In the service sector, travel and tourism is the fastest growing industry. There are two important aspects that help this sector to go and grow, namely efficient service and good hospitality. It helps in gaining the loyal customers, attaining an edge over the competitors. Service and hospitality provisions are vital for the tourism sector. Hospitality industry comprises event planning, theme parks, cruise line, lodging, restaurants, etc. The aim of this report is to make scholars learn about the impact of hospitality provisions on travel and tourism industry. It discusses the composition of the hospitality industry, interrelationship between the tourism sector and the hospitality. In the second section, the horizontal and vertical integrations along with their implications are elaborated. In the third and the last section, the development plan of the hospitality business is elucidated.
LO1 Understand the role of the hospitality industry within the travel and tourism sector
1.1. Discuss the interrelationships between hospitality and wider travel and tourism businesses
The interrelationship between tourism sector and hospitality industry
Date: August, 2018
It is a well-known fact that tourism and hospitality are closely related sectors and both go hand in hand. Tourism is characterised by the engagement of people in moving to another destination in order to seek recreation, leisure, and relaxation. Hospitality services comprise transportation, accommodation, recreation, food and beverage, and leisure (Morrisson, 2015). Hospitality industry serves as a supplier of services for the travel and tourism sector. This article extends the relationship between the two.
Major Hospitality Services
The hospitality industry is not limited to the food and beverages or accommodation, but there are many other facilities. These services help the industry to grow rapidly and generate large revenue. Nowadays, customers seek a wide range of services from the hospitality industry. PKF hotels experts have described a few of such below in this section:-
Sports and Recreation: Hospitality industries are now clubbing two aspects of together like sports and recreation is combined with food and beverage. Now both players and audience can be served in a better way (Reymarie, 2013).
Food and Beverages: Now hotels are serving a wide range of foods and beverage to the customers. In addition to this, they are offering complimentary breakfast
Event Management: Hotels, restaurants, and banquets offer event management facilities for special occasions, such as birthday party, wedding ceremony, business meetings and conferences, etc.
Amusement and Theme Park: These services require a large investment. Therefore, only big hospitality organisations provide them. These theme parks are provided with the food and beverage, on-site hotels, sitting facility.
Vending Operations: These services are helpful in places where serving manual foods and drinks are not easy and convenient.
Transportation: Many hotels are taking a step further and providing airport pick and drop services to their customers. This really helps them to increase customer satisfaction and loyalty (Osborn, 2013).
The concept of Hospitality in the global business environment
Countries where exports depend on the tourism sector, the hospitality sector helps in uprooting the globalisation process. The tourism industry is characterised by the large cross-border flow of money and people. It brings the foreign exchange in the country, helps in the expansion of local businesses and market. Furthermore, it is a pivotal point for local people and the cross-fertilisation of customs and cultures. Hospitality industry plays a crucial role in bringing people together on a global platform. As per the experts of PKF hotel, hospitality industry helps in minimising the gap caused by the trade imbalance. The effects of globalisation in the tourism sectors can be studied through the exchange of customs and languages, rising literacy rate, foreign exchange, and regulatory environments.
Main hospitality providers
Talking about different components of the hospitality industry, there are six of them that fall under the banner of the hospitality sector. Customers in the hospitality sector seek different services based on their needs (Osborn, 2013). To cater their demands in the best way possible, the following sub-sectors are developed by the marketers.
(Figure 1: Components of Hospitality Sector)
(Source: GCSE Leisure and Tourism, 2016)
In the United Kingdom, hotels are awarded the star ratings by four Hotel Rating Boards, namely the Visit Britain, the AA, Visit Wales, and Visit Scotland. Each board has different criteria for giving the rating.
One Star Hotel: These hotels have an average level of quality, adequate furniture, and fitting. Such hotels are small, privately owned, and have limited facilities. Hotels have an eating area plus an authorised bar.
Two Star Hotel: Along with all the features of one-star hotels, these hotels emphasise the sanitation facilities and a healthy environment. Customers can avail of some services by paying an additional charge.
Three Star Hotel: These hotels are bigger than the previous two and they offer a large range of facilities. Bedrooms are spacious with additional furniture. These hotels have a common area, such as restaurants, bars, and lounge seating.
