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Presently, considerable research in the field of economics of tourism since the 1970s led to well established models and methodologies to quantify tourism demand. Main factors that proved its significance are for example income in the country of origin, relative tourism prices at the destination, or substitute prices of an alternative destination.

On the other hand travel motivation has been a focus within destination choice theories. The typical tourist undertakes several steps before deciding for a vacation destination. Each stage is influenced by internal and external stimuli and the tourists intention maximize its utility, thus to ‘make the most of it’.

It becomes apparent that the root of total tourism demand lies within both economic and socio-psychological theories. It is the intention of the thesis to therefore propose a combined framework. In order to prove its validity a survey will be conducted to capture stereotypes associated with Ireland and the Irish and to what extend this influences Ireland as a destination choice. The results will then be incorporated into the new framework to help future research testing other variables.

Literature Review
Theory of Tourism Demand

Research differentiates between two major approaches to analyze tourism demand: Tourism economists mainly consider an economic framework while travel motivation mainly applies a socio-psychological framework (Goh, 2012). The following paragraphs will go into more detail on each of the theories to illustrate that tourism demand can be derived from theories of destination choice as well as market demand theory.

Although studying the characteristics of tourism is a comparably new era starting in the 1960’s, this industry’s excessive growth has also led to an equally extensive evolution as a field of study and consequently its methods and findings.

Neoclassical economic theory usually assumes a multi-stage budgeting process for every choice for a certain product or service. Within a tourism context this process can be divided as in Figure . Additionally, each stage corresponds to a utility maximization problem where the consumer subconsciously intends to maximize the utility of the choices within the given budget constraint (Smeral & Weber, 2000). As Figure illustrates the budget line shows how different combinations of tourism expenditure could be allocated to the destinations, but the indifference curve shows that the tourist wishes to allocate set proportions of the budget to each (Sinclair & Stabler, 1997).

The most recent review papers by Song and Li (2008) and Song et al. (2012) summarize the research progress made in respect of approaches, applied methods, innovations, emerging topics, research gaps, and directions for future research. According to their assessment a number of researchers have created and tested a variety of demand models for different destinations in order to quantify its impacts. Most commonly the number of arrivals is used as the indicator for total tourism demand of a destination, although tourist expenditure, and tourist nights in registered accommodations were chosen in some studies. Predominantly considered determinants that empirically proved to have an impact on tourism demand were:

Income in country of origin
Relative tourism prices at destination
Substitute prices of alternative destination
Travel cost
Marketing expenditure
One-off events

(Song, et al., 2009)

While total impact and its explanatory variables have been thoroughly investigated through several econometric models, little attention is placed to the social context of tourism decision making: “Traditional demand theory does not explain how preferences and tastes are formed and change [aˆ¦]” (Sinclair & Stabler, 1997, p. 29).

Decision-making processes, its components and generalized frameworks have been widely researched over the past decades (Crompton & Um, 1991; Woodside & Lysonski, 1989). Decrop (2005) for example classified the factors of tourist’s decision-making process into six cognitive constructs:

Tourist perception
Learning and attitude
Personality and self-concept
Motivation and involvement
Emotion
Context

On the contrary, Crompton and Um (1991) explain how tourist’s perception of a destination is influenced by internal and external inputs (see Figure ). Connecting the findings of Heung et al. (2001) review about major vacation motives and Gallarza et al. (2002) findings on attributes related to the destination image, it becomes apparent that research exploring factors influencing destination choice has been extensive.

Despite the wide recognition of Um and Cromptons’s framework of a multi-stage destination choice and acceptance that beliefs and attitudes are related to destination preferences, they are some restrictions when it comes to the act of purchasing a vacation at a destination. During the early stage of selecting a destination socio-psychological factors such as image or beliefs are significant indicators in specifing which destination evolved to a late consideration stage. However, the ultimate selection depends to a higher magnitude on perceived inhibtors acting on a potential traveler such as monetary constraints (Crompton & Um, 1992). According to Crompton and Um’s findings in the consumer behavior, tourism, and recreation choice literature “aˆ¦constraints should be integrated into the cognitive choice process.” (Crompton & Um, 1992, p. 97)

Figure : Framework of decision-making process by Crompton and Um (1991) (Source: Own illustration)

Similarly, very few prior studies focused on the influence of socio-psychological factors on demand itself. During the 1970’s several studies concluded that a large number of explanatory variables affecting demand are too small to have a significant influence, but if aggregated “aˆ¦are likely to be as important as prices and income in determining travel growth.” (Goh, 2012, p. 1862). Additionally, O’Hagan and Harrison (1984) again proved the high significance of non-economic factors in their study.

The main reason for omitting relevant variables in tourism demand theory is its difficulty to define and collect accurate measures (Song & Witt, 2000). Attempts to integrate socio-psychological factors into tourism demand models have failed due to the lack of appropriated procedures and econometric models. As most these factors are more commonly interrelated a new more complex modeling approach would have to be designed and tested. As Stabler notes: “Though motivations and preferences, in which images are embodied, are acknowledged as being important, they tend to be ignored by ‘main stream’ economists, because they are either assumed to be relatively stable and therefore do not influence the model, or are considered too complex to cope with.” (Stabler, 1988, p. 137)

In summary, apart from each other the economic perspective as well as the socio-psychological aspect has been subject to extensive research. Both fields of study realize their incompleteness when it comes to assessing tourist behavior and demand. However, to fully comprehend and measure the tourism demand, theories of destination choice and theory of market demand should be combined to create an in-depth understanding (Goh, 2012).

Stereotyping

Social categorizing allows people to respond quicker to a range of perceptual impressions. As Lustig and Koester (1999) state the way humans process can be broken down into three aspects:

Conceptual categories [1]
Ethnocentrism [2]
Stereotyping

For this thesis most important, is the effect of “stereotyping”. First mentioned by Lippmann in 1922 it refers to a selection process to simplify our perception of others; creating “pictures in our heads” (Lippmann, 1922, p. 5). Basically, the cognitive representations of a group influence our thinking, judgment and behavior of people within that group. Hewstone and Brown (1986) defined three characteristics of stereotypes:

Often individuals are categorized, usually on the basis of easily identifiable characteristics such as sex or ethnicity.

A set of attributes is ascribed to all (or most) members of that category. Individuals belonging to the stereotyped group are assumed to be similar to each other, and different from other groups, on this set of attributes.

The set of attributes is ascribed to any individual member of that category (p. 29)

Thus, after defining an out-group, “they”, on the basis of their differing characteristic to oneself, the dissimilarities are emphasized and extended in order to create a more distinct division between the social groups. Last, the characteristics are attributed to all members of that group, resulting in a person not being treated as an individual, but as a typical example of a category (Lustig & Koester, 1999; Hinton, 2000).

Before judging, people rarely gather a sufficient amount of information from various resources. Most commonly, they had a direct experience with a few people of the out-group, received information and opinions second hand such as from friends or relatives, were influenced by the output of the mass media, or just general “pigeonhole” thinking (Brewer, 1996). These sources that form a stereotype initially are moreover the multipliers and causes for stereotypes shared by an entire social group. As Stangor and Schaller (1996, pp. 4-5) mention: “From one perspective stereotypes are represented within the mind of an individual person. From the other perspective, stereotypes are represented as part of the social fabric of a society, shared by the people within the culture. [aˆ¦] Because group values and group behavior provide the underlying foundation of stereotyping, stereotypes only have meaning to the extent they are culturally shared.” Stereotyping is therefore not only an individual problem, but when they are shared within a society; they have a considerable (positive or negative) impact on the labeled individual or group.

As diverse and intricate as the environment appears to be and as useful as it seems to simplify this complexity by structuring, the more dangerous it becomes to misjudge and have inaccurate assumptions. Judd and Park (1993) assessed three major phenomena resulting from stereotyping: The so-called “out-group homogeneity effect” causes the person in the in-group to consider members of the out-group to be much more similar to one another than in reality. Second, humans tend to make wrong or inappropriately exaggerated assumptions about the group average, such as when all US Americans are assumed to be friendly and service-oriented, but also superficial. Third, the phenomenon of prejudices occurs when there is a “negative valence inaccuracy”, thus a negative attribute is weighted more important while the positive is being ignored or underestimated. For instance, when visiting the US a tourist could stereotype all Americans being superficial or insincere (the negative attribute), but disregarding the fact that they are highly service and customer oriented (positive attribute). Conversely, one can show a “positive valence inaccuracy”.

As Kunda and Scherman-Williams already proved in 1993 imprecise stereotyping can eventually lead to false interpretation of ambiguous incidents. Consider, for example, the unambiguous event of losing a soccer game. Ethnic stereotypes could relate the failure to laziness if the team was from Germany or low ability if the team is Kazakhstani. “Thus, stereotypes will affect judgments of the target’s ability even if subjects base these judgments only on the act, because the stereotypes will determine the meaning of the act.” (Kunda & Sherman-Williams, 1993, p. 97)

Stereotypes even have consequences for future behavior. An investigation by Seta and Seta (1993) revealed the following results:

The stereotype would persist even after the subjects were exposed to a disconfirming behavior as they expected a future action would compensate for the atypical behavior

If a subjects stereotype would be consistently challenged by a member of the stereotyped group then expected compensatory behavior would cease. Nevertheless, the subject still expects another member of the group to “make up” for the disconfirming behavior.

This way people are still able to anticipate certain future events without making it necessary to revise their deeply set beliefs and values.

In conclusion, stereotypes are highly subjective, but because experiences and events are shared through various channels, it can eventually lead to a shared consensus. Although categorizing helps an individual to cope with an ambiguous environment more efficiently, caution has to be exercised to avoid unjust judgment of other’s behavior. Stereotyping is a strong set of beliefs and values, which is difficult to overcome for an individual and consequently even less likely for an entire social group.

Conclusion

Literature review gives a scattered insight into tourism behavior and demand. The field of tourism economics with its consistent developments in methodological innovations, research progresses, and different approaches consists of a comprehensive body of knowledge and theoretical foundations. Similarly, extensive research in the tourist behavior area and especially the understanding of decision-making process has led to a number of frameworks and assessment methods. Apart from each other, both have empirically and qualitatively evidence for a number of factors influencing the consumer equilibrium – the point at which the tourist’s economical constraints intersects with the consumer indifference curve. Thus, market demand is proven to be depicted from economical as well as socio-psychological theories. However, only very few studies attempted to combine and investigate their relationship and impact.

Factors influencing destination choice and destination image are many. Stereotypes are one of numerous causes shaping personality and beliefs. Due to its persistent nature and difficulty to overcome deeply held principles, stereotypes proved to be highly influential on expectations towards future situations & people’s behavior. Thus, although stereotyping is a commonly known phenomena its implications into tourism theories is yet limited.

The literature gave a profound understanding of economic and non-economic tourism theories as well as origin and impact of stereotypes on social behavior. It is the papers intention to prove a significant relationship between stereotypes and its influence on destination choice.

Research Problem
Research Problem

It is evident from the literature that market demand as well as destination choice theory face constraints when trying to explain the complexity of tourist’s choices. Despite their methodological developments in econometric models over the past decades, integrating qualitative as well as quantitative measures has failed due to lack of available data or complexity. Similarly, socio-psychological frameworks tend to omit inhibitors and constraints such as budget.

From the research problem identified above, the research question can be formulated as follows:

To what extend can stereotypes be classified as a relevant factor influencing tourism demand?

In other words, the author will intends to link both economic and socio-psychological factors into tourism demand theory. Further, it is hypothesized that stereotypes have a significant impact on the decision-making process of tourists and thus tourism demand in general.

Research Objectives

The research objectives are generated from the research question and should provide clearer sense of purpose and direction for the researcher (Baker, 2000). The following research objectives arise from the hypothesis above:

Establish a framework that includes both socio-psychological and economic factors

Song et al. (2012) as well as Song & Li (2008) noted in their review papers that developments in tourism demand are limited to quantifiable measures. During their early works Crompton & Um (1992) realized as well that the destination choice process is not limited to intrinsic motivators. Goh (2012) recently proposed an initial framework linking destination choice and theory of market demand.

Investigate on stereotypes existing towards Ireland/Irish

Seta & Seta (1993) found that stereotypes deep-rooted and difficult to overcome. Stereotypes about Ireland and the Irish are widespread which could be due to its high emigration throughout the previous centuries. Since its subjective nature social science has not scientifically named or analyzed existing stereotypes. It will ths become essential to collect primary data.

Analyze connection between existing stereotypes and willingness to choose Ireland as a vacation destination

The multi-stage destination decision-making process has most commonly been researched by Crompton & Um (1991; 1992) and Decrop (2005). Influencing factors are numeral and their magnitudinal impact depends on the stage of the process as well.

Assess to what extend the economic tourism demand formula can be extended by the socio-psychological factors

Research integrating socio-psychological aspects with tourism demand theory is limited. For example, Goh (2012) was able to link the factor weather with tourism demand theory. Based on the framework established from the first objective the author intends to generalize the findings.

Research Method

The methodology outlines how the research objectives are to be achieved within the given time frame and explains the rationale behind the chosen method (Saunders, et al., 1997). Special emphasize is to be placed on the research design, data collection, and ethical implications.

Research Design

In order to resolve the above mentioned research objectives a triangulate approach has been chosen, applying both quantitative as well as qualitative methods.

First, in order to fully comprehend and test the relationship between stereotypes and tourism demand, a framework needs to be created which stems from economical as well as consumer choice theory. This inductive and more discovery-oriented approach is necessary due to the lack of available research and quantitative data that combined the two fields of study. Through an investigation of the literature about economic tourism demand and socio-psychological theory, the exploratory research will confidently result in a comprehensive tourism demand framework. Additionally, it will clarify the authors understanding about the separateness and consequently help to successfully commence with subsequent objectives (Heath & Tynan, 2010).

The main focus of this thesis will rely on a positivist approach though, thus deducing a hypothesis from the theory and empirically testing it (Saunders, et al., 1997). The intention is to quantitatively prove a causal relationship between stereotypes and tourism demand. From the literature review it can be concluded that socio-psychological factors play a major role when deciding for a destination and as a result imply to have certain impact on tourism demand of that destination. However, this hypothesis has not been tested yet.

In order to do accomplish objectives two and three a survey will be conducted among people who have not visited or lived in Ireland. Conducting surveys allows the researchers to have more control over the research process and is widely perceived as authoritative by people in general (Saunders, et al., 1997).

According to an analysis from Ireland’s national tourism board “Failte Ireland” its main markets are Britain, North America, France, and Germany (Failte Ireland, 2011). The author intends to collect sufficient amount of data from at least two source countries, namely United States and Germany. As the survey is standardized it will be easier to distribute to the different nations and later compare the received results. It aims at collecting cross-sectional data about the kinds of stereotypes existing towards Ireland and the Irish as well as the participant’s willingness to choose Ireland as a vacation destination based on their held beliefs. Regression analysis will then allow the author to conduct the fourth step of positivist research: “Examining the specific outcome of the inquiry. It will either tend to confirm the theory or indicate the need for its modification” (Robson, 2002, pp. ???18-19)

According to Saunders et al. (1997) the data collected might not reach such a wide range as a qualitative research method would due to the limited number of questions a questionnaire can contain. However, in case the conducted survey does not give sufficient causal explanation, thus its validity and reliability cannot be assured, additional secondary data from a recent survey by “Failte Ireland” could be analyzed who interrogated tourists that have chosen Ireland as a vacation destination (Failte Ireland, 2011). It is important to note though, this data can only serve supplementary as a clear distinction between stereotypes and other reasons to choose Ireland has not been considered.

The reason for choosing a positivist approach is the advantages that come with it. Its deductive nature allows the application of a rigorous structure that would make this hypothesis applicable to generalization and give an opportunity for further research to test other socio-psychological factors (Easterby-Smith, et al., 2001).

The last objective intends to incorporate the findings from the survey into the framework proposed at the beginning of the research applying the knowledge gained throughout the thesis. If the survey were to prove the causal relationship between stereotypes leading to higher likeliness to choose Ireland, the hypothesis demonstrated its validity. The fourth objective is to conclude to what extend the findings can be generalized and applied to other non-economic factors.

Data Collection

As mentioned above the main purpose of this thesis is a survey among US and German citizens collecting empirical data about stereotypes towards Ireland and the Irish as well as their willingness to choose Ireland as a vacation destination based on their held beliefs. Irish born as well as residents who previously visited Ireland are excluded. This specification is especially relevant as stereotypes root mainly from other people’s experience (i.e. visitors to Ireland) and/or limited familiarity with the other social group (i.e. Irish emigrants) (Brewer, 1996).

The author targets to gain 50 utilizable questionnaires from each nation, totaling to n=100. In order to ensure a high number of participants from Germany the survey will be translated into German as well.

Distribution will primarily be channeled as a web questionnaire through social media. This note only enables the survey to reach a wide range of potential partakers and guarantees there anonymity, but also ensures a certain level of randomness which is one of the main challenges when conducting surveys. Although the author cannot fully exclude a connection with all the participants, the potentially exponential circulation minimizes this risk.

The data then will be used for a linear regression analysis in order to validate how the independent variable (stereotype) impacts the dependent variable (select Ireland as vacation destination). The linear regression will only be an approximation of the true relationship though, as it is not possible to include all the variables which may have an influence on the dependent variable (Koop, 2009). The omission of these variables in the model is referred to as the error term. The basic regression model is written as

where y equals dependent variable (select Ireland as vacation destination), coefficients I± and I?, x represents the independent variable (stereotype), and refers to the error term. A null hypothesis test will be applied to determine whether results are statistically significant.

Main problems arising using regression analysis can be autocorrelation, omitted variable bias and multi-collinearity (Koop, 2009). As the hypothesis is only testing the impact of one independent variable on one dependent variable, autocorrelation can be neglected. Similarly, multi-collinearity, evident through high p-values and low t-stats can be excluded as only one explanatory variable is applied. However, omitted variable bias can lead to unreliable coefficients if an explanatory variable which may have an impact on the dependent variable are omitted from the data set. However, as mentioned above it is nearly impossible to include all explanatory variables, which is why the error term is included. The values of the coefficients will nevertheless be treated with caution.

Ethical considerations have to be taken into account as well. The online survey ensures the participants anonymity and no personal data will be collected. Additionally, it goes without saying that the author conducts this hypothesis in an objective and non-discriminatory manner. Stereotypes have a tendency to classify or even favor one social group over the other. The thesis is not intended to strengthen or overcome beliefs towards Ireland or the Irish, but to capture a ‘snapshot’ of existing stereotypes.

It is widely acknowledge that planning is crucial to successful tourism development and management; and planning has been a widely adopted principle in tourism development at both regional and natural levels.

Tourism in Europe has been the subject of considerable academic debate and commentary since the political even of 1988-89. The debate has often focused on Central Europe, whose future free market depends on planning especially including tourism. In particular, strategic planning in the region will be critical to the future success of tourism as attempts are made to utilise tourism in the process of planned economic change.

The lack of coordination and cohesion within the highly fragmented tourism industry is a well-known problem to destination planners and mangers. Gunn (1988) stated that continuous tourism planning must be integrated with all other planning for social and economic development, and could be modelled as an interactive system. He pointed out that “the go-it-alone” policies of many tourism sectors of the past are given way to stronger cooperation and collaboration. No one business or government establishment can operate in isolation” (Gunn 1988; 272).

On the other hand, Inskeep (1991) has pointed out the importance of an effective organisational structure for tourism management and the need for continuous, integrated planning. Achieving coordination among the government agencies, between the public and the private sector, and among private enterprises is a challenging task, however, and requires the development of new mechanisms and processes for incorporating the diverse elements of the tourism system.

