Category: Free Essays

Strategic concepts in tourism, hospitality and events

Individual assignment: Grande Bretagne Hotel Athens; External business environment

INTRODUCTION

No company in the world is working standalone and in isolation. That’s even more emphasised in the tourism industry where the location of the tourism companies follows the location of the tourism product, the tourism destination. A hotel can not be located standalone in a no attractive tourism destination and expect success, it should be as close to the epicentre of the tourism happening and movement. The problem is, every tourism company wants that, and they all have to compete in the saturated, consistent market with each other and with the environment like a whole.

In this assignment we will discuss the challenges and implications of the external environment applied to our hospitality organisation of a choice based on the selected theoretical model. Further evaluate the competitive environment using the Porter’s Five Forces Model with closing recommendation for the future of the business.

BRIEF DESCRIPTION OF CHOSEN SUPPLIER

For the purpose of this assignment we had chosen the New Hotel Athens.

New Hotel Athens (formerly Olympic Palace Hotel), along with 4 other hotels, is a part of Yes Hotels chain, and they are part of the worldwide Design Hotel company with more than 250 independent hotels in over 50 countries worldwide. (http://corporate.designhotels.com/about_design_hotels)

Situated in Plaka area in central Athens, New Hotel is a 79 room establishment designed by the Brazilian award winning design duo Fernando and Humberto Campana. The hotel also sports exquisite all-day bar-restaurant, New taste, and Workshop Floor, meeting space with teleconference facilities.

IDENTIFICATION OF FACTORS ISSUES IN THE EXTERNAL ENVIRONMENT (MACRO ANALYSIS)

Business environment refers to those factors of the surrounding of business enterprise which have influence on the functioning of a business. The business cannot control these aspects but can respond to change if needed. This is also call macro environemnt.

(http://books.google.gr/books?id=nfADHVmJkTUC&pg=PA3&dq=external+business+environment&hl=en&sa=X&ei=jiJvVNnjHJP5asqEgvgL&redir_esc=y#v=onepage&q=external%20business%20environment&f=true)

External business environment

Economic conditions

Economic conditions are global as well as national, and when there is a global financial crisis as in 2007, and the recent one, changes in the external environment can be dramatic. Positive economic condition of the nation have also positive effect on their spending habits. And opposite, when the nation is suffering financial hardship, the money that will be spent for recreation and holidays will be less. Indirectly, the negative economic condition increase the unemployment rate and the interest rate and taxations.

New Hotel Athens, operates within the EU and Greek economic environment. Considering the not so positive economic condition of the country and the Euro zone generally, we can say irrefutable that it reflects negatively on the business. After a calamitous recession in which the economy shrank by 30%, government debt now stands at 174% of GDP and the budget deficit last year was almost 13% of GDP (The Economist 2014). This leaded to aggressive rise of the taxes, increased interest rate for bank loans and credits and overall increase cost of the raw materials and imports.

In the table below we can see the country’s economic freedom index and few other economy related facts and figures like, the the freedom of corruption, fiscal freedom, business, labour and trade freedom etc. (The Heritage Foundation 2014)

Greece, Economic Freedom index 2014 – Source The Heritage Foundation

Regardless of the present adverse condition in the country, there is a positive forecast for the future economy of the country from international and domestic experts. High government official also promised a new taxation “roadmap” that would be unveiled in the future, with the maximum income tax cut to 32 per cent from 42 per cent and the corporate tax rate reduced to 15 per cent from 26 per cent. (ABC News 2014)

Market (competition)

The market/competition is a constantly amending factor in the external environment of the business. Not only that new competitors arise and other disappear, but also the existing ones are changing and adapting their marketing strategies, product lines and prices. Often those changes are not evident so the businesses must be alerted to what their competitors are doing.

Our hotel is one of the 23, exclusive 5 star hotels in the central area of Athens, excluding Piraeus and Glyfada (Greekhotels.com 2014), and one of the 176, 5 star hotels in the country. (Hellenic Chamber of Hotels 2006). In that saturated market are included as well the big international players like Starwood, Intercontinental, Hilton and other hotel chains with great influence on the market and provide fierce competitiveness. But New Hotel Athens diversificate in many ways from the competition, and their business model follows the fresh market trends providing a product for a niche tourism clients.

Technology

In the last half a century, one of the rapid change factors in the external environment and the constant pusher on the businesses and organisations has been the technological change. If the don’t react sufficiently quick to this change, they can face with the risk of losing market shares. The technological change don’t affects only on the design of the products, but as well on the delivery of service.

In the example with our hotel, we must say that this external factor is taken into consideration seriously, and even used for competitive advantage. The property is recently renovated according to the latest standards and trends, with implemented computer controlled in house systems, offering free WiFi to the customers (unlike most of the 5 star hotels), and having great interactive web page and social networks presence.

Climate change

Climate change is an insidious threat because the pace of change may be recognisable only if considered on a decade-by-decade basis. The effect of climate change will not fall equally on all nations and all businesses. Businesses that depend directly on a good supply of water e.g. agriculture, field sports will be adversely effected if climate change results in reduced rainfall. However the flow on affect of drought will eventually work their way through to all businesses in the affected community.

Legal

The most common law changes that affect business include Workplace Health and Safety, Consumer Protection, Industrial Relation and Environmental Law. But most obvious change in law through legislation is the taxation. Sometimes the taxation changes occur fast and with little warning and there is not much time for the business to prepare.

The New Hotel Athens guests are protected by the general Greek consumer protection law for all transactions you make while travelling in the country. As enterprise, the hotel is obliged to issue written receipts, that safeguards the consumer in the event of any claim or dispute with the enterprises. (VisitGreece 2014)

Media

The significant changes in the technology and the rise of the internet, reflected on the media as well and changed it from ground up. That affected deeper on the external business environment. The old channel for communication where suffocated, altered and brand new ones appeared. The businesses had to embrace this change and adapt to it as fast as possible.

New Hotel Athens following the modern media trends, had build extensive online presence all over the internet (as a medium). And had gained significant positive feedback. For example Trip Advisor, according to the votes by the customers, had awarded this hotel with the “Travelers Choice Award” for 2014 and had ranked it as number 7 out of 324 hotels in Athens. Except the booking sites, New Hotel Athens heavily uses the social media for promotion and communication with the customers and the public.

Political

Just like law, changes in the general government policy can be well notified and discussed or changes without notice. Many organisations depends on the government financial assistance and if there is a change in the government policy, those funding can be reduced or to completely disappear. Also any political instability in the country, leads to destabilisation of the society and have repellent effect on the tourism. For example the recent political crisis in Greece and the rise of the radicalism had negative impact on the tourism as a whole. Some of the media even scared out the tourists with warnings of racist attacks (Hamilton Spectator 2012). Or the few cases when the strict immigrants policy mistreated few tourists by the police in Athens (BBC 2013).

Demographic

The population changes include increasing or decreasing of the population, change in the age group proportion, change in the ethnic diversity, change in the number of two-income families, number of marriages and geographic population distribution. All those changes affects the external environment of a business. Human resources, security and mentality wise.

New Hotel Athens operates in quite diversive demographic environment that just adds to the colourfulness of the business.

USING THEORETICAL MODELS TO SUPPORT THE DISCUSSION?????

PORTERS 5 FORCES (MICRO ANALYSIS)

Porter five forces analysis is a framework to analyze level of competition within an industry and business strategy development. It includes three forces from ‘horizontal’ competition and two forces from ‘vertical’ competition. Porter referred to these forces as the micro environment, to contrast it with the more general term macro environment (Porter 1980).

The Porter’s Five Forces is a powerful and simple tool for understanding where the power lies in a business situation. Conventionally, the tool is used to identify whether new products, services or businesses have the potential to be profitable. However it can be very illuminating when used to understand the balance of power in other situations.

Porter’s 5 Forces (Source Wikimedia)

Supplier Power:

The bargaining power of suppliers is also described as the market of inputs. Suppliers of components, raw materials, labor, and services to the firm can provide power over the firm when there are few or no substitutes. Suppliers may refuse to provide those supplies to the firm or charge high prices for the unique resources. Potential factors are:

Supplier switching costs, supplier concentration, degree of differentiation, substitute, labor unions, supplier competition etc.

New Hotel Athens, being part of the YES Hotels chat and part of Design Hotel chain, can maintain wide supply chain due to the dispersed suppliers connection of the sister companies and the mother company. If there is leak of supplies from one source, they can easily switch to other supplier connected to some of the other properties or globally with the mother company, Design Hotel Chain. From F&B materials to technology. Though, thats not applicable to the suppliers who provide unique supplies to the hotels.

Buyer Power:

The bargaining power of customers, is described also as the market of outputs. It is the ability of customers to make a pressure over business, therefore to affects the customer’s sensitivity to price changes. The companies can take measures to reduce buyer power, such as introducing a loyalty program and promotions. If the buyer have many alternatives then his power is high and opposite. Potential factors for this are: buyer concentration, buyers switching costs, buyer information, substitute products, barganing leverage, buyers price sensitivity etc.

Competitive Rivalry:

For most of industries the intensity, competitive rivalry is the biggest determinant of the competitiveness of the industry. Potential factors includes: Innovation, advertising, competitive strategies, company concentration, degree of transparency etc.

Threat of Substitution:

The existence of different products that can satisfy the same need, can make the customers switch to alternatives. Potential factors here includes: the propensity to substitute, price performance of substitute, buyer switching costs, product differentiation, number of substitute products available, ease of substitution, quality depreciation etc.

Threat of New Entry:

Power is also influence by the ability of companies to enter the market. If it does not cost much time or money to enter the market and compete effectively, if there are few economies of scale in place, or if there is little protection of the key technologies, new competitors can quickly enter the market and weaken the existing business position.The following few factors can affect on how much new entrants can be a threat: existence of barriers to entry, government policy, capital requirements, absolute cost, economies of scale, product differentiation, brand equity, expected retaliation, access to distribution, customer loyalty, industry profitability etc.

BASED ON THE ANALYSIS, FEW REALISTIC RECOMMENDATION FOR CHANGE

Conducting macro and micro environmental analysis we can come up with some conclusion …

Carnival Corporation plc is a global cruise company, with a portfolio of 12 brands. It is one of the leading cruise operators in both North America and Europe. The company primarily operates in the US, the UK, Continental Europe and Canada. The company recorded revenues of $11,839 million during the fiscal year ended November 2006, an increase of 6.7% over 2005. The operating profit of the company was $2,613 million during fiscal year 2006, a decrease of 1% as compared to 2005. The net profit was $2,279 million in fiscal year 2006, an increase of 1.2% over 2005.

Carnival’s mission statements reads, “Our mission is to deliver exceptional vacation experiences through the world’s best-known cruise brands that cater to a variety of different lifestyles and budgets, all at an outstanding value unrivaled on land or at sea”.

To be the leading cruise operator in all segments entered and to maintain the most up-to-date fleet of cruise ships in the world

To develop new cruise segments and innovative cruise packages to reach a larger number of potential and past cruisers

Employ sophisticated promotional efforts to achieve a greater awareness by the public concerning the availability and affordability of cruise travel

Attract the first-time and younger cruisers (Carnival), experienced cruisers (Holland America), upscale cruisers (Seaborne), and cruisers wanting a sailing vacation (Windstar)

Promote cruises as an alternative to land-based vacations

Provide a variety of activities as well as ports of call

Be innovative in all respects of operations of the ship

3. Strategies:

Global growth through concentric diversification via acquisition of cruise lines and building new ships, particularly in the Asia and European markets.

High quality of the service towards the customer resulting in high customer satisfaction, leading to new and repeat customers.

Economies of scale by increasing the size of the company resulting in the lowest break-even point in the cruise industry.

Horizontal growth financed through internal funds.

4. Policies:

Sophisticated promotional efforts to gain loyalty from former customers and new customers

Remodel its ships, varying offered activities, and being innovative through RD in all aspects of ship operations.

Strategic Managers
Board of Directors

Although information is not available about most of the board members, we do know that at least two members of top management are also insiders on the Board: Micky Arison (Chairman of the Board) and Howard Frank (Vice Chairman).

The stock of Carnival Corporation is publicly traded and at least 20% of privately held stock of the Arison family has been sold to fund expansion. Arison probably controls the board.

Top Management

Members of top management are as follows:

Micky Arison, Chairman, CEO, (Carnival Corporation)

Robert Dickinson, President and COO (Carnival Cruise Lines)

Kirk Lanterman, President and CEO (Holland America Lines)

Howard Frank, Vice Chairman and COO (Carnival Corporation)

Gerald Cahill, Senior VP Finance and CFO (Carnival Corporation)

Lowell Zemnick, VP Treasurer (Carnival Corporation)

Peter T. McHugh, President and COO (Holland America Lines)

Meshulam Zonis, Senior VP of Operations (Carnival Corporation)

Carnival Corporation is a family tradition passed down from Ted Arison (founder) to his son Micky (current CEO and Chairman). Micky Arison and Bob Dickinson seem to be the main driving force behind strategic decisions in the company.

III. EXTERNAL ENVIRONMENT (EFAS Table; see Exhibit 1)
A. Natural Environment

Environmental groups

Stringent regulations on ships

Environmental and health and safety regulations

Could increase costs of compliance

Instituted Safety and Environment position

EPA – studies on waste water

Annual award program

Financially supporting ocean conservation groups

B. Societal Environment
1. Economic

Unstable economy

2. Technological

Computer and information technology extremely important

3. Political-Legal

Increased regulations are issued by the Coast Guard, U.S. Department of Health and Federal Maritime Commission.

4. Sociocultural:

Growth is slowing in the cruise travel industry (2% from 1991 – 1995). It is also estimated that only 5-7% of the North American market has ever taken a cruise.

Two-income families have more disposable income to apply towards vacations.

The aging of America means more potential customers for the Holland America Line, which serves an older, more established clientele. Increased emphasis on family vacations and a growing “family” cruise segment.

Periodic political tensions which occur in cruise an area (such as the Mideast or Mediterranean) causes cruise competition to intensify in safe waters until the tensions cease.

B. Task Environment

Threat of new entrants is low, given the recent rash of cruise line failures, mergers, and buyouts.

The competitive nature of the industry makes it unattractive to enter, and high start-up costs serve as a barrier to entry.

Rivalry between competitors is high, with six major competitors (including Princess and Royal Caribbean Cruise Lines) and eight minor competitors.

With berth capacity increasing, rivalry may grow more intense if demand doesn’t rebound.

Bargaining power of suppliers (shipbuilders) is moderate since shipbuilding is a very money- and time-intensive process.

If a shipbuilder can’t deliver on a contract, Carnival can’t easily obtain a replacement ship.

Bargaining power of customers may grow in the future due to the combination of increased berth capacity and decreased demand.

The combination of these factors would lead cruise operators to offer deep discounts, and customers would have more affordable options in choosing the cruise they want.

Threat of substitutes is escalating with the introduction of all-inclusive combination cruise/land packages such as Disney’s Big Red Boat vacations.

Other stakeholders such as the American Maritime Union pose a threat, with their continued charges against Carnival (and other operators) concerning exploitation of cruise employees.

IV. INTERNAL ENVIRONMENT (IFAS see Exhibit 2)
A. Corporate Structure

Carnival Corporation serves major market segments through Carnival, Holland America, and Seaborne (joint venture).

Decision-making is centralized, with top management and the Board of Directors controlling all strategic decisions.

The corporation attempts to reduce routine decision-making by standardizing shipboard operations when possible.

B. Corporate Culture

Carnival Corporation’s culture seems to internalize the concept of providing guests with the highest service standards while keeping a firm grip on operating costs.

There is significant corporate pride regarding Carnival’s position as the leader and innovator in the cruise industry.

C. Corporate Resources
1. Marketing

Carnival Corporation’s main marketing objective is to hold on to its 44% market share in the cruise industry.

It plans to retain the leadership position through aggressive promotional campaigns by gaining loyalty from former cruisers and by being innovative in shipboard activities and operations. Carnival’s cruise product is well-defined and positioned to serve three major markets: contemporary, premium, and luxury.

Carnival Cruise Lines (contemporary) targets young and first-time cruisers with moderately priced packages which include airfare and a variety of shipboard amenities.

Prices are competitive with those of other similar cruise and land-based packages. The “Fun Ship” cruise theme markets the ship itself as the primary vacation destination, with ports-of-call being of secondary importance.

Holland America Lines (premium) is positioned to attract higher income travelers with cruise prices averaging 25-35% higher than Carnival Cruises.

HAL serves an older, more established clientele. Carnival provides additional vacation opportunities through Westmark Hotels, Westours, Gray Line Tours, and the McKinley Explorer railroad coaches in Alaska. These auxiliary tours and hotels are marketed primarily to satisfy growing demand for Alaskan land vacations in conjunction with Carnival’s Alaskan cruises.

Seaborne serves the luxury market with South American, Mediterranean, Southeast Asian, and Baltic cruise destinations.

Seaborne serves very wealthy clientele with worldwide cruises up to 98 days’ duration.

Windstar Sail Cruises serves a specialty cruise niche with ships that have small capacity (fewer than 150 guests) and can approach smaller, less traveled ports-of-call.

Carnival Corp. was the first cruise operator to advertise on television.

Carnival books 99% of its cruises through travel agents and has implemented an incentive program to reward travel agents who suggest a Carnival cruise before other vacations.

