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To what extent will the process of globalisation affect the growth of the tourism or/and hospitality industry? Free essay! Download now

Home > University > Leisure and tourism > To what extent will the process of globalisation affect the growth of the tourism or/and hospitality industry?

To what extent will the process of globalisation affect the growth of the tourism or/and hospitality industry?

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Downloads to date: N/A | Words: 3000 | Submitted: 05-May-2008
Spelling accuracy: N/A | Number of pages: | Filetype: Word .doc

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The essay explores the globalisation trends and their impact on both industries.

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Globalization may be characterized as “the commingling economies, the falling of boarders and the democratization of culture and information” (Erdly&Kesterson-Townes, 2002:1). It is a dominant force in today’s business environment, (Neetle, 2004) and it may be seen as an indicator for global companies that forces them to adapt to their changing environments (Gannon&Johnson, 1997). Palmer(1984) claims, that the tourism and hospitality industries are “inextricably linked” and defines them as “transpitality industry” therefore those industries may be analyzed as one. In transpitality industry globalization affects the supply and demand side in many ways. The examples of demand factors are: increasing wealth, rise of global business and its importance in increased cross boarder travel, more experienced and knowledgeable tourists resulting in increasing diversity of preferences. Supply factors are: cheaper costs of air travel, emerging new destinations, opening of boarders, spreading of free market and the accompanied more across boarders’ capital flows and the availability of investment capital to owners and operators, extending of suppliers on a global scale resulting in continued consolidation strategies. (Erdly&Kesterson-Townes, 2002, Smeral, 1998)
The purpose of this essay is to depict the extent to which globalization will affect the growth of transpitality industry and the analysis of economic, socio-cultural and political factors is the prism trough which it will be touched upon.

The integration of economies, combined with decreasing limitations, resulting from the globalization has provided large companies, which have been restricted by domestic market saturation, higher costs of home operations and increased competition in advanced economies, with the opportunity to expand into developing economies and become multi-national corporations (MNC’s). (Neetle, 2004). However, the increasing requirements of purchasers, decreasing prices combined with aggressive methods of technological “race” forced through by global concerns has lead to rising cost of expansion, shortening life cycles of product and technology and in consequence to the thread of profitability. Therefore employing such strategic options as: acquisitions, joint-ventures, leasing, franchising, management contracts or strategic alliances enabled the reduction of costs of “conquering a new market” by sharing them with other participants of global economy (Dąbrowska, 2006) and provided the potential to exploit economies of scale (Neetle, 2004). For example, since the usage of credit cards has become popular many transpitality industries tend to establish strategic alliances with banks in order to cut the costs, raise financial reserves, increase attractiveness of products and competitive advantage (Chen and Tseng, 2005). According to Dąbrowska (2006), in Taiwan hotels account for the largest number of the banks strategic partners. Wei (2003) points out that the hotel industry is an example where the management contracts form the major or the only part of the industry’s total operations allowing rapid expansion, as they cause little financial impact even when the initial capital investment in a new hotel is taken into consideration, e.g.: Marriott International is the largest global hotel management company with a portfolio of 759 managed properties (Dela Cruz, 2000),
Nevertheless this approach does not dominate the whole industry and different expansion routes are employed. Accor, the French hotel operator, grew impressively by acquisition of Pullman, Arcade or Motel 6, franchising of Formule 1. Ibis and Novotel were expanded organically (Alexander&Lockwood, 1996 cited by Wei, 2003). 94 % of Holiday Inn hotels globally are under franchising agreement from Bass Hotels & Resorts, the rest are either under management contract or joint venture, leased or owned by Bass Hotels and Resorts. There are also arrangements that have not survived as the World witnessed when Pan American sold Inter-continental to Grand Metropolitan after airline deregulation. (Go&Pine, 1995 cited by Wei, 2003)
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