Countries need to have an idea about where they want their tourism sector to be in the future and the route it is going to follow to get there. If nations do not have a strategic plan for their tourism, then the old cliche can apply. “If you don’t know where you are going, how will you know when you have arrived”? (Tim Hannagan 1998, p. 120). In this write up, the meaning of both strategic planning and tourism will be analysing, and also analytical argument on strategic planning for tourism will be explored. Furthermore, few example of tourism planning activities will be evaluated to support the subject matter. Thus, what is

Strategic planning / Tourism

“Strategic planning is concern with deciding what business an organisation should be in, where it wants to be and how it is going to get there” (Smith 1994). Strategy “is the direction and scope of an organisation over the long term, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations” (Johnson and Scholes 2005).

Harrison et’ al (1995). Explain that “strategic is about clarifying your mission, setting clear long term objectives and formulating a comprehensive and integrated set of steps to achieve it”. Strategic planning then is concern with defining and achieving organisational purpose (Porter 1994). “planning is the purposive process in which goals are set and policies elaborated to implement them” and is “concerned with understanding and explaining the substance of policy content and policy decisions and the way in which policy decision are made.” (Barett and Fudge, 1981).

On the other hand, According to World Tourism Organisation (WTO) the organisation defines tourism as: “the short term movement of people to destinations away from the communities in which they live and work, and their activities during their trip, including travel, day visits and excursions” (WTO cited in T. Outhart. et’ al 2001, p.4) so tourism includes short term travel for all purpose, weather for leisure or business.

Furthermore tourism is about the temporary, short term movement of people to destinations outside the place where they normally live and work and about their activities during their stay at these destinations. (Outhart O. & Taylor L. 2001, p.6).

Tourism development is the planning and ongoing development of destinations, facilities and services to meet the need of current and future tourist. When tourism is effectively planned and managed, tourism development can result in huge improvement and benefits both for visit and tourist and for the local population, therefore the need of strategic planning for tourism in order to meet the desire of people living in the demanding world has to be encouraged so as to promote and attract tourist as well as building their confidence with tourism activities. Tourism planning has also been seen as a way of extending the life cycle of a destination with a view of exploring new opportunities, adaptation to the current market demand and marketing harmonisation and as well forecast for the future.

As stated by Clegg (1994), “tourism activities comprise the world’s largest industry with over trillion of dollars in revenue produced” and the challenges in benefiting from such economic impact is the result of efficient planning that will take into account the preservation and protection of the environment, the enhancement of a community quality of life and development and that will attract not only first-time visitors but also repeaters as a result of building a reputation and be a successful destination. (Inskeep 1991, WTO 1994) in their own contribution to tourism planning and development, they stated that “planning is crucial to successful tourism development and management; and planning has been a widely adopted principle in tourism development at both regional and national levels.”

On the other hand, (Cooper et’ al. 1993; Shepherd, 1998) argued that poor tourism planning will cause social problems, degradation of the environment, short-term benefit and failure or constraints due to “lack of analytical details or miscalculations regarding the control of land usage” (Cooper et’ al. 1993; Shepherd, 1998). Furthermore, (Tosun and Jenkins, 1996) elongated the above comment by saying that “the failure of central planning caused by lack of community involvement as well as mismatch between central planning and local possibilities is detrimental for the tourism market. Thus emphasising on a new concept of sustainable development to empower the planning system for long term success of tourism as it can help to promote and support conservation, regeneration and economic development as well as enhance the quality of life of visitors and host communities” (Holden, 2008; Wall and Mathieson, 2006).

Furthermore, Gunn and Varr (2002) stated that “if tourism is to reach towards better economic impact it must be planned as well towards goals of enhanced visitor satisfaction, community integration, and above all, greater resource protection.”

Strategic and Its Resources Implication Fig 1
Stage of strategy process
Questions
Description

STRATEGY FORMULATION

Mission statement

Statement of aims

Statement of Values

What is our purpose?

What kind of organisation do we want to take?

A clarification of the purpose of the business

Environmental Analysis

Where are we now?

This involves the gathering and analysis of intelligence on the business environment. E.g. staffing, resources, competitors, stakeholder expectation

Objectives

Where do we want to be?

This involves detailed articulation of aims i.e. setting a target for the organisation to achieve

Strategic choice of strategies

How are we going to get these?

Strategies describe how the objectives are to be achieved

Options analysis

Are these alternative routes

Here you identify options required to be screened

in order to choose the best

STRATEGY IMPLEMENTATION

Action

How do we turn plans into reality?

A specification of the operational activities & task required.

Monitoring and Control

How will we know if we are getting these?

Taking corrective action as necessary and reviewing strategy

Source: (Johnson & Scholes 1997 p. 13) & (Catterick 1995 p. 14)

Many organisations produce separate mission statements and statements of aims, objectives and strategies. The strategic plan will contain all of these, which is also applicable to all countries embarking on tourism activities.

Looking at the meaning of tourism and its activities, the theory and practice of strategic planning for tourism sector in every nation cannot be measured. This is evident on the ground that, it is clear that effective strategic planning and management is a prerequisite for the successful utilization of tourism as an agent of change in every nation. Tourism is seen as transcending the traditional economic sectors and is viewed as an industry which can actively regenerate the small business/entrepreneurial sector with all its flexible and responsiveness to dynamic changes. However, the transformation of a centralised economy, characterised by flexible practices and a low priority for tourism, does involve a change of “hearts and minds” as much as it is needs outside strategic planning from expertise. No wonder that, Hungary has recognised the advantages that tourism can bring as witnessed by Prime Ministerial statement in 1990 lauding tourism as a potential power-house for the economy.

However, Hall’s (1991a) most persuasive point is that, tourism is seen as an integral part of economic restructuring by exposing the system to both national and international forces and, in so doing, introducing potential foreign investors, encouraging privatisation and reducing the level of bureaucracy and centralisation. All this are made possible via strategic planning approach adopted by a given nation.

In the case of tourism, Page & Thorn (1997) suggested that a national policy or strategy was required in addition to the RMA, if sustainable tourism goals in New Zealand were to be achieved, since then a national strategy has been produced, reviewed and subsequently updated, emphasising the sustainable development concepts and the desirability of integrating environmental, economic, social and cultural considerations in the long-term management of tourism resources.

Tourism Planning Approaches (Countries overview)

The changing evolution of tourism, its different political and socioeconomic development environments, and the diverse scientific and technical contributions in the field’s related disciplines (urban, regional, environmental planning, etc.) shape different approaches to planning. Such approaches have been the object of interesting systematizations, especially the critical perspectives of Getz (1987), and Tosun and Jenkins (1998) for Third World Countries, which are neither mutually exclusive nor a reflection of a chronological evolution: boosterism, economic, physical-spatial, and community-oriented approaches. To these four could be added two more that are omnipresent in today’s literature: a strategic approach and planning for sustainable tourism.

Boosterism has been the dominant tradition ever since the emergence of mass tourism. It is based on a favourable, uncritical assessment of tourism that identifies it as intrinsically positive and ignores its potential negative effects on economic, socio cultural, and environmental levels. Halls (2000) expresses his doubts about its consideration as a way of focusing on Getz’s contributions, four approaches can be distinguished, and planning since it is precisely characterized by being a tourism implementation and development method that reveals lack of planning. The economic approach conceives tourism’s as an instrument that can help achieve certain economic aims. It reinforces tourism’s character as an export industry and its potential contribution to growth, regional development, and economic restructuring. Public intervention, in its regulating and promoting role, gives priority to economic purposes over environmental and social ones, although it also attends to all the factors that can jeopardize its economic efficiency: development opportunity costs, selection of the most profitable market segments, control over demand satisfaction, estimate of its economic impacts, etc. However, this approach does not usually analyze how the benefits derived from tourism are distributed socially (Burns 1999).

The physical-spatial approach incorporates the territorial dimension with the aim of adequately distributing economic activities, and specifically tourism activities, in space, while also ensuring a rational land use. It is an approach in which both town and country planning and tourism planning coverage as a result of the recognition that its development has an environmental basis. This approach mainly focuses on the preservation of the natural resources that make the industry possible and on the management of the environmental impacts it causes. Among the examples of the physical-spatial approach, Hall (2000) mentions the work by Gunn in the late 70s (Gunn 1994) or Instep’s integrated approach (Inskeep 1991).

The community oriented approach originated in the late 70s with the numerous works that criticized tourism’s negative sociocultural effects (de Kadt 1979; Smith 1977). It is not exclusively confined to the aim of solving and preventing those effects. In fact, it promotes a local tourism development control scheme so that residents are the ones who benefit the most from that development, thus avoiding conflict situations that could put the industry’s future viability in danger. Murphy’s work (1985) undoubted constitutes a basic reference point of an approach revitalized by the need to achieve greater social involvement in planning processes. This circumstance has provided the momentum to undertake, from public instances, bottom-top planning schemes, among them the European initiative leader for rural development.

Strategic planning moved from the business context to regional and urban planning in the 80s, and it has a strong influence on economic restructuring schemes for declining places and sectors (Borja and Castells 1997; Va’zquez Barquero 1993). This approach has been progressively incorporated into tourism planning and essentially focuses on the search for competitiveness of firms and destinations in a changing, complex environment. In short, it contributes to or reinforces the following distinguishing elements of tourism planning: analysis of the competitive environment as a fundamental element in the definition of the firm’s or destination’s strategy; definition of a wide time scope for planning on the basis of foresight and prospective techniques; stress on social participation and the creation of coordination and cooperation channels among stakeholders; and the rise in value of planning as a process that is permanent, flexible and integrated into management (Ansoff 1988; Borja and Castells 1997; Hall 2000; Ivars 2001; Porter 1982). Planning for sustainable tourism is related to the great deal of interest aroused by the development paradigm ever since the celebration of the Rio Summit in 1992. The application of its principles to tourism is especially relevant due to its ambivalence, for it can help to preserve and improve the environment.

THE STRATEGIC PLAN AND IMPLIMENTATIONS OF COUNTRIES

For example, the strategic plan and implementation program for the county of Szolnok in Hungary highlight many of the problems facing the future development and reorientation of tourism in Central European States.

During the construction of the strategic plan, the largest obstacle was identifying tourism facilities that would meet the development needs of the county while minimising the risk of social or environmental damage. The county strategic planner came up with the following planning strategy;

Phase 1; Immediate Action

Improve Quality of Existing Facilities

Improve utilization of existing facilities

Improve Economic Benefits from Tourism

Improve Performance of existing Entrepreneurs

Create environment for future tourism planning

Phase 2; Immediate to Medium Term Action

Develop Szolnok town as tourist centre

Increase Accommodation stock

Create new restaurants/cafes in tourist areas

Develop new tourism activities

Build on existing cultural/heritage attractions

Encourage the development of closer linkages between sectors

Phase 3; Medium to Long Term Action

Wider tourist base-conference business

Develop new up-marker tourist facilities

Widen the marketing activities

Establish strong links with national/international organisations

Adopt a fully international computerised reservation system

Continue to develop monitoring/regulation and research into tourism activities in the county

Develop new 5 year tourism development plans.

The result of the strategy plan and its implementation is a county that is now poised to break through into wider tourism markets, armed with promotional materials of high quality, tourism information and maps together with a broad spectrum of products, a network of commercial and organisational links that will enable it to capitalise on the potential market for visitors from within and to Hungary.

On the other hand the strategic planners for tourism in Spain came up with what is refer to as FUTURES (Master Competitiveness Plan for Spanish Tourism) (Ministerio de Comercio y Turismo 1994). This plan opened a new state of tourism policy in which the state redefined its role within an institutional discourse that intended to consolidate a system of coordination and cooperation between the different administrations. The FUTURES plan became the catalyst of this change encouraging the design of specific plans for the 1992-1995 period, favoring cooperation through actions financed jointly by the different administrations and fostering the participation of public and private agents. The plan was a reflection of the third generation of tourism policies, according to Fayos’ classification (1996) where competitiveness turned out to be a key element for tourism management.

The FUTURES plan formed a part of the structural adjustment theory (Bote and Marchena 1996) which focused on the adaptation of Spain’s supply to the structural changes caused by the market that jeopardized the competitiveness of the country’s tourism industry.

Finally, this period witnessed the start of the planning model derived from Spain’s entry into the European Union with the preparation of the 1989-1993 Plan de Desarrollo Regional (Regional Development Plan) for Objective -1 regions and the 1989 – 1993 Plan Regional de Reconversio’n Regional y Social (Regional Plan for Regional and Social Restructuring) for Objective – 2 regions. These plans made possible the application of Europe Structural Funds to tourism in Spain and implied the definition of a regional development strategy where special attention was paid to tourism, both in those autonomous communities in which it has a strategic role and in others where it was perceived as an emergent industry (Ivars 2001).

Essential objectives included taking advantage of tourism growth expectations, the valuation of non-exploited resources, the contribution made by new products to territorial rebalance and finally, the incorporation of tourism into local development strategies both in rural and urban milieus.

In the case of Barnette County, Wisconsin, a strategic planning was formulated to improve its tourism industry as for decades tourism has been the main economic revenue for the area. Based on existing data collected from a 1993 assessment, an action plan was implemented and the main issues encountered were lack of organisation, marketing performance, finding and government perceptions form which actions were created to eradicate the problem but it didn’t escape failure since estimated budget to find a visitor centre wasn’t reach due to lack of fund, marketing guides on the county printed but not distributed, eco-tourism was to be developed using a joint marketing grant but was refused by the state of Wisconsin. Overall, it showed the issues of lack of interest and participation from stakeholders (tourism businesses and government) for further tourism development of Barnett County.

Looking at New Zealand as a case study, a county that want to increase the level of its tourism activity and sustainable tourism has become the key of the country to do so, which according to Bramwell & Lane 2000; Hall & Page, 2006), “the success of sustainable tourism planning depends on existing planning and management functions that guide appropriate developments and the ability to respond to pressure on infrastructure and environments that increasing tourism demand creates”. The concerns for New Zealand are that the tourism product relies a lot on the natural resources and the image of a ‘clean and green country’ (Tourism New Zealand’s marketing campaign) and its has been quite a problematic issue in some areas with regards to conservation and preservation of the environment.

Page and Thorn (1997) suggested that “a national policy or strategy was required in addition to the RMA (Resource Management Act), if sustainable tourism goals in New Zealand were to be achieved.” Based on the previous research undertaken by Page and Thorn in 2001 and 2002, the following issues were encountered such as lack of considering the number of international tourist’ arrival at national level, lack of planning at national level which Page and Thorn argued that if a national plan was needed in order to achieve a more “balance equitable and beneficial patterns of tourism activity and development for destinations and host communities,” however a PCE (Parliamentary Commissioner for the Environment) report on education for Sustainable development, suggested that the like and dislike and the caring of something lies with the people.

What was found from the previous study was the lack of communication and integration between the RMA and the local authorities and resources available from the government was inadequate. However the recent study also reflect the incapacity of the RMA to work together with the national government, since tourism related project were not released but effort has been done to integrate the process of a sustainable development and increase the continuity of collaboration between the public and private sector, but there is still that major gap between strategy and the implementation of the policy formulated in the evolution towards a more sustainable New Zealand.

Based on which Page and Thorn (2002) stated that a national plan is required if tourism is to be developed with the target of enhancing the quality of life of its local people and increase environmental protection from the tourism activity. Furthermore, within the tourism planning the goal and objectives set should be achieved to challenge pro-development policy in order for New Zealand to keep up in the term of competitive advantage as a ‘clean, green and sustainable tourism destination’. As argued by Edgel, Allen, Smith and Swanson (2008), “those destinations, localities and nations that prepare good policies and implement detailed strategic plans will reap the benefits for sustaining their tourism products in the future”, which is the indispensable and fundamental basis of New Zealand tourism strategy. Hence leads to betterment of tourism activities in New Zealand.

Furthermore, before any implementation, analysis study will be performed through survey of existing data and collection of primary data. The data requirements will include information such as existing tourism profiles, “travel patterns, tourist attractions, accommodation and other tourist facilities, land availability, economic and government structure, education and training needs and provisions, environmental indicators, socio-cultural characteristics, investment sources and available capital, relevant legislation and regulation and private sector organisation.” (Cooper et’ al. Tourism Principle and Practices).

Ones data has been collected, the issues associated with it will be analysis in terms of assets (infrastructures), market assessment of demand and supply and feasibility study, source of funding and impact of economic, environment and social factors in terms of tourism needs and opportunities and overcome detrimental impact.

The result derived from these analysis will help in the formulation of plan and policies such as marketing strategies, human resources management, environmental conservation, economic and tourism development by which implementing and monitoring to ensure the development path and avoid deviation from the actual plan of the nation on tourism sector.

The diagram below represents the key stages in the planning process.

Fig 2 Key stages in the planning process

Source: Tourism principle and practices by Cooper et al.

RECOMMENDATION

Tourism has been identified as one of the primary industries with the potential to assist local communities in developing economic diversity (Allen et’ al 1993, Davis & Morais, 2004) However, tourism is not a panacea for economic decline. Tourism has the potential to create both positive and negative impacts. Gunn (1994) indicated that, there is no other form of development “that has so many far-reaching tentacles as tourism” (p.16). For tourism development to be successful, it must be planned and managed responsibly (De Oliveira, 2003; Inskeep, 1991; Martin, 1995).

Inskeep, (1991) furthered the concept of responsible management, warning that “ill-conceived and poorly planned tourism development can erode the very qualities of the natural and human environment that attract visitors in the first place” (p. 460).

Thus communities that use or plan to use tourism as an economic development tool to diversify their economy must develop strategic planning policies for the sustainable development of the community.

It should be noted that one key to strategic planning for sustainable development of tourism in a community is the inclusion of stakeholders. Without stakeholders support in the community, it is nearly impossible to develop tourism in a sustainable manner. Therefore, a clear understanding of the attitudes and interests of stakeholders is a necessary precursor to the strategic planning and management of sustainable tourism.

Strategic planning also emphasise the integration of economic, socio-cultural and environmental, therefore stakeholders should collaborate and take into consideration the preservation of culture and environment while maximising economic growth and returns to community. Jamal and Getz (1995) define these collaborative efforts as “a process of joint-decision making among autonomous key stakeholders of an inter-organisational, community tourism domain to resolve planning problems of the domain and/or to manage issues related to the planning and development of the domain.”

CONCLUSION

Tourism exists as a powerful economic force in the development of both community-based and global markets. Today, its activities comprise the world’s largest industry with over three trillion dollars in revenues produced. (Clegg 1994). Accordingly, the success of sustainable strategic planning depends on existing planning and management functions that guides appropriate developments and the ability to respond to pressure on infrastructure and environments that increasing tourism demand creates.

As Iskeep, (1991) argues, the special relationship between tourism and the environment, based on a unique dependency on natural and cultural resources, requires a balanced approach to tourism planning and development to maximise the associated benefits and minimise the negative impacts. Therefore, if ill-planned or excessive development is permitted, tourism can damage the special qualities that are essential for sustainable development.

Finally, the importance of strategic planning for tourism within a sustainable development context is now acknowledged globally as it was addressed as a specific topic in a review of Agenda 21 in 1997. In 2002, the world summit on sustainable development included a submission on sustainable tourism (chapter IV, paragraph 43) in the Johannesburg plan of implementation, which identified that while tourism has positive effects, uncontrolled (lack of strategic planning) tourism growth can undermine the basis of tourism. However, the extent to which sustainable development ideology is translated into policy and practice requires a strategic planning investigation to uncover the tourism activities that need urgent attention to meet the demand of visitors. This can be in a form of language to be used, create an image to be used, practically assistance and guidance, promotional material and its design, and strategic for the provision of tourism information.

