Globalisation is a key issue for the hospitality industry. Identify and critique up to three impacts of globalisation on the hospitality industry and discuss strategies that hotel companies may implement to address globalisation.
Abstract Globalisation is becoming increasing important these years in international hotel industry. In this essay, a literature review has been conducted to identify 3 impacts of globalisation on the hospitality industry. When hotels flag their properties in a new country, they must localise their products and services in order to adapt the culture traditions of that country. “Thinking global and acting local” (“glocal”) is vital strategy for no matter big or small hotel companies. Besides the “glocal” strategy, differentiation strategy is also useful for hotel companies to become competitive in the global environment.
Hall (1997) indicates that globalization has become a key concept in business, economic and political activities since 1990s. The hospitality industry is often regarded as one of the most ‘global’ in the service industry (Litteljohn, 1997). Nowadays, more and more people are traveling around the world, when they are far from their home they need a place to stay, a bed to sleep, food to eat. They might end up choosing hotels. This is where the hospitality industry comes into play (Frink, 2009); this is why hotels are everywhere. Due to the fast increase of tourism and business activities around the globe, in every corner of the world, there must be hotels such as Hilton, Marriot, and Westin. Go & Pine (1995) state that the hospitality industry is a subsector of the travel and tourism sector, and one of the most rapidly expanding fields in the service sector. This article is going to identify and review 3 impacts of globalisation on the hospitality industry. And discuss strategies that hotel companies may implement including standardisation and localisation strategies and differentiation strategies when they enter into the globalisation.
Frink (2009) described globalisation as the process of companies developing their business or operations overseas. It has several impacts on the hospitality industry. First of all, it forces hotel companies to choose best locations all over the world to expand their properties. Location is essential to a hotel, no matter whose target market is business travelers or tourists. Johnson & Vanetti (2005) state that the size and nature of the place in which the hotel is located are seen to be the most important factor for big or small chains. The famous tourism destinations and CBD of a city are the best choice for hotel groups to develop their properties. However, when those areas are not in their own country, or when they want to flag their hotels as many as possible, hotels have to globalise. There is a good example of how a good location can benefit a hotel’s business. Hyatt group has one hotel in shanghai which name is Grand Hyatt Shanghai, it is located in the centre of the Lujiazui business district, and occupies 53rd to 87th floors of the Jin Mao Tower building (Hyatt, 2010). Jin Mao Tower building is a business building as famous in shanghai as the World Trade Center in New York. There are many 500 fortune companies in this building, when those big and wealthy companies have employees or clients come from other world to visit shanghai, Hyatt is the first hotel on their list. This is part of the reason why Grand Hyatt always has the highest RevPAR (revenue per available room) in Shanghai. Reversely, wrong location will lead hotels to failure. For example, The Ritz-Carlton Lake Las Vegas closed on May 2, 2010 after several years struggle, this was the first time for the reputable Ritz-Carlton brand and this negative record will have inevitably impact on this brand in the future. Ritz-Carlton Lake Las Vegas locates in the suburb of Las Vegas, though it was a luxurious and high-end resort hotel, people come to Vegas for a much more exciting and lively vacation (Hernandez, 2010).
The next impact of globalisation is economics, which is also very important. There is only so much of the market share a hotel company can get by staying local or in their own country. Frink (2009) states that globalisation enables hotel companies to expand their business to other countries to gain additional market share. The more properties the hotel group has, the more customers it might have, thus the more opportunities for them to gain more profit. Frink also states that many hotel companies “go global” mainly because they desire to achieve a larger customer base. Ohmae (1989) claimed that big companies must become more global if they want to compete, they must view the whole world as one single borderless marketplace (as cited in Vignali, 2001). Most big hotel group such as Intercontinental, Marriott, Hilton and Hyatt are surviving even when economic crises come because they have globalized. According to Hotels Giants Survey 2008, Intercontinental has hotel in 100 countries, which is the most, followed by Starwood, which has establishments in 95 countries and Accor has hotels in 90 countries. A great number of hotel companies are forced to globalize in order to remain competitive, otherwise they can not survive, and they should always expand their business to make progress and keep pace with the rivalry. Generally speaking, the more places of business that a hotel company has, the better chances for the hotel company to be successful in the hospitality industry (Frink, 2009). In terms of cost economies, quantity buying can always reduce purchasing cost, that’s why many international hotel companies set up their central procurement department to sign global contracts with suppliers and do the centralized purchasing for their respective establishments in the meantime maintain the same standard.
