The hospitality sector is one of the most lucrative economic sectors in the world. The industry has undergone exponential growth over the past decades. A large number of investors have ventured into the industry in an effort to exploit the prevailing market potential. The Australian hospitality industry plays a fundamental role in the country’s economic growth. For example, the industry has been a source of employment for over 500,000 employees. The industry is comprised of hotels, bars, and restaurants. Firms operating in the industry have implemented a number of changes such as diversifying their product portfolio in their quest to align their operations with the prevailing economic, demographic, and social situations. Most of the industry players deal with provision of beverage, accommodation, and food products.
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Despite its attractiveness, the industry is experiencing a myriad of challenges. Some of these challenges relate to an increment in the intensity of competition, change in consumer behaviours, labour shortages, and the regulatory environment. These changes have arisen from the high rate of globalisation and economic changes. For example, the recent global economic crisis led to a significant decline in occupancy ration. On the other hand, the intensity of competition might lead to a decline in the level of profitability. These forces show that the industry is very volatile.
Despite these pressures, the industry players have an obligation to satisfy their customers and at the same time maximise their profitability. This assertion underscores the importance of the industry players adopting effective strategic management practices in order to cultivate their competitiveness (El-garaihy 224). One of the aspects that the firm should take into account relates to quality of service.
Currently, service quality is a key determinant on the extent to which an organisation nurtures a strong customer relationship. Therefore, it is imperative for service-oriented firms such as hotels and restaurants to consider differentiating their operations based on quality. However, this goal can only be achieved if hotel and restaurants’ management teams understand the customers’ needs. Service quality is subject to the implemented processes, outcomes, and interaction between a firm’s employees and its clientele.
Aim and scope
This report illustrates how Hotel Windsor, which operates in Australia, can improve the quality of its services. The report assesses the various issues that the hotel’s management team should incorporate in its strategic management practices.
Hotel Windsor, which is owned by the Halim Group, is one of the largest hotels in Australia. The hotel is strategically located at Spring Street in Melbourne, Australia. The firm has undergone remarkable growth since its inception in 1884. Some of the notable changes include the purchasing of the “building by the state government in 1977 and its subsequent lease to the Oberoi Group in 1980, which undertook major restorations and refurbishment of the hotel, which re-established the hotel’s market position” (The Windsor par. 8). In 2005, the hotel was sold to the Halim family, which has since then improved it.
Currently, the business has successfully developed into a 5-star hotel. Currently, the hotel operates 180 rooms and 20 suites. Over the years, the hotel has attracted renowned personalities such as Richard Branson, Margret Thatcher, Don Bradman, York’s Duke and Duchess, George VI, and Elisabeth Bowes-Lyon, which indicates that the firm has improved its public image. In 2007, Hotel Windsor was ranked amongst the top 18 hotels for its best service. In addition, Hotel Windsor is committed to giving memorable experiences to its customers. In 2014, the hotel’s management team announced its intention to undertake comprehensive re-development and restoration of the hotel, which is expected to take 3 years [from November 2014-November 2017] (The Windsor par. 2).
The Australian hotel industry underwent notable growth in 2013 due to the improvement in domestic and international tourism. Domestic overnight trips increased by 4.1% in 2013, which is the highest rate of growth since 2000 (Deloitte Access Economics 7). Similarly, leisure travel experienced a 6.6% growth, which is the highest rate of growth since 2007. On the other hand, corporate trips increased by 3.5%.
International tourism has further accelerated the rate of industry growth. International arrivals increased by 5.5% in 2013. Significant proportions of international tourists in Australia are of Chinese, Malaysian, Singapore, Hong Kong, Thailand, India, and Taiwan origin. Moreover, the country received a substantial number of tourists from Europe and the US. Deloitte Access Economics (7) posits that the number of visitors from the United Kingdom and the United States increased by 6.8% and 6.2% respectively. The increment in international tourism has been facilitated by the growth in the airline industry, for example, the emergence of the low cost carriers.
