Hospitality Business in the Global Context

Executive Summary of Hospitality Business in the Global Context

The case study analyses the hospitality industry and the scope of expansion of Anantara Hotels, Resorts and Spas in Australia. It uses the economic analysis tools that are provided by Michael Porter to assess the profitability and competitiveness in the industry. The tools assist and formulate a kind of competitor strategy for the company. The analysis in the study shows that differentiation is the main factor in this industry. Thus, before entering into the industry in Australia, the company needs to differentiate either in respect to the location or more luxurious experience.

Table of Contents

Introduction

Rationale

Porter's Five Forces

Conclusion

References

Introduction to Hospitality Business in the Global Context

One of the essential components of the Australian economy is its tourism. This comprises both of domestic and international components. It was seen that in the year 2015, 7.4 million international tourists visited Australia. This number increased to 8.6 million in the year 2019. There was an increase in 3 per cent. The charming environment and the extraordinary climate of Australia attract visitors from all over the world. The safe environment, world-class beauty and unique heritage are famous among the travellers. The visitors like to use the spa and other recreational facilities while they travel different destinations. The world of hospitality is no exception in a society where everyone is looking for “the next cool thing". Tourists are always on the hunt of the new and best experiences. They visit new hotels and resorts to get the newest trend of the industry. Sustainability is also becoming the hottest trend over the last few years.

This case study focuses on one of the luxurious resort and spa that provides excessive recreation facilities in Thailand- Anantara Hotels, Resorts and Spas. This is the luxurious brand hotel of an international hotel owner ‘Minor Hotel’ who is also an operator and an investor (Minor International 2016). The first hotel was opened in historic seaside retreat of Hua Hin of Thailand in 2001. This was later expanded all across the world to contemporary resort destinations, lush islands, uncharted beaches, cosmopolitan cities, desert sands and heritage destinations. The continents where Anantara Hotels, Resorts and Spas are spread are Asia, Middle East and Europe. Anantara is not opened in Australia while the other brands of Minor hotels such as Oaks and Avani are there in Australia. The number of employees operating in Anantara Hotels, Resorts and Spas is 968 and it has earned 179 million dollars as revenue. This hotel has earned various awards as a result of providing luxurious accommodation and amenities for leisure (Anantara Hotels Resorts and Spas 2020).

Rationale of Hospitality Business in the Global Context

It is forecasted that the long term outlook of the accommodation sector would be strong in Australia. The hospitality industry has a different and unique environment that influences all the competitors in the industry. The demand for the hotels, resorts and spas would be high in the future. Tourists are always looking for places where they can enjoy the peace and create private experiences. They desire to feel pampered and restored and thus seek more luxury relaxation facilities to get away of their hectic and busy schedules. Anantara Hotels, Resorts and Spas provide peaceful accommodation options along with longer stays, exclusive use of garden areas, pools and private dining (Ivanova and Ivanov 2015).

It was observed that the growth in the hospitality industry was increasing during the period of 2015 to 2019. The average growth from the year 2015 to the year 2020 was recorded as 3.9 per cent. The number of tourists arriving both international and domestic was increasing in Australia since 2015. This increase in the number of tourists was due to the depreciation of Australian dollars. This depreciation led to reduced travel of domestic tourists to overseas. Thus, this overall led to rise in the demand for the services in the hospitality industry.

The expansion of this company in Australia is beneficial despite of the fact that the Covid- 19 pandemic led to slow down in the growth of the hospitality industry. This slow down and fall in the revenue is short term. There are countries like New Zealand who contained the outbreak of Covid- 19 and would increase the demand of these industries. Moreover, glancing at the history, after the global recession the industry has grown at a good speed. This strengthens the view that the future prospects remain positive.

Porter’s Five Forces

The corporate strategy of any company should be made on the basis of the structure of an industry and how it changes. The five factor model of Porter helps to understand the industry and the prospects whether it is profitable for a company to enter into that industry (Dobbs 2014). The Porter's five forces competitive analysis would help to evaluate the environment of the Hotels and Resorts industry in Australia. The five macro factors introduced by the Porter are:

Threat of Substitute Goods: In the hospitality industry, there are chances that the new company enters and progress successfully. There are many firms in this industry with all the price ranges and differences in the levels of service and amenities. The greatest challenge in this industry is to attract the tourists and visitors to the unique services provided by the firm over the services provided by the competitors. The threats of substitution are increasing day by day with the advancements in technology. The internet is making the industry more efficient. It increases the size of the potential market. Thus, a superb strategic plan is essential given the potency of this industry.

There is the threat of newly formulated internet approach or marketing campaign that can erode the customer base of the firm. If the Anantara Hotels, Resorts and Spas need to expand in Australia, the development of a value chain process is necessary along with collaborative event management.

Bargaining Power of Buyers: With the advancements in technology and internet facilities, it has become very convenient to go online and search for the best hotels that offer excellent services. The need of middle men or travel consultants is reduced due to internet to get assistance. It is seen that with the help of technology advancements, the buyers have become more and more capable of searching the best hotels and also have increased bargaining power. Also, when the concentration of buyers is more than the players in the market, then the industry has buyers with higher bargaining power. This is the case in hospitality industry. Certain number of buyers while purchasing hotel rooms in bulk has more bargaining power. These groups comprises of tour operators and convention participants or organisers (Varelas and Georgopoulos 2017).

