INTERNATIONAL HOSPITALITY MANAGEMENT
INTERNATIONAL HOSPITALITY MANAGEMENT
Background on the hospitality industry 2
PEST Analysis of the emerging market 8
Hotel strategy to be adopted and to be implemented within the emerging market 10
Practical application of strategy 13
class="western" style="page-break-before: always"> Introduction
Hospitality industry refers to the broad category that includes various fields among the existing services industry that effectively involve lodging, drink service, event planning, food and transportation facilities for the potential consumers of the hotel. The report will show the background of the hospitality industry and tourism and also of IHG that is considered a great hotel globally. IHG is the large multinational hotel that provides different product line and services with effective implementation of technologies to the consumers. The report will also show SWOT analysis conducted of IHG so that the management can determine planning for the expansion of operations. The report will also study the emerging market in which IHG is planning to expand, i.e., Bali and PEST analysis is conducted of the emerging market. The report will show different strategies that IHG can adopt for the expansion and attraction or retention of the workforce. In the end, the report will show a practical application for the expansion in the next 5 years.
Background on the hospitality industry
The hospitality industry is considered as the broad category of various fields among the services provided by the hotels such as food, drinks, lodging, event planning, transportation and theme planning. Hospitality industry involves hotels, bars and restaurants. All hospitality and tourism industries are important for businesses, consumers, economies and employees as this industry are considered as highest engagement globally. The tourism industry is considered as the greatest contribution to the global economy. The tourism industry is considered as the largest revenue generator for the country as well as for cultural wealth.
It is also considered as one of the most important economic engines for effective growth and development of the country and hotel. Tourism and hospitality provide various career opportunities such as hotel manager, travel agent, tour operator, executive chef, and event and conference organizer (Jones et al., 2016). Tourism and hospitality are considered as one of the largest service industries globally. Hospitality and tourism industry is essential for providing travelers with various facilities as they move for a specific reason such as luxury, necessity and leisure.
< class="western" style="page-break-before: always">Background to IHG
IHG hotel is part of InterContinental hotels group plc; it is considered a British multinational hospitality organization. Headquarter of IHG hotel is established in Denham, Buckinghamshire, England. IHG hotel was originated back in 1777 when William Bass established Bass Brewery. The triangle logo of IHG hotel was first ever trademark that was registered in the United Kingdom. As per the analysis of November 2020 IHG possess hotel more than 5977, and more than 889,582 rooms (?or?evi? and Jankovi?, 2015).
IHG owns various brands involving Regent hotel, Holiday Inn club vacation, Hotel Indigo, Crowne Plaza, InterContinental, Holiday Inn Express and many other. IHG is also listed in London Stock Exchange and is also a constituent of the FTSE 100 Index. IHG possess more than 36643 employees working towards the success of the hotel. IHG hotel was founded on 15 April 2003. IHG hotel provides an online platform where consumers can book their rooms and travel over the phone with great offers and discounts (Salvioni, 2016). IHG provides a variety of offer and online booking, IHG possess own website that helps consumers to make their journey comfortable.
< class="western" style="page-break-before: always">SWOT analysis of IHG
As one of the leading hotels in the hospitality industry, IHG possesses numerous strength that ensures management to thrive in the market place. Strength and opportunities of IHG will help in determining the plan for expansion of the business operations in emerging market (Lin, 2016).
Strength
IHG provides automation of all the activities that brought consistency in workplace and quality of the products and also ensure the company for expansion and scale down according to the demand in the competitive market.
IHG is successful at Go to Market strategies for their products and services.
IHG possess highly skilled workforce by providing successful training and development programs.
IHG investing high resources in training and development for its employees that were resulting in the workforce which is not highly skilled
The management can successfully track record for the development of new products and product innovation.
IHG possess strong dealer community
IHG also provide a high level of satisfaction to their potential and new customers.
IHG perform operations in an excellent manner in the new market and has built expertise in entering the new and emerging market and making success or profit off them.
Weakness
IHG need high investment in new and modern technologies. The new technologies provide the organization with the scale of expansion and also provide opportunities in different geographical where the company is planning to expand business operations.
The actual profitability ratio and net contribution % of IHG group are considered below among the hospitality industry average.
The financial planning of IHG is not done properly and efficiently. As per the current ratio and liquid assets ratio, the management of IHG can more efficiently use cash to meet day to day operations.
The IHG hotel possesses limited success outside the cure business.
The management of IHG is not good at forecasting product demand that leads to a higher rate of missed opportunities in comparison to their competitors.
The day's inventory of IHG is higher than competitors which increase the company’s capital to invest in different channels.