2. Finance

Currently Carnival Corporation’s primary financial consideration is the control of costs in order to maintain a healthy profit margin (greater than 20%).

Another main concern is the current expansion plan funded by internal growth.

The financial ratios show several areas that need to be addressed in the company.

Carnival has very low liquid assets, as evidenced by the low current and quick ratio, and has negative working capital, which may cause creditors to doubt whether Carnival can meet its current obligations.

Overall, the liquidity of the company is very poor but may be common to the industry since so much money is tied up in the fixed assets portion of the balance sheets.

In other areas, Carnival is doing much better with a profit margin of 22%, ROI of 11%, and ROE of 19%.

The company isn’t overburdened by debt and has two revolving credit agreements for a total of $1 billion, $815 million of which is still available for the refurbishing and building of ships.

In the past five years the corporation has experienced losses due to the discontinuation of the Fiestamarina Line and two of its hotels.

Carnival recently purchased $101 million of secured notes issued by Kloster Cruise Lid. (Norwegian Cruise Lines).

Kloster has experienced financial difficulties, and if the company fails, Carnival will be in position to claim a portion of Kloster’s assets.

A financial strength of Carnival Corp. is that it is registered as a Controlled Foreign Corporation and thus is exempt from U.S. Federal income taxes at the corporate level.

3. Research and Development

Carnival relies on RD on the part of its shipbuilders to produce faster, more fuel efficient, technologically advanced ships.

Carnival also uses service RD to implement and improve shipboard entertainment and activities to serve the disparate needs of the three market segments they serve.

4. Operations

Main operations consist of the twelve cruise lines and the auxiliary tours and hotels mentioned in the analysis of marketing.

The company expects to take delivery of ten new ships (including several “superliners”) in the next four years; seven for the Carnival Line, two for the Holland America Line, and one for Windstar. These ships will result in a 20,484 passenger increase over Carnival Corp.’s current capacity and cost $3.3 billion.

This expansion will enable Carnival to stay competitive with its rivals, who are also expanding, but if future demand remains depressed, the extra capacity could negatively affect future profitability.

The major strength of Carnival’s operations is that they are very efficient; it has the lowest break-even point of any organization in the cruise industry.

It has also been able to achieve significant economies of scale by standardizing layout and shipboard operations on its ships.

Carnival’s fixed costs make up 33% of the company’s operating expenses, and they can’t be reduced in proportion to decreases in passenger loads and revenues.

Major variable costs as a percent of operating expense are as follows: airfare (25-30%), travel agent fees (10%), and labor (13-15%).

Shipboard operations are very labor-intensive, which results in high labor costs.

Carnival Corporation’s cruises are also subject to general threats in the environment such as political conflicts and natural disasters in areas where they cruise.

Human Resource Management

Cruises are labor-intensive, requiring extensive screening and hiring of employees.

Employees work on contracts of 3-9 months and are recruited mostly from third-world countries.

Carnival has employees from 51 nations

Carnival has been cited by the American Maritime Union for exploitation of employees, but the average employment period is approximately eight years, and supply exceeds demand for all cruise employee positions.

Information Systems

Although it is not mentioned in the case, Carnival Corporation’s information system is assumed to be quite extensive, in order to record passenger reservations taken from hundreds of travel agents and to orchestrate the daily operations of this large company.

The information system also appears to give very detailed breakdowns of expenses between cruise divisions and within cost categories.

Analysis of Strategic Factors
Situational Analysis (SWOT) (SFAS Matrix; see Exhibit 3)

1. Strengths

Largest cruise operator

Strong brand portfolio

Strong geographic presence

2. Weakness

High debt burden in FY 2006

3. Opportunities

Expansion of cruise operations

growing travel and tourism in China

reopening of cruise centers

4. Threats

Economic slowdown in the US

Increased minimum wages in the US

Intense Competition

VI. Strategic Alternatives and Recommended Strategy
A. Strategic Alternatives

1. Growth Strategies: Move more aggressively into the family cruise market segment.

Pros: Taps a new, growing market with fewer competitors than the traditional cruise industry. It allows alternate use of ships that aren’t being used if future demand remains depressed. This strategy allows Carnival to keep ahead of its competitors, and the company’s low break-even point puts it at an advantage over competitors who are pursuing a similar expansion plan. Pursuing moderate expansion allows Carnival to maintain its position as the market leader. This seems to be the strategy that the company wants to pursue, and management has been successful in bucking negative industry trends in the past.

Cons: This strategy requires a new way of thinking to be successful in satisfying family needs. In addition, a lower price may be necessary to attract families who are looking for affordable vacations. Competitor Disney is a major force in the vacation industry. If demand doesn’t rebound, the industry may face price wars and deep discounts. This effect will be compounded by Carnival’s inability to cut fixed costs in the face of decreasing demand, and profitability may be sharply reduced.

2. Pause Strategy: Considering the possibility of decreased demand and the uncertainty of future demand, it may be prudent to delay contracting for any additional ships until it is apparent whether cruise demand will rebound.

Pros: The company wouldn’t be tying up capital in additional ships when demand may not merit it. This would allow the company to concentrate on refining its current operations and marketing strategy. It may also lead to an improvement in the liquidity ratios.

Cons: If demand does rebound and Carnival hasn’t ordered additional ships, there will be a time lag until it receives new ships. In addition, if Carnival’s competitors continue expansion, then the company runs the risk of losing its leadership position in the industry.

3. Retrenchment Strategy: Carnival currently isn’t in a position where retrenchment is recommended. However, if demand doesn’t rebound, retrenchment could become a necessity in the future.

B. Recommended Strategy

Recommend that the company continue to pursue its current growth plan.

This strategy allows Carnival to stay current with its competitors.

If demand remains depressed in future years, there will still be ample time for Carnival to reassess its corporate strategy as long as they don’t delay indefinitely.

IMPLEMENTATION

The recommended strategy doesn’t require any extensive changes in current programs.

Top management should closely monitor the industry and general economic trends to determine whether demand will rebound as expected.

If not, management should formulate alternate strategies that adjust to these conditions.

EVALUATION CONTROL

Carnival’s management needs to address the poor state of the company’s working capital and current ratio.

These are of concern since a low current ratio may cause the company to default on certain debt covenants.

However, the state of the working capital and current ratio may be normal when compared with industry standards, since a large portion of the balance sheet assets is concentrated in fixed assets.

The company’s information systems are sufficient to evaluate the performance of the recommended strategy and to separate costs associated with the expansion.

Carefully monitors future demand and makes necessary adjustments, I think it is in a good position to maintain its leadership position in the industry and continue to be financially successful.

IX. EFAS, IFAS, and SFAS EXHIBITS

Exhibit 1

EFAS (External Factor Analysis Summary)

Key External Factors

Weight

Rating

Weighted Score

Comments

Opportunities

Only 5-7% of N. American market has cruised

.12

5

.60

Great number of potential customers

More emphasis on family vacations

.08

3

.24

Developing market segment

Two-income family – more disposable income

.08

3

.24

Cruises are an option

Changing industry

.13

4

.42

Threats

000000.0000

00000

Slowing growth in the cruise industry

.10

5

.50

2% in 1991-1995

Very competitive industry

.20

4

.80

Six major competitors

Demographic changes

.08

4

.32

Aging population

Strong economic conditions

.15

5

.75

Threat of substitutes

.06

3

.18

air, car

TOTAL SCORES
1.00
4.05
IX. IFAS, EFAS, and SFAS EXHIBITS

Exhibit 2

IFAS (Internal Factor Analysis Summary)

Key Internal Factors

Weight

Rating

Weighted Score

Comments

New larger ships

.05

4

.20

Future over capacity

104% capacity

.10

4

.50

#1

“Fun Ship” cruise theme

.05

4

.20

Effective

Clients – only tap 5%

.05

4

.20

Hard to get rest

Strong management team

.15

5

.75

Best in industry

Marketing/travel agents

.12

5

.60

strong team

Corporate culture

.10

5

.50

Strong

Acquisitions – concentric diversification

.14

4

.56

Great acquisition

HRM – exploiting employees

.05

4

.20

Stay 8 years

Financially strong

.10

4

.40

Low B/E and cash for new ships

Market share – 26%

.10

5

.50

#1

Healthy profit margins

.04

4

.16

TOTAL SCORES
1.05
4.77
IX. SFAS, EFAS, and IFAS EXHIBITS

Exhibit 3

SFAS (Strategic Factor Analysis Summary)

Key Strategic Factors

Weight

Rating

Weighted Score

Duration

S I L

Comments

Only 5-7% of Americans have taken a cruise

.15

4

.60

X

Potential customers

Growing family vacation market segment

.10

3

.30

X

Potential customers

Very competitive industry

.15

4

.60

X

Six competitors

Escalating threat of substitutes

.10

3

.30

X

Disney

26% market share

.15

5

.75

X

Industry leader

Lowest break-even point

.15

4

.60

X

Efficient

High fixed costs

.10

4

.40

X

Standardization

Poor liquidity ratios

.10

2

.20

X

Cash-poor

TOTAL SCORES
1.00
3.75

This report is based on the strategic analysis of First Choice Holidays PLC, one of the world’s leading package holiday companies. An analysis of the company’s internal and external environments will be undertaken resulting in the researcher’s findings of the opportunities and threat that the industry faces.

A look at the industry’s competitive forces will determine show the profitability of different industries and the data found, analysed showing the different external competitive forces that affect organisation and how information can be used to counter them.

A strategic analysis of the company will show the company’s competitive and financial strength in which the company’s strengths and weaknesses will be highlighted. A strategic fit which will indicate whether the company’s mission and strategies fits its internal capabilities and its external environment.

1.0 Market Environment Analysis of First Choice Holidays PLC
1.1 History

First Choice Holidays PLC, trading name of TUI UK limited is part of the TUI Travel PLC Group of companies, one of the world’s leading travel companies, which operates in over 180 countries. The company boasts of having more than 30 million customers worldwide in 27 key source markets such as the United States, Italy, France, India and the United Kingdom. In addition to First Choice Holidays, the company has over 200 brands which are comprised of market leading mainstream brands and specialist brands.

The company operates in four sectors:

Mainstream – this is the largest sector in terms of the company’s financial performance and employee numbers. It comprises of leading tour operators and ‘power’ brands as well as it operates 146 aircraft and serves 22 million customers.

Activity – this sector has over 40 activity travel businesses that operate under five divisions which are Marine, Adventure, Ski, Student and Sport. The adventure businesses take more customers to iconic adventure destinations than any other operator and serve 1.1 million customers.

Specialist and Emerging markets – this is an international portfolio of travel businesses focusing on specific destinations, premium travel experiences or particular customer demographic segments, often with differentiated and exclusive products.

Accommodations and Destinations – this sector sells and provides a range of services in destination to tour operators, travel agents, corporate clients and direct to consumers worldwide. Some services include hotel accommodations, cruise handling and round trips for customers.

TUI Travel operates its headquarters from the U.K and employs approximately 50,000 people in over 200 travel businesses in the world.

First Choice Holidays PLC, formerly Owners Abroad (Wholesale) Limited and Owners Abroad PLC was formed in 1973. After launching an airline, Air2000, the company moved into Specialist holidays. The company was restructured and rebranded into First Choice Holidays PLC after several acquisitions and joint ventures with various tour companies and cruise liners. The group then structured itself into four sectors: Mainstream, Activity, Specialist and Online Destination Services before the merger with TUI Travel PLC in 2007. First Choice was awarded the Most Environmentally Responsible Large Tour Operator (2007-2009) from the British Travel Awards.

1.2 Vision and Strategic Goal

Since First Choice merged with TUI Travel, it shares the same vision and strategic goals. The company’s vision statement is ‘Making Travel Experiences Special’. The company’s strategic goals are to create superior shareholder value by being the leading global leisure travel group providing its customers with the widest choice of differentiated and flexible travel experiences to meet their changing needs and focusing their strategic initiatives for profitable growth. These include developing the company’s business model, continuous efficiency improvements and development of growth opportunities.

1.3 PEST Analysis

According to G. Johnson et al. in the text Exploring Corporate Strategy, PEST stands for Political, Economical, Social, Technological, Environmental and Legal. It provides a comprehensive list of influences on the possible success or failure of particular strategies that First Choice may face or is facing at present.

Political

With the government’s hiking of aviation taxes and Air Passenger Duty (APD), this causes airline tickets to be expensive, therefore discouraging prospective customers from choosing the package holiday company.

Political unrest in some countries may cause customers to decide on not travelling to that particular destination out of fear for their safety.

Impact on individual of anti-terror measures likely to increase inconvenience of some travel options.

The government’s Fuel Price ‘escalator’ is a way of government making money while protecting the environment by discouraging people to travel less.

The May 2010 British elections caused political instability with certain actions destabilising the whole of Europe.

The government can form new regulations under which these companies can operate which may or may not be positive.

Economical

The current inflation rate of the U.K is 3.1% which affects air fares, clothing, food etc.

With the rise in petrol fuel which increased by 3% above inflation, customers are feeling the pinch of this and are less likely to choose taking a vacation with any package holiday company.

The unemployment rate is at 7.7% which lowered by 0.1% over the last quarter. Having a rise in employment will raise confidence in consumer spending.

The UK Pound Sterling Exchange Rate has shown recent developments which are indeed very much favourable for the citizens of the U.K. travelling abroad. At present the UK Pound Sterling Exchange Rate has posted the UK Pound Sterling at nearly double the worth of the US Dollar, which means that when British citizens travel to the U.S. they will be able to draw double bargains for their money’s worth.

Social

The number of people purchasing on the internet has been on a constant rise. In 2009, 18.31million U.K households have access to the internet. In a survey it was found that 69% of U.K households use the internet to purchase services related to travel & accommodation.

Increased popularity of foreign travel leading leads to a boom in demand for air travel. However, this has been adversely affected by international terrorism which causes concern for the safety and security of future package-holiday makers.

The interaction between tourists and the chosen host community can be one of the factors that may affect a community as tourists may not be sensitive to local customs, traditions and standards.

People’s life style changes cause package holiday companies to now offer customised packages and online booking facilities to meet customer expectations.

Technological

Today more companies are choosing to broadcast their products via the internet. Online booking has been one of the biggest factors affecting the package holiday industry. U.K residents are now constantly using the internet to book their holiday trips which saves on time for them as well as providing convenience.

Advertising on the internet has been proven to boost sales for companies; more and more people are using the internet as a way to communicate their needs and wants to the outside world.

1.4 Porter’s Five Forces Analysis
Figure 1. The Five Forces That Shape Industry Competition

First Choice is in a very dynamic and competitive industry, the Porter’s Five Forces Model was created to show the profitability of different industries. This model is used for analysing the different external competitive forces that affect organisation and how information can be used to counter them.

The following is an analysis using the model:

Threat of New Entrants

First Choice has direct ownership of its own airline and hotels. New entrants may not have the capital for such an investment and therefore may depend on external airlines and hotels to provide their customer with a service.

New competitors may not possess the “know-how” or have the necessary experience to begin operating a package holiday business.

Government regulations provides a list of rules that new competitors have to take into consideration before beginning operation, some of which may pose a problem for beginners in this industry.

In an already highly competitive market, there will be the issue of pricing to new competitors. Pricing packages in a way that it may be attractive for holiday travellers without being too low so that it may end up running at a loss.

Threat of Substitute Products or Services

First Choice’s main competitor, Thomas Cook, has dropped its prices to compete with them for lowest priced package holidays. If successful, customers may be lead to choose that company and divert from the services of First Choice.

Competitors may not possess assets such as its own airline or hotel but offers the same services at a cheaper cost.

Destinations that the company may not have package deals for, other competitors may provide causing prospective customers to switch to the competitor’s services.

Bargaining Power of Buyers

Buyers can dictate the price of package holidays being that the industry is a highly competitive one. Buyers have a lot more choices on package holiday services to choose from.

Market research has shown that buyers are taking fewer 7/14 night packages causing package holiday companies to attempt differentiation and specialisation of certain package deals to cater to those who take shorter trips.

The threat of buyers going directly to suppliers is possible. The purchasing of airplane tickets from the airline and the booking of accommodation is an imminent threat to the industry.

Convenience is key for today’s buyers. With the internet customers would choose the company which can provide the complete package holiday service without leaving the comfort of their homes.

Bargaining Power of Suppliers

If oil prices rise, suppliers of fuel for the airlines may raise their prices.

Fuel suppliers can dictate prices for their product depending on the demand for flights. Taxes applied to the cost price of fuel can affect the cost of package holiday deals.

Suppliers will have high negotiation powers for those package companies now entering the market but for those experienced and large companies such as First Choice or Thomas Cook, there will be a balance of power.

Rivalry Among Existing Competitors

Thomas Cook, the main competitor for First Choice and parent Company TUI Travel, has joined with the company offering cheap package deals which increased the already existing price competition.

First Choice was combined with its sister company Thomson award winning airline Thomson Airline to be one of the top package holiday airline in the UK which is acquiring the Boeing 787 Dreamliner which meant it will be a fifth more fuel efficient than its competitors Flybe and Thomas Cook Airlines.

Thomas Cook offers a range of financial services that First Choice does not which includes foreign exchange services, their own prepaid currency card and the recent innovation of creating an app for the Iphone and Android phones.