Tourism planning has also been seen as a way of extending the life cycle of a destination with a view of exploring new opportunities, adaptation to the current market demand and marketing harmonisation and as well forecast for the future. Therefore, it is on this premise that the researcher believes that the role of strategic planning in tourism development of any nature can not be quantified.

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CHAPTER 2
LITERATURE REVIEW

2.1 Introduction

The purpose of this chapter is to review the key literature and the related theories regarding the tourism industry . The focus will be the medical tourism/healthcare services theories of competitiveness . The key findings are based on the applicability of the literature to the purpose and scope of study.

2.2 Main theories of Tourism

The research related to the tourism industry is associated with the two main theories. These theories are related to the tourists dependency of moving from one place to other in terms of leisure, medical services, business purpose etc.

2.2.1 Modernization Theory

Tourism is a process of temporary movement of people from developed to developing countries from the perspective of the modernization theory. The ability to experience and understand other cultures without abandoning the modern values and traditions will lead to increase in the number of tourists from the developed countries. Tourists from the developed countries are more likely to enjoy the culture of the developing countries within the structure of the modern societies.

2.2.2 Push-Pull Theory

According to this theory, some people move because they are pushed out of their own place, others move because they are pulled or attracted to another place. Ravenstein (1889) concluded that pull factors were important than push factors. Oppressive laws, high taxes, bad climate and uncomfortable surroundings forces people to migrate.

Individuals desiring to have leisure have the option of selecting a place that best meets their standards, and are attracted towards those places because of what it has to offer. Thus pull factors are important in determining the destination for a tourist. Traditionally, Europe attracts a large number of tourists , but in the recent years, Asia have been attracting the tourists, due to its unique cultural and social attractions. This theory frames the hypothesis that “the greater the level of pull factors, the greater will be the increase in tourism.”

2.3 Tourism Industry of India

Tourism is the largest growing service industry in India, contributing 6.23% to the national GDP and 8.78% to the total employment in India. India attracts more than 5 million annual foreign tourist arrivals and 527 million domestic tourism visits .The tourism industry of India generated about US$100 billion in 2008 and is expected to increase to US$275.5 billion by 2018 at a 9.4% annual growth rate. The 2010 Commonwealth Games in Delhi are expected to significantly increase tourism in India.

2.3.1 Types of Tourism in India

a) Nature Tourism : India’s geographical diversity results in varieties of nature tourism.

Foreign tourists are attracted by the natural beauty of India.

Water falls in Western Ghats including Jog falls (highest in India).
Western Ghats
Kerala Backwaters
Hill Stations
Wildlife Reserves

b) Adventure Tourism : It has also increased in recent years due to India’s climate and topography. Varieties of adventures on land, water and air can be found in India. The following are the types of adventure tourism in India:

River Rafting
Mountain Climbing
Rock Climbing
Skiing
Paragliding
Boat Racing

c) Wildlife Tourism : India’s rich forest areas with unique species of wildlife attract foreign toursists for wildlife tourism in India such as the Ghana National Park and the Corbett National Park.

d) Pilgrimage Tourism : India’s famous cultural temples like the Golden Temple and the Char Dham attracts foreign tourists from all over the world to visit India.

e) Healthcare Tourism : India is one of the top healthcare services provider country in the world with low cost treatment and high quality helathcare when compared to countries such as the U.S.A. and the U.K.

f) Monument Tourism : India is famous for its historic monuments all over the world. Large number of foreign tourists visit India to see the Taj Mahal, the Qutub Minar, Red Fort and the Gateway of India.

g) Eco Tourism : India has a variety of preserved natural areas which attracts tourists for eco tourism in india . The Gir National Park and the Kaziranga National Park are some natural preserved areas.

h) Beach Tourism: India is also famous for its beaches in Chennai , Goa and Mumbai. Tourists visit these places to enjoy the beautiful beaches along the coastline.

2.4 Healthcare Tourism in India

Healthcare Tourism is one of the major growing industry in India. ‘The Economic Times (6 January 2009) reported that India’s medical tourism sector is expected to have an annual growth rate of 30%, making it a Rs. 9,500-crore industry by 2015.’ ‘The Indian Express (18 September 2006) estimates of the value of healthcare tourism to India are expected as high as $2 billion a year by 2012.’

The key advantages of India in attracting the foreign medical tourists are-

Low Costs of Medical Treatment
Availablity of advanced medical technologies
Achievement of International Quality Standards in Healthcare Services

‘The Chicago Tribune (28 March 2008) reported that Healthcare treatment costs in India are low in price as compared to the treatment in U.S.A and U.K.’ The most popular treatments in India include – heart surgery, bone-marrow transplant, cardiac bypass, eye surgery and hip replacement.

Indian healthcare service providers in India comprises of many Hospital groups like- Apollo Hospitals and Fortis Healthcare who are the major contributors of India’s success in international market for healthcare tourism. Many Indian hospitals have been certified from the British Standards Institute and Joint Commission on Accreditation of Healthcare Organisations . The Indian city of Chennai has been declared India’s Health Capital because of its contribution of 45% of medical tourists from abroad and 30-40% of domestic health tourists.

‘The Economic Times (18 November 2008) reported that India has developed into a hub for medical tourists seeking quality healthcare at an affordable cost. Nearly 4,50,000 foreigners sought medical treatment in India last year. A cardiac surgery in India would cost 9000 USD than the cost of 75000 USD to 100,000 USD in U.S.A. A spine surgery would cost around 8000-9000 USD in India than the cost of 65000 USD in U.S.A. A joint replacement would cost 8000 USD in India than the cost of 55000-65000 USD in U.S.A.’

Many Indian hospitals are promoting their international quality of healthcare services by joining international accreditation agencies to obtain the necessary approvals on safety and quality services.

Travelodge is the first budget hotel launched in 1985 in UK. It operates 380 hotels with 26,500 room in the UK. Travelodge is planning to grow 1000 more hotels by 2020. It employs above 5500 people and 87% of the booking are made online.

The UK hotel market is estimated around 700,000 rooms (source: Melvyn Gold, “Qualification of serviced accommodation supply in UK”, December 2007)

UK hotel market is segmented mainly into four categories, Brander full service which has 14% of the market share, branded budget 12% branded mid market 62% and unbranded independents 62%.the current economic environment has seen increase in drop out of unbranded independents and people prefer to book with branded budget due to network coverage, brand strength strong balance sheet and distribution.

Grant Hearn, Travelodge CEO, commented: “2008 was another record year of growth for the

Travelodge brand with over 19% revenue growth”. Room sold increased by 9 percent to 6 million

The growth of Travelodge has been incredible but company faced a few challenges and one of the major challenge company is facing is overbooking.

Overbooking is one of the important revenue management tool in hotels operation management to operate effectively and enhance profitability.

Revenue Management is seen as an important technique in the hotels’ operation and therefore to maximize their revenues, hotels are increasingly implementing Revenue Management practices (Hwang and Wen, 2009). As a consequence of implementing such systems, many companies in the service sector such as hotels systematically overbook capacity in order to maximize the revenue at one particular point in time (Wangenheim and Bayon, 2007).

If overbooking is not implemented correctly it can result in loss of room revenue, loss of hotel reputation, decreased customer loyalty and decrease hotels profitability.

This report discusses the main characteristics of overbooking and its impact on the company in theoretical and practical prospective.

Theoretical insights of overbooking

One of the central concepts in Revenue Management is overbooking. The practice of overbooking can be defined as confirming more reservations than the hotels’ available physical capacity to provide the service. (Ivanov, 2006; Ivanov, 2007; Chiang et al 2007; McGill, van Ryzin,1999; Kamath, Bhosale, Manjrekar,2008). Hence, the objective of overbooking is to improve the expected profit and instead of selling each room once, profit can be increased by selling it several times (Birkenheuer, 2009).

In fact, overbooking as an integral part of Revenue Management has received significant attention from literature. From a historical perspective, overbooking is present in the studies of Falkson (1969), Simon (1968), Vickrey (1972) and many others. The major objective of these studies was to outline a control practice for cancellations. Nowadays, overbooking has become an emerging matter in industries with perishable products. It yields considerable impacts on companies’ performance.

In terms of the hospitality industry, the profitability of hotels is largely dependent on their utilization of capacity. Conversely, demand for rooms and extensions of stay are very unstable and are hard to predict (van Ryzin, 2005). Hoteliers are challenged by how to determine the occupation of rooms for customers who are financially unequal and meanwhile – maintain a stable rate of demand given the hard to predict circumstances (Okumus, 2004). This is all possible utilizing overbooking, which enables proper allocation of resources and optimization of sales.

However, maximizing the number of sold rooms per night cannot be easily accomplished. One of the most challenging tasks of the hotel operation management is to deal with the unpredictable nature of the customers, because not all booked reservations will turn into real service consumption (Lai et al, 2005). To this end overbooking may entail a company from the hospitality industry not being able to serve all its customers properly because of lower number of initially expected people that do not appear as agreed. In this respect, overbooking may have both positive and negative impact. On the one hand, it may result in refusal to provide a service, but on the other, it can also take the form of compensation for those bookers, who cannot received the value package they have agreed on and paid for (Kimes and Wagner, 2001).

“From their practical experience managers know that all not bookings confirmed for a particular date will be really used” (Ivanov, 2006). There are several possible scenarios that can cause this. Despite of their reservations, because of different circumstances some guests cancel their stay and terminate their reservations, some does not cancel their booking but fail to show up, or other guests reduce their stay and as a result the room remains unsold and hence capacity not utilize is lost forever (Ivanov, 2006, Talluri et al, 2004; Chiang et al, 2007; Hung, 2004; Bitran; Leon, 1989).

Therefore hotels adopt overbooking in order to protect against losses with no-shows and to offset the effect of cancellations and shortened stays (Hwang and Wen, 2009; Kamath et al, 2008; Selmi, 2008; Chiang et al 2007; Hung, 2004; Sulistio, Kim, and Buyya, 2008).

Impacts of overbooking on hotels’ operation management

Apart from the opportunity of the hotel to minimize the effect of reservation uncertainties there are possibilities the number of cancellations and no shows to be less then the number of overbookings, then some of the clients will not be accommodated and should be walked to other hotels (Ivanov, 2006).

Thus, if a hotel decides to employ overbooking in its operations it should manages carefully not only the opportunity cost of the unsold room but also the overbooking costs for alternative hotel accommodation and transportation that the hotel has to pay in order to compensate a customer in case of overbooking (Ivanov, 2006; Hung, 2004).

Besides the evident financial costs occurring in case of walking a guest having already booked, “costs the lost hotel’s goodwill and reputation and the risks of dissatisfaction, loss of trust, loss of future customer loyalty are much more expensive for the hotel” (Selmi, 2007). Overbooking policy and control According to Selmi (2007), “the risk of customer refusal appears if the overbooking is no realized precisely”. In this regard, Kimes (1989) emphasized on the importance of a clearly stated overbooking policy within the hotel operation management. The objective of overbooking policy and control is to find an optimal overbooking level to maximize the expected revenue and to minimize the potential risk of denied service (Chiang et al 2007). Netessine and Shumsky (2002) as cited by Ivanov (2006; 2007) proposed a basic mathematical model for calculating the optimal number of overbookings and according to his findings the optimal overbooking level is “inversely related to the amount of cancellation charges applied – the closer the cancellation charge to the room rate, the lower the missed benefit from the unoccupied room and the less stimuli to overbook”. In case of presence of guaranteed and non-guaranteed bookings, Ivanov (2007) suggests that the optimal number of overbookings has to be set separately for each type. Alternatively, according to Hung (2004) factors that could be considered while setting overbooking limits include: probabilities of cancellation and no-show; room demand distribution over time and conditions of length of stay; stay extension probabilities influenced by the intended length of stay. Moreover Hung (2004) assumes that the proportion of cancellations depends on the customer category, intended length of stay, day of week of first stay over, and time until first stay over.

Impact of overbooking on customer behavior According to Talluri et al (2004) overbooking is frequently cited in customer complaints and remains the primary source of dissatisfaction. Moreover, results of an experiment made by Wangenheim and Bayon (2007) confirm that the practice of overbooking is likely to be perceived as unfair by service customers. Wangenheim and Bayon (2007) analyze behavioral consequences of the fairness towards overbooking by proposing and confirming several hypotheses. According to their research the negative consequences of service failure arising from overbooking are stronger for the high – status customer than for the low – status customers and therefore, hoteliers have to carefully “overbook its high-values classes”. Additionally, Wangenheim and Bayon (2007) emphasize on the importance that if a hotel ignores the log-run behavior consequences of overbooking, this may lead to negative consequences on its operations.

One such negative consequence is proposed to be a customer who faces a denied service due to overbooking and still remains hotels’ client because of either high fixed switching barriers or current loyalty membership programs. However, in response to the service failure “the customer may adjust its investment into the exchange relationship not only by

decreasing the number of sales, but also by trying to take advantage of discount offers or purchasing lower level services from the hotel” (Wangenheim and Bayon, 2007).

On the other hand, Hwang and Wen (2009) analyze the effect of the perceived fairness toward hotels overbooking and compensation practices by examining customers’ reactions toward hotel overbooking. Some of their most vital findings from this study are that “women are more likely than men to feel that overbooking is unfair”, customers’ perceptions to the fairness of overbooking is not affected by other customer variables including length of stay, membership status, payer source, reservation channel, and reservation time; participants’ perceived fairness toward the hotel’s overbooking and compensation policies were strongly correlated with positive word-of-mouth publicity. One of the most important results of the research shows that the perceived fairness of the participants toward the hotel’s compensation policy is related to their loyalty. Therefore, Hwang and Wen (2009) propose that hotels should consider designing compensations that help positively influence customers’ perceived fairness toward overbooking and that encourage customers’ ongoing patronage and loyalty.

In a conclusion, issues like determining the optimal number of excess reservations, minimizing compensation cost, and dealing with the negative effects from customers facing a denied service are considered as the most challenging areas of the practice of overbooking and every hotel striving to maximize its profitability should not underestimate them (Sulistio, Kim, and Buyya, 2008).

Practical Implications of overbooking As the hospitality industry is evolving, hotel owners and hotel managers are constantly seeking to update their approaches in order to achieve optimal allocation of resources. Novelli, Schmitz and Spencer (2006) have discovered that hoteliers make every effort to employ contemporary technologies in their business. By this implication, hotel managers and owners do not only sustain competitive advantage, but also create new products and services. In view of this, it can be concluded that implementation of new technologies that create new products is a technological innovation (Evangelista, 1999).

On the other hand, the implementation of innovative technologies to a service company can have a significant influence in terms of operational efficiency (Freeman and Soete, 1997). Additionally, Porter (1990) supports the latter thesis by highlighting that the performance of a company is highly dependent on new technologies. In view of technological innovations today many hotels recognize the importance of overbooking practice and thus its implementation has become generally accepted step toward hotels’ successful operations.

The practical application of Revenue Management and Overbooking incorporates the following integral elements (Vinod, 2004):

Figure 1 Revenue Management application

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Source: Vinod, B. (2004), Journal of Revenue & Pricing Management

Market segmentation: Segmenting customers according to their preferences and spending patterns is a must to make sure the most appropriate customers with perfectly fitted attributes are sold the proper rooms that can maximize revenues (Oliveira, 2003).

Defining rate classes (inventory pooling): Involves creating groups of the existing rates that close in terms of value (Vinod, 2004).

Demand forecasting: demand forecasting is essential to determine room occupancy. In the context of Revenue Management it is important as it can control occupancy using the data of length of stay. This can be achieved by possessing data on rate class demand and duration of stay (Vinod, 2004).

Supply forecasting: earlier and late checkouts can also determine room occupancy, which is an element also involved in Revenue Management.

Overbooking control: encompasses sales of rooms exceeding the maximum available number of rooms to offset for no shows and cancellations. However, there are some risks associated with overbooking as it may result in grievances from unsatisfied customers who have received an inappropriate room. In such cases hoteliers offer compensations and fringe benefits (Smith, 1982). According to Vinod (1992) Revenue Management can bring 20% of the total revenues. Revenue mix control and exception processing: involves planning important future dates with discretion and matching them with overbooking levels (Vinod, 2004). Performance measurement and management reporting: closely scrutinizing the Revenue Management processes is essential to track down the data quality and future planning basis. However, in order to lead a hotel into a winning direction, overbooking has to be managed and controlled very carefully. Ivanov (2006) defines the management of overbooking as a set of “managerial techniques and activities connected with continuous planning, reservation and control” and he outlined two main groups of activities that should be performed in the daily hotel operation. The hotel managers should on one hand, to define an optimal number of overbookings for each date and continuously to modify it according to the market changes of the hotel and the specific demand and booking patters and on the other hand, to manage carefully decisions and operational activities related with walking guests with overbookings. In this regard, Ivanov (2006) proposes that factors such as length of stay, rooms rates and client status have to be considered by hotel managers while dealing with walking a guest with confirmed reservation. Additionally, Kimes (1989) analyzes several managerial concerns essential for an effective overbooking practice and states that “top management cannot assume that Revenue Management will just happen, it requires careful planning and training”. Thus employees have to be intensively trained in order to clearly understand the aim and characteristics of overbooking. Moreover, employees who are directly dealing with overbooking decisions have to be periodically trained how to behave in possible customer conflicts and “to take their own decisions in an unfamiliar situation” (Ivanov, 2006). In order to be minimized the possible customer dissatisfaction in case of overbooking, it is vital for the hotel to establish service recovery programmes with standardized procedures and to make employees to be aware and follow them (Ivanov, 2006)

For a profitable applied overbooking in the hospitality industry, hotels must understand not only consumers’ behavior but also to consider the impact of competition and the currently economic situation that imposes significant supply and demand fluctuations. As hotels compete with each other in order to attract more customers, Revenue Management decisions of one hotel inevitably influence the demand for other hotels in the same region or area. However, recent trends propose that hotels should collaborate with is competitors that result in increased number of formed alliances with each other to maximize their revenue (Chiang et al, 2007) Revenue Management’s challenges in the hospitality industry As explained before, Revenue Management finds application to two significant industries: hospitality and airline. The first one, however, is much more complex in terms of industry saturation and rooms management. This creates hurdles for the optimal operation of Revenue Management techniques. In the hotel industry Revenue Management can be applied either locally or via centralized system. The second one involves gathering data and taking decisions from a focal site for other properties. In practice only a limited number of hotels and hotel chains are able to manage centralized data processing and therefore the majority of players on the hospitality industry opt for property based Revenue Management.

Recommendations for future research

Despite of the acknowledged importance of overbooking as one the most effective successful Revenue Management techniques used in hotel operation and widely discussed topic in research literature, there are no current studies discussing the overbooking management of Bulgarian hotels and its impact on their operation. Therefore, future research may focus on the possible application of Revenue Management techniques to the Bulgarian hospitality industry. Future studies may also focus on the demand side of Bulgarian tourism as the country has witnessed fluctuating visitor rates during the past two decades despite the growing profits generated by the particular industry.