The third impact of globalisation on the hospitality industry is culture. The world is a global village and difference places have different culture and traditions. Frink (2009) mentioned that globalisation makes hotel companies adapt different culture and alter their approaches when they enter a new country. Expansion to a country with totally different culture is a big risk to most hotel companies, they must consider the different cultures in the destination image of the places, what cuisine the locals or natives have and what types of foods are forbidden due to the religion or law when they are trying to sell their products. Frink (2009) also mentioned that hotel companies must understand the difference in currency and the difference in language. For example, Hilton Tokyo Bay Hotel located in Japan cannot have too many English speaking front office receptionists, who can not speak Japanese, in order to serve local Japanese guests. There must be someone there who knows how to speak Japanese to effectively serve the guests. And they will have local employees who understand the local culture and speak the native language to serve the native guests. Frink indicated that globalisation forces companies adapt different cultural perspectives; if a company refuses to adapt it might lose. Globalisation also brings culture diversity to the industry, which is always a positive thing and it also brings hotel companies more understanding of the perspectives of different cultures, which help them to do better. Besides those above three impacts, Frink (2009) also mentioned other impacts, for example, globalisation in hospitality industry has created more job opportunities help with the growth and stability of the hospitality industry.
When hotel companies entered into globalisation, it actually becomes “survival of the fittest.” Strong businesses will survive and become stronger and the weak ones will be eliminated and fade away. Frink (2009) states that globalisation requires adjusting and evaluation of various factors. Harvey (2007) indicated that hotel companies need to keep the same standard in each and every establishment because customer loyalty will depend on whether a hotel can deliver the brand promise consistently throughout their hotel experience. In the mean time, the companies need to think appropriate ways to present their products to different cultures, which means they really must use and balance the standardisation and localisation strategies. Rutihinda & Elimimian (2002) indicated that standardisation requires operations with resolute constancy, providing same things in the same way everywhere, while localisation needs adjusting of products and practices in every single place. It is not so easy to balance the two exactly opposite strategies. However, both of them are equally important. In another word, hotel companies must “think global and act local”. This concept is becoming increasingly vital for hotel companies no matter big or small, to remain competitive. The term “glocalisation” used by Salazar (2005) perfectly expresses the concept “think global and act local”, it helps one to take hold of the many interconnections between the standardisation and the localisation strategies.
Peters and Frehse (2005) stated that already in the 1970s international hotel companies tried to use standardisation strategy in their services with an appropriate consistency in terms of quality. Whitla et al. (2007) state that standardisation makes a hotel brand recognizable and that is what people are looking for, the consistency and the predictability especially for business travelers. However, Whitla et al. (2007) also mentioned that hotel chains need to balance the provision of a standardized level of service and amenities with customers’ tastes or preferences in some degree of local adaptation. Frink (2009) found hotel companies, when they decide to globalise into foreign countries, are faced with many barriers to overcome, such as language, funding, competition, and cultural differences Sometimes it is very hard for a hotel company to enter a new country, especially when the new county has a totally different culture and tradition. For example, alcohol is forbidden in muslin societies, Indians don’t eat beef, gambling is illegal in many countries. Whitla et al. (2007) believe that adaptation is required for many reasons including consumer interests, laws, culture and traditions. For instance, hotels in western countries often rely on accommodation revenues to make profit, whereas hotels in Asia count on food charges. Asian hotels therefore need to focus more on offer more and larger restaurant outlets, targeting local diners as well as overnight foreign guests. Rutihinda & Elimimian (2002) mentioned that many hotel companies who localised their marketing strategies and products have been successful. However, some others fail due to their applications of wrong implementation strategies and insensitivity to the consumer culture of the country. Czinkota & Ronnenken (1995) emphasized that “glocalisation” in the marketing plans is essential and vital to suit local tastes, to meet special needs and consumers’ non-identical requirements (as cited in Vignali, 2001). Besides, some customers, especially tourists are looking for “local flavor” in hotels (Armstrong et al., 1997), which means hotels design could reflect the destination image (Hawkins, 2007). In term of this, the famous “7-star” hotel Burj al Arab has got great success, the hotel were designed in the shape of a billowing Arabian dhow sail, it represents a significant tribute to the nation’s seafaring heritage (Jumeirah, nd). It has already become the icon of Dubai, the destination image of Dubai, and the hotel itself became the tourist attraction of the country. Besides hotel design, Heide et al. (2007) believes hotel ambience is also very important part of the “glocalisation”, because ambience is a key success factor that is directly linked to financial consequences.
