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Like many other industries, the hospitality industry faces new challenges and opportunities today. With the technological advancements of the modern world, newly arising uncontested demand, and changing standards of operation, companies providing various services to visitors in New Zealand recognise either new issues or factors present in the industry before but currently growing to become more important issues. First of all, there are socio-cultural issues requiring companies to respect their clients’ needs related to social and cultural backgrounds and to meet expectations associated with what is normal and acceptable in different cultures.
Second, there are economic issues, including external market influences and internal considerations of clients’ economic capabilities. Third, there are issues of creating comfortable and enjoyable environments for those who receive hospitality services. Then, there are sustainability issues that change the way hospitality managers approach their work, the use of resources, and the generation of waste. Finally, there are global issues that present both opportunities and challenges. To address every group of issues, general conceptual understandings were provided, then the impact of those issues on the financial and operational hospitality management was assessed, and finally, recommendations were provided to the hospitality industry players to successfully address each group of issues.
Socio-Cultural, Economic, and Environment Issues
In hospitality management, it is recognised that socio-cultural, economic, and environmental issues play a significant role. First of all, what is meant by socio-cultural issues is a number of considerations related to potential and existing clients’ backgrounds, such as their cultural origin and social position. In other words, these issues address the differences among people and communities in terms of what is thought to be acceptable among them and what they might expect from the hospitality industry based on the socio-cultural context in which they live (Tajeddini & Trueman, 2012).
In any business, socio-cultural issues are a factor because any business works with clients and strives for meeting their needs. However, it can be said that, in the hospitality industry, socio-cultural issues are even more important than in other industries because a major goal in hospitality management is to provide comfort. When an establishment accommodates people, it becomes their temporary home, and home is the place where one’s socio-cultural aspects are most vividly displayed, manifested, and exercised. One cannot be comfortable when finding himself or herself out of the context to which he or she is accustomed. Hospitality managers must take all this into consideration.
However, sometimes people stay in a hotel because what they want is to break out of the context of their everyday lives and because they are looking for something new and different. For example, a person lives in a rural community, but once in a while he or she stays in a hotel, and the person may find it very enjoyable that he or she is treated very differently from the treatment normally received in his or her community. It is gratifying to be provided with high-quality hotel service. Another example is exotic hotels in different countries where people go to familiarise themselves with a different culture, which is why they do not necessarily expect to be treated in the context to which they are used: they are looking for a different context. However, a hospitality manager should not be misled by these considerations. People do not expect hotels to be exactly like their homes, but they do expect to be treated with proper respect and attention to their cultural and social norms, traditions, and attitudes.
Socio-cultural issues-particularly arise when local cultures encounter tourists’ cultures. People in different parts of the world eat differently, drink differently, talk differently, and all this should be taken into consideration by hospitality managers. For example, if it is recognised that visitors from a particular country have a strong culture of tea drinking, an establishment should introduce a tea menu, and this is how the impact of socio-cultural issues on financial and operational management of an establishment is manifested.
Another wide category of issues is economic. It encompasses many considerations from the financial capacity of visitors to the overall market situation with which a hospitality establishment should align its actions and strategies. For example, unemployment is a market condition that affects the hospitality industry and presents both challenges and opportunities (Mensah & Dei Mensah, 2013). On the one hand, the industry receives higher access to workforce and more opportunities to hire people if there is a need to do so for the purposes of growth and development (such a need may come from the increasing number of tourists). On the other hand, the availability of the workforce also creates the need to improve the selection process to make sure that all new employees meet appropriate requirements. Another example is the clients’ practice to bring their own food and drinks, and this practice affects the profit of a hospitality establishment.
Finally, what is meant by “environment issues” in this part is a number of considerations related to the organisation of space and atmosphere in an establishment or in activities held by hospitality managers. “Environment issues” can also refer to the natural world, the ways in which human activities impact on it, and the ways in which it affects human activities, but these issues will be addressed further (see Sustainability Issues). Creating a proper environment in which the hospitality services are provided to clients is one of the important functions of managers, although it may often be overlooked (Brunner-Sperdin, Peters, & Strobl, 2012).
Creating such an environment is largely associated with employee relations: employees should be provided with a clear understanding of the general vision and with practical tools to make guests and visitors feel welcomed. If the proper environment is not established, the impact on financial and operational management is that loyalty is not built-in clients, and the rate of repeat clients is low, which affects the establishment’s profits and its reputation among potential clients.
Recommendations can be provided for all three groups of issues discussed above. First, to address socio-cultural issues, a hospitality manager should ensure that proper market research activities have been conducted to identify what potential clients want, need, and how they perceive the proper provision of hospitality functions. All this should be considered in the process of policymaking. If clients’ habits, such as drinking habits, do not comply with a hotel’s policy, the situation should be resolved in the most delicate way because it is recognised that clients’ habits cannot be simply ignored by the management (Altinay, Madanoglu, Daniele, & Lashley, 2012).