Conclusions

In order to survive in the furious competition and to generate more revenue while using the same amount of recourses it is necessary and critical to the hotels operation management to use effectively its reservation inventory and to increase its occupancy rate (Hung, 2004). Revenue Management techniques and the models of overbooking if applied appropriately would maximize the revenues of hotels (Kamath et al, 2008). However, the possibilities of customer dissatisfaction, and risk of loss of reputation because of denied service, force many hotels to avoid the practice of overbooking. Therefore, before hotel managers to deicide whether or not to implement overbooking they should first consider what Birkenheuer (2009) explained “the best estimation of risk and opportunity will provide the best profit”. In this study we have outlined the dynamic nature of service industries and have demonstrated the importance of Revenue Management and most notably – one of its most significant aspects – overbooking. We have narrowed the scope of this research down to the hospitality industry and have found major differences in the demand patterns towards such companies in the former industry. Some customers prefer flexible cancellation terms, while others are not much attentive to that. Hoteliers offer differential pricing to their own advantage to hedge against fluctuating demand. We have also found that substitution is one of the most effective method of managing overbooking practices, but yet a cost/benefit analysis must be performed in order to track down the real consequences. Essentially, within the current dynamic decision making situation in the hospitality industry, overbooking levels have been found to have significant revenue maximizing properties. In view of this, through this study we have discovered some of the chief management objectives that could be achieved through overbooking in the framework of Revenue Management: profit maximization; capacity allocation; maximization of average revenue per customer; maximization of net present value; and minimization of customer grievances. Finally, as hospitality industry on a global scale is a mass volume-driven business, overbooking has become an emerging topic as vacant rooms do not bring any profits. However, perhaps even more significant remains the problem how to manage customer disappointment, in cases they cannot be relocated to similar hotels as a result of overbooking.

With the increasing sophistication of hotel guests and patrons, the continual improvement of hospitality services towards the attainment of unparalleled excellence in the business remains the only edge the hotel has to sustain its position if not attain the leadership in the industry. By adopting the ISO 9001:2008 framework, the acculturation of a learning organization into the consciousness of each employee of the hotel shall provide the impetus to strive and be better in providing service to hotel guests and patrons. A Quality Management System or QMS will govern the conduct of each of the hotel’s front liners. The QMS shall also provide the parameters for quality service while performance monitoring of each of the processes shall be through the process’ key performance indicators. Any flaw or parameter that fails to satisfy the accepted threshold of the performance indicator shall be subject to a root cause analysis to determine a corrective or preventive solution. The QMS requires regular review to ensure that the organization remains focus and faithful to its objective. The hotel employee’s performance shall be subject to evaluation by using the key performance indicator’s root cause analysis. For QMS, the hotel guest’s or patron’s feedback, comment or opinion is accorded greater weight as it will not only change how the hotel will conduct its business but it will equally show how the hotel value their guest’s and patron’s point of view with regard to the hotel’s operation.

Contents

Executive Summary 2

Contents 2

Introduction 4

METHODOLOGY 5

THE HOTEL 5

Design 6

Supply 7

Planning 7

Shop-floor control 8

The environment 8

Technology 8

The Hotel’s CUSTOMER SERVICE 9

CUSTOMER SERVICE Challenges 11

Summary 12

Bibliography 13

Introduction

Revenue in a Hotel business shall anchor on two factors, namely: (1.) level of occupancy or guest traffic that includes patrons to its facilities, and (2.) Efficiency and Quality of its services (Cornell University, 2010). Thus, among other industries in the world, the Hospitality industry remains dependent on the market pulse and good business sense. Good business sense refers to the operation strategy and business strategy that would result to operation efficiency and quality service.

The marriage of technology and human ingenuity are very much apparent in the hotel industry by deploying an Enterprise Resource Planning system. As applied to the hotel industry, it would ensure excellent customer experience from their reservation up to their next visit. The deployment of a Customer Relationship Management System would ensure that all issues are addressed and monitored and shall similarly ensure that the business is properly guided on how to become customer centric. However, technology will not work on its own as its success will be dependent on the employees who use the system and those who will execute the work instructions recommended by the system.

A framework that will capitalize on the strength of the employee enabled by technology shall be the onus of this paper. The sole purpose of which is to ensure the customer focused operation of the hotel while practicing processes that feed on continual improvements to manage the bottom line. Using these strategies, Leadership in the industry and profitability should not be far behind.

METHODOLOGY

The valuable discussions in Operation Management have been the inspiration by this writer to seek out more knowledge in pursuit of excellence. Thus, it led to the discovery that the concepts presented herein have been in existence for some time, and various authors not only wrote extensively on the subjects but they have exhaustively been part of its continual improvement so to speak. Capitalizing from the experiences of these management gurus and the erudite deliberation in Operations Management this author therefore recommend a more comprehensive examination of the Hotel’s Customer Service.

Using the ISO 9001:2008 Quality Management System framework, this author shall discuss the merits and wisdom of its implementation in this paper in support of the Hotel’s operation and primordial goal. It is ideal to implement the quality management system in all the processes of the Hotel to ensure that there will be no gap that can dissuade if not prevent the Hotel from being the center for customer service excellence. The ISO 9000 Quality Management System have previously been regarded as applicable only to the manufacturing industry since it normally refers to the quality in the creation of a product. However, in ISO 9001:2008 Quality Management System the word “product” can alternately refer to as “service” [1] . The hospitality industry has long been recognized a service-oriented industry (Ramaswamy). Its main product is unlike any other industry since its product is the service provided by the hotel employees. The quality metrics of hospitality service is equal to the amount of satisfaction of each customer multiplied by the number of customer over a period of time.

THE HOTEL

The hotel is a five star hotel that is highly profitable and popular privately owned located in the center of an international city with a high level of tourist traffic, particularly international tourists. It boasts of a two hundred fifty suites, two dining rooms, one of which offers a standard menu and seats three hundred people while the other seats only a hundred but it offers discriminating a la carte choices for an upscale market. The hotel also has two cocktail bars; one that is publicly accessible from the streets while the other is for hotel guests only however both are open to guests and non-guests alike.

The hotel is home to three kitchens, with the two serving the two dining rooms while the third serves the three function rooms rented for parties, weddings, conferences and other similar events. The function rooms seat fifty, two hundred and one thousand, respectively while each function room can have their own bars if required. The hotel similarly provides other facilities that would include a swimming pool, gym, sauna and a car park with one hundred and fifty private bays.

The hotel employs both permanent full-time and part-time contract workers. Each area has its own supervisor, with qualified and experienced managers overseeing the supervisors for the respective departments. As indicated, not only does the hotel enjoy a modest profit from its operation, it boasts of a decent amount of guest and patron traffic from its hotel and facilities operation.

Design

Designing a particular type of service impacts the hotel’s customers to enrich their stay or their hospitality experience is a practical application of this concept as described by Slacks and Johnston in 2004. To illustrate: the design process in the formulation of a process that will provide returning guests with discounted rates if they return during the off-peak or lean days will ensure occupancy during the lean months and expand marketing exposure.

Supply

Raw materials used as ingredients to hotel food are sensitive to spoilage and contamination thus it is important to manage its handling from delivery, storage and inventory. The release of the goods from storage should be strictly enforced and implemented through proper tagging and warehousing strategy. To illustrate; Meat products can last for a certain period through refrigeration but must also consider volatility and seasonality to its supply. The system predicting the usage of the hotel base on its routine consumption and the scheduled events shall either place an order or forego an order automatically and later implement First-in-first-out in the warehouse with the use of the inventory tag.

Planning

Planning within the context of the hospitality industry often relates to Business Planning. Case in point, the hospitality business is sensitive to the time of the year particularly its occupancy. From July to August is normally the time when air travel is at its busiest due to the summer vacation in the United States and some countries. Hotels outside the United States that are vacation destinations of Americans are at its busiest. However, during the lean months, when occupancy is at its lowest, hotel managers and administrators’ creativity are normally put to test.

To illustrate a viable business strategy during the lean months is to pre-sell the room through discount cards. The concept is to sell discount cards at a price of one or two nights’ stay that will be availed only during the lean months. Modest discounts may be availed by cardholders including the facilities or services offered by the Hotel. The card shall expire within one year from its issuance to give the hotel the opportunity to sell continuously the unoccupied hotel rooms during the lean months.

Shop-floor control

Shop floor strategies include Job and shift Scheduling, housekeeping, Process improvement and increasing process efficiency in the context of providing quality service. ISO 9001:2008 has closed the gap between a tangible product and service that both demand quality. According to the system, the best way to ensure quality service is to identify focus areas, then to provide measurable targets that are congruent with the focus areas’ goals.

The environment

Some hotels realize their impact to the environment of the local community and as part of their strict adherence to their corporate conscience social responsibility often adopts a sound environmental management system. Not only would this comply with the international initiatives regarding environmental concerns but in practice, this will also respond well to its corporate social responsibility initiatives.

Technology

The use of technology to lower the cost of operation through the automation of processes and increase the security at the hotel is a strategy that does not normally provide a tangible and visible result overnight. To illustrate: Supply Chain Management as envisioned is a technology driven strategy that will ensure that raw materials used as ingredients for food do not spoil or do not get contaminated.

The strategy requires inventory immediate tagging in each delivery. By providing secure keys to every guest, a hotel management system would be able to adjust the room temperature and the Air Handling Unit load depending on the rooms that have activated keys. Using the secure keys inserted in its slot will enable the system to determine the additional load needed for the air conditioning requirement instead of the Air Handling Unit continuously operating even without any guest inside is a waste of energy.

The Hotel’s CUSTOMER SERVICE

The hotel’s customer does not start becoming a customer when he finally pays the initial down payment for a room or service, he does not start becoming a customer at the instant he shows up at the hotel’s premises or orders his first drink from the bar. A guest or patron starts becoming a customer as soon as he says the first word to any of the hotel’s staff, telemarketer or even parking attendant or valet (Borsenik & Stutts, 1997). Ergo, all aspects of the hotel’s operation almost concern itself with customer service. Customer service is not merely providing the hotel’s service to the guests or patron, it is making sure that the customer is satisfied and fulfilled in the usage of the facilities including their encounter with the hotel’s staff (Michelli, 2008). Therefore, all processes that will affect the customer directly or indirectly are customer service providing processes.

To illustrate the reservation clerk represents the hotel as its first liner when the customer called in to reserve a room or book the one of the services of the hotel. A pleasant conversation would result to immediate booking and a not so pleasant conversation is the loss of a potential client. The interaction with the valets or the parking attendants may be the second encounter of the hotel with its customer. The next would be the door person, the front desk, the concierge, the room boy, the hotel cleaners and then floor security for hotel guests. While for those partaking and enjoying the services of the Hotel would be entertained from the door person by the receptionist and then the floor manager or the facilities attendant. The guests would then be interfacing next with the waiters if they were at the bar or restaurant, the lifeguard for the swimming pool and fitness instructor for the gym and sauna.

To illustrate the indirect service providers in the Hotel that ensures not only the satisfaction of the guests or patron they themselves are responsible for the behind the scene hospitality experience. These would include the kitchen staff that would include the chef and those responsible for preparing the food. The engineer that ensures the temperature of the pool and the gym is optimal or the safety engineer monitoring the safety levels at the sauna, the hallway and lobby temperature. The indirect service providers also include the cashiers that provide the correct change and charges, the security guards that ensures the safety of the guests and the surrounding. This also includes the janitorial staff that ensures the health of the guests by making the immediate surrounding garbage or dirt free.

The processes that govern the operation and performance of the customer interaction of the services provided as described shall be the focus of the Quality Management System framework of ISO 9001:2008 (International Organization for Standardization, 2008). Aligning with the Vision, Mission, Values and Strategy of the Hotel the Quality Management System framework will allow the Hotel to define its own Quality Mission Statement that states the personality of the hotel. Each of the processes followed or implemented by the process owners as described above that interacts with the Hotel’s guests, patrons or customers, in general, shall be covered by the Quality Mission Statement.

Juxtapose with the Quality Missions Statement aligned processes, Key Result Areas will be developed will remain the targets of the processes. The Key Result Areas should be customer centric and should work towards the attainment of the best hospitality experience of the guests or patrons as provisioned by the Hotel. In order to measure the success of the process owners in achieving their key result areas, metrics in the form of key performance indicators for each process are to be developed.

To illustrate: The valet service is often neglected by most Hotels but its importance and the opportunity it presents to save the Hotel’s image from the customer’s bad experience from the services of the hotel is precious being the last process the customer has to go through before leaving the hotel. The possible key result area for the valet services could be the immediate return of the guest’s vehicle to him. The key performance indicators could be the amount of time it will take the valet to retrieve the car and return it to the owner. The idea would be the shorter the amount of time it takes to retrieve the car the more satisfied the customer would be.

CUSTOMER SERVICE Challenges

Cultural Sensitivities

The primary challenge in any customer service is the differences in the personality or origins of the guests. Cultural sensitivities often create friction between the service provider and the customer. To illustrate: in the west shaking the head from side to side often means no, however in some culture particularly the Indian culture it means yes.

Gender and Other Sensitivities

At times, being chivalrous is being sexist while being helpful to people with disabilities is being offensive. A balance and clear criteria are should be studied depending on the area where the Hotel is located so as not to compromise quality service with sensitivities.

Summary

The hospitality industry has evolved from an industry that only provided board and lodging to transient travelers in the previous century to an actual destination that offers a myriad of services to weary travelers and to vacation and relaxation seekers. The Quality Management System as enabled by technology should provide the edge to the hotel in terms of managing its bottom line from the business perspective while also providing the framework in determining the best way to service its guests and patrons. The Quality Management System therefore will equally define the customer centric culture of the hotel geared towards providing the best, if not one of the best hotel experience to its guests.

The continual improvement concept of the Quality Management System will engender excellence in the very fiber of the hotel’s staff. The key performance indicators shall provide the metrics to gauge the efficacy of the process including the performance of its employees. The root cause analysis as well as the development of the corrective and preventive solution is essential to the concept.

One of the virtues of ISO 9001-2008 Quality Management System is that it would let the hotel develop its own Quality Management framework as derived from the hotel’s unique culture. The hotel shall not only reflect its personality but it shall be the driving force towards excellence in customer service. The commitment to customer service as driven by the Quality Management System shall therefore be personal not only for the organization, but also for the individual employees.

The Operation Management plays a major role in the organization. Operations management (OM) is the business action that plans, organizes, coordinates, and controls the assets bare to aftermath a company’s appurtenance and services. Operations management is an administrative function. For example restaurant has different functions include purchasing, receiving, controlling, and requisition of raw material.

Operations management deals with the architecture and administration of products, processes, and casework and accumulation chains. It considers the acquisition, development, and appliance of assets that firms charge to bear the appurtenances and casework their audience want.

As the name suggests, the job of an operations manager in any alignment is to architecture and administer the activities in such a way, that the plan abundance of the advisers goes up as able-bodied as best appliance of the concrete assets of the alignment can be achieved. It is one of the capital responsibilities of an operations manager. One of the responsibilities of an operations Manager is to accommodate the advisers of the alignment with an able alive ambiance area adroitness can advance and aggregation spirit can develop the process.

In my country Hotel is a major private sector what I observed. So I will discuss about the problems and challenges that are faced by the hotel industry. The main aim of the hotel industry is giving accommodation and food for the customers. There are different types of hotels depend upon the services provided to the customers. For example apartment hotel, commercial hotels, economy hotels, resorts, residential villas, etc.

The Hotel industry is one of the most important industries for the country growth. The hotel industry is a complete industry apparent from acute competition. Market allotment increases about comes at a competitor’s expense. Industry-wide, a lot of advance occurs in the international, rather than the domestic, arena. Employees, customers, competitors, government, suppliers, are the main for the hotel business to grow and getting profits.

The Taj Hotel

The Indian Hotels Company Limited (IHCL) and its subsidiaries are collectively known as Taj Hotels Resorts and Palaces and is recognized as one of Asia’s largest and finest hotel company. Incorporated by the founder of the Tata Group, Mr. Jamsetji N. Tata, the company opened its first property. Taj Hotels Resorts and Palaces comprises 93 hotels in 55 locations across India with an additional 16 international hotels in the Maldives, Malaysia, Australia, UK, USA, Bhutan, Sri Lanka, Africa and the Middle East.

Literature Review/ Situation Analysis

Operational management is regularly changing the new challenges for organization in the world. In the present century technology plays a very important role in the growth of every company. The world is shrinking because of technology, and the efficiency of all industries in the world has increased because of technology. In the same way the operation management is also developing with the advancement in technology. The direct result of this is the companies’ development, growth and increasing profits

Operations Management has been recognized as an important agency in a country’s bread-and-butter growth. Operations Management was identified, as account area became added prominence. Rapid changes in technology have an Irish abundant opportunities and challenges, Rapid changes in technology have Irish abundant opportunities and challenges, which accept resulted in the accessory of manufacturing capabilities through new materials, facilities, techniques and procedures. Hence, managing an account arrangement has become an above claiming in the all-around aggressive environment. Operations management has been a key aspect in the advance and abundance in business around the world.

In the Hotel scenario compare with operation management is goods in the terms of services like food, accommodation, like inputs to the customers and the outputs getting revenue to the hotel through customer paid money for the services received by the company.

The Taj hotel is becomes one of the major 5 star category hotels in the world now. Generally the Taj hotel have different departments are present every where in the world. There are mainly two types of departments are exists in the hotel as follows

Operational Department

Administration Department

These two department have again some branch departments are present as follows

Operational Departments

Food and Beverage Service Department

Food and Beverage kitchen Department

Housekeeping Department

Front Office Department

Administration Department

Human Resource Department

Security department

Engineering and Maintenance department

Sales and Marketing department

Cost control department

Provision department

Finance and account department

Food and Beverage Kitchen Department

Kitchen is major department in the kitchen. In this department food will be cooked and maintained in hygiene way and will be served to the guest in the restaurant. In the Taj hotel kitchen they follow specific rules in the kitchen, the have different operation has to perform as it follows

Get permission to use the kitchen.

Wash your hands easily with soap and baptize afore starting your kitchen preparations. Continually ablution easily as bare like affecting the debris can or acrimonious up items from the floor.

Re-read the cooking method several times.

Accept all of the all-important ingredients. Put them out on the counter.

Wash vegetables afore affable it.

use the altered colors ample to anticipate aliment poisoning

use apple-pie surfaces

don’t apprehend in the food

don’t accumulate meat so continued out of the freezer

accumulate your accessories clean

Get out all of the accessories like pans and barometer cups.

Use oven pot holders if demography aliment in and out of the oven.

Clean as you go along.

Do NOT leave pots on the stove afterwards you are done application them.

According to the designation cooks do their Operations in the kitchen. as follows

Executive Chef:

Executive chef is the person is responsible for the total actives in the kitchen. In ample operations, Executive Chef may accomplish authoritative duties alone and administer an amount of chefs. In operation, the Executive Chef or chef may both accomplish authoritative and assembly duties. in the kitchen (planning, conducting, training, hiring/firing).Responsible for Planning Menus (with restaurant mgr). Responsible for Recipe standardization, Has Knowledge and acquaintance in International and bounded cuisine.

Sous chef: He is responsible for in the kitchen functions after executive chef. He will take care of the menu planning and briefing in the kitchen.

Chef de partie: He is the in charge in the cooking in the staff food and head of the department. He will do roaster of the staff and records of food.

Food and Beverage service Department

This is sister department for the kitchen department. This department is having responsible room service, banquets, restaurants, lounges and pubs in the hotel. This department main aim is service food and beverages to guest in the hotel. Food is done in the kitchen and beverages made in the bar. They are different types of restaurants are present in the hotel like service restaurants, Fine dining restaurants, specialty restaurants,

Food and beverage Manger: He is the in charge of all operations are held in the restaurant. He will do supervise of all the staff grooming, menu planning,

The major Opeartion doing in the food and beverage service

The major operation is serving the food and beverage in the restaurant or room service to the guest in the hotel.

Making the cocktails and mock tails in front of the guest.

Arrange the tables for the breakfast, lunch, and dinner.

