Managing International Tourism Resit Assignment
School of Business and Law
University of East London
TM5009 Managing International Tourism
This assignment is individual work.
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This assignment allows you to evaluate how the accommodation sector addresses changes in tourism demand.
3. Details of the assignment task
Discuss how key aspects of changing tourism demand are affecting the accommodation sector and evaluate measures that are used to address such changing demand.
Your discussion must
• explain the challenges and opportunities that have arisen from a range of demand changes over recent years,
• evaluate how accommodation providers have address these opportunities and challenges,
• consider how their actions have ensured that they offer a positive visitor experience,
• include examples of three different accommodation providers that show how they have successfully addressed changing demand,
• assess, for one of the three examples, whether the providers measures could be regarded as best practice in the industry,
• be supported by relevant literature, including sources that were discussed in class.
4. Assignment Instructions
This assignment must be presented in report format. You must include a title page, an executive summary, a reference list and a table of contents. Place these fouritems on a separate page each.
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• Include a table of contents that show on which page each section starts.
• Include your reference list.
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Specific marking criteria for this assignment
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MANAGING INTERNATIONAL TOURISM
EVALUATING THE WAYS IN WHICH ACCOMMODATION SECTOR ADDRESSES CHANGES IN TOURISM DEMAND
The present report provides an overview of the changing demands of the tourism demands and the procedure used by the accommodation sector to address these demands. The report also highlights the basic challenges and the demands that have arisen as a result changes in the demand. The accommodation providers address these challenges by implementing effective strategies as is seen in the case of Hilton, Marriott International and Starwood Hotels and Resort. All these accommodation providers have focused on expansion to address the opportunity of a new source and utilised technology to market their brands, reduce cost and address the needs of the customers. However, Hilton Hotel has been more successful in terms of customer satisfaction, quality, expansion and brand name.
Tourism can be defined as the activities of the people travelling and staying at different places outside their common environment for leisure, business or other purposes. The tourism industry consists of a wide variety of wide variety of sectors that provide a large number of products and services to the customers. The tourism industry has become quite important for country's economy because it helps to increase the income. The UK is eighth largest tourism destination in terms of a number of visitors. It accounts for 3.6% of global international tourism receipts. Tourism is the fastest growing in the UK and the net worth of tourism industry is Britain is going to be £257 billion by 2025. However, the demand for tourism rarely remain static and changes with the passage of time. The present report would shed light on these changes and evaluate the opportunities and challenges of these changes. In addition to this, the report would also shed light on the strategies adopted by three specific accommodation and analyse their effectiveness.
The tourism industry has to encounter challenges due to the changes in its framework condition like political and economic situation, technological innovations, demographic changes, new product development with new price level and new tactics of marketing and planning. Some of these changes are beneficial for the industry while some others create significant challenges. Changes in the consumer behaviour, economic structure, political situation and technological innovations have given rise to new demands within the tourism industry that would be discussed in this section.
1. Development of New Source Markets
Lohmann (2014) commented that enlargement of European Union (EU) has included more countries and this has increased the size of EU by 25% and the population also increased by 20%. Hence, the GDP of EU also increased by 5%. This has created changes in the demand for tourism in Europe. This has made it easier for the visitors to access all the destinations for vacations. However, the competition for the holiday destinations has increased. The scope of people for choosing destination has increased and this has made considerable changes in the source market of Europe’s Tourism.
2. Changes in Demography
Demographic change is a significant driver of demands of tourism industry not only in the UK but also in other parts of the world. Increased life expectancy has led to an older growing society. The number of the children are declining due to the decline of fertility along with changes in the traditional family pattern. The education level of the population has also increased and the role of the women in society has altered. These changes in demographic can be seen in the travel behaviour of the people. For instance, the senior citizens would show activeness by more trips with different preferences. It is seen that people aged 70 to 80 years has increased by 50% in Germany and they preferring abroad for their holiday destinations. The family trips with children have declined by 8% for the last 10 years. However, the tourism activities for the smaller families has increased (58.5% in 2002) (Lohmann, 2014)
3. Technological development
Technological advancement has brought changes in the ways decisions are made by the customers. Information search allows the customers to gather information about the price, tour operation and the destination and hence the consumers can analyse the benefits. The consumers are flexible and they can switch over the destination, and tour operators and hotels. This consumer attitude has led to increasing price orientation (Alegre and Pou, 2006). The tour agencies and the accommodation sector has focused on providing quality service at a low price and this led to increased market share, high turnover and low profit.