In terms of economic issues, a major recommendation is to continuously improve the practices associated with financial and economic analysis and reporting; any business today is highly affected by global and local market forces, and it is almost impossible for a business to survive without considering economic factors. To address such economic issues as the clients’ practice to bring their own food and drinks, it is necessary to develop and properly ensure policies to ensure that the establishment’s profit is not seriously damaged (Davis, Lockwood, Pantelidis, & Alcott, 2013). Finally, to build environments (setting, space organisation, and atmosphere), hospitality managers should pay extensive attention to employee relations and corporate programs that unite teams and turn facilities from places with hospitality services into environments where clients and guests are comfortable and willing to come again in the future.
Sustainability is a major theme in the business world today, and it is wrong to assume that the theme only applies to fossil fuel producers or companies operating large manufacturing facilities that can harm the natural environment. In hospitality management, the discussion about sustainability is held, too. Sustainable development is essentially a type of development that does not undermine further development, i.e. uses resources according to their availability (slower than they are naturally produced) and generates less waste than the amount that can be naturally processed or taken up by nature (Moldan, Janoušková, & Hák, 2012).
In case these two conditions are not followed, the resources are used faster than they become available, and more waste is produced than it is safe to produce, i.e. the amount of resources constantly decreases, and the amount of waste constantly grows. This type of development is known as unsustainable, and it signifies that, at some point in the future, there will be no resources left and too much waste.
To prevent this scenario, which is a threat to the entire humanity, it is necessary to find different resources, e.g. renewable resources, such as wind and sun energy (Twidell, & Weir, 2015), and to develop new methods of waste management, e.g. to reduce its amounts, reuse more what can be reused, and recycle certain materials to eventually make use of them again.
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By resources, many people mean the sources of energy that is necessary for any development and operation. However, businesses consume many things apart from energy, and there are various types of resources recognised in the hospitality industry (Goeldner, & Ritchie, 2012). First of all, New Zealand possesses a large number of natural resources, including flora (forests), fauna (wildlife), landscape (mountains and valleys), and water (rivers, lakes, and the ocean). Also, the climate should be recognised as a resource, too, as there is a large period during the year during which New Zealand can host tourists.
Apart from natural resources, there are also cultural and services resources (Murphy, 2013): the former category includes heritage, traditions, diversity, historic buildings, ethnic celebrations, carnivals, arts, and music; the latter category includes established touristic infrastructures, transport systems, hotels, restaurants, and other things that make coming to New Zealand for vacation easier, more convenient, and more enjoyable. All this should be recognised by hospitality managers as opportunities and used to address the needs of tourists by creating establishments and tours that fully benefit from the availability of resources. However, hospitality managers should act according to the sustainability principle, i.e. use resources in such a way that ensures that they will not be exhausted.
A way to look at the impact of sustainability issues on the financial and operational hospitality management is to use the perspective of carrying capacity (Castellani, & Sala, 2012). For example, the physical carrying capacity of a site is the number of modifications, such as road building or constructing facilities that produce waste, it can take. Another example is the ecological and biological capacity of a place—in indicates how the place can tolerate the presence of tourists without its ecosystem or biodiversity being seriously damaged.
Also, there is the concept of psychological carrying capacity that refers to the experience of tourists and establishes that there is a point at which personal impressions of tourist start to diminish. Finally, social carrying capacity is the maximal amount of touristic presence in a certain place that does not damage local communities by socially or behaviourally affecting their members. Carrying capacities of resources impose limitations on the hospitality industry and affect management. Since it is recognised that resources can be used to a certain extent only, hospitality managers need to plan their operation in a way that sustainable development is ensured.
In the context of sustainability, it should not be overlooked that the hospitality industry is not only a potential violator of sustainable development principles (which is why its compliance with the principles should be enforced) but also a potential victim. Unsustainable development is no damage to nature only but damage to humanity as well (Lee, 2013). Unsustainable use of land leads to erosion and deterioration, which make the land unsuitable for further use for recreational purposes; deforestation leads to decreased biodiversity and lower quality of air; pollution leads to the destruction of ecosystems and negative effects on people’s health. Unsustainable actions destroy natural resources that the hospitality industry could use.
Concerning recommendations, it is advised to hospitality managers to adhere to the principles of sustainable development and comply with any policies enforced in New Zealand related to environmental friendliness (Bebbington, Unerman, & O’Dwyer, 2014). Sustainable development will prevent the degradation of resources and ensure that the industry will have all the necessary resources in the future to continue improving the services it provides to tourists. That is why hospitality management should not only avoid pollution, i.e. avoid directly harming the environment, but also recognise that places that it uses to attract tourists have limitations in terms of how many tourists they can host and how much impact from the touristic activity they can take.