It is worth mentioning that Human resource management (HRM) also needs to use “glocalisation” strategy in the hospitality industry. HRM departments are the spine of every organization; they must learn and understand the employee rights and laws for not only their home companies, but for all of their establishments around the world. Different countries have different employee rights and labor laws. Frink (2009) states the hospitality industry Human resource managers must be very careful of these employee rights and labor laws or it could cost those hotels millions in fines and penalties. Nowadays many hotels are localised in term of staffing. Local staff members know their own culture very well and they can speak local language to serve local guests while having multilingual staff is better to serve the guests from all over the world. Harvey (2007) mentioned it is always good to have staff from different counties which brings diversity, but they have different beliefs, background, customs and traditions. How to think global and act local when dealing culture differences is a challenge that HR managers need to conquer.
Sometimes hotels’ “glocalisation” strategies are still not enough, especially for the purpose to attract leisure guests. Ghemawat (1991) stated that when tourists travel to another place to spend a vacation, they want to experience difference and try something new. Otherwise they lose fun when they stay at the hotel. Nowadays the global competitions between hotels are getting fiercer; some hotel companies are using differentiation strategies in order to succeed. Rutihinda & Elimimian (2002) stated that differentiation strategy is based on the ability to provide guests with distinct products or services. Ghemawat (1991) stated that these special and distinctive attributes make them unique in the eyes of their guests (as cited in Rutihinda & Elimimian, 2002). For example, there is a hotel in America called “Dog Bark Park Inn”, the hotel looks like a giant beagle. Guests sleep and have breakfast in the body of the beagle. For another example, in German there is a hotel which name is “Alcatraz Hotel”, it used to be a prison, the owner kept the original spirit of the building, so every guestroom is like a cell, and the toilet is just next to the bed. Guests also get striped pajamas instead of a normal bath robe which makes them look like prisoners, the only difference between this hotel and a real prison is seem like guests can leave it whenever they want. The more special one is a hotel made of real ice, it sounds unbelievable but it is true, it’s called “the Ice Hotel” in Canada, this hotel has become world- famous for winter experience. The architecture of the hotel including artwork and furniture carved form ice blocks. Most guests believe this hotel is amazing and beautiful and the experience is special and enjoyable. These successful stories have told us, the hoteliers must not only think and act “glocal”, but also think “difference”.
In conclusion, Globalisation has become a key issue for the hospitality industry. It is the process of hotel companies’ expanding their business or operations to foreign markets, and taking their business to new heights. This literature review addressed three impacts of globalisation on the hospitality industry including location, economics and culture. Globalisation enables hotel companies to choose locations all over the world to expand their business. If businesses expand, the hospitality industry will expand with it. Globalisation helps hotel companies to gain other market share and thus gain more profit and reduce purchasing cost through quantity buying or centralised purchasing. Besides globalisation also causes hotel companies to consider different cultures and traditions when they enter a new country and bring culture diversity into the industry which is always a positive thing. When hotel enter into globalisation, they should use standardisation and localisation strategies which means they should keep the same standard in terms of service and quality while altering their service and product to adapt to the different culture and traditions. The concept “Thinking global and acting local” (or “thinking glocal”) is essential for hotel companies’ development. Besides, using differentiation strategies is also a good way to become competitive. Differentiation strategy is about providing guests with distinct products or services. These unique and distinctive attributes make them attractive in the eyes of their guests.