1.5 Industry Life Cycle

Figure 2. Industry Life Cycle

Source: http://alife4testing.co.uk/

This model is used to showcase which stage the package holiday industry is at current. The industry is currently in the ‘Shakeout’ stage of the lifecycle. The barriers to entry are currently high, economies of scale have been achieved, forcing smaller companies to be acquired by bigger companies such as TUI Travel and Thomas Cook or exiting all together.

1.6 Critical Success Factors (CSFs)

The Critical Success Factors of the package holiday industry will highlight the key factors that present and upcoming companies should focus on that will bring satisfactory results, therefore ensuring successful competitive performance.

Creating a consolidated market – Combining companies or products into one provides opportunities for significant cost savings as well as revenue synergies.

Having more direct ownership of airlines and accommodation suppliers.

Having successful product differentiation will attract more customers from segments such as university students.

To raise awareness, influence choice, change behaviour, and develop and promote new products to encourage responsible holiday choices.

Maximised web sales and content.

1.7 Opportunities and Threats of the Market Environment

Having analysed the market environment of the industry, the following will highlight the various opportunities and threats the market faces.

INDUSTRY
Opportunity
Threat

To consolidate the market by taking over smaller companies.

The opportunity to come up with new innovative products/services because of the changing consumer market.

To build new capital to purchase assets such as aeroplanes and cruise ships, reducing dependency of suppliers with that mode of transport.

New mergers and strategic alliances to promote the maximisation of synergy profits.

To maximise on the use of the internet market, to make it more interactive for consumers.

Low cost airline competitors such Ryanair and EasyJet has relatively low prices.

Natural disasters that may occur at destinations or the home country.

People owning foreign property won’t be willing to take a full package holiday, just a cheap flight.

People booking their holidays for themselves and not through the package holiday companies.

Threat of terrorist attacks may change a customer’s perception on safety when travelling.

Table 1. The Opportunities and Threats of the Package Holiday Industry

Having analysed the market environment of the industry, this paper will now take a closer look at First Choice Holidays PLC’s strategies which will explain the company’s various operations and the resources to get it done.

2.0 Strategic Analysis of First Choice Holidays PLC

Strategy is concerned with matching a firm’s resources and capabilities to the opportunities that arise in the external environment. The following shows the strategic analysis of First Choice and the tools used.

2.1 Value Chain Analysis of First Choice Holidays PLC

A Value Chain Analysis describes the activities that take place in a business and relates them to an analysis of the competitive strength of the business.

Figure 3. Michael Porter’s Value Chain Model

Source: http://www.12manage.com/images/picture_porter_value_chain.gif

The following is the value chain analysis for First Choice Holidays PLC:

Inbound Logistics

Providing all working material for travel shops and tour operators.

Printing of travel brochures.

Liaising with suppliers of fuel for Thomson aircraft.

Liaising with financial institutions for the supply of various foreign exchange currencies to be made available online and at First Choice travel shops.

Communication with various hotels and other sources of accommodation.

Hiring of security for airport parking facilities.

Operations

Booking and pre-payment of hotels and other sources of accommodations for clients at various destinations.

Liaising with different tour operators, transport and excursion providers.

Booking and pre-payment of excursions providers.

Updating the travel website for online booking.

Securing flights for various destinations.

Liaising with insurance company, Mondial Assistance (UK) Ltd., for travel insurance for customers.

Fuelling of aircraft for flights.

Ensuring there is enough on board staff for flights.

Outbound Logistics

Distributing brochures to customers.

Distribution of airline tickets or cruise ship passes to customers.

Marketing and Sales

Online booking as well as a pre-departure website for new and existing customers.

The availability of 300 travel shops spread conveniently across the UK.

Advertising of the company and airline by television and print also on the company’s website.

Call centre staff are readily available for customer support.

The offering of special package deals at a lower price.

Existing customers’ sharing their experiences about the company through word-of-mouth.

Service

The service of travel insurance for all customers.

Airport parking so that customers can safely use their vehicles and park instead of hiring alternative transport to get them to the there.

The service of Traveller’s cheques is provided to customers who want to purchase foreign currency.

Seats on the plane can be reserved before customers travel, making it easier and more comfortable for a family to sit together.

Car hires are organised for customers in need of transport during their holiday.

Qualified child care-takers or nannies are provided to customers equipped with toys and other equipment from respected UK brands such as Crayola and Little Tikes.

Firm Infrastructure

The following departments make up First Choice’s company infrastructure.

Sales

Marketing

Finance and Admin

Human Resources

Support

Engineering and Research

Operations

IT and IS

Human Resource Management

Employees are trained to be knowledgeable about the industry and company.

Training is done for employees so that they can assist customers with choosing the perfect holiday option for their budget.

Nannies for baby-sitting services are trained and qualified with NNEB/CACHE (or equivalent).

Air hostesses are equipped with the necessary first aid and situation response training.

Technology Development

Continued development online booking and interactive websites such as the pre-departure site.

Outbound dialler system was installed to automate the call-in service for agents, giving them guidance through the many services and products First Choice has to offer.

A browser-based management information system enables management to access operational and business information to monitor how calls are made.

Procurement

Research on various locations for new accommodation according to customers’ needs and wants.

Communication with vendors and other tour operators.

Acquisition of the necessary technology needed to run the company.

The purchasing of new aeroplanes for flights to more destinations at a greater speed.

2.2 The Strategic Capabilities of First Choice Holidays PLC

An organisation’s strategic capabilities are its capacities, resources and skills that create a long-term competitive advantage. The following shows the strategic capability of First Choice.

2.2.1 Resources and Competences

Resources
Competences

Threshold

Capabilities

Threshold resources

Tangible

300 travel shops in the U.K

14,000 employees

Airline – First Choice Airways

Expedition cruise ships

Over ?2 billion in assets

Intangible

4th largest package holiday company

Brand strength

Owner of several market leading brands such as 2wentys & Falcon

Online booking website

State of the art communication systems (MO Communicator)

A contributor to an ?13.8 billion revenue

Threshold competences

Deployment of travel shops in various key areas in the U.K.

To create a market leading presence in the Russian market through joint ventures

The introduction of Microsoft Office Communicator to implement an IP-based voice network to deliver better customer service.

Enhancing customers’ experience online by ways of after-sales services

Investments such as yachts, aeroplanes and expedition cruise ships that provide First Choice with a greater competitive advantage.

Capabilities for competitive advantage

Unique Resources

Tangible

Boeing 787 Dreamliner aeroplanes that are able to go greater distances and offers greater fuel efficiency.

First Choice Holiday Village designed for families and a 5-star spa concept for couples.

Intangible

Powerful brand with the merger with the largest leisure company in the world.

37 years in the travel and leisure industry.

Relationships with suppliers to retain 150 million bed nights per year.

Core Competences

Operational profitability which allows First Choice to respond to changes in the trading environment.

Possessing profitable capacity by having individual flight allows the company to determine optimum seat capacity by each U.K airport and to ensure the most appropriate aircraft fleet size and type are maintained.

Consolidation of aircraft fleet as a fuel conservation measure and to reduce the company’s direct carbon footprint.

Table 2. Resources and Competences of First Choice Holidays PLC

2.3 The Financial Analysis of First Choice

Following a look at the company’s resources and competences, a brief analysis of the company is needed to see where it stands in the industry. First Choice is a part of TUI Travel PLC, therefore shares in the group’s profitability. Having merged with the group, First Choice has contributed to ?93million in synergy profits as well as the group’s overall revenue of ?18.6billion.

The following shows a break-down of the company’s financial capability in the following areas in 2009:

2.3.1 Profitability

Gross Profit Margin – This is used to assess a firm’s financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold. The company’s Gross Profit Margin stood at 8.4% in 2009, an improvement of 1.1% of the previous year. This shows that the company’s pricing strategies have been effective.

Net Profit Margin – This is used to show how much profit a company makes for every ?1 it generates in revenue or sales. The company’s net profit margin stood at -0.77% which states which has improved over the previous year of -2.1%. Therefore this shows a rise in efficiency after all expenses and that have been considered.

Return On Assets – This gives an idea as to how efficient management is at using its assets to generate earnings. The company earned 0.3% from invested capital (assets) compared to 2008’s -1.4% loss. As a result this shows the company is earning more money on less investment.

Return on Equity – This shows the amount of net income returned as a percentage of shareholders equity. The company showed a 1.2% profit made from shareholder investments, a rise from the previous year -0.1%. Thomas Cook, the company’s main competitor had a higher return at 2.37%.

2.3.2 Liquidity

Current Ratio – This is used to determine a company’s ability to pay off its short-terms debts obligations. The company’s current ratio stands at 3:5 which means they can pay off its obligations should it become due at that point.

Acid Test Ratio – This indicates whether a firm has enough short-term assets to cover its immediate liabilities without selling inventory. The company showed a ratio of 1:2 for 2009, which means that the company has enough liquid assets to cover an unexpected drawdown of liabilities.

2.3.3 Leverage or Debt

Debt to Equity Ratio – This indicates what proportion of equity and debt the company is using to finance its assets. The company showed a ratio of -3% which means that they were not aggressive in financing it’s growth with debt and has the ability to repay loans.

Total Debt to Total Assets – This is used to measure a company’s financial risk by determining how much of the company’s assets have been financed by debt. The company showed a ratio of 3:4 meaning that 75% of the company’s assets are financed by the creditors or debt (and therefore 25% is financed by the owners).

2.3.4 Activity (see Appendix)

Asset Turnover – This shows the amount of sales generated for every dollar’s worth of assets. The company showed a ratio of 1.5 which means for every dollar in total asset spent they gain 1.5 in revenue compared to the industry’s 0.34 ratio.

Despite a drop in revenue, the company still remained profitable and above its competition. It is seen that the company has an edge and is inviting for any investor. The following shows the companies. The following shows the strengths and weaknesses of the First Choice.

First Choice Holidays PLC
Strengths
Weaknesses

One of the market leaders in the package holiday industry both domestically and globally.

Technologically advanced, creating new ways using technology to make decisions on their own without going physically to an agent.

Offers a wide range of comprehensive services that customers enjoy.

Ability to consolidate the market.

Inability to fully penetrate the Western market resulting in dependency on the European market for revenues.

As at August 2010, there was a consistent decrease in bookings following the recurrence of airspace closures, the emergency budget and the UK weather.

Accounting errors on the part of executives.

3.0 The Strategic Fit Analysis of First Choice Holidays PLC

Strategic fit indicates how well the First Choice Holiday’s mission and strategies fit its internal capabilities and its external environment. First Choice is the 4th largest package holiday company in the UK. Its main competitors are Airtours, Thomas Cook and its sister company Thomson Holidays, currently Thomsons dominates the industry.

According to Investopedia, competitive advantages give a company an edge over its rivals and an ability to generate greater value for the firm and its shareholders. The more sustainable the advantage, the more difficult it is for competitors to neutralize the advantage. It is the company’s competitive advantage that allows it to earn excess returns for its members. Having a competitive advantage is important to First Choice because without it, the company will have no economic reason to exist and will just simply wither away. Through the analysis done in this essay, although First Choice is ranked as #4, it still holds an advantage on its competitors.

First Choice used the strategy of backward integration, meaning the company purchased suppliers in order to reduce dependency. An example of this would be its own airline and the First Choice Holiday Village. The acquisition of new aeroplanes, the Boeing 787 Dreamliners, would prove to be a major advantage as consumers are now taking responsibility for the environment and with these aeroplanes; the company will showcase environmental performance by reducing their carbon emissions. Having these assets will give First Choice the advantage of delivering products or services of a higher value at a cheaper price, as a result gain cost leadership.

Using the internet for online sales has maximised their profits also the company retained their customers while gaining new ones. The company’s liquidity and financial situation is stable despite a drop in revenue in 2009, with that they are capable of market consolidation. An example of that would be the acquisition of C.I.T Holidays, a UK based company with extensive operations in Spain and Italy.

First Choice has a long history within the industry along with experience. They have proven to be well prepared to any changing environment. The company has achieved high economies of scale because of its access to larger market allowing them to operate with greater geographical reach. They have the ability to create value for money to its customers and have shown to be innovative by way of creating differentiated products such as its pre-departure website, an after-sales service.

3.1 The SWOT Analysis of First Choice Holidays

The SWOT Analysis provides information that is helpful in matching the firm’s resources and capabilities to the competitive environment it operates.

First Choice Holidays PLC
Strength

One of the market leaders in the industry.

Ability to offer differentiated products/services.

Commitment to customer service.

Wealth of knowledge of the industry.

Backward Integration which made them spread across the value chain.

Strong distribution channels, the strongest being online sales.

Weakness

A 13.5% reduction in package prices because of a decrease in sales as a result of the recession and events such as the volcano ash disruption in mid-April 2010.

A loss of ?69million in revenue in 2009 compared to the year before.

Opportunities

Further expansion through acquisitions and mergers.

With new mergers and alliances, an opportunity to create synergy profits arise.

Threat

Airlines and hotels are now offering package deals.

Threat to Thomson Airlines from low cost airlines such as Ryanair.

Terrorist threats or attacks will change customers’ perception of safety when travelling.

In conclusion, First Choice Holidays PLC is strategically fit and has a high advantage over the competition. The company is seen to be attractive for investment, although their profits fell for the previous financial year and sister company Thomson Holiday still stands at number one, but with new products underway, there may be a positive change.

The author has to strategically evaluate Accors expansion plan of adding 10,000 rooms per annum in total during two years (2007-2008) in both established market chosen as United States of America and emerging market chosen as China. The author will also review the marketing, financial strategies that Accor has adopted in these markets till now and then suggest future strategies to expand in these markets. The author will also be suggesting about the brand that Accor should look forward to expand.

Accor is a large French multinational corporation operating in nearly 90 countries and Accor Hospitality, the Accor hotels branch, has more than 4,000 hotels worldwide. It starts from the most luxurious hotels to the most economic lodging solution. Under its belt there are brands like sofitel, novotel, mercure, ibis, red roof inns, etap, motel 6, studio 6 and formule 1. The group is looking to expand its hotel business in an established (USA) and establishing (China) market by adding 20,000 rooms over the period of two years. The author has to strategically evaluate and make suggestions to the group.

With a corporate representation throughout the world, Accor Hotels have become one of the largest players in the industry. It is an intricate organisation with multiple brands and qualifications of hotels, as well as supplementary products and services. Accor finds it important to incorporate the small and medium-sized hotels in managing customers’ needs and requests as they are the direct link to the customers.

Accor is a large French multinational corporation operating in nearly 90 countries. Accor is the European leader in hotels (Accor Hospitality) and a global leader in corporate services (Accor Services). Accor Hospitality, the Accor hotels branch, has more than 4,000 hotels worldwide. It starts from the most luxurious hotels to the most economic lodging solution.

(Reference: http://www.fundinguniverse.com)

Aims & Objectives: This report aims to develop international expansion plans for Accor in established and emerging market in the given span of time during the year 2007-2008. The objective is to provide rationale for the selection of markets, and propose branding, finance, and marketing strategy to the Board of ACCOR to add an additional 10,000 rooms per annum across both established markets (Europe, including France and North America) and other areas of the world (Latin America, Africa, Middle East and Asia/Pacific).

Research Methodology: This report is based on the case study for the ACCOR group of hotels which is from the module study guide and is a piece of research by the “The Centre for Hospitality Research at Cornell University”. The various secondary sources accessed have been as following: internet, journals, professional reports, government reports and others to produce data for the targeted markets.

In 1967 Gerard Pelisson and Paul Dubrule opened their first Novotel hotel on a roadside near Lille in northern France. Travel was booming in France in the 1960s and the hotel industry had not yet expanded to meet the demand. French hotels, in general, were either rural inns or luxury hotels in city centers. Dubrule decided to build American-style highway hotels in the medium price range and collaborated with Pelisson, a former head of market research at IBM-Europe. Through Pelisson’s connections the partners were able to secure a bank loan, and the Novotel firm was launched. The company’s ensuing success was in large part due to its being first to break into the unexploited European market for highway lodging. Each Novotel provided standardized rooms, ample parking facilities, and restaurants featuring local cuisine. Soon Novotels also were established at airports and popular vacation sites, such as the seaside and mountain areas.

The acquisition of the Mercure hotel chain in 1975 pushed the company into metropolitan areas and the business traveler market, and these hotels varied according to regional demands in style, character, and restaurant offerings. By the end of the 1970s Novotel had become the premier hotel chain in Europe with 240 establishments in Europe, Africa, South America, and the Far East.

Accor’s brand worldwide
Formule1

Lowest rates on the market.

Functional room for one,

Two or three people.

All-you-can-eat breakfast buffet.

Round-the-clock check-in.

Etap

Pleasant convenient room for one, two or three people.

Budget price.

All-you-can-eat breakfast buffet.

Round-the-clock check-in.

Motel 6

The lowest price of any national chain.

Red Roof Inn

Renovated product.

Low rates.

Comfortable beds.

RediCard Preferred

Member loyalty program.

Ibis

Simple, reliable pricing policy.

Always very well situated, in city centres, close to airports or near major tourist or business areas.

Service quality (ISO 9001 certification and 15-minute satisfaction guarantee).

Environmentally friendly waste, water and energy management systems.

Teams on duty around the clock.

Breakfast served from 4:00 a.m. to noon.

Hot snacks available at any time.

Mercure

Shared values, such as a strong regional focus, a unique personality and an exceptional wine list.

For business and leisure stays, in city centres, at the seaside or in the mountains.

