managed through new approaches and marketing. Therefore, commerce professionals should further investigate the hospitality industry to determine the various ways of improving its productivity.
Reference List
González-Torres, T., RodrĂguez-Sánchez, J.-L. and Pelechano-Barahona, E. (2021) ‘Managing relationships in the Tourism Supply Chain to overcome epidemic outbreaks: the case of COVID-19 and the hospitality industry in Spain’, International Journal of Hospitality Management, 92, 102733. Web.
Richard, B. (2017) ‘Hotel chains: survival strategies for a dynamic future’, Journal of Tourism Futures, 3(1), pp. 56-65. Web.
Robin, C.F., Pedroche, M.S.C. and Astorga, P.S. (2017) ‘Revisiting green practices in the hotel industry: a comparison between mature and emerging destinations’, Journal of Cleaner Production, 140(3), pp. 1415–1428. Web.
Serra-Cantallops, A. et al. (2018) ‘Progress in research on CSR and the hotel industry (2006-2015)’, Cornell Hospitality Quarterly, 59(1), pp. 15–38. Web.
Yadegaridehkordi, E. et al. (2020) ‘The impact of big data on firm performance in hotel industry’, Electronic Commerce Research and Applications, 40, 100921. Web.