Opportunities
The management can decrease the cost of transportation due to lower shipping prices can also support management to bring down the cost of IHG products; thus, it provides opportunity.
IHG can adopt online channel to attain and attract new consumers and provide them with various offers on products and services of the company.
The management needs a stable free cash flow that provides opportunities to invest in the different product line.
Due to government agreement provide the opportunity of opening up of the new market, for IHG hotels. It offers a great opportunity for the organization to raise high revenue streams and adopt a new and different product line to fulfil the need and demand of the consumers.
The lower inflation rate is another opportunity for IHG as a lower inflation rate bring higher stability in the competitive market (Lin, 2016).
Threat
Increase in raw material can raise threat to the InterContinental Group plc profitability.
The need and demand for the highly profitable product are seasonal, and this can impact the profitability of the organization.
The IHG possess a shortage of skilled workforce in the global market that raises the threat to growth.
Change in consumer buying behaviour from the online platform
Government has started new environmental regulation under the Paris agreement.
Liability law of different countries distinguishes from each other.
Overview of emerging market
Emerging market refers to the market that possesses different characteristics for a developed market but sometimes does not meet the standards. For the tourism industry, the emerging market requires that possess good places to visit and affordable consumers. Bali is an island in Indonesia and known for its good visiting places. A middle-class family can easily afford the trip to Bali as food and living are not expensive in Bali. Bali Indonesia is the current emerging market for IHG hotels. Indonesia possesses effective political stability and also considered as one of the East Asia Pacific highest vibrant democracies and also emerging as a confident middle-income country that is essential for the IHG hotel expansion (Sarkar, 2014).
Indonesia is considered an attractive market for investors as well as for visitors mainly for the middle class, improvement in political/ economic openness, and also potential relation among business. The middle class has rapidly grown in the last five years, and more people globally can afford travel this far. Bali is considered as one of the top destinations for middle-class travelers from across the globe. Bali is popular for a holiday destination, volcanic mountains, coral reefs and iconic beaches. The island is considered as the home of religious sites such as city Kuta has lively bars.
< class="western" style="page-break-before: always">PEST Analysis of the emerging market
Political: Indonesia maintains a very good relationship with foreign countries and avoids being in challenges with nations. In Bali largest money generating industries is tourism. IHG can effectively operate in Bali and expand business operations and profitability. Bali is considered as the parliamentary democracy, and it is known as the efficient country that possesses a set of tax policies. The fluctuation in rates of tax can influence the profit revenue of the hospitality industry (Sijabat, 2019). The government of Bali has a set of procedures and plans related to taxation. Therefore, IHG needs to conduct regular market research in reference to observe the tax rates. This can effectively influence the pricing strategy and then on the profit of the organization. Indonesia is considered as one of the highest law and ordering ratings across the globe.
Economic: Indonesia is considered as 16th largest economy globally. Various private organizations and foreign investors contribute to the Indonesia economy. Hospitality is among the biggest industries in Indonesia. Bali is influenced by large economic development such as the recession. It leads to the economic crisis in Bali. Baht currency exchange rate highly suffered. The Bali government can only solve this problem by borrowing money from international monetary funds. There is the lowest unemployment rate, and IHG can improve employment opportunities in the country. The government is extending different policies related to an increase in investment and making the framework of regulatory more transparent so that investors can be attracted. The economy was influenced by COVID-19 pandemic. But IHG can take advantage in such a situation and improve the economic condition of Bali.
Social: the overall population of Indonesia is 271936596, which is considered as 3.52% of the overall global population and influence the target for industry to attract and retain consumers. The population of Bali also possess effective expenditure income that increases their expenses on travelling and products. Thailand is also considered a large tourism country due to its beautiful landmark and climate and also known as the popular destination all over the globe. Bali is also popular for medical tourism. Thus the effective mixture of the lifestyle of Bali can improve tourism in a country that can increase the revenue for IHG and economic condition of Bali. Indonesia possesses a 95% literacy rate. The government of Indonesia contribute to both education and health care system. The middle class is rapidly growing rapidly in the country, and there is a drastic change in consumer’s behaviour. Indonesia also faces some of the major challenges related to the human right violation, corruption, increase in the rate of smoking, poverty, malnutrition, and nepotism.