4. Increased disposable income and preferences for leisure
Since 1950, the income of the people has increased. Educational and technological development has led to the formation of new businesses and organisation that increased the job opportunities. The salary of the people, particularly of the developed countries has increased. Changes in demographic structure have reduced the number of children and increased the number of income earners within the family. People are preferring to spend on leisure more as seen in the graph below:
Figure 1: Increase in leisure Spending
(Source: VisitEngland, 2013)
In the above image, it is evident people are spending more on leisure activities as compared to household income and this has increased since 2005. This is because of increased disposable income as well as the changing demographic pattern.
The new trends and the demands that have been identified above have created challenges as well as opportunities for the tourism industry.
1. Increased Revenue
With the increase in the new source markets, there are chances for the tourism industry to earn more as the people are preferring are travelling to the new destination. The barrier to entry in the tourism industry is reduced as new source market implies new customers and more income.
2. Improved scope of marketing
Technological development has not only provided flexibility to the consumers to obtain better knowledge about tour operation and location but it has also provided the different sectors of the tourism industry to improve their marketing strategy. Utilisation of social media, e-mails, CRM has allowed accommodation sectors to better communicate with the customers and address their needs as well as grievances (Gannon et al. 2015)
3. Development of customer base
The increase in disposable income and changes in the demographic pattern have given rise to the opportunity of increasing the customer base. Since more and more people are preferring to spend on tourism activities, then tourism sector can increase the customer by formulating and implementing effective strategies for attracting customers (Torres et al. 2015)
4. Increase investment
With the increase in the scope of income and customer base, the profitability of accommodation sector, tour operators, transport sector has increased and this has created opportunities for increased investment in improving the quality of the service and the products that are given to the customers.
Development of new source market has led to the entry of new firms into the tourism industry and this increased the competition within the market. The big firms are surviving but for the start-ups and the small business, it has become quite difficult to survive in the market.
Since competition has increased, the firms are striving hard to provide best product and service at a low price to attract customers. This is helpful in increasing the market share but the profit of the companies are declining since companies are focusing on mass selling at low rate of profit (Melissen et al. 2016)
The lifestyle and the demands of the customers are changing over time. The accommodation sector, tour operators and the transport sector are trying hard to address these changes by developing new strategies and these are creating real challenges for the tourism industry.
Accommodation is one of the basic needs of tourism. The accommodation can be in the form of small and low budgeted hotels or in form of luxury hotels. The changes in the demand for the tourism has created an impact on the accommodation sector of the tourism industry. Different accommodation business has focused on developing strategies to address the current needs and changing tourism demands. Since the number of the aged people are increasing hence the accommodation business are catering the needs of the common people with reduced mobility. The hotels are incorporating different needs of different age group under one roof (Tribe, 2015). The accommodation services have relied on different technological advancements not only to serve the needs of the customers but also to reach out to the customers and marketing their products and services. Moreover, to encounter the stiff competition, the accommodation business in the tourism sector are focusing on product differentiation. In this section, three different accommodation providers and their strategies to address the changing demands would be discussed.
Example 1: Hilton Hotel and Resorts
Hilton Hotel and Resorts is a global brand that provides accommodation and catering services. The target market of this accommodation provider include both the business and the leisure travellers. Considering the changes in the tourism demand, the management of this organisation has implemented several strategies. Taking account of the new source market not only in EU but also all around the world and increased disposable income the organisation has focussed on expansion. This brand has set up hotels in different location like in major cities, near airports and popular tourist destinations all around the world. They focus on expanding their global footprint as is seen in the image below:
Figure 2: Hilton Hotel Global Room Supply
(Source: Sec.gov, 2017)
The number of the hotels and time-share units is at a high rate than any other accommodation providers. This has helped to overcome the stiff competition and create competitive strengths. Hilton has also taken advantage of technological development and utilised technology for marketing and distributions, guest and room management, safety and security and energy management. This has helped in improving the customer base and proper utilisation of technology has helped to overcome the challenges of price reduction. The loyalty program has enabled the management of Hilton to satisfy the customers and also evaluate their needs and grievances. Investment has increased through the capital efficiency of their timeshare business. To overcome the challenge of low profitability and reduced price, the management has maximised the cost efficiency of the portfolio through labour management practices and reducing the cost to drive profitability.