Four Star Hotel: These hotels offer a very high standard of accommodation along with numerous services and facilities. A good quality and comfortable furniture are installed in the rooms. Some leisure facilities are provided that too have a high quality.
Five Star Hotel: These hotels offer luxury quality accommodation with a large number of services. Spacious bedroom and bathroom along with public areas. The service quality matches the international standards.
The interrelation between travel and tourism and hospitality
Tourism is an intrinsic part of the hospitality sector and both go hand in hand. Many researchers believes that without the tourism sector, the existence of the hospitality industry cannot be thought of, and the reverse is also true. Without the hospitality sector, people who travel won't have places to eat or relax (Reymarie, 2013). This can have a major dent in the growth of the tourism sector. People would start avoiding traveling and rather choose to stay at home. In simple words, tourism and hospitality strengthen each other's growth.
In this article, a reflection of the relationship between hospitality sector and tourism industry was given. Here, the major hospitality providers were mentioned and different hotel ratings were elaborated. Furthermore, the linkage between globalisation and hospitality industry was elucidated.
LO2 Understand the impact of integration within the hospitality industry
In this rapidly changing global hospitality market, only the strongest and fittest organisations can survive. For this purpose, companies are following ‘growth by brand merging or acquisition’ strategies. In this report, the integration concept in the hospitality industry was elaborated. Furthermore, different consequences of merging the businesses were talked about.
This report is more of an elaboration of various effects of merging or acquiring the business in order to sustain the position in the ever-changing hospitality market. Here, a discussion on the need of merger and its effects on the business are elaborated.
2.1 Analyse the implications of integration to the hospitality industry
To begin with, the discussion, let's first understand the meaning of mergers and acquisitions (M&A). These are the business strategies by which two or more organization get consolidated. In the former process, two companies get integrated into a single unit. On the other hand, the acquisition means that one firm acquires the other (Lee, 2013). The reason behind choosing the M&A strategies is to create more value as compared to what one can create individually. In short, companies take the M&A approach just because of wealth maximisation. In Mergers, both companies are the equal partner and share their resources. Two or more companies consolidate and a new business entity emerges out of it with a new management system. Merging is done to improve the operational and technical strengths of the firm. Acquisitions are sometimes called takeovers where no new company emerges out of the existing one (Kumari, 2013). The acquired enterprise is completely consumed and the assets are used by the acquired firm. Integration can be of two types:-
- Vertical Integration: Vertical Integration is a competitive business approach used in order to gain the control over the one or more operational stage of a business organisation. Majority of companies opt for this approach in order to gain control over the production unit to prepare its products. For instance, a distributor firm is bought by a supplier firm or the other way round. In simple words, the bigger and higher order firms acquire the lower order firms. This integration empowers the firm to bring unparalleled influence over other. This has many benefits like a company can attain monopoly by purchasing the competing firms. It provides the firm an opportunity to invest in highly specialised assets and brings more control over the operations. In addition to this, it allows more control over the businesses.
- Horizontal Integration: This kind of integration takes place when a bigger company acquires or merges with other equal or small-scale industries in the same sector. For example, Marriott International bought the Starwood Hotels & Resorts. This is done to strengthen the position in the market. By this mode, a company can attain economies of scope and scale or increase the market share. In addition to this, it can help in reducing the cost of the production (Lee, 2013). However, this has certain downsides as well as a company has to deal with a large number of legalities and antitrust issues. In addition to this, this can reduce the flexibilities and ability to perform at maximum potential. Apart from this, there is one major setback of integrating horizontally i.e., the overall value of the firm get reduced.
2.2. Discuss how integration has affected a hospitality business
The basic growth factor for the businesses is to develop relationships with customers, suppliers, other subsidiary businesses that last longer. Integration strategies are needed to expand the business locally and globally. As the horizontal and vertical integration has already been discussed, now their effects on the hospitality organisation are needed to analyse. As Marriott International is seeking opportunities to expand its cross-border business, it is taking the integration and collaborative approaches like acquisition and restructuring.