Making arrangements for the buffet service

Communicate and co ordinate with the guest about food and beverages.

Take feedback from the guest about food.

Housekeeping Department

This is backbone for the hotel industry. This is also one of the important departments in the hotel. The Main aim of the department is to keep the hotel premises and rooms in the hotel cleanly. The Major duty for the housekeeping staff is to clean the total areas in the hotel, rooms, staff areas, lockers in the kitchen. Beside that they are responsible for the decorating with the flowers in the rooms in the hotel.

The major Operations are present in the housekeeping department as follows

Guest Rooms: housekeeping department has to check the guest room before and after guest arrival and departure. Before the guest comes in the hotel they have to clean the room and keep all the amenities in the room and check all the fixtures are working properly or not. Once guest left the hotel they have to clean again room and any leftover by the guest they have to submit in the front office department in the hotel.

Public areas: This public area includes lobby, Gym, lockers of staff, kids club etc. the public areas should clean regular basis in the hotel.

Linen and laundry: This is place where all the clothes will be cleaned and given to the guest and staff of the hotel as well. So this place is the main for the hotel to keep it clean and fresh.

Front Office Department

This is the sister department for the housekeeping department. This department called public face department because once guest comes to the hotel he will see only front office people in the hotel. This department is centre of hotel functions. They have different operations has to perform in the hotel like guest receiving, welcoming, send guest in to room and explain the facilities in the room available in the hotel.

Different Front Office people have to perform different operations doing in the hotel is as follows

Executive Front office Manger: He is responsible person for the operation happening in the Front office department. He will prepare the duty roaster for the staff in the department. Prepare the records and reports of the guest.

Reception: This department will provide the information about hotel and different departments in the hotel. They will attend the calls from the guest and answer and advise them in the corrective manner.

Bell service: He is the responsible for the guest luggage. He will escort the guest till the room and explain the facilities present in the room. He will full details of the safety and security plans also.

Concierge: she is the accountable person for the guest complaints. She will suggest the solution for guest problems. She will advise the guest for the about services in the hotel means about arrange Transportation, Plan for outing, reservation for the table in the restaurant.

Night Auditor: He is the most important back office person in the hotel. He will prepare records of guest accounts and review the revenue of the hotel regularly in the month basis.

All operations aftermath articles and casework by alteration inputs into outputs application an ‘input-transformation-output’ process. Put simply, operations are processes that yield in a set of ascribe assets which are used to transform something, or are adapted themselves, into outputs of articles and services. And although all operations accommodate to this accepted input-transformation-output model, they alter in the attributes of their speci¬?c inputs and outputs.

Outputs

INPUTS

Transformation

In the same way The Taj Hotel has also do the same process like Input-transformation-output. In the hotel industry various departments are present include food and beverage department, housekeeping, front office etc. The Taj hotel also has some of the Challenges and problems facing are as follows

The different the Taj hotel has facing different challenges and problems during in the hotel.

Materials:

This is one of the major inputs for the hotel industry for every department. The Taj hotel also facing with supply of materials from suppliers. In the positive way In the Food and beverage department as in the kitchen department inputs like raw material means vegetable then they transform into the food. It is going to be served to the guest. If the guest likes the food he will have another order and automatically revenue increases.

Information

In The Taj hotel some times they are facing about information about guest as well as employees. And they don’t have proper information other hotels revenue and occupancy. Front office staff has information about all the departments in the hotel and services available in the hotel. So Front office people can easily guide the guest in good manner. The guest also will feel happy to come again. The hotel will get reputed guest regularly. The hotel will get nice name as well.

Customers:

The Taj Hotel people say CUSTOMER IS GOD. So for this situation hotel does not have any difficulty about guest because they have reputed guest. In these manner customers has to satisfy by the hotel staff through services. Once the customer pleased with the staff then customers will advise to their friends to come to the hotel. So customer also one of the best for the hotel to improve the growth and revenue of the hotel.

Facilities:

The Taj Hotel provides several facilities for the customers and staff also. But some of the staff in the hotel feeling uncomfortable with the hotel facelifts. These facilities may vary from hotel to hotel. Generally The Taj hotel facilities include swimming pool, gym, kids club, Wi-Fi, pick up and drop, good ambience etc. The hotel revenue is depending upon the facilities given by the hotel to the customers.

Staff:

In the Taj hotel staff is very experience and more innovative people. And almost all the staff has staying since to many years in the Taj itself. All the operation is done by the hotel staff in the hotel. Every person has their own duties and responsibilities. Everyone has to coordinate and communicate each other for smooth running of the hotel business. Trained Staff will work efficiently to get the goals completed in the organization.

Coordination

This is major function followed in the Taj hotels. Some times there are not appropriate coordination between branches. In the hotel premises they follow exact coordination for get task done. This is also very important for the hotel to achieve desired goals in the hotel. Coordination is the act of organizing, authoritative altered humans or things plan calm for an ambition or aftereffect to accomplish adapted goals in an organization. Coordination is an authoritative action in which altered activities of the business are appropriately adapted and interlinked. In the hotel every coordination in need for employee to employee to get the task done. And also co ordination require between departments to departments also for the hotel.

Communication

Communication is plays vital role in the business. The Taj hotel has very good communication between employees as well departments. So that’s way they become top most hotels in the world. In every department in the hotel must work with proper communication between employees and departments as well. Every operation or work needs corrective communication. The advice action is complete already the receiver has accepted the bulletin of the sender. Thus advice cans action beyond all-inclusive distances in time and space.

Housekeeping
Engineering and Maintenance
Purchasing and cost control
Finance and accounting
Sales and Marketing
Human Resource
Front office and GRE
Food and Beverage
Operations
Function
Results and Analysis

The Taj Hotel operations manager is amenable over the all-embracing circadian operations in a Hotel. The operations manager is ultimately the one amenable for authoritative abiding that aggregate in the hotel runs smoothly, that the The Taj Hotel is in acceptable adjustment and that the hotel is authoritative a profit. Some of the departments that a Hotel Operations Manager oversees cover the foreground desk, housekeeping, animal resources, and aliment service. The The Taj Hotel Operations Manager is as well in allegation of authoritative abiding that the guests accept a absolute acquaintance and will wish to break again. Part of this includes ambidextrous with guests alone including any complaints that arise

The The Taj Hotel Operations Manager position is altered from added OM fields because it deals accurately with aspects in a hotel. This agency that the position can as well crossover into chump account and as well resources. Along with defective the authoritative and authoritative abilities archetypal of OM jobs, a Hotel Operations Manager will as well charge to be acceptable at ambidextrous with humans and a abundant communication.

The Taj Hotel operations Manager Controls all the departments such as aliment production, aliment & beverages, housekeeping, foreground appointment again alone one operations Manager could be appointed. Operations Manager is the one who handles & in-charge all operation of the company. He is amenable of mission & eyes of the company. His duties are to accredit who can handle the accomplishing of the assignment & the arrangement of the operations to the subordinates. Overlooks the operations & guides the arrangement in administration the assembly & deliveries.

The Taj Hotel Operations Managers are personalities who adore alive with people. They accept to adore affair the assorted guests and accouterment for their generally assorted needs. They accept to as well accept personality characteristics including the adeptness to adapt abounding altered operations, assay budgets, break problems and multitask.

The The Taj Hotel operations Manager is amenable for authoritative abiding the hotel is authoritative money and alive aural its allotted budget. The operations Manager will generally be the one to accomplish the alarm on authoritative aliment and will sometimes accomplish added decisions that advice access the advantage of the hotel as a whole.The Taj Hotel operations managers are amenable for authoritative abiding hotel guests accept the best acquaintance accessible during their break in the hotel so that they may in about-face adjudge to book addition break at the hotel. The Taj Hotel operations managers will accomplish decisions that they anticipate will advance the all-embracing acquaintance for guests, including hotel adornment and staffing.

Although all operations processes are agnate in that they all transform inputs, they do alter in an amount of ways. They are

Volume

Variety

Variation

Visibility

Volume

The volume has altered implications whether it is in a top or low.

In the low levels of volume, the company’s operations accept specific characteristics such as accepting low alliteration in the accustomed procedures, anniversary agents affiliate performs added than one job in added words they are multifunctional, beneath approach and top assemblage costs. In the top levels of volume, the company’s operations accept its own specific characteristics such accepting top repeatability in the accustomed procedures, there will be specialization, systemization, added basic accelerated and low assemblage costs. It also important for the business.

Variety

The variety function has its own association as able-bodied whether it is top or low. In the top ancillary of the calibration there will be added adaptability in the procedure, complex, the aggregation will accomplish abiding to needs and of advance the assemblage amount will be high. If the aggregation is in the low ancillary of the calibration the procedures will be able-bodied defined, there will be routine, standardization, and of advance low assemblage cost.

Variation

The variation in appeal has abounding implications that can be apparent from the company’s characteristics. If the aggregation is in the top levels of appeal aberration again it has alteration capacity, apprehension for what the chump ability demand, flexibility, in blow with appeal and top assemblage cost. While in the added ancillary of the scale, the aggregation would accept an abiding and anticipated demand, routine, top appliance of assets and low assemblage cost.

Visibility

The visibility function which is the clue his or her adjustment through its altered stages has its implications whether it is top or low. If it is top the barter accept abbreviate cat-and-mouse tolerance, achievement absolute by chump perception, chump acquaintance abilities are bare and actual important and the accept array is absolutely high. And if it is low, the time lag amid assembly and consumption, there will be standardization, the chump acquaintance abilities will not be actual important or needed, the aggregation accept to accept a top agents appliance and centralization.

A The Taj Hotel operations Manager is amenable for ambidextrous with any complaints guests may accept about their break in the hotel. The operations Manager will allege with guests about issues they may accept and plan with them against the best resolution to the both eration for both parties.

Operations management leads the way for the organizations to accomplish its goals with minimum effort. The role of operations management is to transform a company’s inputs into the ¬?nished appurtenances or services. Inputs cover assets (such as workers and managers), accessories and processes as able-bodied as materials, technology, and information. Outputs are the appurtenances and casework an aggregation produces.

The set of communal administration activities, which are complex in accomplishment assertive products, is alleged as assembly management. If the aforementioned abstraction is continued to casework management, then the agnate set of administration activities is alleged as operations management .Another above cold of operating systems is to advance assets for the accomplishment of customer wants effectively. Inefficient use of assets or bare chump service leads to bartering abortion of an operating system.

Operations management is anxious about with the utilization of resources, i.e. obtaining maximum aftereffect from assets or minimizing their loss, beneath utilization of waste. The admeasurements of the utilization of the resources’ abeyant ability are bidding in agreement of the admeasurements of available time acclimated or occupied, amplitude utilization, levels of activity, etc. Each admeasurements indicates the admeasurements to which the ambient or accommodation of such assets is utilized. This is referred as the cold of resource utilization

In all of operations management’s absolute and aberrant activities there is a charge to acquaint both with centralized agents and with alien customers, suppliers and the broader community. How abundant of a branch manager’s time is spent on altered activities, and how the accent of anniversary is changing. Consulting and communicating with operations agents acutely takes up an ample bulk of these operation managers’ time to ensure that the concrete and the assets of the alignment are able to aftermath the appropriate superior and bulk of appurtenances and casework at the appropriate time and cost, so that chump expectations and requirements can be met. Leadership and administration of assets and humans active is cardinal to the role of an operations manager, which as well involves advancing the affairs budgets, managing the programs, authoritative the employees’ plan and assuredly evaluating the agent performance.

The Operational Manager needs to accept the achievement requirements of the process. The operational Manager is amenable to advise action operators how to accomplish the processes. The operational Manager is amenable to actualize advance accomplishments to abide the achievement. The Operational Manager needs to accept the achievement requirements of the process. The operational Manager is amenable to advise action operators how to accomplish the processes. The operational Manager is amenable to actualize advance accomplishments to abide the achievement issues that are particular during their assay of the action and Action Operator achievement data.

The hotel operations Manager works anon with staff, affective them to do the best job accessible and accommodate abundant account to hotel guests. A The Taj Hotel operations Manager will as well generally authority training sessions with agents to advice them become acquainted with hotel behavior and actuate them to advice the hotel succeed. The Taj Hotel operations managers are not appropriate to accept any specific educational or acquaintance background. Most beyond The Taj Hotels will appoint managers with several years’ acquaintance alive in the hotel industry. Preference for jobs is about accustomed to those who accept a amount in accommodation administration or a affidavit in hospitality.

Conclusion and References

To sum it up all it is clearly says that the Operational Management is plays very important role in the every business in the world. Operational manager is main key for entire business operations. He is the person The Taj hotel is run by the operational departments. These operational departments are only main source of the revenue of the hotel. In every department has different functions has to perform. So the manager played a vital role in the operation in the hotel industry. The Manager wills responsibility for the entire operation done in the hotel. He is the person control and manage all operations performed in the hotel. They follow every same operation in every hotel in all over the world. With help of operation Management the Taj hotel make easy their operations in the business.

For an organization of your choice, outline a new product or process or other form of innovation.Definition of creativity and innovation:

“Creativity is the ability to think new idea. (This includes the ability to rethink an old idea, for example to think of a new application for an existing technology.”

“Innovation is the process by which the new idea is put into practice.”

[ (center of competitiveness, 2001)]

Introduction about OBEROI GROUPS:

Oberoi groups are one of the India’s famous private organizations which step into the different markets in the year of 1934. It has a powerful market position for its products and services. Oberoi hotels are well known for its high quality service and luxury. A distinctive future of the Oberoi hotels is that they got their own highly motivated and well trained staff which provides a good standard quality of services which is really hard to find today.

Apart from the hotel industry, Oberoi groups is engaged in the following business as well,

Flight catering
Airport restaurant
Travel and tour services
Car rentals
Project managements & corporate air charters.

Oberoi groups has won many awards which as follows,

It has been ranked as the best hotel chain (outside the U.S) in Conde’ Nast Travelers 2007 business Travel Awards reader’s survey.
It has been ranked as the best hotel chain (outside the U.K) in the Guardian, Observer and guardian.co.uk Travel Awards 2008 reader’s survey.
Rated as the second best resorts in India. And lots of other awards.

[ (Oberoi hotels and resorts, 2009)]

Mission:

“Our Guests:

we are committed to meeting and exceeding the expectations of our guests through our unremitting dedication to every aspect of service.

Our People:

We are committed to the growth, development and welfare of our people upon whom we rely to make this happen.

Our Distinctiveness:

Together, we shall continue the Oberoi tradition of pioneering in the hospitality industry, striving for unsurpassed excellence in high-potential locations all the way from the Middle East to Asia-Pacific.

Our Shareholders:

As a result, we will create extraordinary value for our stakeholders.”

Vision:

We see an organization which aims at leadership in the hospitality industry by understanding its guests, and designing and delivering products and services which enable it to exceed their expectations. We will always demonstrate care for our customers through anticipation of their needs, attention to detail, distinctive excellence, warmth and concern.

[ (The Oberoi hotels and resorts, 2009)]

A Tragic year:

The Oberoi hotel in Mumbai is situated in the heart of the city and a few minutes away from lots of tourist attractions and the hotel has a beautiful view of blue sea and sky which attracts most of the tourist. And the facilities and services are always in a good slandered. Oberoi hotel is a good competitor for Taj hotel in India.

But the Tragedy on 27 November 2008 was a major break down for Oberoi hotel in Mumbai. The attacks by terrorist in Oberoi trident in India shock the world by killing more than 100 peoples inside the hotel which include foreign tourists. The attack didn’t only spare the life of the innocent people; it destroyed the beauty of the hotel as well. The gun shots, bombs and fire destroyed everything they touched. Terrorist turned the beautiful hotel as the graveyard for the innocent people who died in the attack. After the army killed those gunmen, the hotel reception was almost demolished. Oberoi hotel (Mumbai) was shut down for a while. Oberoi hotel even lost some of its share holders in the market.

Innovation process by the organization:

But all those bad things didn’t stop Oberoi hotel to shut down completely. It was flashing in the news and everywhere that the Oberoi hotel was re opened a year and a half after the terror strike with the complete new look. It was published in the press that, “After extensive restoration and renovation costing over 40 million dollars, the Oberoi opened its doors to guests Saturday, announcing its return with front-page newspaper advertisements that simply said: WELCOME BACK.”

(AGENCY, 2010)

The Oberoi hotel in Mumbai is back into business now. The transformation of the hotel is completely different and is has brand new look. But what about their customers? Did they able to get back their customers? Actually they have a surprising innovation process in the organization which was highlighting in the news and press which is as follows,

“April 22 (Bloomberg) — India’s luxury Oberoi hotel groups will open their flagship Mumbai properties in the next quarter with $6,750-a-night suites and butler services to win back tourists a year and a half after deadly terrorist attacks.

The Mumbai Oberoi will reopen on April 24, charging as much as 300,000 rupees ($6,750) a night for 2,050 square foot rooms, which will include quarters for guests’ security officers.”

(SF Gate, 2010)

Their innovation is that by reducing the rates and price levels, there might be a chance of getting their customers back into the business. This will also lead to attract the new customers into the hotel. This is a simple trick which is used by any kind of business in the market which is also an effective one. Usually in the market in order to sell a new product or increase the sales of the existing product, organizations normally reduce the price level. Most of the consumers fell for the cheap price. But later on the organizations will slowly increase the price level where the customers blindly buy the same product even though when the price increases.

This is the same technique which the Mumbai Oberoi hotel is using now as their innovation. But this kind of innovation is normally used everywhere in this world. Although it seems to be a reasonable one. People who couldn’t afford the price level before terror strikes might be interested as the price level is decreased.

Their innovation in the market:

As there is a recession in the today’s market which is pushing the weakest industries and the organizations out of the market, lots of organizations have been kicked out of the market. This is going to be the hard time for Oberoi hotel to win back their customers. Due to the recession, lots of hospitality industries reduced their price level to attract the tourists.

It is surprising that another famous hotel in Mumbai called Taj Mahal Palace was also being attacked by the terrorist on the same day as Oberoi was attacked and reopened recently. They also have reduced the price level which is more or less same level as Oberoi’s. This is going to be a big problem for Oberoi groups.

The first thought comes in the mind of people about the new Oberoi is that as they have invested lots of money in rebuilding the hotel; they are going to charge more prices for their services. But in this case, they have reduced the price level and given an additional feature like a free butler service. So this might be an advantage for the organization.

The second thought is that the security level. People always criticize the poor security of the hotel. But the chairman of Oberoi hotel groups [P.R.S OBEROI], announced the press about their tight and improved security level of the new Oberoi. He stated to the press that, “A big part of the focus has been to improve security. The hotel now has 150 security cameras, up from just 15 at the time of the attacks. It has 50 security personnel, five times the number it had in 2008. Visitors who drive up are greeted by a big steel gate where their cars are searched. The large windows in the lobby that overlook south Mumbai’s picturesque, crescent-shaped bay are now made from reinforced, shatterproof glass.”

(NDTV, 2010)

Finally more or less they have answered almost every question about the hotel. This may lead the people to think positive about the hotel which is equal to win back their customers.

Disadvantages and advantage of their Innovation:

Even though their innovation seems to be a good one, there are some other few disadvantages exists which are as follows,

It doesn’t fit with the current market situation. Because of the recession, all other hotels have already reduced their price level which makes no difference. Maximum numbers of people will still go for the cheap price.
Their innovation is very simple one which might not suite the current market situation. A huge amount of money has been invested in re-building the hotel, to win back the amount invested and their customers, there should be a powerful innovation must be implemented.
This is also the time where Oberoi’s competitors will try to overtake and try to conquer the market.