Example 2: Starwood hotels and resorts
Starwood Hotels and Resorts are also an American brand that franchises and manages accommodations services along with spas, restaurants and residences. The business strategies of this hotel sector have also changed considering the changes in the tourism demand. Considering intense competition in the market, the organisation has focused on excellent brand through brand management and developing new products and services. To address the issue of ever-changing needs and the demands of the customers, Starwood hotels and resorts have made use of the full-service operating model and product standards. Furthermore, the company has also focused on customer insight marketing to address their needs and grievances. To take the opportunity of technological development, Starwood hotels and resorts has focused on digital presence and social media marketing (Chathoth, 2016). The organisation has also considered the opportunity of increasing customer base and income by growing guest program and this has helped in increasing the occupancy rates and customer loyalty. To overcome the challenges of price reduction, Starwood hotels and resorts have focused on cost by leveraging their global assets, customer base and other resources.
Example 3: Marriot International
Marriot International provides accommodation services to several businesses and leisure tourist travelling all and around the world. Taking account of intense competition in the accommodation sector, Marriot International has developed board differentiation strategy. The organisation has developed multiple hotel brands. This has also enabled Marriot International, to overcome cater the needs of different customers and overcome the challenges of changes in demography. The organisation provide upscale services like Ritz Carlton, JW Marriot Resorts for the high-end consumers with luxurious experience to Fairfield that provide quality accommodation to the visitors at low budgets(Harmon, 2010).
Information Resources, which is the technology division of Marriott, has work in collaboration with partners to create technology direction. Recent initiatives and technology solutions has helped in improving profitability through cost reduction and enhance the marketing activity of the business. Considering the increasing ageing population, the management of the organisation has made several arrangements that satisfied their needs and requirements such as the luxury resorts. Moreover, to increase their customer base and profitability, the organisation has made different arrangements in their hotel in different parts of the world (Marriot Lodging Development, 2017).
The strategies employed by the different accommodation providers have helped in improving the experience of the visitors. Technological advancement has helped Marriot to increase its customer base. MARSHA is reservation network and demand management tool used by Marriot. Marriot.com has improved the guest experience and the revenue of the entire brand has increased by 38% for the last five years (Marriot Lodging Development, 2017). Provision of different services has increased the satisfaction of the customers. Compared to Marriot, the performance of accommodation section of Hilton Hotel is improved. This focused service brand has tailored products and services to appropriately meet the needs and the demands of the customers and address the changing demands. They have refined their luxury brands to refine their modern products and services for the luxury travellers and aged population of Europe. This has increased the usage of Hilton Hotel more as compared to Marriott International as shown below:
Figure 3: Hilton Vs. Marriot
(Source: Skift, 2017)
In the above figure, it is evident that Hilton has expanded more as compared to Marriott International.
Apart from the other two, the Starwood International by strengthened their brand identity and expanded their lodging brands. The company has increased their internet presence and branded amenities for the accommodation to better satisfy the customers. The guest program has increased their occupancy rate and market opportunities. The difference in accommodation and revenue among Hilton, Marriot and Starwood are shown below:
Figure 4: Comparison of accommodation providers
(Source: Loyalty Lobby, 2017)
Hilton, Marriot International and Starwood hotels have deployed strategies that have helped them addressing the changes in tourism demands. They have focused on expansion of their hotels as new sources are opening up. However, Hilton hotel has displayed the best practice to attract the target market. They focus on expanding their global footprint for which they have been able to create a competitive edge. The prices of the product and the services provided by Hilton Hotel are kept low by cost efficiency of the portfolio through labour management practices and reducing the cost to drive profitability and this creates product differentiation(Source: Sec.gov, 2017).
The loyalty program has enabled the management of Hilton to satisfy the customers and also evaluate their needs and grievances. Revenue obtained by Hilton from each room is higher which $106 as compared to the other competitors is. This clearly implies that the product differentiation strategy of Hilton is effective enough to attract the customers and this has created brand name and image in the market. Proper utilisation of technology has helped to overcome the challenges of price reduction and increasing customer base (Worldwide, 2014).
The present report evaluates the changes in the demand of the tourism industry. Development of new sources and changes in the demographic pattern has brought changes in the taste and the preferences of the customers. People are becoming more flexible in selecting their destination and accommodation. The accommodation providers like Hilton, Marriot International and Starwood hotels have focused on addressing these needs by formulating strategies and suitable business model. These accommodation providers have relied on different technological advancements not only to serve the needs of the customers but also to reach out to the customers and marketing their products and services. Moreover, to encounter the stiff competition, the accommodation business in the tourism sector is focusing on product differentiation.