For this purpose, the organisation has adopted both horizontal and vertical integration in order to increase the revenue and improvise values. As one of the leading tourism industries, Marriott aims at increasing the occupancy rate, customer satisfaction, cost effectiveness, and ultimately corporate streamlining (Kumari, 2013). Recently, the organisation acquires Starwood Hotels & Resorts. The integration can have the following effect on the business of the Marriott:-
- Market Control: Integration is one of the most effective strategies to control the business market. In addition to this, the company can have a cost advantage over other. Marriott has minimised the discrepancies and market threats from new entrants by merging with them or acquiring their shares. This has helped them in the empowerment of the firm regarding the price rates of the services.
- Branding: Taking over the control of the tour operating firms, investing in the local brands, and bringing them under one umbrella have helped the Marriott in retaining their old patrons and adding values to their brand name. This way they can increase customer loyalty and satisfaction.
- Globalisation: The cross-border market offers a large opportunity of generating large profits. This also helps in reaching out the global customers and gain exposure. In addition to this, if the organisation is facing trade barriers in the local market, then integrating with the overseas companies can help in discarding those hindrances.
Some studies have suggested that integration may not necessarily benefit the hospitality businesses. Some of the key issues are highlighted in here:-
- Brand Repositioning: Many a time it occurs that the acquired firm has overlapping and duplication in brand and promotional strategies. As a result, the organisation has to reposition, rebrand, or retire one or more products and services.
- Revision of Standards: Another issue that the hoteliers face while undergoing a merger or acquisition is the unification and adjustment of the standards. Sometime the acquiring firm's standards may not work on the acquired firm.
- Changes to be done in operator services: While merging two or more units, their existing operator services and other essential loyalty programmes have to be changed. This disturbs the whole functioning of the units.
LO3 Be able to plan the development of hospitality businesses
3.1 Develop a rationale for a selected project clearly justifying decisions linked to the target market
A business development plan is a guide for the organisation that consists of mission, goals, objectives, values, target market and strategies, etc. Every business needs a development plan. It is prepared after a rigorous SWOT analysis. Moreover, the plan also helps in guiding the workforce and operation as well. Opening any business is not easy as its success depends upon various factors, such as target market study, research in setting up the mission, vision, and objectives for the organisation. The development plan will be beneficial in proving the viability of the business idea to the investors (Mihalič, et.al, 2012). Here a rationale for setting up a development plan is explained below:-
- Brand Logo: It should have the brand name and date. This helps in brand recognition and developing customer awareness.
- Goals: These should reflect the idea of the opening up of the organisation. It may also include the motive to work with suppliers, distributors, and meeting the deadlines. The goals should define the overall concept and uniqueness of the products and services.
- Objectives: These are steps to achieve the organisational goals. These are usually set by the manager in order to get the work done. Objectives can be regarding any aspects of the business activity.
- Concept: This should reflect the basic idea behind opening the restaurant and what and how this restaurant can do better than the existing ones. The investors would like to invest after understanding the business concept (Mihalič, et.al, 2012).
- Service: For the restaurant business, there is a wide range of services, such as fine-dining, candle-light facilities, open roof dining area, This would help the businesses to grab the attention of the investor.
- Management team: Once the services to be offered are established, the team to take care and manage them is to be selected. Every member of the team should be made aware of his/her role.
- Target Market: This consist of the demographic and other characteristics, such as gender, age, sex, social status, etc. Selection of the target audience is based on market research and study.
- Market Overview: This consist of the micro and macro conditions of the target market. Macro-level consists of local and zonal economic conditions, whereas the micro level will talk about the competitors in the market.
- Marketing Strategy: The success of the business depends on the marketing plan effectiveness. It consists of strategies used by the company to create brand awareness among the target customers. This includes the use of various media strategy.
- Specialists and Consultants: This may consist of various professionals, such as an attorney, architect, accountant, designer, PR & Marketing, etc.
- Finance: Once the idea of the business is finalized by the consultants, the next step is to arrange funds for the business. This can have different proportion like the owner can spend all from his side or he can ask banks to provide loans.