Technological: rapid growth needs to adopt effective technology to enhance the success and GDP in the country. In technology, Bali is improving as the advanced country through which the government of the country provides different incentives for the tourism industry that are effectively implementing technological infrastructure and innovation. IHG is rapidly expanding operations in different countries with the implementation of e-commerce platform so that consumers can directly book their rooms. Television is considered as the best medium for mass communication the organization can also use online platform. Indonesia has made good progress in the adoption of new and modern technology (Sijabat, 2019). The government has developed a plan for making Indonesia 4.0 to improve the growth and success in technology and improve the industrial capacity in a country that will provide opportunities of employment in major areas such as beverage, food, textile, automotive, chemical and electronic.
Hotel strategy to be adopted and to be implemented within the emerging market
The porter's generic strategies were introduced by Michael Porter. This model effectively helps organizations to attain competitive advantage with the implementation of appropriate strategies. The main focus of the framework is on three major strategies such as cost leadership, differentiation and focus. Increase in competition n the hospitality strategy has made it difficult for IHG to attain a competitive advantage and improve the market share of with making high efforts (Islami et al., 2020).
Cost leadership
This strategy of the model includes attaining competitive opportunities with lowering the cost of the services. Cost leadership is considered as the best generic strategy that IHG can implement in different markets. The primary objective for IHG should preserve the leadership position in the market with efficient management of organizations value chain. The main focus of IHG is on easy accessibility and affordability for services produced across the globe that can improve brand awareness and improve the overall sales of the organization. IHG can effectively offer discount rather than lowering the production cost to achieve the target and to handle the high pressure in the workplace. This strategy help management to expand the market share in the competitive market by targeting the middle and upper-class people.
While the implementation of cost leadership strategy has offered different benefits to the IHG group like expanding the consumer base, improving brand recognition, improvement in consumption, and improvement in sales by ensuring product accessibility and affordability.
Differentiation
The management of IHG can use a differentiation strategy with cost leadership strategy to attain a competitive advantage in the international market. This strategy helps IHG in improving the customer base by providing different line and innovative products and services. The main goal of IHG use differentiates strategy by providing innovation in existing or new products and services of the industry. With this, the management can stand out their new products and services from various available alternatives. The management of IHG makes high investment in the advertisement, marketing, and also celebrity endorsement for improvement in the differentiation strategy. Having the oldest and strongest presence across the globe that are differentiated in IHG marketing and communication strategies.
The brand logo is also considered as the differentiation strategy for IHG, which help consumers to recognize the hotel for a long time. A strong brand image in consumers mind help management in the improvement of overall sales and productivity of the organization, and it also serves as a strong differentiation strategy. IHG provides a variety of products and services that match the taste and preference of all the consumers across the globe. The main tools that top authority of IHG use is an innovation that provides differentiated augmented services that can attract the consumers and improve their desire or preference towards the IHG hotels (Mutunga and Minja, 2014). With effective product differentiation, the IHG group can fulfil the need and demand of Bali consumers by efficient analysis of market research.
Focus strategy
The main focus of this strategy is to concentrate their resources to expand the segment of consumers that hotel is targeting. When IHG or any other organization adopt focus strategy, the management serves a particular market segment selected by top authority and to improve their competitive opportunities n niche marketing. IHG can adopt this strategy by lowering the cost and offer the highest value to consumers. To serve the needs and desire to a niche market, the management of IHG adopt low-cost focus strategy at the possible lowest price for the products and services of the organization. While the management adopts focus strategy to improve the preference, taste, needs, design and offer of the products and services to satisfy the expectations of consumers to improve the value for money.
Justification of strategy
For effective expansion in the emerging market, i.e., Bali the main focus of IHG hotel is on building preferred brands, strengthen loyalty programs, premium owner proposition, improving high revenue and leveraging scale with the lowest cost direct channel. IHG can effectively adopt cost leadership and differentiation strategy by providing a different line of products and services. The cost leadership will help management to design different products and services according to the income of travellers. IHG is a rapidly growing hospitality industry with the huge availability of finance that will support management in fulfilment of needs and preference of each class consumers. Recently IHG has announced a partnership with Asset World Corporate. With the effective structure of operations, IHG is also expanding operations in different areas to become the leader among the competitors. Collaboration and partnership are referred to the agreement and actions that are made by management related to sharing of resources to achieve the mutual goal that success and improvement in profitability of the organization (Brenes et al., 2014). IHG can effectively expand by collaborating with the well-known hotel in Bali so that they can expand by using a differentiation strategy.
IHG hotel can effectively use innovative technology in different product and service line or in operations of the hotel to reduce the workload of the employees and to make work easy for travellers. Product and service differentiation can lead to improvements in revenue and productivity of the organization. IHG can provide different rooms according to the income and preference of the consumers so that they can make their journey comfortable with IHG hotel services. IHG is making services and products affordable by consumers. Cost leadership strategy will help IHG to expand their operation and attract consumers towards the affordable and accessible rooms that are according to their need, and consumers do not have to spend high expenses on travelling. The hotel is expanding business operations due to the increase in travelling of consumers across the globe.