But on the bright side, the one major advantage is that the Oberoi’s major competitor called Taj is also facing the same problem. This might be a good chance for Oberoi as it will take time for their competitor to capture the market. In the mean time Oberoi can resolve the problems and get back their market position.

And the other small advantage is that of the new look of the hotel. The old customers may come back to visit the brand new hotel. This will not only attract the old customers, it might bring the new customers as well which is the first step for the success after the tragedy.

How to implement this innovation in the right way:

The following are the major steps to implement the innovation in order to succeed any kind of business,

First of all, decision making on implementing an innovation should be done by the top level management and should be very careful while implementing it.
An innovation will survive in the market, only when the organization understands the market and balance it with the position of the organization in the market. And the innovation should be a powerful one where it should be a new one in the market and an attractive one as well, so that it will get the attention of others i.e. new customers. But the innovation by the Oberoi hotels is like a market tactics where it is used by others in the market. It is not a new one as the innovation is bringing something new where no one has seen it in this world. So reducing the price is not just an innovation but they have given an additional facility like a free butler service for this reasonable price which is a new process for their group. It will attract the new customers as they already know that this is going to be the temporary offer by the Oberoi group.
The innovation should be a flexible one, so that any changes will not affect the any process in the organization. Because the market never remains constant. It will keep on changing according to the time and the factors which influence the change. It should also be flexible with the customers as each and every customer is different from each other. In this point of view, their innovation is quite an advantageous level. They have changed according to the time. Because of their tragedy and the recession in the market, they have done the right thing of reducing the price level and an additional free service. This will always works in the market as we have discussed above. Even though they have implemented an innovation, their process remains constant. May be the look of the hotel changed but the process remains constant. Their service to the customer didn’t change or they didn’t lose the entire market. Nothing changed except the look as it may brings the new customers into the business.
If the innovation is more or less familiar in the market, then at least there should be an improvement in that which will make it as a different one when compared to others. The most important step is that the innovation should never affect the vision, mission and the objectives of the organization. Because the innovation is just to improve the business where the vision, mission and the objectives are the basics to survive in the competitive market. This is a good point where the Oberoi groups did achieve. They made a small difference in their innovation of offering a free butler service which makes a difference from others. It is clear that their innovation is not affecting the vision, mission and the objective of the organization. Their mission is to exceed the level of customer satisfaction. The innovation or the recession didn’t affect their customer satisfaction.

And the other important fact is that their innovation didn’t affect the process in the Mumbai hotel or any other process of their different hotels or groups. In some cases it does happen. An impact on a single process of business will affect the entire business and even result in vanishing the organization from the market. A fine example for this scenario is that the Switzerland was dominating the watch making business in the years of 1968. They had a huge profit and powerful market implementations. They were well known as good inventors. But later in 1980, the market collapsed and lots of watch making employees lost their job. The Switzerland lost their market because of their new competitor called Seiko which grabbed the opportunity of making electronic quartz which was rejected by Switzerland. It is clear that the Switzerland was continuously making watch without changing the fundamental rules and didn’t bother about their external environment. (STUDY UP, 2009). And the market never remain stable, it changes all the time as per the time and the need of the customers. Especially in the hotel industry, the market never remains constant. So if an organization fails to take a look over the external fit or fails to look after the defects which affects the organization’s process, then there is a plenty of change for their competitors to take over their business and leads the market which will end up in winding up the business.

When comparing to that example, it is clear that the changes in the Mumbai Oberoi hotel didn’t chance any process in the hotel as well as the other hotels of its own group. Even though they have invested a lot of funds in re building the hotel, they didn’t suffer that much. It is in the press that they are planning to open new hotels in India and abroad in a very few years. “The Oberoi Group is planning to launch a luxury hotel in Goa. Goa is going to witness development of 12 new hotels over a period of 3-5 years, according to a survey by Federation Of Hotel and Restaurant Associations Of India and HVS International. The Oberoi could be one of these 12 new hotels.” (ITOPC). It shows that how powerful their financial background is even in their tragic time period and their excellent survival in the market.

And one of their major competitors in India is Taj hotel groups which were also attacked by the terrorist at the same time when the Oberoi was. This is a big advantage for Oberoi groups as their competitor is also facing the same problem. It is interesting that the innovation by the Oberoi hotel is more or less familiar with the Taj hotel groups where they have also reduced the price level after they have reopened their hotel in Mumbai. Taj hotel has reduced their price level to 3, 50,000 rupees per night where Oberoi’s price level is 3, 00,000 rupees per night. The price level of Oberoi is little less when compared to the Taj hotel groups which is an advantage for Oberoi groups. In addition the Oberoi hotel now offers a free butler service for that reasonable price which s also an advantage and will be an effective one in the market. There is a scope that it will grasp the attention of the customers in the market and brings them into the business. In this way they have made a difference which is an advantage for Oberoi groups as we have discussed above that the majority for people always falls for the cheap market price.

But only reducing the price level is not enough to survive in the competitive market. In order to face the market in a recession time, there should be a change in the general process in the organization, more importantly not the main process of the organization. For example as the Oberoi groups comes under the hospitality industry, it has a major opportunity to survive even in the recession time. There is always a scope for tourism and hospitality industry no matter what is happening in the market. Even though there is a recession in the market, Oberoi hotel groups are in the bright side where the hospitality industries are less affected when comparing to other industries.

Understanding the problem of Mumbai Oberoi groups, what they could do now is to make a difference in their customer satisfaction level. The hotel is already known for its customer satisfactory level. Even though a small good change in a good process will be more effective than a normal one. By improving their customer satisfaction, they might be able to win back their customers which are equal to achieve their goals and objectives. (Vision, mission).

It is very important that Oberoi hotel groups should not keep this low price tactics for a very long time. They should get back to their normal price as soon as they win back their customers or the market come back to the normal state. As they have invested lots of money on the Mumbai hotel, they should also look over the future and make some long term plans as well. They should not only concentrate on winning back their customers, they should also look for winning back their money which is invested in re-building the hotel and capture the market.

Only bringing something new to this world is not easy as it seems. It should also reach the customers knowledge without which even a powerful innovation is nothing but a waste idea. In today’s world there are plenty of ways where anything could be passes to the public knowledge. There are lots of media for everything. In this case, the Oberoi hotel groups used lots of media to pass their innovation in the knowledge of the people. This could also be a threatening factor as this may lead to the duplication of ideas by the other organizations in the market. But in this case, most of the percentage falls on the positive side which is a good favor for the Oberoi hotel groups.

Conclusion:

The Oberoi hotel group seems to be a struggling fish in the hooks of the terrorism and the bad market. But it is not yet pulled out of the water (market). It is pulling itself to survive. The hotel was being attacked by the terrorist and completely destroyed, at the time they were ready to get back into the business, the market was far worse than they expected. But they didn’t slip out of the market. With their powerful financial background, they are back into business and stepping into their normal level which shows that they could do better in the near future.

Their innovation was a simple one it seems to be an effective one in the market. It didn’t affect any of its process and the innovation didn’t cause any big changes in the organization. These are the very basic points for bringing the innovation in the market which are all achieved by the Oberoi hotel groups. And their major competitor is also facing the same problem which is also a positive climate for the Oberoi hotel groups in the market. May be their hotel was completely destroyed by those terrorist but they are back into business with a promising high tight security which helps the public to have a confident to walk into the hotel again without any of those death fear. Though there are some threats in the market, it is just a stepping stone for the Oberoi hotel groups for their bright future.

On an overall basis, we have covered everything about the basic idea of the Oberoi hotel groups and their marketing position. We have also discussed about their innovation process and how they have implemented their innovation in the market and how successful it worked and also given a suggestion of how it could be more effective. It is important to note that there is always a bright fortune for the hospitality industry in this world as the human expectations are always a head then their imagination. So there is a bright scope for the Oberoi hotel groups which is very near and crystal clear.

Bibliography:
(2010). Retrieved APRIL 1, 2010, from NDTV: http://www.ndtv.com/news/cities/a-mumbai-hotel-reopens-grander-than-before-20545.php
AGENCY, T. N. (2010, APRIL 24). TREND NEWS AGENCY. Retrieved MAY 1, 2010, from http://en.trend.az/regions/world/ocountries/1675687.html
center of competitiveness. (2001). Retrieved 4 13, 2010, from http://www.cforc.org/newsdata/news.asp?StoryID=73
ITOPC. (n.d.). Retrieved 4 28, 2010, from ITOPC: http://www.itopc.org/travel-trade/new-hotels-in-pipeline.html
Oberoi hotels and resorts. (2009). Retrieved 4 25, 2010, from http://www.oberoihotels.com/awards.asp
SF Gate. (2010, APRIL 21). Retrieved MAY 1, 2010, from http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2010/04/21/bloomberg1376-L19D6Z1A1I4H-1.DTL
STUDY UP. (2009). Retrieved 4 11, 2010, from STUDY UP: http://studyup.cut-the-knot.org/factors/externalenvironmentalfactors.html
The Oberoi hotels and resorts. (2009). Retrieved 4 25, 2010, from http://www.oberoihotels.com/about_us/mission_and_vision.asp

The NZ aviation sector has grown from strength-to-strength in the recent years. New Zealand has a very high involvement with the aviation industry than many other countries. The aviation industry over here is world-class and the kiwis are air minded too. This made the aviation business a large one. Moreover, from the past few years, the innovation and technology has allowed the aviation industry to grow significantly.

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“Air NewZealand” has a very special brand image among the New Zealanders and it is the sole largest airline in the country.

The report is presented by Narendra Inti, a PG Dip Business student at UNITEC, Auckland. The first part (Part A) of the report speaks about the history of Air NewZealand and provides an overview about the Managing Team, the organization’s mission-vision-values and the prime elements of the organization’s existence. By identifying the key values, the report also focuses on the key strategic-elements of the organizational strategy that helped to establish the firm.

Environmental scan, both at the micro and macro levels is included in the report. Environmental analysis would expose the issues that need to be addressed for a business to become successful. The report also emphasizes on those areas in business where commendable performance is required to forecast success.

2. INTRODUCTION

The “Air NewZealand” originated as TEAL (Tasman Empire Airways Limited) in 1940. TEAL was a flying-boat organization operating between Australia and NZ. Later, in 1965 TEAL was completely owned by NZ government and took the new name as “Air NewZealand”. Though it was privatized largely in 1989, the majority stake was took over by the NZ government in 2001 after the tie up with Ansett (an Australian carrier company) failed miserably due to the financial issues that prompted to fold the operations of Ansett. The recent figures show that about 12.8 million passengers are carried annually by “Air NewZealand”. Currently, it operates on a mighty fleet that comprise of the “Boeing-747”, “Boeing-767”, “Boeing-777” and an “Airbus-A320” on the international routes.

“Air NewZealand” also operates domestically with its regional subsidiaries:

Air Nelson

Eagle Airways

Mount Cook-Airline

“Air NewZealand” achieved the “Airline of the Year” awards for the years of 2010 and 2012.

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2.1 COMPANY OVERVIEW

Company name: Air New Zealand Limited

Company Type: Public

Company Size: 10,001+employees

Industry: Air lines/ Aviation

Website: http://www.airnewzealand.co.nz/

Registered Office

Air New Zealand House185

Fanshawe Street, Auckland1010

NEW ZEALAND

Stock-Exchange Listing

NZX trading code: AIR

ASX trading code: AIZ

2.2 Key People

CHIEF-EXECUTIVE OFFICER: Rob Fyfe

CEO DESIGNATE : Christopher Luxon

DEPUTY CEO : Norm Thompson

CHIEF FINANCIAL OFFICER : Rob McDonald

GROUP GENERAL MANAGERS:

Group General Manager Short-haul Airlines : Bruce Parton

Group General Manager People & Technical Operations: Vanessa Stoddart

General Manager Airline Operations and Safety : David Morgan

General Manager Marketing and Communications : Mike Tod

General Manager Strategy : Stephen Jones

2.3 OBJECTIVES

The global economy has been facing a challenging environment due to the ongoing recession and this combined with a heavy competitive market has slowed down the economic activity. This has resulted in a great change in the people’s attitude towards the mode of travelling. The highly competitive market has compelled the organizations to deal more strategically. Present global economic crisis has limited the people’s ability to spend and so they look for something that is cost effective and at the same time very useful.

The report mainly focuses on the “strategic-foundations” of “Air NewZealand”. Narendra Inti has conducted the PESTEL analysis as a part of the environmental scan while dealing with the “macro-level” analysis of the “Air NewZealand” followed by the Porter’s five frame-work to analyze at the micro level. The findings from the environmental scan are used to address the key level strategic issues and thereby help the organization to grow and be successful consistently.

3. STRATEGIC FOUNDATIONS

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An organization comprises of the following “strategic-foundations”

Mission

Vision

Strategy

Values

3.1 THE MISSION
Air_New_Zealand.png

The tag line “Worlds warmest welcome” clearly suggests that “Air NewZealand” is committed to provide the best service to the people and that is what they have been doing since their inception. About 13 million people all around fly on “Air NewZealand” , annually. It could happen only because of the warmest service they have been providing and this is what is differentiating “Air NewZealand” from the other airlines. The commitment towards their mission “Worlds warmest welcome” has fetched them international acclaim. It is not just the kiwis who love to enjoy the service of this airlines, also people from many other countries do.

Apart from the best airlines award for the years of 2010 and 2012, it has been continually winning “Best Passenger-Service Award” presented by ATWMA (Air-Transport World magazine-award).

3.2 THE VISION
Vision of “Air NewZealand”:

“Air NewZealand will strive to be number one in every market we serve by creating a workplace where teams are committed to our customers in a distinctively New Zealand way, resulting in superior industry returns.”

Values
3.2.1 PROVIDING THE BEST SERVICE

Air NewZealand’s approach towards the customers begins by knowing the customers need. They enquire its customer where they are traveling and how many people, why & when, and what is that they value during the journey. This helps them to decide the network and their schedule; and the service and process is tailored to match needs of the customer during the journey. Every employee of Air NewZealand commits himself to make-a-difference to their customers and their business.

3.2.2 COMMUNITY SUPPORT

Air NewZealand is the top sponsor of most of the major events conducted in New Zealand. It holds a record for sponsoring a lot of groups and supporting many charities by donating huge amounts and providing travel assistance.

3.2.3 EnvironmentAL CARE

Air NewZealand is highly dedicated to minimize the aviation’s impact on the environment. ANZET (Air NewZealand Environment-Trust) has been making donations to support the development for conservation & the research projects in NZ.

3.2.4 Customers AIRLINE

They value their customers and that has made them the customer’s choice. They constantly study about peoples changing tastes and give top priority to the customer’s needs. That is the reason their quality in service has been always above the customer’s expectations.

3.3 KEY ELEMENTS OF PLANNED STRATEGIC DIRECTIONS

“Air NewZealand” want to build a competitive advantage in their businesses with the help of its employee’s innovation and creativity.

“Air NewZealand” is highly committed to champion and also promote NZ and kiwis, business and the culture both at home and abroad.

They believe in teamwork and its great committed team aiming for the growth of its organization and vitality of New Zealand.

“Air NewZealand” wants to always be the customer’s choice of airline, when people travel to/from or within NZ.

4. ENVIRONMENTAL SCAN

The Environmental scanning helps to find out current or forthcoming changes because it thoroughly focuses on those areas the organization might have neglected previously. So there are 6 elements/segments of the generic environment that has its effect on an organization. The impact caused due to these segments differs from organization to organization. The organization need to mainly concentrate on researching, monitoring, reporting and analyzing the data. The resultant findings of this analysis can be used as the tools that convert uncertainty into strategy (Aaker, David, Michael and Mills, 2005).

4.1 MACRO ANALYSIS

Business environment surrounding an organization comprises of external influences which affects an organization’s decisions and its performance. So the PESTEL analysis provides a methodological approach to find out and analyze those macro environmental segments that could affect the strategies involved in business, and also helps to forecast how these factors might influence the performance of the business in the current and future scenarios.

The environmental study starts with the study of six factors of the PESTEL analysis. The six factors are interrelated to each other and each factor cannot be viewed as a unique one. During the analysis one need to take in to consideration a lot of macro-environmental-factors so that the strategic process of policy formulation can be more useful to the current and future scenarios.

The factors discussed below gives an insight for the strategy makers as to what to incorporate in the organization strategy to make it efficient and those environmental factors that are very essence of a business strategy. According to their organization needs, the strategy makers need to assess other factors too that could have the potential to influence the organizations output, which is not mentioned below. Therefore the mantra is to concentrate on the key factors that need to be addressed in order to be successful.

(Grant, 2010)

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4.1.1 POLITICAL factors

Political factors can have either a positive or a negative impact on a business and that pure depends on the current scenario in a country .So, understanding and monitoring the political environment is very crucial for every business because this factor can significantly affect any business. Some key questions that are a part of the political environment which the strategy makers need to find the answers before proceeding further are: “whether the government is stable?”, “what type of a government is it?”, “what type of economic policy do they have?”, “What type of trade policies the government has?”, “what are the Diplomatic proceedings in the neighboring countries?”. Once the strategy makers get the answers for the above questions, they need to incorporate the findings in the strategy making process and this helps them to forecast the future.

Almost 74% of the stake of “Air NewZealand” being owned by the NZ government, there seems to be no trouble for “Air NewZealand” from the political front as for as New Zealand is considered. Moreover policies were framed to benefit the organization since the NZ government strongly believed that it is something related to the integrity of the nation. But the organization needs to constantly monitor and adapt to the policies of the overseas governments as the policies, taxes and regulations change very frequently.

ECONOMIC factors

The economic factors which can affect a business and the factors that need to be considered are: demand for service or goods, regulation, interest and the inflation rates, access to the credit and un-employment proportion. The above mentioned factors can directly affect the market competition, demand and the supply.

Though the global economy is gloomy, the local economic conditions in New Zealand are far better than many other developed countries. The major areas like Australia, Singapore and Gulf countries where “Air NewZealand” flees to and from are also in good shape economically. So there are no concerns as of now for “Air NewZealand” in this segment.

4.1.3 SOCIAL factors

Social factors are very crucial and they can play a key role in influencing a business. Social factors include several components like lifestyle, trends, wealth distribution among the people and ethnicity. Human beings are social animals and so the social factors that influence are interrelated to people’s culture, opinions and changing tastes.

The “Air NewZealand” is very good at marketing themselves in a way that appeals to the people. They focus on diverse cultures and that can been seen in their service, which address and values the culture. To give an example, during the recent rugby world cup few planes were painted in black to support the “All Blacks” rugby team of NZ. This clearly shows that they give a lot of importance to incorporate the social factors in the strategy making process. Also the way “Air NewZealand” staff address the people of different cultures is another classic example too.

4.1.4 TECHNOLOGICAL factors

Businesses should continually implement new technologies to give the best service in the market. Companies with good vision look out for the best technologies that are apt for their business and implement those technologies to take an advantage in the market.

“Air NewZealand” is very good in terms of implementing new technology. As their company vision states, they always strive to provide competitive advantage blended with creativity and innovation. When few airlines are still with old technology in the seating facilities…etc, “Air NewZealand” constantly monitors the technology advancements and updates them regularly to their services.

4.1.5 DEMOGRAPHIC factors

New Zealand is a place of great ethnic mix. People from all over the world have come and settled here. Every year there is a great increase in young generation pouring from all the over the world for good study and job opportunities over here. This is a great advantage for the “Air NewZealand” as the immigrants fly to home countries very frequently. This is also a reason that boosted up the “Air New Zealand” business.

4.1.6 Legal factors

The legal factors include the regulations of employment, health, safety and service. “Air NewZealand” has to abide by the “New Zealand Civil Aviation Act 1990”.