Novotel

Open spaces featuring contemporary design, for rest and relaxation.

Bright, spacious, pleasant rooms where guests can work or unwind in a comfortable setting.

Customers can eat whatever, whenever and wherever they want.

Offers adapted to the needs of all travellers.

Suite Hotel

Innovative, modern concept.

30-square-meter modular suites.

With Boutique Gourmand, food can be purchased around the clock in the hotel lobby.

Free relaxing massage every Thursday evening.

The longer the stay, the lower the price.

Smart cars made available free-of-charge to medium-stay customers.

Sofitel

Prime locations in leading business centres and resorts.

Each hotel is unique in its design, architecture and culture.

Sofitel’s exclusive MyBed concept, the guarantee of a good night’s sleep.

Restaurants offering innovative, contemporary cuisine that surprises diners, awakening their senses and stirring their emotions.

Hotel Distribution Worldwide

Accor has its 4,000 hotels in 90 countries. It has its presence all seven continents and in all mojor cities. (Reference: www.accorhotels.com)

Europe
Africa
Asia
Australia
North America

Andorra

Algeria

Cambodia

Australia

Canada

Austria

Benin

China

Fiji Islands

Mexico

Belgium

Burkina Faso

India

French Polynesia

USA

Bulgaria

Burundi

Indonesia

New Zealand

Cyprus

Cameroun

Japan

Norfolk Island

Czech Republic

Chad

Laos

France

Egypt

Malaysia

Germany

Equatorial Guinea

Philippines

Greece

Gabon

Singapore

Hungary

Ghana

South Korea

Ireland

Guinea

Thailand

Italy

Ivory Coast

Vietnam

Lithuania

Mauritania

Luxembourg

Mauritius

Monaco

Morocco

Netherlands

Nigeria

Poland

Reunion

Portugal

Rwanda

Romania

Senegal

Russia

South Africa

Spain

Tunisia

Development strategy

Accor’s hotel business has continued its sustained pace of development. Most importantly, they devised a new, more efficient business model based on two foundations:

Stronger brands those are now more visible, more attractive and more strategically aligned.

An “asset right” real estate strategy, which consists of adapting operating structures to the profile of each country and market segment.

Pelisson and Dubrule developed their expanding company with a decentralized management and a unique dual chairmanship. Although to comply with French law the partners took turns holding the official position of chairman, they made all decisions jointly and shared responsibilities, immersing themselves in all aspects of the business. The company’s specialty became variety, providing hotel chains to fit every need. In 1973 Sphere S.A. was created as a holding company for a new chain of two-star, no-frills hotels, called Ibis; the first Ibis was opened the following year. During this time, the company also acquired Courte Paille, a chain of roadside steakhouses founded in 1961, which reflected many of the same priorities as Novotel: practicality, easy parking, consistent quality, and quick service.

(Reference: http://www.fundinguniverse.com)

Accor expanded at a far swifter rate than its international rivals, becoming the largest operator in Europe. It led the market in France and West Germany, and expanded in the medium and economy range in Spain, Italy, and Britain with its $75 million investment budget. The company’s European base provided three-quarters of its revenue, with more than half coming from hotels and the rest from its foodservices.

(Reference: http://www.fundinguniverse.com)

In 1997, Dubrule and Pelisson decided to retire from active management and were succeeded by Jean-Marc Espalioux. Espalioux’s new management team focussed on relocating Accor’s cash. In an effort, to deleverage themselves and free resources to provide for expansion, Accor disposed of a‚¬3 billion of real estate assets as part of a sale and leaseback programme.

(Reference: http://www.fundinguniverse.com)

Business Mix

Accor S.A. operates in hotels and services sector worldwide. It provides luxury and upscale, midscale, and economy hotel services. It also designs, develops, and manages prepaid solutions, including food vouchers, welfare and assistance programs, family assistance solutions, gift vouchers and cards, loyalty programs and incentive campaigns, and expense management services to corporate clients and public institutions. In addition, the company operates restaurants and casinos, as well as provides onboard train services to the railway sector. Accor was incorporated in 1960 and is headquartered in Evry, France.

Financial Performance

Profit before tax rose to a‚¬727 million in 2005, an all-time record, and the Group’s balance sheet was more solid than ever. Based on these results, shareholders will be asked to approve an ordinary dividend of a‚¬1.45 per share, a 26.1% increase, plus an exceptional dividend of a‚¬1.50 per share, representing a total payout of a‚¬320 million. This dividend policy is accompanied by a share buyback program that has had a positive effect on earnings per share. (Reference: www.accorhotels.com)

Accor’s 2006 results were excellent, as can be seen in three key figures:

aˆ? Revenue rose by 6.6%, the biggest increase since 1998.

aˆ? Profit before tax rose by 28% to a‚¬727 million, a record.

aˆ? EBITDAR margin, at 27.4%, was our highest ever.

These figures prove that Accor is developing fast and enjoying very good financial health, as illustrated by their low level of debt. Another reason for satisfaction is that these improved results concern both the Services and the Hotels businesses. For the year, revenue was up 15.5% in Services and 6.1% in Hotels. And, if 2006 was a very good year, the outlook for 2007 is also very encouraging. With the two businesses’ growth potential, the economic turnaround (especially in Europe with the upturn in the hotel cycle) and the emerging markets of China and India, they have every reason to be optimistic. For 2007, Accor is on track to step up the pace of growth, with the goal of adding 200,000 rooms by 2008. (Reference: www.accorhotels.com)

Strategy

Very quickly too, it became apparent that there was a need for a clearer strategy that would enable the Group to more accurately identify its development priorities and, more importantly, focus its managerial and financial resources. In addition to this two-pronged strategic shift, senior management, under the leadership of Gilles Pelisson, outlined a sustained expansion strategy combining acquisitions, notably in the Services business, and stepped up organic growth in the Hotels business with the opening of 200,000 new rooms between 2006 and 2010, especially in China, India and other fast-growing regions. Redefining the market positioning of the brands also made it necessary to reposition the Sofitel brand and create a new non-standardized banner in the economy segment, All Seasons. The brand strategy has led to a shift away from the Accor corporate banner toward the operating brands.

Accor focuses repeatedly on a specific vision for growth and believes in sustainable, profitable growth through three pillars:

A geographically and structurally balanced portfolio

A disciplined, and results-oriented management of resources and assets

A set of powerful, aligned brands

(Ref: case study)

“The Right Approach” became Accor’s strategic vision of its Hotels division focussed on making Accor’s Hotels business more profitable, less cyclical and well appreciated by its clients:

To achieve these goals, five levers drive the “Right Approach”:

Align the brand portfolio with customer expectations (The Right Brands)

Redefine the networks around this brand portfolio (The Right Network)

Improve hotel operating performance in the reconfigured business base (The Right Operating Performance)

Adapt hotel operating structures to improve return on capital employed and reduce cash-flow volatility (The Right Asset Management) – Shift the corporate culture to deliver the best value-added services to hotel owners (The Right Service Provider).

Ownership Structure

For the lower and mid segment hotels Accor can consider giving franchises or entering in joint ventures. However, for the high end segment hotels like sofitel and novotel, Accor should maintain ownership approach as these properties have higher profit sensitivity. In 2003, Accor opened 10 new properties under these brands, and they owned or leased these new properties.

Accor should have less capital-intensive operating structures, which is a key to their success, especially in economically sensitive countries. While Accor owns and leases some properties, they also look to management contracts and franchising.

(Reference: case study)

Developed Market

For the developed market the author has chosen three developed markets from which one will be shortlisted after the analyses. The author has chosen UK, France and USA as its markets for analysis. Accor has great presence in all the three markets.

Accor has 125 hotels in UK mainly in the mid-segment. The demand for mid-segment hotels in the UK is strong and most of the Accor hotels are doing well. However, UK is not a big market compared to the US for Accor. Accor already has a good presence in the European market and hence there is limited scope of expansion. Similarly, in France Accor have a staggering number of hotels and resorts in all segments. It also has a lot of services in France. It has its strongest presence in France considering the size of France to the UK and the US. Accor already has a very good presence in France in all the segments. Hence it has little scope for growth. In the USA, Accor has motel 6 and studio 6. It is also present in the upscale market. However, it still has a large scope for expansion in all the segments as the US market is so vast and diverse. Therefore, in the developed markets, the author has shortlisted the US market for the addition of 10,000 rooms in the year 2007-08.

Developing Market

Like the developed market the author will choose three developing markets and shortlist one of them for the analysis. The developing markets are India, China and South Korea. South Korea is relatively a small country and the economic growth is not impressive enough for Accor to add 10,000 rooms in this market. Accor entered the Indian market in the early 80’s and failed miserably. Accor has few operational hotels in India mainly business hotels. However, the political system in India is somewhat chaotic as compared to China. The third market chosen is China. China is a huge country in terms of land and is the fastest growing economy in the world. It has a stable government and its foreign policies towards the hospitality industry are very friendly. Therefore, the author has shortlisted China as its developing market.

ESTABLISHED MARKET (USA)
_______________________________________________________
Rationale

The United States of America (commonly referred to as the United States, the U.S., the USA, or America) is a federal constitutional republic comprising fifty states and a federal district. At 3.79 million square miles (9.83 million km?) and with about 305 million people, the United States is the third largest country by total area and third largest by land area and by population. The United States is one of the world’s most ethnically diverse and multicultural nations, the product of large-scale immigration from many countries. The U.S. economy is the largest national economy in the world, with an estimated gross domestic product (GDP) of US$14.3 trillion (23% of the world total based on nominal GDP and almost 21% at purchasing power parity). (Reference: http://www.wikipedia.com)

Geographical Location

North America is the northern continent of the Americas, situated in the Earth’s northern hemisphere and almost totally in the western hemisphere. It is bordered on the north by the Arctic Ocean, on the east by the North Atlantic Ocean, on the southeast by the Caribbean Sea, and on the south and west by the North Pacific Ocean; South America lies to the southeast. North America covers an area of about 24,709,000 square kilometres (9,540,000 square miles), about 4.8% of the planet’s surface or about 16.5% of its land area. As of July 2008, its population was estimated at nearly 529 million people. It is the third-largest continent in area, following Asia and Africa, and the fourth in population after Asia, Africa, and Europe. (Reference: http://www.wikipedia.com)

PESTLE Analysis
Political

A seldom-stated fact of life is that without political stability it is impossible to have economic progress. Until a nation has a stable political system in place, it is impossible for people to plan their lives, conduct business successfully and go about their daily routines with any hope for the future. The United States has enjoyed 135 years of political stability since the end of the Civil War. The United States is the oldest democratic republic. This is an incredible accomplishment. It is amazing that no other country has been able to copy the American system of government successfully. It is as if that system is uniquely suited to that single country. (Reference: http://www.wikipedia.com)

With mass manufacturing long gone from America, hospiatality industry is one of the key generators of revenue. Hence the American government has given some concessions for the development and growth of the industry:

Grant of Infrastructure Status for hotels

Concession for Convention Centres

Continuation of Concessions

Depreciation rate for hotel buildings

Concession in Income Tax Act for the Hotel Industry

(Reference: http://www.capitalmarket.com)

Economical

Fortunately for U.S. hotel owners and operators, actual RevPAR improvement through the first six months of 2004 has already reached 9.5 percent. Most encouraging was the 3.2 percent increase in ADR. Record-breaking growth rates for revenues and profits are certainly welcome news for U.S. hotel owners and operators. The industry leaders have forecasted growth in the coming years for hospitality industry in the USA. Also with backing of the US government the hospitality industry is believe to show good results in coming years.

(Reference: http://www.wikipedia.com)

Social

The American population is comparatively young compared to other developed nations like Japan and Germany and a lot of young immigrant work force is also available in the country. Therefore, it is doubly beneficial for the hospitality industry, which is always on the lookout for young work force and customers. The American government safeguards the interests of its people through following agendas:

the social inclusion process

Coordination of social security schemes

Anti-discrimination and relations with civil society

Equality between women and men

Social Agenda 2005-10

(Reference: http://www.childstats.gov)

Technological

The effective use of hospitality technology is one of the key factors in providing stellar customer service, since the proper implementation of this technology helps to ensure that key aspects of service are not accidentally forgotten or avoided.

The hospitality sector in the US spent a total of $917 million in 2006 on R&D activities, compared to $784 million in 2005. As the President outlined in his State of the Union Address, the ACI commits $5.9 billion in FY 2007 and more than $136 billion over 10 years to increase investments in research and development (R&D), strengthen education, and encourage entrepreneurship and innovation. (Reference: http://www.capitalmarket.com)

Legal

The lobour laws in America are very stringent. Therefore, the hotel has to abide by the rules to avoid fines and getting into legal disputes. Some of the laws for the hospitality industry are as follows:

Common Law System

Right To Privacy

American with Disabilities Act

Safety and Security

Food and Beverage Consumption

Employment

Workplace

Contracts

Travel and Tourism

The international arrivals market for the United States has changed significantly since 2000. This goal of this analysis is to provide insights into changes affecting the top inbound markets to the U.S. The U.S. welcomed 56 million international visitors from 213 countries during 2006, up 10 percent from 2005. Total arrivals were also up 9 percent from 2000, the former record year for total non-resident visitation to the country. Arrival records were set by 72 countries, nine of which were among the top 20 inbound markets. Therefore, in 2007, the growth in arrivals was driven more from the ’emerging’ markets than the top arrival markets.

Overseas arrivals (excluding Canada and Mexico) totalled 23.9 million during 2006, up 10 percent from 2005. Travel from overseas markets accounted for 43 percent of total arrivals to the U.S. and contributed significantly to the overall growth in international arrivals in 2007. Although overseas travel is rebounding from its low in 2003 it was down eight percent from its peak in 2000 (graph below). Fourteen of the top 20 overseas markets exceeded 2006 arrivals levels by double-digits: Germany, France, Australia, Brazil, Italy, India, PRC/HK, Spain, the Netherlands, Ireland, Venezuela, Colombia, Sweden and Israel. (Reference: http://www.travelstatistics.com)

Economic Growth

In real terms, America’s economy grew by 3.7 percent in 2006, faster than most other developed economies around the globe and faster than the historical U.S. growth rate, since 1970, of 3.2 percent.

The overall level of GDP was $9.89 trillion (in 2000) when Bush was elected and $9.87 trillion in the third quarter of 2006. Exactly three years later, GDP is $10.88 trillion, a 10 percent real increase. To put that in perspective, just the growth of the U.S. economy over the past three years is larger than half of the entire French economy. (Reference: http://www.economicreform.com)

Brand Selection

Headquartered in Dallas (Carrollton), Texas, Accor North America operates more than 900 upscale and economy properties including nationwide economy leaders Studio 6 and Motel 6 and the upscale Sofitel and mid-scale Novotel and Ibis hotel locations in the U.S., Canada and Mexico. Its flagship chain, Motel 6, caters primarily to vacationing families in the US and Canada with a limited menu of amenities.

Accor’s plan for the U.S. should focus on Motel 6, Studio 6, Sofitel and Novotel brands. The company should plan to grow Motel 6 and Studio 6 aggressively. “We’re working on new prototypes for both brands,” Le Mener said. “We intend to be very aggressive with a goal to develop 70 to 75 properties a year”, Mener added. Novotel should follow the growth plan of Sofitel, which is to have properties only in the top 20 to 25 markets in the U.S. “We see Novotel as an international network,” he said.

Business travellers and families on a vacation are looking for budget hotels as they want the cheapest mode of accommodation. Accor has a great presence in the low budget segment and therefore, it should continue to grow its hold in this segment. However, it should also look at growing in other segments of the market. This will help Accor in creating brand awareness and also increase its market share in the US.

Accor in USA
Brand Hotels Rooms Managed/Franchised

Motel 6 815 85,421 127

Red Roof Inns 360 39,622 101

Studio 6 37 4,714 2

Sofitel 8 2,633 1

Novotel 6 1,835 3

Total 1,226 134,225 234
(Reference: http://www.accor.com)
Financial Strategy

Accor USA was struggling with manual account reconciliation that postponed month-end accounting for its growing number of properties. Department inefficiencies and error-prone manual processes caused delays with the identification of exceptions like missing and late deposits. High turnover at properties and reporting delays exposed the company to expensive losses with annual write-offs averaging $1.5 million. Accor USA had no process for escheatment and a 2004 audit resulted in $3 million dollars in penalties for unclaimed property that had not been filed with the appropriate states. (Reference: http://www.accor.com)

Accor USA faces a lot of financial problems that cannot be sorted out in a matter of time. It has very less cash left to fund its operation in the USA. Although, the funds from operations increased 7% to $906 million in 2005, it still struggles to keep up. Capital expenditure for renovation and maintenance rose by nearly 15% to

$326 million during the year, and represented 4.5% of revenues, versus 4.2% in 2005. Free cash flow amounted to $580 million. (Reference: http://www.accor.com)

As seen above, Accor USA’s debt is decreasing and cash flows are increasing, therefore it should concentrate on the expansion programme as the cash flows increase. However, it should focus on economy hotels like Motel 6 and Studio 6 as they require less money. To fund these projects Accor can raise cash money from equity market and some from its operations.

With its more substantial financial resources, Accor should step up the pace of growth and enjoy greater financial flexibility. The initial three-year (2005-2007) expansion budget has been increased by 39%, to EUR 1.7 billion from EUR 1.2 billion, to fund the development of various hotel projects in the U.S. (Reference: http://www.accor.com)

To improve its financial flexibility, Accor should undertake an innovative real estate management strategy designed to meet two main objectives:

Reduce capital intensity in upscale hotels.