Practical application of strategy
The practical application of strategy will help management to determine the actual implementation of strategies in the real-world that will help IHG hotel for further expansion. This will help management to work accordingly so that top authority can expand their business operations and generate high revenue for increasing competition in the international market.
Years |
Practical application |
Year 1 |
IHG hotel launch different line of products and services with innovation in existing and new products and services. Products and services should be provided to consumers at an affordable price so that consumers can be attracted towards the products and services of the organization. IHG hotel can implement different techniques for making activities and operations automatic so that employees and consumers do not have to panic. IHG can bring innovation in promotion techniques and online site so that consumers can directly interact with the hotel through an online platform. All these new and emerging technologies will help to effectively deal with the current situation of COVID-19 pandemic. |
Year 2 |
Improvement in the consumer's response in Bali. As setting uptake time and attracting consumers is not as easy as it seems. For retention of consumers, the IHG hotel will provide different offers and discounts so that consumers can be attracted towards the services and retain for a long period that will maintain a strong relationship. By providing consumers with their need and preference can help the management of the hotel to retain more consumers. Positive feedback from consumers can help the hotel to bring improvement in different activities ad makes the hotel more competitive in the market. |
Year 3 |
Improvement in overall profitability and revenue generated by the organization. With the retention of consumers, the profitability and productivity of the organization will improve that will improve the overall revenue generation. This can help management to think further for the expansion of business operations in other countries. Profitability and greater revenue generation can help management to improve the product and operations of the hotel. |
Year 4 |
Improvement in productivity and profitability will lead to the expansion of the operation in different countries. In this year, the organization will again think for the expansion of the business operations. Effective planning will be formulated related to expansion for the operations, and finance availability will be checked so that no further obstacles arise between the implementation of expansion plans. |
Year 5 |
Planning for expansion will be executed in this year so that it can provide competitive benefits to the IHG hotel in the international market. The planning will be related to finance, budget, human resource, raw material, collaboration, expected risks and proper research of the market. The management can plan for expansion in different countries with existing or new products and services as per the market research. |
Conclusion
From the above report, it is concluded that for expansion of the hospitality industry, it is essential for management to attain competitive advantage. The report has studied hospitality and tourism and an overview of the IHG hotel. SWOT analysis is conducted to determine various strength and opportunities for the expansion of business operations in the different emerging market. In the current report, the emerging market that was selected was Bali as it is considered as one of the best places for people to visit. The report has also studied the PEST analysis of the emerging market that is Bali so that management can plan for expansion in the new country. IHG hotel has adopted collaboration, cost leadership and differentiation strategy for expansion of business operations. The report has studied the practical application of different strategies with forecasting the success and planning for expansion in the upcoming 5 years.
References
Books and journal
Brenes, E.R., Montoya, D. and Ciravegna, L., 2014. Differentiation strategies in emerging markets: The case of Latin American. Journal of Business Research, 67(5), pp.847-855.
?or?evi?, D.Ž. and Jankovi?, M., 2015. Modern distribution and development of hotel industry in the world. Ekonomika, 61(3), pp.99-110.
Fagertun, A., 2017. Labour in paradise: Gender, class and social mobility in the informal tourism economy of urban Bali, Indonesia. The Journal of Development Studies, 53(3), pp.331-345.
Islami, X., Mustafa, N. and Latkovikj, M.T., 2020. Linking Porter’s generic strategies to firm performance. Future Business Journal, 6(1), pp.1-15.
Jones, P., Hillier, D. and Comfort, D., 2016. Sustainability in the hospitality industry. International Journal of Contemporary Hospitality Management.
Lin, X., 2016. Strategy analysis of a boutique and lifestyle hotel: a SWOT analysis (Doctoral dissertation, California State Polytechnic University, Pomona).
Mutunga, S.L. and Minja, D., 2014. Generic strategies employed by food and beverage firms and their effects on sustainable competitive advantage. International Journal of Business and Management Review, 2(6), pp.1-15.
Salvioni, D., 2016. Hotel chains and the sharing economy in global tourism. SYMPHONYA Emerging Issues in Management, (1).
Sarkar, A., 2014. Brand love in an emerging market: a qualitative investigation. Qualitative market research: an international journal.
Sijabat, R., 2019. Macro-environment analysis of the tourism industry in Indonesia: findings from the PEST analysis. Innovative Issues and Approaches in Social Sciences.
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