4.2 MICRO ANALYSIS

The micro-environment involves organizations/individuals that are dealt by the firms regularly. Stakeholders groups in business viz. suppliers, competitors, distributors, employees and customers come under the micro-environment. All the stakeholder groups can show their impact on a firm directly. Managers need to often interact with the stakeholders since their decisions have direct impact on the business. Therefore the micro-environmental factors play a critical role in organization’s behavior and success.

Many frameworks and models are recommended to analyze an organization’s micro-environment where it operates.

Porter’s Five Forces Of Competition Framework

In 1979, Michael.E.Porter, a professor from Harvard Business School proposed a frame-work known as “Porter Five Frame-Work”. This framework was very useful for business strategy-development and for the ongoing industrial-analysis. These five forces are useful to analyze the competition in a given environment of the market and help to improve the strategy (Michael, Duane, and Robert, 2005).

The forces of “Porter’s five” framework are based on the “S-C-P paradigm” (structure and conduct & performance)” in organizational-economics. This can be applied to diverse scenarios and different range of problems and thereby help the businesses to be more profitable (Porter, 1979).

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The five forces were referred as micro-environment by Michael E.Porter. The micro-environment consists of the forces that are close to the organization which can affect the ability of an organization to serve the customers and its profitability. Firms would be able to apply its core competencies, network or the business model to gain profits over industry average.

4.2.1. Bargaining power of suppliers

The term “suppliers” can be referred to all the sources of input required to provide the goods or the services. A service industry needs infrastructure, labor and the other supplies. This requirement has lead to supplier-buyer relationship between the firm that provides material and the industry that provides goods or services. If the suppliers are powerful, they could exert influence on the industry that provides goods or services, by selling the material at very high prices with an intention to capture the industry’s profit.

Supplier bargaining-power could be high in the following scenarios:

If the market is completely dominated by very few giant suppliers.

If there are no substitutes for those products.

If the buyers are fragmented, the bargaining power would be low.

Sometimes switching to a different supplier could cost more.

In the case of airlines, are there several-buyers and few principal-suppliers?

Yes, in the case of airline industry there are many buyers like “Air NewZealand” and only two suppliers viz Boeing and Airbus. So the power is in the hands of those two suppliers.

Is the supplier’s brand image strong?

Yes, Boeing and Airbus have a very strong brand image and they are the only suppliers of aircrafts for many airline service providers like “Air NewZealand”.

Can the suppliers raise prices?

Suppliers have all the power to increase their prices, but currently they might not do so as the airline industry is struggling with low profits due to heavy competition.

Can the suppliers find new customers?

Yes, it is easy to find new customers but not many are jumping into this sector so easily.

4.2.2 Bargaining power of buyers

The buyer bargaining power of Porter’s five forces refers to the consumer’s pressure in-order to get the better quality service and lower prices. According to the Porter’s framework of industry analysis, “buyer bargaining power” is one among the five forces that shape the structure of a completion in an industry. The main idea here is “buyer bargaining-power” in any given industry affects the competitive-environment for the seller and thus influencing the seller’s profitability. If the buyers are strong, they could pressure the sellers to improve quality of the product, provide more services and to reduce the prices. Buyers play a key role in creating demand in an industry.

Are there very few leading-buyers and many sellers in airline industry?

The entire population of New Zealand and other users from many different countries form the customer base and this is too high when compared to airlines operating.

Are the services standardized?

Yes. The customers demand a wide range of high quality services at low prices.

Are the buyers forced to be tough?

No.

Is it easy for the buyers to switch their suppliers?

Yes. There are many airlines operating currently and so the customer can easily switch if they find that they are not getting what they prefer from the current airlines.

4.2.3 Threat of NEW ENTRANTS

The new entrants can be referred to the new firms that pop in and emerge in any given industry and thereby giving a tough competition to the existing already established firm. New entrants cannot actually compete on equivalent terms on the already established and recognized firms. There are many risk factors involved that need to be considered by the new entrants. There is minimum scope for the new entrants to come up on a large scale.

The three main barriers for a new entrant are brand loyalty, economies-of-scale and absolute-cost-advantages (Hill and et al, 2007). Going by the current scenario, it is not so easy for the new entrants to survive in an airline industry, because this particular industry is very congested and has very high entry barriers. Moreover airline industry is less attractive due to high initial investment required and very less profits to gain. So there is no threat of new entrants to “Air NewZealand”.

4.2.4 Threat of substituteS

The substitute refers to the alternatives that are available in the market to the buyers.

The alternatives that are available for the customers are referred to as substitutes. Speaking in context to airlines, alternative transport methods like roadways, railways and waterways can be a threat to domestic airlines as a train or ship can be used for leisurely travel purpose. But still airlines secure the position of fastest mode of transport and it would continue its dominance in the international market of transport.

4.2.5 RIVALRY BETWEEN ESTABLISHED COMPETITORS

The business that is providing similar services or goods is referred to as rival. It exists if there are more many firms in a market. These firms constantly try to capture the markets of the other firms to better their position and get an edge over the others. Normally the competition is on the product basis, cost, customer service and promotional campaigning to achieve a better place in the market. This force gives a clear idea about the competition intensity between the current players in the market. High competition results in lowering the prices & margins and this affects the profitability of every single firm in the industry.

Though “Trans Tasman” market zone in airlines is completely dominated by “Air NewZealand” and “Qantas”, other competitors like “Virgin Blue” and “Emirates” play a vital role in determining the prices in the market.

Competition and intensity of rivalry in airline industry is likely to be high when the following happens:

Competition Structure

The rivalry would be more when it has small sized competitors’ vice versa when there is single largest market leader.

Strategic objectives

The competition increases if the competitors take up fierce growth plans. It would be a different scenario if they only aim for the profits. In the airline industry, the competition is more focused on advertising, pricing structure and customer satisfaction.

The main competitors of “Air NewZealand” are listed below:

Qantas Airways & its subsidiary Jetstar Airlines

Virgin Australia Airlines

Emirates Airlines

5. KEY STRATEGIC ISSUES

The aviation industry has seen drastic changes from the recent past. Airlines have become very competitive as the airlines are more focused on capturing the market share of the others. As far as the “Trans Tasman” zone is considered, the environment for aviation is in good shape.

Understanding The Markets and Customers

To survive and effectively compete in the aviation sector it is essential for the airlines to understand the market and the changing tastes of the customers. Airlines can retain a customer only if they provide the best in their service. So retaining has become one of the key issues for airlines. Therefore, “Air NewZealand” should constantly check their SL’s, frequentness and connectivity. They should constantly survey and update accordingly to meet the customer taste and expectations.

Increasing use of loyalty marketing

A concept that aims to encourage the customers to use a product or service frequently by instilling a loyalty sense in them is called “loyalty marketing”. There are various loyalty program adapted by the airlines. “Air NewZealand” provides a “frequent-flyer” loyalty program that gives a chance for the customers to win points during their trips. Once the customer has sufficient points, he could redeem them in order to avail some free benefits.

re-align procurement strategies

Recession has taught many good lessons. It has clearly shown how trends could become volatile. The current global economic crisis has urged the aviation industry to realign the procurement-strategy. Therefore it is very necessary for “Air NewZealaand” to establish an efficient strategy and procurement system in order to succeed in any uncertain conditions and be successful.

6. CONCLUSION

Aviation industry is a very hi-fi industry. “Air NewZealand” has to make sure that their staff is providing the “WOW” factor in their service that a customer would always expect. They need to strategically plan all their moves and should always strive to provide the best market rates and the best service in the market.

“Air NewZealand” has been constantly receiving aviation industry awards for its operations and it has got excellent honor of services. It enjoys a giant 52 % of total market share in the “Trans Tasman” aviation zone. Therefore “Air NewZealand” should always strive to be the best by providing the best.

Euro Disney and other Disney are subsidiaries to Walt Disney Company. This is a case study based on Euro Disney to critically analyse and answer question of the Not So Wonderful World of EuroDisney- Things are Better Now at Paris Disneyland. EuroDisney first year of operation was faced with several factors in which hindered their financial growth and success in the first year of operation.

The case study will analyse and answer several questions relating to the Not so Wonderful world of EuroDisney. The questions are broken down in to five which are: 1) Why was Euro Disney performing poorly during its first year of operation? Recommend and propose strategies and suggestions to improve the situation? 2) To what degree do you consider that these factors were a) foreseeable and b) controllable by either Euro Disney or the parent company Disney? Evaluate the cross-cultural marketing skills of Disney! 3) Do you think the new theme park would have encountered the same problems if a location in Spain had been selected? 4) If you were the business development manager, what would be the major consideration you would go through before selecting a location for the next Disneyworld? 5) From your discussion select a location you think will be the next Disneyland site.

By the end of the analysis, a clear understanding it to be derive on what lead to the not so wonderful world of EuroDisney, and shading light on mistakes made by the parent company.

CHAPTER 1
INTRODUCTION

The Walt Disney Company is the parent company of Euro Disney and other Disney company in various countries making it a network of international family entertainment network in all house hold around the world with four business diversification which are media networks, parks and resorts, studio entertainment and consumer products. Disneyland, Disney world and all places Disney have been known as the happiest place on earth, the goal of Walt Disney is opening Disneyland was not to just be a theme park, but to be a theme park that the entire family could enjoy. Although the Walt Disney Company was founded in 1938, it was not until 1952 that the theme park, Disneyland, was opened to the public. When Walt Disney opened an amusement park in the middle of Southern California orange groves in 1955, he changed the way that Americans, and the world, viewed such entertainment. Once the domain of carnival hucksters, amusement parks underwent a significant makeover at the hands of the head of the Disney Studios

Walter Elias Disney is a pioneer, innovator and possessor of one of the most fertile imaginations in the world. He was an American film producer, director, screenwriter, voice actor, animator, entrepreneur, entertainer, international icon and philanthropist. Disney is famous for his influence in the field of entertainment during the twentieth century. As the co-founder (with his brother Roy O. Disney) of Walt Disney Productions, Disney became one of the best-known motion picture producers in the world. The corporation he co-founded, now known as The Walt Disney Company, today has annual revenues of approximately U.S. $35 billion. Disney is particularly noted for being a film producer and a popular showman, as well as an innovator in animation and theme park design. He and his staff created a number of the world’s most famous fictional characters including Mickey Mouse, a character for which Disney himself was the original voice. He received fifty-nine Academy Award nominations and won twenty-six Oscars, including a record four in one year, giving him more awards and nominations than any other individual. He also won seven Emmy Awards. He is the namesake for Disneyland and Walt Disney World Resort theme parks in the United States, Japan, France, and China.

In April 1992, The Walt Disney Company and Affiliated Companies opened a new park for European visitors. It was located by the river Marne some 20 miles east of Paris and was designed to be the biggest and most lavish theme park that Walt Disney Company had built as compared to other sister companies (Cateora, & Graham, p.615). Nevertheless, the development of big theme park in Paris instead arise Euro Disney’s start up problems because the management has done some mistakes on project plan. They could not arrange a proper plan. Since the management not able to purposely consider certain outcomes, there was a something wrong in planning Euro Disney. The Disney management also did not have ample assumption about the European market as well as they did for their parent mark.

CHAPTER 2
2.0 CASE STUDY

The not-So-Wonderful World of Euro Disney – Things Are Better Now at Paris Disneyland.

2.1 The questions of case study to be answered:
Question 1

Why was Euro Disney performing poorly during its first year of operation? Recommend and propose strategies and suggestions to improve the situation?

Question 2

To what degree do you consider that these factors were a) foreseeable and b) controllable by either Euro Disney or the parent company Disney?

Question 3

Evaluate the cross-cultural marketing skills of Disney!

Question 4

Do you think the new theme park would have encountered the same problems if a location in Spain had been selected? Discuss!

Question 5

If you were the business development manager, what would be the major consideration you would go through before selecting a location for the next Disneyworld? From your discussion select a location you think will be the next Disneyland site.

CHAPTER 3
3.0 ANSWERS TO CASE STUDY
3.1 Question 1

Factors that contributed to Euro Disney’s poor performance during its first year of operation.

Euro Disney’s factors of poor performance marketing mistakes were present throughout the whole inception of Euro Disney. Euro Disney were faced with several affecting factors which contributed to the failure or poor performance of the company, the factors came along with location, price, and lack of research in exchange rate, as well as the style of the theme park all played roles in the lack of success experienced by Euro Disney. The factors that played into the unsuccessful first year could have been foreseen and somewhat easily by Euro Disney or the parent company, the same goes for their being able to control them. Hostility among the French had risen even as the plans were being set as it was stated earlier, that they did not want American imperialism invading their country and culture. Cateora & Graham, p.614 reports, “Paris theatre director Mnouchhkin” descried Euro Disney as a “cultural Chernobyl.” In fall 1989, during a visit to Paris, French columnist pelted Michael Eisner with eggs. The joke going around at the time was, “for Euro Disney to adapt properly to France, all seven of snow white’s dwarfs should be named Grumpy …”

Location

Many factors contributed to Euro Disney’ poor performance during the first year of operation and many of these factors could have been alleviated if the proper factors would have been looked at previously. The first problem was the demographics and subsidies, and because the French government made Disney an offer it could not refuse, they located Euro Disney 20miles outside of Paris, a location that was thought to be very convenient. It played a negative role in the success in the success for Disney. How many people go to Paris to get glimpses of American theme parks? Most of the tourist going to Paris would spend time travelling the city and its wonders. About 17 million lives less than two hour drive from Paris and another 310 million can fly there at the same tie or less. The French government offered the company more than $1billion in various incentives; all in the expectation that project would create 30,000 French jobs. “The land came at rock bottom prices, cheap loans were made available, and a dedicated high speed TGV and suburban railway link was also offered by the French. France gave Disney an offer they could not refuse, overlooking the over value franc, bad weather, French people not being known for their hospitality and occasional anti-American demonstration by angry farmers because French agricultural subsidies had been cut, Paris was still chosen to be home of Euro Disney. The climate in Paris was also unsuitable and off-season attendance was way below expectation. Many landmarks events were competition to Euro Disney’s opening year, such event was the one held in Spain. “Spain held the world fair in Seville and Barcelona was home to the 1992 Olympics which took tourists to area other than Paris.” All in all, 1992 was not looking good for Euro Disney in terms of success.

Foreign uncontrollable and Exchange rate.

In Paris in regards to economic forces, legal forces, competition, and culture can be held accountable for Euro Disney misfortune. In opening in the summer of 1992, Europe was entering into recession and this caused income from catering, merchandise, including souvenirs and foods, hotels to be way below that was expected. High interest rates also caused many currencies to devaluate against Franc leading to more financial difficulties for Euro Disney. In negotiation with France, lawyers were used excessively. The rigid legal approach was offensive to the French, who, like most Europeans consider depending on lawyers to reach a conclusion to be last resort. Despite the foreign market uncontrollable hindering the park from the beginning, when Euro Disney opened in the summer of 1992 many marketing and operational errors factored into the parks unsuccessful opening.

Advertisement made by Euro Disney

Another controllable factor was the advert made by Euro Disney, which factored the poor the poor performing by the Euro Disney in Paris. Euro Disney advertising had emphasised Disney image as an alluring bit of American rather than an explaining to potential customers what they can actually do for the park. France (2004) reports, “every surface that could possibly have an advert placed on it clothing, buses, taxis, myriad walls and billboards, even the snow you sky on now hawks something.” According to Wikipedia encyclopaedia, A?Advertising is the promotion of goods and services, companies and ideas, usually performed by an identified sponsor. Company are bombarding us with thousand of advert with only one intention, to persuade us to buy their product. Euro Disney’s image marketing did not explain to Europeans that the theme park was or what attractions it had to offer the European consumer. The company advertising focused on the size of the park and the glamour behind it that this poor marketing strategy hurt over all business. No one in France cared that Euro Disney had cost over $4 billion and that its 4,800 acres include five separate recreation areas, six hotels with room for 5,200 people in all, an entertainment centre, a 27 hole golf course and a wooded campground. The marketing strategy in America was used in France and it backfired when the French visitors stayed away from the park. Yes advertising bombards us everywhere, but it is not without control and regulation by the government, businesses, and citizens. This opens one of the major issues in advertising, “the question of law and ethics.” The sensitivity perceived by the French in relation to the advert was that, it did not tell them what the citizens will benefit from the EuroDisney, and also the French were not happy with how the Americans use their own advertising style.

Poor Management operation

The management of Euro Disney had difficulties due to cultural and lack of understanding of the French culture. Operational errors that easily could have been avoided accounted for more troubles than were expected in the Euro Disney. In regards to employees, alcohol, admission and hotel prices, and breakfast in the hotel, staffing problems, and regulations regarding pets, many problems cause the Euro Disney misfortune in the first year. The employees dressed code enforced on employees prohibited facial hair and limited the use of makeup and jewellery. The lack of understanding by the parent country in regards to the dress culture of the French affected customer patronage. The French did not think dress standards like that existed outside the west military academy. Also the ban on alcohol caused astonishment in a country where glass of wine is normally given for launch and it is necessary as a fork for eating. However banning the alcohol in this theme park could have ever been a consideration is unbelievable and since it was a major issue, this policy of not serving alcohol in the park was also a hindering factor at Euro Disney. Another factor that leads to poor operation was the price system. Prices involve around Euro Disney were also the cause of it not performing well and not generating profit. “consultant who studied the park say that its high admission price 30 percent more that Disney Orlando makes visitors keen to take as many rides as possible, so they spend less time shopping for Mickey Mouse ears and such”. Prices at the Disney hotel were high compared to other hotels in Paris, the hotels in Paris ranges from $180 to $380 in the Paris metropolis.

Staffing problem

One of the major factors in the customer relationship in the international marketing, even at the domestic market is the customer- staff relationship. At Euro Disney, there were staffing approach problems too. The company had tried using the same team work model it did use either in America or Japan, which did not work in France. Within the first nine weeks of Euro Disney’s operation, roughly 1,000 employees, 10 percent of the employee left. People were leaving because they felt they were not being understood and they were not being treated in an appropriate manner that was satisfactory to them. The company actually taught that Monday would be a les busy day, while Friday a hectic busy time, but the reverse was the case, Monday turned out to be very busy at the Euro Disney.

Unforeseen issues

Factors that really could not be seen by managers included the approach to European recession, the Golf war in 1991, and increased interest rates. External factors that affected business were also the devaluation of the Franc currency in the international market, which lead to competitors to draw the attention of customers to the various sites. These competitors were the world’s fare in Seville and the 199 Olympics, which was held in Barcelona. (Cateora, & Graham, p.615)

Ethnocentrism

The managers of Disney and Euro Disney used their way of doing business, their cultural belief and ethics, and what they know and are used to in order to try and get another country to do the same. Cateora & Graham describes in more detail, “A brainstorming, kick the door down attitude seemed to reign amongst the U.S. decision makers.” The authors referred to one former manager’s comment, “We were arrogant, it was like, we were building the Taj Mahal and people will come on our terms.” Ethnocentrism is usually referred to as “tunnel vision. This view says that one certain ethnic group beliefs about morals is the right one and better than any group. The French saw the American managers as bullies, arrogant, and workaholics. A search for the topic, “Business culture Vs French” (n.d) refers to Laura Hampton, French ministry of Education as she explains the views that the French have about American business and culture:

“The French have a love or hate relationship with the U.S. We are deeply admired for many things (entertainment industry, our political system, our optimism as a people) but they are also very critical of the role the U.S has played in globalisation which they see threatening their own identity, culture, and language… (Regarding management practices) the French are less direct about theory expectation and you have to pay closer attention to the subtle cues given to you.,

Disregarding the French culture of being the world’s biggest consumers of wine, the management of Disney still hung on their “we know best” conviction. Male employees had to keep well groomed as the American managers wanted in this way. Their insensitivity to the French culture led to a very bad start even though they did relent in some areas such as allowing females employees to wear brightly coloured nails polish and allowing kennels for the quest pets. The French would never dream of leaving their pets when going on vacation. (Cateora & Graham, p 615)

CONCLUSION: the major factor that contributed to their poor performance, during their first year of operation can be narrowed down to marketing surveysm, which lead to ethnocentrism and self reference criterion.