Variable holding costs in the midscale segment.

In the upscale segment (Sofitel), Accor wants to sell the hotel properties while retaining the management contract, sometimes with a minority stake, in order to reduce earnings volatility in a segment that is more sensitive to business cycles. The objective is for 75% of all Sofitel units to be under management contract in 2006, versus 62% in 2004 and 52% in 2000. (Reference: http://www.accor.com)

In midscale hotels, fixed leases are going to be transformed into variable leases based on a percentage of revenues with no minimum guaranteed. One of the objectives is to variable a proportion of the hotels’ fixed costs.

Marketing Strategy
Accor’s big-spender approach has made it the arch-collector of brands, and some observers wonder whether the group can continue being all things to all people without diluting its focus. Nevertheless, it’s an approach that has established the French company as the world’s third-largest hotel operator, and its coverage of multiple market sectors allows it to spread the risks of a downturn in any one part of its business.
Accor group should be focussing on marketing its hotels through advertisements in magazines, television and Accor’s other services operational in the U.S. It has joined hands with various magazines and is actively participating in television adverts, which will help in marketing its product.
Many customers locate and book their Accor hotel accommodation through www.accorhotels.com and associated brand-specific web sites, where they are offered the opportunity to opt-in to an online communications programme.
Accor’s online relationship marketing strategy should aim to convert prospects into customers and build customer value through increasing the depth of relationship and growing revenues from repeat bookings, cross-sales, up-sales and referrals.
Customer relationship and marketing director of Accor Hotels, Mathieu Staat, said, “Online relationship marketing is an important, but complex activity for us. Accor have several hotel brands and offer online communications in up to five languages to subscribers across 15 target zones. They also run six different loyalty and subscription cards.

Introduction of tourism industry

The hospitality and tourism industry is the world’s largest industry that has been growing significantly in the last few years. The noteworthy augmentation of the industry is attributed to many factors such as development of easy modes of transportation, changing demands of the people to visit various destination places, increasing need for exploring adventurous and artistic places worldwide and creation of tourist destinations in numerous countries for making the tourism industry an integral part of their economies (Bender, Gidlow & Fisher, 2013; Wang, 1999).

Since the tourism industry has gained huge importance, it has become a major area of study of the leading scholarly researchers. These specialists are doing extensive studies on the industry, the factors impacting its performance and the impact of tourist role on the destination images created by the tourism authorities in each country (Lim, 2007; Prentice, 2004). In order to study various aspects of the tourism industry, one school of thought is focussing on the socio-demographic characteristics and needs related to the specific styles of vacations or tourist roles (Cohen, 1974; Kim, 2009; McCabe, 2005).

For instance, Yiannakis and Gibson (1999), cited by Nicoletta and Servidio (2012), established that the tourist role’s preference is linked to the place where a person lives in his/her adult life. On the other hand, second school of thought is analysis the impact of stereotyping of tourist role on the discriminatory practices that are created by the authorities in the destination places (Lee, Law & Murphy, 2011; Jacobsen et al., 2012). Hence, there is an enormous collection of work on the tourism industry, tourist role and the challenges faced by the players of the industry.

Contribution of researchers in tourist studies

In order to study the tourist role in the tourism industry, the researchers have utilised the ‘anthropology study’ to generate an extensive body of theory that can provide assistance in defining and delimiting the object of study i.e. tourist. The classical theorists such as Cohen (1979), Horne (1992), Kadt (2001), Pearce (1982) and Smith (1978), cited by Heimtun (2007), have ascertained the relationship that exists between guests and hosts which means that they are created by developing a series of dichotomies such as locals/foreigners, stability/transience, production/consumption and work/leisure.

Although these dichotomies do exist in the sector but it is important to conceptualize the role of tourist that has been mainly treated by the researchers in a negative way (Caru & Cova, 2003; Frankin, 2003); the primary purpose is to make some beneficial contributions can be made in the field of research. The foremost aim of the studies related to tourists is not to defend them and close the eyes towards the negative aspects of the tourism but it should also highlight the positive aspects of the tourism and address the challenges that are encountered by the tourists during their visits in the destination places (Selstad, 2012).

Various roles of tourist as depicted by researchers

For decades, the tourists have been portrayed as the second-class citizens (Burner, 2001); this feeling of being considered as a dumb or unimportant person has been impacting the treatment of tourists worldwide. According to Jack and Phipps (2005), the local residents at destination places used to believe that tourists’ activities are lazy, dumb and fatuous. However, these conventional views about tourist behaviours have been challenged and many researchers have successfully revamped the tourist roles in the destination places and the shift has been made on studying the tourist experience (Dann, 2000).

Uriely (2005) gave a review on the conceptual development of an excellent tourist experience that has received huge appreciation by the concerned authorities in the tourism industry. The researcher identified four developmental phases of the tourist roles:

The tourism should be viewed as a separate activity from everyday life routine.

There is a shift from the portrayal of tourists as homogenous people as a general form to multiplication of the depictions that are captured while tourism experience.

A shift in focus for the objects displayed by the industry towards the negotiation of meanings in subjective way for determining the level of experience.

A significant move from the decisive and contradictory academic information flow such as experience as moments of truths to harmonizing and virtual interpretations.

The main problem in theories about the experience of tourist was that they lack focus on the term ‘tourist role’. Hence, the modern theorists started studying the tourist attitudes and behaviours that were depicted by their experiences in the destination places along with the stereotypes that were created among the tourist groups belonging to similar ethnic groups, religion, race, culture and etc. (Iverson, 2010).

Stereotyping and prejudiced views of tourist role

Since many researchers classified the tourist roles on the basis of their analysis, they created certain stereotypes about the tourist roles so that the tourist studies can be flourished. For instance, Cohen (1979) classified the tourist roles into four categories i.e. the explorer, the individual mass tourist, the drifter and the organised mass tourist. Jafari (2003) emphasised that the better classification of tourist roles can be stereotyped by adding behavioural characteristics such as takes photos, visits well-known places, pleasantly purchases souvenirs, tries local food, stays for some in one location and explores numerous destinations privately.

From the studies of contemporary researchers, it is evident that they defined the role of tourists in accordance to their purpose of tourism; when there was increased focus on the tourism, there was less emphasis on treating tourist an individual. Cohen (1979) classified tourists into four broad groups such as recreational type, experimental type, existential type and experiential type. In each mode of tourism, the tourist wants to have some time off from everyday routine so that the energy can be revitalised and explore the culture and aesthetic offerings of the other countries that have distinctive norms, values and societies (Chok, Mcbeth & Warren, 2007).

The postmodern theorists have emphasised that the tourist roles have to be studied from the negotiated and subjective characteristics rather than rigid and reductionist perspectives that were done by contemporary researchers; their entire focus is on the tourist roles, meanings, attitudes and experiences. The recent terminology coined by Jacobsen and Munar (2012) is ‘anti-tourist’ attitude which shows that the tourists want to be viewed in the role of tourist but want to keep a power distance when in this role.

According to these researchers, the conception of anti-tourist role seems to challenge the tourist’s sense of individuality and identity; the role distance becomes of utmost importance to them as they want to maintain a feeling that each individual has different experience that can be entirely distinctive from all other players and occupants of the role (Litvin, Goldsmith & Pam, 2008). It is believed that each tourist will have different sense of feelings in varying situations as each one of them has distinctive values, beliefs, preferences, attitudes and behaviours (Yang & Wall, 2009).

Most of the researchers have challenged the concept of stereotyping the tourist role on the basis of cultural differences or nationality because sometimes they often lead to misconceptions about tourist groups. For instance, it is believed that Japanese people cannot speak English and the tourist guide has to provide them assistance when communicating among the local residents; it is untrue in many situations as there are many Japanese people who can easily communicate in English.

Likewise, there is a belief that Asian people like to eat their food items and don’t prefer to try out the local food items of the destination place; it is a myth as well because there are many people who are looking forward to try out the new food items of the destination place (Selstad, 2012). Hence, the tourist roles should not be confined to the limited set of observations as every tourist has distinctive features and prefers to be treated in accordance to the individual personality possessed by the person.

Rethinking the tourist role

With the robust growth and development in the field of Internet, the tourist roles have changed to a great extent as the tourists have become information seekers and proficient in developing their own travelling packages. As they have easy access to the extensive range of details about various destination places, they ensure that they select the places in accordance to their own choices so that they have a marvellous time during their complete tourism (Selstad, 2012).

The concerned authorities have to ensure that they even make proper use of the advertising mediums so that right message is communicated to the tourists. One key point that has to be given adequate attention is that the tourists should be treated as individual beings and they should be presented many alternatives so that they can have a sensational travelling experience.

Conclusion

From the studies of a wide array of theorists and researchers, it is evident that the tourist roles cannot be stereotyped as the tourists prefer to be treated as distinguished individuals and they avoid being viewed as aliens or strangers in the destination places. The tourism industries have to ensure that they offer the most astonishing experience to the visitors and offer them unlimited opportunities for carrying out their activities within the ethical boundaries of the country in accordance to the Law.

Hence, the stereotypes have immense impact on the tourist role and it should be changed so that the tourists are willing to visit the place on repetitive basis and any conflicts in their views about tourism in the respective place are tackled properly.

London offers some great 5 star London hotels so you that you can experience the capital in luxury. The London’s 5 star hotels are some of the best in the world. There are the old established traditional hotels like Claridge’s, and other chic, modern boutique hotels like The Hempel, there is a great choice in London’s finest 5 star accommodations.

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It always cross mind of stakeholders in the tourism industry of why people buy package trips to be on holiday or business trip they take, why visitors choose one particular destination instead of another. For the stakeholders, it is a challenge to learn and understand pre-requisite factors visitors take into consideration in choosing a destination. Holloway (1998) said that relatively little is known about tourist motivation and although numerous statistics are gathered which reveal a great deal about who goes where, the reasons for these choices are little understood.

These literature reviews highlights the different theories of stakeholders and the use of Network Analysis (NA) to study the link between different destination stakeholders. Stakeholder theory is a management theory which argues that the interests of all stakeholders are of intrinsic value (Donaldson and Preston, 1995).Literatures also enlightens the different theories of motivation combine with the different author’s motivational factors to explain why people travel. The “pull” and “push” motivation factors are the theories that are the most acceptable (Yoon & Uysal 2005; you et al., 2000). The concept behind this theory is that people travel because they are pushed and pulled to travel by certain forces (Uysal & Jurowski,1994). Uysal & Jurowski, 1994 stated the push factor are socio-psychological needs related to intrinsic motivators while pull factors relates to the attractiveness and specific features of the destinations. ).

LINK BETWEEN STAKEHOLDERS AND NETWORK

A tourism destination may be considered as a cluster of interrelated stakeholders embedded in a social network (Scott at al., 2008a).Such a network of stakeholders interacts, jointly meeting visitor needs and producing the experience that the travellers consume. A stakeholder is “any group or individual who can affect or is affected by the achievement of the organization’s objectives” according to Freeman, (1984, p.46). Palmer, 1996; Tyler and Dinan 2001; Pforr, 2002; developed networks as an important conduit for managing public-private relationships and understanding structures of tourism governance.

Interaction of stakeholders is multifaceted. Governance is a concept used to direct the stakeholders. It refers to relationships between multiple stakeholders and how they interact with one another. It involves how stakeholders determine implement and evaluate the rules for their interaction (Beritelli et al., 2007).

The Network Analysis is an applicable method used to study the link between tourism destination stakeholders while differentiating between the public and private sector.

An individual firm’s performance depends on the behavior of others that it is directly and indirectly connected to according to Freeman (1984). The NA studies the links between tourism destination stakeholders, while distinguishing between private and public sectors.NA show in preferential order with which stakeholder they want to be in touch first.

TOURISM MOTIVATION

The question that is still asks by many authors and stakeholders are the factors that encourage tourism to travel, that is, motivation. Motivation refers to hat directs the behavior of the individual towards goals. It is defined as the psychological process that gives behavior purpose and direction( Kreithner,1995). According to S.P.Robbins (1997), motivation is the process by which activities are started directed and sustained to fulfill both physical and psychological needs. Whenever an individual try to satisfy a need it is classified as motivation, need is an objective interest. Robbins (1997) explained the motivation process as follows.

C:UsersNathaliePictures3-8cb9d53c1c.jpg

(Source: S.P. Robbins (1997), Organization Behavior: Concepts, Controversies, Applications, 7th Ed.

The diagram demonstrates the willingness for individual to employ high levels of effort to reach organizational goals in order to satisfy some individual needs or self- individual needs.

As shown above, unsatisfied need always lead an individual to be anxious. This state of mind is converted into tension making an individual to wish something. These wishes or drives provoke a search behavior. As from the search behavior, individual discover wants that if satisfied will lead to a reduction in tension.

So, when an individual is on pressure, they alleviate this stress by making effort. The greater the stress the higher will be the effort made. This effort leads towards achieving goals set, leading to satisfaction of needs. According to the understanding of Luthan (1995), this process lies in the meaning of and relationship between needs, drives and incentives.

The following section deal with the different factors stating why visitors want to visit a destination and why they choose one particular destination instead of another. To better understand the, the concepts of “push” and “pull” factors are developed.

THE PUSH FACTOR A TRAVEL MOTIVATOR

“Travel motivations” is one of the useful approaches in understanding travel needs and tourists’ behaviours (Crompton, 1979; Yoon & Uysal, 2005).After the study done by Jang and Wu(2006), they stated that there are significant differences among travellers from different countries in terms of the level of importance attached to the “push” and “pull” factors. Starting with the push factor,it described how people are pushed to make a travel decision by internal forces (example,to have holiday, to rest or relaxaˆ¦) according to Uysal & Hagan. Push factors are socio-psychological needs, which are related to intrinsic motivators. The Maslow’s (1943) hierarchy of needs is the most influential model used and its application to tourism research. All human needs can be arranged in a hierarchy of five categories according to Maslow (1970) as shown in the figure below.

C:UsersNathaliePictures450px-Maslow’s_Hierarchy_of_Needs_svg.png

According to Maslow, the human need follow these steps in an ascending manner. The most basic need is the physiological one which satisfied the basic needs of individual. Once the basic need is fulfilled, human upgrade their needs and look forward for the next level to be satisfied. However, there are cases where individuals want to satisfy a higher level though the lower level is not accomplished.

Pearce (1982) suggests that travel motivation has the properties of an approach-avoidance paradigm. He developed the ‘Travel Career Ladder (TCL) in accordance with the Maslow’s hierarchy of needs as a conceptual framework. The aim of the TCL is to show how people’s needs change as experience increase. Pearce classified the TCL into five steps starting with the lowest;

Relaxation

Stimulation

Relationship

Self-esteem and development

Fulfillment

TLC proposes that people progress upwards through motivational levels with accumulated travel experiences (Lee and Pearce, 2002). The TLC demonstrates how individual start their travel career at a low level, that is, Relaxation. As individuals become more experienced travelers, they advance for higher goals until they reach high level of fulfillment.

E:070360103001.png

It is recognized that the push factors contribute in the study of tourism behavior and understand a wide variety of needs that can be influential motivator to tourist behavior. Cohen (1972, 1979a, 1979b) contended that what tourists want is not merely to satisfy their psychological needs but authenticity of the destination. So, the other factor which could motivate people to travel must be taken into consideration. The following section will focus on the external motivator.

THE PULL FACTOR

The pull factor focus on another aspect of tourism behavior. Pull factors are external and related to the attractiveness and specific features of the destination (Uysal & Jurowski, 1994). They are the general features of tourism regions that people recognize as touristically agreeable and attractive, such as culture, traditions and heritage, nature, amusement among others (Peters, 1969).After the study on travel motivators of Yuan & Mc Donald, Jang &Wu (2006), Mohammad & Mat Som (2010), Jang & Wu (2006) asserted that common pull factors found in most studies were natural and historical environments, safety, cost, ease of access, and facilities.

A destinations attractiveness pulled individuals in their travel decision. Dann (1981) asserted that it is comprehensible that researchers focus attention on the pull factors of tourist behavior, since they symbolize the specific attractions of the destination, which tempt once the decision has been made. Dann(1981) also claimed that the pull factors of the resort such as sunshine, relaxed tempo and friendly natives , both respond to and strengthen push factor motivation.

DIRECT RELATIONSHIP BETWEEN TH E PUSH AND PULL FACTOR

People’s motivation to travel has been discussed on a multidisciplinary basis since the

aftermath of the Second WorldWar, when mass tourism began to thrive. It is not only a

matter of explaining, from a psychological perspective, why some people travel and others do not (Crompton, 1979; Dann, 1977; Plog, 1974).

Plog’s (1974) With “travel personality,” P. L. Pearce’s With (1988) “travel career ladder” (TCL),and Cohen’s With (1972) concept of “strangeness-familiarity,” try to show the possible factors that drives people to travel. Plog use the travel personality to model to study why do some people do no travel. He based himself on psychological impetus.

Push-Pull framework a motivational paradigm

Moreover, Plog (2001) use the Travel Personality model to study why some people do not travel. Plog (1974) concluded that nontravelers are indeed nonadventuresome and proposed the notion of travel personality in this sense; dependable, near dependable, mid-centric, near venturer, and venturer types. In his model, emphasis is laid on psychological impetus.