The increase in domestic and international tourism led to a significant increment in revenue per available room, especially in Melbourne, Hobart, Darwin, and Sydney cities. This trend is expected to be sustained into the future. A study conducted by Deloitte shows that domestic visitor nights will increase to 300 million by 2016, which projects growth in market potential (Deloitte Access Economics 5). Furthermore, the study shows that international visitors from Asian countries will account for a significant proportion of the industry’s growth over the next 3 years. The chart below illustrates the projected growth rate with regard to international tourism.
Analysis of the macro environment
Hotel Windsor’s operations are subject to different macro-environmental forces such as politics, the country’s economy, and social-cultural environment coupled with technological and legal changes. Therefore, it is essential for the hotel’s management team to take into account these forces. Below is an analysis of how these macro-environmental forces are affecting the firm’s operations.
Political and legal environments
Over the years, Australia has been experiencing a relatively high degree of political stability. This aspect explains why the hotel industry is experiencing growth in the level of profitability arising from increment in the rate of domestic and international tourism. The political stability has arisen from the adoption of democratic system of governance and a comprehensive constitution. Judging from the country’s governance system, there is a high probability of the hotel industry experiencing remarkable growth in the future. The Australian tourism industry will also benefit from the adoption of the Chinese Tourism Law, which was enacted in 2013. The law’s objective is to enforce tour operators to avoid breach of contract in order to offer consumers a unique experience. Firms in the Australian tourism industry such as hotels and restaurants have supported the law broadly (Deloitte Access Economics 9).
Most regions around the world have recovered from the recent global economic recession. The recovery has been occasioned by the implementation of economic stimulus packages by respective governments. In 2013, the United States economy grew with a margin of 2%. Similarly, countries in the European and Atlantic regions have also recorded growth. The Chinese economy has also recorded continued growth. At the end of 2013, China’s economic growth was estimated to be 7.7% and has remained stable over the past 6 months. In 2014, China is expected to grow at an average rate of 7.2% (Deloitte Access Economics 7). A study conducted by Deloitte in 2013 shows that Australia’s economy would experience growth in 2014. Subsequently, there is a high probability of improvement in the citizen’s living standards. This trend will improve the likelihood of consumers integrating travel into their consumption process (Deloitte Access Economics 3).
The world has undergone remarkable economic growth over the past decade, as evidenced by the improvement in individuals’ living standards. A study conducted by the United Nations World Tourism Organisation in 2011 underscores an increment in the number of consumers who can afford air travel. By 2010, the total number of international arrivals around the world had increased to 940 million. This aspect shows that consumers are increasingly adopting travel [domestic and international] in their consumption patterns. This trend underscores the projection that Australian will experience an increment in the number of international arrivals over the next three years. Moreover, the high rate of globalisation means that firms in the Australian hotel industry will experience an increment in the rate of cultural diversity.
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Therefore, it is imperative for the industry players to take into account this element in their service delivery processes in order to attract and retain a large number of customers. Another notable social-cultural change that is affecting the hotel industry relates to change in the consumers’ lifestyle, as evidenced by the high rate at which they are demanding unique experience in their consumption processes. Additionally, consumers are demanding value for their money in their consumption processes.
The 21st century has been characterised by remarkable evolution of information communication technology, which has arisen from the high rate of innovation. The Internet is one of the technologies that have extensively revolutionised information communication. Consumers across the world have embraced technology in their consumption process, as evidenced by the high rate at which they are purchasing goods and services online. In an effort to align with the prevailing market trends, firms in the hotel industry are incorporating technology in their operations with the objective of achieving operational efficiency and entrenching the customers’ experience.
Climate change is one of the major challenges facing the long-term success of firms in the tourism industry. Different economies are advocating businesses to adopt environmental sustainability as one of their strategic management practices. The National Australian Built Environment Rating System [NABERS] is one of the government agencies that are charged with the responsibility of assessing the extent to which the existing buildings have complied with environmental regulation. Moreover, consumers prefer being associated with organisations whose operations are environmental friendly. In its quest to undertake the improvements slotted for 2014 to 2017, Hotel Windsor should adhere to the set quality specifications.