3.1.2 RECOMMENDATION, PROPOSE STRATEGY AND SUGGESTION TO IMPROVE THE SITUATION AT EURO DISNEY.

There are several means in which the controllable factors could be avoided in other to present Euro Disney the success it needed at the first year of business. This means are suggest and proposed as follows:

The deliverance of advertising to the customers, not on the physical composition of just the area alone, but on the resources and service that a customer will get from patronising the resort. Advertising should be careful controlled. Society needs to make sure that people are not taken in by misleading advertisement. There is a set of principles that all advertisers must follow (Roman & Mss, 2003, p.200):

Tell the truth, show the truth- the product should look exactly the same way as the consumers will purchase it
Make the general impression truthful- “Advertising is judged not by what it says, but what consumer’s thinks it says”. (p.201)
Ban “weasels” and dangling companions- All sentences must be clear.
Substantiate product claims- must provide evidenced that the claim is true.
Back testimonials with research.

It is crucial that cross cultural communication, cooperative decision-making and collaborative problem solving be implemented in multinational corporation management like Disney. It is important that the management of a multinational corporation work together to overcome boundaries and differences and to be able to communicate, and collaborate in order to effectively work together, communicate, make decision, and solve problems as a single entity as globalisation does simple that. This brings the world together. The EuroDisney could use the help of the Disney in Turkey in other to be able to handle the cultural difference in French. By understanding the French culture, EuroDisney will be able to bring polices that will be accepted by the French customers. The French cherish their culture that it is important for EuroDisney to able to adapt the culture and avoid cultural self criterion, rather try to understand the culture of the French.

Make use of their number one asset which is human resource in order to apply the best approaches and method and focus on both macro and micro economics of the global business. The management from the head quarters branch(in this case, management from the United State) cannot do this alone but will achieve success if he learns from those in the various parts of the world and learns from those who are experts in the various locations and cultures in which they live and work. They will next, approaches communication, sales, customers services, find solutions, developing innovative tactics, and so on. The best way in managing a diverse sales team is to incorporate the sales management from each area and empowering them and learning from them, this system will help the Euro Disney to overcome the cultural differences and policies that are not suitable for the French workers.

Generally as management, it is important to have a general knowledge of domestic activities and policies, and to understand the various cultures and operations of the sales force outside of the United States. This can only be accomplish by using human resource from which are familiar with the culture of French, company, and cultures, how business is handled in different parts of the world, varying company policies and operations (although the company is an entity, policies and routines vary slightly, if not extremely, in order to accommodate the differences), language and cultural differences, various sales methods, training, customer service, account management, follow up procedures, key account management, and so on. Can only be handled by working with the various sales teams and using their expertise.

CONCLUSION: The above mentioned proposed recommendation will tackle the poor performance at Euro Disney. The first recommendation should be the market research and survey, which will tackle the staffing problem, cultural issues and drafting and delivering of effective promotion,

3.2 Question 2
3.2.1 The factors that could have been foreseeable and controlled by Euro Disney or the parent company.

Taking a look at the above mentioned factors that lead to the poor performance of Euro Disney in their first year of operation, some of the factors were possibly foreseeable, while some were not foreseeable and uncontrollable. A company reputation and size of Disney is allowed no room for mistakes. The stakes involved are billions of dollars. Complementary businesses like that of the hotel industry are reliant upon the success on the success of this team park in Paris. Generous funds received from the government and private institutions would have to be made well of. Disney should be able to foreseen the unforeseen.

When Euro Disney was established the consideration taking into account is the geographical area and culture as well. However Disney established the Euro Disney based on the nature or American thinking, they expected the Europeans to act as Americans and thrive over newly designed theme park. They forgot that they were producing a massive theme park bigger than any other theme park in Europe for the American mentality. They could have calculated the exchange rate, and did not calculate the European culture. They could have foreseen the problems mentioned in the above poor performance factors listed.

Factors such as those mentioned above are not categorized as the unforeseen; rather they are being classified as the expected factors, which Euro Disney or the parent company Disney should have detected. Economics, politics, culture complemented and associated with in depth analysis of the 4P’s follow the basic principles of marketing. Disney should have foreseen the changing economic scene in France with the forthcoming European recession in 1991. The relationship with the French government should have been handled with greater care and delicacy, because of the size of the investment involved and ultimately, the number of jobs dependant on the success of the Euro Disney. Looking at culture, the parent company can force itself on another people, looking at the cultural profile of the French, which in this case was the European continent. Disney promoted its product, the theme park similar to that of Tokyo Disneyland in Japan believing Europeans wanted their piece of Americana. In international marketing, the needs and wants of the consumer are being indentified, the package presented by Disney to their customer meet neither their needs nor wants. Disney true success lies in adapting to the surrounding culture of the French and Europe as a whole, being marketing oriented in finding success in customer satisfaction. Disney failed in both aspects. Culture is wide and change occurs when resistance slowly yields to acceptance, so the basis of resistance becomes unimportant or forgotten, which means that on the part of the European community, we are certain to see compromise, but over a period of time. Disney too has to reconcile with the environment it has settled in. we read in the case that Disney does ultimately mend it ways. Making room for continuous change is the best way to go about its business.

CONCLUSION: most of the factors that lead to the poor performance of EuroDisney in their first year of operation were foreseeable which are the staffing problem, advert problem, and cultural differences and so on, where some factors were not, such as the economic recession at that time in Europe.

3.3 Question 3
The cross-cultural marketing skills of Disney

The problem was that in the beginning, cross cultural marketing skills were not used and employed. Taking for example, Disney executives were told that French did not take breakfast in the morning, which lead to downsize but surprisingly, the French do eat breakfast.

Cross cultural marketing would have let the managers know that the Europeans were more energetic and covered more of the Euro Disney theme park and rides than those in the western hemisphere. Therefore, instead of the normally three days stay at the Disney American theme park, the stays were normally shortened to two days stay. The European vacation customs were not being examined so the theme park did not see profits and success as hoped. Americans take short breaks but they take the more often. However, Europeans take one month for holiday. The American managers thought that the Europeans would change their one month tradition and adopt the Americans shorter yet more frequent time off but did not happen. The French schedule remains the same and they would close the office and factory during the entire month of August, which was contrary to what the American do. These factors should have been considered. Cross cultural marketing would have been extremely useful but the parent company executives were being quite ethnocentric and it cost a great price. (ibid, p.615) needed to say, their cultural marketing skills were unsatisfactory, in fact, nonexistent. Had they had any skills of this sort, the beginning would have been a success and not such a failure at the start.

Therefore, we can say that the skills of Euro Disney cross cultural marketing skill was poor, they did not have skills of cross cultural marketing skills which is the main key in dealings in international trade like Euro Disney. They put an American theme park in the middle of Europe with American mentality, American food, and this did not heed to the cultural values of the Europeans. However, the new CEO in 1993, the park understood their problem and made the changes. They then started their new marketing plan, which included skills of cross cultural values, understanding. They started to include French and European favourites like Zoro and Mary Poppins. They advertising campaign include famous European characters with the magic kingdom. Within a year, they took off deals boosted.

CONCLUSION: after the recognition of the problem facing Euro Disney which was the cross cultural marketing skill, which was bad. After some time park understood the pending problem and provided a solution, which was the use of French in their advertising campaign and so on.

3.4 Question 4
3.4.1 New theme park in Spain

Spain is a country that accept and receive foreign cultures compared to France, the southerners receive foreign culture with greater warmth compared to the central and east Europeans, in which if Euro Disney would have launched in Spain, Disney would have met less criticism. But we should bear in mind that, Euro Disney is actually built to serve the entire Europe as a whole not just Spain. Therefore, criticism will likely come from other part of Europe, even if Spain receives Americans with warmth.

Cultural profile is formed as the bases of international marketing relationship, how a product is being marketed in the international market, in a foreign country is based on the cultural variable present in the country. In other for Disney success in marketing the theme park internationally, it will force them never over emphasise the importance of understanding the culture of a foreign culture. A theme park in any part in Europe generally, Spain not excluded will face a varying percentage of regal restraints, political risk, culture conflict, and economic disruption as well.

Therefore, if Disney places a theme park in Spain, it is believed that the cultural difference will lay a huge role in its success, as suggested earlier. Disney would have to adapt to the customers culture and the culture of Spain generally, and incorporate them into the development, implementation, and operation of a new theme park. The workaholic habits of the Americans is opposite of not just Spain’s focus of life and family first, but generally Europe as a continent. In the United States, people focus more on themselves and individuality is the focus not group (Hofstede cultural dimension).

CONCLUSION: international marketing is the function associated with culture, what one is able to do in marketing to a particular foreign product is shaped by the cultural variables of the country. A theme park is Spain as in another part of Europe would face a varying proportion of, legal restraints, political risk, culture conflict, and economic disruption.

3.5 Question 5
3.5.1 The major considerations for the next Disneyworld

The consideration for the next Disneyworld should be in Dubai. Dubai should be considers as the next Disneyworld location priority. Dubai (UAE) is the major commercial business hub of the Arab world. Business horizons expand from the west coast of the United States to the eastern Philippine archipelago. Business communities around Europe have created a stronghold here as a gateway to most of Northern Africa, the Middle East and to a limited extent the Asian Subcontinent. Dubai seems to be a good strategic location for the Next Disney world to be established. Dubai is seen as the portal not only to the minority communities from Europe, Asia and America’s but specifically to the Muslim world of over one billion. Then underlying opportunities are immense. The parent company Disney is already a recognise figure in households of the respective location UAE. The relaxed social and cultural atmosphere Dubai possesses over Muslim states should not pose a threat to the continuity of business at Disney in Dubai, which will be called Disney Arabia.

Dubai reports a GDP (gross domestic product) per head of US$15,000 to $18,000, one of the highest figures in Asia. The trade balance remains a surplus with over US$500 million. The infrastructure boasts access to telecommunication facilities and transport by land, air and water as state of the art. The diverse ethnic communities level communication barriers between the Arabs and expatriates. All in all, Dubai posses the qualities and the right backdrop to promote the new “Disney Arabia” to a wider scope of people, both the conservative and the more liberal, foreign and local. Thus, lunching the new Disney subsidiary is obviously not an overnight or one day project, meticulous planning will be needed in defining the eight P’s as pertinent to the Arab world.

CONCLUSION: it is important to learn from the mistakes that were made when EuroDisnay was started. Having offices and managers from the country will be detrimental. Incorporating Dubai culture and examining the tourist activities, practices and trends will be crucial to the making of breaking of a Disney in Dubai.

CHAPTER 4
4.0 CONCLUSION

Euro Disney faces poor performance during their first year of operation, which makes it important to learn from mistakes that were made when Euro Disney was started. Having offices and managers from th

1. Introduction

Nowadays, cruise tourism plays an important role in the tourism industry. Cruise ships become newer, larger and more comfortable so that nearly every need of the customers can be satisfied on the high seas. Capabilities like theaters, cinemas, fitness clubs, discotheques, casinos, tennis courts and many others are common on most modern cruise ships. Moreover, that most of the named activities are already included in the price. Thereby the ships beat about all the seven oceans to the most beautiful places on earth like for instance the Caribbean. But all these glorious sounding features involve several negative environmental problems. Cruise ships contaminate the seas with tons of waste and sewage which causes decreases of biodiversity, coral reefs and of course the water quality. Mass tourism harms and destroys ecological systems like beaches and reefs. This examination is about the impacts of cruise tourism to the environment and contingencies how to make cruise tourism more sustainable.

2. Utilization of resources

Cruise tourism requires an abundance of resources and produces quantities of waste. A typical Caribbean cruise ship produces about 50tons of waste, 7.5 million liter potable water, 800.000 liter wastewater and 130.000 liter oleiferous water. Approximately 75% of all produced wastewater are caused by cruise ships. Between 1993 and 1998 over 100 cases of marine pollutions were investigated in the Caribbean. The estimate number of unknown cases might exceed this number many times over because the disposal of wastewater takes place in aquatic environments where environmental pollution is permitted on payment of a fee.

Furthermore the cruise industry requires a convenient super- and infrastructure at their destinations which often overwhelms the financial capability of the regions and causes a dependency to the cruise tourism.

3. General information about the impact of the cruise tourism industry

The entire tourism industry has positive as well as negative impacts on the economy, the culture and the environment. Thereby the cruise industry is no exception. Being an in Niche market the cruise industry’s impact is higher-than average. By establishing more than 450,000 employments with salaries of 15 billion US-Dollars in the whole and a turnover of some billion dollars above all the cruise industry in the USA has a great impact on the economy. Furthermore a big impact on the government’s revenues and expenditures is notable. The revenues of local governments consist like following:

Taxes paid on turnovers by cruise passenger, the crew and the cruise line

Temporarily taxes on accommodations that are paid by passengers

Revenues in fees paid by passengers as well as by the cruise line, including fees for calling at a port, cleaning and other expenditures on a harbor

Fees for recycling and the use of water

Fees for passengers, including admission charge and payments for medical provision

Tax payment of companies which distribute products and services to cruise lines passengers taxes paid by enterprises

Operational costs on- site

Secondary or indirect tax revenues like payment of property tax by employees of the cruise lines and their families

4. Possibilities to create sustainable cruise tourism

The Cruise tourism encompasses different segments and sub segments. Aspects of sustainability in the sense of ecological sustainability play in most of the sub-segments of cruise tourism a more or less important role. All indications are that the cruise industry, in its own interest, tries to eliminate these negative impacts as fast as possible.

Potential Reasons, as the fact that one of the most important subareas of cruise industry, the Caribbean, cannot comply the conception of sustainable tourism in the sense of the definition of sustainability mentioned in the Bruntland Report, have to be searched on the academic and socio-cultural level. To find concrete evidence on these levels seems to be difficult.

Although the cruise tourism initiate doubtless economical impulses on the destinations, the essentially effects on the long term local development remain to be unrealized. The relation between costs and benefits on the environmental level as well as on the socio- cultural level seems to be unbalanced what a disadvantage of the destinations is. A quantification of this context owes.

With the undersigning of a pioneering nature protection agreement on January 15th 2008, re-experienced the 12-month collaboration of Conservation International, the tourism agency of Cozumel, and the Florida-Caribbean Cruise Association its climax. Cruise industry representatives from the government, private enterprise association and cruise ship association were part of this contract. With the undersigning of this arrangement the contractual partners originated a significant nature conservancy initiative which should help to protect the vulnerable biodiversity of the most popular cruise destination on earth – Cozumel, Mexico.

In the year 2006 the island employed about 1000 workers for cruise ships, which brought an estimate number of 2.6 million cruise passengers to Cozumel. During peak times up to nine cruise ships with over 10.000 tourists reach the island’s harbor daily. The rapid growing of the cruise tourism industry led to a heavy burden for the environment.

The agreement composes the fundament for sustainable cruise tourism which will be achieved with the following projects:

The creation of more awareness for environmental problems among the cruise tourists, tour operators and within the local community

Improvement of the infrastructure of the island (especially the transportation- and waste-management)

Increased security for the coral reef

Indemnity of the strict observance of current laws

These projects were developed during a range of workshops by groups of different stakeholders. Hereby over 80 leading representatives of the cruise tourism were brought together in order to pinpoint important environmental aspects and to achieve a common accomplishment for these projects. This common planning process is worldwide the first of its kind in the cruise tourism. Therefore Cozumel is the only cruise ship destination which helps to prevent its nature and biodiversity.

Leading representatives of the cruise tourism established the so-called Stewardship Working Group which is supposed to implement objectives mentioned in the environment protection agreement. Following objectives are on the agenda:

Every cruise ship passenger will see a 30 second information-movie in which he will appealed to handle sustainable in order to protect the nature

In a photo exhibition, nearby the landing stage, the passengers will see the unspoilt districts of the island

All tour-boats on the island have their own recycling system

In the next step the representatives will evolve awareness campaigns which involve not only the cruise tourists but also the tour operator and hosts. Approximately over 500.000 cruise tourists will be involved in such campaigns.

5. Particular sensitive sea area

The cruise industry will be confronted with several challenges related to environmental issues in the future. These challenges relate to the activities in the oceans, especially in and around important nature protection areas. The international Maritime Organization (IMO) recognized that issue and initiated counteractions, the so called Particular Sensitive Sea Areas (PSSA). At present there exist 11 PSSA’s. The effective guidelines of these areas commit all the governments of the IMO member- states to ensure that cruise lines which drive under their flag have to keep the methods of protection.

The following 11 PSSA’s were arranged:

The Great Barrier Reef, Australia (1990)

The Sabana-Camaguey Archipelago, Cuba (1996)

The Malpelo Island, Colombia (2002)

The Sea around the Florida Keys (2002)

The Wadden Sea, Denmark, Norway, Germanys (2002)

The Paracas National Reserve, Peru (2003)

The western European Waters (2004)

Enlargement of the existing PSSA of the Great Barrier Reef including the Torres Strait Islands (2005)

The Canary Islands, Spain (2005)

The Galapagos Archipelago, Ecuador (2005)

The Baltic Sea, Denmark, Estonia, Finland, Germany, Latvia, Lithuania, Poland and Sweden (2005)

The MARPOL Convention arranges three complementary methods for the contamination management: Reduction of waste products, Recycling and disposal of waste. With the agreement of the MARPOL Convention a cruise ship can convert its waste and dispose it on its own as well as leave the waste on a harbor for disposal either by store it, burn it or recycle it.

6. Studies and scientific literature

In the more recent past only a small number of studies concerning the environmental impact of the cruise industry existed. For a considerable time a wide range of articles, reports, books, campaigns and websites occurred. The most informative subscription are scientific works (Cruise Ship Tourism, 2006, CABI), which interpret the concrete impacts of the cruise industry to the environment. The most considered researches were published by Ross Dowling and Ross Klein (Cruise Ship Blues – The Underside of the Cruise Industry, 2002, and Cruise Ship Squeeze – The New Pirates of the Seven Seas, 2005, New Society Publishers).

Furthermore, Klein also operates to websites (www.cruisejunkie.com and www.cruiseresearch.org) where the visitor can find a varies number of resources like detailed lists of diseases, cancellations, suicides, passengers who fell overboard, powertrain problems, environmental incidents, health issues and many more. Between 2002 and 2006 over one thousand facts were collected.

7. Conclusion

Although the cruise tourism has a huge negative impact on the environment there are still no homogenous regulations or laws to protect the ecological system. Even if some regions established such laws, regulations and awareness campaigns there are still huge areas of freedom to act in an environmentally harmful way.

Due to the magnitude of the seas the direct environmental impacts are not clearly recognizable in a short time but they cause long-term damages. The new cruise ships which are bigger than ever before and the increasing demand in this tourism branch won’t help to come to grips with this problem. In terms of achieving sustainable tourism it is, therefore, a sub-sector within which socio-economic, cultural and environmental considerations need to be continually analyzed, addressed and monitored. However, decision-makers in cruise tourism destinations, particularly those outside North America, need to work closely with operators to facilitate both integrated waste management and intergenerational and intra-societal equity rather than merely accept the prospect of short-term economic gain.