The Anantara Hotels, Resorts and Spas have to decide on the target group while expanding in Australia. This is because differentiation becomes significant factor while targeting the business travellers. Whereas, in the case of tourists and leisure travellers, the hotels have to keep competitive prices (Cheng 2013).

The Rivalry among Existing Competitors: It is noted that the rivalry amongst the competitors in the hospitality industry is intense. Business people generally seek the best prices for the best experience. This leads to reduction in the prices to a competitive level. The cost of product differentiation and switching costs are low which results in the intense rivalry in the hotel industry. The following factors are responsible for intense rivalry among the competitors:

Large number of competitors
Growth of industry is slow
Competitors are of equal size
Low customer loyalty
Products or services are easily substituted
Competitors are of equal size

The demand of the rooms in Australia has increased by 2.8 per cent while on the other hand; the supply of the rooms has increased by 1.9 per cent. This shows that the excess demand can be absorbed by the expansion of the Anantara Hotels, Resorts and Spas in Australia. Some of the companies in the industry of Hotels and Resorts that have large market share in Australia are: Holiday Inns Holdings Pvt. Limited, Marriott International Management Company, AAPC Limited, Hilton International Australia Pvt. Limited and Event Hospitality and Entertainment Limited. It is seen that with the advancements of technology, the hotels and Resorts are also updating themselves to survive in the competitive market. There are new developments seen in this industry like mobile devices being used as door keys, service automation and on demand technology. These are also the consequences of the higher expectations of the visitors.

Threat of New Entrants (Barriers to Entry): It is the initial investments that build the barrier to the entry in the hospitality industry. The capital costs and the fixed costs are very high in this industry. Thus, the company or firm has to ensure that the output is produced to the maximum and the resources are used at its utmost potential. However, the barriers to entry are reduced with the help of internet. The availability of the various efficient channels of communication helps to lessen the starting costs of marketing. It provides the competitors who are new in the market the access to the potential suppliers and the resources. Moreover, it is observed that the chains of hotel have an advantage over the local entrepreneurs in this industry. This is due to the customer loyalty and brand image.

One of the essential barriers in this industry is differentiation. A company that can differentiate itself from its competitors either on the basis of location, quality of service, amenities or other qualities has an edge over other competitors and can easily attract customers. Thus, before expanding the business in Australia, the Anantara Hotels, Resorts and Spas have to be conscious about the target market and the quality of service. The hotels and resorts which are planning to expand in Australia have to invest in the innovation of the services that are given to the tourists.

Bargaining Power of Suppliers: The threat of bargaining power of suppliers in the hospitality industry is not substantial. When there are few people to fill the service area of the industry, then the bargaining power of the labour supply is higher. In this case, the company has an advantage of attracting excellent staff that can provide exceptional services and experiences to the visitors. Thus, there is only power of labour, trained staff and personnel that the hotel industry is subjected to. The power of suppliers in this hospitality industry is low. This force thus has low influence on the competitiveness.

Conclusion on Hospitality Business in the Global Context

The ability to differentiate and the quality of service are the two most important things the hospitality industry thrives on. There should be trained staff and personnel and good management that would determine the quality of service of the firm. The Anantara Hotels, Resorts and Spas can expand their business by organising exhibitions, conventional events and entertainment shows. The hospitality industry is more durable during the times of recession. There are very few hindrances in the successful growth in the market of hospitality industry due to the reduced threat of substitute and low power of suppliers. Thus, the five competitive forces of Porter benefit the planning sector of the firm. The Anantara Hotels, Resorts and Spas needs to determine its strengths that are unique and the target market. It can align its strategy to support its identity (Tavitiyaman et al. 2011). The five forces help to determine the survival and the economic value. In reviewing the strategies of the chains of hotels, it is found that differentiation is the main component. The Anantara Hotels, Resorts and Spas can differentiate by location or by providing very luxurious experience.

References for Hospitality Business in the Global Context

Anantara Hotels, Resorts and Spas 2020, ‘About us: Anantara believes Life is a Journey’, https://www.anantara.com/en/about-anantara

Australasian Leisure Management 2019, ‘Anantara hotels, resorts and spas receives top accolades at world spa awards’, Ausleisure,

https://www.ausleisure.com.au/news/anantara-hotels-resorts-and-spas-receives-top-accolades-at-world-spa-awards/

Cheng, D.S., 2013. Analyze the hotel industry in porter five competitive forces. Journal of Global Business Management, 9(3), p.52.

Dobbs, M.E., 2014. Guidelines for applying Porter's five forces framework: a set of industry analysis templates. Competitiveness Review.

Ivanova, M. and Ivanov, S., 2015. The nature of hotel chains: An integrative framework. International Journal of Hospitality & Tourism Administration, 16(2), pp.122-142.

Minor International 2016, Company Profile Information as at 1Q16, Corporate Information, http://mint.listedcompany.com/misc/presentation/20160518-mint-company-profile-1q2016-02.pdf

Tavitiyaman, P., Qu, H. and Zhang, H.Q., 2011. The impact of industry force factors on resource competitive strategies and hotel performance. International journal of hospitality management, 30(3), pp.648-657.

Varelas, S. and Georgopoulos, N., 2017. Porter’s competitive forces in the modern globalized hospitality sector–the case of a Greek tourism destination. J Tour Res, 18, pp.121-131.

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