Developing competitiveness is critical in an organisation’s quest to achieve long-term survival. Thus, it is imperative for Hotel Windsor’s management team to understand the prevailing market dynamics in order to formulate effective operational strategies that will promote the firm’s profitability. The competitiveness of the Australian hotel industry is affected by a number of forces, which include threat to entry, buyer and seller bargaining power, threat of substitute, and rivalry amongst the industry players. These forces have profound impact on an organisation’s competitiveness.
Threat of entry
The industry is characterised by high threat of entry due to its attractiveness. Over the past few years, the industry has experienced an increment in the number of local and foreign firms. This trend is expected to continue into the future as the global economy recovers. More investors will enter the industry in an effort to exploit the prevailing market opportunities. The threat of entry will further be increased by the view that there are no significant barriers of entry into the industry. Therefore, the likelihood of increment in the intensity of competition is very high.
Supplier bargaining power; high
The hotel industry is service oriented. Thus, its success depends on the skills and knowledge of the labour force. However, the industry has experienced an increment in the rate of employee turnover over the past few years. Furthermore, the rate of employee turnover in the Australian tourism industry is increased by the high rate of the aging population. This trend is affecting service delivery amongst hotels.
Buyer bargaining power; high
The hospitality industry is characterised by a large number of firms. A study conducted by ABS in 2006 showed that there were 3,454 hotels operating in Australia. Subsequently, consumers are faced with a wide range of options from where they can seek hotel services. Moreover, the large number of industry players means that the cost of consumers switching from one firm to another is relatively low. Therefore, it is imperative for Hotel Windsor to be concerned with fostering a high degree of brand loyalty amongst consumers in order to minimise the likelihood of consumers switching to its competitors.
Industry rivalry; high
The large number of industry players has made the degree of industry concentration in the Australian hotel industry to be relatively high. Consequently, the industry is characterised by a high degree of rivalry. The emergence of the information age has increased the consumers’ knowledge on the industry players, hence leading to an increment in the degree of competition. The majority of the industry players are using the Internet in creating awareness on their market existence. Therefore, it is imperative for Hotel Windsor to consider utilising the Internet in creating a unique customer experience.
Threat of substitute; high
The Australian hotel industry is characterised by a large number of industry players. The hotels are distributed in different parts of the country. Therefore, consumers can easily switch to a competing firm if they are not satisfied with the services provided by a particular firm.
The analysis above shows that the hospitality industry in Australia is likely to be very competitive and challenging in the future. Consequently, it is imperative for the industry players to implement effective operational strategies in order to enhance their competitiveness. One of the aspects that the hotel’s management teams should focus on relates to improving quality of their services.
Strategies to improve quality at Hotel Windsor
Service oriented companies such as hotels and restaurants are required to establish a comprehensive quality design similar to their counterparts in the manufacturing industry. Consequently, firms’ management teams should understand what constitutes quality of their service by conducting consumer-market research. Mehrabi, Nasiripour, and Delgoshaei argue that focusing on the customers’ tastes and preferences is fundamental in determining an organisation’s long-term success (568). Therefore, it is imperative for service-oriented firms to integrate the concepts of total quality management in their service quality management. By focusing on high quality, Hotel Windsor will be in a position to attain a competitive market position. Furthermore, the firm’s performance will improve significantly.
Hotel Windsor should understand that managing quality is relatively complex due to its service orientation. In order to survive in the competitive business environment, the hotel’s management team should consider investing in continuous quality improvement. Some of the issues that the firm’s management team should take into account are evaluated herein.
Customer service training
One of the most important elements that the hotel should take into account in its quality improvement process is people. Employees are considered as an important component in an organisation’s long-term success. Customer experience in service industry is subject to the effectiveness of service delivery (Naik, Bhargavi, and Prabhakar 240). Consequently, the firm’s management team should focus on fostering a strong customer relationship. Firms that are successful in the hospitality industry invest in improving the quality of their human capital in order to nurture an excellent customer experience. Tourism Australia, which is charged with the responsibility of promoting tourism in Australia, is focused at attracting high-yielding tourists into the country. This aspect means that firms in the industry are under pressure to offer premium experiences to customers (Service Skills Australia 4).