Globalisation is a major factor in the business world today. This process is manifested not only in the emergence of international and global companies but also in the growing significance of international and global markets. It means that local markets find themselves affected by forces which did not affect them before—the global economic processes. There are many factors that contribute to the growing role of global processes, and the three major drivers of globalisation identified in the hospitality industry are technologies, ease of travel, and growth of multinational corporations.
An influential economist and business theorist Theodore Levitt proposed a concept in the early 1980s of differentiating between international and global companies. The former operates in many countries and operate differently by adjusting its operation to the local context and the specificity of demand. Global companies, on the other hand, discover universal demand and sell the same products and services to customers in many countries in the same way because they do not operate in many local markets—they operate in one global market (Liu, Guillet, Xiao, & Law, 2014).
Within the last 35 years, the situation has changed, but the concepts of universal demand and global market and the idea that people from all over the world may be willing to buy the same things in the same way everywhere remain influential. Not to take away from the importance of socio-cultural differences (see Socio-Cultural, Economic, and Environment Issues), hospitality managers should acknowledge that they can be more successful if they try to enter the global market instead of trying to avoid its influences.
The strategy of avoiding the influences of globalisation can often be observed in local industries because there are influences recognised as negative. A major influence recognised as negative is the impact of financial crises (Cohen, 2012). Originating in one country, a financial crisis affects the economies of other countries through the mechanisms of global markets. Common consequences include unemployment and slow recovery from the recession: these risks are especially dangerous for vulnerable economies. In the context of the hospitality industry, a major effect of globalisation is that new touristic destinations emerge and become more accessible; as a result, established destinations lose significant portions of visitors.
It is widely acknowledged today by the industry’s participants that the hospitality business is changing. The demand is changing according to the shifts in touristic preferences. New technologies and availability of new destinations make travelling a different experience from what it was before. Moreover, it is expected that the change will continue, as with the growing visibility of climate change effects, people will prefer high speed rail to air travel, and many other patterns of their recreation and choices associated with it will change due to the global forces and processes.
The impacts of globalisation on financial and operational hospitality management are manifold. On the one hand, many people in every part of the world receive easier access to travelling, which means that the hospitality industry encounters new demand, and it can facilitate growth and development. On the other hand, as the numbers of tourists grow, so do the numbers of touristic destinations, and the novelty of the latter, as it contrasts with established destinations labelled as “usual” touristic spots, is likely to attract many tourists (Gustavo, 2013). The hospitality industry players, therefore, face both new opportunities and new competition created by globalisation.
Concerning recommendations, a general recommendation for the hospitality industry in New Zealand is to embrace the opportunities provided by globalisation and manage risks associated with it instead of rejecting participation in the global market. Apart from his ideas on the globalisation of markets, Levitt is also famous for the concept of marketing myopia—the term that he used to refer to limited visions of businesses (Boone & Kurtz, 2012). For the purpose of proper development and success in the modern world with its globalisation and technological advancements, a primary task for a company, according to Levitt, is to define the industry in which is operates—and define it correctly.
Fro example, a company that provides railway services faces growing competition from air travel companies. The increasing popularity of air travel was, most certainly, a negative factor for railway companies; Levitt argues that, if such companies’ vision is that they are in the railway industry, they will go down with the ship of their industry. However, if their vision is that they are in the transportation industry, they suddenly have new opportunities to address the same needs of the same customers whose needs they addressed before. Similarly, a company that is in the DVD rental business can shut down as DVD rental becomes less popular, but if the company establishes that it is in the entertainment business, not merely in the DVD rental business, it can offer many other services to its customers, such as streaming media.
The hospitality industry players in New Zealand should recognise that they all are in the tourism and hospitality business, not narrowly in, for example, skiing, hiking, or kayaking business. Globalisation is the process that pushed businesses toward broader visions, and businesses should adopt them to succeed in the global market.
The issues that the hospitality industry in New Zealand faces today were divided into several groups, and for each, the impact on financial and operational management was identified, and recommendations were suggested. For socio-cultural issues, it is recognised that clients have certain expectations based on their backgrounds, which is a driving force for companies to introduce new policies and solutions, and the behaviours of clients can damage profits, which is why socio-cultural considerations should be incorporated into the industry’s policies. Economic factors, such as unemployment, affect touristic companies, too, which is why practices associated with financial and economic analysis and reporting should be improved.
To address the issues of sustainable development, companies should recognise that their resources, including natural and cultural resources of New Zealand, have carrying capacities, which is why there is the need to plan the use of resources accordingly and not overuse them or promote environmental degradation or negative social processes caused by excessive influences of tourists on local communities. Finally, it is recommended to companies to embrace the opportunities provided by globalisation, to search for universal demand, i.e. why people from all over the world might be interested in the hospitality industry of New Zealand, and to recognise that making operation broader is a way for a company to succeed in the global market.
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