Cohen (1972, 1979a, 1979b, 1984), from a sociological perspective, set his model in a broader social context, arguing that tourism is essentially a social phenomenon. Tourists therefore should be analyzed by underscoring their relationships with both business establishments such as tour operators and the destination (Cohen, 1972). Highlighting social relationships in the tourism system remains the most remarkable distinction of Cohen’s (1972) model, which is represented by the concept of strangeness-familiarity. This concept is constructed by breaking down Boorstin’s (1964) holistic image of “the tourist” into more specific and empirically identifiable types,namely, the “organized mass tourist,” “individual mass tourist,” “explorer,” and

122 Yong Chen, Barry Mak, and Bob McKercher “drifter” (Cohen, 1972).

As Plog, Pearce and Cohen focus in the same field of study, they all use their model to represents an integrated motivation framework. The aim behind is to show the possible linkages among the three models.

Diagrams + Explanations

(It is

taken for granted in this framework that the destination represents the pull factors of

tourist motivation, whereas characteristics of individual tourists represent the push

factors (Crompton, 1979). However, at a destination such as in a city with a complex

of economic, cultural, and historical attractions and heritages, tourist behavior may

demonstrate a pattern other than those indicated by, for example, the distance decaying

effect from the origin to the destination.)

2. Structure of the tourism and hospitality industry and role of stakeholders:

(Burcu & Ozgur, 2008) The stakeholders’ needs and demands are understood and responded to by organizations, based on the concept of stakeholder management. According to (Svendsen, 1998), the main role of stakeholder management is to protect the organization from the damaging impacts of the activities of the stakeholder. Some techniques like consultation, issue analysis, strategic communications, and formal contracts or agreements should be utilized by the organization.

(Huber, Scharioth, & Pallas, 2004), explained that organizations strive to gain the trust of the main stakeholders, who have a greater influence on them and with whom they have constructive interactions. For any organization, financial success is important and they will use any tools at the expense of the environment, members of staff, and/or local communities. This careless attitude will result in losses and damages in relationships with the stakeholders. The two significant variables for the decision on stakeholders by an organization are a) their possibility of threatening an organization and, b) their possibility of cooperating with an organization. The two relationship variables are cooperative potential and competitive threat. These two relationship variables reflect the capacity of stakeholders’ for cooperation and threat in a specific matter facing the organization.

(Lim, Ahn, & Lee, 2005), stated that companies can adopt four possible categories for stakeholder management: a) reactive, b) defensive, c) accommodative, and d) proactive. Depending on the stakeholder’s potential for threat and cooperation, companies decide their postures and strategies for stakeholder management such as a) leading, b) collaborating, c) involving, d) defending, e) educating, and f) monitoring. (Clarkson Centre for Business Ethics, 1999), developed a list of the essential principles of stakeholder management.

The first principle highlights the requirement of identifying stakeholders’ legitimate interests, which will be used in decision making processes by an organization.
The second principle refers to the need for communication between the organization and its stakeholders. The engagement with the stakeholder is required to reduce conflicts.
The third principle reflects the idea that there could be differences with the involvement of stakeholders in the organization. While the organization may have official relationships with few of stakeholders, other stakeholders are approached in unofficial ways either through direct contact, press release or advertising.
The fourth principle underlines the significance of balancing risks and rewards among various stakeholders impartially and observes the need of distributing benefits to all parties.
The fifth principle highlights the need for cooperation with public and/or private entities with the sole objective to reduce risks related to corporate practices.
The sixth principle relates the aspect of respecting human rights which are threatened by the present and future activities in an organization.
The last principle brings the attention of managers to identify their own difference of interests to normalize stakeholder relationships in order to increase credibility of organization.
3. Strategic Stakeholder Management: Tourism’s Perspective

One of the important generators of revenue is the Tourism sector which is also a job generating sector and serves as a medium of development. Tourism sector has gained great importance as it generates economic development and prosperity even in places which would not be used as an economic source. The industry’s coordinated actions; highly fragmented and diverse structure makes it special and successful.

The tourism sector could be contemplated as a system. As (Mill & Alastair, 2002) mentioned, there are many reasons to view tourism as a system. Some of them are:

Interdependency in tourism i.e., all organizations in this sector are interrelated parts and work together to achieve common goals.
Dynamic and constantly changing characteristics i.e. it be affected by outer influences such as political uncertainty, war, international relations, terrorism, technological developments, epidemics, and changes in demographic conditions.
Complex sector with different types of activities and organizations.
Intense competitiveness of tourism i.e. all kinds of tourism organizations have to vie with each other globally.
Need for responsiveness. Tourism is a sector where many elements which are independent and any change in one element can cause changes in other parts. Therefore, it’s important to maintain harmony of all parts. The stakeholder management practices should be utilized to create the harmony and forge strong relationships between the tourism organizations and their stakeholders.
4. Environmental trends in the global tourism industry:

(Dwyer, Deborah, Nina, Carolina, & Noel, 2008) Tourism is closely connected to the environment. The two main reasons for determining the viability and attractiveness of an area as a tourist destination is the natural environment and climate conditions (Dwyer & Kim, 2003). The developments for tourism are based on features such as gaining easy access for visitors to natural or manmade environments. The concerns of stakeholders of tourism which include researchers has always centered on the ways tourism development may offer opportunities for managing environmentally sensitive areas and the conservation of unique environments. (United Nations Environment Programme ((UNEP), 2002), reported that the focus is on tourism where it can help in reducing environmental pollution and usage of resources.

The main environmental trends include change of climate, depletion of natural resources and loss of biodiversity:

Change of Climate:

The increase in release of concentrations of greenhouse gases influences the change of climate and global warming. Climate change is a global occurrence and its major effects are felt at the local and regional scale. Effects of climate change and warming trends include: rise in sea-level, changes to ocean currents, melting of glacial and polar ice, losing of snow cover, high heat index and high diurnal temperatures, and changes to precipitation patterns (IPCC, 2007).

Climate changes are influential in determining the destinations preferred by tourists and also on the profitability of the industry through increase in costs of energy use.

Policies to lessen emission of greenhouse gas will invariably affect the operator costs and destination competitiveness particularly for longer destinations (Dwyer & Forsyth, 2008).

Depletion of natural resource:

The increasing paucity of natural resources required to steer industrial development will give rise to a number of effects. The factors affecting the availability of natural resources like food production, water and energy, are increase in population and economic development. The result of ‘peaking’ in oil production, commonly known as ‘Peak Oil’, will increase the expenses of fossil fuel based energy sources.

‘Peak Oil’ refers to the maximum rate, i.e. ‘peak’ of production of world oil to a point beyond which it goes to permanent decline. The decline in production of oil along with increase in demand will result in increase of fuel costs. Consequently, the new ‘carbon economy’ is set to push the want for energy efficiency and investment in renewable forms of energy. In future, half of the world’s population will face shortage of water due to scarcity of water resources. The arable land and native bush land will diminish extensive agriculture and broad-scale land clearing due to demands for higher food production.

Loss of bio diversity: (United Nations Environment Programme (UNEP), 2003), reported that the main danger to loss of species biodiversity is habitat loss. Loss of biodiversity is expected to substantially affect those destinations that highlight nature based or eco tourism.

Analyzing Marketing Opportunities & Challenges: The Macro-environment

(Amy, Eliza, & Cynthia, 2009) The major macro-environmental forces recognize and discuss the affect the ability of hospitality industry to market its offerings. All organizations in the hospitality industry function in a constantly changing macro-environment, and thus giving prospect for marketers to conduct business or pose threats to the companies. The environmental changes have to be monitored closed before marketing strategies are considered by companies. The hospitality marketers must analyze and observe the six major forces (demographic, economic, political/legal, social/cultural, technological and natural/ecological), as shown below:

Figure 1: Macro-Environmental Forces

Environment

What it is?

Relevant indicators

(Examples of what to study?)

Demographic

Characteristics of people that structure the geographic unit of analysis as country, state, region.

Population size, density, gender, age structure, occupation, geographic distribution, ethnic mix.

Economic

Issues affecting the nature and path of the economy in which an organization operates.

Disposable income, power of purchasing, interest rate, GDP growth, inflation, consumption pattern, unemployment rate.

Political/Legal

Issues related to electoral politics, legislative and regulations, including regulatory agencies and pressures from interest groups.

Government stability, Control of wage/ price, Implementation of legislation such as equal opportunities, health and safety, tax policy, lawsuits, patents/ copyrights.

Technological

Changes in product/service/process technologies.

Activities in Research and development, applications of knowledge, information management, development of new product / service, improvement in productivity.

Social/Cultural

Values people hold and broad trends in society

Research and development activities, new product/ service development, productivity improvement, applications of knowledge, information management.

Natural/Ecological

Issues pertaining to environmental sustainability.

Water and air quality, solid waste, energy management, conservation, recycling.

Table 1: Macro-environmental Forces

5. Market research

Importance of Psychographic Research

(Yvette & Felix, 2004) (Wells, 1975), defined Psychographic research as “quantitative research intended to place consumers on psychological dimensions.” According to (Gladwell, 1990), this type of research “analyzes consumer’s attitudes, perceptions, needs, interests, opinions, activities, and daily lifestyle.” (Shih, 1986), recognized that “Psychographics is very meaningful and relevant” and (Abbey, 1979) stated that “it’s very important means to provide additional information beyond the demographic characteristics.” Abbey suggested that psychographic variables produce major differences between the groups of consumers, and these differences were bigger than the differences produced by the demographic profiles. (Mayo, 1975), stated that psychographics are useful than demographics in explaining consumers because they differentiate better between them (Ryel & Grasse, 1991).

The market segmentation has found a valuable means in Psychographics. (Gladwell, 1990), observed that psychographic characteristics of tourists have to be examined thoroughly by marketer if their destinations need to be marketed successfully to tourist. Psychographic variables are helpful in recognizing various types of tourists, distinguishing their segments and differentiating between the segments (Schewe & Calantone, 1978). Psychographic measures provide complete profiles of tourists and give the marketers a clear picture of the tourists they are attracting. Psychographics cannot be independent even though psychographics has a comparative advantage over demographics, (Schewe & Calantone, 1978). In order to understand a consumer market better, marketers should use psychographic data along with other criteria such as demographic, geographic, or behaviorist. Psychographic data needs to be incorporated in its research studies of the tourism and hospitality industry to benefit from the knowledge of its customers.

The data was collected through a qualitative research method. Qualitative methods offer varied empirical processes intended to describe and interpret the experiences of participants in a context specific setting. Data was collected from 30 representatives via semi-structured, in-depth interviews. Local residents, governmental, non-governmental and academic stakeholders were considered in order to acquire the opinion locally, regionally and nationally regarding the implementing sustainable tourism development.

The concept of sustainable tourism development became important due to fact that local residents are involved in tourism planning and decision-making. (Jackson, 2000). A sampling strategy was arrived at to ensure residents participating were ambassadors of a cross-section of the community. The sampled residents included those who resided in the tourism/non-tourism zone and were directly/indirectly involved with and/or affected by tourism activities. Many of the interviewed residents and who were involved in the industry were engaged as local guides or owners of home stay lodging and resorts, or souvenir and food catering shops. In-depth interviews saw participation of 20 local residents. Convenience sampling constituted a technique of non probability that attempts to get a sample of convenient elements which is less expensive and less time-consuming when compared with other sampling techniques (Malhotra, 2004).

Governmental institutions had an essential part in sustainable tourism development initiatives. Therefore, they participated in the study and to aid in establishing a swell of other respondents. This was considered the most appropriate method, as the researcher was not well informed about the formal or informal ‘network connections’ locally (Jennings, 2001). The researcher chose a few respondents involved decision making for the destination i.e. Town Council, Sub-District Administration Organization. Other relevant stakeholders interviewed were the local tourist office, a non-governmental organization and academics. Totally 10 governmental respondents were interviewed. Interview questions related to the sustainable tourism development concept and stakeholders were developed. These questions were directed to five local residents in August 2012. The interviews led to alterations in: (1) interview time and how respondents were approached, and (2) the interview questions using simpler and non-technical terminology. Then, in-depth interviews were conducted in September 2012. In order to gain further insights and data, the questions were open ended. The interviews were recorded, transcribed and organized based on the interview questions.

DOES STAFF INDUCTION IMPACT UPON LABOUR TURNOVER IN THE UK HOSPITALITY INDUSTRY?CHAPTER 1
INTRODUCTION
1.1 Overview

This dissertation studies human resource management (HRM) and specifically employee induction and labour turnover. It aims to explore, evaluate and analyse the impact of employee induction on labour turnover in the hospitality industry. There is a plethora of literature that supports induction training and promotion of organisational culture, suggesting it can lead to higher levels of commitment, productivity, quality of service and profitability and reduced level of labour turnover (Boella, 2000: Fowler, 1999: Hofstede, 1994: Mullins, 1992: Nickson, 2007: Taylor, 2008: Torrington, 1994: Storey, 2007: Watson, 1995).

1.2 Rationale

It is widely recognised by academics (Boella 2000:, Boella and Goss-Turner 2005:, Cook, 1993: Fowler, 1999: Goldsmith, Nickson, Sloan and Wood, 2003: Meighan, 2000: Mullins 1992: Sommerville, 2007: Storey, 2007) that high levels of staff turnover can lead to lower levels of customer service, reducing customer satisfaction decreasing profitability.

The original reason for undertaking this study stems largely from the authors personal experience of working in the hospitality industry. Experiencing first hand the effect of a high labour turnover through team members either; resigning, being sacked, changing department or coming to the end of their contract. The effects of the high turnover added pressure to existing staff as they had to cover shifts, train new staff whilst also losing shared knowledge and expertise; leading to reduced staff morale, productivity, levels of service and customer satisfaction.

Employee turnover has a research stream that can be traced back to the work of March and

Simon (1958) and was primarily based upon the level of job satisfaction and organisational commitment. Labour turnover has always been high in hospitality, leisure and tourism compared to other sectors (Boella, 1992). This is reinforced with a survey by Roberts in 1995 (cited in Goldsmith et al 2003) found that of the 150 hospitality companies surveyed, where 95 percent identified high labour turnover as a problem. Ten years later and the industry still has a reputation for very high levels of labour turnover (Boella and Goss-Turner, 2005).

The UK hospitality, tourism and leisure industry sector accounts for nearly 5% of the UK’s total economic output, employing around two million people, representing one in 14 jobs, approximately 7% of the total UK workforce (People 1st, 2009). According to research by the Charted Institute of Personnel Development (CIPD), the hospitality industry has the highest staff turnover in the UK. A survey by People 1st (2009) reinforced this point by highlighting the 31 percent turnover figure in 2008/2009, costing an estimated ?414 million. The average cost of filling the vacancy created by turnover at ?219 without marketing, with marketing it would cost ?673 and ?764 for a managerial position.

With the world recession, organisations are looking to save money where ever possible, reducing staff turnover is one area that could be seen as a target.

1.3 Aims and Objectives
1.3.1. Aim

To evaluate the effect staff induction has on labour turnover in the UK hotel sector; looking specifically at operational staff.

1.3.2 Objectives

The objectives for this dissertation are as follows:

To evaluate literature on labour turnover, staff induction, organisational culture and commitment and HRM approaches in the hospitality industry.
To analyse different approaches to induction and its effect on labour turnover.
To evaluate models of best practice in induction and evaluate their use in the hospitality industry.
To make recommendations on a best fit model of induction in the hospitality industry. Concluding the research and identifying limitations to the dissertation.
1.4 Research Methodology

Research can be defined as “an orderly investigation of a defined problem using scientific methods to gather representative evidence and draw logical, unbiased conclusions” (Poynter, 1993-p1). Sekran (2000) defined research as “the process of finding a solution to a problem after thorough study and analysis”. This dissertation is “a review of existing knowledge in a particular area together with the creation of a new slant of this knowledge” (Clark, Riley, Wilkie and Wood, 1998: p.7). The dissertation uses secondary research only. According to Clark et al (1998) and Sekran, (2000) secondary research does not introduce any new data and is based solely on data that already exists. The generic topic of HRM, linked to organisation culture, commitment, loyalty and staff induction has been widely researched and producing many academic journals, articles and theory which can be drawn upon.

There are numerous advantages to using secondary research. As the data has already been published it can save resources such as time and money (Sekran, 2000), larger sets of data can be collected, analysed and evaluated with the effort focused on the analysis and evaluation (Saunders, Lewis and Thornhill, 2007). Furthermore, it can present higher quality data than primary research, it provides both qualitative and quantitative research (Sekran, 2000) and it can be checked by anyone at any time. Saunders et al (2007:p.256) stated that additionally it allows “more time to think about the theoretical aim and substantive issues” and can lead to “unforeseen or unexpected discoveries.” However there are some disadvantages to using secondary data. The data could have been collected with a purpose different to the research question it is being used for (Saunders et al, 2007). The data may be out of date, old or unreliable, so first the validity of the source must be verified (Sekran 2000). Clark et al (1998) identified that up to date information may be difficult to obtain.

Types of secondary data that are to be used in this research project uses various sources, including; government publications, industry statistics and reports, book and journals. These will be providing the main source of information, as the majority of this research is reliable and easily available. In order to locate information and sources, Emerald, Brookes Electronic Library, Google Scholar, and Brookes Library will be used. Online resources are quick, simple and easy to access.