Hotel Windsor should invest a substantial amount of its resources in training its workforce. One of the areas that the firm should focus on relates to customer service training. Currently, the tourism and hospitality industries in Australia are experiencing labour shortage. First, the country’s education system does not fully address the skills needs of firms in the industry. Secondly, the high rate of globalisation has increased mobility of labour. Therefore, the rate at which employees are seeking more fulfilling jobs has increased significantly. This trend is likely to persist over the next two decades.
Investing in customer service training will improve the effectiveness with which Hotel Windsor attracts and retains customers. The hotel will be in a position to address the skills gap in its service delivery. The hotel will be in a position to leverage on human capital as a source of competitive advantage. According to Service Skills Australia (4), investing in customer service training improves an organisation’s operational efficiency by minimising the likelihood of an organisation scrambling to recruit job candidates from the external labour market who have compatible skills to fill positions that are left vacant.
Hotel Windsor should implement a comprehensive customer service-training program. The training program should aim at enhancing the skills of its workforce. In a bid to ensure a high rate of success, Hotel Windsor should conduct a comprehensive consumer market research in order to understand the market demand. Some of the dimensions that the firm should focus on in its training program include
Focusing on reliability will improve the effectiveness with which Hotel Windsor consistently and continuously delivers the promised quality to customers. Consumers are adopting technology in the process of consuming hospitality services. For example, consumers are increasingly making reservations with regard to hospitality services through the Internet. Hotel Windsor has to ensure that the quality promised through its marketing communication mediums such as its website is met. In line with its commitment to attract a large number of customers, Hotel Windsor should ensure that its workforce offer a high degree of assurance to its clients. Thus, the firm should train its employees on how to be courteous coupled with inspiring trust and confidence amongst its workforce.
The customer service-training program should incorporate the concept of responsiveness. The firm’s employees should be trained on how to serve customers promptly and respond to their service needs in a timely manner. It is also imperative for the firm’s management team to ensure that its employees give individual attention to customers. This aspect will increase the probability of customers developing a high degree of trust and loyalty. Previous studies show that responsiveness is directly related to service quality (Auka, Bosire, and Matern 42). The training program should also focus on inculcating empathy amongst its employees. Empathy refers to the extent to which employees depict a sense of personalised attention and care towards employees.
Hotel Windsor should consider improving tangibility in its premises. One of the ways through which this goal can be achieved is by integrating the concepts of interior design. Previous studies conducted show that the ambience of particular premises influences the duration that consumers stay in a particular retail store. The hotels management team should ensure that the hotel has incorporated effective interior designs (Naseem, Ejaz, and Malik 52).
Considering the view that the hotel intends to undertake a major improvement of the hotel premises over the next three years, it is essential for the management team to implement modern hotel facilities in addition to ensuring an effective layout. The hotel’s walls should be painted artistically and the areas surrounding the hotel building be nicely kept in order to influence service quality. Taking into account these elements will increase patronage within the hotel, hence increasing customer loyalty.
Implementing digital technology
Koutroumanis argues that restaurants and hotels “have historically been slow in adopting new technology” (76). Most hotel owners had the perception that integrating technology in their operations would shrink their profit margins. Subsequently, they shied from the prevailing technological advancement. However, the past decade has been characterised by improvement in the rate at which hoteliers are appreciating the role of technology in promoting their competitive advantage and long-term success.
The 21st century has been characterised by a high rate of technological advancement. One of the technologies that have experienced remarkable growth relates to information communication technology. The technology has greatly revolutionised organisation’s operations. Most firms in the hospitality industry are integrating digital technology in an effort to achieve competitiveness with regard to service delivery. Digital technology is perceived as an avenue through which organisations can exceed customers’ expectations, hence developing a high level of customer satisfaction.