- Licensing: Once the funds are arranged, the last step is to obtain the permit or license from the government or the relevant licensing authority
3.2. Develop a plan for a hospitality business which includes the operational requirements of the business’ organisational structure in relation to human resource allocation
In this section, the business development plan Seven Park Place-a fine dine restaurant is elaborated. The restaurant would be having an inimitable style menu based on classic French Cuisine. The food is inspired by the seasons in the UK. The importance of the restaurant is going to be the signature dishes of one of the greatest chefs of the UK, William. The restaurant is being designed with elegance, fine and unique interior decors, and has intimate space. In addition to this, the restaurant is featured with bright colours and jewels that create an outstanding backdrop for the exotic dining experience. The restaurant would be having an online reservation for serving the customers in a better way. The further business plan features are mentioned below:-
The mission is to keep the dining experience as simple as it can be by bringing the simplicity in the dishes and let them speak for the organisation.
- Expand the business across the borders of the UK, especially in New Jersey and the USA.
- Stay small with outstanding food and services.
- Keeping the cost of the food below 35% of the overall revenue.
- To Achieve up to 12% ROI for the first two years.
The main objective of carrying out a market research is to identify the target market and the customer’s need. For this purpose, both quantitative and qualitative approaches will be used (Spenceley, 2012). Both face-to-face interview and questionnaires methods will be employed. For this minimum, 1000 respondents will be contacted. Since the restaurant targets the upper-class strata of the society, the research will disclose their needs.
- The restaurant would be having an inimitable style menu based on classic French Cuisine.
- The food is inspired by the seasons in the UK. The importance of the restaurant is going to be the signature dishes of one of the greatest chefs of the UK, William.
- The restaurant is being designed with elegance, fine and unique interior decors, and has intimate space.
- The restaurant is featured with bright colours and jewels that create an outstanding backdrop for the exotic dining experience.
- The restaurant would be having the online reservation for serving the customers in a better way.
- To have a control over the cost in every stage of operation. This can be done through a lean approach.
Management and Organisational Chart
(Figure 2: Management Structure)
(Source: By Author)
Funding: The financial mix of Seven Park Place has 40% owner’s money and 60% loan from different banks.
Licensing: This the most crucial part of any business. Without obtaining a license from the governing authority, no business can operate in the UK.
Stage 2: Designing Operations
Organisational Culture: The restaurant will be having a very simple culture which can be adapted by the employer as per their convenience. Since the workforce can comprise people of the different race (Morrisson, 2015). Therefore, it is important to respect their own culture.
Branding: The organisation is aiming to develop their brand image based on the name of their master chef-William as he is the renowned chef in the UK. Apart from this, they aim at branding through product development that ultimately leads to word of mouth promotion.
Connecting with the Target Market: As per some previous case studies, the upper-class customers are now looking for simplicity in foods rather than exotic flavours. Therefore, the restaurant has developed its menu based on this demand of the patrons.
Customer Flows: It depends on the effectiveness of the marketing model. The 7P's of the marketing mix is to be addressed efficiently.
Stage 3: Operating and Managing
Team structure: The team members include the following personnel (Premier Inn, 2016):-
- Serving Staff
- Hosting Staff
Rulebook: It is emphasised that the restaurant should have a well-codified rulebook in order to avoid any misunderstanding or conflict among the employees.
Compliance with the Laws: Since the restaurant operates in the UK, it has to follow certain legislation and standards defined by the government (Spenceley, 2012). This includes the Health and Safety at Workplace Act of 1984, the Data Protection Act 1998, and the Equality Act 2010.
In this report, the relationship between the tourism sector and the hospitality industry was elaborated thoroughly. Both industries go hand in hand. Tourism industry de facto is a sub-category in the hospitality sector. Here, the most important aspect of tourism industry i.e., hospitality provisions were elaborated. Service and hospitality provisions are vital for the tourism sector. Hospitality industry comprises event planning, theme parks, cruise line, lodging, restaurants, etc. The aim of this report was to make scholars learn about the impact of hospitality provisions on travel and tourism industry. It discussed the composition of the hospitality industry, the interrelationship between the tourism sector and the hospitality. In the second section, the horizontal and vertical integrations along with their implications were elaborated. In the third and the last section, the development plan of the hospitality business was elucidated.
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