1.5 Limitations to Research

The research for this project does not include primary data, and is purely based on secondary research, as explained above this has its drawbacks. The project focuses on the UK as will hte literature however non UK sources will be used.

1.6 Chapter Structure

This section will briefly outline the chapter structure and give an overview of what each chapter entails.

Chapter 1

This chapter outlines the aims and objectives of the research paper, including a rationale justifying the reasons for this enquiry of research along with possible limitations and problems that may occur. It will also give a brief overview of the research methods used.

Chapter 2

This chapter defines and identifies labour turnover in the UK hospitality industry. Exploring the patterns, causes and effects including the induction crisis.

Chapter 3

This chapter aims to define and describe the current staff induction process, highlighting key approaches and models. Exploring the importance of socialization and building loyalty and the benefits.

Chapter 4

This chapter draws on the research and applies it in indentifying a best fit staff induction model to reduce labour turnover in the hospitality industry.

Chapter 5

This chapter aims to evaluate and review the effect staff induction has on labour turnover. This chapter also provides a conclusion with the recommendations and limitations to the research.

CHAPTER 2
EVALUATING LABOUR TURNOVER IN THE HOSPITALITY INDUSTRY AND IT’S IMPACT UPON PERFOMANCE
2.1 Introduction

Labour turnover is an important issue to all employers worldwide; from governments and multinational companies to small privately owned business (Goldsmith, A., Nickson, D., Sloan, D. and Wood, R. 1997). Labour is an essential resource to any business, determining future success (Lucas, 2004). This chapter defines labour markets, explores the concept of labour turnover, defining it and highlighting key methods used to measure labour turnover, along with the effects.

2.2 Labour Markets

The starting point for all strategic activity in HRM is to understand in which an organisation operates (Goldsmith et al, 1997). It is only possible to formulate accurate policies and practices once its keys features have been identified and their importance understood (Torrington, Hall and Taylor, 2005). The labour market is the source that provides the fuel for labour turnover.

Riley (2000) refers to the labour market as a pool of available talent in which employers compete to recruit and subsequently retain staff. Labour markets are not organised, centrally planned, structure co-ordinated machines, rather a free flow or movement of employees in and out of jobs (Goldsmith et al 1997). Riley (1996) summed up the free flowing, erratic nature by stating that the market consists of thousands of individual decisions by employees and employers independently. Over time these small, singular choices provide a pattern or trend of the labour market, meaning the supply and demand in a labour market can be determined by the independent unconnected decisions (Torrington et al, 2005).

One model created to help understand the labour market within the hospitality industry is the ‘dual labour market theory’ (Goldsmith et al, 1997 p16). They state the labour market is ‘made up of two distinct but related groups or markets’, a primary labour market and a secondary labour market. Below in Table 1 is an outline of each theory.

PRIMARY LABOUR MARKETS

SECONDARY LABOUR MARKETS

1. Jobs are supplied by large, highly profitable firms.

1. Jobs are supplied by mainly small firms where profitability is not easily assured.

2. There is a high capital to labour ratio in these firms and high productivity.

2. There is a low capital to labour ratio and productivity tends to be low.

3. Production is usually large scale in nature and based on substantial proactive investment in technology.

3. Production is usually small scale and intensive in nature, and in commercial personal service industry at least, technological requirements are based on clearly defined needs.

4. There is a stable demand for products arising from national and international markets.

4. Demand for products and services is subject to irregular and/or seasonal fluctuations rooted in local and regional markets.

5. Wages and skill levels are relatively high.

5. Wages and skill levels are relatively low.

6. Opportunities exist for training and advancement.

6. Training opportunities are limited as are opportunities for advancement.

7. Employment is stable.

7. Employment is unstable.

8. Unionisation is often high.

8. Unionisation is low or nonexistent.

Table cited in Goldsmith et al (1997) p17.

Woods (1997) agreed with the dual labour market theory, summarising the primary market as consisting of highly profitable large firms, relatively highly skills jobs with the opportunity for training and development. It is widely perceived that the majority of the hospitality industry is similar to the secondary labour market; with profitability not guaranteed, relatively low paid, low level skilled jobs that are intensive (Goldsmith et al, 1997).

2.3 The UK Hospitality Labour Market

The UK hospitality, tourism and leisure industry sector accounts for nearly 5% of the UK’s total economic output, employing around two million people, representing one in 14 jobs, approximately 7% of the total UK workforce (People 1st, 2009). However as highlighted by Lucas and Wood (2000) the hospitality industry id highly reliant on young part time and casual labour. The State of the Nation Report 2009 by People 1st reinforces their point with 16 percent of the hospitality workforce aged between 16 and 19 years old, whilst only 5 percent are over 60 years old. Of the total workforce 59 percent are female of which 55 percent are part time employees, compared with 31 percent male.

Boella (2000) identified that the common hospitality employee is typical of the secondary labour market; seeking short term employment, with relatively low or no skills. They have no desire to create a career and consequently leave after a short term of employment. This constant turnover is part of a vicious cycle, whereby employers are reluctant to invest in employees and as they leave soon after training (representing a loss of investment) and the employees leave due to little or no training (Goldsmith et al, 1997; Mullins, 2001).

2.4 Labour Turnover

As already established the hospitality industry has a high level of turnover. Boella and Goss-Turner (2005, p178) define labour turnover as ‘the total number of leavers expressed as a percentage of the total number of employees in a department, unit or organisation’. Lashley and Lincoln (2003) agreed by highlighting labour turnover simply as the movement of labour out of and into a working organisation.

To understand how ones organisations faring it is possible to compare to industry averages. It is clear that hospitality had a higher than average figure in 2007. This high level of turnover is widely accepted as normal (Mullins, 2001).

Industry

Average Turnover 2007

Hotels and Catering

32.6%

Retail and Wholesale

27.5%

Media and Publishing

27.1%

Construction

27.1%

Call Centres

24.6%

Communication

23.5%

Manufacturing

20.95

Table: Turnover Rate. Cited in Taylor (2008 pp434).

2.4.2 Benefits of Labour Turnover

It is highly debated in the literature as to whether turnover is a positive or negative within a business. Carrel et al (1995) in Taylor (2005) present the notion of functional versus dysfunctional turnover, suggesting that functional promotes innovative ideas and methods. Boella (2000) agreed and stated that with new employees ‘comes a breath of fresh air’, a necessary change to prevent stagnation. Torrington et al (2005) also draw attention to research by Hom and Griffeth (1995) that has shown function turnover exists greater than dysfunctional. The net results is an improvement in productivity as the poorer employees quit, leaving a higher proportion of good employee enhancing organisational effectiveness.

2.5 Reasons for High Labour Turnover

People leave employment for a variety of reasons, many of which are outside the power of an organisation to influence; such as leaving is retirement. Highlighted below are some of the key reasons of labour turnover.

2.6.1 Induction Crisis

Mullins (1998) cited staff turnover to be at the highest level during the first few months of employment as the induction crisis. A report in 1984 by the HBTIB states that in the specific sector of guesthouses and hotels almost 45 percent of all new workers left their employment within the first three months, and 15 percent within the first month. This has reduce slightly over the last 20 years, with the People 1st (2009) survey highlighting that over 10 percent of turnover came within the first six months of employment, with bar staff at an average of 30 percent. This trend is disruptive and expensive, especially as the investment of training and time have been lost (Mullins, 1998). Torrington et al (2005) go further and identify more costs lost, such as marketing and interviewing, although these can be saved if the next employee is hired internally as opposed to externally.

2.6.2 Outside Factors

Outside factors relate to situations where someone leaves for reasons that are largely unrelated to their work (Torrington et al, 2005). One of the most common reasons is relocation, whereby an employee moves cities or countries. Others might include the lifelong passion to travel, illness, and family issues (Meighan, 2000). To an extent this type of turnover is unavoidable, however is may be possible to provide childcare or flexible working hours (Torrington et al, 2005).

2.6.3 Push and Pull Factors

With push factors the problem is dissatisfaction with work or the organisation, leading to unwanted turnover (Torrington et al, 2005: Lashley and Lincoln, 2003). Causes could include a range of issues from; insufficient development opportunities, boredom, ineffective supervision, poor levels of employee involvement or personality clashes (Goldsmith et al, 1997, Fowler, 1999: Mullins, 1995 and Torrington et al, 2005). If there are no opportunity to voice these concerns an employee’s tend to look elsewhere for work.

Pull factors are the opposite, the attraction of a rival employer. Salary levels are often cited as the main cause, when a rival offers a better employment deal (Fowler, 1999). However it could also be; better opportunities, a chance to work with a particular person, or location issues such a commuting distance (Torrington et al, 2005). The two main aims for employers are to take are to ensure they know what the competition is offering, so they can be realistic and competitive (Meighan, 2000). It’s also important that an employee understand what he has and appreciates it.

2.7 Understanding Labour Turnover

Torrington et al (2005) stress that there is very little an organisation can do to manage turnover unless they understand the reasons for it.

2.7 Costs of Labour Turnover

In monetary term labour turnover cost the industry ?414 million in 2008/2009 (People 1st, 2009). However this has a decreased since 2000 according to Boella (2000) who stated that labour turnover was ?430 million. The formula used to calculate labour turnover is the number of employees who left during a period divided by the average number of employed during a period, times by 100 and represented as a percentage. Boella (2000) identified that although the results of this formula givers a labour turnover percentage, it does not give any indication of productivity of the staff, so it is best to monitor both.

Lashley and Lincoln (2003) state that there are a number of ways to determine the cost of labour turnover, yet the prevalent statistic used compares the number of leavers to the number to the normal component of staff. Whilst this is easier and quicker to calculated, it is less accurate and doesn’t take into consideration the seasonality of an organisation, and giving no indication of the amount of time spent by an employee at the organisation Meighan (2000).

Torrington et al (2005) suggests that labour turnover represents both direct and indirect costs. Direct costs include advertising, travel expense, marketing, additional staff overtime pay, interview time (Boella, 2000: Lashley and Lincoln, 2003 and Mullins, 1998). These cost are easily calculated and visible.

Indirect costs associated with labour turnover include loss of leadership, low levels of staff expertise, reduced productivity, increased wastage and reduce customer satisfaction (Boella, 2000: Mullins, 1998: Taylor, 2005 and Torrington et al 2005). These intangible costs affect the remaining staff more, and are difficult to put a price on.

2.9 Conclusion

The three common reasons stated by Torrington et al (2005) for leaving include:

Dissatisfaction with the conditions of work, especially house.
A perception that they were not being given sufficient career development opportunities
A bad relationship with their immediate supervisor.

The nature of the industry itself (seasonal, limited career structures). The nature of individual units (location, size, staff/work ratios). The nature of individual managers (lacking formal management training, acceptance of high labour turnover). High proportion of worker from the secondary labour market. Torrington et al.

CHAPTER 3
AN ANALYSIS OF DIFFERENT APPORACHES TO INDUCTION
3.1 Introduction

The following chapter provides a definition staff induction and socialisation and its importance, highlighting the key areas and effectiveness. The aim is to investigate the theories behind the induction process and its requirements.

An employee is an ambassador to their organisation, representing them through their attitudes and behaviour, how they act is partly down to the organisational culture (Sommerville, 2007, p 47). How employee’s understand and learn these attributes begins with staff induction and socialisation. In HRM literature, organisational socialisation is widely recognised as a key process ensuring new employees can be efficient and effectively integrated within the organisation (Taylor, 2006). Both induction and socialisation are entwined together. Staff induction practices govern unconsciously or deliberately organisational socialisation (Torrington et al, 2005). With the continuous process whereby new recruits are brought into the firm is an important element of HRM practice. If executed well it can help to retain the new employee and reduce staff turnover (Lashley and Best, 2002).

3.2 Performance Management Systems

There have been a significant number of studies over the last 15 years investigating the link between HRM and organisational performance. These have focused on the extent to which (if at all) high commitment or best practice HRM may lead to improvements in worker or organisational performance (Taylor). The idea is that particular bundles of HR practices have the potential to contribute improved employee attitude and behaviours, lower levels of absenteeism and labour turnover, higher levels of productivity, quality and customer service in all types of organisations (Sommerville). Performance management aims to directly link together individual goals, departmental purposes and organisational objectives (Torringon et al). Examples of performance management systems include; recruitment and selection, training and development. Armstrong and Baron (2007, p7-8) defined a performance management system:

Communicates the organisation vision and objectives to all employees
Set departmental and individual performance targets linked to organisational objectives.
Uses formal review procedures to communicate performance requirements.
Conducts formal reviews of progress
Uses the review process to identify training, development and reward outcomes.
Evaluates the whole process.
3.3 Induction Training

Starting a new job can be a stressful process, wondering if you will fit in with your new co-workers, if everything is as good as advertised. Whilst some nerves are inevitable, helping to reduce them and making the new employee feel welcome are vital in retaining new comers (Lashley and Best, 2002). The term ‘induction’ can be interpreted in several ways, however in the generally used in the context of the workplace to describe the entire process of an adjusting to their new working environment and jobs (CIPD, 2010).

Whenever new employees join an organisation there is always a period of learning and adaptation before they become fully effective (Meighan, 2000). Partly, this involves finding out about the practicalities of the job and facts about pay, other employee benefits and the organisation’s rule and regulations (Fowler, 1999). But there is also the need to understand the less tangible but very powerful influence of ‘the way we do things around here’ or culture (Meighan, 2000). Every organisation has its own culture and new employees are unlikely to be fully effective or feel comfortable in their work until they have absorbed this cultural influence and adjusted to it (Taylor, 2006).

Induction has a number of distinct purposes (Armstrong, 2007), all of which are concerned with preparing the new employees to work as effectively as possible and as soon as is possible in their new jobs. The induction is the initial process of learning and adjustment (Fowler, 1999). Meighan (2000, p5) went further and defined induction as ‘a planned, systematic process to help new employees settle into their jobs, quickly, happily and effectively’. Marchington and Wilkinson (2008) suggest that induction covers a variety of informal and formal programmes. From simple greeting and showing a new employee to their work station to personalised programme away from the immediate place of work.

However some academics (Lashley and Rowson, 2000: Marchington and Wilkinson, 2008: Skeates, 1991: Storey, 2007: Tayeb, 2005) believe that the induction process begins with recruitment and selection. Here the employee and employer can discuss expectations and understand what’s realistic, assisting in reducing a mismatch the job role, benefits and expectations. In accordance with these views induction (Skeates, 1991, p16) has been describe as being any arrangement made to familiarise the new employee with the organisation, safety rules, general conditions of employment and the department in which they are involved in. Boella (2000) reinforces this point by suggesting that the induction processes also involve welcoming the new recruit and introducing them to their new colleagues, and that the process starts from the initial contact with the employer.

Irrespective of whether or not a structure process is in place, all employees go through an induction phase. In many organisations especially those that do not have a specific human resource department or manager, this may be little more than greeting before being shown to their workplace. New employees may be told to ask questions if needed and are left to get on with the job as it is assumed they already posses the skills to complete the task. Sometimes a rite of passage may consist of a joke, (go and get me a long weight), with little attempt to explain anything about the company from its mission statement to direction. Even information regarding health and safety or disciplinary procedures. However this can leave the employee feeling isolated and confused, unaware of the rules, causing them to leave. Each problem represents a cost to the employer; poor quality of work, unproductive new starter, time spent on disciplinary issues, re advertising the job. In these circumstances it is unlikely the employer will develop commitment and loyalty (Taylor, 2006).

Organisation socialisation is one of the fundamental processes that define how cultures emerge (Tuttle, 2002). It underpins the social structures (Cable and Parsons, 2001) that shape not only how social actors interact but also the boundaries of action and the rules of engagement. In the context of organisations, socialisation is a process that significantly shapes their way of core practices shape how things are done and why they are done in a particular way (Torrington et al, 2005). Staff induction and socialisation (Ardts et al, 2001) are central to the replication of an organisation because they enable new individuals to become functional members of a group.

Ardts et al (2001, p159) defines organisation socialisation as “the learning process by which newcomers develop attitudes and behaviour that are necessary to function as a fully fledged member of the organisation”. This extends the process of inducting a new employee to the organisation by imprinting the norms, expectations and behavioural patterns. It focuses on the interaction between a stable social system and the new members entering it. Successful socialisation is the transformation from an outsider to participating effective insider (Copper-Thomas and Anderson, 2006, p492).

3.3.1 Psychological Contract

One of the major influences on behaviour at is the psychological contract (Boella, 2000). The contract refers to the unwritten expectations (Taylor, 2006) of the employer and employees have of their relationship. What each other expects to be delivered, what they expect from the working experience, how they expect to be treated (Marchington and Wilkinson, 2005: Meighan, 2000: Taylor, 2006). These expectations exist only in the head of employees, but this does not mean they should be underestimated (Torrington et al, 2005). Like written contracts they can be breached, broken or changed without consent, resulting in dissatisfaction, de-motivation, and higher levels of staff turnover (Armstrong, 2007). The loyalty and commitment from the employee are lost because of a perceived injustice or a disloyal breach of their contract (Boella, 2000).