Hotel Windsor should consider integrating emerging digital technologies in an effort to develop unique guest experience. The industry analysis above shows that tourism in Australia will undergo substantial growth in the future. Therefore, there is a high probability of Hotel Windsor experiencing an increment in the number of customers. In order to meet the travellers’ contemporary needs effectively and efficiently, the hotel’s management team should evaluate how it can adopt digital technology.
Some of the areas that digital technology can greatly improve the quality of service delivery at Hotel Windsor relates to internal communication, quest data management, hotel-property management systems, and inventory management. Internal communication technologies will improve the effectiveness and efficiency with which customers make reservations at the comfort of their hotel rooms. On the other hand, hotel-property management systems will ameliorate the customers’ stay in the hotel rooms. For example, the firm should consider implementing a technology whereby they can use their fingerprint to check-in their hotel rooms.
The hotel’s management team should implement a property management system that will provide customers with an opportunity to pay for hotel services and check-in and out of the hotel at different points. This move will minimise the burden of carrying identification and payment forms during their stay in the hotel. Implementing hotel-property management systems will provide the firm with an opportunity to understand the customers’ tastes and preferences. For example, the firm’s management team will be in a position to understand the customers’ preferences with regard to beverage and food products. Subsequently, Hotel Windsor will gather additional market intelligence that can be used in improving the quality of service delivery at the hotel.
In a bid to improve the customers’ experience, Hotel Windsor should consider simplifying the client’s check-in process by minimising the amount of time spent during the checking in process. For example, the hotel should provide customers with an opportunity to check-in using their wireless devices upon arrival at the hotel’s premises. The firm should also consider implementing a technology whereby customers can check-in at their homes. However, this technology should be enhanced using an effective identification technology such as biometric fingerprint identification in order to ensure that it is secure. Consequently, the technology will provide customers with an opportunity to by-pass manual check-in procedures.
The hospitality industry in Australia is expected to experience notable growth in the future. The growth will emanate from changes in the macro business environment. For example, improved political stability and collaboration between Australia and European, Asian, and American countries will improve the rate of international tourism. Subsequently, firms in industries such as hotels will experience an increment in the number of visitors.
The recovery of the global economy from the global economic recession and the recent debt crisis in the Euro Zone means that more jobs will be created. Therefore, consumers will experience an increment in the size of their disposable income. Considering the high rate at which consumers are appreciating domestic and international travel, there is a high probability of experiencing an increment in the number of visitors.
Currently, the Australian hospitality industry is characterised by intense competition. The degree of industry rivalry is likely to grow in the future considering the lucrative nature of the Australian hospitality industry. The likelihood of more investors venturing the industry in an effort to tap the market potential is very high.
In addition to the above changes, the industry faces a challenge emanating from change in consumer behaviours. Consumers are increasingly anchoring their level of satisfaction in consuming services on the extent to which they achieve unique experiences. Therefore, it is imperative for the industry players to undertake a comprehensive analysis on the prevailing market changes in order to gain intelligence on how to improve the quality of their operations.
In order to achieve the desired level of competitiveness, it is imperative for Hotel Windsor to take into account the following elements in its quality improvement process.
The hotel’s management team should be concerned with improving the effectiveness with which its workforce interact with the customers. One of the ways through which this goal can be achieved is by investing in a comprehensive employee-training program. The program should focus on imparting employees with adequate and relevant skills and knowledge on customer service. This move will ensure that customers are served effectively and efficiently, hence improving their level of satisfaction.
During the 21st century, technology has become a critical component in organisation’s quest to develop unique customer experience. Therefore, it is critical for Hotel Windsor’s management team to implement diverse digital technologies. The technologies should be designed in such a way that they make the consumers stay at the hotel premises to be enjoyable and easy.
Improve on the ambience
Hotel Windsor should improve the ambience of the hotel. For example, the hotel should invest in interior designing. In a bid to improve on the hotel’s ambience successfully, Hotel Windsor’s management team should adopt emerging architectural designs. This move will play a fundamental role in ensuring that the combinations of the various elements in the interior designing processes contribute to promoting the level of customer satisfaction. Additionally, it is also essential for the firm to outsource well-established interior designing firms.
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