Riley (2000) stated that the old contract characterises the yester year workforce; focusing on building long term relations, job security and career progression in exchange for loyalty. The ‘new contract’ has modified to typify the current flexible, transactional workforce (Taylor, 2007). The employer offers employment for a limited period, with some development opportunities in exchange for the employee completing a set of defined duties to an agreed standard until a better offer arises. As a result there is greater flexibility with less commitment (Tanke, 2001) and loyalty, as employees see their employment as short term and an opportunity to make money, develop skills and experience (Torrington et al, 2005), increasing the likelihood of staff turnover. In recent years much debate has been raised on the subject of the old versus the new contract (See TABLE *****)

The Old Psychological Contract

EMPLOYEE OFFERSEMPLOYER OFFERS

Loyalty

Security

Commitment

Future career

MICE industry is increasing rapidly and create tremendous amount of profits worldwide in tourism sector. MICE stand for meeting, incentives, conferences and exhibition which driving ahead as a key growth driver. The MICE industry plays a very important role and economic contributor in Singapore’s tourism industry.

There are many factors that makes Singapore become a major MICE destination in the world. Singapore is working hard to stay on top of the competitive business event arena and now Singapore is ranked as the top convention city in Asia for ninth times.

Singapore has the first class conventions venue such as Singapore Expo. Besides, Singapore’s pro business environment, multi-ethnic landscape, strategic geographic location and multi lingual populace has attract many business travellers prefer to do their business tourism in Singapore.

With its strategic location, government support and all those strengthen factors; it makes Singapore boost them to hit the highest achievement in this sector. The influencing factors are divided into few different categories.

1.2 Problem Statement

This research is about how Singapore develops themselves to become a major MICE destination among the world. At the moment, they are doing a very great job as a MICE destination in Singapore. In fact, there are several factors that influence Singapore as a MICE destination.

1.3 Research Question

– What is MICE industry all about?

– What are the major factors that influence Singapore as a major MICE destination in the world?

– What makes Singapore become a major MICE destination in the world?

– The forecast be for this sector in Singapore and why?

– What makes Singapore continuously attracts high profile and highly rated international business events?

– What have Singapore’s government done in order to boost up their MICE industry among the world?

1.4 Research Objective

This research is going to find out the factors that influence Singapore as a major MICE destination in the world. By carry out this research, the MICE industry in Singapore has growth rapidly and future lifestyle as well.

Besides, there is also the understanding of how importance MICE industry that could affect Singapore’s tourism sector and to find out the reason why business travelers’ loyalty toward Singapore as their favorite MICE destination.

Lastly, this research also show the evaluate business travelers’ benefit and interest by organizing an event in Singapore.

1.5 Conceptual Framework

Define MICE industry in Singapore

Strategic Location

Critical Mass

Communication Infrastructure

Stability political and economic in Singapore

The major factors that influence Singapore as a major MICE Destination in the world

Excellent transportation system and telecommunication connectivity.
Excellent meeting and conference venue.
Pro Business environment and government’s support
The forecast be for this sector in Singapore

Figure 1.1

According to this figure 1.1, it illustrates the major factor that influences Singapore as a major MICE destination in the world. The purpose of showing this figure is to demonstrate the topic of this report. The theory framework will show the reason why Singapore can become a ideal MICE destination to the business travellers. Firstly, this research shows aspect that could influence Singapore as a major MICE destination. Besides this, the report also shows how Singapore develops their MICE industry in tourism sector. Lastly, will be the evaluation of forecast for this sector in Singapore.

1.6 Scope and Limitation

The scope for this research is to focus on Singapore MICE industry. Besides that, is to observe how Singapore’s MICE industry growth rapidly within these few years, how they develop their MICE industry in order to increase the amount of tourist and to predict Singapore’s MICE industry in the future.

The time constraint will be the limitation as this research paper due to the study period of time which is from January 2010 to June 2010. It s about half year time, due to the limited time the researcher may face the difficulties when finding the resources and getting the information from journals, online journals, newspaper, websites, books and etc. There is only limited and restricted literature for Singapore MICE industry that is related in the journal databases such as EBSCO Host, Ebrary, and Google Scholar, and some of the sources that provided were not up to date. But this is a challenge for me to do more on this research.

Significance of the Study

This research aims to gain an understanding on how Singapore’s MICE industry growth rapidly in tourism sector. To carry out this research, Singapore is working hard and put themselves out on top of the challenging business event’s field.

This research is very important and very useful. Through this research, the targeted readers which are interested in organize a conference event in Singapore can refer to and to find out the reason why Singapore can be a major MICE destination in the world by maintains their quality and their MICE facilities. Other than that, this research could recommend targeted readers to choose Singapore as their ideal MICE destination.

Chapter 2
Review of the Related Literature
2.1 MICE Industry in Singapore

MICE industry is increasing rapidly and create a tremendous amount of profits worldwide in tourism sector. MICE are acronym of meeting, incentives, conferences and exhibition which driving ahead as a key growth driver. Europe and North America has been stated as one of the front MICE destination but Asia also one of the country that involves a lot in this industry. Singapore is not an exception. The MICE industry plays a very important role and economic contributor in Singapore’s tourism industry. A new era of tourism development and attractions will be gearing up for major revitalization by Singapore’s tourism sector; it will also re-define Singapore’s tourism landscape.

Singapore has the first class conventions and exhibition facilities such as SINGAPORE EXPO and SUNTEC Singapore international convention & exhibition centre. In addition, Singapore has outstanding communication infrastructure, it provides more convenience to tourist travel from one place to another domestically and internationally. Singapore’s pro business environment, multi-ethnic landscape, strategic geographic location and multi lingual populace has attract many business travellers prefer to do their business tourism in Singapore and accompaniment by MICE facilities, infrastructure, expertise and proficient in event management.

Singapore put themselves out on top of the challenging business event’s field. Singapore MICE industry has grown rapidly and now Singapore is ranked the world top three cities for meetings by the Unions of International Associations (UIA). Apparently Singapore has been stated and positioned as the Top Convention City all around Asia for ninth time and the Third Top Convention City around the world for the second consecutive year by ICCA Ranking. Singapore has leapfrogged two score to reach on top of the ranking, defeating Paris and Vienna and providing its goal to be the top of the universe an improvement.

2.2 The factors that could influence Singapore as a major MICE destination in the world.

There are many factors that can manipulate Singapore to become a major MICE destination in the world and it also could affect their tourism sector by increase MICE events in their own country. The factors also can be consider as their strength mean while it is a positive factor that can enhance their MICE sector to becoming the Best City for MICE events among the world in the future.

2.2.1 Critical Mass

The most important factor is it has critical mass; it has been awarded by the Union of International Association (UIA) and Asia’s top convention city for several years. By developing a critical mass of MICE event is this industry, this will helps to create an eco-system of business event that harmonize one another’s existence. Business event not only generate enliven of MICE industry in the mean time it’s also build up Singapore’s value intention as a MICE destination. For the past few years, Singapore has increase the amount of international meetings. These shows from the creativity and quality of the Singapore MICE industry and construct Singapore constantly catch the attention of high-profile international business event.

2.2.2 Strategic Location

Secondly, Singapore has a strategic geographic location which is central location in Asia and also a connection between east and west. It also acts as key district hubs for Asia. This strategic location makes Singapore exert a pull on global businesses and it smoothly links around the world. There were few big events of different industries was held in Singapore such as Asia Aerospace, Food & Hotel Asia, Communic Asia and Broadcast Asia and etc. The feedback was great. Singapore is a safe hospitable country; this is also one of the reasons that event organizers choose Singapore.

Beside this, Singapore Changi Airport is also one of the busiest airlines in the world, which connects to over 180 cities in 50 countries and is categorize as a premier International Maritime Centre. It’s wide ranging air and sea linkages allow ones business to allowed 2.8 billion people within a seven hours flight radius. Singapore Tourism Board claims that “Singapore position attest to its appeal as a premium business travel and meetings, incentive travel, convention and exhibition destination”

2.2.3 Stability political and economic in Singapore

Singapore has a good reputation of efficient, honest and politically stable government compare to other countries. Singapore’s stability of political gives the trust of safe for business travellers to decide to organise events in Singapore. Singapore is a knowledge-based economy and attracts worldwide investments. This may attract foreign investors flock its shores because of their open trade procedure, social stability, world class infrastructure and international communication links. The stability of Singapore’s economic also will raise the amount of business travellers invest in promoting their product in Singapore. The IMD World Competitiveness Yearbook 2008 stated that Singapore as the world’s second most competitive economy. The stability political and economic growth is sustain by the government of Singapore, it helps to attract more business travellers to held their event in Singapore with no burden compare to their competitors such as Malaysia and Hong Kong.

2.2.4 Communication Infrastructure

Singapore is well known by their efficiency and good communication infrastructure have allow it to attract a whole train of international events including the Asia-Pacific Economic Cooperation (APEC) meetings in 2009 and the forth coming event will be the first-ever summer Youth Olympic Games which falls on 14th August 2010 to 26th August 2010. Singapore also attracts business travellers to contribute to its achievements as a main destination for both business and entertainments.

Singapore has rated the top in terms of basic infrastructure and technology infrastructure in the World Competitiveness Yearbook. Its efficiency through latest technology and modern infrastructure makes Singapore MICE industry speedily grow in tourism industry.

2.2.5 Pro Business environment and Government Support

Singapore is recognized as a PRO business environment and it’s recommended as the most beneficial place in the world for businessman to start their business there. In facts, Singapore has been noted as No 1 in terms of Ease of Doing businesses for the past four years by the World Bank. Singapore is one of the lowest corporate and income tax rates among the most of the countries. The government has improves the firm environment to help business manage more efficiently.

Singapore has effectively reached a good amount of association meetings by its well-built business basics and plans to assemble a active ecosystem of business events. Singapore Tourism Board (STB) said “All vital signs are pointing towards the return of business confidence in the Singapore business event sector, fuelled by dynamic developments taking place within the tourism landscape. Leverage in our sterling track record and a sound business fundamental, Singapore has secured a robust pipeline of business events, including key international association meeting in coming years”. The general pro-business environment gives Singapore a competitive boundary as a major MICE destination in the world. There is another reason that makes Singapore become a PRO business environment and MICE destination because of the strongly government support through Singapore Tourism Board (STB), government support was the key to make an event successful.

Singapore’s government give fully support in this sector and contributes Singapore as a vibrant business environment. Singapore devoted a lot in promoting the MICE business and also their tourist attractions because conventions and event have the ability to make more profits and jobs in short term and it can increase the interrelated investment and the amount of visitation on longer term. The Singapore Exhibition and Convention Bureau (SECB), a group of the STB has develop the “Business Events in Singapore (BE in Singapore)” its help business events organizers release a higher amount of events. Besides, Singapore Tourism Board (STB) also launched another campaign “Make It Singapore” and it helps to offer marketing support and motivation to potential MICE business. Furthermore, Singapore is has the professionalism in the MICE industry that can makes Singapore to be a global exchange core where people can gather and share their ideas and knowledge.

2.2.6 Excellent meeting and conference venue and offers venue

Singapore is a global core for business and leisure and it is also a best option for convention and events. The excellences of hotel ballrooms and with the first class convention centres, Singapore has continuously recreates with new event location and attraction such as Marina Bay Sands Singapore. Marina Bay attractions will create a unique MICE venue that we cannot found elsewhere in Asia with international standard MICE facilities and services.

MICE facilities in Marina Bay Sands, Singapore Expo, Suntec International Convention and Exhibition Centre are amalgamate to boost Singapore’s attractiveness as a business and leisure destination. Suntec Singapore International Convention and Exhibition Centre and Singapore Expo are defined as a favourite choice for all find of business event due to their huge exhibition spacious. A good convention centre, exhibition halls and meeting venue plays a very important role when we organize an event.

2.2.7 Excellent Transportation System and Telecommunications Connectivity

Singapore posses of efficiency and excellent public transportation system, which includes cabs, buses and the modern Mass Rapid Transport (MRT) rail system same goes to their air transportation. Tourists can get around in Singapore with no burden due to their excellent transport system. An outstanding network of railway system and buses connect travellers to reach any point of the city and the public transportation prices are reasonable to everyone. Singapore provides convenience for foreign business travellers to reach any destination, conference venues and attractions with their public transport system on time due to their punctuality of railway systems. The newly opened MRT network has made ease of access to conference venue such as Suntec Singapore and Singapore Expo, it made convenient for those business travellers. Beside this, Singapore’s bus network is tremendously frequent and extensive and it does not only bring convenient to Singapore’s citizen and also tourists.

Singapore is well recognized for their public transportation and telecommunications connectivity. According to a survey carried out by Singapore’s Land Transport Authority in year 2006, 8 out of 10 Singaporeans were satisfied with their public transportation system such as buses and also railway system, Singapore has 21 Tbps of installed international communication infrastructure capacity, adequate for every business require in telecommunications connectivity. They are one of the more aggressive telecommunication hubs around Asia Pacific. They also provide excellent telecommunication links with broadband network all around business hotels, so those business travellers can surf the internet anytime when inside the hotel room.

2.3 Forecast Singapore MICE industry in the future.

From my point of view, I strongly believe that Singapore will finalize to the top spot and becoming the Best City for MICE venue in the future. Singapore will also be leading ahead of other countries. Singapore’s tourism background is going through a dynamic transformation. On year 2010, there will be more cityscape that gives off more vibrant and enthusiasm on the atmosphere. Singapore are still innovating themselves by introducing newly, modern venue and outstanding facilities to give their foreign business travellers and demonstrators a pleasure knowledge and ambience. They will also keep up their status as Asia’s premier MICE destination through recommending new transportation system and entertainments. The Asia-Pacific is likely to attract over 100 million business travellers and MICE visitors by 2015 with the growth prospective in the region. Therefore there will be no surprise that Singapore to become a bigger slice of this MICE market.

With its stability political and global economy shows signs of reflect, the business event sector is in good chance of taking advantage of on business opportunities. In the upcoming years, Singapore will keep a strong pipeline of business occasion, including the key international association meetings. Ms Melissa Ow, Assistant Chief Executive, Business Travel and MICE Group, Singapore Tourism Board (STB) said: “As we move into 2010, and climate of economy recovery the STB will continue to work closely with our industry partners to meet business event organisers’ evolving needs, explore new business leads and strengthen our international marketing and channel development efforts.”

Marina Bay sands will be one of the improvement into an amalgamate MICE venue which offers 200,000 square meter of convention and exhibition space which create and grow strategic business occasion. These developments will redefine Singapore’s downtown and central business region. There are estimate more than 150,000 meeting attendees are to stopover Singapore for those events that already booked at the Marina Bay Sands. Besides, Resort World Sentosa has accommodated 35,000 attendees at a single event. Marina Bay Sands said that it has secured more than 30 events development to be held there from this year to 2012.

On the year of 2010, the world’s first -ever summer Youth Olympic Games will be hosted by Singapore. With approximately arrival of 15,000 overseas participants and visitors bring about 180,000 or more visitor to Singapore. Beside this, Singapore is also hosting a series of upcoming events and meetings in these few years, such as International Cruise Terminal 2010, Gardens by the Bay 2010, Sports Hub 2010, National Art Gallery 2013 and many more.

Singapore will continue to expand their abilities and upgrading their infrastructure to provide business event travellers in order to guarantee their position as one of the top Asian. Singapore Tourism Board (STB) has planned to upgrade the facilities of Singapore Expo to make sure Singapore Expo is well-organized to sustain the development of MICE industry. The upgraded facilities will ensure Singapore Expo retains their excellent venue for business events.

There are many growing competitors out there from other country such as Malaysia, Hong Kong, Thailand, Macau and etc. But Singapore is making every chance to offer good facilities and services to their business event travellers. Besides, STB are working continuously closely with the events industry. The main purpose is to increase the amount of the business event at Singapore and to make sure that the MICE sector continues to move ahead as a key driver of tourism development in Singapore.

Lastly, I personally think that Singapore has performed well in this industry and lead Singapore to be on top of the MICE industry, because during the staging events in Singapore, the event organiser can be assured of their quality service, accompanied by its tremendous transportation and professional workforce. Although Singapore has obtain a lot of awards but they don’t feel self-esteem, they keep on their good work and maintaining their facilities to achieve and make them the best MICE destination in the world. Furthermore, Singapore’s MICE industry is on the roadway and I strongly believe that if Singapore put in more efforts on this industry, it can leapfrog to reach the top and becoming the Best City for MICE events among the world in the future.

Chapter Three
Research Methodology
3.1 Research Method

For the methodology, this research will be using questionnaire. Among quantitative method and qualitative method, I use both of the method for my research. It is also known as a mix of approaches. The first method is quantitative method which is a technique to gather quantitative data such as information dealing with numbers and anything that is measurable. While for the qualitative method is to understand the meaning of the numbers produced by quantitative method. We have to observe case analysis with given research imply to qualitative methods and quantitative methods to request respondents to rank their perception about these particular topic.

3.2 Research Design

There are two types of research method which is qualitative method and quantitative method. Qualitative method is more on observation and quantitative method is subjective. Qualitative method need to collect date based on quality and is difficult to generalize because everyone’s perception is different; meanwhile it may affect the quality of the result.

For the quantitative method, it is more objective compared to qualitative method because the data must be fact and logic. And it will be in numbers and also in statistics such as graphs or tables. It is essential to use both methods to understand the core of this research.

3.3 Data Collection

Apparently the data in this report is collected from the secondary data which is online database. Secondary data can be easily found at journal, articles, websites, textbooks, books and etc. The researcher gets the journal from the college library website and it is mainly taken from the Google Scholar and EBSCO Host.